SUBSCRIPTION AGREEMENT
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THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of April 29,
2005, by and among Techedge, Inc., a Delaware corporation (the "Company"), and
the subscribers identified on the signature pages 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 at two or more Closings up to One Million Dollars ($1,000,000) (the
"Purchase Price") of shares of the Company's common stock, $.0001 par value (the
"Common Stock") at a per share price of $0.68, and warrants (the "Warrants"), in
the form attached hereto as Exhibit A, to purchase shares of Common Stock (the
"Warrant Shares"). Up to Five Hundred Thousand Dollars ($500,000) of the
Purchase Price shall be payable on the Initial Closing Date as defined in
Section 1 hereof. Up to Five Hundred Thousand Dollars ($500,000) of the Purchase
Price will be payable within five (5) business days after the actual
effectiveness (the "Actual Effective Date") of the Registration Statement as
defined in Section 11.1(iv) of this Agreement. The shares of Common Stock sold
pursuant to this Agreement (the "Shares"), the Warrants and the Warrant Shares
are collectively referred to herein as the "Securities"; and
WHEREAS, the aggregate proceeds of the sale of the Shares and the 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. Initial Closing. Subject to the satisfaction or waiver of the terms and
conditions of this Agreement, on the Initial Closing Date, each Subscriber shall
purchase and the Company shall sell to each Subscriber the number of Shares and
Warrants designated to be sold to such Subscriber on the Initial Closing Date as
set forth on the signature page hereto next to the name of such Subscriber (the
"Initial Closing Shares" and "Initial Closing Warrants," respectively). The
aggregate purchase price of the Initial Closing Shares to be purchased by the
Subscribers on the Initial Closing Date shall be equal to the product obtained
by multiplying (x) the number of Initial Closing Shares by (y) $0.68. The
Initial Closing Date shall be April 29, 2005, or such other date as is mutually
agreed among the parties.
1A. Subsequent Closings
(a) Subsequent Closing Dates. In the event that the Company sells less
than 735,294 shares of Common Stock on the Initial Closing Date, the Company, at
its option, may sell the remaining shares at one or more subsequent closings
(each, a "Subsequent Closing" and collectively, the "Subsequent Closings") which
shall be held at such time and place not later than 30 days after the Initial
Closing Date as shall be mutually agreed upon by the Company and the subsequent
Subscribers (the date of such Subsequent Closing is hereinafter referred to as
"Subsequent Closing Date"). In the event of any Subsequent Closing, each
Subscriber thereat shall sign a counterpart of this Agreement (whereupon such
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subsequent Subscriber shall become a party hereto for all purposes hereof).
Subject to the satisfaction or waiver of the terms and conditions of this
Agreement on a Subsequent Closing Date, each Subscriber shall purchase and the
Company shall sell to each Subscriber the number of Shares and Warrants
designated to be sold to such Subscriber on the Subsequent Closing Date as set
forth on the signature page hereto next to the name of such Subscriber (the
"Subsequent Closing Shares" and "Subsequent Closing Warrants," respectively).
The aggregate purchase price of the Subsequent Closing Shares to be purchased by
the Subscribers on a Subsequent Closing Date shall be equal to the product
obtained by multiplying (x) the number of Subsequent Closing Shares to be
purchased on such Subsequent Closing Date by (y) $0.68.
(b) Conditions to Subsequent Closing. The occurrence of a Subsequent
Closing is expressly contingent on (i) the truth and accuracy, in all material
respects, on the applicable Subsequent Closing Date of the representations and
warranties of the Company and each subsequent Subscriber contained in this
Agreement, (ii) continued compliance in all material respects with the covenants
of the Company set forth in this Agreement, (iii) the non-occurrence of any
material default by the Company of its obligations and undertakings contained in
this Agreement. The exercise prices of the Warrants issuable on the Subsequent
Closing Date shall be adjusted to offset the effect of stock splits, stock
dividends, pro rata distributions of property or equity interests to the
Company's shareholders after the Initial Closing Date.
(c) Subsequent Closing Deliveries. On a Subsequent Closing Date, the
Company will deliver the Subsequent Closing Shares and Subsequent Closing
Warrants to the Escrow Agent and each Subscriber will deliver his respective
portion of the Purchase Price applicable thereto to the Escrow Agent. On a
Subsequent Closing Date, the Company will deliver a certificate ("Subsequent
Closing Certificate") signed by its chief executive officer or chief financial
officer (i) representing the truth and accuracy in all material respects of all
the representations and warranties made by the Company contained in this
Agreement, as of the Subsequent Closing Date, as if such representations and
warranties were made and given on such date, (ii) adopting the covenants and
conditions set forth in Sections 9, 10, 11, and 12 of this Agreement in relation
to the Shares and Warrants to be delivered on such Subsequent Closing Date, and
(iii) certifying the non-occurrence of any material default by the Company of
its obligations and undertakings contained in this Agreement. A legal opinion
nearly identical to the legal opinion substantially in the form Annexed hereto
as Exhibit C shall be delivered to each Subscriber purchasing Securities at the
Subsequent Closing in relation to the Company and the Shares and Warrants to be
purchased on such Subsequent Closing Date ("Subsequent Closing Legal Opinion").
2. Final Closing.
(a) Final Closing. The closing date in relation to the Final Closing
Purchase Price shall be the fifth (5th) day after the Actual Effective Date (the
"Final Closing Date"). Each of the Initial Closing Date, a Subsequent Closing
Date and the Final Closing Date is hereinafter referred to individually as a
"Closing Date." Subject to the satisfaction or waiver of the terms and
conditions of this Agreement on the Final Closing Date, each Subscriber shall
purchase and the Company shall sell to each Subscriber the number of Shares and
Warrants designated on the signature page hereto next to the name of such
Subscriber (the "Final Closing Shares" and "Final Closing Warrants,"
respectively). The aggregate purchase price of the Final Closing Shares to be
purchased by the Subscribers on the Final Closing Date shall be equal to the
product obtained by multiplying (x) the number of Final Closing Shares by (y)
$0.68.
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(b) Conditions to Final Closing. The occurrence of the Final Closing is
expressly contingent on (i) the truth and accuracy, in all material respects, on
the Actual Effective Date and the Final Closing Date of the representations and
warranties of the Company and each Subscriber contained in this Agreement, (ii)
continued compliance in all material respects with the covenants of the Company
set forth in this Agreement, (iii) the non-occurrence of any material default by
the Company of its obligations and undertakings contained in this Agreement,
(iv) the delivery on the Final Closing Date of Final Closing Shares covered by
the Registration Statement, which Registration Statement must be declared
effective by the Commission on or before the Final Closing Date, and (v) the
delivery of the Final Closing Warrants for which the Warrant Shares issuable
upon exercise thereof have been included in the Registration Statement. The
exercise prices of the Warrants issuable on the Final Closing Date shall be
adjusted to offset the effect of stock splits, stock dividends, pro rata
distributions of property or equity interests to the Company's shareholders
after the Initial Closing Date.
