SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT
(this
“Agreement”),
is
dated as of ____________, 2007, by and among Purple Beverage Company,
Inc.
(formerly Red Carpet Entertainment, Inc.), a Nevada corporation
(the
“Company”),
and
the subscribers identified on the signature page hereto (each a “Subscriber”
and
collectively “Subscribers”).
WHEREAS,
the
Company and the Subscribers are executing and delivering this Agreement
in
reliance upon an exemption from securities registration afforded by
the
provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission
(the
“Commission”)
under
the Securities Act of 1933, as amended (the “1933
Act”).
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscribers, as provided
herein,
and the Subscribers, in the aggregate, shall purchase not less than
$3,000,000
and not more than $3,500,000 in the aggregate (the "Purchase
Price"):
|
(i)
|
up
to 7,000,000 shares of the Company’s $.001 par value Common Stock (the
“Shares”)
at a per share purchase price of $0.50;
and
|
|
(ii)
|
up
to 7,000,000 Common Stock purchase warrants (the “Warrants”),
in the form annexed hereto as Exhibit
A,
exercisable to purchase an equivalent number of shares of
Common Stock
(the “Warrant
Shares”)
during the period and at the per share purchase price set
forth in the
Warrants (the “Exercise
Price”).
|
The
Shares, the Warrants and the Warrant Shares are collectively referred
to herein
as the "Securities";
WHEREAS,
the
aggregate proceeds of the sale of the Shares, and Warrants contemplated
hereby
shall be held in escrow pursuant to the terms of a Funds Escrow Agreement
to be
executed by the parties substantially in the form attached hereto as
Exhibit
B
(the
“Escrow
Agreement”).
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained
in this
Agreement the Company and the Subscribers hereby agree as follows:
1. Closing
Date.
The
“Closing
Date”
shall
be the date that not less than $3,000,000 Purchase Price is transmitted
by wire
transfer or otherwise credited to or for the benefit of the Company.
The
consummation of the transactions contemplated herein shall take place
at the
offices of Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx,
Xxx Xxxx 00000, upon the satisfaction or waiver of all conditions to
closing set
forth in this Agreement. Subject to the satisfaction or waiver of the
terms and
conditions of this Agreement, on the Closing Date, each Subscriber
shall
purchase and the Company shall sell to each Subscriber, Units (as defined
below)
at a price per Unit of $50,000.
2. Units.
The
Shares and Warrants will be sold in units (“Units”).
Each
Unit purchased for $50,000 will entitle the Subscriber to receive 100,000
Shares
at an allocated Purchase Price of $0.50 per Share, and 100,000
Warrants.
3. Warrants.
On the
Closing Date, the Company will issue Warrants to the Subscribers. The
Warrants
will be exercisable at $2.00 per Warrant Share. The Warrants will be
exercisable
immediately on the Closing Date and for five years thereafter.
1
4. Subscriber
Representations and Warranties.
Each
Subscriber hereby represents and warrants to and agrees with the Company
only as
to such Subscriber that:
(a) Organization
and Standing of the Subscribers.
If such
Subscriber is an entity, such Subscriber is a corporation, partnership
or other
entity duly incorporated or organized, validly existing and in good
standing
under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization
and Power.
Such
Subscriber has the requisite power and authority to enter into and
perform this
Agreement and the other Transaction Documents (defined below) and to
purchase
the Warrants being sold to it hereunder. The execution, delivery and
performance
of this Agreement and the other Transaction Documents by such Subscriber
and the
consummation by it of the transactions contemplated hereby and thereby
have been
duly authorized by all necessary corporate or partnership action, and
no further
consent or authorization of such Subscriber or its Board of Directors,
stockholders, partners, members, or managers, as the case may be, is
required.
This Agreement and the other Transaction Documents have been duly authorized,
executed and delivered by such Subscriber and constitutes, or shall
constitute
when executed and delivered, a valid and binding obligation of such
Subscriber
enforceable against such Subscriber in accordance with the terms
thereof.
(c) No
Conflicts.
The
execution, delivery and performance of this Agreement and the other
Transaction
Documents and the consummation by such Subscriber of the transactions
contemplated hereby and thereby or relating hereto do not and will
not (i)
result in a violation of such Subscriber’s charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default
(or an
event which with notice or lapse of time or both would become a default)
under,
or give to others any rights of termination, amendment, acceleration
or
cancellation of any agreement, indenture or instrument or obligation
to which
such Subscriber is a party or by which its properties or assets are
bound, or
result in a violation of any law, rule, or regulation, or any order,
judgment or
decree of any court or governmental agency applicable to such Subscriber
or its
properties (except for such conflicts, defaults and violations as would
not,
individually or in the aggregate, have a material adverse effect on
such
Subscriber). Such Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with,
any court or
governmental agency in order for it to execute, deliver or perform
any of its
obligations under this Agreement and the other Transaction Documents
or to
purchase the Securities in accordance with the terms hereof, provided
that for
purposes of the representation made in this sentence, such Subscriber
is
assuming and relying upon the accuracy of the relevant representations
and
agreements of the Company herein.
(d) Information
on Company.
Such
Subscriber has been furnished with or has had access at the XXXXX Website
of the
Commission to the Company's Form 10-KSB filed on April 2, 2007 for
the fiscal
year ended December 31, 2006, and the financial statements included
therein,
together with all subsequent filings made with the Commission available
at the
XXXXX website and the form of Form 8-K which will be filed by the Company
in
connection with the Merger which will include the consolidated financial
statements of the Company and Subsidiaries (as defined in Section 5(a)
below)
required to be included therein (“Merger
8-K”)
(hereinafter referred to collectively as the "Reports").
The
form of Merger 8-K substantively in the form to be filed with the Commission
is
annexed hereto as Exhibit
C.
In
addition, such
Subscriber may have received in writing from the Company such other
information
concerning its operations, financial condition and other matters as
such
Subscriber has requested in writing, identified thereon as OTHER WRITTEN
INFORMATION (such other information is collectively, the "Other
Written Information"),
and
considered all factors such
Subscriber deems material in deciding on the advisability of investing
in the
Securities.
(e) Information
on Subscriber.
Such
Subscriber is, and will be at the time of the exercise of the Warrants,
an
"accredited
investor",
as
such term is defined in Regulation D promulgated by the Commission
under the
1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of
United
States publicly-owned companies in private placements in the past and,
with its
representatives, has such knowledge and experience in financial, tax
and other
business matters as to enable such
Subscriber to utilize the information made available by the Company
to evaluate
the merits and risks of and to make an informed investment decision
with respect
to the proposed purchase, which represents a speculative investment.
Such
Subscriber has the authority and is duly and legally qualified to purchase
and
own the Securities. Such
Subscriber is able to bear the risk of such investment for an indefinite
period
and to afford a complete loss thereof. The information set forth on
the
signature page hereto regarding such
Subscriber is accurate.
2
(f) Purchase
of Units.
On the
Closing Date, such
Subscriber will purchase the Shares and Warrants as principal for its
own
account for investment only and not with a view toward, or for resale
in
connection with, the public sale or any distribution thereof.
(g) Compliance
with Securities Laws.
Such
Subscriber understands and agrees that the Securities have not been
registered
under the 1933 Act or any applicable state securities laws, by reason
of their
issuance in a transaction that does not require registration under
the 1933 Act
(based in part on the accuracy of the representations and warranties
of
such
Subscriber contained herein), and that such Securities must be held
indefinitely
unless a subsequent disposition is registered under the 1933 Act or
any
applicable state securities laws or is exempt from such registration.
Such
Subscriber will comply with all applicable rules and regulations in
connection
with the sales of the Securities.
(h) Shares
Legend.
The
Shares, and the Warrant Shares shall bear the following or similar
legend:
"THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE
STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)
AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."
(i) Warrants
Legend.
The
Warrants shall bear the following or
similar legend:
"NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE 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 (B) AN OPINION OF
COUNSEL
(WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES."
3
(j) Communication
of Offer.
The
offer to sell the Securities was directly communicated to such Subscriber
by the
Company. At no time was such Subscriber presented with or solicited
by any
leaflet, newspaper or magazine article, radio or television advertisement,
or
any other form of general advertising or solicited or invited to attend
a
promotional meeting otherwise than in connection and concurrently with
such
communicated offer.
(k) Authority;
Enforceability.
This
Agreement and other agreements delivered together with this Agreement
or in
connection herewith have been duly authorized, executed and delivered
by such
Subscriber and are valid and binding agreements enforceable in accordance
with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to
or affecting creditors’ rights generally and to general principles of equity;
and such Subscriber has full power and authority necessary to enter
into this
Agreement and such other agreements and to perform its obligations
hereunder and
under all other agreements entered into by such Subscriber relating
hereto.
(l) Restricted
Securities.
Such
Subscriber understands that the Securities have not been registered
under the
1933 Act and such Subscriber will not sell, offer to sell, assign,
pledge,
hypothecate or otherwise transfer any of the Securities unless pursuant
to an
effective registration statement under the 1933 Act, or unless an exemption
from
registration is available. Notwithstanding anything to the contrary
contained in
this Agreement but subject to the Subscriber Lockup [as defined in
Section
4(o)], such Subscriber may transfer (without restriction and without
the need
for an opinion of counsel) the Securities to its Affiliates (as defined
below)
provided that each such Affiliate is an “accredited investor” under Regulation D
and such Affiliate agrees to be bound by the terms and conditions of
this
Agreement. For the purposes of this Agreement, an “Affiliate”
of
any
person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control
with such
person or entity. Affiliate includes each Subsidiary of the Company.
For
purposes of this definition, “control”
means
the power to direct the management and policies of such person or firm,
directly
or indirectly, whether through the ownership of voting securities,
by contract
or otherwise.
(m) No
Governmental Review.
Such
Subscriber understands that no United States federal or state agency
or any
other governmental or state agency has passed on or made recommendations
or
endorsement of the Securities or the suitability of the investment
in the
Securities nor have such authorities passed upon or endorsed the merits
of the
offering of the Securities.
(n) Correctness
of Representations.
Such
Subscriber represents as to such Subscriber that the foregoing representations
and warranties are true and correct as of the date hereof and, unless
such
Subscriber otherwise notifies the Company prior to the Closing Date,
shall be
true and correct as of the Closing Date.
