SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT
(this
“Agreement”),
dated
as of May ___, 2006, by and among Oxford Media, Inc. (formerly known as Becoming
Art Inc.), a Nevada corporation (the “Company”),
and
the subscribers identified on the signature page hereto (each a “Subscriber”
and
if
more than one, 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) 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 One Million Five
Hundred Thousand Dollars ($1,500,000) (the "Purchase
Price")
of
principal amount of 12% promissory notes of the Company (“Note”
or
“Notes”)
in the
form annexed hereto as Exhibit
A
and as a
due diligence fee, share purchase warrants (collectively the “Warrants”),
in
the form attached hereto as Exhibit
B,
to
purchase shares of the Company’s $0.001 par value common stock (“Common
Stock”)
(the
“Warrant
Shares”).
The
Notes, 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
may 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. 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 and the amount
of Warrants determined pursuant to Section 3 below. The aggregate principal
amount of the Notes to be purchased by the Subscribers on the Closing Date
shall, in the aggregate, be equal to the Purchase Price. The Closing Date shall
be the date that subscriber funds representing the net amount due to the Company
from the Purchase Price is transmitted by wire transfer or otherwise to or
for
the benefit of the Company. The consummation of the transactions contemplated
herein shall take place at the offices of Grushko & Xxxxxxx, P.C., 000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of all
conditions to Closing set forth in this Agreement (“Closing
Date”).
2. Due
Diligence Warrants.
On the
Closing Date, the Company will issue and deliver Warrants to the Subscribers.
Three due diligence Warrants will be issued for every ten dollars invested
on
the Closing Date. The per Warrant Share exercise price to acquire a Warrant
Share upon exercise of a Warrant shall be as stated in the Warrant. The Warrants
shall be exercisable until five (5) years after the issue date of the Warrants.
The holder of the Warrants is granted the registration rights set forth in
this
Agreement. The Warrant exercise price and the number of shares of Common Stock
issuable upon exercise of the Warrants shall be equitably adjusted to offset
the
effect of stock splits, stock dividends, pro rata distributions of property
or
equity interests to the Company’s shareholders, and as otherwise described in
the Warrant.
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3. Security
Interest.
The
Subscribers will be granted a security interest in certain assets of the Company
and Subsidiaries (as defined in Section 5(a) of this Agreement), including
ownership of the Subsidiaries, to be memorialized in a “Security
Agreement”,
a form
of which is annexed hereto as Exhibit
D.
Each
Subsidiary will execute and deliver to the Subscribers a form of “Guaranty”
annexed
hereto as Exhibit
E.
The
Company will execute such other agreements, documents and financing statements
reasonably requested by Subscribers, which will be filed at the Company’s
expense with such jurisdictions, states and counties designated by the
Subscribers. The
Company will also execute all such documents reasonably necessary in the opinion
of Subscribers to memorialize and further protect the security interest
described herein. The Subscribers will appoint a Collateral Agent to represent
them collectively in connection with the security interest to be granted to
the
Subscribers. The appointment will be pursuant to a “Collateral
Agent Agreement”,
a form
of which is annexed hereto as Exhibit
F.
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 Securities 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.
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(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 of the Securities, 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 Securities 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.
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) Warrant
Shares Legend.
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 OR ANY APPLICABLE STATE SECURITIES LAW
OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO OXFORD MEDIA, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
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(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 OR ANY APPLICABLE
STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO OXFORD MEDIA,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(j) Note
Legend.
The
Note shall bear the following legend:
"THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO OXFORD MEDIA, 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.
4
(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 and each of its
subsidiaries have been duly authorized and validly issued and are fully paid
and
nonassessable.
(c)
Authority;
Enforceability.
This
Agreement, the Notes, the Warrants, the Escrow Agreement, Security Agreement,
Collateral Agent Agreement, Guaranty 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 Subsidiaries
(as
the case may be) 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 and Subsidiaries have full corporate power and authority necessary
to enter into and deliver the Transaction Documents and to perform their
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).