(c) Final Closing Deliveries. On the Final Closing Date, the Company will
deliver the Final Closing Shares and Final Closing Warrants to the Escrow Agent
and each Subscriber will deliver his portion of the respective Purchase Price to
the Escrow Agent. On the Final Closing Date, the Company will deliver a
certificate ("Final Closing Certificate") signed by its chief executive officer
or chief financial officer (i) representing the truth and accuracy in all
material respects of all the representations and warranties made by the Company
contained in this Agreement, as of the Initial Closing Date, any Subsequent
Closing Date, the Actual Effective Date, and the Final Closing Date, as if such
representations and warranties were made and given on all such dates, (ii)
adopting the covenants and conditions set forth in Sections 9, 10, 11, and 12 of
this Agreement in relation to the Final Closing Shares and Final Closing
Warrants, (iii) representing the timely compliance by the Company with the
Company's registration requirements set forth in Section 11 of this Agreement,
and (iv) certifying the non-occurrence of any material default by the Company of
its obligations and undertakings contained in this Agreement. A legal opinion
nearly identical to the legal opinion substantially in the form Annexed hereto
as Exhibit C shall be delivered to each Subscriber at the Final Closing in
relation to the Company, Final Closing Shares, and Final Closing Warrants
("Final Closing Legal Opinion"). The Final Closing Legal Opinion must also state
that all of the Registrable Securities have been included for registration in an
effective registration statement effective as of the Actual Effective Date and
Final Closing Date.
3. Warrants. On each Closing Date, the Company will issue and deliver to
the Subscribers Warrants to purchase four (4) shares of Common Stock for each
ten Shares issued on such Closing Date. The per Warrant Share exercise price to
acquire a Warrant Share upon exercise of a Warrant shall be $1.10. The Warrants
shall be exercisable until five (5) years after each Closing Date.
4. Subscriber's 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 the 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. Each Subscriber has the requisite power and
authority to enter into and perform this Agreement and to purchase the Shares
and Warrants being sold to it hereunder. The execution, delivery and performance
of this Agreement 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, as the case may be, is required. This Agreement has been duly
authorized, executed and delivered by such Subscriber and constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Subscriber enforceable against the Subscriber in accordance with the terms
thereof.
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(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by such Subscriber of the transactions
contemplated hereby 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 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. The Subscriber has been furnished with or has
had access at the XXXXX Website of the Commission to the Company's annual report
on Form 10-KSB for the year ended December 31, 2004 and the Company's proxy
statement for its 2005 annual meeting of stockholders, all as filed with the
Commission, together with all subsequently filed reports on Forms 10-QSB and 8-K
and other filings made by the Company with the Commission and available at the
XXXXX website (hereinafter referred to collectively as the "Reports"). In
addition, the Subscriber has received in writing from the Company such other
information concerning its operations, financial condition and other matters as
the Subscriber has requested in writing (such other information is collectively,
the "Other Written Information"), and considered all factors the Subscriber
deems material in deciding on the advisability of investing in the Securities.
(e) Information on Subscriber. At the time such Subscriber was offered the
Securities, it was and at the date hereof it is, and as of each Subsequent
Closing Date on which it purchases Securities, as of the Final Closing Date and
on each date on which it exercises Warrants it will be, an "accredited
investor", as such term is defined in Regulation D promulgated by the Commission
under the 1933 Act. The Subscriber is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the
authority and is duly and legally qualified to purchase and own the Securities.
The Subscriber is able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof. The information set forth on the
signature page hereto regarding the Subscriber is accurate.
(f) Purchase of Shares and Warrants. On each Closing Date, the 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.
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(g) Compliance with Securities Act. The 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 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. In any event, and subject to
compliance with applicable securities laws, the Subscriber may enter into lawful
hedging transactions with third parties, which may in turn engage in short sales
of the Securities in the course of hedging the position they assume and the
Subscriber may also enter into short positions or other derivative transactions
relating to the Securities, or interests in the Securities, and deliver the
Securities, or interests in the Securities, to close out their short or other
positions or otherwise settle short sales or other transactions, or loan or
pledge the Securities, or interests in the Securities, to third parties that in
turn may dispose of these Securities.
(h) Shares Legend. The Shares and the Warrant Shares shall bear the
following or similar legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR WITH ANY STATE SECURITIES COMMISSION,
AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED BY THE HOLDER IN THE ABSENCE OF A REGISTRATION STATEMENT THAT
IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE LAWS
AND RULES, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO TECHEDGE,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(i) Warrants Legend. The Warrants shall bear the following or similar
legend:
"THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR WITH ANY STATE SECURITIES LAW COMMISSION. THIS WARRANT AND THE
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF A REGISTRATION STATEMENT THAT IS EFFECTIVE UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE LAWS AND RULES, OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO TECHEDGE, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(j) Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber by the Company. At no time was the Subscriber
presented with or solicited by any leaflet, newspaper or magazine article, radio
or television advertisement, or any other form of general advertising or
solicited or invited to attend a promotional meeting.
(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 the 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 Subscriber has full corporate 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 the Subscriber relating hereto.
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(l) Restricted Securities. 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.
Notwithstanding anything to the contrary contained in this Agreement, 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. 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. Each 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) No Market Manipulation. No Subscriber has 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.
(o) No Group Participation. No Subscriber is a member of any group, nor is
any Subscriber acting in concert with any other person, including any other
Subscriber, with respect to its acquisition of the Securities.
(p) Correctness of Representations. Each Subscriber represents as to such
Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and, unless a Subscriber otherwise notifies the
Company prior to each Closing Date shall be true and correct as of each Closing
Date.
(q) Survival. The foregoing representations and warranties shall survive
the Closing Date for a period of three years.
5. Company Representations and Warranties. The Company represents and
warrants to and agrees with each Subscriber that:
(a) Due Incorporation. The Company and each of its Subsidiaries 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 and each of its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. For purposes of this Agreement, a "Material Adverse Effect"
shall mean a material adverse effect on the financial condition, results of
operations, properties or business of the Company and its Subsidiaries taken as
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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 50% 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. All the Company's Subsidiaries as of the
Closing Date are set forth on Schedule 5(a) hereto
(b) Outstanding Stock. All issued and outstanding shares of capital stock
of the Company and each Subsidiary have been duly authorized and validly issued
and are fully paid and nonassessable.
