OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of
___________, 1997 (the "Agreement"), is executed in reliance upon the exemption
from registration afforded by Regulation S ("Regulation S") as promulgated by
the Securities and Exchange Commission ("SEC"), under the Securities Act of
1933, as amended (the "1933 Act"). Capitalized terms used herein and not
defined shall have the meanings given to them in Regulation S.
This Agreement has been executed by the undersigned "Buyer" in connection
with the private placement of 8.0% Convertible Debentures of Xxxxx Xxxxxx
Multimedia Company, Inc., a corporation organized under the laws of New York,
with its principal executive offices located at 00 X. 00xx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, X.X. 10010 (hereinafter referred to as "Seller"). Buyer hereby
represents and warrants to, and agrees with Seller that:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER
(THE "1933 ACT"), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES (AS DEFINED IN REGULATION S OF THE 1933 ACT) OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S OF
THE 1933 ACT) EXCEPT PURSUANT TO REGISTRATION UNDER OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
1. Agreement To Subscribe; Purchase Price.
(a) Subscription. The undersigned Buyer hereby subscribes for and
agrees to purchase the Sellers 8.0% Convertible Debentures substantially in the
form of the Debentures attached as Exhibit A hereto and having an aggregate
original principal amount of Two Million United States Dollars (U.S.
$2,000,000) (singly, a "Debenture," and collectively, the "Debentures"), at an
aggregate purchase price as set forth in subsection (b) herein.
(b) Payment. The Purchase Price for the Buyer's portion of the
Debentures shall be _________________________ United States Dollars
(U.S. $_________) (the "Purchase Price"), which shall be payable at each
closing pursuant to Section 1(c) herein by delivering immediately available
funds in United States Dollars by wire transfer to the designated depository of
Seller for closing by delivery of securities versus payment.
(c) Closing. Subject to the satisfaction of the conditions set
forth in Sections 7 and 8 hereof, the closing of the transactions contemplated
by this Agreement shall occur from time to time in denominations of not less
than $50,000 but in any event $2,000,000 shall close on or before January 31,
1997, and the balance on or before May 5, 1997, or such earlier or later date
as is mutually agreed to in writing by Buyer and Seller.
2. Buyer Representations and Covenants; Access to Information.
Offshore Transaction. In connection with the purchase and sale of
the Debentures, Buyer represents and warrants to, and covenants and agrees with
Seller as follows:
(i) Buyer is not a natural person and is not organized under
the laws of any jurisdiction within the United States (as defined in
Regulation S), was not formed by a U.S. Person (as defined in Section
902(o) of Regulation S) for the purpose of investing in securities not
registered under the 1933 Act and is not otherwise a U.S. Person. Buyer
is not, and on the closing date will not be, an affiliate of Seller;
(ii) At the time the buy order was originated, Buyer was outside
the United States and is outside of the United States as of the date of
the execution and delivery of this Agreement;
(iii) No offer to purchase the Debentures or the common stock of
Seller issuable upon conversion of the Debentures (collectively, the
"Securities"), was made by Buyer in the United States;
(iv) Buyer is purchasing the Securities for its own account
and Buyer is qualified to purchase the Securities under the laws of its
jurisdiction of residence, and the offer and sale of the Securities
will not violate the securities or other laws of such jurisdiction;
(v) All offers and sales of any of the Securities by Buyer
prior to the end of the Restricted Period (as hereinafter defined)
shall be made in compliance with any applicable securities laws of any
applicable jurisdiction and in accordance with Rule 903 and 904, as
applicable, of Regulation S or pursuant to registration of the
Securities under the 1933 Act or pursuant to an exemption from
registration. In any case, none of the Securities have been and will
be offered or sold by Buyer to, or for the account or benefit of, a U.S.
