SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of January 21,
2005, by and among The Xxxxxxxx Coach, Inc., a Delaware corporation (the
"Company"), and the subscribers identified on the signature page hereto (each
a "Subscriber" and collectively "Subscribers").
WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement in reliance upon an exemption from securities registration
afforded by the provisions of Section 4(2) 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 Five Hundred Thousand Dollars ($500,000) (the "Purchase Price")
of principal amount of 12% promissory notes of the Company ("Note" or "Notes")
and share purchase warrants (collectively the "Warrants"), in the form
attached hereto as Exhibit A, to purchase shares of the Company's $.00001 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 shall be held in escrow pursuant to the terms of
a Funds Escrow Agreement to be executed by the parties substantially in the
form attached hereto as Exhibit B (the "Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscribers hereby
agree as follows:
1. Closing. 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.
2. Security Interest. The Subscribers will be granted a
security interest in all the assets of the Company to be memorialized in a
"Security Agreement", a form of which is annexed hereto as Exhibit C. The
Company will execute such other agreements, documents and financing statements
to 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 Subscriber 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 in the assets of the
Company. The appointment will be pursuant to a "Collateral Agent Agreement",
a form of which is annexed hereto as Exhibit D.
3. Warrants. On the Closing Date, the Company will issue and
deliver Warrants to the Subscribers. Three (3) Warrants will be issued for
every dollar ($1) invested on the Closing Date. The per Warrant Share
exercise price to acquire a Warrant Share upon exercise of a Warrant shall be
$0.15. The Warrants shall be exercisable until five (5) years after the issue
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date of the Warrants. The holder of the Warrants is granted the registration
rights set forth in this Agreement. The Warrant exercise price and amount of
Shares 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.
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) 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 June 30, 2004 as filed with the
Commission, together with all subsequently filed Forms 10-QSB, 8-K, and
filings made with the Commission available at the XXXXX website (hereinafter
referred to collectively as the "Reports"). In addition, the Subscriber has
received in writing from the Company such other information concerning its
operations, financial condition and other matters as the Subscriber has
requested in writing (such other information is collectively, the "Other
Written Information"), and considered all factors the Subscriber deems
material in deciding on the advisability of investing in the Securities.
(b) Information on Subscriber. The Subscriber is, and
will be at the time of exercise of any of the Warrants, an "accredited
investor", as such term is defined in Regulation D promulgated by the
Commission under the 1933 Act, is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to
utilize the information made available by the Company to evaluate the merits
and risks of and to make an informed investment decision with respect to the
proposed purchase, which represents a speculative investment. The Subscriber
has the authority and is duly and legally qualified to purchase and own the
Securities. The Subscriber is able to bear the risk of such investment for an
indefinite period and to afford a complete loss thereof. The information set
forth on the signature page hereto regarding the Subscriber is accurate.
(c) 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.
(d) 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.
(e) 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 THE
XXXXXXXX COACH, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
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(f) 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 THE
XXXXXXXX COACH, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(g) 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 THE XXXXXXXX COACH, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
(h) 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.
(i) 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.
(j) Restricted Securities. Subscriber understands that
the Securities have not been registered under the 1933 Act and such Subscriber
will not sell, offer to sell, assign, pledge, hypothecate or otherwise
transfer any of the Securities unless (i) pursuant to an effective
registration statement under the 1933 Act, (ii) such Subscriber provides the
Company with an opinion of counsel, in a form reasonably acceptable to the
Company, to the effect that a sale, assignment or transfer of the Securities
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may be made without registration under the 1933 Act, or (iii) Subscriber
provides the Company with reasonable assurances (in the form of seller and
broker representation letters) that the Warrant Shares may be sold pursuant to
(A) Rule 144 promulgated under the 1933 Act, or (B) Rule 144(k) promulgated
under the 1933 Act, in each case following the applicable holding period set
forth therein. Notwithstanding anything to the contrary contained in this
Agreement, such Subscriber may transfer (without restriction and without the
need for an opinion of counsel) the Securities to its Affiliates (as defined
below) provided that each such Affiliate is an "accredited investor" under
Regulation D and such Affiliate agrees to be bound by the terms and conditions
of this Agreement. For the purposes of this Agreement, an "Affiliate" of any
person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with
such person or entity. For purposes of this definition, "control" means the
power to direct the management and policies of such person or firm, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise.