4
(o) Subscriber
Lockup. Subscriber
agrees that until six months after the Closing Date (the “Restriction
Period”)
without the prior, written consent of the Company, Subscriber will
not sell,
transfer or otherwise dispose of any Shares or Warrant Shares during
the
Restriction Period, other than in connection with an offer made to
all
stockholders of the Company in connection with merger, consolidation
or similar
transaction involving the Company. Subscriber further agrees that the
Company is
authorized to place “stop orders” on its books to prevent any transfer of Shares
or Warrant Shares held by the undersigned in violation of the terms
of this
Section 4(o). Upon
the
expiration of the Restriction Period, and for each of the successive
six 30-day
periods thereafter (collectively, the “Limitations
Period”),
Subscriber may sell, pledge, hypothecate, or otherwise derive economic
value
from an amount of Shares equivalent to not more than five percent of
the number
of Shares purchased hereunder (which number may increase pro rata based
upon the
exercise by the Subscriber of the Warrants purchased hereunder. Upon
the
expiration of the Limitations Period, the Subscriber will no longer
be subject
to any contractual transfer restrictions on the disposition of any
of the Shares
or Warrant Shares. Notwithstanding the foregoing restrictions on transfer,
Subscriber may, at any time and from time to time during the Restriction
Period
and Limitation Period, transfer all or a portion of the Shares, Warrants
and
Warrant Shares (i) as bona fide gifts or transfers by will or intestacy
and (ii)
to any trust for the direct or indirect benefit of the Subscriber or
the
immediate family of the Subscriber, provided that any such transfer
shall not
involve a disposition for value; provided, that, in the case of any
gift or
transfer described in clauses (i) and (ii), each donee or transferee
agrees in
writing to be bound by the terms and conditions contained herein in
the same
manner as such terms and conditions apply to the transferring Subscriber.
The
foregoing restrictions and limitations on transfer are referred to
as
“Subscriber
Lockup”.
(p) Survival.
The
foregoing representations and warranties shall survive the Closing
Date.
5. Company
Representations and Warranties.
The
Company represents and warrants to and agrees with each Subscriber
that:
(a) Due
Incorporation.
The
Company is a corporation or other entity duly incorporated or organized,
validly
existing and in good standing under the laws of the jurisdiction of
its
incorporation or organization and has the requisite corporate power
to own its
properties and to carry on its business as presently
conducted. The Company is duly qualified as a foreign corporation to
do business
and is in good standing in each jurisdiction where the nature of the
business
conducted or property owned by it makes such qualification necessary,
other than
those jurisdictions in which the failure to so qualify would not have
a Material
Adverse Effect. For purposes of the Transaction Documents, a “Material
Adverse Effect”
shall
mean a material adverse effect on the financial condition, results
of
operations, prospects, properties or business of the Company and its
Subsidiaries taken as a whole. For purposes of this Agreement, “Subsidiary”
means,
with respect to any entity at any date, any corporation, limited or
general
partnership, limited liability company, trust, estate, association,
joint
venture or other business entity of which more than 30% of (i) the
outstanding
capital stock having (in the absence of contingencies) ordinary voting
power to
elect a majority of the board of directors or other managing body of
such
entity, (ii) in the case of a partnership or limited liability company,
the
interest in the capital or profits of such partnership or limited liability
company or (iii) in the case of a trust, estate, association, joint
venture or
other entity, the beneficial interest in such trust, estate, association
or
other entity business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such
entity. The
Subsidiaries as of the Closing Date are set forth on Schedule
5(a).
(b) Outstanding
Stock.
All
issued and outstanding shares of capital stock of the Company have
been duly
authorized and validly issued and are fully paid and
non-assessable.
(c) Authority;
Enforceability.
This
Agreement, the Shares, the Warrants, Funds Escrow Agreement, and all
other
agreements delivered together with this Agreement or in connection
herewith to
which the Company is a party (collectively “Transaction
Documents”)
have
been duly authorized, executed and delivered by the Company and are
valid and
binding agreements of the Company enforceable in accordance with their
terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting
creditors' rights generally and to general principles of equity. The
Company has
full corporate power and authority necessary to enter into and deliver
the
Transaction Documents and to perform its obligations thereunder.
5
(d) Capitalization
and Additional Issuances.
The
authorized and outstanding capital stock of the Company and Subsidiaries
as of
the date of this Agreement and the Closing Date (not including the
Securities)
are set forth on Schedule
5(d).
There
are
no outstanding agreements or preemptive or similar rights affecting
the 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 Subsidiaries or other equity interest
in the
Company or Subsidiaries except as described on Schedule
5(d).
The
Common Stock, options, warrants, agreements and other rights to acquire
equity
of the Company and any Subsidiary outstanding as of the last Business
Day
preceding the Closing Date is set forth on Schedule
5(d).
The
only
officer, director, employee and consultant stock option or stock incentive
plan
in effect or contemplated by the Company as of the Closing Date is
described on
Schedule
5(d).
As of
immediately after the Closing, not including the Securities, the Company
will
have outstanding not more than the amount of shares of Common Stock
and not more
than the amount of shares of Common Stock issuable upon exercise of
warrants,
options, commitments or agreements as set forth on Schedule
5(d).
(e) Consents.
No
consent, approval, authorization or order of any court, governmental
agency or
body or arbitrator having jurisdiction over the Company, Subsidiaries
or any of
their Affiliates, the OTC Bulletin Board (“Bulletin
Board”)
or the
Company's shareholders is required for the execution by the Company
of the
Transaction Documents and compliance and performance by the Company
of its
obligations under the Transaction Documents, including, without limitation,
the
issuance and sale of the Securities. The Transaction Documents and
the Company’s
performance of its obligations thereunder has been unanimously approved
by the
Company’s Board of Directors.
(f) No
Violation or Conflict.
Assuming the representations and warranties of the Subscribers in Section
4 are
true and correct, neither the issuance and sale of the Securities nor
the
performance of the Company’s obligations under the Transaction Documents by the
Company will:
(i) violate,
conflict with, result in a breach of, or constitute a default (or an
event which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the articles or certificate
of
incorporation, charter or bylaws of the Company, (B) to the Company's
knowledge,
any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body,
or
arbitrator having jurisdiction over the Company or over the properties
or assets
of the Company or any of its Affiliates, (C) the terms of any bond,
debenture,
note or any other evidence of indebtedness, or any agreement, stock
option or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its Affiliates is a party,
by which
the Company or any of its Affiliates is bound, or to which any of the
properties
of the Company or any of its Affiliates is subject, or (D) the terms
of any
"lock-up" or similar provision of any underwriting or similar agreement
to which
the Company, or any of its Affiliates is a party except the violation,
conflict,
breach, or default of which would not have a Material Adverse Effect;
or
(ii) result
in
the creation or imposition of any lien, charge or encumbrance upon
the
Securities or any of the assets of the Company or any of its Affiliates
except
as described herein; or
6
(iii) result
in
the activation of any anti-dilution rights or a reset or repricing
of any debt
or security instrument of any other creditor or equity holder of the
Company,
nor result in the acceleration of the due date of any obligation of
the Company;
or
(iv) will
result in the triggering of any piggy-back registration rights of any
person or
entity holding securities of the Company or having the right to receive
securities of the Company.
(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 any
applicable state securities laws;
(ii) have
been, or will be, duly and validly authorized and on the date of issuance
of the
Shares and Warrant Shares, such Shares and Warrant Shares will be duly
and
validly issued, fully paid and non-assessable and if registered pursuant
to the
1933 Act and resold pursuant to an effective registration statement
will be free
trading and unrestricted;
(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;
(iv) will
not
subject the holders thereof to personal liability by reason of solely
being such
holders; and
(v) assuming
the representations and warranties of the Subscribers as set forth
in Section 4
hereof are true and correct, will not result in a violation of Section
5 under
the 1933 Act.
(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 the Transaction Documents. There is no pending
or, to the
best knowledge of the Company, basis for or threatened action, suit,
proceeding
or investigation before any court, governmental agency or body, or
arbitrator
having jurisdiction over the Company, or any of their Affiliates which
litigation if adversely determined would have a Material Adverse
Effect.
(i) No
Market Manipulation.
The
Company and its Affiliates have not taken, and will not take, directly
or
indirectly, any action designed to, or that might reasonably be expected
to,
cause or result in stabilization or manipulation of the price of the
Common
Stock to
facilitate the sale or resale of the Securities or affect the price
at which the
Securities may be issued or resold.
(j) Information
Concerning Company.
The
Reports, including the exhibits and financial statements included therewith,
and
Other Written Information contain all material information relating
to the
Company and its operations and financial condition as of their respective
dates,
which information is required to be disclosed therein. Since the dates
of the
most recent financial statements included in the Reports, and except
as modified
in the Other Written Information or in the Schedules hereto, there
has been no
Material Adverse Event relating to the Company's business, financial
condition
or affairs not disclosed in the Reports. The Reports, including the
exhibits and
financial statements included therewith, and Other Written Information
do not
contain any untrue statement of a material fact or omit to state a
material fact
required to be stated therein or necessary to make the statements therein,
taken
as a whole, not misleading in light of the circumstances when made.
7
(k) Stop
Transfer.
The
Company will not issue any stop transfer order or other order impeding
the sale,
resale or delivery of any of the Securities, except as may be required
by any
applicable federal or state securities laws and unless contemporaneous
notice of
such instruction is given to the Subscriber.
(l) Defaults.
The
Company is not in violation of its articles of incorporation or bylaws.
The
Company is not in (i) 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,
(ii)
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) violation of any statute, rule or regulation
of any
governmental authority which violation would have a Material Adverse
Effect.
(m) 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 offer of the Securities pursuant to this Agreement to be integrated
with
prior offerings by the Company for purposes of the 1933 Act or any
applicable
stockholder approval provisions, including, without limitation, under
the rules
and regulations of the Bulletin Board which would impair the exemptions
relied
upon in this Offering or the Company’s ability to timely comply with its
obligations hereunder. Neither the Company nor any of its Affiliates
will take
any action or steps that would cause the offer or issuance of the Securities
to
be integrated with other offerings which would impair the exemptions
relied upon
in this Offering or the Company’s ability to timely comply with its obligations
hereunder. The Company will not conduct any offering other than the
transactions
contemplated hereby that will be integrated with the offer or issuance
of the
Securities that would impair the exemptions relied upon in connection
with the
offer and sale of the Securities or the Company’s ability to timely comply with
its obligations hereunder.
(n) No
General Solicitation.
Neither
the Company, nor any of its Affiliates, nor to its knowledge, any person
acting
on its or their behalf, has engaged in any form of general solicitation
or
general advertising (within the meaning of Regulation D under the 0000
Xxx) in
connection with the offer or sale of the Securities.
(o) No
Undisclosed Liabilities.
The
Company has no liabilities or obligations which are material, individually
or in
the aggregate, other than those incurred in the ordinary course of
the Company
business since the date of the most recent audited financial statements
of the
Company contained in the Reports, and which, individually or in the
aggregate,
would reasonably be expected to have a Material Adverse Effect,
except
as disclosed in the Reports or on Schedule
5(o).
(p) No
Undisclosed Events or Circumstances.
Since
the date of the most recent audited financial statements of the Company
contained in the Reports, no event or circumstance has occurred or
exists with
respect to the Company or its business, 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.
(q) Dilution.