5
(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, the OTC Bulletin Board (the “Bulletin
Board”)
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. The Transaction Documents and the Company’s
performance of its obligations thereunder has been approved unanimously by
the
Company’s directors.
(f) No
Violation or Conflict.
Assuming the representations and warranties of the Subscribers in Section 4
are
true and correct, neither the issuance and sale of the Securities nor the
performance of the Company’s obligations under 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) 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 any of its subsidiaries
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
or
subsidiaries is a party, by which the Company or any of its Affiliates or
subsidiaries is bound, or to which any of the properties of the Company or
any
of its Affiliates or subsidiaries 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 or subsidiaries is a party except the
violation, conflict, breach, or default of which would not have a Material
Adverse Effect on the Company; 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, its subsidiaries 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 other creditor or equity holder of the Company,
nor result in the acceleration of the due date of any obligation of the Company;
or
(iv) result
in
the activation of any piggy-back registration rights of any person or entity
holding securities of the Company or having the right to receive securities
of
the Company.
(g) The
Securities.
The
Securities 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 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;
6
(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, as amended (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 twenty-four months.
(j) No
Market Manipulation.
The
Company has 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 of the Company
to
facilitate the sale or resale of the Securities or affect the price at which
the
Securities may be issued or resold.
(k) Information
Concerning Company.
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
Securities, when issued, will be restricted securities. 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.
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(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 on the Company, (ii) not 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 its
knowledge not in violation of any statute, rule or regulation of any
governmental authority which violation would have a Material Adverse Effect
on
the Company.
(n)
No
Integrated Offering.
Neither
the Company, nor any of its Affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would cause
the offer of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of the Bulletin Board. Nor will the Company or any of its
Affiliates or subsidiaries take any action or steps that would cause the offer
or issuance of the Securities to be integrated with other offerings. 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.
(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 OXMI.
The Company has not received any oral or written notice that its common stock
is
not eligible nor will become ineligible for quotation on the Bulletin Board
nor
that its common stock does not meet all requirements for the continuation of
such quotation. The Company satisfies all the requirements for the continued
quotation of its 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 December 31, 2005 and which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect other than as
set
forth in Schedule
5(q).
(r) No
Undisclosed Events or Circumstances.
Since
December 31, 2005, 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.
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(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 unanimously concluded, in its good faith business
judgment, that the issuance of the Securities is in the best interests of the
Company. The Company specifically acknowledges that its obligation to issue
the
Warrant Shares upon exercise of the Warrants is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other 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) 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
G.
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 exercise of the Warrants.
7.1.
Covenants
of the Company.
The
Company covenants and agrees with the Subscribers as follows:
9
(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.
The
Company shall promptly secure the listing of the Warrant Shares upon each
national securities exchange, or automated quotation system upon which they
are
or become eligible for listing (subject to official notice of issuance) and
shall maintain such listing so long as any Warrants are outstanding. The Company
will maintain the listing of its Common Stock on the American Stock Exchange,
Nasdaq SmallCap Market, Nasdaq National Market System, Bulletin Board, or New
York Stock Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock (the “Principal
Market”)),
and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common
Stock
from any Principal Market. As of the date of this Agreement and the Closing
Date, the Bulletin Board is and will be the Principal Market.
(c) Market
Regulations.
The
Company shall notify the Commission, the Principal Market and applicable state
authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the
Subscribers and promptly provide copies thereof to Subscriber.
(d) Reporting
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 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 limitation, the Company will
(v)
cause its Common Stock to continue to be registered under Section 12(b) or
12(g)
of the 1934 Act, (x) comply in all respects with its reporting and filing
obligations under the 1934 Act, (y) comply with all reporting requirements
that
are applicable to an issuer with a class of shares registered pursuant to
Section 12(b) or 12(g) of the 1934 Act, as applicable, and (z) 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 Warrant Shares
by
each Subscriber or two (2) years after the Warrants have been exercised, the
Company will use its best efforts to continue the listing or quotation of the
Common Stock on the Principal Market or other market with the reasonable consent
of Subscribers holding a majority of the Warrants and Warrant Shares, 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
7.1(e)
hereto.
