CONVERTIBLE NOTE
NEITHER
THIS NOTE NOR THE SECURITIES THAT MAY BE ISSUED BY THE
BORROWER UPON CONVERSION HEREOF (COLLECTIVELY, THE "SECURITIES")
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF
ANY
STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY
INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED: (i) IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
1933 ACT, OR APPLICABLE STATE SECURITIES LAWS; OR (ii) IN THE
ABSENCE
OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE
ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT
OR; (iii) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE
144 UNDER THE 1933 ACT.
CONVERTIBLE
NOTE
Brooklyn,
New York
|
_____
, 2007
(the "Issuance
Date")
|
$
_____________
|
FOR
VALUE RECEIVED, Future
Now, Inc., a Delaware corporation (the "Company"),
hereby promises to pay to the order of
or
registered assigns (the "Holder") the principal
amount of ___________ and
No/100 Dollars on __, 2010 (the "Maturity Date"), and
to
pay interest on the unpaid principal balance hereof at the rate of Ten and
½
percent (10.5%) per annum from the
Issuance Date in accordance with the terms hereof or otherwise. The principal
balance of this Note shall be
payable pursuant to Paragraph 1. Interest on this Note shall accrue and be
payable pursuant to Paragraph 1.
Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in the
Subscription Agreement, dated between
the Company and the Holder (the "Subscription
Document"),
pursuant
to which this convertible note (the "Note") was originally issued. The
term
"Note" and all reference thereto, as used throughout this instrument, shall
mean
this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented. This Note and
the
Other Notes (as hereinafter defined) issued by the Company on the Issuance
Date
pursuant to Subscription
Documents executed by the Company and purchasers of the Other Notes
(collectively, the
"Subscription
Documents") are
collectively referred to in this Note as the "Notes."
1.
Payments
of Principal and Interest.
(a) Payment
of Principal.
The
principal balance of this Note shall be paid to the Holder hereof
on
the Maturity Date. The Company shall not prematurely pay or prepay any
outstanding principal balance
to the Holder.
(b) Payment
of Interest.
Interest on the unpaid principal balance of this Note shall accrue at a rate
of
Ten and ½ percent (10.5%) per annum commencing on the Issuance Date. Interest
shall be computed on the
basis
of a 365-day year and actual days elapsed. Interest shall be due and payable
semi-annually (“Payment
Date”),
in
arrears, with first payment due six months from Issuance date. Payment will
be
made to the Holder within thirty days following a Payment Date
(c) Default
Interest.
Any
amount of principal or interest on this Note which is not paid when
due
shall bear interest at the rate of eighteen percent (18%) per annum from the
date thereof until the same
is
paid ("Default
Interest") and
the
Holder, at the Holder's sole discretion, may include any accrued but
unpaid Default Interest in the Conversion Amount.
(d)
General
Payment Provisions.
All
payments of principal and interest on this Note shall
be
made in lawful money of the United States of America by check to such account
as
the Holder may from
time
to time designate by written notice to the Company in accordance with the
provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day
which
is not a Business
Day (as defined below), the same shall instead be due on the next succeeding
day
which is a Business
Day and, in the case of any interest payment date which is not the date on
which
this Note is paid in full, the extension of the due date thereof shall not
be
taken into account for purposes of determining the amount
of
interest due on such date. For purposes of this Note, "Business
Day"
shall
mean any day other than
a
Saturday, Sunday or a day on which commercial banks in the State of New York
are
authorized or required by
law or
executive order to remain closed.
2.
Conversion
of Note.
At any
time prior to the Maturity Date, this Note shall be convertible into
shares of the Company's common stock, par value $.001 per share (the
"Common
Stock"),
on
the terms and
conditions set forth in this Paragraph 2.
1
(a) Certain
Defined Terms. For
purposes of this Note, the following terms shall have the
following meanings:
(1) "Conversion
Amount" means
the
sum of (A) the principal amount of this Note
to
be converted with respect to which this determination is being made, (B) accrued
and unpaid interest,
if so included at the Holder's sole discretion, and (C) Default Interest, if
any, on unpaid interest and principal, if so included at the Holder's sole
discretion.
(2) "Conversion
Price" means
the
lower of (i) the price per share issued in a Qualified Financing or Acquisition,
both as defined below, at a 20% discount, or (ii) $3.25.
(3) “Other
Notes" means
the
convertible notes, other than this Note, issued by the
Company pursuant to Subscription Documents.
(4) "Person"
means
an
individual, a limited liability company, a partnership, a
joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
(b)
Xxxxxx's
Conversion Right.
Unless
otherwise converted, the Notes shall be redeemed at the earlier of either (i)
three years from the Issuance Date, or; (ii) the date upon which the Company
completes the sale of Common Stock (or like security, including convertible
debt
instruments) for aggregate proceeds of at least Two Million Five Hundred
Thousand and No/100 Dollars ($2,500,000) (the “Qualified Financing”), or; (iii)
the closing of a material acquisition of the Company, and Change of Control,
as
defined, whether by merger, recapitalization, sale of assets or other similar
material transaction (an “Acquisition”). Change of Control shall mean the sale
and/or transfer of in excess of 50% of then outstanding voting stock of the
Company in a transaction, Acquisition or Qualified Financing.
At
the
Note holder’s option, all, or a portion of the principal, accrued interest, and
if applicable Default Interest on the Notes may be converted into shares of
the
Company’s Common Stock along with a Qualified Financing or Acquisition at the
Conversion Price noted above or at any point through the delivery of the
Conversion Notice provided under Exhibit I.
The
Holder shall be required to request conversions in increments of $1,000
or
more. The Company shall not issue any fraction of a share of Common Stock upon
any conversion; if
such
issuance would result in the issuance of a fraction of a share of Common Stock,
the Company shall round such fraction of a share of Common Stock up to the
nearest whole share.
(c)
Note
Redemption Feature.
This
Note
also contains an automatic principal Redemption Feature which requires the
Company to escrow three and one-half percent (3.5%) of its gross revenues in
a
separate bank account (“Redemption Funds”) and redeem this Note on a semi-annual
basis (“Measurement Period”) until such time that the total principal has been
repaid. The first payment due under this Redemption Feature will be for the
measurement period of April 1, 2007 through March 31, 2008. The initial payment
will be payable pro-rata to the Holders on or before May 1, 2008 and be paid
out
prorata to Holders of record on a basis of the percentage of a Holder’s
individual Note balance to the total outstanding Notes. Thereafter, the
Redemption Funds will be distributed pro-rata among the holders of the Notes
within thirty (30) business days after the end of each semi-annual Measurement
Period. Until such a time that the Principal, Interest and, if applicable,
Default Interest due under the Notes is fully repaid, the total Redemption
Funds
will be paid out for each Measurement Period, irrespective of the aggregate
amount of Notes issue under the Subscription Documents.
(d)
Conversion Amount of this Note pursuant to Paragraph 2.(b) shall be determined
according to the following formula (the "Conversion
Rate"):
Conversion
Amount
Conversion
Price
The
number of shares into which the Notes are convertible will equal the quotient
of
the converted principal and interest divided by the lower of (i) the price
per
share issued in a Qualified Financing or Acquisition at a twenty percent (20%)
discount, or (ii) $3.25 (item (i) or (ii), the “Conversion Price”).
(e) Mechanics
of Conversion. The
conversion of this Note shall be conducted in the following manner:
(1) Holder's
Delivery Requirements. To
convert this Note into shares of Common Stock on any date set forth in the
Conversion Notice by the Holder (the "Conversion Date"), the Holder hereof
shall
(A) transmit by facsimile (or otherwise deliver), for receipt on or prior
to
11:59 p.m., Eastern Time on such date, a copy of a fully executed notice of
conversion in the form
attached hereto as Exhibit I (the "Conversion
Notice")
to the
Company; and (B) surrender
to a common carrier for delivery to the Company as soon as practicable following
the date of
the
Conversion Notice original of the Note being converted.
2
(2) Company's
Response. Upon
receipt by the Company of a copy of a Conversion Notice, the Company shall
as
soon as practicable, but in no event later than five (5) Business Days after
receipt of such Conversion Notice, send, via facsimile and overnight courier,
a
confirmation of receipt of such Conversion Notice (the "Conversion
Confirmation") to
such
Holder indicating that the Company will process such Conversion Notice in
accordance with the terms
herein. Within fifteen (15) Business Days after the date of the Conversion
Confirmation, the Company
shall issue and surrender to a common carrier for delivery to the address as
specified in the Conversion
Notice, a certificate, registered in the name of the Holder, for the number
of
shares of Common Stock to which the Holder shall be entitled. If less than
the
full principal amount of this Note is submitted for conversion, then the Company
shall within fifteen (15) Business Days after receipt of the Note and at its
own
expense, issue and deliver to the Holder a new Note for the outstanding
principal amount not so converted; provided that such new Note shall be
substantially in the same form as this Note.
(3) Record
Holder. The
person or persons entitled to receive the shares of Common
Stock issuable upon a conversion of this Note shall be treated for all purposes
as the record holder
or
holders of such shares of Common Stock on the Conversion Date.
