SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT
(this
“Agreement”),
dated
as of May 31, 2006, by and among Ness Energy International, Inc., a Washington
corporation (the “Company”),
and
the subscribers identified on the signature page hereto (each a “Subscriber”
and
collectively “Subscribers”).
WHEREAS,
the
Company and the Subscribers are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“Commission”)
under
the Securities Act of 1933, as amended (the “1933
Act”).
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscribers, as provided
herein,
and the Subscribers, in the aggregate, shall purchase up to $1,022,727.29
(the
"Aggregate
Principal Amount")
of
principal amount of promissory notes of the Company (“Note”
or
“Notes”),
a
form of which is annexed hereto as Exhibit
A,
convertible into shares of the Company's common stock, no par value (the
"Common
Stock")
at a
per share conversion price set forth in the Note (“Conversion
Price”);
and
share purchase warrants (the “Warrants”),
in
the form annexed hereto as Exhibit
B,
to
purchase shares of Common Stock (the “Warrant
Shares”).
The
Notes, shares of Common Stock issuable upon conversion of the Notes (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 Notes 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
C
(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. Conditions
to Closing.
Subject
to the satisfaction or waiver of the terms and conditions of this Agreement,
on
the Closing Date, each Subscriber shall purchase and the Company shall sell
to
each Subscriber a Note in the principal amount designated on the signature
page
hereto. The principal amount of the Notes to be purchased by the Subscribers
on
the Closing Date shall, in the aggregate, be equal to the Aggregate Principal
Amount. The aggregate purchase price for the Notes (“Aggregate
Purchase Price”)
shall
equal to the result of (x) divided by (y), where (x) equals the Aggregate
Principal Amount and (y) equals 1.136363.
2. Closing
Date.
The
“Closing
Date”
shall
be the date that subscriber funds representing the net amount due the Company
from the Closing Purchase Price of the Offering [as defined in Section 8(b)]
is
transmitted by wire transfer or otherwise to or for the benefit of the Company.
The consummation of the transactions contemplated herein for all Closings
shall
take place at the offices of Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of all conditions
to
Closing set forth in this Agreement.
3. Warrants.
On the
Closing Date, the Company will issue and deliver Warrants to the Subscribers.
One Class A Warrant will be issued for each one Share which would be issued
on
the Closing Date assuming the complete conversion of the Notes issued on
the
Closing Date at the Conversion Price in effect on the Closing Date. The per
Warrant Share exercise price to acquire a Warrant Share upon exercise of
a Class
A Warrant shall be 108% of the average of the volume weighted average price
of
the Common Stock as reported by Bloomberg L.P. for the five trading days
preceding the Closing Date. The Class A Warrants shall be exercisable until
three years after the Closing Date, or five years after the Closing Date
if the
Registration Statement [as defined in Section 11.1(iv)] is not declared
effective by the Commission within one hundred and eighty days after the
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 and
has
the requisite corporate power to own its assets and to carry on its
business.
(b) Authorization
and Power.
Each
Subscriber has the requisite power and authority to enter into and perform
this
Agreement and to purchase the Notes 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.
(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 Notes or acquire the Warrants 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 Form 10-KSB for the year ended December 31, 2005
and
all periodic reports filed with the Commission thereafter, but not later
than
five business days before the Closing Date (hereinafter referred to 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.
The
Subscriber is, and will be at the time of the conversion of the Notes and
exercise of the Warrants, an "accredited investor", as such term is defined
in
Regulation D promulgated by the Commission under the 1933 Act, is experienced
in
investments and business matters, has made investments of a speculative nature
and has purchased securities of United States publicly-owned companies in
private placements in the past and, with its representatives, has such knowledge
and experience in financial, tax and other business matters as to enable
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 Notes and Warrants.
On the
Closing Date, the Subscriber will purchase the Notes 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, but
Subscriber does not agree to hold the Notes and Warrants for any minimum
amount
of time.
(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. From
the
date the Subscriber received a written offer from the Company describing
the
Offering until the date of the public announcement or Form 8-K filing described
in Section 9(m), the Subscriber will not have directly or indirectly purchased
or sold Common Stock or Common Stock equivalents except as part of the
Offering.
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. Affiliate when employed in connection with the Company
includes each Subsidiary [as defined in Section 5(a)] of the Company. For
purposes of this definition, “control”
means
the power to direct the management and policies of such person or firm,
directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise.
(h) Shares
Legend.
The
Shares and the Warrant Shares shall bear the following or similar
legend:
"THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED
FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAW
OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NESS ENERGY INTERNATIONAL,
INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
(i) Warrants
Legend.
The
Warrants shall bear the following
or
similar legend:
"THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND
THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
NESS
ENERGY INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(j) Note
Legend.
The
Note shall bear the following legend:
"THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAW
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NESS ENERGY INTERNATIONAL,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(k) 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 otherwise than in connection and concurrently with such
communicated offer.
(l) 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.
(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) 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 the Closing Date, shall
be
true and correct as of the Closing Date.
(o) Survival.
The
foregoing representations and warranties shall survive the Closing Date until
three years after the Closing Date.
5. Company
Representations and Warranties.
The
Company represents and warrants to and agrees with each Subscriber that except
as set forth in the Reports or the Other Written Information and as otherwise
qualified in the Transaction Documents:
(a) Due
Incorporation.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the requisite
corporate power to own its properties and to carry on its business is disclosed
in the Reports.
The
Company is duly qualified as a foreign corporation to do business and is
in good
standing in each jurisdiction where the nature of the business conducted
or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. For purpose 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 taken individually, or
in the
aggregate, as a whole. For purposes of this Agreement, “Subsidiary”
means,
with respect to any entity at any date, any corporation, limited or general
partnership, limited liability company, trust, estate, association, joint
venture or other business entity) of which more than 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 have been duly
authorized and validly issued and are fully paid and nonassessable.
(c) Authority;
Enforceability.
This
Agreement, the Note, the Warrants, the Escrow Agreement, and any other
agreements delivered together with this Agreement or in connection herewith
(collectively “Transaction
Documents”)
have
been duly authorized, executed and delivered by the Company 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. The Company has full corporate
power and authority necessary to enter into and deliver the Transaction
Documents and to perform its obligations thereunder.
(d) Additional
Issuances.
There
are no outstanding agreements or preemptive or similar rights affecting the
Company's common stock or equity and no outstanding rights, warrants or options
to acquire, or instruments convertible into or exchangeable for, or agreements
or understandings with respect to the sale or issuance of any shares of common
stock or equity of the Company or other equity interest in any of the
Subsidiaries of the Company except as described on Schedule
5(d).