Except as set forth on Schedule
7.1(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 without the express written consent of Subscribers.
10
(f) Reservation.
Prior
to the Closing Date, the Company undertakes to reserve, pro rata,
on
behalf of each holder of Warrant, from its authorized but unissued common stock,
a number of common shares equal to the amount of Warrant Shares issuable upon
exercise of the Warrants. Failure to have sufficient shares reserved pursuant
to
this Section 9(f) for three (3) consecutive business days or ten (10) days
in
the aggregate shall be a material default of the Company’s obligations under
this Agreement.
(g) 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 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 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; 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 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 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 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.
11
(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 Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration Statement (as
defined in Section 11.1(iv) 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 Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to Rule 144, without regard to volume limitations, the Company agrees
that except in connection with a Form 8-K or the Registration Statement, it
will
not disclose publicly or privately the identity of the Subscribers unless
expressly agreed to in writing by a Subscriber or only to the extent required
by
law and then only upon five days prior notice to Subscriber. In any event and
subject to the foregoing, the Company undertakes to file a Form 8-K or make
a
public announcement describing the Offering not later than the first business
day after the Closing Date. A form of the proposed Form 8-K or public
announcement is annexed hereto as Exhibit
H.
In the
Form 8-K or public announcement, the Company will specifically disclose the
amount of common stock outstanding immediately after the Closing.
(n) 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.
(o) Offering
Restrictions.
For so
long as Notes are 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.
(p) Negative
Covenants.
So long
as the Notes are outstanding, 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 created with respect
to
Excepted Issuances, provided no such lien may attach to any such assets
purchased with proceeds of the Offering; 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;
12
(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, and (iii)
for
other employee benefits, including stock option agreements under any stock
option plan of the Company.
7.2.
Injunction
- Posting of Bond.
In the
event a Subscriber shall elect to exercise the Warrant in whole or in part,
the
Company may not refuse 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 exercise of all or part of said Warrant
shall have been sought and obtained by the Company and the Company has posted
a
surety bond for the benefit of such Subscriber in the amount of 130% of the
aggregate purchase price of the Warrant Shares which are 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.
7.3.
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 exercise of a Warrant
on
or before the Delivery Date (as defined in the Warrant) and if after nine (9)
business days after the exercise date of the Warrant the Subscriber or a broker
on 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
exercise (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 exercise
price
for which such exercise 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 exercise of $10,000 of Warrant exercise price, 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.
13
7.4.
Seniority.
Except
as otherwise provided for herein, until the Notes are fully satisfied or
converted, the Company shall not grant nor allow any security interest to be
taken in the assets of the Company or any subsidiary of the Company; nor issue
any debt, equity or other instrument which would give the holder thereof
directly or indirectly, a right in any assets of the Company or any subsidiary
of the Company, superior to any right of the holder in or to such
assets.
7.5.
Mandatory
Redemption at Subscriber’s Election.
In the
event (i) the Company is prohibited from issuing Warrant Shares, (ii) the
Company fails to timely deliver Warrant Shares on a Delivery Date, as defined
in
the Warrant, (iii) upon the occurrence of any other Event of Default (as defined
in the Note or in this Agreement), and any of the foregoing continues for more
than thirty (30) business days, (iv) a Change in Control (as defined below),
or
(v) 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 equal to multiplying up to the outstanding principal amount of the
Note
designated by the Subscriber by 120%, together with accrued but unpaid interest
thereon ("Mandatory
Redemption Payment").
Upon
receipt of the Mandatory Redemption Payment, the corresponding Note principal
and interest will be deemed paid and no longer outstanding. For purposes of
this
Section 7.5, “Change
in Control”
shall
mean (i) the Company no longer having a class of shares publicly traded or
listed on a Principal Market, (ii) the Company becoming a Subsidiary of another
entity (other than a corporation formed by the Company for purposes of
reincorporation in another U.S. jurisdiction), or (iii) the sale, lease or
transfer of substantially all the assets of the Company or
Subsidiaries.