(f) Taxes.
The
Company shall pay any and all taxes that may be payable with respect
to
the
issuance and delivery of Common Stock upon the conversion of Notes.
(g) Adjustments
to Conversion Price. If
the
Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of
its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse
stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number
of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased.
3. Other
Rights of Holders.
(a)
Reorganization,
Reclassification, Consolidation, Merger or Sale.
Any
recapitalization,
reorganization, reclassification, consolidation, merger, sale of all or
substantially all of the Company's
assets to another Person or other transaction which is effected in such a way
that holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "Organic
Change." Prior
to
the
consummation of any (i) Organic Change or (ii) other Organic Change following
which the Company is
not a
surviving entity, the Company will secure from the Person purchasing such assets
or the successor resulting
from such Organic Change (in each case, the "Acquiring
Entity")
a
written agreement (in form and substance
reasonably satisfactory to the holders of a majority of the Notes then
outstanding) to deliver to each Holder
in
exchange for this Note, a security of the Acquiring Entity evidenced by a
written instrument substantially similar in form and substance to this Note,
and
reasonably satisfactory to the Holders of a majority of the Conversion Amount
of
the Notes then outstanding. Prior to the consummation of any other Organic
Change, the Company shall make appropriate provision (in form and substance
reasonably satisfactory
to the Holders of a majority of the Conversion Amount of the Notes then
outstanding) to ensure that
each
of the Holders will thereafter have the right to acquire and receive in lieu
of
or in addition to (as the case
may
be) the shares of Common Stock immediately theretofore acquirable and receivable
upon the conversion of such Holder's Note, such shares of stock, securities
or
assets that would have been issued or payable
in such Organic Change with respect to or in exchange for the number of shares
of Common Stock which would have been acquirable and receivable upon the
conversion of such Holder's Note as of the date of
such
Organic Change (without taking into account any limitations or restrictions
on
the convertibility of the Note).
4. Out
of
State Execution. The
Company and the Holder hereby acknowledge that this Note maybe
executed by the Company outside the State of New York and delivered to Holder
outside the State of New
York.
Further, the Holder acknowledges that the Holder may take possession and custody
of the Note outside the
State
of New York.
5. Reservation
of Shares. The
Company shall at all times, so long as any principal amount of the
Notes
is outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for
the
purpose of effecting the conversion of the Notes, such number of shares of
Common Stock as shall at
all
times be sufficient to effect the conversion of all of the principal amount
of
the Notes then outstanding; provided
that the number of shares of Common Stock so reserved shall at no time be less
than one hundred ten percent (110%) of the number of shares of Common Stock
for
which the principal amount of the Notes are at any time convertible. The initial
number of shares of Common Stock reserved for conversions of the Notes
and
each increase in the number of shares so reserved shall be allocated pro rata
among the Holders of the Notes based on the principal amount of the Notes held
by each Holder at the time of issuance of the Notes or increase in the number
of
reserved shares, as the case may be. In the event a Holder shall sell or
otherwise transfer any of such Holder's Notes, each transferee shall be
allocated a pro rata portion of the number of reserved shares of Common Stock
reserved for such transferor. Any shares of Common Stock reserved and allocated
to any Person which ceases to hold any Notes shall be allocated to the remaining
Holders, pro rata based on the principal amount of the Notes then held by such
Holders.
3
6. Voting
Rights. Holders
shall have no voting rights, except as required by law, including but
not
limited to the New York Business Corporation Act and as expressly provided
in
this Note.
7. Reissuance
of Note. In
the
event of a conversion or redemption pursuant to this Note of less than
all
of the Conversion Amount represented by this Note, the Company shall promptly
cause to be issued and
delivered to the Holder, upon tender by the Holder of the Note converted or
redeemed, a new note of like tenor
representing the remaining principal amount of this Note which has not been
so
converted or redeemed and
which
is in substantially the same form as this Note.
8. Defaults
and Remedies.
(a)
Events
of Default.
An
"Event
of Default" is:
(i)
default for thirty (30) days in
payment of interest or Default Interest on this Note; (ii) default in payment
of
the principal amount of this Note
when
due; (iii) failure by the Company for thirty (30) days after notice to it to
comply with any other material provision of this Note; (iv) if the Company
pursuant to or within the meaning of any Bankruptcy Law; (A) commences a
voluntary case; (B) consents to the entry of an order for relief against it
in
an involuntary case; (C) consents to the appointment of a Custodian of it or
for
all or substantially all of its property; (D) makes a general assignment for
the
benefit of its creditors; or (E) admits in writing that it is generally
unable to pay its debts as the same become due; or (vi) a court of competent
jurisdiction enters an order
or
decree under any Bankruptcy Law that: (I) is for relief against the Company
in
an involuntary case; (2)
appoints a Custodian of the Company or for all or substantially all of its
property; or (3) orders the liquidation of the Company or any subsidiary, and
the order or decree remains unstayed and in effect for thirty
(30) days. The Term "Bankruptcy
Law"
means
Title I 1 , U.S. Code, or any similar Federal or State Law
for
the relief of debtors. The term "Custodian" means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy Law.
(b)
Remedies.
If
an
Event of Default occurs and is continuing, the Holder of this Note may
declare all of this Note, including any interest and Default Interest and other
amounts due, to be due and payable
immediately.
9. Vote
to Change the Terms of this Note. This
Note
and any provision hereof may only be amended by an instrument in writing signed
by the Company and holders of a majority of the aggregate Conversion Amount
of
the Notes then outstanding.
10. Lost
or Stolen Note. Upon
receipt by the Company of evidence satisfactory to the Company of
the
loss, theft, destruction or mutilation of this Note, and, in the case of loss,
theft or destruction, of an indemnification
undertaking by the Holder to the Company in a form reasonably acceptable to
the
Company and,
in
the case of mutilation, upon surrender and cancellation of the Notes, the
Company shall execute and deliver
a
new Note of like tenor and date and in substantially the same form as this
Note;
provided, however, the
Company shall not be obligated to re-issue a Note if the Holder
contemporaneously requests the Company to
convert such remaining principal amount into Common Stock.
11. Payment
of Collection, Enforcement and Other Costs. If:
(i)
this Note is placed in the hands of
an
attorney for collection or enforcement or is collected or enforced through
any
legal proceeding; or (ii) an
attorney is retained to represent the Holder of this Note in any bankruptcy,
reorganization, receivership or
other
proceedings affecting creditors' rights and involving a claim under this Note,
then the Company shall pay
to
the Holder all reasonable attorneys' fees, costs and expenses incurred in
connection therewith, in addition to all other amounts due
hereunder.
12. Cancellation.
After
all
principal and accrued interest at any time owed on this Note has been
paid
in
full, this Note shall automatically be deemed canceled, shall be surrendered
to
the Company for cancellation and shall not be reissued.
13. Waiver
of Notice. To
the
extent permitted by law, the Company hereby waives demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default
or enforcement of this Note.
14. Governing
Law. This
Note
shall be construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this
Note shall be governed by,
the
laws of the State of New York, without giving effect to provisions thereof
regarding conflict of laws. Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the state
and federal courts sitting in
Kings
County, New York, for the adjudication of any dispute hereunder or in connection
herewith or with
any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to
assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding
is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service
of
process and consents
to process being served in any such suit, action or proceeding by sending by
certified mail or overnight
courier a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
4
15. Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief.
The
remedies
provided in this Note shall be cumulative and in addition to all other remedies
available under this Note,
at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and no remedy
contained herein shall be deemed a waiver of compliance with the provisions
giving rise to such remedy and nothing herein shall limit a Holder's right
to
pursue actual damages for any failure by the Company
to comply with the terms of this Note. The Company covenants to each Holder
of
Notes that there shall be no characterization concerning this instrument other
than as expressly provided herein. Amounts set forth or provided for herein
with
respect to payments, conversion and the like (and the computation thereof)
shall
be the amounts to be received by the Holder thereof and shall not, except as
expressly provided herein, be
subject to any other obligation of the Company (or the performance
thereof).
16. Specific
Shall Not Limit General; Construction. No
specific provision contained in this Note shall
limit or modify any more general provision contained herein. This Note shall
be
deemed to be jointly drafted by the Company and all Holders and shall not be
construed against any person as the drafter hereof.
17. Failure
or Indulgence Not Waiver. No
failure or delay on the part of this Note in the exercise of
any
power, right or privilege hereunder shall operate as a waiver thereof, nor
shall
any single or partial exercise
of any such power, right or privilege preclude other or further exercise thereof
or of any other right, power
or
privilege.
18. Registration
Rights.
The
Holder shall have such registration rights with respect to the number of shares
of Common Stock issuable upon exercise of the Conversion of the Note (the
"Registrable Securities") as is set forth in the Registration Rights Agreement
among the Company and the Holder.