The
Common stock of the Company on a fully diluted basis outstanding as of the
last
trading day preceding the Closing Date is set forth on Schedule
5(d).
(e) Consents.
No
consent, approval, authorization or order of any court, governmental agency
or
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, any Principal Market (as defined in Section 9(b) of this Agreement),
nor 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.
(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 be reasonably
likely to constitute a default in any material respect) under (A) the articles
or certificate of incorporation, charter or bylaws of the Company, (B) to
the
Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation
or determination applicable to the Company of any court, governmental agency
or
body, or arbitrator having jurisdiction over the Company or over the properties
or assets of the Company or any of its Affiliates, (C) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any agreement,
stock
option or other similar plan, indenture, lease, mortgage, deed of trust or
other
instrument to which the Company or any of its Affiliates is a party, by which
the Company or any of its Affiliates is bound, or to which any of the properties
of the Company or any of its Affiliates is subject, or (D) the terms of any
"lock-up" or similar provision of any underwriting or similar agreement to
which
the Company, or any of its Affiliates is a party except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect;
or
(ii) result
in
the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates;
or
(iii) result
in
the activation of any anti-dilution rights or a reset or repricing of any
debt
or security instrument of any current, former or future creditor or equity
holder of the Company, nor result in the acceleration of the due date of
any
obligation of the Company; or
(iv) result
in
the activation of any piggy-back registration rights of any person or entity
holding securities or debt of the Company or having the right to receive
securities of the Company.
(g) The
Securities.
The
Securities upon issuance:
(i) are,
or
will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and
any
applicable state securities laws;
(ii) have
been, or will be, duly and validly authorized and on the date of conversion
of
the Notes and upon exercise of the Warrants, the Shares and Warrant Shares
will
be duly and validly issued, fully paid and nonassessable and, if registered
pursuant to the 1933 Act and resold pursuant to an effective registration
statement, will be free trading and unrestricted;
(iii) will
not
have been issued or sold in violation of any preemptive or other similar
rights
of the holders of any securities of the Company;
(iv) will
not
subject the holders thereof to personal liability by reason of being such
holders provided Subscriber’s representations herein are true and accurate and
Subscribers take no actions or fail to take any actions required for their
purchase of the Securities to be in compliance with all applicable laws and
regulations; and
(v) will
have
been issued in reliance upon an exemption from the registration requirements
of
and will not result in a violation of Section 5 under the 1933 Act.
(h) Litigation.
Other
than as described in the Reports, there is no pending or, to the best knowledge
of the Company, threatened action, suit, proceeding or investigation before
any
court, governmental agency or body, or arbitrator having jurisdiction over
the
Company, or any of its Affiliates that would affect the execution by the
Company
or the performance by the Company of its obligations under the Transaction
Documents. Except as disclosed in the Reports, there is no pending or,
to the
best knowledge of the Company, basis for or threatened action, suit, proceeding
or investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its Affiliates which litigation
if adversely determined would have a Material Adverse Effect.
(i) Reporting
Company.
The
Company is a publicly-held company subject to reporting obligations pursuant
to
Section 13 of the Securities Exchange Act of 1934 (the “1934
Act”)
and
has a
class of common shares registered pursuant to Section 12(g) of the 1934 Act.
Pursuant to the provisions of the 1934 Act, the Company has timely filed
all
reports and other materials required to be filed thereunder with the Commission
during the preceding twelve months, except for the report on Form 10-QSB
for the
quarter ended March 31, 2006 which was filed on May 24, 2006.
(j) No
Market Manipulation.
The
Company and its Affiliates have not taken, and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected
to,
cause or result in stabilization or manipulation of the price of the Common
Stock to
facilitate the sale or resale of the Securities or affect the price at which
the
Securities may be issued or resold, provided, however, that this provision
shall
not prevent the Company from engaging in investor relations/public relations
activities consistent with past practices.
(k) Information
Concerning Company.
The
Reports contain all material information relating to the Company and its
operations and financial condition as of their respective dates and all the
information required to be disclosed therein. Since the last day of the fiscal
year of the most recent audited financial statements included in the Reports
(“Latest
Financial Date”),
and
except as modified in the Other Written Information or in the Schedules hereto,
there has been no Material Adverse Event relating to the Company's business,
financial condition or affairs not disclosed in the Reports. The Reports
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
not
misleading in light of the circumstances when made. The Company has not provided
to the Subscribers any material non-public information.
(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 and unless contemporaneous notice
of
such instruction is given to the Subscriber.
(m) Defaults.
The
Company is not in violation of its articles of incorporation or bylaws. The
Company is (i) not 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,
(ii)
not subject to nor in default with respect to any order of any court, arbitrator
or governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under
any
statute or other law respecting antitrust, monopoly, restraint of trade,
unfair
competition or similar matters, or (iii) to the Company’s knowledge not in
violation of any statute, rule or regulation of any governmental authority
which
violation would have a Material Adverse Effect.
(n) Not
an
Integrated Offering.
Neither
the Company, nor any of its Affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would cause
the offer of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the
rules
and regulations of the OTC Bulletin Board (“Bulletin
Board”)
which
would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder. Nor will the Company
or
any of its Affiliates take any action or steps that would cause the offer
or
issuance of the Securities to be integrated with other offerings which would
impair the exemptions relied upon in this Offering or the Company’s ability to
timely comply with its obligations hereunder. The Company will not conduct
any
offering other than the transactions contemplated hereby that will be integrated
with the offer or issuance of the Securities, which would impair the exemptions
relied upon in this Offering or the Company’s ability to timely comply with its
obligations hereunder.
(o) No
General Solicitation.
Neither
the Company, nor any of its Affiliates, nor to its knowledge, any person
acting
on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the 0000 Xxx)
in
connection with the offer or sale of the Securities.
(p) Listing.
The
Company's common stock is quoted on the Bulletin Board under the symbol NESS.
The Company has not received any oral or written notice that the Common Stock
is
not eligible nor will become ineligible for quotation on the Bulletin Board
nor
that the Common Stock does not meet all requirements for the continuation
of
such quotation. The Company satisfies all the requirements for the continued
quotation of the Common Stock on the Bulletin Board.
(q) No
Undisclosed Liabilities.
The
Company has no liabilities or obligations which are material, 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’s
businesses since the Latest Financial Date, and which, individually or
in the
aggregate, would reasonably be expected to have a Material Adverse
Effect,
except
as disclosed on Schedule
5(q).
