NARROWSTEP INC. SUBSCRIPTION AGREEMENT
Exhibit 10.1
000
Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Gentlemen:
Reference is hereby made to the
Agreement and Plan of Merger, dated as of May 29, 2008, among Onstream Media
Corporation (“Onstream”), Onstream Merger Corp. (“Merger Sub”), Narrowstep Inc.
(the Company”) and X. Xxxxxx Xxxxx XX, as amended by First Amendment to
Agreement and Plan of Merger, dated of even date herewith (the “Merger
Agreement”). The Merger Agreement provides for, among other things,
the merger of Merger Sub with and into the Company (the
“Merger”). Capitalized terms used herein have the respective meanings
ascribed thereto in the Merger Agreement unless otherwise defined
herein.
The
undersigned desires to purchase shares of the Company’s Series A Preferred Stock
having substantially the terms and conditions described in Schedule I attached
hereto (the “Preferred Stock”) for an aggregate purchase price of
$___________. The parties hereto acknowledge that the only condition
precedent to the obligation of the undersigned to purchase the shares of
Preferred Stock subscribed for pursuant to this Subscription Agreement (this
“Agreement”) is the simultaneous consummation of the Merger and that an escrow
agent selected by the Company shall hold the above referenced purchase price in
escrow to be released upon the undersigned’s purchase of the Preferred Stock in
accordance with the terms of this Agreement. In connection with the
foregoing, the undersigned agrees to execute and deliver an escrow agreement in
form and substance reasonably satisfactory to such escrow agent and the
Company.
The
undersigned acknowledges that a certificate of relative rights, privileges and
designations of the Preferred Stock (the “Certificate of Designation”) shall be
filed by the Company with the Secretary of State of Delaware prior to the
Effective Time of the Merger. In addition, the undersigned
acknowledges that (i) on or prior to May 29, 2008 the Company entered into
subscription agreements for the purchase by investors of an aggregate of
$300,000 of Preferred Stock (the “Original Preferred Stock Investment”); and
(ii) the Company intends to offer additional shares of Preferred Stock in such
amounts as determined by the Company (the
"Offering"). Assuming $700,000 of Preferred Stock is purchased in the
Offering, the aggregate number of shares of Preferred Stock issued pursuant to
the Original Preferred Stock Investment and the Offering for an aggregate
purchase price of $1,000,000 will, subject to and in accordance with the terms
of the Merger Agreement, at the Effective Time, be automatically converted into
and become the right to receive 2,000,000 shares of Onstream common stock, par
value $0.0001 per share.
In connection with this Agreement, the
undersigned subscriber represents and acknowledges as follows:
Section 1. Access to Information.
The Company has provided access to the
undersigned and any investment advisor, attorney, accountant and/or other
purchaser representative acting on behalf of the undersigned (all of whom are
hereinafter collectively referred to as "purchaser representatives") copies of
all filings made by the Company with the Securities and Exchange Commission (the
“SEC”) on or prior to the date hereof (the “SEC Filings”), and an opportunity to
ask questions and receive answers concerning the proposed business of the
Company and the terms and conditions of the Merger and the Offering, and have
provided to the undersigned and the undersigned's purchaser representative(s),
if any, an opportunity to obtain any and all additional information necessary to
verify the accuracy of the information which has been furnished.
Section 2. Reliance on Own Knowledge and Experience or
Purchaser Representative.
The undersigned represents that it is
(i) an institutional “accredited investor” within the meaning of Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act of 1933, as amended
(the “Act”), or (ii) a “qualified institutional buyer” as such term is defined
pursuant to Rule 144A promulgated under the Act, as specified by the undersigned
on the signature page to this Agreement, and that he has had prior investment
experience, including investments in unregistered securities and is qualified by
training and experience in business and financial matters to evaluate the merits
and risks of an investment such as the purchase of the Preferred Stock offered
by the Company.
Section 3. Subscriber's Acknowledgments.
The Company has disclosed to me and the
undersigned understands that:
(a) There
is no present public market for the Preferred Stock and it is unlikely that a
public market for the Preferred Stock will develop in the future.
(c) Due
to the absence of a public market for the Preferred Stock: (i) the undersigned
may not be able to liquidate this investment in the event of an unexpected need
for cash; (ii) transferability of the Preferred Stock is extremely limited; and
(iii) in the event of a disposition of the Preferred Stock, the undersigned
could sustain the loss of all or part of his investment in the Preferred
Stock.
(d) The
Preferred Stock has not been registered under the Act or State securities laws
and, therefore, the Preferred Stock cannot be resold or transferred unless it is
subsequently registered under the Act and applicable State securities or "Blue
Sky" laws or exemptions from such registration are available.
(e) A
legend summarizing the restrictions on the transfer of the Preferred Stock will
be made on the Preferred Stock to be purchased by me.