(c) Authority; Enforceability. The execution and delivery of this
Agreement, the Warrants, the Escrow Agreement, and any other agreements
delivered together with this Agreement or in connection herewith (collectively
the "Transaction Documents") have been duly authorized by the Company. Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof, will be
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. The Company has the requisite
corporate power and authority to enter into and deliver the Transaction
Documents and to consummate the transactions contemplated thereby.
(d) [RESERVED].
(e) Consents. No consent, approval, filings, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company, or any of its Affiliates, the 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, other than (i) the filing with the Commission of one or more
Registration Statements in accordance with the requirements of this Agreement,
(ii) filings required by state securities laws, (iii) the filing of a Notice of
Sale of Securities on Form D with the Commission under Regulation D of the
Securities Act, (iv) the filings required in accordance with this Agreement and
(v) those filings that have been made or obtained prior to the date of this
Agreement.
(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
this Agreement and all other agreements entered into by the Company relating
thereto by the Company will:
(i) violate, conflict with, result in a breach of, or constitute a
default (or an event which with the giving of notice or the lapse of time or
both would constitute a default) under (A) the certificate of incorporation,
charter or bylaws of the Company, (B) to the Company's knowledge, any decree,
judgment, order, law, treaty, rule, regulation or determination applicable to
the Company of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company or over the properties or assets of the Company or
any of its Affiliates, (C) the terms of any bond, debenture, note or any other
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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, in each case, violations, conflicts,
breaches, or defaults which would not result in a Material Adverse Effect; or
(ii) except as contemplated hereby, 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; or
(iii) Except as set forth on Schedule 5(f)(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) Except as set forth on Schedule 5(f)(iv), result in the
activation 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 when issued and paid for in accordance
with the Transaction Documents:
(i) will be free and clear of any security interests, liens, claims
or other encumbrances except those created by Subscribers, subject to
restrictions upon transfer under the 1933 Act and any applicable state
securities laws;
(ii) on the date of issuance of the Shares and upon exercise of the
Warrants, the Shares and Warrant Shares will be duly and validly issued, fully
paid and nonassessable;
(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 being such holders; and
(v) will not result in a violation of Section 5 under the 1933 Act.
(h) Litigation. There is no pending or, to the knowledge of the Company,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
Subsidiaries or any of its Affiliates that would materially and adversely affect
the execution by the Company or the performance by the Company of its
obligations under the Transaction Documents. Except as disclosed on the
Disclosure Schedule or in the Reports, there is no pending or, to the knowledge
of the Company, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company, Subsidiaries or any of its Affiliates, which litigation if adversely
determined would have a Material Adverse Effect.
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(i) Reporting Company. The Company has a class of securities registered
pursuant to section 12(g) of the 1934 Act and files periodic and other reports
as required by Section 13(a) of the 1934 Act. Pursuant to the provisions of the
1934 Act, the Company has filed all reports and other materials required to be
filed thereunder with the Commission during the preceding twelve months or has
timely filed a valid extension of such time of filing and has filed any such
Reports prior to the expiration of any such extension.
(j) No Market Manipulation. The Company and its Affiliates have not taken,
and will not take, directly or indirectly, any action in contravention of either
federal or state securities laws 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.
(k) Information Concerning Company. As of their respective dates, the
Reports complied in all material respects with the requirements of the 1933 Act
and the 1934 Act and the rules and regulations of the Commission promulgated
thereunder. Since the date of the 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 or
Subsidiaries' business, financial condition or affairs not disclosed in the
Reports that is required to be disclosed in the Reports. The Reports 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, in
light of the circumstances under which they were made, not misleading.
(l) 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 in
which case contemporaneous notice of such instruction must be given to the
Subscriber.
(m) Defaults. The Company and each Subsidiary is not in violation of its
certificate of incorporation or bylaws. Neither the Company nor any of its
Subsidiaries is (i) in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
Material Adverse Effect nor (ii) in default with respect to any order of any
court, arbitrator or governmental body having jurisdiction over such entity, or
subject to or party to any order of any court or governmental authority having
jurisdiction over the Company or any Subsidiary 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, which default would
have a Material Adverse Effect.
(n) No Integrated Offering. The Company has not made any offers or sales
of any security or solicited any offers to buy any security under circumstances
that it believes 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.
(o) No General Solicitation. The Company has not 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 and sale of the Securities.
(p) Listing. The Company's common stock is quoted on the Bulletin Board.
The Company has not received any written notice that its common stock is not
eligible nor will become ineligible for quotation on the OTC Bulletin Board
("Bulletin Board") nor that its common stock does not meet all requirements for
the continuation of such quotation and the Company satisfies all the
requirements for the continued quotation of its common stock on the Bulletin
Board.
9
(q) No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities or obligations which are material on a
consolidated basis, either individually or in the aggregate, which are not
disclosed in the Reports and Other Written Information, other than those
incurred in the ordinary course of the Company and Subsidiaries' businesses
since December 31, 2004 and which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, except as disclosed on
Schedule 5(q).
(r) No Undisclosed Events or Circumstances. Since December 31, 2004, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(s) Capitalization. The authorized and outstanding capital stock of the
Company and Subsidiaries as of the date of this Agreement and as of each Closing
Date (not including the Securities) are set forth on Schedule 5(d), which shall
be updated by the Company as of each Closing Date. Except as set forth on
Schedule 5(d), there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or giving
any right to subscribe for any shares of capital stock of the Company or any of
its Subsidiaries. All of the outstanding shares of Common Stock of the Company
and Subsidiaries have been duly and validly authorized and issued and are fully
paid and nonassessable. The Company owns either beneficially or of record all of
the outstanding shares of capital stock or equity interests of the Subsidiaries.
(t) [RESERVED].
(u) No Disagreements with Accountants and Lawyers. There are no material
disagreements of any kind presently existing between the Company and its
Subsidiaries and either the accountants and lawyers formerly or presently
employed by the Company or its Subsidiaries, including but not limited to
disputes or conflicts over payment owed to such accountants and lawyers.
(v) 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.
(w) Investment Company. Neither the Company nor any of its Subsidiaries is
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(x) 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 each Closing Date.
(y) Survival. The foregoing representations and warranties shall survive
the Closing Date for a period of three years.
10
6. Regulation D Offering. 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 each Closing
Date, the Company will provide an opinion reasonably acceptable to Subscriber
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 to be purchased on such Closing Date and other matters reasonably
requested by Subscribers. A form of the legal opinion is annexed hereto as
Exhibit C. The Company will provide, at the Company's expense, such other legal
opinions in the future as are reasonably necessary for the issuance and resale
of the Shares and Warrant Shares pursuant to an effective registration
statement.