(r) No
Undisclosed Events or Circumstances.
Since
the Latest Financial Date, 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 the Closing Date (not including the Securities)
are set forth on Schedule
5(d).
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
have
been duly and validly authorized and issued and are fully paid and
nonassessable.
(t) Dilution.
The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders
of
the Company’s equity or rights to receive equity of the Company. The board of
directors of the Company has concluded, in its good faith business judgment,
that the issuance of the Securities is in the best interests of the Company.
The
Company specifically acknowledges that its obligation to issue the Shares
upon
conversion of the Notes, and the Warrant Shares upon exercise of the Warrants
is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company or parties entitled to receive equity of the Company.
(u) No
Disagreements with Accountants and Lawyers.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company, including but not limited
to
disputes or conflicts over payment owed to such accountants and
lawyers.
(v) DTC
Status/Transfer Agent.
The
Company’s transfer agent is eligible to participate in and the Common Stock is
eligible for transfer pursuant to the Depository Trust Company Automated
Securities Transfer Programs. The name, address, telephone number, fax number,
contact person and email address of the Company transfer agent are set forth
on
Schedule
5(v)
hereto.
(w) Investment
Company.
Neither
the Company nor any Affiliate is an “investment company” within the meaning of
the Investment Company Act of 1940, as amended.
(x) Subsidiary
Representations.
The
Company makes each of the representations contained in Sections 5(a), (b),
(d),
(e), (f), (h), (k), (m), (q), (r), (s), (u) and (w) of this Agreement, as
same
relate to each Subsidiary of the Company, with the same qualifications to
each
such representation.
(y) Correctness
of Representations.
The
Company represents that the foregoing representations and warranties are
true
and correct as of the date hereof in all material respects, and, unless the
Company otherwise notifies the Subscribers prior to the Closing Date, shall
be
true and correct in all material respects as of the Closing Date.
(z) Survival.
The
foregoing representations and warranties shall survive until three years
after
the Closing Date.
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 the 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 and other matters reasonably
requested by Subscribers. A form of the legal opinion is annexed hereto as
Exhibit
D.
The
Company will provide, at the Company's expense, such other legal opinions
in the
future as are reasonably necessary for the issuance and resale of the Common
Stock issuable upon conversion of the Notes and exercise of the Warrants
pursuant to an effective registration statement or an exemption from
registration.
7.1. Conversion
of Note.
(a) Upon
the
conversion of a Note or part thereof, the Company shall, at its own cost
and
expense, take all necessary action, including obtaining and delivering, an
opinion of counsel acceptable to the Company’s transfer agent, so that the
Company's transfer agent shall issue stock certificates in the name of
Subscriber (or its nominee) or such other persons as designated by Subscriber
and in such denominations to be specified at conversion representing the
number
of shares of Common Stock issuable upon such conversion. The Company warrants
that no instructions other than these instructions have been or will be given
to
the transfer agent of the Company's Common Stock and that, unless waived
by the
Subscriber, the Shares will be free-trading, and freely transferable, and
will
not contain a legend restricting the resale or transferability of the Shares,
provided the Subscriber represents that the Shares are or will be sold pursuant
to an effective registration statement covering the Shares or exemption from
registration, or are otherwise exempt from registration.
(b) Subscriber
will give notice of its decision to exercise its right to convert the Note,
interest, any sum due to the Subscriber under the Transaction Documents
including Liquidated Damages, or part thereof by telecopying an executed
and
completed Notice
of Conversion
(a form
of which is annexed as Exhibit
A
to the
Note) to the Company via confirmed telecopier transmission or otherwise pursuant
to Section 13(a) of this Agreement. The Subscriber will not be
required to surrender the Note
until
the Note has been fully converted or satisfied. Each date on which a Notice
of
Conversion is telecopied to the Company in accordance with the provisions
hereof
shall be deemed a Conversion
Date.
The
Company will itself or cause the Company’s transfer agent to transmit the
Company's Common Stock certificates representing the Shares issuable upon
conversion of the Note to the Subscriber via express courier for receipt
by such
Subscriber within three (3) business days after receipt by the Company of
the
Notice of Conversion (such third day being the "Delivery
Date").
In
the event the Shares are electronically transferable, then delivery of the
Shares must
be made
by electronic transfer provided request for such electronic transfer has
been
made by the Subscriber
and the Subscriber has complied with all applicable securities laws in
connection with the sale of the Common Stock, including, without limitation,
the
prospectus delivery requirements. A Note representing the balance of the
Note
not so converted will be provided by the Company to the Subscriber if requested
by Subscriber, provided the Subscriber delivers the
original Note to the Company. In the event that a Subscriber elects not to
surrender a Note for reissuance upon partial payment or conversion, the
Subscriber hereby indemnifies the Company against any and all loss or damage
attributable to a third-party claim in an amount in excess of the actual
amount
then due under the Note. “Business
day”
and
“trading
day”
as
employed in the Transaction Documents is a day that the New York Stock Exchange
is open for trading for three or more hours.
(c) The
Company understands that a delay in the delivery of the Shares in the form
required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
described in Section 7.2 hereof, respectively after the Delivery Date or
the
Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber. As compensation to the Subscriber for such
loss, the Company agrees to pay (as liquidated damages and not as a penalty)
to
the Subscriber for late issuance of Shares in the form required pursuant
to
Section 7.1 hereof upon Conversion of the Note in the amount of $100 per
business day after the Delivery Date for each $10,000 of Note principal amount
being converted of the corresponding Shares which are not timely delivered.
The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other remedies
which may be available to the Subscriber, in the event that the Company fails
for any reason to effect delivery of the Shares by the Delivery Date or make
payment by the Mandatory Redemption Payment Date, the Subscriber may revoke
all
or part of the relevant Notice of Conversion or rescind all or part of the
notice of Mandatory Redemption by delivery of a notice to such effect to
the
Company whereupon the Company and the Subscriber shall each be restored to
their
respective positions immediately prior to the delivery of such notice, except
that the liquidated damages described above shall be payable through the
date
notice of revocation or rescission is given to the Company.
(d) 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 or damages
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.
7.2. Mandatory
Redemption at Subscriber’s Election.