The
Company's executive officers and directors understand the nature of
the
Securities being sold hereby and recognize that the issuance of the
Securities
will have a potential dilutive effect on the equity holdings of other
holders of
the Company’s equity or rights to receive equity of the Company. The board of
directors of the Company has concluded, in its good faith business
judgment,
that the issuance of the Securities is in the best interests of the
Company. The
Company specifically acknowledges that its obligation to issue the
Warrant
Shares upon exercise of the Warrants is binding upon the Company and
enforceable
regardless of the dilution such issuance may have on the ownership
interests of
other stockholders of the Company or parties entitled to receive equity
of the
Company.
8
(r) No
Disagreements with Accountants and Lawyers.
There
are no material disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise between the Company and the accountants
and
lawyers presently employed by the Company, including but not limited
to disputes
or conflicts over payment owed to such accountants and lawyers, nor
have there
been any such disagreements during the two years prior to the Closing
Date.
(s) Investment
Company.
Neither
the Company nor any Affiliate of the Company is an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.
(t) Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other
person
acting on behalf of the Company, has (i) directly or indirectly, used
any funds
for unlawful contributions, gifts, entertainment or other unlawful
expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or
to any
foreign or domestic political parties or campaigns from corporate funds,
(iii)
failed to disclose fully any contribution made by the Company (or made
by any
person acting on its behalf of which the Company is aware) which is
in violation
of law, or (iv) violated in any material respect any provision of the
Foreign
Corrupt Practices Act of 1977, as amended.
(u) Reporting
Company.
The
Company is a publicly-held company subject to reporting obligations
pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended (the "1934
Act")
and
has a class of Common Stock registered pursuant to Section 12(g) of
the 1934
Act. Pursuant to the provisions of the 1934 Act, the Company has timely
filed
all reports and other materials required to be filed thereunder with
the
Commission during the preceding twelve months.
(v) Listing.
The
Company's Common Stock is quoted on the Bulletin Board under the symbol
REDZ.
The Company has not received any oral or written notice that its Common
Stock is
not eligible nor will become ineligible for listing on the Bulletin
Board nor
that its Common Stock does not meet all requirements for the continuation
of
such listing. The Company satisfies all the requirements for the continued
listing of its Common Stock on the Bulletin Board.
(w) DTC
Status.
The
Company’s transfer agent is a participant in, and the Common Stock is eligible
for transfer pursuant to, the Depository Trust Company Automated Securities
Transfer Program. The name, address, telephone number, fax number,
contact
person and email address of the Company transfer agent is set forth
on
Schedule
5(w)
hereto.
(x) Solvency.
Based
on the financial condition of the Company as of the Closing Date after
giving
effect to the receipt by the Company of the proceeds from the sale
of the
Shares, (i) the Company’s fair saleable value of its assets exceeds the amount
that will be required to be paid on or in respect of the Company’s existing
debts and other liabilities (including known contingent liabilities)
as they
mature; (ii) the Company’s assets do not constitute unreasonably small capital
to carry on its business for the current fiscal year as now conducted
and, after
the Closing Date as proposed to be conducted including its capital
needs taking
into account the particular capital requirements of the business conducted
by
the Company, and projected capital requirements and capital availability
therefor; and (iii) the current cash flow of the Company, together
with the
proceeds the Company would receive, were it to liquidate all of its
assets,
after taking into account all anticipated uses of the cash, would be
sufficient
to pay all amounts on or in respect of its debt when such amounts are
required
to be paid. The Company does not intend to incur debts beyond its ability
to pay
such debts as they mature (taking into account the timing and amounts
of cash to
be payable on or in respect of its debt).
9
(y) Company
Predecessor and Subsidiaries.
The
Company makes each of the representations contained in Sections 5(a),
(b), (c),
(d), (e), (f), (h), (j), (l), (o), (p), (r), (s), (u), and (x) of this
Agreement, as same relate to the Subsidiary of the Company. All representations
made by or relating to the Company of a historical or prospective nature
and all
undertakings described in Sections 9(g) through 9(l) shall relate,
apply and
refer to the Company, Subsidiaries and their predecessors. The Company
represents that it owns 100% of the outstanding equity of the Subsidiaries
and
rights to receive equity of the Subsidiaries free and clear of all
liens,
encumbrances and claims. No person or entity other than the Company
has the
right to own and receive any equity interest in the Subsidiaries.
(z) Correctness
of Representations.
The
Company represents that the foregoing representations and warranties
are true
and correct as of the date hereof in all material respects, and, unless
the
Company otherwise notifies the Subscribers prior to the Closing Date,
shall be
true and correct in all material respects as of the Closing Date; provided,
that, if such representation or warranty is made as of a different
date in which
case such representation or warranty shall be true as of such date.
(AA) Survival.
The
foregoing representations and warranties shall survive the Closing
Date.
6. Regulation
D Offering/Legal Opinion.
The
offer and issuance of the Securities to the Subscribers is being made
pursuant
to the exemption from the registration provisions of the 1933 Act afforded
by
Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
D
promulgated thereunder. On the Closing Date, the Company will provide
an opinion
reasonably acceptable to the Subscribers from the Company's legal counsel
opining on the availability of an exemption from registration under
the 1933 Act
as it relates to the offer and issuance of the Securities and other
matters
reasonably requested by Subscribers. A form of the legal opinion is
annexed
hereto as Exhibit
D.
The
Company will provide, at the Company's expense, such other legal opinions,
if
any, as are reasonably necessary in each Subscriber’s opinion for the issuance
and resale of the Shares and Warrant Shares pursuant to an effective
registration statement, Rule 144 under the 1933 Act (“Rule
144”)
or an
exemption from registration.
7. Broker’s
Commission.
The
Company on the one hand, and each Subscriber (for himself or itself
only) on the
other hand, agrees to indemnify the other against and hold the other
harmless
from any and all liabilities to any persons claiming brokerage commissions
or
similar fees other than Palladium Capital Advisors, LLC (the “Broker”)
on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party’s actions. Anything in this
Agreement to the contrary notwithstanding, each Subscriber is providing
indemnification only for such Subscriber’s own actions and not for any action of
any other Subscriber. Each Subscriber’s liability hereunder is several and not
joint. The Company agrees that it will pay the Broker on the Closing
Date an
aggregate cash fee equal to 10% of the Purchase Price as commission,
and 3% of
the Purchase Price as a non-accountable expense allowance, directly
out of the
funds held pursuant to the Escrow Agreement (“Broker’s
Fees”).
The
Company represents that there are no other parties entitled to receive
fees,
commissions, or similar payments in connection with the offering described
in
this Agreement except the Broker. On the Closing Date, the Company
will issue to
the Broker five year warrants to purchase Common Stock (the
“Broker’s
Warrants”)
in
an
amount equal to 10% of the number of Shares issued pursuant to this
Agreement.
The terms of the Broker’s Warrants will be the same as the Warrants issued to
the Subscribers. The Broker may designate itself, employees or other
persons
(the “Broker
Holders”)
to
receive all or a portion of the Broker’s Warrants at Closing. All the
representations, covenants, warranties, undertakings, remedies, liquidated
damages, indemnification, and other rights including but not limited
to
reservation rights made or granted to or for the benefit of the Subscribers
are
hereby also made by the Company and granted to the Broker Holders.
10
8. Subscriber’s
Legal Fees.
The
Company shall pay to Grushko & Xxxxxxx, P.C., a fee of $35,000
(“Subscriber’s
Legal Fees”)
(of
which $7,500 has been paid) as reimbursement for services rendered
to the
Subscribers in connection with this Agreement and the purchase and
sale of the
Shares and Warrants (the “Offering”).
The
Subscriber’s Legal Fees and expenses will be payable out of funds held pursuant
to the Escrow Agreement. Grushko & Xxxxxxx, P.C. will be reimbursed at
Closing for all lien searches, security interest filing fees, and printing
and
shipping costs for the closing statements and documents to be delivered
to
Subscribers and for background checks on the senior management of the
Company
and Subsidiaries conducted on behalf of Subscribers.
9. Covenants
of the Company.
The
Company covenants and agrees with the Subscribers as follows:
(a) Stop
Orders.
The
Company will advise the Subscribers, within twenty-four hours after
it receives
notice of issuance by the Commission, any state securities commission
or any
other regulatory authority, of any stop order or of any order preventing
or
suspending any offering of any securities of the Company, or of the
suspension
of the qualification of the Common Stock of the Company for offering
or sale in
any jurisdiction, or the initiation of any proceeding for any such
purpose.
(b) Listing/Quotation.
The
Company shall promptly secure the quotation or listing of the Shares
and Warrant
Shares upon each national securities exchange, or automated quotation
system
upon which they are or become eligible for quotation or listing (subject
to
official notice of issuance) and shall maintain same so long as any
Warrants are
outstanding. The Company will maintain the quotation or listing of
its Common
Stock on the Bulletin Board, American Stock Exchange, National Capital
Market,
Nasdaq Global Market, Nasdaq Global Select Market, or New York Stock
Exchange
(whichever of the foregoing is at the time the principal trading exchange
or
market for the Common Stock (the “Principal
Market”),
and
will comply in all respects with the Company's reporting, filing and
other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the
Common Stock
from any Principal Market. As of the date of this Agreement and the
Closing
Date, the Bulletin Board is and will be the Principal Market.
(c) Market
Regulations.
The
Company shall notify the Commission, the Principal Market and applicable
state
authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary
action and
proceedings as may be required and permitted by applicable law, rule
and
regulation, for the legal and valid issuance of the Securities to the
Subscribers and promptly provide copies thereof to the Subscribers.
(d) Filing
Requirements.
From
the
date of this Agreement and until the later to occur of (i) two (2)
years after
the Closing Date, or (ii) until all the Shares and Warrant Shares have
been
resold or transferred by all the Subscribers pursuant to a registration
statement, if any, or pursuant to Rule 144, without regard to volume
limitations
(the date of occurrence of the second such event being the “End
Date”),
the
Company will (A) cause its Common Stock to be registered under Section
12(b) or
12(g) of the 1934 Act, (B) comply in all respects with its reporting
and filing
obligations under the 1934 Act, and (C) voluntarily comply with all
reporting
requirements that are applicable to an issuer with a class of shares
registered
pursuant to Section 12(b) or Section 12(g) of the 1934 Act, if the
Company is
not subject to such reporting requirements. The Company will not take
any action
or file any document (whether or not permitted by the 1933 Act or the
1934 Act
or the rules thereunder) to terminate or suspend its reporting and
filing
obligations under said acts until the End Date. Until the End Date,
the Company
will continue the listing or quotation of the Common Stock on a Principal
Market
and will comply in all respects with the Company's reporting, filing
and other
obligations under the bylaws or rules of the Principal Market. The
Company
agrees to timely file a Form D with respect to the Securities if required
under
Regulation D and to provide a copy thereof to each Subscriber promptly
after
such filing.
11
(e) Use
of
Proceeds.
The
proceeds of the Offering will be employed by the Company as described
on
Schedule
9(e).
Except
as set forth on Schedule
9(e),
the
Purchase Price may not and will not be used for accrued and unpaid
officer and
director salaries, payment of financing related debt, redemption of
outstanding
notes or equity instruments of the Company nor non-trade obligations
outstanding
on a Closing Date. Until the End Date, the Company will not prepay
any financing
related debt obligations nor redeem any equity instruments of the
Company.