IN
WITNESS WHEREOF, the
Company has caused this Note to be signed by Xxxxxxx Xxxxxxxxx, its Chief
Executive Officer,
on and
as of the Issuance Date.
| Future Now, Inc. | |||
|
Xxxxxxx
Xxxxxxxxx, CEO
|
|||
5
EXHIBIT
I:
CONVERSION
NOTICE
Reference
is made to the Convertible Note issued by Future Now Inc. (the "Note"). In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert a portion or all of the principal
balance of the Note, indicated below into shares of Common Stock, par value
$.001 per share (the "Common
Stock"), of the Company, by tendering the Note specified below as of the date
specified below.
|
Date
of Conversion:
|
|
|
Aggregate
Principal Amount to be converted:
|
|
|
No(s).
of Note to be converted:
|
|
|
Please
confirm the following information:
|
|
|
Conversion
Amount:
|
|
|
Conversion
Price:
|
|
|
Number
of shares of Common Stock to be issued:
|
Please
issue the Common Stock into which the Note is being converted in the name of
the
Holder of the Note and
to
the following address:
|
|
|
|
Telephone
Number: Facsimile
Number:
|
Authorization:
| By: | ||
|
Title:
|
|
|
|
|
||
|
|
Dated:
Please
issue a new Note(s) for the outstanding principal balance in the name of the
Holder and to the following
address:
|
Outstanding
Principal Balance:
|
|||
|
Telephone
No.: Facsimile No.: Authorization:
|
|||
|
|
|||
| By: | |||
| Title: |
|
||
|
|
Dated:
6
WARRANT
AGREEMENT
WARRANT
AGREEMENT (the "Convertible Note Warrant Agreement"), dated as of this
_
day
of ____,
2007
(the
"Effective Date"), by and among Future Now, Inc., a Delaware corporation
(the "Company"), and the investors signatory hereto (collectively, the “Warrant
holders" and each, a
"Warrant holder").
Each
of
the Warrant holders have executed a Subscription Agreement (each, a "Convertible
Note") for the purchase of Convertible Note Units (as defined therein)
consisting of
a
convertible note (the "Convertible Note") and warrants to purchase shares of
the
Company common stock, par value $.001 (the "Common Stock"). This Convertible
Note Warrant Agreement is being executed in connection with the purchase of
the
Convertible Note Units.
Capitalized
terms used herein but not otherwise defined shall have the meanings ascribed
to
them in the
Subscription Agreement. In addition, certain capitalized terms used herein
are
defined in Paragraph 13.
In
consideration of the parties mutual covenants and agreements contained herein
and for other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Issuance
of Warrant.
(a) The
Company hereby issues and grants to each Warrant holder warrants (a "Convertible
Note Warrant") to purchase shares of Common Stock in an amount equal to
the
product obtained by multiplying (x) the Principal Amount (as such term is
defined in the certain Convertible
Note executed as of an even date herewith) of the Convertible Note by thirty-two
percent (32%). The Common Stock issuable
upon exercise of the Convertible Note Warrants being collectively referred
to
herein as the "Warrant Shares." Each Convertible Note Warrant shall entitle
the
holder thereof, subject to the satisfaction of the conditions to exercise set
forth in Paragraph 7 of this Convertible Note Warrant Agreement,
to purchase, on or prior to 5:00 p.m., New York City time, on ___,
20__,
(the
"Warrant
Expiration Date") that number of Warrant Shares equal to the quotient obtained
by multiplying one (1) by the number of Convertible Note Warrants granted
pursuant hereto. If not sooner expired pursuant to
the
terms hereof, the Convertible Note Warrants, and any and all rights of exercise
thereof, shall expire on the Warrant Expiration Date, The Warrant Shares
issuable under this Convertible Note Warrant Agreement and the Exercise Price
are subject to adjustment pursuant to Paragraph 8 of this Convertible Note
Warrant Agreement.
(b) Subject
to the adjustments contained in Paragraph 8, the "Exercise Price" per Warrant
Share shall be seventy-five cents ($0.75).
2.
Form
of Warrant Certificates.
Within
twenty one (21) business days after the Closing (as defined
in the Convertible Note), with respect to each respective Warrant holder, the
Company shall cause to be executed and delivered to such Warrant holder one
or
more certificates evidencing the Convertible Note Warrants (the "Warrant
Certificates") to which such Warrant
holder is entitled. Each Warrant Certificate delivered hereunder shall be
substantially in the form set forth
in
Exhibit 1 attached hereto and may have such letters, numbers or other
identification marks and legends,
summaries or endorsements printed thereon as the Company may deem appropriate
(provided same are not inconsistent with the terms of this Convertible Note
Warrant Agreement) or as may be required by
applicable law, rule or regulation. Each Warrant Certificate shall be dated
as
of the Effective Date (first defined above).
3.
Execution
of Warrant Certificates.
(a) Each
Warrant Certificate delivered hereunder shall be signed on behalf of the
Company
by one (1) officer of the Company. Each such signature may be in the form of
a
facsimile thereof and
may
be imprinted or otherwise reproduced on the Warrant Certificates.
(b) If
any
officer of the Company who signed any Warrant Certificate ceases to be an
officer of the Company before the Warrant Certificate so signed shall have
been
delivered by the Company, such
Warrant Certificate nevertheless may be delivered as though such person had
not
ceased to be an officer of
the
Company.
4.
Registration.
Warrant
Certificates shall be issued in registered form only. The Company will
keep
or
cause to be kept books for registration of ownership and transfer of each
Warrant Certificate issued pursuant
to this Convertible Note Warrant Agreement. Each Warrant Certificate issued
pursuant to this Convertible Note Warrant Agreement shall be numbered by the
Company and shall be registered by the Company in the name of the holder thereof
(initially, the Warrant holder). The Company may deem and treat the
registered holder of any Warrant Certificate as the absolute owner thereof
(notwithstanding any notation of
ownership or other writing thereon made by anyone) for the purpose of any
exercise thereof and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
7
5.
Transfers
and Exchanges.
(a)
Transfers.
Subject to the provisions of this Paragraph 5, the Convertible Note Warrants
are
transferable, in whole or in part, upon surrender of the Warrant Certificates
evidencing such Convertible
Note Warrants at the office of the Company, together with a written assignment
in the form of
the
assignment appearing at the end of the form of Warrant Certificate attached
hereto as Exhibit 1, duly executed by the registered holder thereof or its
agent
or attorney. Upon such surrender, the Company shall, subject to this Paragraph
5, register or cause the registration of the transfer upon the books maintained
by or on
behalf
of the Company for such purpose. If the Convertible Note Warrants evidenced
by
any Warrant Certificate
are to be transferred in whole, the Company shall execute and deliver a new
Warrant Certificate or
Warrant Certificates in the name of the assignee or assignees in the
denominations specified in the instrument of assignment. If the Convertible
Note
Warrants evidenced by any Warrant Certificate are to be transferred in part,
the
Company shall execute and deliver a new Warrant Certificate or Warrant
Certificates
to and in the name of the assignee or assignees in the denominations specified
in the instrument of assignment and a new Warrant Certificate to and in the
name
of the assigning holder in an amount equal to
the
number of Convertible Note Warrants evidenced by the surrendered Warrant
Certificate that were not
transferred.
(b) Restrictions
on Transfer. Unless otherwise consented to by the Company, no Warrant
may be sold, pledged, hypothecated, assigned, conveyed, transferred or otherwise
disposed of (each, a
"transfer") unless (i) the transfer complies with all applicable securities
laws
and the provisions of this Convertible
Note Warrant Agreement and (ii) the transferee agrees in writing to be bound
by
the terms of
this
Convertible Note Warrant Agreement.
(c)
Exchanges.
Convertible Unit Warrant Certificate may be exchanged, at the option of the
holder thereof, upon surrender of such Warrant Certificate at the office of
the
Company, for one or more
other Warrant Certificates of like tenor and representing in the aggregate
the
same number of Convertible
Note Warrants as was represented by the surrendered Warrant
Certificate.
(c) Cancellation.
Warrant Certificates surrendered for transfer or exchange shall be canceled
by
the Company.
6. Mutilated
or Missing Warrant Certificates. If
any
Warrant Certificate is mutilated, lost, stolen or destroyed, the Company shall
issue, upon surrender and cancellation of any mutilated Warrant Certificate,
or in lieu of and substitution for any lost, stolen or destroyed Warrant
Certificate, a new Warrant Certificate
of like tenor and representing an equal number of Convertible Note Warrants.
In
the case of
a
lost, stolen or destroyed Warrant Certificate, a new Warrant Certificate shall
be issued by the Company only
upon
the Company's receipt of reasonably satisfactory evidence of such loss, theft
or
destruction and, if requested, an indemnity or bond reasonably satisfactory
to
the Company.
7. Exercise
of Convertible Note Warrants.
(a) Exercise.