7. Escrow Arrangements; Form of Payment. Upon execution hereof by the
parties and pursuant to the terms of the Escrow Agreement, each Subscriber
agrees to make the deliveries required of such Subscriber as set forth in the
Escrow Agreement and the Company agrees to make the deliveries required of the
Company as set forth in the Escrow Agreement.
8. Finder/Legal Fees.
(a) Finder's Fee. The Company on the one hand, and each Subscriber (for
himself only) on the other hand, agree to indemnify the other against and hold
the other harmless from any and all liabilities to any persons claiming
brokerage commissions or finder's fees other than Unisource Inc. ("Finder") 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. The Company agrees
that it will pay the Finder on each Closing Date a cash finder's fee of eight
percent (8%) of the portion of the Purchase Price received by the Company on a
gross basis on such Closing Date (collectively, the "Finder's Fees"), directly
out of the funds held pursuant to the Escrow Agreement. The Company represents
that there are no other parties entitled to receive fees, commissions, or
similar payments in connection with the Offering except the Finder.
(b) Legal Fees. The Company shall pay to Grushko & Xxxxxxx, P.C., a
one-time fee of $10,000 ("Legal Fees") 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") and acting as Escrow Agent for the
Offering. The Legal Fees will be payable out of funds held pursuant to the
Escrow Agreement.
9.1. Covenants of the Company. The Company covenants and agrees with the
Subscribers as follows:
(a) Stop Orders. For so long as the Registration Statement is effective,
the Company will advise the Subscribers, promptly 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. The Company shall promptly secure the listing of the Shares
and the Warrant Shares upon such national securities exchange, or electronic or
automated quotation system, if any, upon which shares of the Company's Common
Stock are then listed (subject to official notice of issuance) and shall
maintain such listing, so long as any other shares of Common Stock shall be so
listed, such listing of all Registrable Securities from time to time issuable
under the terms of the Transaction Documents. For so long as the Subscribers
hold any Shares or Warrant Shares, the Company will use commercially reasonable
efforts to maintain the listing or authorization of quotation, as applicable, of
11
its Common Stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq
National Market System, Bulletin Board, 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 material respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the Principal Market, as applicable. For so long as the Registration
Statement is effective, 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 if such notices are not promptly
made available on the Commission's XXXXX website. As of the date of this
Agreement and the Final 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 Subscriber
if such filings are not available on the Commission's XXXXX website.
(d) Filing Requirements. From the date of this Agreement and until the
sooner of (i) three (3) years after the Final Closing Date, or (ii) until all
the Shares and Warrant Shares are salable pursuant to Rule 144, without regard
to volume limitations or are transferred by the Subscribers pursuant to the
Registration Statement or Rule 144, the Company will (A) cause its Common Stock
to continue to be registered pursuant to Section 12 of the 1934 Act, and (B)
comply in all material respects with its reporting and filing obligations under
the 1934 Act. The Company will use commercially reasonable efforts not to 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 such registration or
to terminate or suspend its reporting and filing obligations under the 1934 Act
until three (3) years after the Final Closing Date. Until the earlier of the
resale of the Common Stock and the Warrant Shares by each Subscriber or two (2)
years after the Warrants have been exercised, the Company will use commercially
reasonable efforts to continue the listing or quotation of the Common Stock on a
Principal Market and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market. 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.
(e) Use of Proceeds. The proceeds of the Offering will be employed by the
Company for general corporate purposes, except that such proceeds 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 each Closing Date.
(f) Reservation. Prior to the Initial Closing Date, the Company undertakes
to reserve, pro rata, on behalf of each holder of Shares or Warrants, from its
authorized but unissued common stock, a number of common shares equal to the
Shares and Warrant Shares issuable upon exercise of the Warrants. Failure to
have sufficient shares reserved pursuant to this Section 9.1(f) for three (3)
consecutive business days or ten (10) days in the aggregate shall be a material
default of the Company's obligations under this Agreement.
(g) [RESERVED].
(h) [RESERVED].
12
(i) [RESERVED].
(j) Governmental Authorities. From the date of this Agreement and until
the sooner of (i) three (3) years after the Final Closing Date, or (ii) until
all the Shares and Warrant Shares have been resold or are transferable by all
the Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, 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.
(k) [RESERVED].
(l) [RESERVED].
(m) Confidentiality/Public Announcement. From the date of this Agreement
and until the sooner of (i) three (3) years after the Final Closing Date, or
(ii) until all the Shares and Warrant Shares have been resold or transferred by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company agrees that except in
connection with a Form 8-K or the Registration Statement, it will not disclose
publicly or privately the identity of the Subscribers unless expressly agreed to
in writing by a Subscriber or only to the extent required by law. In any event
and subject to the foregoing, the Company shall file a Form 8-K or make a public
announcement describing the Offering not later than the first business day after
each Closing Date. In the Form 8-K or public announcement, the Company will
specifically disclose the amount of common stock outstanding immediately after
the Initial Closing Date. A form of the proposed Form 8-K or public announcement
to be employed in connection with the Offering is annexed hereto as Exhibit D.
(n) Further Registration Statements. Except for a registration statement
filed on behalf of the Subscribers pursuant to Section 11 of this Agreement or
as disclosed on Schedule 11.1, the Company will not file any registration
statements or amend any already filed registration statement including but not
limited to a Form S-8 with the Commission or with state regulatory authorities
without the consent of the Subscriber until the sooner of (i) the Registration
Statement shall have been current and available for use in connection with the
public resale of the Shares and Warrant Shares for 120 days or (ii) until all
the Shares have been resold or are transferable by the Subscribers pursuant to a
registration statement or Rule 144, without regard to volume limitations
("Exclusion Period"). The Exclusion Period will be tolled during the pendency of
a Non-Registration Event as defined in Section 11.4 hereof. With respect to Form
S-8, the Exclusion Period shall be determined only pursuant to Section 9(n)(ii).
(o) Blackout. The Company undertakes and covenants that until the end of
the Exclusion Period, the Company will not enter into any acquisition, merger,
exchange or sale or other transaction that could have the effect of delaying the
effectiveness of any pending registration statement or causing an already
effective registration statement to no longer be effective or current for a
period of more than thirty (30) consecutive days or forty-five (45) days, in the
aggregate, during any 365 day period.
(p) Non-Public Information. The Company covenants and agrees that neither
it nor any other person acting on its behalf will 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 and hold it in confidence. The
Company understands and confirms that each Subscriber shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.