(f) Reservation.
Prior
to the Closing Date, and at all times thereafter, the Company shall
have
reserved, pro rata,
on
behalf of each holder of a Warrant, from its authorized but unissued
Common
Stock, a number of share of Common Stock equal to the amount of Warrant
Shares
issuable upon exercise of the Warrants.
(g)
DTC
Program.
At all
times that Warrants are outstanding, the Company will employ as the
transfer
agent for the Common Stock, Shares and Warrant Shares a participant
in the
Depository Trust Company Automated Securities Transfer Program.
(h) Taxes.
From
the date of this Agreement and until the End Date, the Company will
promptly pay
and discharge, or cause to be paid and discharged, when due and payable,
all
lawful taxes, assessments and governmental charges or levies imposed
upon the
income, profits, property or business of the Company; provided, however,
that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company shall have set aside on its books adequate reserves
with
respect thereto, and provided, further, that the Company will pay all
such
taxes, assessments, charges or levies forthwith upon the commencement
of
proceedings to foreclose any lien which may have attached as security
therefore.
(i) Insurance.
From
the date of this Agreement and until the End Date, the Company will
keep its
assets which are of an insurable character insured by financially sound
and
reputable insurers against loss or damage by fire, explosion and other
risks
customarily insured against by companies in the Company’s line of business, in
amounts sufficient to prevent the Company from becoming a co-insurer
and not in
any event less than one hundred percent (100%) of the insurable value
of the
property insured less reasonable deductible amounts; 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.
(j) Books
and Records.
From the
date of this Agreement and until the End Date, the Company will keep
true
records and books of account in which full, true and correct entries
will be
made of all dealings or transactions in relation to its business and
affairs in
accordance with generally accepted accounting principles applied on
a consistent
basis.
(k) Governmental
Authorities.
From the
date of this Agreement and until the End Date, the Company shall duly
observe
and conform in all material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its properties
or
assets.
(l) Intellectual
Property.
From
the date of this Agreement and until the End Date, the Company shall
maintain in
full force and effect its corporate existence, rights and franchises
and all
licenses and other rights to use intellectual property owned or possessed
by it
and reasonably deemed to be necessary to the conduct of its business,
unless it
is sold for value.
(m) Properties.
From the
date of this Agreement and until the End Date, the Company will keep
its
properties in good repair, working order and condition, reasonable
wear and tear
excepted, and from time to time make all necessary and proper repairs,
renewals,
replacements, additions and improvements thereto; and the Company will
at all
times comply with each provision of all leases 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.
12
(n) Confidentiality/Public
Announcement.
From the
date of this Agreement and until the End Date, the Company agrees that
except in
connection with a Form 8-K in connection with the Offering or in correspondence
with the SEC regarding same, it will not disclose publicly or privately
the
identity of the Subscribers unless expressly agreed to in writing by
each
Subscriber to be identified but only to the extent required by law
and then only
upon five days prior notice to Subscriber. In any event and subject
to the
foregoing, the Company undertakes to file the Merger 8-K including
a description
of the Offering substantively in the form submitted to Subscribers,
not later
than the fourth business day after the Closing Date. Upon delivery
by the
Company to the Subscribers after the Closing Date of any notice or
information,
in writing, electronically or otherwise, and while Shares, Warrants,
or Warrant
Shares are held by such Subscribers, unless the Company has in good
faith
determined that the matters relating to such notice do not constitute
material,
nonpublic information relating to the Company or Subsidiaries, the
Company shall
within one business day after any such delivery publicly disclose such
material,
nonpublic information on a Report on Form 8-K or otherwise. In
the event that the Company believes that a notice or communication
to a
Subscriber contains material, nonpublic information, relating to the
Company or
Subsidiaries, the Company shall so indicate to such Subscriber contemporaneously
with delivery of such notice or information. In the absence of any
such
indication, such Subscriber shall be allowed to presume that all matters
relating to such notice and information do not constitute material,
nonpublic
information relating to the Company or its Subsidiaries.
(o) Non-Public
Information.
The
Company covenants and agrees that except for the Reports, Other Written
Information and schedules and exhibits to this Agreement, which information
the
Company undertakes to publicly disclose not later than the sooner of
the
required or actual filing date of the Merger 8-K described in Section
9(n)
above, neither it nor any other person acting on its behalf will at
any time
provide any Subscriber or its agents or counsel with any information
that the
Company believes constitutes material non-public information, unless
prior
thereto such Subscriber shall have agreed in writing to receive such
information. The Company understands and confirms that each Subscriber
shall be
relying on the foregoing representations in effecting transactions
in securities
of the Company.
(p) Further
Registration Statements.
Except
in connection with the Underwritten Offering [as defined in Section
12(a)], the
Company will not, without the consent of the Subscribers holding a
majority of
the Shares and the Warrant Shares outstanding on the date consent is
requested,
file with the Commission or with state regulatory authorities any registration
statement or amend any already filed registration statement to increase
the
amount of Common Stock registered therein, or reduce the price at which
such
Common Stock is registered therein, (including but not limited to Forms
S-8),
until the expiration of the “Exclusion
Period,”
which
shall be defined as twelve months after the Closing Date.
(q) Blackout.
The
Company undertakes and covenants that without the consent of the Subscribers,
until the end of the Exclusion Period, the Company will not enter into
any
acquisition, merger, exchange or sale or other transaction or fail
to take any
action that could have the effect of making Rule 144 unavailable to
the
Subscribers for unrestricted resales of the Shares without volume limitations
or
further restrictions on transfer for a period of twenty or more days
in the
aggregate during any three hundred and sixty-five day period.
(r) Offering
Restrictions.
Until
the expiration of the Exclusion Period, the Company will not enter
into any
Equity Line of Credit or similar agreement, nor issue nor agree to
issue any
floating or Variable Priced Equity Linked Instruments nor any of the
foregoing
or equity with price reset rights (collectively, the “Variable
Rate Restrictions”).
For
purposes hereof, “Equity
Line of Credit”
shall
include any transaction involving a written agreement between the Company
and an
investor or underwriter whereby the Company has the right to “put” its
securities to the investor or underwriter over an agreed period of
time and at
an agreed price or price formula, and “Variable
Priced Equity Linked Instruments”
shall
include: (A) any debt or equity securities which are convertible into,
exercisable or exchangeable for, or carry the right to receive additional
shares
of Common Stock either (1) at any conversion, exercise or exchange
rate or other
price that is based upon and/or varies with the trading prices of or
quotations
for Common Stock at any time after the initial issuance of such debt
or equity
security, or (2) with a fixed conversion, exercise or exchange price
that is
subject to being reset at some future date at any time after the initial
issuance of such debt or equity security due to a change in the market
price of
the Company’s Common Stock since date of initial issuance, and (B) any
amortizing convertible security which amortizes prior to its maturity
date,
where the Company is required or has the option to (or any investor
in such
transaction has the option to require the Company to) make such amortization
payments in shares of Common Stock which are valued at a price that
is based
upon and/or varies with the trading prices of or quotations for Common
Stock at
any time after the initial issuance of such debt or equity security
(whether or
not such payments in stock are subject to certain equity
conditions).
13
(s) Lockup
Agreement.
The
Company will deliver to the Subscribers on or before the Closing Date
and
enforce the provisions of an irrevocable lockup agreement (each a “Lockup
Agreement”)
in the
forms annexed hereto as Exhibits
E(1), E(2), and E(3),
with
the persons identified on Schedule
9(s)
(each a
“Restricted
Person”
and
collectively, “Restricted
Persons”).
Schedule
9(s)
identifies the form of Lockup Agreement to which each Restricted Person
is
subject. The Company acknowledges that a “Transaction”
as
defined in the Lockup Agreements annexed hereto as Exhibits
E(2)
and
E(3),
has
occurred, the Offering is also an “Event”
as
defined in the Lockup Agreements annexed hereto as Exhibits
E(2)
and
E(3),
and that
the Subscribers are “Third-Party
Beneficiaries”
under
all of the Lockup Agreements. The Company acknowledges that the Subscribers
have
requested that the Lockup Agreements be enforced and the Company agrees
to
enforce the provisions of the Lockup Agreements for the benefit of
the
Subscribers.
(t) Notices.
For so
long as the Subscribers hold any Securities, the Company will maintain
a United
States address and United States fax number for notices purposes under
the
Transaction Documents.
10. Covenants
of the Company Regarding Indemnification.
(a) The
Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers' officers, directors, agents, Affiliates,
members,
managers, control persons, and principal shareholders, against any
claim, cost,
expense, liability, obligation, loss or damage (including reasonable
legal fees)
of any nature, incurred by or imposed upon the Subscriber or any such
person
which results, arises out of or is based upon (i) any material misrepresentation
by Company or breach of any representation or warranty by Company in
this
Agreement or in any Exhibits or Schedules attached hereto, 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 Subscriber relating hereto.
(b) Promptly
after receipt by Subscriber of notice of the commencement of any action,
Subscriber shall, if a claim in respect thereof is to be made against
the
Company hereunder, notify the Company in writing thereof, but the omission
so to
notify the Company shall not relieve it from any liability which it
may have the
Subscriber other than under this Section 10(b) and shall only relieve
it from
any liability which it may have to such Subscriber under this Section
10(b),
except and only if and to the extent the Company is prejudiced by such
omission.
In case any such action shall be brought against Subscriber and it
shall notify
the Company of the commencement thereof, the Company 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 Subscriber, and,
after notice
from the Company to such Subscriber of its election so to assume and
undertake
the defense thereof, the Company shall not be liable to such Subscriber
under
this Section 10(b) for any legal expenses subsequently incurred by
such
Subscriber 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 Subscriber and
the Company
and the Company shall have reasonably concluded that there may be reasonable
defenses available to Subscriber which are different from or additional
to those
available to the Company or if the interests of the Subscriber reasonably
may be
deemed to conflict with the interests of each other, the Subscriber
and the
Company, as a group, shall have the right to select one separate counsel,
reasonably satisfactory to the Subscriber and Company, 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 Company as incurred.
14
11.1. Delivery
of Unlegended Shares.
(a) Within
3
business days (such third business day being the “Unlegended
Shares Delivery Date”)
after
the business day on which the Company has received (i) a notice that
Shares or
Warrant Shares or any other Common Stock held by a Subscriber have
been sold
pursuant to a registration statement, if any, or Rule 144, (ii) a representation
that the prospectus delivery requirements, or the requirements of Rule
144, as
applicable and if required, have been satisfied, (iii) the original
share
certificates representing the shares of Common Stock that have been
sold, and
(iv) in the case of sales under Rule 144, customary representation
letters of
the Subscriber and/or a Subscriber’s broker regarding compliance with the
requirements of Rule 144, the Company at its expense, (y) shall deliver,
and
shall cause legal counsel selected by the Company to deliver to its
transfer
agent (with copies to Subscriber) an appropriate instruction and opinion
of such
counsel, directing the delivery of shares of Common Stock without any
legends
including the legend set forth in Section 4(i)
above
(the “Unlegended
Shares”);
and
(z) cause the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the balance
of the
submitted certificate, if any, to the Subscriber at the address specified
in the
notice of sale, via express courier, by electronic transfer or otherwise
on or
before the Unlegended Shares Delivery Date.