Person or within the United States until after the end of the forty
(40) day period commencing on the later of (x) the date of closing of
the offering of the Securities or (y) the date of the first offer of
the Securities to persons other than distributors (the "Restricted
Period"), as certified by Buyer to Seller, and thereafter only
pursuant to a Registration Statement or an applicable exemption from
registration;
(vi) The transactions contemplated by this Agreement (a) have
not been and will not be pre-arranged by Buyer with a purchaser located
in the United States or a purchaser which is a U.S. Person, and (b) are
not and will not be part of a plan or scheme by Buyer, to evade the
registration provisions of the 1933 Act;
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(vii) Buyer understands that the Securities are not registered
under the 1933 Act and are being offered and sold to it in reliance on
specific exclusions from the registration requirements of Federal and
State securities laws of the United States, and that Seller is relying
upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of Buyer set forth
herein in order to determine the applicability of such exclusions and
the suitability of Buyer and any purchaser from Buyer to acquire the
Securities;
(viii) Buyer shall take all reasonable steps to ensure its
compliance with Regulation S and shall promptly send to each purchaser
who acts as a distributor, dealer or a person receiving a selling
concession, fee or other remuneration in respect of any of the
Securities, who purchases prior to the expiration of the Restricted
Period referred to in subparagraph (v) above, a confirmation or other
notice to the purchaser stating that the purchaser is subject to the
same restrictions on offers and sales as Buyer pursuant to Section
903(c)(2)(iv) of Regulation S;
(ix) Buyer has not conducted and shall not conduct any
"directed selling efforts" as that term is defined in Rule 902(b) of
Regulation S; nor has Buyer conducted any general solicitation relating
to the offer and sale of any of the Securities in the United States or
elsewhere;
(x) This Agreement has been duly authorized, validly executed
and delivered on behalf of Buyer and is a valid and binding agreement
in accordance with its terms, subject to general principals of equity
and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally;
(xi) The execution and delivery of this Agreement and the
consummation of the purchase of the Securities, and the transactions
contemplated by this Agreement do not and will not conflict with or
result in a breach by Buyer of any of the terms or provisions of, or
constitute a default under, the articles of incorporation or by-laws
(or similar constitutive documents) of Buyer or any indenture,
mortgage, deed of trust, or other material agreement or instrument to
which Buyer is a party or by which it or any of its properties or assets
are bound, or any existing applicable law, rule or regulation of the
United States or any State thereof or any applicable decree, judgment
or order of any Federal or State court, Federal or State regulatory
body, administrative agency or other United States governmental body
having jurisdiction over Buyer or any of its properties or assets;
(xii) All invitations, offers and sales of or in respect of,
any of the Securities, by Buyer and any distribution by Buyer of any
documents relating to any offer by it of any of the Securities will be
in compliance with applicable laws and regulations and will be made in
such a manner that no prospectus need be filed and
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no other filing need be made by Seller with any regulatory authority
or stock exchange in any country or any political sub-division of any
country;
(xiii) Buyer will not make any offer or sale of the Securities
by any means which would not comply with the laws and regulations of
the territory in which such offer or sale takes place or to which such
offer or sale is subject or which would in connection with any such
offer or sale impose upon Seller any obligation to satisfy any public
filing or registration requirement or provide or publish any
information of any kind whatsoever or otherwise undertake or become
obligated to do any act;
(xiv) Neither the Buyer nor any of its affiliates has entered,
has the intention of entering, or will during the Restricted Period
enter into any put option, short position or other similar instrument
or position with respect to any of the Securities or securities of the
same class as the Securities;
(xv) the Buyer (or others for whom it is contracting hereunder)
has been advised to consult its own legal and tax advisors with
respect to applicable resale restrictions and applicable tax
considerations and it (or others for whom it is contracting hereunder)
is solely responsible (and the Seller is not in any way responsible)
for compliance with applicable resale restrictions and applicable tax
legislation;
(xvi) No Government Recommendation or Approval. Buyer
understands that no Federal or State or foreign government agency has
passed on or made any recommendation or endorsement of the Securities;
(xvii) Current Public Information. Buyer acknowledges that it
and its advisors, if any, have been furnished with all publicly
available materials relating to the business, finances and operations
of Seller and all publicly available materials relating to the offer
and sale of the Securities, in each case which have been requested by
Buyer. Buyer further acknowledges that it and its advisors, if any,
have had the opportunity to ask questions of the Seller regarding the
business, operations and financial condition of Seller, and have
received complete and satisfactory answers to such inquiries;
(xviii) Buyer's Sophistication. Buyer acknowledges that the
purchase of the Securities involves a high degree of risk, including
the total loss of Buyer's investment. Buyer has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of purchasing the Securities and is
capable of bearing a complete loss of its investment hereunder; and
(xix) Tax Status. Buyer is not a "10-percent Shareholder"
(as defined in Section 871(h)(3)(B) of the U.S. Internal Revenue Code)
of Seller.