Subject to the terms and conditions set forth in this Paragraph 7, at any
time
and
from time to time prior to the Warrant Expiration Date the Convertible Note
Warrants may be exercised
for that number of Warrant Shares as may be determined appropriate by the
Warrant holder. Should a Warrant holder fail to exercise this Convertible Note
Warrant in full prior to the Warrant Expiration Date, then the entitlement
of
such Warrant holder to the Warrant Shares shall be automatically cancelled
and
void. In order to exercise the Convertible Note Warrants, a Warrant holder
shall
deliver to the Company the following: (i) a written notice, in the form of
the
Election to Purchase appearing at the end of the form of Warrant Certificate
attached hereto, indicating the election of such Warrant holder to exercise
the Convertible Note Warrants for all or such portion of the Warrant Shares
as
identified by the Warrant
holder therein; (ii) the Warrant Certificate or Warrant Certificates evidencing
the Convertible Note Warrants
being
exercised; and (iii) payment of the aggregate Exercise Price.
(b) Payment
of Exercise Price. Payment of the Exercise Price with respect to that
portion
of the Convertible Note Warrants being exercised hereunder shall be made by
the
payment by the
Warrant holder to the Company, in cash, by cashier's check or wire transfer,
of
an amount equal to the Exercise
Price multiplied by the number of Warrant Shares being acquired by the exercise
of the Convertible Note Warrants.
(c)
Payment of Taxes. The Company shall be responsible for paying any and all issue,
documentary,
stamp or other taxes that may be payable in respect of any issuance or delivery
of Warrant Shares
on
exercise of the Convertible Note Warrants, except in the case where any Warrant
Shares shall be
registered in a name or names other than the name of the holder of a Convertible
Note Warrant. In the event that Warrant Shares shall be registered in a name
or
names other than the name of the holder of a Convertible
Note Warrant, funds sufficient to pay all transfer taxes, if any, which shall
be
payable upon the
execution and delivery of such Warrant Shares shall be paid by the holder
thereof to the Company at the time
a
Warrant holder delivers such Convertible Note Warrants to the Company for
exercise.
8
(d)
Delivery of Warrant Shares. Upon receipt of the items referred to in Paragraph
7. (a), the Company shall, as promptly as practicable, and in any event within
three (3) Business Days thereafter, execute
and deliver or cause to be executed and delivered, to or upon the written order
of the Warrant holder exercising
the Convertible Note Warrants, and in the name of such Warrant holder or such
designee of such Warrant holder, a share certificate or share certificates
representing the number of Warrant Shares to be
issued
on exercise of the Convertible Note Warrants and enter full details of such
issuance in the stock register of the Company in order to confer upon the
Warrant holder or the designee of such Warrant holder legal
title thereto. The share certificate or share certificates issued to such
Warrant holder or its designee shall bear
any
restrictive legend required under applicable law, rule or regulation. The share
certificate or share certificates
so delivered (and the entry in the stock register) shall be registered or made,
as the case may be, in
the
name of such Warrant holder or such other name as shall be designated in said
notice. A Convertible Note Warrant
shall be
deemed to have been exercised and such share certificate or share certificates
shall be
deemed
to have been issued, and such holder or any other person so designated to be
named therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date that such notice, together
with payment of the aggregate Exercise Price and the Warrant Certificate or
Warrant Certificates evidencing
the Convertible Note Warrants to be exercised, is received by the Company as
aforesaid and the
corresponding entries are made in the stock register of the Company. If the
Convertible Note Warrants evidenced by any Warrant Certificate are exercised
in
part, the Company shall, at the time of delivery
of the share certificate or share certificates, deliver to the holder thereof
a
new Warrant Certificate evidencing
the Convertible Note Warrants that were not exercised or surrendered, which
shall in all respects
(other than as to the number of Convertible Note Warrants evidenced thereby)
be
identical to the Warrant Certificate being exercised. Any Warrant Certificates
surrendered upon exercise of Convertible Note Warrants
shall
be canceled by the Company.
(e) Cashless
Exercise.
7.e.1 Determination
of Amount.
In lieu
of the payment of the Exercise Price in the manner required by Section 7 (b)
the
Holder shall have the right (but not the obligation) to pay the Exercise Price
for the shares of Common Stock being purchased with this Convertible Note
Warrant Agreement upon exercise by the surrender to the Company of any
exercisable but unexercised portion of this Convertible Note Warrant having
a
"Value" (as defined below), at the close of trading on the last trading
immediately preceding the exercise of this Warrant, equal to the Exercise Price
multiplied by the number of shares being purchased upon exercise ("Cashless
Exercise Right"). The sum of (a) the number of shares being purchased upon
exercise of the non-surrendered portion of this Convertible Note Warrant
pursuant to this Cashless Exercise Right and (b) the number of shares underlying
the portion of this Convertible Note Warrant being surrendered, shall not in
any
event be greater than the total number of shares of Common Stock purchasable
upon the complete exercise of this Convertible Note Warrant if the Exercise
Price were paid in cash. The "Value" of the portion of the Convertible Note
Warrant being surrendered shall equal the remainder derived from subtracting
(a)
the Exercise Price multiplied by the number of shares underlying the portion
of
this Convertible Note Warrant being surrendered from (b) the Market Price of
the
shares multiplied by the number of shares underlying the portion of this
Convertible Note Warrant being surrendered. As used herein, the term "Market
Price" at any date shall be deemed to be the last reported sale price of the
Common Stock on such date, or, in case no such reported sale takes place on
such
day, the average of the last reported sale prices for the immediately preceding
three trading days, in either case as officially reported by the principal
securities exchange on which the Common Stock is listed or admitted to trading,
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange or if any such exchange on which the Common Stock is listed
is not its principal trading market, the last reported sale price as furnished
by the NASD through the Nasdaq National Market or SmallCap Market, or, if
applicable, the OTC Bulletin Board, or if the Common Stock is not listed or
admitted to trading on the Nasdaq National Market or SmallCap Market or OTC
Bulletin Board or similar organization, as determined in good faith by
resolution of the Board of Directors of the Company, based on the best
information available to it.
7.e.2 Mechanics
of Cashless Exercise.
The
Cashless Exercise Right may be exercised by the Holder on any business day
on or
after the Commencement Date and not later than the Expiration Date by delivering
the Election to Purchase form attached hereto with the cashless exercise section
completed to the Company, exercising the Cashless Exercise Right and specifying
the total number of shares of Common Stock the Holder will purchase pursuant
to
such Cashless Exercise Right.
7.e.3 Validity.
The
foregoing provisions of this Section shall not apply if the securities to be
issued upon exercise of the Cashless Exercise Right may not be validly issued
under the laws of the jurisdiction of incorporation of the Company.
9
8. Adjustment
of Number of Warrant Shares Issuable Upon Exercise and Adjustment of
Exercise
Price.
(a)
Stock
Dividends, Subdivisions and Combinations. If at any time after the date hereof
the
Company shall: (i) pay a dividend, or make any other distribution of, additional
shares of Common Stock to
all
holders of its Common Stock (other than pursuant to the exercise of Convertible
Note Warrants); subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock; or (iii) combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then
the
number of Warrant Shares for which each Convertible Note Warrant is exercisable
immediately after
the
occurrence of any such event shall be proportionately increased in the case
of
(i) and (ii) above
and
proportionately decreased in the case of (iii) above.
(b)
Certain Other Distributions. If at any time after the date hereof the Company
shall make
any
dividend, or any other distribution by the Company to the holders of its Common
Stock, of any shares of capital stock of the Company, evidences of indebtedness
of the Company, cash or other assets (including
rights, warrants, convertible securities or other securities (of the Company
or
any other Person)), other
than any dividend or distribution (i) upon a capital reorganization,
reclassification, merger or consolidation to which Paragraph 8.(c) applies,
or
(ii) of any common stock referred to in Paragraph 8.(a), then
(x)
the number of Warrant Shares for which each Convertible Note Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying
the
number of shares of Common Stock for which one Convertible
Note Warrant is exercisable immediately prior to such distribution by a fraction
(A) the numerator of which shall be the Current Market Price per share of Common
Stock at the time of such distribution
and (B) the denominator of which shall be the Current Market Price per share
of
Common Stock minus
the
amount allocable to one share of Common Stock of the fair value (as determined
in good faith by the
Board
of Directors of the Company) of any and all such evidences of indebtedness,
shares of stock, other securities
or property so distributed.