In the
event (i) the Company is prohibited from issuing Shares, (ii) the Company
fails
to timely deliver Shares on a Delivery Date, (iii) upon the occurrence of
any
other Event of Default (as defined in the Note or in this Agreement), any
of the
foregoing that continues for more than twenty (20) business days, or (iv)
of the
liquidation, dissolution or winding up of the Company, then at the Subscriber's
election, the Company must pay to the Subscriber ten (10) business days after
request by the Subscriber (“Calculation
Period”),
a sum
of money determined by multiplying up to the outstanding principal amount
of the
Note designated by the Subscriber by the greater of (y) 120%, or (z) a fraction
in which the numerator is the highest closing price of the Common Stock during
the Calculation Period and the denominator is the lowest applicable Conversion
Price during the Calculation Period, together with accrued but unpaid interest
thereon ("Mandatory
Redemption Payment").
The
Mandatory Redemption Payment must be received by the Subscriber on the same
date
as the Shares otherwise deliverable or within ten (10) business days after
request, whichever is sooner ("Mandatory
Redemption Payment Date").
Upon
receipt of the Mandatory Redemption Payment, the corresponding Note principal
and interest will be deemed paid and no longer outstanding. Liquidated damages
calculated pursuant to Section 7.1(c) hereof, that have been paid or accrued
for
the ten day period prior to the actual receipt of the Mandatory Redemption
Payment by the Subscriber shall be credited against the Mandatory Redemption
Payment.
7.3. Maximum
Conversion.
The
Subscriber shall not be entitled to convert on a Conversion Date that amount
of
the Note in connection with that number of shares of Common Stock which would
be
in excess of the sum of (i) the number of shares of common stock beneficially
owned by the Subscriber and its Affiliates on a Conversion Date, and (ii)
the
number of shares of Common Stock issuable upon the conversion of the Note
with
respect to which the determination of this provision is being made on a
Conversion Date, which would result in beneficial ownership by the Subscriber
and its Affiliates of more than 4.99% of the outstanding shares of common
stock
of the Company on such Conversion Date. Beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934,
as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
Subscriber shall not be limited to aggregate conversions of only 4.99% and
aggregate conversions by the Subscriber may exceed 4.99%. The Subscriber
may
waive the conversion limitation described in this Section 7.3, in whole or
in
part, upon and effective after 61 days prior written notice to the Company
to
increase such percentage to up to 9.99%. The Subscriber may decide whether
to
convert a Note or exercise Warrants to achieve an actual 4.99% or up to 9.99%
ownership position as described above.
7.4. Injunction
Posting of Bond.
In the
event a Subscriber shall elect to convert a Note or part thereof or exercise
the
Warrant in whole or in part, the Company may not refuse conversion or exercise
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 from a court, on notice, restraining and
or
enjoining conversion of all or part of such Note or exercise of all or
part of
such Warrant shall have been sought and obtained by the Company
or at
the Company’s request or with the Company’s assistance, and
the
Company has posted a surety bond for the benefit of such Subscriber in
the
amount of 120% of the outstanding principal and interest of the Note, or
aggregate purchase price of the Shares and Warrant Shares which are sought
to be
subject to the injunction, 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.
7.5. Buy-In.
In
addition to any other rights available to the Subscriber, if the Company
fails
to deliver to the Subscriber such shares issuable upon conversion of a
Note by
the Delivery Date and if after six (6) business days after the Delivery
Date the
Subscriber or a broker on the Subscriber’s behalf, purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a
sale by such Subscriber of the Common Stock which the Subscriber was entitled
to
receive upon such conversion (a "Buy-In"),
then
the Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if
any) for
the shares of Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note for which such conversion was not timely
honored,
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 the Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of $10,000 of note principal and/or interest, 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.
7.6 Adjustments.
The
Conversion Price, Warrant exercise price and amount of Shares issuable upon
conversion of the Notes and exercise of the Warrants shall be adjusted as
described in this Agreement, the Notes and Warrants.
7.7. Redemption.
The
Securities shall not be redeemable or mandatorily convertible except as
described in the Note and Warrants.
8. Broker/Legal
Fees.
(a) Broker’s
Commission.
The
Company on the one hand, and each Subscriber (for himself only) on the other
hand, agrees to indemnify the other against and hold the other harmless from
any
and all liabilities to any persons claiming brokerage commissions or similar
fees other than the entity identified on Schedule
8,
(the
“Broker”)
on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party’s actions. Anything in this
Agreement to the contrary notwithstanding, each Subscriber is providing
indemnification only for such Subscriber’s own actions and not for any action of
any other Subscriber. The Company agrees that it will pay the Broker the
fee set
forth on Schedule
8
(“Broker’s
Fees”).
The
Company represents that there are no other parties entitled to receive fees,
commissions, or similar payments in connection with the offering described
in
this Agreement except the Broker.
(b) Legal
Fees.
The
Company shall pay to Grushko & Xxxxxxx, P.C., a cash fee of $25,000
(“Legal
Fees”)
(of
which $10,000 has been paid) as reimbursement for services rendered to the
Subscribers in connection with this Agreement and the purchase and sale of
the
Notes and Warrants (the “Offering”).
The
Legal Fees and reimbursement for estimated UCC search fees, if any, (less
any
amounts paid prior to Closing) to be paid by the Company will be payable
on the
Closing Date out of funds held pursuant to the Escrow Agreement.
9. Covenants
of the Company.
The
Company covenants and agrees with the Subscribers as follows:
(a) Stop
Orders.
The
Company will advise the Subscribers, within two hours after the Company 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.
If
applicable, the Company shall promptly secure the listing of the shares of
Common Stock and the Warrant Shares upon each national securities exchange,
or
electronic or automated quotation system upon which they are or become eligible
for listing and shall maintain such listing so long as any Notes or Warrants
are
outstanding. The Company will maintain the listing or quotation of its Common
Stock on the American Stock Exchange, Nasdaq Capital 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 respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common
Stock
from any Principal Market. As of the date of this Agreement, the Bulletin
Board
is the Principal Market.
(c) Market
Regulations.
If
applicable, 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.
(d) Filing
Requirements.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to the Registration Statement
or
pursuant to Rule 144, without regard to volume limitations, the Company will
(A)
cause its Common Stock to continue to be registered under Section 12(b) or
12(g)
of the 1934 Act, (B) comply in all respects with its reporting and filing
obligations under the 1934 Act, (C) voluntarily comply with all reporting
requirements that are applicable to an issuer with a class of shares registered
pursuant to Section 12(g) of the 1934 Act, if Company is not subject to such
reporting requirements, and (D) comply with all requirements related to any
registration statement filed pursuant to this Agreement. The Company will
use
its best 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 said acts until two (2) years after the Closing Date. Until
the earlier of the resale of the Shares and the Warrant Shares by each
Subscriber or two (2) years after the Closing Date, the Company will use
its
best efforts to continue the listing or quotation of the Common Stock on
a
Principal Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market.