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(f) The
Preferred Stock has not been registered under the Act in reliance upon an
exemption under the provisions of that Act which depends, in part, upon the
investment intention of the purchaser. In this connection, the
undersigned understands that it is the position of the SEC that the statutory
basis for such exemption would not be present if the representation of the
purchaser merely meant that its present intention was to hold such Preferred
Stock for a short period, such as the capital gains period of the Internal
Revenue Code, for a deferred sale, for a market rise, or for a sale if the
market does not rise (assuming that a market develops) for a year, or for any
other fixed period. The undersigned realizes that, in the view of the
SEC, a purchase now with an intent to resell would represent a purchase with an
intent inconsistent with this investment representation, and the SEC might
regard such a sale or disposition as a deferred sale to which the exemption is
not available.
(g) An
investment in the Company involves considerable risks not associated with other
investments, including without limitation, the risks identified in the SEC
Filings.
(h) No
Federal or State agency has made any finding or determination as to the fairness
of the investment, nor have they made any recommendation or endorsement
concerning the Preferred Stock.
(i) This
Subscription Agreement is not revocable by the undersigned and the undersigned
is submitting this Agreement intending to be legally bound thereby.
(j) The
undersigned acknowledges that he has reviewed the SEC Filings to the extent he
deemed necessary or advisable. The undersigned has had an opportunity
to ask questions of and has received answers from the Company concerning any of
the information contained in the SEC Filings and any other information requested
by the undersigned regarding the Merger, the Offering and the business and
operations of the Company.
Section 4. Subscriber Representations.
The undersigned represents and warrants
as follows:
(a) The
undersigned is acquiring the Preferred Stock for his own account for investment
only and not for or with a view to resale or distribution. The
undersigned has not entered into any contract, undertaking, agreement or
arrangement with any person to sell, transfer or pledge to such person or anyone
else the Preferred Stock which he is subscribing to purchase and the undersigned
has no present plans or intentions to enter into any such contract, undertaking,
agreement or arrangement.
(b) The
undersigned can bear the economic risk of losing his entire investment in the
Preferred Stock. The undersigned is prepared to bear the economic
risk of this investment for an indefinite time.
(c) The
overall commitment of the undersigned to investments which are not readily
marketable is not disproportionate to his net worth, and an investment in the
Preferred Stock will not cause such overall commitment to become
excessive. The undersigned's need for diversification in his
investment portfolio will not be impaired by an investment in the
Company.
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(d) The
undersigned has adequate means of satisfying his short term needs for cash and
has no present need for liquidity which would require him to sell his Preferred
Stock.
(e) The
undersigned has substantial experience in making investment decisions of this
type and/or he is relying on his own advisors in making this investment decision
and, therefore, either alone or together with its advisors, he has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of an investment in the Company.
(f) The
principal business address of the undersigned, or if the undersigned is an
individual, his principal residence, is in the state indicated in the address
beneath his signature at the end of this Agreement. Unless otherwise
indicated, all communications, contacts and discussions relating to the Offering
occurred in the state in which the undersigned maintains its office, or if the
undersigned is an individual, in the state in which he maintains his
residence.
Section 5. Reliance on Representations.
The undersigned acknowledges and
understands that the Company and its directors, officers, employees, agents and
representatives are relying upon the information, representations and agreements
contained in this Agreement and upon any other information which has been
furnished by the undersigned in determining that the undersigned is a suitable
investor and that this investment is duly authorized and in deciding to accept
the undersigned's subscription for the Preferred Stock.
Section 6. Agreements of
the Undersigned Subscriber.
The undersigned hereby agrees as
follows:
(a) This
offer may be accepted or rejected, in whole or in part, in the sole discretion
of the Company.
(b) In
the event this offer to purchase is accepted, the undersigned agrees to execute
all documents in connection therewith deemed necessary or advisable by the
Company in its sole discretion.
(c) Any
Preferred Stock acquired pursuant to the Offering will not be sold or otherwise
transferred: (i) without the prior written consent of the Company, which consent
shall be conditioned on receipt of an opinion of counsel reasonably satisfactory
to the Company to the effect that such proposed transfer is being made pursuant
to the registration requirements of the Act or pursuant to an exemption
therefrom and complies in all respects with any applicable state securities or
"Blue Sky" laws, or (ii) without registration under the Act and applicable State
securities or "Blue Sky" laws.
(d) In
the event the subscription is not accepted, any money tendered will be refunded
in full without interest and without deduction within a reasonable period of
time.
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Section 7. Representations Relating to Authority.
If the undersigned subscriber is a
corporation, partnership, trust or other entity, the undersigned represents and
warrants that:
(a) It
is duly incorporated or organized, validly existing and in good standing in its
state of incorporation or organization and in all other jurisdictions in which
the character of its business makes such qualification necessary.