13
(q) Limited Standstill. The Company will deliver to the Subscribers on or
before the Initial Closing Date and enforce the provisions of irrevocable lockup
agreements ("Limited Standstill Agreements") in the form annexed hereto as
Exhibit E, with the parties identified on Schedule 9.1(q) hereto.
10. Covenants of the Company and Subscriber Regarding Indemnification.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend
the Subscribers, the Subscribers' officers, directors, agents, Affiliates,
control persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon 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 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 material covenant or undertaking to
be performed by the Company hereunder.
(b) Each Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company and each of the Company's officers, directors, agents,
Affiliates, control persons against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company or any such person which results, arises
out of or is based upon (i) any material misrepresentation by such Subscriber or
breach of any warranty by such Subscriber in this Agreement or in any Exhibits
or Schedules attached hereto, or other agreement delivered pursuant hereto; or
(ii) after any applicable notice and/or cure periods, any breach or default in
performance by such Subscriber of any covenant or undertaking to be performed by
such Subscriber hereunder.
(c) In no event shall the liability of any Subscriber or permitted
successor hereunder or under any Transaction Document or other agreement
delivered in connection herewith be greater in amount than the dollar amount of
the net proceeds actually received by such Subscriber upon the sale of
Registrable Securities (as defined herein).
(d) The procedures set forth in Section 11.6 shall apply to the
indemnification set forth in Sections 10(a) and 10(b) above.
11.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing one hundred and twenty-one
(121) days after the Initial Closing Date, but not later than two (2) years
after the Initial Closing Date ("Request Date"), upon a written request therefor
from any record holder or holders of more than 50% of the Shares and Warrant
Shares actually issued upon exercise of the Warrants, the Company shall prepare
and file with the Commission a registration statement under the 1933 Act
registering the Shares and Warrant Shares issuable upon exercise of the Warrants
(collectively "Registrable Securities") which are the subject of such request
for unrestricted public resale by the holder thereof. For purposes of Sections
11.1(i) and 11.1(ii), Registrable Securities shall not include Securities (A)
which are registered for resale in an effective registration statement, (B)
included for registration in a pending registration statement, or (C) which have
been issued without further transfer restrictions after a sale or transfer
pursuant to an effective registration statement or Rule 144 under the 1933 Act.
Upon the receipt of such request, the Company shall promptly give written notice
to all other record holders of the Registrable Securities that such registration
statement is to be filed and shall include in such registration statement
Registrable Securities for which it has received written requests within ten
(10) days after the Company gives such written notice. Such other requesting
record holders shall be deemed to have exercised their demand registration right
under this Section 11.1(i).
14
(ii) If the Company at any time proposes to register any of its securities
under the 1933 Act for sale to the public, whether for its own account or for
the account of other security holders or both, except with respect to
registration statements on Forms X-0, X-0 or another form not available for
registering the Registrable Securities for sale to the public, provided the
Registrable Securities are not otherwise registered for resale by the
Subscribers or Holder pursuant to an effective registration statement, each such
time it will give at least fifteen (15) days' prior written notice to the record
holder of the Registrable Securities of its intention so to do. Upon the written
request of the holder, received by the Company within ten (10) days after the
giving of any such notice by the Company, to register any of the Registrable
Securities not previously registered, the Company will cause such Registrable
Securities as to which registration shall have been so requested to be included
with the securities to be covered by the registration statement proposed to be
filed by the Company, all to the extent required to permit the sale or other
disposition of the Registrable Securities so registered by the holder of such
Registrable Securities (the "Seller" or "Sellers"). In the event that any
registration pursuant to this Section 11.1(ii) shall be, in whole or in part, an
underwritten public offering of common stock of the Company, the number of
shares of Registrable Securities to be included in such an underwriting may be
reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the foregoing provisions, or Section 11.4
hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 11.1(ii) without thereby incurring any
liability to the Seller.
(iii) If, at the time any written request for registration is received by
the Company pursuant to Section 11.1(i), the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
1933 Act in connection with the proposed offer and sale for cash of any of its
securities for the Company's own account and the Company actually does file such
other registration statement, such written request shall be deemed to have been
given pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights
of the holders of Registrable Securities covered by such written request shall
be governed by Section 11.1(ii).
(iv) The Company shall file with the Commission a Form SB-2 registration
statement (the "Registration Statement") (or such other form that it is eligible
to use) in order to register the Registrable Securities for resale and
distribution under the 1933 Act not later than thirty (30) days after the
Initial Closing Date (the "Filing Date"), and use its reasonable efforts to
cause the Registration Statement to be declared effective not later than one
hundred and twenty (120) days after the Initial Closing Date (the "Effective
Date"). The Registration Statement will cover not less than a number of shares
of Common Stock that is equal to the Shares and Warrant Shares issuable pursuant
to this Agreement upon exercise of the Warrants. The Registrable Securities
shall be reserved and set aside exclusively for the benefit of each Subscriber
and Warrant holder, pro rata, and not issued, employed or reserved for anyone
other than each such Subscriber and Warrant holder. The Registration Statement
will promptly be amended or one or more additional registration statements will
be promptly filed by the Company as necessary to register additional shares of
Common Stock to allow the public resale of all Common Stock included in and
issuable by virtue of the Registrable Securities. Without the written consent of
the Subscriber, no securities of the Company other than the Registrable
Securities will be included in the Registration Statement, except as described
on Schedule 11.1.
15
11.2. Registration Procedures. If and whenever the Company is required by
the provisions of Section 11.1(i) or 11.1(ii) to effect the registration of any
Registrable Securities under the 1933 Act, the Company will, as expeditiously as
practicable:
(a) subject to the timelines provided in this Agreement, prepare and file
with the Commission a registration statement required by Section 11, with
respect to such securities and use reasonable efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as herein provided), promptly provide to the
holders of the Registrable Securities, if so requested, copies of all filings
and Commission letters of comment and notify Subscribers (by telecopier and by
e-mail addresses provided by Subscribers) and Grushko & Xxxxxxx, P.C. (by
telecopier and by email to Xxxxxxxxx@xxx.xxx) on or before 6:00 PM EST on the
first business day following the day the Company receives notice that (i) the
Commission has no comments or no further comments on the Registration Statement,
and (ii) the registration statement has been declared effective (failure to
timely provide notice as required by this Section 11.2(a) shall be a material
breach of the Company's obligation and a Non-Registration Event as defined in
Section 11.4 of this Agreement);
(b) use its reasonable efforts to prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective until such registration statement has been
effective for a period of two (2) years, and comply in all material respects
with the provisions of the 1933 Act with respect to the disposition of all of
the Registrable Securities covered by such registration statement in accordance
with the Sellers' intended method of disposition set forth in such registration
statement for such period;
(c) furnish to the Sellers, at the Company's expense, such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement;
(d) use its commercially reasonable efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of New York and such jurisdictions as the Sellers
shall request in writing, provided, however, that the Company shall not for any
such purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified, subject itself to
in any such jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) if applicable, list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify the Sellers when a prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event of
which the Company has knowledge as a result of which the prospectus contained in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or which becomes subject to a Commission,
state or other governmental order suspending the effectiveness of the
registration statement covering any of the Shares or Warrant Shares.