The Company agrees to timely file a Form D with respect to the Securities
if
required under Regulation D and to provide a copy thereof to each Subscriber
promptly after such filing.
(e) Use
of
Proceeds.
The
proceeds of the Offering will be employed by the Company for the purposes
set
forth on Schedule
9(e)
hereto.
Except as set forth on Schedule
9(e),
the
Purchase Price may not and will not be used for accrued and unpaid officer
and
director salaries, payment of financing related debt, redemption of outstanding
notes or equity instruments of the Company, litigation related expenses or
settlements, brokerage fees, nor non-trade obligations outstanding on a Closing
Date. For so long as any Notes are outstanding, the Company will not prepay
any
financing related debt obligations, nor redeem any equity instruments of
the
Company.
(f) Reservation.
Prior
to the Closing Date, the Company undertakes to reserve, pro rata,
on
behalf of the Subscribers from its authorized but unissued common stock,
a
number of common shares equal to 200%
of
the amount of Common Stock necessary to allow each Subscriber to be able
to
convert all Notes issuable pursuant to this Agreement and interest thereon
and
reserve 100% of the amount of Warrant Shares issuable upon exercise of the
Warrants. Failure to have sufficient shares reserved pursuant to this Section
9(f) shall be a material default of the Company’s obligations under this
Agreement and an Event of Default under the Note.
(g) Taxes.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to the Registration Statement
or
pursuant to Rule 144, without regard to volume limitations, the Company will
promptly pay and discharge, or cause to be paid and discharged, when due
and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company; provided,
however, that any such tax, assessment, charge or levy need not be paid if
the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto, and provided, further, that the Company will
pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefore.
(h) Insurance.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to the Registration Statement
or
pursuant to Rule 144, without regard to volume limitations, the Company will
keep its assets which are of an insurable character insured by financially
sound
and reputable insurers against loss or damage by fire, explosion and other
risks
customarily insured against by companies in the Company’s line of business, in
amounts sufficient to prevent the Company from becoming a co-insurer and
not in
any event less than one hundred percent (100%) of the insurable value of
the
property insured less reasonable deductible amounts; and the Company will
maintain, with financially sound and reputable insurers, insurance against
other
hazards and risks and liability to persons and property to the extent and
in the
manner customary for companies in similar businesses similarly situated and
to
the extent available on commercially reasonable terms.
(i) Books
and Records.
From the
date of this Agreement and until the sooner of (i) two (2) years after the
Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to the Registration Statement
or
pursuant to Rule 144, without regard to volume limitations, the Company will
keep true records and books of account in which full, true and correct entries
will be made of all dealings or transactions in relation to its business
and
affairs in accordance with generally accepted accounting principles applied
on a
consistent basis.
(j) Governmental
Authorities.
From the
date of this Agreement and until the sooner of (i) two (2) years after the
Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to 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) Intellectual
Property.
From
the date of this Agreement and until the sooner of (i) two (2) years after
the
Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to the Registration Statement
or
pursuant to Rule 144, without regard to volume limitations, the Company shall
maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights to use intellectual property owned or
possessed by it and reasonably deemed to be necessary to the conduct of its
business, unless it is sold for value.
(l) Properties.
From the
date of this Agreement and until the sooner of (i) two (2) years after the
Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to the Registration Statement
(as
defined in Section 11.1(ii) hereof) or pursuant to Rule 144, without regard
to
volume limitations, the Company will keep its properties in good repair,
working
order and condition, reasonable wear and tear excepted, and from time to
time
make all necessary and proper repairs, renewals, replacements, additions
and
improvements thereto; and the Company will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected to
have a
Material Adverse Effect.
(m) Confidentiality/Public
Announcement.
From the
date of this Agreement and until the sooner of (i) two (2) years after the
Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to 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 or
as
otherwise required in any other Commission filing, it will not disclose publicly
or privately the identity of the Subscribers unless expressly agreed to in
writing by a Subscriber, only to the extent required by law and then only
upon
five days prior notice to Subscriber. In any event and subject to the foregoing,
the Company shall file
a
Form 8-K or make a public announcement describing the Offering not later
than
the first business day after the Closing Date. In the Form 8-K or public
announcement, the Company will specifically disclose the amount of common
stock
outstanding immediately after the Closing. A form of the proposed Form 8-K
or
public announcement to be employed in connection with the Closing is annexed
hereto as Exhibit
E.
(n) Further
Registration Statements.
Except
for a registration statement filed on behalf of the Subscribers pursuant
to
Section 11 of this Agreement, and as set forth on Schedule
11.1
hereto,
the Company will not file any registration statements, including but not
limited
to Forms S-8, with the Commission or with state regulatory authorities without
the consent of the Subscriber until the expiration of the “Exclusion
Period”,
which
shall be defined as the sooner of (i) the Registration Statement shall have
been
current and available for use in connection with the resale of the Registrable
Securities (as defined in Section 11.1(i) for a period of 180 days, or (ii)
until all the Shares and Warrant Shares have been resold or transferred by
the
Subscribers pursuant to the Registration Statement or Rule 144(k) under the
1933
Act, without regard to volume limitations. The Exclusion Period will be tolled
during the pendency of an Event of Default (as defined in the
Note).
(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.
(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. The Company understands and confirms that each Subscriber shall
be
relying on the foregoing representations in effecting transactions in securities
of the Company. In any event, the Company will offer to the Subscriber an
opportunity to review and comment on the Registration Statement thereto between
three and five business days prior to the proposed filing date
thereof.
(q) Offering
Restrictions.
Until
the expiration of the Exclusion Period and during the pendency of an Event
of
Default, except for the Excepted Issuances, the Company will not enter into
an
agreement to nor issue 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, without the prior written
consent
of the Subscriber, which consent may be withheld for any reason. For so long
as
at least twenty-five percent (25%) of the principal amount of the Notes is
outstanding, the Company will not enter into any equity line of credit or
similar agreement, nor issue nor agree to issue any floating or variable
priced
equity linked instruments nor any of the foregoing or equity with price reset
rights.
(r) Negative
Covenants.