In the
event that the Shares are sold in a manner that complies with an exemption
from
registration, the Company will promptly instruct its counsel to issue
to the
Company’s transfer agent an opinion permitting removal of the legend
(indefinitely, if pursuant to Rule 144(k) of the 1933 Act, or for 90
days if
pursuant to the other provisions of Rule 144).
(b) In
lieu
of delivering physical certificates representing the Unlegended Shares,
upon
request of a Subscriber, so long as the certificates therefor do not
bear a
legend and the Subscriber is not obligated to return such certificate for the
placement of a legend thereon, the Company will cause its transfer
agent to
electronically transmit the Unlegended Shares by crediting the account
of
Subscriber’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission system, if such transfer agent participates
in such
DWAC system. Such delivery must be made on or before the Unlegended
Shares
Delivery Date.
(c) The
Company understands that a delay in the delivery of the Unlegended
Shares
pursuant to Section 11 hereof later than the Unlegended Shares Delivery
Date
could result in economic loss to a Subscriber. As compensation to a
Subscriber
for such loss, the Company agrees to pay late payment fees (as liquidated
damages and not as a penalty) to the Subscriber for late delivery of
Unlegended
Shares in the amount of $100 per business day after the Delivery Date
for each
$10,000 of purchase price of the Unlegended Shares subject to the delivery
default. In the event damages are payable pursuant to the foregoing
sentence and
pursuant to Section 1.7 of the Warrant in connection with the same
Warrant
Shares, then the Subscriber may elect to receive liquidated damages
under this
Section 11.1(c) or Section 1.7 of the Warrant or Section 13(g) below.
If during
any 360 day period, the Company fails to deliver Unlegended Shares
as required
by this Section 11.1 for an aggregate of 30 days, then each Subscriber
or
assignee holding Securities subject to such default may, at its option,
require
the Company to redeem all or any portion of the Shares and Warrant
Shares
subject to such default at a price per share equal to the greater of
(i) 120% of
the purchase price of such Shares and Warrant Shares, or (ii) a fraction
in
which the numerator is the highest closing price of the Common Stock
during the
aforedescribed 30 day period and the denominator of which is the purchase
price
of the Shares and Exercise Price of the Warrant Shares, as the case
may be,
during such 30 day period, multiplied by the purchase price of the
Shares and
Exercise Price of the Warrant Shares, as the case may be (“Unlegended
Redemption Amount”).
The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand.
15
(d)
In
addition to any other rights available to a Subscriber, if the Company
fails to
deliver to a Subscriber Unlegended Shares as required pursuant to this
Agreement, within 7 business days after the Unlegended Shares Delivery
Date and
the Subscriber or a broker on the Subscriber’s behalf, purchases (in an open
market transaction or otherwise) shares of common stock to deliver
in
satisfaction of a sale by such Subscriber of the shares of Common Stock
which
the Subscriber was entitled to receive from the Company (a "Buy-In"),
then
the Company shall pay in cash to the Subscriber (in addition to any
remedies
available to or elected by the Subscriber) the amount by which (A)
the
Subscriber's total purchase price (including brokerage commissions,
if any) for
the shares of Common Stock so purchased exceeds (B) the aggregate purchase
price
of the shares of Common Stock delivered to the Company for reissuance
as
Unlegended Shares together
with interest thereon at a rate of 15% per annum accruing until such
amount and
any accrued interest thereon is paid in full (which amount shall be
paid as
liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a
total
purchase price of $11,000 to cover a Buy-In with respect to $10,000
of purchase
price of shares of Common Stock delivered to the Company for reissuance
as
Unlegended Shares, the Company shall be required to pay the Subscriber
$1,000,
plus interest. The
Subscriber shall provide the Company written notice indicating the
amounts
payable to the Subscriber in respect of the Buy-In.
(e) In
the
event a Subscriber shall request delivery of Unlegended Shares as described
in
Section 11.1 or Warrant Shares upon exercise of Warrants and the Company
is
required to deliver such Unlegended Shares pursuant to Section 11.1
or the
Warrant Shares pursuant to the Warrants, the Company may not refuse
to deliver
Unlegended Shares or Warrant Shares based on any claim that such Subscriber
or
any one associated or affiliated with such Subscriber has been engaged
in any
violation of law, or for any other reason, unless, an injunction or
temporary
restraining order from a court, on notice, restraining and or enjoining
delivery
of such Unlegended Shares or exercise of all or part of said Warrant
shall have
been sought and obtained by the Company or at the Company’s request or with the
Company’s assistance,
and the
Company has posted a surety bond for the benefit of such Subscriber
in the
amount of 120% of the amount of the aggregate purchase price of the
Shares and
Warrant Shares which are subject to the injunction or temporary restraining
order, which bond shall remain in effect until the final unappealable
disposition of the litigation of the dispute and the proceeds of which
shall be
payable to such Subscriber to the extent Subscriber obtains judgment
in
Subscriber’s favor.
11.2. In
the
event commencing one hundred and eighty-one (181) days after the Closing
Date
and ending one year thereafter, the Subscriber is not permitted to
resell any of
the Shares or Warrant Shares without any restrictive legend or if such
sales are
permitted but subject to volume limitations or further restrictions
on resale as
a result of the unavailability to Subscriber of Rule 144(k) under the
1933 Act
or any successor rule (a “144
Default”),
for
any reason except for Subscriber’s status as an Affiliate or “control person” of
the Company, then the Company shall pay such Subscriber as liquidated
damages
(“Liquidated
Damages”)
and
not as a penalty an amount equal to one and one-half percent (1.5%)
for each
thirty (30) days (or such lesser pro-rata amount for any period less
than thirty
(30) days) of the purchase price of the Shares and Warrant Shares owned
by the
Subscriber during the pendency of the 144 Default. For purposes of
this Section
11.2, the entire Purchase price of the Units will be allocated to the
Shares and
the purchase price of actually held Warrant Shares will be the aggregate
Exercise Price thereof. Liquidated Damages will not be payable in connection
with Shares and Warrant Shares that are not transferable due to the
applicability of the Subscriber Lockup. Liquidated Damages must be
paid in cash
within ten (10) days after each thirty (30) day period or shorter period
for
which Liquidated Damages are payable.
16
11.3. Subscriber
Questionnaire.
Each
Seller shall answer the questions set forth in Selling Shareholder
Questionnaire
(“Subscriber
Questionnaire”)
in the
form attached as Exhibit
F
and
deliver such completed Subscriber Questionnaire to the Company and
Broker on or
prior to the Closing Date. Seller represents that the information provided
by
such Seller shall be true and correct as of the Closing Date and the
date such
Subscriber Questionnaire is delivered to the Company and Broker.
12. (a) Favored
Nations Provision.
Other
than in connection with the Excepted Issuances (defined below), if
at any time
the Warrants are outstanding, or with respect to the Shares still owned
of
record and beneficially by a Subscriber until eighteen months after
the Closing
Date, if the Company shall agree to or issue (the “Lower
Price Issuance”)
any
Common Stock or securities convertible into or exercisable for shares
of Common
Stock (or modify any of the foregoing which may be outstanding) at
a price per
share or conversion or exercise price per share which shall be less
than the
purchase price in respect of the Shares, or if less than the Exercise
Price in
respect of the Warrant Shares, without the consent of each Subscriber,
then the
Company shall issue, for each such occasion, additional shares of Common
Stock
to each Subscriber respecting those Shares and Warrant Shares at the
time of the
Lower Price Issuance so that the average per share purchase price of
such Shares
and Warrant Shares is equal to such other lower price per share and
the Exercise
Price shall automatically be reduced to such other lower price. The
average
purchase price of the Shares and average Exercise Price in relation
to the
Warrant Shares shall be calculated separately for the Shares and Warrant
Shares.
Common Stock issued or issuable by the Company for no consideration
will be
deemed issuable or to have been issued for $0.001 per share of Common
Stock. The
delivery to a Subscriber of the additional shares of Common Stock shall
be not
later than the closing date of the transaction giving rise to the requirement
to
issue additional shares of Common Stock. For purposes of the issuance
and
adjustment described in this paragraph, the issuance of any security
of the
Company 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 the
issuance of the additional shares of Common Stock upon the sooner of
the
agreement to or actual issuance of such convertible security, warrant,
right or
option and again at any time upon any subsequent issuances of shares
of Common
Stock upon exercise of such conversion or purchase rights if such issuance
is at
a price lower than the purchase price of the Shares or Exercise Price
in effect
upon such issuance. The rights of each Subscriber set forth in this
Section
12(a) are in addition to any other rights the Subscriber has pursuant
to any
Transaction Document, and any other agreement referred to or entered
into in
connection herewith or to which such Subscriber and Company are parties.
Each
Subscriber is also given the right to elect to substitute any term
or terms of
any other offering in connection with a Lower Price Issuance for any
term or
terms of the Offering in connection with Securities owned by such Subscriber
as
of the date of a Lower Price Issuance. “Excepted
Issuances”
shall
mean (i) full or partial consideration in connection with a strategic
merger,
acquisition, consolidation or purchase of substantially all of the
securities
or assets of corporation or other entity which holders of such securities
or
debt are not at any time granted registration rights, (ii)
the
Company’s issuance of securities in connection with strategic license agreements
and other partnering arrangements so long as such issuances are not
for the
purpose of raising capital and which holders of such securities or
debt are not
at any time granted registration rights, (iii) the Company’s issuance of Common
Stock or the issuances or grants of options to purchase Common Stock
to
employees, directors, and consultants, pursuant to plans described
on
Schedule
5(d),
(iv) an
underwritten public offering that raises gross proceeds of not less
than
$5,000,000 from the sale of Common Stock at not less than $1.00 per
share,
preferred stock the initial conversion ratio for which is equivalent
to not less
than $1.00 per share of Common Stock, and in the case of warrants or
options
issued in connection therewith at exercise prices of not less than
$1.00 per
share (“Underwritten
Offering”),
and
(v) as a result of the exercise of Warrants which are granted or issued
pursuant
to this Agreement on the terms described in the Transaction Documents
as of the
Closing Date.
17
(b) Maximum
Exercise of Rights.
In the
event the exercise of the rights described in Section 12(a) would
or
could result in the issuance of an amount of Common Stock of the Company
that
would exceed the maximum amount that may be issued to a Subscriber
calculated in
the manner described in Section 10 of the Warrant, then the issuance
of such
additional shares of Common Stock of the Company to such Subscriber
will be
deferred in whole or in part until such time as such Subscriber is
able to
beneficially own such Common Stock without exceeding the applicable
maximum
amount set forth calculated in the manner described in Section 7.3
of this
Agreement. The determination of when such Common Stock may be issued
shall be
made by each Subscriber as to only such Subscriber.