(c)
Upon
Reclassifications, Reorganizations, Consolidations or Mergers. In the event
of
any
capital reorganization of the Company, any reclassification of the stock of
the
Corporation (other than a
change
in par value or from par value to no par value or from no par value to par
value
or as a result of a stock
dividend or subdivision, split-up or combination or reverse split of shares),
or
any consolidation or merger
of
the Company with or into another Person (where the Company is not the surviving
corporation or where
there is a change in or distribution with respect to the Common Stock), except
in the case of a merger -5- or
consolidation to which clause (i) of the last sentence of this Paragraph 8.(c)
applies, each Convertible Note Warrant,
effective at the close of business on the date such reorganization,
reclassification, consolidation,
or merger shall become effective, shall thereafter be exercisable for the kind
and number of shares of stock or other securities or property, (including cash)
receivable upon the consummation of such reorganization, reclassification,
consolidation or merger, by a holder of the number of shares of Common Stock
deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation or merger)
upon exercise of such Convertible Note Warrant and otherwise shall have the
same
terms and conditions applicable immediately prior to such time of such
reorganization, reclassification, consolidation or
merger. The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations,
or mergers. The Corporation shall not effect any such reorganization,
reclassification, consolidation or merger unless, (i) in the case of a merger
or
consolidation in which the consideration receivable upon consummation of such
merger or consolidation by a holder of shares of Common Stock consists
solely of cash, either (x) simultaneously with the consummation thereof, the
Corporation shall pay to the Holder of the Warrant Certificate evidencing such
Convertible Note Warrants an amount in cash equal to (A) the amount in cash
that
would be received upon such consummation by a holder of the number of
shares
of Common Stock deliverable (immediately prior to such consummation) upon
exercise of such Convertible
Note Warrants less (B) the Exercise Price or (y) the Exercise Price for any
Convertible Note Warrant
exceeds
the amount in cash that would be so received or (ii) in all other cases, prior
to the consummation thereof, the successor corporation (if other than the
Corporation) resulting from such reorganization,
reclassification, consolidation, or merger shall assume, by written instrument,
the obligation to
deliver to the holders of this Convertible Note Warrant such shares of stock,
securities or property, including
cash, which, in accordance with the foregoing provisions, such holders shall
be
entitled to receive upon
such
exercise.
(d) Exercise
Price Adjustment. Whenever the number of Warrant Shares into which a Convertible
Note Warrant is exercisable is adjusted as provided in Paragraphs 8.(a) and
8.(b), the Exercise
Price payable upon exercise of the Convertible Note Warrant shall simultaneously
be adjusted by
multiplying such Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which
shall be the number of shares of Common Stock into which such Convertible Note
Warrant was exercisable
immediately prior to such adjustment, and the denominator of which shall be
the
number of shares of
Common
Stock into which such Convertible Note Warrant was exercisable immediately
thereafter.
(e) Notice
of
Certain Events, Upon the occurrence of any event resulting in an adjustment
in
the number of Warrant Shares (or other stock or securities or property)
receivable upon the exercise
of the Convertible Note Warrants or the Exercise Price, the Company shall
promptly thereafter (i)
compute such adjustment in accordance with the terms of the Convertible Note
Warrants, (ii) prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, and (iii) promptly mail copies of such
certificate to each Warrant holder.
9. Reservation
of Shares. The
Company shall at all times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued share capital,
the
aggregate number of the Warrant Shares deliverable upon the exercise of all
outstanding Convertible Note Warrants, for the purpose
of enabling it to satisfy any obligation to issue the Warrant Shares upon the
due and punctual exercise of
the
Convertible Note Warrants, through 5:00 p.m., New York City time, on the Warrant
Expiration Date.
10
10. No
Impairment. The
Company shall not, by amendment of its organizational documents, or through
reorganization, consolidation, merger, dissolution, issuance or sale of
securities, sale of assets or any other
voluntary action, willfully avoid or seek to avoid the observance or performance
of any of the terms of the
Convertible Note Warrants or this Convertible Note Warrant Agreement, and shall
at all times in
good
faith assist in the carrying out of all such terms and in the taking of all
such
actions as may be necessary or appropriate in order to protect the rights of
Warrant holder under the Convertible Note Warrants
and
this Convertible Note Warrant Agreement against wrongful impairment. Without
limiting the generality of the foregoing, the Company: (i) shall not set or
increase the par value of any Warrant Shares above
the
amount payable therefor upon exercise, and (ii) shall take all actions that
are
necessary or appropriate in order that the Company may validly and legally
issue
fully paid and nonassessable Warrant Shares upon the exercise of the Convertible
Note Warrants.
11. No
Rights or Liabilities as Shareholder. No
holder, as such, of any Warrant Certificate shall be
entitled to vote, receive dividends or be deemed the holder of Shares which
may
at any time be issuable on
the
exercise of the Convertible Note Warrants represented thereby for any purpose
whatever, nor shall anything
contained herein or in any Warrant Certificate be construed to confer upon
the
holder of any Warrant Certificate, as such, any of the rights of a shareholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance
of
Common Stock, reclassification of Common Stock, change of par value or change
of
Common Stock to no par value, consolidation,
merger, conveyance or otherwise), or to receive notice of meetings or other
actions affecting stockholders or to receive dividend or subscription rights,
or
otherwise, until such Warrant Certificate shall have been exercised in
accordance with the provisions hereof and the receipt and collection of the
Exercise Price
and
any other amounts payable upon such exercise by the Company. No provision
hereof, in the absence
of affirmative action by Warrant holder to purchase Warrant Shares shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
12. Fractional
Interests. Notwithstanding
the provisions of the Articles of Incorporation of the Company, the Company
shall not be required to issue fractional shares of Common Stock upon exercise
of the Convertible Note Warrants or to distribute certificates that evidence
fractional shares of Common Stock.
If
any fraction of a Warrant Share would, except for the provisions of this
Paragraph 12, be issuable on
the
exercise of a Warrant, the number of Warrant Shares to be issued by the Company
shall be rounded to
the
nearest whole number, with one-half or greater being rounded up, and less than
one-half being rounded down.
13. Additional
Definitions. Unless
the context otherwise requires, the terms defined in this Paragraph 13, whenever
used in this Convertible Note Warrant Agreement shall have the respective
meanings
hereinafter specified and words in the singular or in the plural shall each
include the singular and the
plural and the use of any gender shall include all genders.
(a) "Affiliate"
shall mean, with respect to any Person, any officer or director of such
Person,
or any other Person directly or indirectly controlling, controlled by, or under
common control with such
Person. For purposes of this definition, "control" means the power to direct
the
management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
(b) "Business
Day" shall mean any day other than a Saturday or a Sunday or any day on which
banks located in New York, New York are authorized or obligated to
close.
(c) "Common
Stock" means the common stock, par value $.001 per share, of the
Company.
(d) "Current
Market Value" per share of Common Stock or any other security on any
date
of
determination means: (i) the average of the daily closing sale prices for each
of 15 trading days immediately
preceding such date (or such shorter number of days during which such security
has been listed or
traded), if the security has been listed on the New York Stock Exchange, the
American Stock Exchange or other national securities exchange or the NASDAQ
National Market for at least 10 trading days prior to such date; (ii) if such
security is not so listed or traded, the average of the daily closing bid prices
for each of
the 15
trading days immediately preceding such date or such shorter number of days
during which such security had been quoted), if the security has been quoted
on
a national over-the-counter market for at least 10
trading days; and (iii) otherwise, the value of the security most recently
determined as of a date within the six
months preceding such day by the Board of Directors of the Company in good
faith,
(e) "Person"
shall mean any corporation, association, partnership, joint venture, trust,
organization,
business, individual, government or political subdivision thereof or
governmental body,
11
14. Miscellaneous.
(a) Additional
Parties. The parties hereto agree that subsequent Persons who purchase
Convertible
Note Units by executing
a Subscription Agreement shall, upon execution
of a counterpart signature page hereto, be added as a party to this Convertible
Note Warrant Agreement and have all rights and privileges of a Warrant holder
and be subject and bound by all the terms and
conditions hereof as if such subsequent party was one of the Warrant holders
on
the date hereof.
(b) Amendments
and Waivers, This Convertible Note Warrant Agreement ma)/ be supplemented or
amended only by a subsequent writing signed by each of the parties hereto (or
their successors
or permitted assigns), and any provision hereof may be waived only by a written
instrument signed by
the
party charged therewith,
(c) Counterparts.
This Convertible Note Warrant Agreement may be executed in counterparts
and each such counterpart shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
(d) Entire
Agreement. This Convertible Note Warrant Agreement and the other documents,
instruments and agreements executed in connection herewith constitute the entire
agreement by, between
and among the parties as to the subject matter hereof and merges and supersedes
any prior discussions,
understandings and agreements of any and every nature by, between and among
them
as to the subject
matter hereof.
(e) Governing
Law. THIS
CONVERTIBLE NOTE WARRANT AGREEMENT
SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
CONFLICTS
OF LAWS, RULES OR PRINCIPLES.
(f) Jurisdiction
and Venue. ANY
SUIT, ACTION OR PROCEEDING WITH RESPECT
TO THIS CONVERTIBLE NOTE WARRANT AGREEMENT SHALL BE BROUGHT
IN THE COURTS OF KINGS COUNTY IN THE STATE OF NEW YORK OR IN
THE
UNITED STATES DISTRICT COURT FOR THE NEW YORK CITY DISTRICT OF NEW YORK. THE
PARTIES
HEREBY ACCEPT THE EXCLUSIVE JURISDICTION OF THOSE COURTS FOR THE PURPOSE OF
ANY
SUCH SUIT, ACTION OR PROCEEDING. THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT ANY OF THEM MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUIT, ACTION OR PROCEEDING RISING OUT OF OR RELATING TO THIS
SUBSCRIPTION
CONVERTIBLE NOTE WARRANT AGREEMENT OR ANY JUDGMENT ENTERED BY ANY COURT IN
RESPECT THEREOF BROUGHT IN ANY OF THE ABOVE DESCRIBED
COURTS AND HEREBY FURTHER IRREVOCABLY WAIVE ANY CLAIM THAT ANY
SUIT, ACTION OR PROCEEDING BROUGHT IN KINGS COUNTY, NEW YORK, HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. THE PARTIES, FURTHER, CONSENT TO SERVICE OF PROCESS
IN
ANY SUCH ACTION OR LEGAL PROCEEDING BY MEANS OF REGISTERED
MAIL OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, IN CARE OF
THE
ADDRESS SET FORTH IN THE CONVERTIBLE NOTE EXECUTED BY SUCH PARTY OR SUCH OTHER
ADDRESS AS EITHER PARTY MAY
FURNISH IN WRITING TO THE OTHER, PROVIDED PROCESS IS ACTUALLY
RECEIVED.