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3. Seller Representations and Covenants.
(a) Reporting Company Status. Seller is a "Reporting Issuer" as
defined by Rule 902 of Regulation S. Seller has registered its Common Stock,
$.001 par value per share (the "Common Stock"), pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Common Stock is listed and trades on NASDAQ Small Cap Market. Seller has filed
all reports required to be filed pursuant to all reporting obligations under
either Section 13(a) or 15(d) of the Exchange Act for a period of at least
twelve (12) months immediately preceding the offer or sale of the Securities (or
for such shorter period that Seller has been required to file such material).
(b) Current Public Information. Seller has furnished Buyer with
copies of its most recent reports, as amended, filed under the Exchange Act
referred to in Section 3(a) above, and such other publicly available documents
as requested by Buyer.
(c) Offshore Transaction. Seller has not offered any of the
Securities to any person in the United States, or any identifiable groups of
U.S. citizens abroad as such terms are used in Regulation S.
(i) At the time the buy order was originated, Seller and/or its
agents reasonably believe the Buyer was outside of the United States
and was not a U.S. person, based on the representations of Buyer.
(ii) Seller and/or its agents reasonably believe that the
transaction has not been pre-arranged with a buyer in the United
States, based on the representations of Buyer.
(iii) No offer to buy or sell the Securities was or will be
made by Seller to any person in the United States.
(iv) The sale of the Securities by Seller pursuant to this
Agreement will be made in accordance with the provisions and
requirements of Regulation S provided that the representations and
warranties of (i) Buyer in Section 2 hereof and (ii) the Broker
contained in the Agreement dated , 1997 between
Seller and Vengua Capital Markets, Ltd. (the "Broker Agreement") are
true and correct.
(v) The transactions contemplated by this Agreement (a) have
not been and will not be pre-arranged by Seller with a purchaser
located in the United States or a purchaser which is a U.S. Person,
and (b) are not and will not be part of a plan or scheme by Seller to
evade the registration provisions of the 1933 Act.
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(d) No Directed Selling Efforts. In regard to this transaction,
Seller has not conducted any "directed selling efforts" as that term is defined
in Rule 902 of Regulation S nor has Seller conducted any general solicitation
relating to the offer and sale of any of the Securities in the United States or
elsewhere based in part upon the representations and warranties of Broker in
the Broker Agreement.
(e) Concerning the Securities. The issuance, sale and delivery of
the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued, fully paid and non-assessable. The Common
Stock issuable upon conversion of the Debenture has been or will be duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Debentures, shall be duly and validly issued, fully paid, and
non-assessable and will not subject the holders thereof, if such persons are
non-U.S. Persons, to personal liability by reason of being such holders. There
are no pre-emptive rights of any shareholder of Seller except as otherwise
disclosed in the reports filed by the Company with the Securities and Exchange
Commission.