11.3. Provision of Documents. In connection with each registration
described in this Section 11, each Seller or holder of Registrable Securities
will furnish to the Company in writing such information and representation
letters with respect to itself and the proposed distribution by it as the
Company shall reasonably deem necessary in order to assure compliance with
federal and applicable state securities laws.
16
11.4. Non-Registration Events. The Company and the Subscribers agree that
the Sellers will suffer damages if the Registration Statement is not filed by
the Filing Date and not declared effective by the Commission by the Effective
Date, and any registration statement required under Section 11.1(i) or 11.1(ii)
is not filed within 60 days after written request and declared effective by the
Commission within 120 days after such request, and maintained in the manner and
within the time periods contemplated by Section 11 hereof, and it would not be
feasible to ascertain the extent of such damages with precision. Accordingly, if
(A) the Registration Statement is not filed on or before the Filing Date, (B) is
not declared effective on or before the Effective Date, (C) the Registration
Statement is not declared effective within five (5) business days after receipt
by the Company or its attorneys of a written or oral communication from the
Commission that the Registration Statement will not be reviewed or that the
Commission has no further comments, (D) if the registration statement described
in Sections 11.1(i) or 11.1(ii) is not filed within 60 days after such written
request, or is not declared effective within 120 days after such written
request, or (E) any registration statement described in Sections 11.1(i),
11.1(ii) or 11.1(iv) is filed and declared effective but shall thereafter cease
to be effective for a period of time which shall exceed 45 days in the aggregate
per year (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) or more than 30 consecutive days
(each such event referred to in clauses A through E of this Section 11.4 is
referred to herein as a "Non-Registration Event"), then the Company shall
deliver to the holders of Registrable Securities included in the Registration
Statement, as Liquidated Damages, an aggregate amount equal to one and one-half
percent (1.5%) of the Purchase Price of the Shares owned of record by such
holder which are subject to such Non-Registration Event for each thirty (30)
days (a prorated portion shall be payable for any period of less than 30 days).
The Company must pay the Liquidated Damages in cash. The Liquidated Damages must
be paid within ten (10) days after the end of each thirty (30) day period or
shorter part thereof for which Liquidated Damages are payable. In the event a
Registration Statement is filed by the Filing Date but is withdrawn prior to
being declared effective by the Commission, then such Registration Statement
will be deemed to have not been filed. All oral or written comments received
from the Commission relating to the Registration Statement must be responded to
within ten (10) business days after receipt of comments from the Commission.
Failure to timely respond to Commission comments is a Non-Registration Event for
which Liquidated Damages shall accrue and be payable by the Company to the
holders of Registrable Securities at the same rate set forth above.
Notwithstanding the foregoing, the Company shall not be liable to the Subscriber
under this Section 11.4 for any events or delays occurring as a consequence of
the acts or omissions of the Subscribers contrary to the obligations undertaken
by Subscribers in this Agreement. Liquidated Damages will not accrue nor be
payable pursuant to this Section 11.4 nor will a Non-Registration Event be
deemed to have occurred for times during which Registrable Securities are
transferable by the holder of Registrable Securities pursuant to Rule 144(k)
under the 1933 Act.
11.5. Expenses. All expenses incurred by the Company in complying with
Section 11, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, costs of insurance and fee of one
counsel for all Sellers are called "Registration Expenses." All underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities, including any fees and disbursements of one counsel to the Seller,
are called "Selling Expenses." The Company will pay all Registration Expenses in
connection with the registration statement under Section 11. Selling Expenses in
connection with each registration statement under Section 11 shall be borne by
the Seller and may be apportioned among the Sellers in proportion to the number
of shares sold by the Seller relative to the number of shares sold under such
registration statement or as all Sellers thereunder may agree.
17
11.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under the
1933 Act pursuant to Section 11, the Company will, to the extent permitted by
law, indemnify and hold harmless the Seller, each officer of the Seller, each
director of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will, subject to the provisions of
Section 11.6(c), reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person, in writing specifically for use in such
registration statement or prospectus, (iv) to the extent that any such loss,
claim, damage or liability results from the settlement of any claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld, delayed or conditioned.
(b) In the event of a registration of any of the Registrable Securities
under the 1933 Act pursuant to Section 11, each of the Sellers severally but not
jointly will, to the extent permitted by law, indemnify and hold harmless the
Company, and each person, if any, who controls the Company within the meaning of
the 1933 Act, each officer of the Company who signs the registration statement,
each director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the 1933 Act, against all losses, claims,
damages or liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Registrable Securities were registered under the 1933
Act pursuant to Section 11, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the Seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
18
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such Seller, as such, furnished
in writing to the Company by such Seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
liability of the Seller hereunder shall be limited to the net proceeds actually
received by the Seller from the sale of Registrable Securities covered by such
registration statement. Seller shall not be liable under this Section 11.6(b)
for any such loss, claim, damage or liability that results from the settlement
of any claim if such settlement is effected without the prior written consent of
the Seller, which consent shall not be unreasonably withheld, delayed or
conditioned.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 11.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 11.6(c), except and only if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 11.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties, as a group, shall have the right to select one
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the event
of joint liability under the 1933 Act in any case in which either (i) a Seller,
or any controlling person of a Seller, makes a claim for indemnification
pursuant to this Section 11.6 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 11.6 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not provided under this Section 11.6; then, and in each such case, the Company
and the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities sold by it pursuant
to such registration statement; and (z) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
19
11.7. Delivery of Unlegended Shares.
(a) Within three (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 have been sold pursuant
to the Registration Statement or Rule 144 under the 1933 Act, (ii) a
representation that the prospectus delivery requirements, or the requirements of
Rule 144, as applicable and if required, have been satisfied, and (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 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(h) above,
reissuable pursuant to any effective and current Registration Statement
described in Section 11 of this Agreement or pursuant to Rule 144 under the 1933
Act (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 Shares 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. Transfer fees shall be the responsibility of the
Subscriber.