(g)
Notices.
Unless otherwise provided, any notice required or permitted by this Convertible
Note Warrant Agreement shall be in writing and shall be deemed sufficient upon
delivery, when delivered personally or by overnight courier or sent by telegram
or fax, or forty-eight (48) hours after being deposited in the United States
mail as certified or registered mail with postage prepaid, and addressed
to
the
party to be notified at such party's address as set forth in the Convertible
Note Unit Securities Purchase Agreement
executed by such party or as subsequently modified by written
notice.
(h) Sections
and Headings. The sections and headings used in this Convertible Note Warrant
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Convertible Note Warrant Agreement.
(i) Severability.
If one or more provisions of this Convertible Note Warrant Agreement
are held to be unenforceable under applicable law, such provision shall be
automatically reformed so
as to
be enforceable while as nearly as possible preserving the original intent of
the
parties.
(j)
Successors
and Assigns. Except as otherwise
provided in this Convertible Note Warrant
Agreement, the terms and conditions of this Convertible Note Warrant Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Nothing in
this
Convertible Note Warrant Agreement, express or implied, is
intended
to confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Convertible Note Warrant Agreement, except as
expressly provided in
this
Convertible Note Warrant Agreement.
12
(k)
Termination.
This Convertible Note Warrant Agreement (other than Paragraph 7.(b)
and
Paragraph 14, and all related definitions, all of which shall survive such
termination) shall terminate on the earlier of (i) the Warrant Expiration Date
and (ii) the date on which all Convertible Note Warrants have
been
exercised.
15. Registration
Rights.
The
Warrant holder shall have such registration rights with respect to the number
of
shares of Common Stock issuable upon exercise of the Convertible Note Warrants
(the "Registrable Securities") as is set forth in the Registration Rights
Agreement among the Company and the Warrant holder.
IN
WITNESS WHEREOF, the parties hereto have duly executed this Convertible Note
Warrant Agreement
on and as of the Effective Date.
| FUTURE NOW, INC. | ||
| |
|
|
| By: | ||
|
Xxxxxxx Xxxxxxxxx, CEO |
||
[Warrant
holder Counterpart Signature Page to Follow]
13
Warrant
holder Counterpart Signature Page
|
WARRANTHOLDER:
Name
of Warrant holder
|
||
| |
|
|
| By: | ||
|
Signature |
||
|
Title:
________________(If Applicable)
|
||
14
EXHIBIT
1
FORM
OF
WARRANT CERTIFICATE
NEITHER
THIS SECURITY NOR THE COMMON STOCK OF THE COMPANY ISSUABLE UPON EXERCISE
HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY, SUCH COMMON STOCK NOR ANY INTEREST
OR PARTICIPATION HEREIN OR THEREIN MAY BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FORM,
OR
NOT SUBJECT TO, SUCH REGISTRATION. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF, AND MAY ONLY
BE
TRANSFERRED IN ACCORDANCE WITH, A CONVERTIBLE NOTE WARRANT AGREEMENT
BY AND BETWEEN FUTURE NOW, INC.
AND THE
WARRANT HOLDERS SIGNATORY THERETO OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE. COPIES OF SUCH AGREEMENTS MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE COMPANY.
NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE; (i) OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR APPLICABLE
STATE SECURITIES LAWS; OR (ii) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN
A
FORM ACCEPTABLE TO THE ISSUER,
THAT REGISTRATION IS NOT REQUIRED
UNDER THE 1933 ACT OR; (iii) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT
TO RULE 144 UNDER THE 1933 ACT.
15
| WARRANT NUMBER 10 |
NUMBER
OF CONVERTIBLE NOTE WARRANTS 8,000
|
||
WARRANT
CERTIFICATE
FUTURE
NOW, INC.
This
Warrant Certificate certifies that Xxxxx
Xxxxxxx, a individual,
or its
registered assigns, is the registered holder of 8,000 Convertible
Note Warrants (the "Warrant holder") to purchase a number of shares (the
"Warrant Shares") of
the
common stock, par value $.001 per share (the "Common Stock") of Future Now,
Inc.
(the
"Company"). Each Convertible Note Warrant entitles the holder to purchase from
the Company
that number of Warrant Shares equal to the product obtained by multiplying
the
quotient obtained by multiplying one (1) by the number of Convertible Note
Warrants represented hereby at the price (the "Exercise
Price") of Seventy-Five cent ($0.75) per Warrant Share in accordance Paragraph
7
of the Convertible Note Warrant
Agreement (the "Convertible Note Warrant Agreement"), between
the Company and Warrant holders signatory thereto. Each Convertible Note Warrant
shall entitle
the holder thereof, subject to the satisfaction of the conditions to exercise
set forth in Paragraph 7 of the
Convertible Note Warrant Agreement, to purchase, on or prior to 5:00 p.m.,
New
York City time, on March
5, 2014 (the
"Warrant Expiration Date"), that number of Warrant Shares equal to the quotient
obtained by multiplying one (1) by the number of Convertible Note Warrants
represented hereby at the price (the "Exercise Price") of Seventy-Five Cents
($0.75) per Warrant Share. Any and all rights of exercise
hereof shall expire on the Warrant Expiration Date. The number of Warrant Shares
issuable under this Convertible Note Warrant Certificate and the Exercise Price
are subject to adjustment pursuant to Paragraph
8 of the Convertible Note Warrant Agreement.
The
Convertible Note Warrants evidenced by this Warrant Certificate are part of
a
duly authorized
issue of Convertible Note Warrants to purchase Warrant Shares and are issued
pursuant to a
Convertible Note Warrant Agreement, which Convertible Note Warrant Agreement
is
hereby incorporated
by reference in and made a part of this instrument and is hereby referred to
for
a description of the
rights, limitation of rights, obligations, duties and immunities there under
of
the Company and Warrant holder.
Warrant
holder may exercise Convertible Note Warrants in accordance herewith and with
the Convertible Note Warrant Agreement by surrendering this Warrant Certificate,
with the Election to Purchase, in the form attached hereto, properly completed
and executed, together with payment of the aggregate Exercise Price, at the
offices of the Company. If, after the exercise of Convertible Note Warrants
evidenced hereby, the
number of Convertible Note Warrants exercised shall be less than all of the
Warrant Shares available hereunder,
there shall be issued to the Warrant holder hereof or its assignee a new Warrant
Certificate evidencing the number
of
Convertible Note Warrants then remaining.
This
Warrant Certificate, when surrendered at the offices of the Company, by the
registered holder thereof
in person, by legal representative or by attorney duly authorized in writing,
may be exchanged, in the manner
and subject to the limitations provided in the Convertible Note Warrant
Agreement, for one or more
other Warrant Certificates of like tenor evidencing in the aggregate a like
number of Convertible Note Warrants.
Warrant
holder may transfer the Convertible Note Warrants evidenced by this Warrant
Certificate,
in whole or in part, only in accordance with Paragraph 5 of the Convertible
Note
Warrant Agreement.
The
Company may deem and treat the registered holder hereof as the absolute owner
of
this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof and for all other purposes,
and
the Company shall not be affected by any notice to the contrary.
(Signature
Appears Next Page)
16
WITNESS
the signatures of the duly authorized directors or officers of the Company
on
this 5th
day
of
March, 2007.
| FUTURE NOW, INC. | ||
| |
|
|
| By: | ||
|
Xxxxxxx Xxxxxxxxx, CEO |
||
ELECTION
TO PURCHASE
Form
to be used to exercise Convertible Note Warrants:
(To
be
executed by the registered Holder to effect a transfer of the within Warrant
Certificate):
Future
Now, Inc.
000
Xxxxxxx Xxxxxx, 0xx
Xxx
Brooklyn,
NY. 11231
Date:
________________, 20___
The
undersigned hereby elects irrevocably to exercise _____ of the Convertible
Note
Warrants evidenced by the attached Warrant Certificate to purchase _____ Shares
of Common Stock of FUTURE NOW, INC. and hereby makes payment of $________ (at
the rate of $____ per Share) in payment of the Exercise Price pursuant thereto.