7.7.
Redemption.
The
Securities shall not be redeemable or mandatorily convertible except as
described in the Note and Warrants.
8. Broker.
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 finder’s
fees on account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party’s actions. The Company
represents that there are no parties entitled to receive fees, commissions,
or
similar payments in connection with the Offering except that the due diligence
Warrants will be issued to the Subscribers.
9. Legal
Fees.
On the
Closing Date, the Company shall pay to Grushko & Xxxxxxx, P.C., a fee of
$10,000 (“Legal
Fees”)
(of
which $5,000 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”)
and
acting as Escrow Agent. The Legal Fees and reimbursement for estimated UCC
search and filing fees and credit reports will be payable on the Closing Date
out of funds held pursuant to the Escrow Agreement.
10.
Covenants
of the Company and Subscriber Regarding Indemnification.
14
(a) The
Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers' officers, directors, agents, Affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of
any
nature, incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material misrepresentation
by
Company or breach of any warranty by Company in this Agreement or in any
Exhibits or Schedules attached hereto, or other agreement delivered pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any breach
or
default in performance by the Company of any 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 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 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 fifty-one (151) 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 Warrant Shares issued and issuable upon exercise of the Warrants, 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).
15
(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 one hundred
and
twenty (120) calendar days after the Closing Date (the
“Filing
Date”),
and
cause to be declared effective not
later
than one hundred and fifty (150) 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 100%
of
the Warrant Shares issuable pursuant to this Agreement upon exercise of the
Warrants (the “Registrable
Securities”).
The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Warrant holder, pro rata,
and not
issued, employed or reserved for anyone other than the Warrant holders. 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 or as set forth on Schedule 11.1 hereto,
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 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), 11.1(ii)
or 11.1(iv) to effect the registration of any Registrable Securities under
the
1933 Act, the Company will, as expeditiously as possible:
16
(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.
17
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 two percent (2%) for each thirty (30) days (or such lesser
pro-rata amount for any period of less than thirty (30) days) of the principal
and accrued interest of the outstanding Notes owned of record by such holder
which are subject to such Non-Registration Event on the first day of each thirty
(30) day or shorter period for which Liquidated Damages are calculable. 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
Notes 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.
18
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.
19
(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 Warrant
Shares have been sold pursuant to a 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
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 Warrant 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.
20
(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 must 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 (as defined in the
Warrants) 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 Warrant Shares subject
to such default at a price per share equal to 120% of the Purchase Price of
such
Warrant Shares (“Unlegended
Redemption Amount”).
(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.
21
(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.
For so
long as any amount remains outstanding on the Notes or until the Registration
Statement has been effective for 365 days, whichever is longer, 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,
(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, and (iv) as a result of the exercise of
Warrants 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
(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. Payment for such purchase by the Subscribers may be made
by
tender of the Note and all sums due under the Note.
(b) Favored
Nations Provision.
Other
than in connection with the Excepted Issuances, if at any time Warrants are
outstanding, 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 Warrant exercise price, without the consent of each Subscriber holding
Notes, 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 Warrant Shares still owned by the Subscriber) is equal
to such other lower price per share and the Warrant exercise price shall
automatically be adjusted to such other lower price. 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,
any
Transaction Document, and any other agreement referred to or entered into in
connection herewith.
22
(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 10 of the Warrant, then the issuance of such
additional shares of common stock of the Company to such Subscriber will be
deferred in whole or in part until such time as such Subscriber is able to
beneficially own such common stock without exceeding the applicable maximum
amount set forth calculated in the manner described in Section 10 of the
Warrant. The determination of when such common stock may be issued shall be
made
by each Subscriber as to only such Subscriber.
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: Oxford Media, Inc., Xxx
Xxxxxxxxxx Xxxxx, Xxxxxxxx X, Xxxxxx, XX 00000, Attn: Xxxxx Xxxxx, President
and
CEO, telecopier: (000) 000-0000, with a copy by telecopier only to: Xxxxx X.