So long
as at least twenty-five percent (25%) of the principal amount of the Notes
issued on the Closing Date is outstanding and during the pendency of an Event
of
Default (as defined in the Note), without the consent of the Subscribers,
the
Company will not and will not permit any of its Subsidiaries to directly
or
indirectly:
(i) create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of
any
jurisdiction) (each, a “Lien”)
upon
any of its property, whether now owned or hereafter acquired except for (i)
the
Excepted Issuances (as defined in Section 12(a) hereof), (ii) (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith
and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue
by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business
in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in
the
ordinary course of business; (e) Liens created with respect to the financing
of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property, or (f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed
by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property (each of (a) through (f), a “Permitted
Lien”)
and
(iii) indebtedness for borrowed money which is not senior or pari passu in
right
of payment to the payment of the Notes;
(ii) amend
its
certificate of incorporation, bylaws or its charter documents so as to adversely
affect any rights of the Subscriber;
(iii) repay,
repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred
stock,
or other equity securities other than to the extent permitted or required
under
the Transaction Documents; or
(iv) engage
in
any transactions with any officer, director, employee or any Affiliate of
the
Company, including any contract, agreement or other arrangement providing
for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity
in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $10,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company, (iii)
for
other employee benefits, including stock option agreements under any stock
option plan of the Company, and (iv) for mineral rights, or interest previously
owned by officers, directors, or employees of the Company as described on
Schedule
9(r).
(s) Limited
Standstill.
The
Company will deliver to the Subscribers on or before the Closing Date and
enforce the provisions of irrevocable standstill agreements (“Limited
Standstill Agreements”)
in the
form annexed hereto as Exhibit
F,
with
the parties identified on Schedule
9(s)
hereto,
who comprise all owners beneficially or otherwise, of 2.5% or more of the
Company’s Common Stock and options or rights to acquire Common
Stock.
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 material 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 material
breach or default in performance by the Company of any covenant or undertaking
to be performed by the Company hereunder, or any other agreement entered
into by
the Company and Subscriber relating hereto.
(b) 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 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 material
breach or default in performance by such Subscriber of any covenant or
undertaking to be performed by such Subscriber hereunder, or any other agreement
entered into by the Company and Subscribers, relating hereto.
(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 Closing Date, but not later than two (2) years after the Closing Date,
upon
a written request therefor from any record holder or holders of more than
50% of
the Shares issued and issuable upon conversion of the outstanding Notes and
outstanding Warrant Shares, the Company shall prepare and file with the
Commission a registration statement under the 1933 Act registering the
Registrable Securities, as defined in Section 11.1(iv) hereof, 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 which are (A) 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 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).
(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 within thirty (30)
calendar days after the Closing Date (the
“Filing
Date”),
and
cause to be declared effective not
later
than one hundred and twenty (120) calendar days after the Closing Date
(the
“Effective
Date”).
The
Company will register not less than a number of shares of common stock in
the
aforedescribed registration statement that is equal to 200%
of
the Shares issuable upon conversion of all of the Notes issuable to the
Subscribers, and 100% of the Warrant Shares issuable pursuant to this Agreement
upon exercise of the Warrants (collectively the “Registrable
Securities”).
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 immediately be amended or
additional registration statements will be immediately 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. Except with the written consent of the Subscriber, no securities
of
the Company other than the Registrable Securities will be included in the
Registration Statement. It shall be deemed a Non-Registration Event if at
any
time after the date the Registration Statement is declared effective by the
Commission (“Actual
Effective Date”)
the
Company has registered for unrestricted resale on behalf of the Subscribers
fewer than 125%
of
the amount of Common Shares issuable upon full conversion of all sums due
under
the Notes and 100% of the Warrant Shares issuable upon exercise of the
Warrants.
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 possible:
(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 its best 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 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 the first business day thereafter that 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 an Event of Default as defined
in the Notes
and
a Non-Registration Event as defined in Section 11.4 of this Agreement);
(b) 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 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 or make them electronically available;
(d) use
its
commercially
reasonable best 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 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) notify
the Subscribers within two hours of the Company’s becoming aware that 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 not misleading in light of the circumstances then existing or which
becomes subject to a Commission, state or other governmental order suspending
the effectiveness of the registration statement covering any of the Registrable
Securities;
(g) provided
same would not be in violation of the provision of Regulation FD under the
1934
Act, make available for inspection by the Sellers, and any attorney, accountant
or other agent retained by the Seller or underwriter, all publicly available,
non-confidential financial and other records, pertinent corporate documents
and
properties of the Company, and cause the Company's officers, directors and
employees to supply all publicly available, non-confidential information
reasonably requested by the seller, attorney, accountant or agent in connection
with such registration statement; and
(h) provide
to the Sellers copies of the Registration Statement and amendments thereto
five
business days prior to the filing thereof with the Commission.
11.3. Provision
of Documents.
In
connection with each registration described in this Section 11, each Seller
will
furnish to the Company in writing such information and representation letters
with respect to itself and the proposed distribution by it as reasonably
shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
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) due to the action or inaction
of
the Company the Registration Statement is not declared effective within three
(3) 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 without being succeeded within fifteen
(15) business days by an effective replacement or amended registration statement
or for a period of time which shall exceed thirty (30) days in the aggregate
per
year (defined as every rolling period of 365 consecutive days commencing
on the
Actual Effective Date (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 holder of Registrable Securities, as
Liquidated
Damages,
an
amount equal to one percent (1%) for each thirty (30) days (or such lesser
pro-rata amount for any period of less than thirty (30) days) of the Purchase
Price of the outstanding Notes and purchase price of Shares issued upon
conversion of the Notes owned of record by such holder which are subject
to such
Non-Registration Event. 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 and Liquidated
Damages will be calculated accordingly. All
oral
or written comments received from the Commission relating to the Registration
Statement must be satisfactorily 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 (if
required), 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, and
fees
of transfer agents and registrars, are called “Registration
Expenses.”
All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities 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.
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, or (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.
(b) In
the
event of a registration of any of the Registrable Securities under the 1933
Act
pursuant to Section 11, each Seller 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 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.
(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.
11.7. Delivery
of Unlegended Shares.
(a) Within
four (4) business days (such fourth business day being the “Unlegended
Shares Delivery Date”)
after
the business day on which the Company has received (i) a notice that Shares
or
Warrant Shares or any other Common Stock held by a Subscriber have been sold
pursuant to 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(i)
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.
(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 the greater of (i) 120%, or (ii) a fraction in which the
numerator is the highest closing price during the aforedescribed thirty day
period and the denominator of which is the lowest conversion price during
such
thirty day period, multiplied by the Purchase Price of such Common Stock
and
Warrant Shares (“Unlegended
Redemption Amount”).