Please issue the Common Stock as to which this Warrant are in accordance with
the instructions given below. or
The
undersigned hereby elects irrevocably to exercise the Cashless Exercise Rights
of the Convertible Note Warrants evidenced by the attached Warrant Certificate
to purchase ___________ Shares of Common Stock of FUTURE NOW, INC. by surrender
of the unexercised portion of the within Convertible Note Warrants (with a
"Value" of $____________ based on a "Market Price" of $_________). Please issue
the Common Stock in accordance with the instructions given below.
|
Name
of holder of Warrant Certificate:
|
|||
|
|
|||
|
PRINT
ADDRESS:
|
|||
|
|
|||
|
FED
TAX ID #, IF APPLICABLE
|
|||
|
|
|||
|
Signature
|
If
said
number of Convertible Note
Warrants is less than the number of Convertible Note Warrants then unexpired
pursuant to the
Convertible Note Warrant Agreement and as evidenced by the Warrant Certificate,
the undersigned requests that a new Warrant Certificate evidencing the unexpired
number of Convertible Note Warrants then
evidenced by this Warrant Certificate be registered in the name
of____________________________________ whose address
is_______________________________________________________________________________,
and that such Warrant Certificate be delivered to
_________________________________________whose
address
is_____________________________________________________________________________________.
Note:
The above signature must correspond with the name as written in the first
sentence of the attached Warrant Certificate
in every particular, without alteration or enlargement or any change whatever,
and if the certificate evidencing the Warrant Shares or any Warrant Certificate
representing Convertible Note Warrants not exercised is to be registered
in
a name other than that in which this Warrant Certificate is registered, the
signature above must be guaranteed.
| Signature Guaranteed: | Dated: _______________, 20___. | ||
|
|
|||
ASSIGNMENT
Form
to be used to assign Convertible Note Warrants:
(To
be
executed by the registered Holder to effect a transfer of the within Warrant
Certificate):
Future
Now, Inc.
000
Xxxxxxx Xxxxxx, 0xx
Xxx
Brooklyn,
NY. 11231
Date:
________________, 20___
FOR
VALUE
RECEIVED,
__________________________________________________________
does
hereby sell, assign and transfer unto _________________________________________,
______ Convertible Note Warrants evidenced by the attached Warrant Certificate,
together with all right, title and interest therein and does hereby authorize
the Company to transfer such right on the books of the Company and to execute
a
new Warrant Certificate in the name of _______________________________, whose
address is________________________________________ evidencing the number of
Convertible Note Warrant so sold, assigned and transferred hereby. If the
number
of
Convertible Note Warrants sold, assigned or transferred hereunder is less than
the unexpired number
of
Convertible Note Warrants evidenced by the attached Warrant Certificate, then
the undersigned
requests that a new Warrant Certificate for an amount of Convertible Note
Warrants equal to
the
unexpired number of Convertible Note Warrants evidenced by the attached Warrant
Certificate that were not sold, transferred or assigned be registered in the
name of the undersigned.
| Name of holder of Warrant Certificate: | |||
|
|
|||
|
(Please
Print) Address:
|
|||
|
|
|||
|
Federal
Tax Identification Number:
|
|||
|
(if
applicable)
|
|||
|
Signature
|
Note:
The above signature must correspond with the name as written in the first
sentence of
the attached Warrant Certificate
in every particular, without alteration or enlargement or any change whatever,
and such signature must be guaranteed.
Signature
Guaranteed:
REGISTRATION
RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT (this
“Agreement”), dated as of this __
day
of ____, 2007,
is by
and between Future Now, Inc., a Delaware Corporation (the “Company”), and the
person whose name appears on the signature page attached hereto (individually
a
“Holder” and collectively, with the holders of other securities issued in the
Offering (as defined below), the “Holders”).
WHEREAS,
pursuant to a Subscription Agreement the Company has offered (the “Offering”) to
sell up to $1,500,000 in 10.5% promissory notes (the “Notes”), convertible into
shares of the Company’s common stock (the “Shares” or the “Common Shares”), each
$50,000 in Notes also includes the issuance of seven year warrants to purchase
16,000 shares of Common Stock, or like security issued in a Qualified Financing
or Acquisition, at an exercise price of $0.75 per share (the “Warrants” along
with the Notes per $50,000 investment, a (the “Unit”). Through an over-allotment
option, the Company may elect to sell up to an additional 10 units in the
Offering for a total of $500,000;
WHEREAS,
pursuant
to the terms of and in order to induce the Holders to enter into certain
Subscription Agreement between the Company and the Holder (the “Subscription
Agreement”) to purchase Units, the Company and each Holder have agreed to enter
into this Agreement setting forth the registration rights to be granted with
respect to the shares of Common Stock issued, or issueable to each holder upon
conversion of the Shares and/or Warrants, issued to each Holder pursuant to
the
Subscription Agreements (the “Registrable Securities”); and
WHEREAS,
it is
intended by the Company and the Holders that this Agreement shall become
effective immediately upon the acquisition by the Holders of the
Units;
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
in
the Subscription Agreement, the Company and the Holder hereby agree as
follows:
1. Registration
Rights
(a)
Piggyback
Registration Rights.
If the
Company at any time proposes to register any of its equity securities under
the
Securities Act of 1933, as amended (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 S-4 or S-8 or another
form not available for registering the Registrable Securities for sale to the
public, a registration statement on Form S-3 to be filed by the Company to
register securities issued in consideration for an acquisition, a registration
statement on Form S-1 covering solely an employee benefit plan or a registration
statement relating to a dividend reinvestment plan), it will give written notice
at such time to each Holder. Upon the written request of each Holder, given
within twenty (20) days after receipt of any such notice by the Company, to
register any of its Registrable Securities (which request shall state the
intended method of disposition thereof), the Company will use its best efforts
to cause the Registrable Securities as to which registration shall have been
so
requested, to be included in the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent requisite
to
permit the sale or other disposition by the Holder (in accordance with its
written request); provided
that
nothing herein shall prevent the Company from abandoning or delaying any such
registration at any time. In the event that any registration pursuant to this
Section 1(a) shall be, in whole or in part, an underwritten public offering
of
equity securities, any request by a Holder pursuant to this Section 1(a) to
register Registrable Securities shall specify that such Registrable Securities
are to be included in the underwriting on the same terms and conditions as
the
equity securities otherwise being sold through underwriters under such
registration. The number of shares of Registrable Securities to be included
in
such an underwriting may be reduced (pro rata
among
all persons or entities having registration rights), if and to be the extent
that the managing underwriter shall 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
except in the case of the Company's initial public offering of Common Stock
(in
which the number of shares to be offered on behalf of selling shareholders
may
be reduced to zero) or in the case of an underwritten offering of an equity
security other than Common Stock (in which the number of shares to be offered
on
behalf of selling shareholders may also be reduced to zero), in no event shall
the number of shares to be registered on behalf of selling Holders be less
than
twenty percent (20%) of the aggregate number of shares to be offered in such
underwriting. If the offering covered by this Section 1(a) shall be an
underwritten public offering, the Company shall designate the managing
underwriter of such offering. In the event of any such reduction or cutback
in
the number of Registrable Securities to be registered, or in the event that
the
Company abandons any such registration prior to the effective date thereof,
the
Holders shall continue to maintain the rights provided by this Section 1,
subject to the termination provisions of this Agreement.
1
(b) Cooperation
with the Company.
The
Holders will cooperate with the Company in all respects in connection with
this
Agreement, including timely supplying all information reasonably requested
by
the Company and executing and returning all documents reasonably requested
in
connection with the registration and sale of the Registrable
Securities.
2. Registration
Procedures.
If and
whenever the Company is required by any of the provisions of this Agreement
to
use its commercially reasonable best efforts to effect the registration of
any
of the Registrable Securities under the 1933 Act, the Company shall (except
as
otherwise provided in this Agreement), as expeditiously as
possible:
(a) prepare
and file with the Securities and Exchange Commission (the “Commission”) a
registration statement and shall use its commercially reasonable best efforts
to
cause such registration statement to become effective and remain effective
until
(i) all the Registrable Securities covered thereby (the “Covered Securities”)
are sold or (ii) all Holders (other than “Affiliates” of the Company, as such
term is defined in Rule 144 under the 1933 Act) are eligible to take advantage
of the provisions of Rule 144(k) under the 1933 Act with respect to all the
Registrable Securities (held by persons other than Affiliates) or (iii) two
years from the date on which such registration statement is declared effective,
whichever is earliest;
(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 and to comply with
the
provisions of the 1933 Act with respect to the sale or other disposition of
all
securities covered by such registration statement;
(c) furnish
to each Holder of the Covered Securities such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the 1933 Act, and such other documents, as such Holder may reasonably request
in order to facilitate the public sale or other disposition of the securities
owned by such Holder;
(d) use
its
commercially reasonable best efforts to register and qualify the Covered
Securities under such other securities or blue sky laws of such jurisdictions
as
the Holders of a majority of the Covered Securities shall reasonably request,
and do any and all other acts and things which may be necessary or advisable
to
enable such Holders to consummate the public sale or other disposition in such
jurisdictions of the Covered Securities owned by such Holders, except that
the
Company shall not for any such purpose be required to qualify to do business
as
a foreign corporation in any jurisdiction wherein it is not so qualified or
to
file therein any general consent to service of process or to submit itself
to
taxation in any jurisdiction which otherwise does not have the right to tax
the
Company;
2
(e) use
its
commercially reasonable best efforts to list such securities on any securities
exchange on which any securities of the Company are then listed, if the listing
of such securities is then permitted under the rules of such exchange;
and
(f) notify
each Holder of Covered Securities, at any time when a prospectus relating
thereto covered by such registration statement is required to be delivered
under
the 1933 Act, of the happening of any event of which it has knowledge as a
result of which the prospectus included 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 the light of the circumstances then
existing.