(k) 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.
(l) 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.
(m) Survival. The foregoing representations and
warranties shall survive the Closing Date for a period of two years.
5. Company Representations and Warranties. Except as set forth
in the Reports, the Company represents and warrants to and agrees with each
Subscriber that:
(a) Due Incorporation. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdictions of their incorporation
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. The Company and each of its
subsidiaries is duly qualified as a foreign corporation to do business and is
in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary, other
than those jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect. For 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 as a whole.
(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 Note,
the Warrants, the Funds Escrow Agreement, the Shares Escrow Agreement and any
other agreements delivered together with this Agreement or in connection
herewith (collectively "Transaction Documents") have been duly authorized,
executed and delivered by the Company and are valid and binding agreements
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
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general principles of equity. The Company has full corporate power and
authority necessary to enter into and deliver the Transaction Documents and to
perform its obligations thereunder.
(d) Additional Issuances. There are no outstanding
agreements or preemptive or similar rights affecting the Company's common
stock or equity and no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of any shares of common
stock or equity of the Company or other equity interest in any of the
subsidiaries of the Company except as described on Schedule 5(d).
(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:
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(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 exercise of the Warrants and issuance of 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);
(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; and
(iv) will not subject the holders thereof to personal
liability by reason of being such holders.
(h) Litigation. There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having
jurisdiction over the Company, or any of its Affiliates that would affect the
execution by the Company or the performance by the Company of its obligations
under the Transaction Documents. 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 on the Company.
(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 twelve 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 which information is required
to be disclosed therein. Since the date of the financial statements included
in the Reports, and except as modified in the Other Written Information or in
the Schedules hereto, there has been no material adverse change in 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.
(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. 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 June 30, 2004 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 June
30, 2004, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.
(s) Capitalization. The authorized and outstanding
capital stock of the Company as of the date of this Agreement and the Closing
Date are set forth on Schedule 5(s). 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. 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) 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.
(w) Survival. The foregoing representations and
warranties shall survive the Closing Date for a period of two years.
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 E. 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:
(a) Stop Orders. The Company will advise the Subscribers,
promptly after it receives notice of issuance by the Commission, any state
securities commission or any other regulatory authority of any stop order or
of any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b) Listing. The Company shall promptly secure the
listing of the Shares and 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.
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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. 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 nor non-trade
obligations outstanding on the Closing Date.
(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
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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.
(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
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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. In the Form 8-K or public announcement, the Company
will specifically disclose the amount of common stock outstanding immediately
after the Closing. A form of the proposed Form 8-K or public announcement to
be employed in connection with the Closing Date is annexed hereto as Exhibit F.
(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.
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.
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 seven (7) business days after the Delivery Date the
Subscriber purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Subscriber of the
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.
7.4. Seniority. 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.
8. Finder/Due Diligence. The Company on the one hand, and
each Subscriber (for himself only) on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
persons claiming brokerage commissions or finder's fees 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
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no parties entitled to receive fees, commissions, or similar payments in
connection with the Offering, except that each Subscriber shall be paid on
the Closing Date a due diligence fee of four percent (4%) of the amount of
Purchase Price invested on the Closing Date by such Subscriber ("Due Diligence
Fee").
9. Legal Fees. On the Closing Date, the Company shall pay to
Grushko & Xxxxxxx, P.C., a fee of $10,000 ("Legal Fees") as reimbursement for
services rendered to the Subscribers in connection with this Agreement and the
purchase and sale of the Notes and Warrants (the "Offering") and acting as
Escrow Agent. The Legal Fees will be payable out of funds held pursuant to
the Escrow Agreement.
10. Covenants of the Company and Subscriber Regarding
Indemnification.