(b) It
has full power and authority to enter into, deliver and perform this Agreement
and it has taken all action required to authorize the execution and delivery of
this Agreement and to consummate the transactions contemplated
hereby. This Agreement is the valid and binding obligation of the
subscriber, enforceable against it in accordance with its terms and the person
signing such documents on behalf of the subscriber has been duly authorized to
act on behalf of and to bind the subscriber.
(c) The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not violate any provision of the
certificate of incorporation and by-laws or the partnership agreement, trust
agreement or limited liability company operating agreement, as applicable, or
any agreement or contract to which the subscriber is a party or by which it is
bound, or any applicable law, ordinance, rule or regulation of any governmental
body having jurisdiction over the subscriber or its business or any order,
judgment or decree applicable to the subscriber.
Section 8. Consent to
Merger.
The undersigned subscriber hereby
consents to, ratifies and approves the Merger and consents to, ratifies and
approves the Merger Agreement. If requested by the Company or
Onstream, the undersigned hereby agrees to execute a separate consent evidencing
the consent of the undersigned as a holder of Preferred Stock to the approval of
the Merger and the adoption of the Merger Agreement and to take such actions as
may be reasonably requested to evidence such consent and approval.
Section 9. Indemnification.
The undersigned subscriber agrees to
indemnify and hold harmless the Company and each director, officer, employee,
agent or representative thereof from and against any and all loss, damage or
liability and all related costs and expenses (including but not limited to,
reasonable attorney's fees and costs of investigation) due to or arising out of
a breach of any covenant, representation or warranty made by him in this
Agreement.
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Section 10. Miscellaneous.
(a) All
notices or other communications given or made hereunder shall be in writing and
shall be delivered or mailed by registered or certified mail, return receipt
requested, postage prepaid to the undersigned at the address set forth below and
to the Company at the address set forth above.
(b) Notwithstanding
the place where this Agreement may be executed by any of the parties hereto, the
parties expressly agree that all the terms and provisions hereof shall be
governed by, and construed in accordance with, the laws of the State of New York
without regard to the choice of law principles thereof.
(c) This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and may be amended only by a writing
executed by all parties.
(d) Whenever
required by the context hereof, the singular shall include the plural, and
vice-versa; the masculine shall include the feminine and neuter genders, and
vice-versa; and the word "person" shall include an individual, corporation,
partnership, trust, estate or other entity.
Section 11. Foreign Person. (check
one)
o The
undersigned hereby certifies that he is not a "foreign person" within the
meaning of Section 7701(a)(30) of the Internal Revenue Code and agrees to notify
the Company prior to becoming a foreign person as so defined. A
"foreign person" is a person who is not a citizen or resident of the United
States.
o The
undersigned hereby certifies that he is a "foreign person" within the meaning of
Section 7701(a)(30) of the Internal Revenue Code.
Section 12. Subscription.
The undersigned hereby subscribes for
shares of Preferred Stock at the aggregate purchase price indicated
below:
Purchase
Price: $______________
The check of the undersigned in the
amount indicated above, payable to the Company, or a wire transfer or delivery
to the account of the Company, will be delivered to the Company upon demand and,
in any event, prior to the Effective Time.
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THE
UNDERSIGNED SUBCRIBER HEREBY REPRESENTS AND WARRANTS TO THE COMPANY THAT IT
IS:
o an
institutional “accredited investor” within the meaning of Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act of 1933, as
amended.
o a
“qualified institutional buyer” as such term is defined pursuant to Rule 144A
under the Securities Act of 1933, as amended.
NAME AND
ADDRESS OF
SUBSCRIBER: ____________________________________________________________________________
__________________________________________________________________________________________________________
_____________________________ ___________________________________
Telephone
Number Signature,
if individual
_____________________________ By:________________________________
Social
Security Number
or
Taxpayer I.D.
No. ___________________________________
TITLE, if applicable
Company Acceptance:
Accepted on ___________________,
2008
By:________________________________________
Title:
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Schedule
I
Material Terms of Series A
Preferred Stock
The
Series A Preferred Stock shall be entitled to such dividends as may be declared
by the board of Directors from time to time out of funds legally available
therefor.
Upon any
liquidation, dissolution or winding up of the Company, the holders of the Series
A Preferred Stock shall be entitled to a liquidation preference equal to the
stated value of the shares of Series A Preferred Stock held by them together
with all unpaid dividends in respect thereof.
Holders
of Series A Preferred Stock shall have no voting rights except as may be
provided by applicable law.
No shares
of any class or series ranking prior to the Series A Preferred Stock as to
dividends or upon liquidation may be issued without the approval of the holders
of a majority of the Series A Preferred Stock then outstanding.
The
holders of the Series A Preferred Stock shall have no right to convert the
Series A Preferred Stock into Common Stock or any other security of the Company
and shall have no right to force the redemption or repurchase of the Series A
Preferred Stock by the Company.
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