The
amount of the aforedescribed liquidated damages that have accrued or been
paid
for the ten 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 six (6) business days after the Unlegended Shares Delivery
Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
open market transaction or otherwise) shares of common stock to deliver
in
satisfaction of a sale by such Subscriber of the shares of Common Stock
which
the Subscriber was entitled to receive from the Company (a "Buy-In"),
then
the Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if
any) for
the shares of common stock so purchased exceeds (B) the aggregate purchase
price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together
with interest thereon at a rate of 15% per annum, accruing until such amount
and
any accrued interest thereon is paid in full (which amount shall be paid
as
liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of
purchase
price of shares of Common Stock delivered to the Company for reissuance
as
Unlegended Shares, the Company shall be required to pay the Subscriber
$1,000,
plus interest. The
Subscriber shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In.
(e) In
the
event a Subscriber shall request delivery of Unlegended Shares as described
in
Section 11.7 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 by the Company or at the Company’s request or with the Company’s
assistance,
and the
Company has posted a surety bond for the benefit of such Subscriber in the
amount of 120% of the amount of the aggregate purchase price of the 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
one year after the Closing Date, 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 or other securities or debt obligations, except in
connection with (i) full or partial consideration in connection with a strategic
merger, acquisition, consolidation or purchase of substantially all of the
securities or assets of corporation or other entity which holders of such
securities or debt are not at any time granted registration rights, (ii)
the
Company’s issuance of securities in connection with strategic license agreements
and other partnering arrangements so long as such issuances are not for the
purpose of raising capital which
holders of such securities or debt are not at any time granted registration
rights,
(iii)
the Company’s issuance of Common Stock or the issuances or grants of options to
purchase Common Stock pursuant to stock option plans and employee stock purchase
plans described on Schedule
5(d)
hereto
at prices equal to or higher than the closing price of the Common Stock on
the
issue date of any of the foregoing, (iv) as a result of the exercise of Warrants
or conversion of Notes which are granted or issued pursuant to this Agreement
or
that have been issued prior to the Closing Date, the issuance of which has
been
disclosed in a Report filed not less than five (5) days prior to the Closing
Date, (v) the payment of any interest on the Notes and liquidated damages
or
other damages pursuant to the Transaction Documents or other securities
instruments that have been issued prior to the Closing Date, the issuance
of
which has been disclosed in a Report filed not less than five days prior
to the
Closing Date, and (vi) as
described on Schedule
12(a)
(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 Notes 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 to
exercise such right.
(b) Favored
Nations Provision.
Other
than in connection with the Excepted Issuances, if at any time Notes or Warrants
are outstanding, and as limited in connection with the Warrants and Warrants
Shares to the time periods set forth in Section 3.4 of the Warrant, 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 or
conversion or exercise price per share which shall be less than the Conversion
Price in respect of the Shares, or if less than the Warrant exercise price
in
respect of the Warrant Shares, without the consent of each Subscriber holding
Notes, 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 Common Stock or Warrant Shares still owned by the
Subscriber) is equal to such other lower price per share and the Conversion
Price and Warrant exercise price shall automatically be reduced to such other
lower price. The average Purchase Price of the Shares and average exercise
price
in relation to the Warrant Shares shall be calculated separately for the
Shares
and Warrant Shares. The foregoing calculation and issuance shall be made
separately for Shares received upon conversion and separately for 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-à-vis such additional common shares shall be, respectively, the
thirtieth (30th)
and
sixtieth (60th)
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 sooner of the agreement to or actual issuance
of
such convertible security, warrant, right or option and again at any time
upon
any subsequent issuances of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price lower than the
Conversion Price or Warrant exercise price in effect upon such issuance.
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, the Note, any
Transaction Document, and any other agreement referred to or entered into
in
connection herewith. The Subscriber is also given the right to elect to
substitute any term or terms of any other offering in connection with which
the
Subscriber has rights as described in Section 12(a), for any term or terms
of
the Offering in connection with Securities owned by Subscriber as of the
date
the notice described in Section 12(a) is required to be given to
Subscriber.
(c) Maximum
Exercise of Rights.
In the
event the exercise of the rights described in Sections 12(a) and 12(b)
would
or
could result in the issuance of an amount of common stock of the Company
that
would exceed the maximum amount that may be issued to a Subscriber calculated
in
the manner described in Section 7.3 of this Agreement, then the issuance
of such
additional shares of common stock of the Company to such Subscriber will
be
deferred in whole or in part until such time as such Subscriber is able
to
beneficially own such common stock without exceeding the applicable maximum
amount set forth calculated in the manner described in Section 7.3 of this
Agreement. The determination of when such common stock may be issued shall
be
made by each Subscriber as to only such Subscriber.
13. Miscellaneous.
(a) Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or
the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Company, to: Ness
Energy International, Inc., 0000
Xxxx
Xxxxxxxxxx 00, Xxxxxx Xxxx, XX 00000, Attn: XX Xxxxxx, CFO, telecopier: (000)
000-0000, with a copy by telecopier only to: Xxxxx Xxxxxxx, Xxxxxxx Law Firm,
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000, Xxxxxx, XX 00000, telecopier: (000)
000-0000, (ii) if to the Subscriber, 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: (000) 000-0000, and (iii)
if
to the Broker, to: the address and telecopier number set forth on Schedule
8
hereto.
(b) Entire
Agreement; Assignment.
This
Agreement and other documents delivered in connection herewith represent
the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by 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.
(c)
Counterparts/Execution.
This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but
one
and the same instrument. This Agreement may be executed by facsimile signature
and delivered by facsimile transmission.
(d) Law
Governing this Agreement.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York without regard to 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
civil or state courts of New York or in the federal courts located in New
York
County. 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.
(e) Specific
Enforcement, Consent to Jurisdiction.
To the
extent permitted by law, the Company and Subscriber acknowledge and agree
that
irreparable damage would occur in the event that any of the provisions of
this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to 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(d) hereof, each
of
the Company, Subscriber 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.
(f) Damages.
In the
event the Subscriber is entitled to receive any liquidated damages pursuant
to
the Transactions, the Subscriber may elect to receive the greater of actual
damages or such liquidated damages.
(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.
(h) Consent.
As used
in the Agreement, “consent of the Subscribers” or similar language means the
consent of holders of not less than 75% of the total of the Shares issued
and
issuable upon conversion of outstanding Notes owned by Subscribers on the
date
consent is requested.
(i) Equal
Treatment.