(a) The Company agrees to indemnify, hold harmless,
reimburse and defend the Subscribers, the Subscribers' officers, directors,
agents, Affiliates, control persons, and principal shareholders, against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the
Subscriber or any such person which results, arises out of or is based upon
(i) any material misrepresentation by Company or breach of any warranty by
Company in this Agreement or in any Exhibits or Schedules attached hereto, or
other agreement delivered pursuant hereto; or (ii) after any applicable notice
and/or cure periods, any breach or default in performance by the Company of
any 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 upon the
sooner of 180 days after the Closing Date, or the occurrence of an Event of
Default as defined in the Note (whether or not such Event of Default is
cured), but not later than two (2) years after the Closing Date ("Request
Date"), upon a written request therefor from any record holder or holders of
more than 50% of the Warrants and Warrant Shares, the Company shall prepare
and file with the Commission a registration statement under the 1933 Act
registering the Warrant Shares issuable upon exercise of the Warrants
(collectively "Registrable Securities") which are the subject of such request
for unrestricted public resale by the holder thereof. For purposes of
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Sections 11.1(i) and 11.1(ii), Registrable Securities shall not include
Securities which are registered for resale in an effective registration
statement or included for registration in a pending registration statement, or
which have been issued without further transfer restrictions after a sale or
transfer pursuant to Rule 144 under the 1933 Act. Upon the receipt of such
request, the Company shall promptly give written notice to all other record
holders of the Registrable Securities that such registration statement is to
be filed and shall include in such registration statement Registrable
Securities for which it has received written requests within ten (10) days
after the Company gives such written notice. Such other requesting record
holders shall be deemed to have exercised their demand registration right
under this Section 11.1(i).
(ii) If the Company at any time proposes to register any
ofits 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"). The Seller is hereby given the same rights and benefits as any
other party identified in such registration. 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 due to such withdrawal or delay.
The Company acknowledges the exercise by the Subscribers of their rights
pursuant to this Section 11.1(ii) for the Registrable Securities to be
included for registration in an amendment to the Registration Statement filed
by the Company with the Commission on October 19, 2004 and the Company
undertakes to comply with its obligations hereunder.
11.2. Registration Procedures. If and whenever the Company is
required by the provisions of Section 11.1 to effect the registration of any
Registrable Securities under the 1933 Act, the Company will, as expeditiously
as possible:
(a) subject to the timelines provided in this Agreement,
prepare and file with the Commission a registration statement required by
Section 11, with respect to the Registrable 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), and promptly provide to the holders of the Registrable Securities
copies of all filings and Commission letters of comment and notify Subscribers
and Grushko & Xxxxxxx, P.C. (by telecopier and by email to Xxxxxxxxx@xxx.xxx)
within one (1) business day of (i) notice that the Commission has no comments
or no further comments on the Registration Statement, and (ii) the declaration
of effectiveness of the registration statement, (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);
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(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;
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of 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) immediately notify the Sellers when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing; and
(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.
11.3. Provision of Documents. In connection with each
registration described in this Section 11, each Seller will furnish to the
Company in writing such information and representation letters with respect to
itself and the proposed distribution by it as reasonably shall be necessary in
order to assure compliance with federal and applicable state securities laws.
11.4. Non-Registration Events. The Company and the Subscribers
agree that the Sellers will suffer damages if any registration statement
required under Section 11.1(i) (the "Registration Statement") is not filed
within 45 days after written request ("Filing Date") and declared effective by
the Commission within 90 days after such request ("Effective Date"), and
maintained in the manner and within the time periods contemplated by Section
11 hereof, and it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, if (A) the Registration Statement is not
filed on or before the Filing Date, (B) is not declared effective on or before
the Effective Date, (C) the Registration Statement is not declared effective
within 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,
or (D) if the Registration Statement is filed and declared effective but shall
thereafter cease to be effective (without being succeeded within fifteen (15)
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business days by an effective replacement or amended registration statement)
for a period of time which shall exceed 30 days in the aggregate per year
(defined as a period of 365 days commencing on the date the Registration
Statement is declared effective) or more than 20 consecutive days. Each such
event referred to in clauses (A), (B), (C) and (D) of this Section 11.4 is
referred to herein as a "Non-Registration Event". All oral or written and
accounting comments received from the Commission relating to the Registration
Statement must be responded to within ten (10) business days. Failure to
timely respond is a Non-Registration Event. 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. A Non-Registration Event will not be deemed to have occurred for
times during which Registrable Securities are transferable by the holder of
Registrable Securities pursuant to Rule 144(k) under the 1933 Act.