Xxxxxxxxx, Esq., Spectrum Law Group, LLP, 0000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxx,
XX 00000, telecopier: (000) 000-0000, and (ii) if to the Subscribers, to: the
one or more addresses and telecopier numbers indicated on the signature pages
hereto, with an additional copy by telecopier only to: Grushko & Xxxxxxx,
P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, telecopier number:
(000) 000-0000.
(b) Entire
Agreement; Assignment.
This
Agreement and other documents delivered in connection herewith represent the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by 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.
23
(d)
Law
Governing this Agreement.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of
New
York or in the federal courts located in the state of New York. The
parties and the individuals executing this Agreement and other agreements
referred to herein or delivered in connection herewith on behalf of the Company
agree to submit to the jurisdiction of such courts and waive trial by
jury.
The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid
or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.
(e) Specific
Enforcement, Consent to Jurisdiction.
The
Company and Subscriber acknowledge and agree that irreparable damage would
occur
in the event that any of the provisions of this Agreement were not performed
in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement
and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
Subject to Section 13(d) hereof, 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) 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 the decision of each Subscriber
to purchase Securities has been made by such Subscriber independently of any
other Subscriber and independently of any information, materials, statements
or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other
Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company acknowledges
that nothing contained in any Transaction Document, and no action taken by
any
Subscriber pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Subscriber in the Registration Statement and (ii) review by,
and
consent to, such Registration Statement by a Subscriber) shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture
or
any other kind of entity, or create a presumption that the Subscribers are
in
any way acting in concert or as a group with respect to such obligations or
the
transactions contemplated by the Transaction Documents. The Company
acknowledges that each Subscriber shall be entitled to independently protect
and
enforce its rights, including without limitation, the rights arising out
of the Transaction Documents, and it shall not be necessary for any
other Subscriber to be joined as an additional party in any proceeding for
such
purpose. The Company acknowledges that it has elected to provide all
Subscribers with the same terms and Transaction Documents for the convenience
of
the Company and not because Company was required or requested to do so by the
Subscribers. The Company acknowledges that such procedure with respect to
the Transaction Documents in no way creates a presumption that the Subscribers
are in any way acting in concert or as a group with respect to the Transaction
Documents or the transactions contemplated thereby.
24
(h) Consent.
As used
in the Agreement, “consent of the Subscribers” or similar language means the
consent of holders of not less than 70% of the outstanding Note principal 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.
25
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
|
a
Nevada corporation
|
||
|
By:_________________________________
|
||
|
Name:
|
||
|
Title:
|
||
|
Dated:
May ___, 2006
|
||
|
SUBSCRIBER
|
PURCHASE
PRICE
|
WARRANTS
|
|
LONGVIEW
FUND, LP
000
Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000
_______________________________________
(Signature)
|
$1,500,000.00
|
LIST
OF EXHIBITS AND SCHEDULES
|
Exhibit
A
|
Form
of Note
|
|
Exhibit
B
|
Form
of Warrant
|
|
Exhibit
C
|
Escrow
Agreement
|
|
Exhibit
D
|
Form
of Security Agreement
|
|
Exhibit
E
|
Form
of Guaranty
|
|
Exhibit
F
|
Form
of Collateral Agent Agreement
|
|
Exhibit
G
|
Form
of Legal Opinion
|
|
Exhibit
H
|
Form
of Form 8-K or Public Announcement
|
|
Schedule
5(a)
|
Subsidiaries
|
|
Schedule
5(d)
|
Additional
Issuances / Capitalization
|
|
Schedule
5(q)
|
Undisclosed
Liabilities
|
|
Schedule
5(v)
|
Transfer
Agent
|
|
Schedule
9(e)
|
Use
of Proceeds
|
Exhibit
5(v) to the Subscription Agreement
Xx.
Xxxxxxx Xxxx
INTERWEST
TRANSFER CO., INC.
0000
Xxxx
0000 Xxxxx
Xxxxx
000
Xxxx
Xxxx
Xxxx, XX 00000
Tel:
(000)000-0000
Fax:
000-000-0000