(b) In lieu of delivering physical certificates representing the
Unlegended Shares, if the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
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 shall cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the account of
Subscriber's prime broker with DTC through its Deposit Withdrawal Agent
Commission 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 two business days after 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. If during any 360 day period, the Company fails
to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
of thirty (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 120% of the Purchase Price of such Common Stock and Warrant
Shares ("Unlegended Redemption Amount"). The amount of the aforedescribed
liquidated damages that have accrued or have been paid for the twenty-day period
prior to the receipt by the Subscriber of the Unlegended Redemption Amount shall
be credited against the Unlegended Redemption Amount. The Company shall pay any
payments incurred under this Section in immediately available funds upon demand.
(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 seven (7) business days after the Unlegended Shares
Delivery Date and the Subscriber purchases (in an open market transaction or
otherwise) shares of common stock to deliver in satisfaction of a sale by such
Subscriber of the 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
20
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 11.7 and the Company is required to deliver such
Unlegended Shares pursuant to Section 11.7, the Company may not refuse to
deliver Unlegended 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 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 Common Stock and Warrant Shares which are subject to the injunction
or temporary restraining order, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Subscriber to the extent Subscriber obtains judgment in
Subscriber's favor.
12. (a) Right of First Refusal. Until the first anniversary hereof, the
Subscribers shall be given not less than seven (7) business days prior written
notice of any proposed sale by the Company of its common stock, other equity
securities, obligations convertible or exercisable for equity securities or debt
obligations, except in connection with (i) full or partial consideration in
connection with a strategic merger, consolidation or purchase of substantially
all of the securities or assets of a corporation or other entity, (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, (iii) the Company's issuance of securities in
connection with any vendor or equipment financing, (iv) as has been described in
this Agreement or in the Reports or Other Written Information filed with the
Commission or delivered to the Subscribers prior to the Initial Closing Date,
(v) the exercise, conversion or exchange of any warrant, option or right to
purchase any securities of the Company, or any convertible or exchangeable
security of the Company outstanding on the date hereof, (vi) the issuance of any
security of the Company to employees, consultants, officers or directors of the
Company pursuant to any stock option plan, stock incentive plan or other
employee benefit plan approved by the Company's board of directors or (vii) the
distribution of any securities of its Subsidiaries pursuant to a spin-off
thereof (collectively the foregoing are "Excepted Issuances"). The Subscribers
who exercise their rights pursuant to this Section 12(a) shall have the right
during the seven (7) business days following receipt of the notice to purchase
such offered common stock, debt or other securities in accordance with the terms
and conditions set forth in the notice of sale in the same proportion to each
other as their purchase of Shares in the Offering. In the event such terms and
conditions are modified during the notice period, the Subscribers shall be given
prompt notice of such modification and shall have the right during the seven (7)
business days following the notice of modification, whichever is longer, to
exercise such right.
21
(b) Offering Restrictions. Until the Registration Statement has been
effective for a period of not less than two (2) years for the sale of the Shares
and the Warrant Shares underlying the Warrants, or during the pendency of a
Non-Registration Event, or when any compensation or liquidated damages are
accruing or are outstanding, the Company will not enter into an agreement to
issue nor issue, other than the Excepted Issuances, any equity, convertible debt
or other securities convertible into common stock or equity of the Company nor
modify any of the foregoing which may be outstanding at anytime at a price equal
to or below the Share purchase price and Warrant exercise price then in effect
for the Subscribers in this Offering, without the prior written consent of the
Subscriber, which consent may be withheld for any reason. Until the end of the
two year period, the Company will not enter into any equity line of credit or
similar agreement, nor issue or agree to issue any floating or variable priced
equity linked instruments nor any of the foregoing or equity with price reset
rights. Notwithstanding the foregoing, all of the provisions of this Section
12(b) shall immediately terminate and be of no further force or effect in the
event that the Subscribers no longer own any Shares, Warrants, or Warrant
Shares.
(c) Favored Nations Provision. Other than the Excepted Issuances, if at
any time Shares are held by a Subscriber until three years after the Actual
Effective Date, the Company shall offer, issue or agree to issue any Common
Stock or securities convertible into or exercisable for shares of Common Stock
(or modify any of the foregoing which may be outstanding) to any person or
entity at a price per share of Common Stock or exercise price per share of
Common Stock which shall be less than the per share Purchase Price of the
Shares, or less than the exercise price per Warrant Share, respectively, without
the consent of each Subscriber holding Shares, Warrants, or Warrant Shares, then
the Company shall issue, for each such occasion, additional shares of Common
Stock to each Subscriber so that the average per share purchase price of the
shares of Common Stock issued to the Subscriber (of only the Shares or Warrant
Shares still owned by the Subscriber) is equal to such other lower price per
share and the Warrant Exercise Price shall automatically be reduced to such
other lower price per share; provided, however, that to the extent that any
adjustment is made to the warrant exercise price under the Warrant as a result
of such issuance, no adjustment shall be made to the Warrant exercise price
pursuant to this Section 12(c). 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. The delivery to the 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. The Subscriber is granted the registration rights described in
Section 11 hereof in relation to such additional shares of Common Stock except
that the Filing Date and Effective Date vis-a-vis such additional common shares
shall be, respectively, the forty-fifth (45th) and ninetieth (120th) date after
the closing date giving rise to the requirement to issue the 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 actual issuance of such convertible security,
warrant, right or option. The rights of the Subscriber set forth in this Section
12 are in addition to any other rights the Subscriber has pursuant to this
Agreement, any Transaction Document, and any other agreement referred to or
entered into in connection herewith.
(d) Maximum Exercise of Rights. In the event the exercise of the rights
described in Sections 12(a) and 12(c) would 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 maximum amount set forth calculated in the manner described in
Section 10 of the Warrant. The determination of when such common stock may be
issued shall be made by each Subscriber as to only such Subscriber.
22
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)
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: Techedge Inc., 00 Xxxx
Xxxxxx Xxxxx, #0X, Xxxxxx, XX 00000, Attn: Xxxxx Xxxx, CEO, telecopier number:
(000) 000-0000, with a copy by telecopier only to: Xxxxxx Xxxxxxx, Esq.,
Xxxxxxxxxx Xxxxxxx PC, 00 Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000,
telecopier number: (000)-000-0000, and (ii) if to the Subscribers, to: the one
or more addresses and telecopier numbers indicated on the signature pages
hereto, with an additional copy by telecopier only to: Grushko & Xxxxxxx, P.C.,
000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, telecopier number: (212)
697-3575.
(b) Interest Rates. 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.