13. Miscellaneous.
(a) Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in
the mail,
registered or certified, return receipt requested, postage prepaid,
(iii)
delivered by reputable air courier service with charges prepaid, or
(iv)
transmitted by hand delivery, telegram, or facsimile, addressed as
set forth
below or to such other address as such party shall have specified most
recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or
delivery by
facsimile, with accurate confirmation generated by the transmitting
facsimile
machine, at the address or number designated below (if delivered on
a business
day during normal business hours where such notice is to be received),
or the
first business day following such delivery (if delivered other than
on a
business day during normal business hours where such notice is to be
received)
or (b) on the second business day following the date of mailing by
express
courier service, fully prepaid, addressed to such address, or upon
actual
receipt of such mailing, whichever shall first occur. The addresses
for such
communications shall be: (i) if to the Company, to: Purple Beverage
Company,
Inc., 000 X. Xxx Xxxx Xxxx., #000, Xx. Xxxxxxxxxx, XX 00000, Attn:
Xxxxxxxx
Xxxxxxxxxx, President, facsimile:
(000)
000-0000, with a copy by facsimile only to: Xxxxx Xxxx LLP, 0000 Xxxx
Xxxxxx,
Xxxxx 000, Xxxxxx, XX 00000, Attn: Xxxxxxx X. Xxxx, Esq., facsimile:
(000)
000-0000, (ii) if to the Subscriber, to: the one or more addresses
and facsimile
numbers indicated on the signature pages hereto, with an additional
copy by
facsimile only to: Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000,
Xxx Xxxx, XX 00000, facsimile: (000) 000-0000, and (iii) if to the
Broker, to:
Palladium Capital Advisors, LLC, 000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxx,
XX 00000,
Attn: Xxxxxxx Xxxxxxxxx, facsimile: (000) 000-0000.
(b) Entire
Agreement; Assignment.
This
Agreement and other documents delivered in connection herewith represent
the
entire agreement between the parties hereto with respect to the subject
matter
hereof and may be amended only by a writing executed by the Company
and the
affected Subscriber and as described in Section 13(h). Neither the
Company nor
the Subscribers have relied on any representations not contained or
referred to
in this Agreement and the documents delivered herewith. No right or
obligation
of the Company shall be assigned without prior notice to and the written
consent
of the Subscribers.
(c) Counterparts/Execution.
This
Agreement may be executed in any number of counterparts and by the
different
signatories hereto on separate counterparts, each of which, when so
executed,
shall be deemed an original, but all such counterparts shall constitute
but one
and the same instrument. This Agreement may be executed by facsimile
signature
and delivered by facsimile transmission.
(d) Law
Governing this Agreement.
This
Agreement shall be governed by and construed in accordance with the
laws of the
State of New York without regard to principles of conflicts of laws.
Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts
of New
York or in the federal courts located in the state and county of New
York. The
parties to this Agreement hereby irrevocably waive any objection to
jurisdiction
and venue of any action instituted hereunder and shall not assert any
defense
based on lack of jurisdiction or venue or based upon forum
non conveniens.
The
parties executing this Agreement and other agreements referred to herein
or
delivered in connection herewith on behalf of the Company agree to
submit to the
in personam jurisdiction of such courts and hereby irrevocably waive
trial by
jury. The
prevailing party shall be entitled to recover from the other party
its
reasonable attorney's fees and costs. In the event that any provision
of this
Agreement or any other agreement delivered in connection herewith is
invalid or
unenforceable under any applicable statute or rule of law, then such
provision
shall be deemed inoperative to the extent that it may conflict therewith
and
shall be deemed modified to conform with such statute or rule of law.
Any such
provision which may prove invalid or unenforceable under any law shall
not
affect the validity or enforceability of any other provision of any
agreement.
18
(e) Specific
Enforcement, Consent to Jurisdiction.
The
Company and Subscriber acknowledge and agree that irreparable damage
would occur
in the event that any of the provisions of this Agreement were not
performed in
accordance with their specific terms or were otherwise breached. It
is
accordingly agreed that the parties shall be entitled to seek an injunction
or
injunctions to prevent or cure breaches of the provisions of this Agreement
and
to enforce specifically the terms and provisions hereof, this being
in addition
to any other remedy to which any of them may be entitled by law or
equity.
Subject to Section 13(d) hereof, the Company hereby irrevocably waives,
and
agrees not to assert in any such suit, action or proceeding, any claim
that it
is not personally subject to the jurisdiction in New York of such court,
that
the suit, action or proceeding is brought in an inconvenient forum
or that the
venue of the suit, action or proceeding is improper. Nothing in this
Section
shall affect or limit any right to serve process in any other manner
permitted
by law.
(f) Independent
Nature of Subscribers.
The
Company acknowledges that the obligations of each Subscriber under
the
Transaction Documents are several and not joint with the obligations
of any
other Subscriber, and no Subscriber shall be responsible in any way
for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The
Company acknowledges that each Subscriber has represented that the
decision of
each Subscriber to purchase Securities has been made by such Subscriber
independently of any other Subscriber and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company which may have been made or
given by any
other Subscriber or by any agent or employee of any other Subscriber,
and no
Subscriber or any of its agents or employees shall have any liability
to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The
Company acknowledges that nothing contained in any Transaction Document,
and no
action taken by any Subscriber pursuant hereto or thereto shall be
deemed to
constitute the Subscribers as a partnership, an association, a joint
venture or
any other kind of entity, or create a presumption that the Subscribers
are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company
acknowledges
that each Subscriber shall be entitled to independently protect and
enforce its
rights, including without limitation, the rights arising out of the
Transaction
Documents, and it shall not be necessary for any other Subscriber to
be joined
as an additional party in any proceeding for such purpose. The Company
acknowledges that it has elected to provide all Subscribers with the
same terms
and Transaction Documents for the convenience of the Company and not
because
Company was required or requested to do so by the Subscribers. The
Company
acknowledges that such procedure with respect to the Transaction Documents
in no
way creates a presumption that the Subscribers are in any way acting
in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated thereby.
(g) Damages.
In the
event the Subscriber is entitled to receive any liquidated damages
pursuant to
the Transaction Documents, the Subscriber may elect to receive the
greater of
actual damages or such liquidated damages.
(h) Consent.
As used
in the Agreement, “consent of the Subscribers” or similar language means the
consent of holders (the “Required
Holders”)
of not
less than 70% of the total of the Shares, and Warrant Shares held by
Subscribers
on the date consent is requested.
19
(i) Equal
Treatment.
No
consideration shall be offered or paid to any person to amend or consent
to a
waiver or modification of any provision of the Transaction Documents
unless the
same consideration is also offered and paid to all the Subscribers
and their
permitted successors and assigns.
(j) Maximum
Payments.
Nothing
contained herein or in any document referred to herein or delivered
in
connection herewith shall be deemed to establish or require the payment
of a
rate of interest or other charges in excess of the maximum permitted
by
applicable law. In the event that the rate of interest or dividends
required to
be paid or other charges hereunder exceed the maximum permitted by
such law, any
payments in excess of such maximum shall be credited against amounts
owed by the
Company to the Subscriber and thus refunded to the Company.
(k) Calendar
Days.
All
references to “days” in the Transaction Documents shall mean calendar days
unless otherwise stated. The terms “business days” and “trading days” shall mean
days that the New York Stock Exchange is open for trading for three
or more
hours. Time periods shall be determined as if the relevant action,
calculation
or time period were occurring in New York City. Any deadline that falls
on a
non-business day in any of the Transaction Documents shall be automatically
extended to the next business day and interest, if any, shall be calculated
and
payable through such extended period.
(l) Captions:
Certain Definitions.
The
captions of the various sections and paragraphs of this Agreement have
been
inserted only for the purposes of convenience; such captions are not
a part of
this Agreement and shall not be deemed in any manner to modify, explain,
enlarge
or restrict any of the provisions of this Agreement. As used in this
Agreement
the term “person”
shall
mean and include an individual, a partnership, a joint venture, a corporation,
a
limited liability company, a trust, an unincorporated organization
and a
government or any department or agency thereof.
(m) Severability.
In the
event that any term or provision of this Agreement shall be finally
determined
to be superseded, invalid, illegal or otherwise unenforceable pursuant
to
applicable law by an authority having jurisdiction and venue, that
determination
shall not impair or otherwise affect the validity, legality or enforceability:
(i) by or before that authority of the remaining terms and provisions
of this
Agreement, which shall be enforced as if the unenforceable term or
provision
were deleted, or (ii) by or before any other authority of any of the
terms and
provisions of this Agreement.
(n) Successor
Laws.
References in the Transaction Documents to laws, rules, regulations
and forms
shall also include successors to and functionally equivalent replacements
of
such laws, rules, regulations and forms. A successor rule to 144(k)
shall
include any rule that would be available to a non-Affiliate of the
Company for
the sale of Common Stock not subject to volume restrictions.
20
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement
by signing
and returning a copy to the undersigned whereupon it shall become a
binding
agreement between us.
|
PURPLE
BEVERAGE COMPANY, INC.
a
Nevada corporation
|
||
| |
|
|
| By: | ||
|
Name:
|
||
| Title: President | ||
| Dated: _________________, 2007 | ||
|
SUBSCRIBER
|
AGGREGATE
PURCHASE PRICE (CASH)
|
SHARES
|
WARRANTS
|
|||
|
Name
of Subscriber:
______________________________________
Address:
_______________________________
______________________________________
Fax
No.: ______________________________
Email
address (not for notice purposes): _________________________
Social
Security Number or Taxpayer ID#
(if
applicable): _________________________
Jurisdiction
of organization (for entities): __________________________
______________________________________
(Signature)
By:
___________________________________
Name:
________________________________
Title:
_________________________________
|
21
LIST
OF EXHIBITS AND SCHEDULES
|
Exhibit
A
|
Form
of Warrant
|
|
|
Exhibit
B
|
Escrow
Agreement
|
|
|
Exhibit
C
|
Form
of Merger 8-K
|
|
|
Exhibit
D
|
Form
of Legal Opinions
|
|
|
Exhibit
E(1)
|
Form
of Lockup Agreement (Insider Group)
|
|
|
Exhibit
E(2)
|
Form
of Lockup Agreement (Service Providers)
|
|
|
Exhibit
E(3)
|
Form
of Lockup Agreement (Venture Beverage Investors)
|
|
|
Exhibit
F
|
Subscriber
Questionnaire
|
|
|
Schedule
5(a)
|
Subsidiaries
|
|
|
Schedule
5(d)
|
Additional
Issuances / Capitalization
|
|
|
Schedule
5(o)
|
Undisclosed
Liabilities
|
|
|
Schedule
5(w)
|
Transfer
Agent
|
|
|
Schedule
9(e)
|
Use
of Proceeds
|
|
|
Schedule
9(s)
|
Lockup
Agreement Providers
|
22
EXHIBIT
E
LOCKUP
AGREEMENT
This
AGREEMENT (the "Agreement") is made as of the ____ day of __________,
2007, by
_________________ ("Holder"), maintaining an address at c/o Purple
Beverage Company, Inc., 000 X. Xxx Xxxx Xxxx., #000, Xx. Xxxxxxxxxx,
XX 00000,
facsimile:
(000)
000-0000,
in
connection with his or its ownership of shares of Purple Beverage Company,
Inc.,
a
Nevada corporation
(the "Company").