(f) Subscription Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(g) Non-contravention. The execution and delivery of this Agreement
and the consummation of the issuance of the Securities and the transactions
contemplated by this Agreement do not and will not conflict with or result in a
breach by Seller of any of the terms or provisions of, or constitute a default
under, the articles of incorporation or by-laws of Seller, or any material
indenture, mortgage, deed of trust, or other material agreement or instrument
to which Seller is a party or by which it or any of its material properties or
assets are bound, or any existing applicable law, rule or regulation of the
United States or any State thereof or any applicable decree, judgment or order
of any Federal or State court, Federal or State regulatory body, administrative
agency or other United States governmental body having jurisdiction over Seller
or any of its properties or assets, the violation of which would have a
material adverse effect on Seller.
(h) Approvals. Other than any additional listing application for
the issuance of the shares of Common Stock upon conversion of the Debentures,
Seller is not aware of any authorization, approval or consent of any
governmental body which is legally required for the issuance and sale of the
Debentures and the Common Stock issuable upon conversion thereof to persons who
are non-U.S. Persons, as contemplated by this Agreement, so long as the sale of
the Debenture and Common Stock are made in accordance with the rules and
regulations of Regulation S.
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4. Exemption; Reliance on Representations. Buyer understands that the
offer and sale of the Securities are not being registered under the 1933 Act.
Seller and Buyer are relying on the rules governing offers and sales made
outside the United States pursuant to Regulation S.
5. Transfer Agent Instructions.
(a) Debentures. Upon the conversion of the Debentures, the holder
thereof shall submit such Debenture with a notice of conversion to the Seller
and the Seller shall instruct Seller's transfer agent to issue one or more
Certificates representing that number of shares of Common Stock into which the
Debenture or Debentures are convertible in accordance with the provisions
regarding conversion set forth in the Debenture. The Seller or its designees
shall act as Debenture Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture.
(b) Common Stock to be Issued Without Restrictive Legend. Upon the
conversion of any Debenture by a person who is a non-U.S. Person, Seller shall
instruct Seller's transfer agent to issue Stock Certificates without
restrictive legend in the name of Buyer (being a non-U.S. Person) and in such
denominations to be specified at conversion representing the number of shares
of Common Stock issuable upon such conversion, as applicable. Seller warrants
that no instructions other than these instructions and instructions to impose a
"stop transfer" instruction with respect to the certificates until the end of
the Restricted Period have been given or will be given to the transfer agent
and that the Common Stock issuable upon conversion of the Debentures in
accordance with the terms thereof shall otherwise be freely transferable on the
books and records of Seller subject to compliance with requirements of
Regulation S. Nothing in this Section 5, however, shall affect in any way
Buyer's or such nominee's obligations and agreements to comply with all
applicable securities laws upon resale of the Securities.
6. Registration. If upon conversion of Debentures effected by the Buyer
pursuant to the terms of this Agreement the Company fails to issue certificates
for shares of Common Stock issuable upon such conversion (the "Underlying
Shares") to the Buyer bearing no restrictive legend for any reason other than
(i) the Company's reasonable good faith belief that the representations and
warranties made by the Buyer in this Agreement or the Notice of Conversion were
untrue when made, or are untrue at the time of question, (ii) failure by the
Buyer to comply with the rules of Regulation S, or (iii) if the restricted
period under Regulation S is extended, then the Company shall be required, at
the request of the Buyer and at the Company's expense, to effect the
registration of the Underlying Shares issuable upon conversion of the
Debentures under the Act and relevant Blue Sky laws as promptly as is
practicable on Form S-3. The Company and the Buyer shall cooperate in good
faith in connection with the furnishing of information required for such
registration and the taking of such other actions as may be legally or
commercially necessary in order to effect such registration. The Company shall
file a registration statement within 60 days of Buyer's demand therefor and
shall use its reasonable best efforts to cause such registration statement to
become effective as soon as practicable thereafter. Such best efforts shall
include, but not be limited to, promptly responding to all comments received
from the staff of the Securities and Exchange Commission, providing Buyer's
counsel with a contemporaneous copy of all written
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communications from and to the staff of the Securities and Exchange Commission
with respect to such registration statement and promptly preparing and filing
amendments to such registration statement which are responsive to the comments
received from the staff of the Securities and Exchange Commission. Once
declared effective by the Securities and Exchange Commission, the Company shall
cause such registration statement to remain effective until the earlier of (i)
the sale by the Buyer of all Underlying Shares registered or (ii) 120 days
after the effective date of such registration statement. The foregoing shall
not in any way limit Buyer's rights in connection with the Common Stock
pursuant to Regulation S.