No
consideration shall be offered or paid to any person to amend or consent
to a
waiver or modification of any provision of the Transaction Documents unless
the
same consideration is also offered and paid to all the parties to the
Transaction Documents.
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.
NESS
ENERGY INTERNATIONAL, INC.
a
Washington corporation
By:_________________________________
Name:
Title:
Dated:
May _____, 2006
|
SUBSCRIBER
|
NOTE
PRINCIPAL AMOUNT
|
PURCHASE
PRICE
|
CLASS
A WARRANTS
|
|
ALPHA
CAPITAL AKTIENGESELLSCHAFT
Xxxxxxxxx
0
0000
Xxxxxxxxxxx
Xxxxx,
Lichtenstein
Fax:
000-00-00000000
__________________________________
(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.
NESS
ENERGY INTERNATIONAL, INC.
a
Washington corporation
By:_________________________________
Name:
Title:
Dated:
May _____, 2006
|
SUBSCRIBER
|
NOTE
PRINCIPAL AMOUNT
|
PURCHASE
PRICE
|
CLASS
A WARRANTS
|
|
IROQUOIS
MASTER FUND LTD.
000
Xxxxxxxxx Xxxxxx
Xxx
Xxxx, XX 00000
Fax:
(212)
__________________________________
(Signature)
By:
|
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT (C)
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.
NESS
ENERGY INTERNATIONAL, INC.
a
Washington corporation
By:_________________________________
Name:
Title:
Dated:
May _____, 2006
|
SUBSCRIBER
|
NOTE
PRINCIPAL AMOUNT
|
PURCHASE
PRICE
|
CLASS
A WARRANTS
|
|
BRISTOL
INVESTMENT FUND, LTD.
Caledonian
House, Xxxxxxx Street
Xxxxxx
Town, Grand Cayman
Cayman
Islands
Fax:
(000) 000-0000
__________________________________
(Signature)
By:
|
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT (D)
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.
NESS
ENERGY INTERNATIONAL, INC.
a
Washington corporation
By:_________________________________
Name:
Title:
Dated:
May _____, 2006
|
SUBSCRIBER
|
NOTE
PRINCIPAL AMOUNT
|
PURCHASE
PRICE
|
CLASS
A WARRANTS
|
|
XXXXX
INTERNATIONAL LTD.
53rd
Street Urbanizacion Obarrio
Swiss
Tower, 16th
Floor, Panama
Republic
of Panama
Fax:
(000) 000-0000
__________________________________
(Signature)
By:
|
LIST
OF EXHIBITS AND SCHEDULES
Exhibit
A Form
of
Note
Exhibit
B Form
of
Warrant
Exhibit
C Escrow
Agreement
Exhibit
D Form
of
Legal Opinion
Exhibit
E Form
of
Form 8-K or Public Announcement
Exhibit
F Limited
Standstill Agreement
Schedule
5(a) Subsidiaries
Schedule
5(d) Additional
Issuances / Capitalization
Schedule
5(q) Undisclosed
Liabilities
Schedule
5(v) Transfer
Agent
Schedule
8 Broker
Schedule
9(e) Use
of
Proceeds
Schedule
9(r) Officer
and Director Mineral Rights
Schedule
9(s) Limited
Standstill Providers
Schedule
12(a) Other
Excepted Issuances
EXHIBIT
F
LIMITED
STANDSTILL AGREEMENT
This
AGREEMENT (the "Agreement") is made as of the ___ day of May, 2006, by the
signatories hereto (each a "Holder"), in connection with his ownership of
shares
of Ness Energy International, Inc., a Washington 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, no 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 an agreement
with each subscriber (“Subscription Agreement”) to the Company’s convertible
notes and warrants (the “Subscribers”), for the sale of an aggregate of up to
$1,000,000 of principal amount of convertible promissory notes and warrants
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 and until the expiration of the Exclusion Period (as
defined in Section 9(n) of the Subscription Agreement (the "Restriction
Period").
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
and
the Closing Date (as defined in the Subscription Agreement), other than in
connection with an offer made to all shareholders of the Company or any merger,
consolidation or similar transaction involving the Company. Holder further
agrees that the Company is authorized to and the Company agrees to place
"stop
orders" on its books to prevent any transfer of shares of Common Stock or
other
securities of the Company held by Holder in violation of this
Agreement.
b. Any
subsequent issuance to and/or acquisition of shares or the right to acquire
shares by Holder 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 the 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 prior to the transfer, 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 without regard to conflicts of laws principles that
would result in the application of the substantive laws of another jurisdiction,
except to the extent that the securities laws of the state in which Holder
resides and federal securities laws may apply. Any proceeding brought to
enforce
this Agreement may be brought exclusively in courts sitting in New York County,
New York.
c. This
Agreement contains the entire agreement of the Holder with respect to the
subject matter hereof.
d. This
Agreement shall be binding upon Holder, its legal representatives, successors
and assigns.
e. This
Agreement may be signed and delivered by facsimile and such facsimile signed
and
delivered shall be enforceable.
f. The
Company agrees not to take any action or allow any act to be taken which
would
be inconsistent with this Agreement.
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:
NESS
ENERGY INTERNATIONAL, INC.
By:______________________________
Schedule
8
Broker
Broker: KMR
CAPITAL, LLC, a division of MidAmerica Financial Services Inc.
000
Xxxx
Xxxx Xxxxxx
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000
Cash
Fee.
The
Company agrees that it will pay the Broker, on the Closing Date a fee of
seven
percent (7%) of the Purchase Price (“Broker’s Cash Fee”). The Company represents
that there are no other parties entitled to receive fees, commissions, or
similar payments in connection with the Offering except the Broker.
Broker’s
Warrants.
On the
Closing Date, the Company will issue to the Broker, share purchase warrants
similar to and carrying the same rights as the Class A Warrants issuable
to the
Subscribers (“Broker’s
Warrants”)
except
that the Broker’s Warrants will be exercisable for five years from the Closing
Date at an exercise price equal to the lesser of $0.155, or 100% of the closing
bid price of the Common Stock as reported by Bloomberg L.P. for the Principal
Market for the trading day preceding the Closing Date. The Broker will receive,
in the aggregate, five (5) Broker’s Warrants for each one hundred (100) Shares
issuable on the Closing Date.
All
the
representations, covenants, warranties, undertakings, remedies, liquidated
damages, indemnification, and other rights including but not limited to
reservation and registration rights made or granted to or for the benefit
of the
Subscribers are hereby also made by the Company and granted to the holders
of
the Broker’s Warrants.