NOW,
THEREFORE, for good and valuable consideration, the sufficiency and
receipt of
which consideration are hereby acknowledged, Holder agrees as
follows:
1. Background.
a.
Holder
is
the beneficial owner of the amount of shares of the Common Stock, $.001
par
value, of the Company (“Common Stock”) designated on the signature page
hereto.
x. Xxxxxx
acknowledges that the Company has entered into or will enter into at
or about
the date hereof agreements including Subscription Agreements with subscribers
(“Subscribers”), effective as of the date hereof for the Company’s Common Stock
and Warrants exercisable for Common Stock (the “Offering”). Holder understands
that, as a condition to closing the Offering, the Subscribers have
required, and
the Company has agreed to obtain on behalf of the Subscribers an agreement
from
the Holder to refrain from selling any securities of the Company from
the date
hereof until the sooner of (i) eighteen months after the date hereof,
or (ii)
the Registration Statement (as defined in the Subscription Agreement)
has been
effective for 270 days (“Restriction Period”). The Holder has entered into this
Agreement in order to induce the Subscribers to close the transactions
contemplated by such agreements.
2. Sale
Restriction.
a. Holder
hereby agrees that during the Restriction Period without the consent
of the
Required Holders (as defined in the Subscription Agreement), the Holder
will not
sell, transfer or otherwise dispose of any shares of Common Stock or
any
options, warrants or other rights to purchase shares of Common Stock
or any
other security of the Company which Holder owns or has a right to acquire
as of
the date hereof or during the Restriction Period, other than in connection
with
an offer made to all stockholders of the Company in connection with
merger,
consolidation or similar transaction involving the Company. Holder
further
agrees that the Company is authorized to and the Company agrees to
place "stop
orders" on its books to prevent any transfer of shares of Common Stock
or other
securities of the Company held by Holder in violation of this Agreement.
The
Company agrees not to allow to occur any transaction inconsistent with
this
Agreement.
b. Any
subsequent issuance to and/or acquisition by Holder of Common Stock
or options
or instruments convertible into Common Stock (“Convertible Securities”) during
the Restriction Period will be subject to the provisions of this
Agreement.
c. Notwithstanding
the foregoing restrictions on transfer, the Holder may, at any time
and from
time to time during the Restriction Period, transfer all or a portion
of the
shares of Common Stock or Convertible Securities (i) as bona fide gifts
or
transfers by will or intestacy, (ii) to any trust for the direct or
indirect
benefit of the undersigned or the immediate family of the Holder, provided
that
any such transfer shall not involve a disposition for value, and (iii)
in bona
fide sales for cash at more than $4.00 per share of Common Stock; provided,
that, in the case of any gift or transfer described in clauses (i),
(ii), and
(iii), each donee or transferee agrees in writing to be bound by the
terms and
conditions contained herein in the same manner as such terms and conditions
apply to the undersigned.
23
3. Miscellaneous.
a. At
any
time, and from time to time, after the signing of this Agreement Holder
will
execute such additional instruments and take such action as may be
reasonably
requested by the Subscribers to carry out the intent and purposes of
this
Agreement.
b. 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. The
parties to
this Agreement hereby irrevocably waive any objection to jurisdiction
and venue
of any action instituted hereunder and shall not assert any defense
based on
lack of jurisdiction or venue or based upon forum
non conveniens.
The
parties executing this Agreement and other agreements referred to herein
or
delivered in connection herewith agree to submit to the in personam
jurisdiction
of such courts and hereby irrevocably waive trial by jury.
The
prevailing party shall be entitled to recover from the other party
its
reasonable attorney's fees and costs. In the event that any provision
of this
Agreement or any other agreement delivered in connection herewith is
invalid or
unenforceable under any applicable statute or rule of law, then such
provision
shall be deemed inoperative to the extent that it may conflict therewith
and
shall be deemed modified to conform with such statute or rule of law.
Any such
provision which may prove invalid or unenforceable under any law shall
not
affect the validity or enforceability of any other provision of any
agreement.
c. All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in
the mail,
registered or certified, return receipt requested, postage prepaid,
(iii)
delivered by reputable air courier service with charges prepaid, or
(iv)
transmitted by hand delivery, telegram, or facsimile, addressed as
set forth
below or to such other address as such party shall have specified most
recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or
delivery by
facsimile, with accurate confirmation generated by the transmitting
facsimile
machine, at the address or number designated below (if delivered on
a business
day during normal business hours where such notice is to be received),
or the
first business day following such delivery (if delivered other than
on a
business day during normal business hours where such notice is to be
received)
or (b) on the second business day following the date of mailing by
express
courier service, fully prepaid, addressed to such address, or upon
actual
receipt of such mailing, whichever shall first occur. The addresses
for such
communications shall be: (i) if to the Company, to: Purple Beverage
Company,
Inc., 000 X. Xxx Xxxx Xxxx., #000, Xx. Xxxxxxxxxx, XX 00000, Attn:
Xxxxxxxx
Xxxxxxxxxx, President, facsimile:
(000)
000-0000, with a copy by facsimile only to: Xxxxx Xxxx LLP, 0000 Xxxx
xxxxxx,
Xxxxx 000, Xxxxxx, XX 00000, Attn: Xxxxxxx X. Xxxx, Esq., facsimile:
(000)
000-0000, (ii) if to the Holder, to: the address and facsimile number
indicated
on first page of this Lockup Agreement.
d. Each
party hereby irrevocably waives personal service of process and consents
to
process being served in any suit, action or proceeding in connection
with this
Agreement or any other Transaction Document by mailing a copy thereof
via
registered or certified mail or overnight delivery (with evidence of
delivery)
to such party at the address in effect for notices to it under this
Agreement
and agrees that such service shall constitute good and sufficient service
of
process and notice thereof. Nothing contained herein shall be deemed
to limit in
any way any right to serve process in any other manner permitted by
law. Holder
irrevocably appoints Purple Beverage Company, Inc. its true and lawful
agent for
service of process upon whom all processes of law and notices may be
served and
given in the manner described above; and such service and notice shall
be deemed
valid personal service and notice upon Holder with the same force and
validity
as if served upon Holder.
24
e. The
restrictions on transfer described in this Agreement are in addition
to and
cumulative with any other restrictions on transfer otherwise agreed
to by the
Holder or to which the Holder is subject to by applicable law.
f. This
Agreement shall be binding upon Holder, its legal representatives,
successors
and assigns.
g. This
Agreement may be signed and delivered by facsimile and such facsimile
signed and
delivered shall be enforceable.
h. The
Company agrees not to take any action or allow any act to be taken
which would
be inconsistent with this Agreement.
i. The
Holder acknowledges that this Lockup Agreement is being entered into
for the
benefit of the Subscribers identified in the Subscription Agreement
dated on or
about ___________ ___, 2007 among the Company and the Subscribers,
may be
enforced by the Subscribers and may not be amended without the consent
of the
Subscriber, which may be withheld for any reason.
IN
WITNESS WHEREOF, and intending to be legally bound hereby, Holder has
executed
this Agreement as of the day and year first above written.
|
HOLDER:
|
||
| (Signature of Holder) | ||
| (Print Name of Holder) | ||
|
Number
of Shares of Common Stock
Actually
Owned
|
||
|
Number
of Shares of Common Stock
Beneficially
Owned. (Describe such shares
and
related instruments on next page)
|
||
|
COMPANY:
|
||
| PURPLE BEVERAGE COMPANY, INC. | ||
|
By:
|
25
EXHIBIT
F
SUBSCRIBER
QUESTIONNAIRE
I. The
Subscriber represents and warrants that he or it comes within one category
marked
below,
and
that for any category marked, he or it has truthfully set forth, where
applicable, the factual basis or reason the Subscriber comes within
that
category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT
STRICTLY
CONFIDENTIAL. The undersigned shall furnish any additional information
which
Purple Beverage Company, Inc. (the “Company”) deems necessary in order to verify
the answers set forth below.
|
Category
A ___
|
The
undersigned is an individual (not a partnership, corporation,
etc.) whose
individual net worth, or joint net worth with his or her
spouse, presently
exceeds $1,000,000.
|
|
|
Explanation.
In calculating net worth you may include equity in personal
property and
real estate, including your principal residence, cash,
short-term
investments, stock and securities. Equity in personal property
and real
estate should be based on the fair market value of such
property less debt
secured by such property.
|
||
|
Category
B ___
|
The
undersigned is an individual (not a partnership, corporation,
etc.) who
had an individual income in excess of $200,000 in each
of the two most
recent years, or joint income with his or her spouse in
excess of $300,000
in each of those years (in each case including foreign
income, tax exempt
income and full amount of capital gains and losses but
excluding any
income of other family members and any unrealized capital
appreciation)
and has a reasonable expectation of reaching the same income
level in the
current year.
|
|
|
Category
C ___
|
The
undersigned is a director or executive officer of the Company
which is
issuing and selling the Company’s $.001 par value Common Stock (the
“Shares”)
and common stock purchase warrants (the “Warrants”)
(collectively referred to as the “Securities”).
|
|
|
Category
D ___
|
The
undersigned is a bank; savings and loan association; registered
broker-dealer; insurance company; registered investment
company;
registered business development company; licensed small
business
investment company (“SBIC”);
any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state
or its political
subdivisions, for the benefit of its employees, if such
plan has total
assets in excess of $5,000,000; or employee benefit plan
within the
meaning of Title 1 of ERISA and (a) the investment decision
is made by a
plan fiduciary which is either a bank, savings and loan
association,
insurance company or registered investment advisor, or
(b) the plan has
total assets in excess of $5,000,000 or is a self directed
plan with
investment decisions made solely by persons that are accredited
investors.
|
|
|
__________________________________________
|
||
|
__________________________________________
|
||
|
(describe
entity)
|
26
|
Category
E ___
|
The
undersigned is a private business development company
as defined in
section 202(a)(22) of the Investment Advisors Act of
1940.
|
|
|
__________________________________________
|
||
|
__________________________________________
|
||
|
(describe
entity)
|
||
|
Category
F ___
|
The
undersigned is either a corporation, partnership, Massachusetts
business
trust, or non-profit organization within the meaning
of Section 501(c)(3)
of the Internal Revenue Code, in each case not formed
for the specific
purpose of acquiring the Securities and with total assets
in excess of
$5,000,000.
|
|
|
__________________________________________
|
||
|
__________________________________________
|
||
|
(describe
entity)
|
||
|
Category
G ___
|
The
undersigned is a trust with total assets in excess of
$5,000,000, not
formed for the specific purpose of acquiring the Securities,
where the
purchase is directed by a “sophisticated person” as defined in Regulation
506(b)(2)(ii) under the Securities Act.
|
|
|
Category H ___
|
The
undersigned is an entity (other than a trust) all the
equity owners of
which are “accredited investors” within one or more of the above
categories. If relying upon this Category alone, each
equity owner must
complete a separate copy of this Agreement.
|
|
|
__________________________________________
|
||
|
__________________________________________
|
||
|
(describe
entity)
|
||
|
Category I ___
|
The undersigned is not within any of the categories above and is therefore not an accredited investor. |
(a)
As
used herein, the term “net worth” means the excess of total assets at fair
market value (including home and personal property) over total liabilities
(including mortgage). For purposes hereof, “individual income” means adjusted
gross income less any income attributable to a spouse or to property
owned by a
spouse, increased by the following amounts (but not including any amounts
attributable to a spouse or to property owned by a spouse): (i) the
amount of
any interest income received which is tax-exempt under Section 103
of the
Internal Revenue Code of 1986, as amended (the “Code”),
(ii)
the amount of losses claimed as a limited partner in a limited partnership
(as
reported on Schedule E of Form 1040), (iii) any deduction claimed for
depletion
under Section 611 et seq. of the Code, and (iv) any amount by which
income from
long-term capital gains has been reduced in arriving at adjusted gross
income
pursuant to the provisions of Section 12.02 of the Code.