(c) 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 both parties. 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.
(d) 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.
(e) Law Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflicts of laws principles that would result in the application of the
substantive laws of another jurisdiction. 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 and the individuals executing this
Agreement and other agreements referred to herein or delivered in connection
herewith on behalf of the Company agree to submit to the jurisdiction of such
courts and waive trial by jury. The prevailing party shall be entitled to
recover from the other party its reasonable attorney's fees and costs. In the
event that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.
23
(f) Specific Enforcement, Consent to Jurisdiction. The Company and the
Subscribers 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 one or more preliminary
and final 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(e) hereof, each of the Company, the
Subscribers and any signator hereto in his personal capacity hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction 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.
(g) 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 (including, but not limited to, the (i)
inclusion of a Subscriber in the Registration Statement and (ii) review by, and
consent to, such Registration Statement by a Subscriber) 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.
24
(h) Resales Absent Effective Registration Statement. Each of the
Subscribers understands and acknowledges that (i) the Transaction Documents may
require the Company to issue and deliver Shares and/or Warrant Shares to the
Subscriber, without legend restricting their transferability under the 1933 Act,
and (ii) is aware that resales of the Shares and/or Warrant Shares may not be
made unless, at the time of resale, there is an effective registration statement
under the 1933 Act covering such Subscriber's resale(s) or an applicable
exemption from registration. Accordingly, each Subscriber hereby covenants and
agrees that, commencing from the time it is advised by the Company that any
registration statement theretofore covering resale of the Shares and/or Warrant
Shares is no longer effective, until such time as the Company advises the
Subscriber there is an effective registration statement covering resale of the
Shares and Warrant Shares, Subscriber will not sell, assign, pledge, transfer or
otherwise dispose of any of the Shares or Warrant Shares without the prior
written consent of the Company unless an exemption from registration is
available to the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
25
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
--------------------------------------------
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.
TECHEDGE INC.
a Delaware corporation
By: /s/ Xxxxx Xxxx
-----------------------------------
Name: Xxxxx Xxxx
Title: CEO
Dated: May 4, 2005
--------------------------------------------- ------------------------ -------------------- -------------------- ---------------
SUBSCRIBER SUBSEQUENT CLOSING SHARES OF COMMON WARRANTS ISSUABLE FINAL CLOSING
PURCHASE PRICE STOCK ISSUABLE ON ON EACH CLOSING PURCHASE PRICE
SUBSEQUENT CLOSING DATE
DATE
--------------------------------------------- ------------------------ -------------------- -------------------- ---------------
ALPHA CAPITAL AKTIENGESELLSCHAFT $250,000.00 367,647 147,059 $250,000.00
Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Xxxxx, Lichtenstein
Fax: 000-00-00000000
/s/ [Illegible]
------------------------------
(Signature)
By:
--------------------------------------------- ------------------------ -------------------- -------------------- ---------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
--------------------------------------------
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.
TECHEDGE INC.
a Delaware corporation
By: /s/ Xxxxx Xxxx
-----------------------------------
Name: Xxxxx Xxxx
Title: CEO
Dated: April 29, 2005
--------------------------------------------- ------------------------ -------------------- -------------------- ---------------
SUBSCRIBER INITIAL CLOSING SHARES OF COMMON WARRANTS ISSUABLE FINAL CLOSING
PURCHASE PRICE STOCK ISSUABLE ON ON EACH CLOSING PURCHASE PRICE
INITIAL CLOSING DATE
DATE
--------------------------------------------- ------------------------ -------------------- -------------------- ---------------
WHALEHAVEN CAPITAL FUND LIMITED $250,000.00 367,647 147,059 $250,000.00
0xx Xxxxx, 00 Xxx-Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx XX00
Fax: (000) 000-0000
/s/ Xxxxxx Xxxxx
------------------------------
(Signature) By: Xxxxxx Xxxxx
--------------------------------------------- ------------------------ -------------------- -------------------- ---------------
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Attachment 1 Disclosure Schedule
Exhibit A Form of Warrant
Exhibit B Escrow Agreement
Exhibit C Form of Legal Opinion
Exhibit D Form of Public Announcement or Form 8-K
Exhibit E Form of Limited Standstill Agreement
Schedule 5(a) Subsidiaries
Schedule 5(d) Additional Issuances / Capitalization
Schedule 5(f)(iii) Existing Anti-Dilution Adjustments
Schedule 5(f)(iv) Existing Registration Rights
Schedule 5(q) Undisclosed Liabilities
Schedule 9.1(q) Limited Standstill Providers
Schedule 11.1 Other Securities to be Registered
EXHIBIT E
LIMITED STANDSTILL AGREEMENT
This AGREEMENT (the "Agreement") is made as of the ____ day of April, 2005
by the signators hereto (each a "Holder"), in connection with his ownership of
shares of Techedge Inc., a Delaware 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, $.0001 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 agreements with subscribers to the Company's Common Stock ("Shares") and
Warrants (the "Subscribers"), for the sale of an aggregate of up to $1,000,000
to the Subscribers (the "Offering"). Holder understands that, as a condition to
proceeding with the Offering, the Subscribers have required, and the Company has
agreed to assist the Subscribers in obtaining, an agreement from the Holder to
refrain from selling any securities of the Company from the date of the
Subscription Agreement until (i) ninety (90) days after the Actual Effective
Date (as defined in the Subscription Agreement) or (ii) the date Subscribers are
able to rely on Rule 144 under the Securities Act of 1933 to resell Shares,
whichever is sooner (the "Restriction Period"), except as described below.
2. Share Restriction.
a. Holder hereby agrees that during the Restriction Period, the Holder
will not sell 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, other than in connection with an offer made to all shareholders of
the Company in connection with a merger, consolidation or similar transaction
involving the Company, a share exchange or a tender offer. 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 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 Common
Stock (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, (iii) to a partnership which is the general partner of a
partnership of which the Holder is a general partner, provided, that, in the
case of any gift or transfer described in clauses (i), (ii) or (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. For purposes hereof, "immediate family" means any relationship by
blood, marriage or adoption, not more remote than first cousin.
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, construed and enforced in accordance
with the laws of the State of New York, except to the extent that the securities
laws of the state in which Holder resides and federal securities laws may apply.
c. Any dispute regarding this Agreement shall be adjudicated exclusively
in the State, Civil or Federal courts located in New York, New York.
d. This Agreement contains the entire agreement of the Holder with respect
to the subject matter hereof.
e. This Agreement shall be binding upon Holder, its legal representatives,
successors and assigns.
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
Beneficially Owned
COMPANY:
TECHEDGE INC.
By:______________________________