11.5. Expenses. All expenses incurred by the Company in complying
with Section 11, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including reasonable
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
fee of one counsel for all Sellers are called "Registration Expenses." All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of any additional
counsel to the Seller, are called "Selling Expenses." The Company will pay
all Registration Expenses in connection with the registration statement under
Section 11. Selling Expenses in connection with each registration statement
under Section 11 shall be borne by the Seller and may be apportioned among the
Sellers in proportion to the number of shares sold by the Seller relative to
the number of shares sold under such registration statement or as all Sellers
thereunder may agree.
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 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 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
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alleged omission so made in conformity with information furnished by any such
Seller, or any such controlling person in writing specifically for use in such
registration statement or prospectus.
(b) In the event of a registration of any of the
Registrable Securities under the 1933 Act pursuant to Section 11, each Seller
severally but not jointly will, to the extent permitted by law, indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the 1933 Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and
each person who controls any underwriter within the meaning of the 1933 Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which such
Registrable Securities were registered under the 1933 Act pursuant to Section
11, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable
hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with information pertaining to such Seller, as such,
furnished in writing to the Company by such Seller specifically for use in
such registration statement or prospectus, and provided, further, however,
that the liability of the Seller hereunder shall be limited to the net
proceeds actually received by the Seller from the sale of Registrable
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 11.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 11.6(c), except and only if and
to the extent the indemnifying party is prejudiced by such omission. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 11.6(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to
it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified parties, as a group, shall have the right to select one separate
counsel and to assume such legal defenses and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by
the indemnifying party as incurred.
(d) In order to provide for just and equitable
contribution in the event of joint liability under the 1933 Act in any case in
which either (i) a Seller, or any controlling person of a Seller, makes a
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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.
12. 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: The Xxxxxxxx Coach, Inc., 00000 0xx
Xxxxxx X., Xxxxxxxxx, XX 00000, Attn: Xxxxx Xxxxxxxxx, CEO, telecopier: (763)
445-2918, with a copy by telecopier only to: Xxxxxx Xxxxxx, Esq., 000 0xx
Xxxxxx, Xxxxxxxx, Xxx Xxxx 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) Closing. 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".
(c) Entire Agreement; Assignment. This Agreement and
other documents delivered in connection herewith represent the entire
agreement between the parties hereto with respect to the subject matter hereof
and may be amended only by a writing executed by both parties. Neither the
Company nor the Subscribers have relied on any representations not contained
or referred to in this Agreement and the documents delivered herewith. No
right or obligation of the Company shall be assigned without prior notice to
and the written consent of the Subscribers.
(d) Counterparts/Execution. This Agreement may be
executed in any number of counterparts and by the different signatories hereto
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on separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. This Agreement may be executed by facsimile signature and
delivered by facsimile transmission.
(e) Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to 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.
(f) 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 12(e) 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.
(g) Independent Nature of Subscribers. The Company
acknowledges that the obligations of each Subscriber under the Transaction
Documents are several and not joint with the obligations of any other
Subscriber, and no Subscriber shall be responsible in any way for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The Company acknowledges that 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.
-18-
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it
shall become a binding agreement between us.
The Xxxxxxxx Coach, Inc.
a Delaware corporation
By: /s/ Xxxxx Xxxxxxxxx
Name: Xxxxx Xxxxxxxxx
Title: CEO
Dated: January 21, 2005
SUBSCRIBER PURCHASE PRICE WARRANTS
-------------------------------------------------------------------------
LONGVIEW INTERNATIONAL EQUITY FUND, LP $125,000.00 375,000
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
_____________________________________
(Signature)
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it
shall become a binding agreement between us.
The Xxxxxxxx Coach, Inc.
a Delaware corporation
By: /s/ Xxxxx Xxxxxxxxx
Name: Xxxxx Xxxxxxxxx
Title: CEO
Dated: January 21, 2005
SUBSCRIBER PURCHASE PRICE WARRANTS
----------------------------------------------------------------------------
LONGVIEW EQUITY FUND, LP $375,000.00 1,125,000
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
____________________________________
(Signature)