The
undersigned agrees that the undersigned will notify the Company at
any time on
or prior to the execution of this Agreement in the event that the
representations and warranties in this Agreement shall cease to be
true,
accurate and complete.
27
II. SUITABILITY
(please
answer each question)
(a) For
an
individual Subscriber, please describe your current employment, including
the
company by which you are employed and its principal business:
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
(b) For
an
individual Subscriber, please describe any college or graduate degrees
held by
you:
______________________________________________________________________________________________________
______________________________________________________________________________________________________
(c) For
all
Subscribers, please list types of prior investments:
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
(d) For
all
Subscribers, please state whether you have you participated in other
private
placements
before:
YES_______ NO_______
(e) If
your
answer to question (d) above was “YES”, please indicate frequency of such prior
participation in private
placements
of:
|
Public
Companies
|
Private
Companies
|
|||
|
Frequently
|
_________
|
_________
|
||
|
Occasionally
|
_________
|
_________
|
||
|
Never
|
_________
|
_________
|
(f) For
individual Subscribers, do you expect your current level of income
to
significantly decrease in the foreseeable future:
YES_______ NO_______
(g) For
trust, corporate, partnership and other institutional Subscribers,
do you expect
your total assets to significantly decrease in the foreseeable future:
YES_______ NO_______
(h) For
all
Subscribers, do you have any other investments or contingent liabilities
which
you reasonably anticipate could cause you to need sudden cash requirements
in
excess of cash readily available to you:
YES_______ NO_______
(i) For
all
Subscribers, are you familiar with the risk aspects and the non-liquidity
of
investments such as the Securities for which you seek to subscribe?
YES_______ NO_______
28
(j) For
all
Subscribers, do you understand that there is no guarantee of financial
return on
this investment and that you run the risk of losing your entire
investment?
YES_______ NO_______
III. MANNER
IN WHICH TITLE IS TO BE HELD.
(circle one)
(a)
Individual
Ownership
(b)
Community
Property
(c)
Joint
Tenant with Right of
Survivorship (both parties
must
sign)
(d)
Partnership*
(e) Tenants
in Common
(f)
Corporation*
(g)
Trust*
(h)
Limited
Liability Company*
(i)
Other
*If
Securities are being subscribed for by an entity, the attached Certificate
of
Signatory must also be completed.
IV. NASD
AFFILIATION.
Are
you
affiliated or associated with an NASD member firm (please
check one):
Yes
_________ No
__________
If
Yes,
please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
*If
Subscriber is a Registered Representative with an NASD member firm,
have the
following acknowledgment signed by the appropriate party:
The
undersigned NASD member firm acknowledges receipt of the notice required
by Rule
3050 of the NASD Conduct Rules.
_________________________________
Name
of
NASD Member Firm
By:
______________________________
Authorized
Officer
Date:
____________________________
29
V. The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor
Questionnaire
contained herein and such answers have been provided under the assumption
that
the Company will rely on them.
VI. In
furnishing the above information, the undersigned acknowledges that
the Company
will be relying thereon in determining, among other things, whether
there are
reasonable grounds to believe that the undersigned qualifies as a Purchaser
under Section 4(2) and/or Regulation D of the Securities Act of 1933
and
applicable state securities laws for the purposes of the proposed
investment.
VII. The
undersigned understands and agrees that the Company may request further
information of the undersigned in verification or amplification of
the
undersigned's knowledge of business affairs, the undersigned's assets
and the
undersigned's ability to bear the economic risk involved in an investment
in the
securities of the Company.
VIII. The
undersigned represents to you that (a) the information contained herein
is
complete and accurate on the date hereof and may be relied upon by
you and (b)
the undersigned will notify you immediately of any change in any such
information occurring prior to the acceptance of the subscription and
will
promptly send you written confirmation of such change. The undersigned
hereby
certifies that he, she or it has read and understands the Subscription
Agreement
related hereto.
IX. In
order
for the Company to comply with applicable anti-money laundering/U.S.
Treasury
Department Office of Foreign Assets Control (“OFAC”)
rules
and regulations, Subscriber is required to provide the following
information:
1. Payment
Information
(a)
Name
and address (including country) of the bank from which Subscriber’s payment to
the Company is being wired (the “Wiring
Bank”):
_______________________________________
_______________________________________
_______________________________________
_______________________________________
|
(b)
|
Subscriber’s
wiring instructions at the Wiring
Bank:
|
_______________________________________
_______________________________________
_______________________________________
(c)
Is
the Wiring Bank located in the U.S. or another “FATF
Country”*?
*
As of
the date hereof, countries that are members of the Financial Action
Task Force
on Money Laundering (“FATF
Country”)
are:
Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland,
France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan,
Luxembourg,
Mexico, Kingdom of the Netherlands, New Zealand, Norway, Portugal,
Russian
Federation, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey,
United
Kingdom and the United States of America.
30
_____
Yes ______
No
(d)
Is
Subscriber a customer of the Wiring Bank?
_____
Yes ______
No
2. Additional
Information
(N.B.:
this Section applies only to prospective investors who responded “no” to either
of Question I(c) or I(d) above.)
The
following materials must be provided to the Company (forms will be
provided by
the Company upon request):
For
Individual Investors:
|
_____
|
A
government issued form of picture identification (e.g.,
passport or drivers
license).
|
|
_____
|
Proof
of the individual’s current address (e.g.,
current utility xxxx), if not included in the form of picture
identification.
|
For
Funds of Funds or Entities that Invest on Behalf of Third Parties Not
Located in
the U.S. or Other FATP Countries:
|
_____
|
A
certificate of due formation and organization and continued
authorization
to conduct business in the jurisdiction of its organization
(e.g.,
certificate of good standing).
|
|
_____
|
An
“incumbency certificate” attesting to the title of the individual
executing these subscription materials on behalf of the prospective
investor.
|
|
_____
|
A
completed copy of a certification that the entity has adequate
anti-money
laundering policies and procedures (“AML
Policies and Procedures”)
in place that are consistent with the USA PATRIOT Act, OFAC
and other
relevant federal, state or non-U.S. anti-money laundering
laws and
regulations (with a copy of the entity’s current AML Policies and
Procedures to which such certification
relates).
|
|
_____
|
A
letter of reference from the entity’s local office of a reputable bank or
brokerage firm that is incorporated, or has its principal
place of
business located, in the U.S. or other FATF Country certifying
that the
prospective investor maintains an account at such bank/brokerage
firm for
a length of time and containing a statement affirming the
prospective
investor’s integrity.
|
For
all other Entity Investors:
|
_____
|
A
certificate of due formation and organization and continued
authorization
to conduct business in the jurisdiction of its organization
(e.g.,
certificate of good
standing).
|
|
_____
|
An
“incumbency certificate” attesting to the title of the individual
executing these subscription materials on behalf of the prospective
investor.
|
31
|
_____
|
A
letter of reference from the entity’s local office of a reputable bank or
brokerage firm that is incorporated, or has its principal
place of
business located, in the U.S. or other FATF Country certifying
that the
prospective investor maintains an account at such bank/brokerage
firm for
a length of time and containing a statement affirming the
prospective
investor’s integrity.
|
|
_____
|
If
the prospective investor is a privately-held entity, a certified
list of
the names of every person or entity who is directly or indirectly
the
beneficial owner of 25% or more of any voting or non-voting
class of
equity interests of the Subscriber, including (i) country
of citizenship
(for individuals) or principal place of business (for entities)
and, (ii)
for individuals, such individual’s principal employer and
position.
|
|
_____
|
If
the prospective investor is a trust, a certified list of
(i) the names of
the current beneficiaries of the trust that have, directly
or indirectly,
25% or more of any interest in the trust, (ii) the name of
the settler of
the trust, (iii) the name(s) of the trustee(s) of the trust,
and (iv) the
country of citizenship (for individuals) or principal place
of business
(for entities).
|
ARTICLE
X. ADDITIONAL
INFORMATION
A
TRUST
MUST ATTACH A COPY OF ITS DECLARATION OF TRUST OR OTHER GOVERNING INSTRUMENT,
AS
AMENDED, AS WELL AS ALL OTHER DOCUMENTS THAT AUTHORIZE THE TRUST TO
INVEST IN
THE SECURITIES. ALL RESOLUTIONS AND DOCUMENTATION MUST BE COMPLETE
AND CORRECT
AS OF THE DATE HEREOF.
32
EXECUTION
PAGE
PURCHASE
PRICE = $_____________ (US Dollars)
NUMBER
OF SHARES OF COMMON STOCK = _______________
NUMBER
OF WARRANTS = __________________
|
Signature
|
Signature
(if purchasing jointly)
|
|
|
Name
Typed or Printed
|
Name
Typed or Printed
|
|
|
Entity
Name
|
Entity
Name
|
|
|
Address
|
Address
|
|
|
City,
State and Zip Code
|
City,
State and Zip Code
|
|
|
Telephone-Business
|
Telephone-Business
|
|
|
Telephone-Residence
|
Telephone-Residence
|
|
|
Facsimile-Business
|
Facsimile-Business
|
|
|
Facsimile-Residence
|
Facsimile-Residence
|
|
|
Tax
ID # or Social Security #
|
Tax
ID # or Social Security #
|
|
| Email Address | ||
| Name in which the Securities should be issued: | ____________________ | |
| Dated: ________________, 2007 |
This
Confidential Subscriber Questionnaire is executed as of ___________________,
2007.
| By: | ||
|
Name: |
||
|
Title:
|
||
33