7. Delivery Instructions. The Debentures being purchased hereunder
shall be delivered to the Buyer at such time and place as shall be mutually
agreed by Seller and Buyer.
8. Conditions To Seller's Obligation To Sell. Seller's obligation to
sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Buyer of this Agreement as
evidenced by execution of this Agreement by Buyer.
(b) Delivery into the Seller's account of good funds by Buyer as
payment in full of the purchase price of the Debentures.
9. Conditions To Buyer's Obligation To Purchase. Buyer's obligation to
purchase the Debentures is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement as
evidenced by execution of this Agreement by the duly authorized officer of
Seller.
(b) Delivery of the Debentures as described herein.
10. Offering Materials. All offering materials and documents used in
connection with offers and sales of the Securities prior to the expiration of
the Restricted Period referred to in Section 2(v) hereof shall include
statements to the effect that the Securities have not been registered under the
1933 Act or applicable state securities laws, and that neither Buyer, nor any
direct or indirect purchaser of the Securities from Buyer, may directly or
indirectly offer or sell the Securities in the United States or to U.S. Persons
(other than distributors) unless the Securities are registered under the 1933
Act and any applicable state securities laws, or any exemption from the
registration requirements of the 1933 Act or such state securities laws is
available. Such statements shall appear (1) on the cover of any prospectus or
offering circular used in connection with the offer or sale of the Securities,
(2) in the underwriting section of any prospectus or offering circular used in
connection with the offer or sale of the Securities, and (3) in any
advertisement made or issued by Seller, Buyer, any other distributor, any of
their respective affiliates, or any person acting on behalf of any of the
foregoing and in accordance with 902(h)(2) of Regulation S.
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11. No Shareholder Approval. Seller hereby agrees that from the Closing
Date until the issuance of Common Stock upon the conversion of the Debentures,
Seller will not take any action in respect of the Securities which would
require Seller to seek shareholder approval of the issuance of the Securities
unless such shareholder approval is required by law or regulatory body
(including but not limited to the NASDAQ Stock Market, Inc.) as a result of the
issuance of the Securities hereunder.
12. Miscellaneous.
(a) Except as specifically referenced herein, this Agreement
constitutes the entire contract between the parties, and neither party shall be
liable or bound to the other in any manner by any warranties, representations
or covenants except as specifically set forth herein. Any previous agreement
among the parties related to the transactions described herein is superseded
hereby. The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties
hereto. Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
(b) Buyer is an independent contractor, and is not the agent of
Seller. Buyer is not authorized to bind Seller, or to make any representations
or warranties on behalf of Seller.
(c) Seller makes no representations or warranties with respect to
Seller, its finances, assets, business prospects or otherwise. Buyer will
advise each purchaser, if any, and potential purchaser of the Securities, of
the foregoing sentence, and that such purchaser is relying on its own
investigation with respect to all such matters.
(d) All representations and warranties contained in this Agreement
by Seller and Buyer shall survive the closing of the transactions contemplated
by this Agreement.
(e) This Agreement shall be construed in accordance with the laws
of New York (without regard to conflicts of law principles) and shall be
binding upon the successors and permitted assigns of each party hereto. This
Agreement may be executed in counterparts, and the facsimile transmission of an
executed counterpart to this Agreement shall be effective as an original.
(f) Buyer agrees to indemnify and hold Seller harmless from any and
all claims, damages and liabilities arising from Buyer's breach of its
representations and/or covenants set forth herein.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
Official Signatory of Seller:
Xxxxx Xxxxxx Multimedia Company, Inc.
By:
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Title:
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Official Signatory of Buyer:
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By:
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Title:
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Address of Buyer:
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