3. Withdrawal
Obligation.
By
including any Covered Securities in any registration statement covered hereby,
each Holder agrees that (x) the Company shall have the right to delay effecting
any registration covered hereby in order to allow the Company to delay
disclosure of sensitive information until such time as the Company is otherwise
required to make such disclosure, and (y) the Holder shall refrain from selling
any Registrable Securities if requested to do so by the Company, provided that
(1) such request shall only be made in order to defer disclosure of sensitive
information until the Company is otherwise required to make such disclosure
and
(2) the Holder is not required to refrain from selling for a period of more
than
thirty (30) days in any ninety (90) day period.
4. Expenses.
All
expenses incurred in any registration of the Holders' Registrable Securities
under this Agreement shall be paid by the Company, including, without
limitation, printing expenses, fees and disbursements of counsel for the
Company, expenses of any audits to which the Company shall agree or which shall
be necessary to comply with governmental requirements in connection with any
such registration, all registration and filing fees for the Holders' Registrable
Securities under federal and State securities laws, and expenses of complying
with the securities or blue sky laws of any jurisdictions pursuant to Section
2(d); provided, however, that the Company shall not be liable for (a) any
discounts or commissions payable to any underwriter; (b) any stock transfer
taxes incurred with respect to Registrable Securities sold on behalf of the
Holder thereof; or (c) the fees and expenses of counsel for any
Holder.
5. Indemnification.
In the
event any Registrable Securities are included in a registration statement
pursuant to this Agreement;
(a) Company
Indemnity.
(i)
Without limitation of any other indemnity provided to any Holder, either in
connection with the Offering or otherwise, to the extent permitted by law,
the
Company shall indemnify and hold harmless each Holder, the affiliates, counsel,
officers, directors and partners of each Holder, any underwriter (as defined
in
the 1933 Act) for such Holder, and each person, if any, who controls such Holder
or underwriter (within the meaning of the 1933 Act or the Securities Exchange
Act of 1934 (the “Exchange Act”) (collectively, the “Indemnified Holders”)),
against any losses, claims, damages or liabilities (joint or several) to which
they may become subject under the 1933 Act, the Exchange Act or other federal
or
state law (collectively, the “Claims”), insofar as such Claims (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a “Violation”): (A) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (B) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or (C) any violation or alleged
violation by the Company of the 1933 Act, the Exchange Act or any state
securities law or any rule or regulation promulgated under the 1933 Act, the
Exchange Act or any state securities law, and the Company shall reimburse each
such Indemnified Holder for any legal or other expenses 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
any Indemnified Holder in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
statement by or on behalf of any such Indemnified Holder.
3
(ii)
The
foregoing notwithstanding, the Company shall not be liable to the extent that
any such Claim arises out of or is based upon a Violation or alleged Violation
made in any preliminary prospectus if (A) such Indemnified Holder failed to
send
or deliver a copy of the prospectus with or prior to the delivery of written
confirmation of the sale of Registrable Securities giving rise to such Claim
and
(B) the prospectus would have corrected such untrue statement or
omission.
(iii)
In
addition, the Company shall not be liable to the extent that any such Claim
arises out of or is based upon a Violation or alleged Violation in a prospectus,
(A) if such Violation or alleged Violation is corrected in an amendment or
supplement to such prospectus and (B) having previously been furnished by or
on
behalf of the Company with copies of the prospectus as so amended or
supplemented, such Indemnified Holder thereafter fails to deliver such
prospectus as so amended or supplemented prior to or concurrently with the
sale
to the person who purchased a Registrable Security from such Indemnified Holder
and who is asserting such Claim.
(b) Holder
Indemnity.
Each
Holder shall indemnify and hold harmless the Company, its affiliates, its
counsel, officers, directors, stockholders, representatives and partners, any
underwriter (as defined in the 1933 Act) and each person, if any, who controls
the Company or the underwriter (within the meaning of the 1933 Act or the
Exchange Act), against any Claims (joint or several) to which they may become
subject under the 1933 Act, the Exchange Act or any state securities law, and
each such Holder shall reimburse the Company and each such affiliate, counsel,
officer, director, stockholder, representative or partner, underwriter or
controlling person for any legal or other expenses incurred by them in
connection with investigating or defending any such Claim insofar as such Claims
(or actions and respect thereof) arise out of or are based upon (i) written
information provided by or on behalf of such Holder to the Company expressly
for
inclusion in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto
or (ii) any sale by such Holder after receipt from the Company of the notice
described in Section 2(f) hereof and prior to acceptance from the Company of
an
amended or supplemental prospectus; provided, however, that the maximum amount
which may be recovered from each Holder pursuant to the indemnification granted
under clause (i) in this paragraph shall be limited to the amount of proceeds
received by such Holder from the sale of Registrable Securities by such Holder
pursuant to such registration statement.
(c) Notice;
Right to Defend.
Promptly after receipt by an indemnified party under this Section 5 of notice
of
the commencement of any action (including any governmental action), such
indemnified party shall, if a claim in respect thereof is to be made against
any
indemnifying party under this Section 5, deliver to the indemnifying party
a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in and if the indemnifying party agrees in writing
that it will be responsible for any costs, expenses, judgments, damages and
losses incurred by the indemnified party with respect to such claim, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if the indemnified
party reasonably believes that representation of such indemnified party by
the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Agreement only if and to the
extent that such failure is prejudicial to its ability to defend such action,
and the omission so to deliver written notice to the indemnifying party will
not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Agreement; provided, however, that the indemnifying party shall
not be required to indemnify the indemnified party for the amount of a judgment
in excess of the amount of any previous settlement offer by the plaintiff that
was rejected by the indemnified party over the objection of the indemnifying
party.
4
If
an
indemnified party notifies an indemnifying party in writing that such
indemnified party elects to employ separate counsel at the expense of the
indemnifying party as permitted by the provisions of the preceding paragraph,
the indemnifying party shall not have the right to assume the defense of such
action or proceeding on behalf of such indemnified party. The foregoing
notwithstanding, the indemnifying party shall not be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any time for
such indemnified party and any other indemnified parties (which firm shall
be
designated in writing by such indemnified parties) in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances.
Any
indemnifying party shall not be liable for any settlement of any such action
or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with its written consent, or if there
be a
final judgment for the plaintiff in any such action or proceeding, the
indemnifying party agrees to indemnify and hold harmless such indemnified
parties from and against any loss or liability by reason of such settlement
or
judgment.
(d) Contribution.
If the
indemnification provided for in this Agreement is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any
Claim
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable
by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault
of
the indemnifying party on the one hand and of the indemnified party on the
other
hand in connection with the statements or omissions which resulted in such
loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state
a
material fact relates to information supplied by or on behalf of the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, the amount any Holder
shall be obligated to contribute pursuant to this Agreement (other than as
described in Section 5(b)(ii) hereof) shall be limited to an amount equal to
the
proceeds to such Holder of the Registrable Securities sold pursuant to the
registration statement which gives rise to such obligation to contribute (less
the aggregate amount of any damages which the Holder has otherwise been required
to pay in respect of such Claim or any substantially similar Claim arising
from
the sale of such Registrable Securities).
5
(e) Survival
of Indemnity.
The
indemnification provided by this Agreement shall be a continuing right to
indemnification and shall survive the registration and sale of any Registrable
Securities by any person entitled to indemnification hereunder and the
expiration or termination of this Agreement. Any purported assignment in
violation of this provision shall be null and void.
6. Assignment
of Registration Rights.
The
rights of the Holders under this Agreement, including the rights to cause the
Company to register Registrable Securities, may not be assigned without the
written prior consent of the Company.
7. Lock-up.
The
Holder agrees that in connection with the Company’s initial public offering, if
any, the Holder shall execute such lock-up agreement as shall be proposed by
the
Company’s managing underwriter, provided that such lock-up agreement is no more
restrictive than the lock-up agreement executed generally by the Company’s
directors and executive officers.
8. Notices.
(a) All
communications under this Agreement shall be in writing and shall be mailed
by
first class mail, postage prepaid, or telecopied or telexed with confirmation
of
receipt or delivered by hand or by overnight delivery service, (i) if to the
Company at Future Now, Inc., 0000 Xxxx 00xx
Xxxxxx,
Xxxxxxxx, XX 00000 Attention: Xxxxxxx Xxxxxxxxx, CEO, or at such other address
as it may have furnished in writing to the Holders of Registrable Securities
at
the time outstanding, or (ii) if to any Holder of any Registrable Securities,
to
the address of such Holder as it appears in the stock or warrant ledger of
the
Company.
(b) Any
notice so addressed, when mailed by registered or certified mail shall be deemed
to be given five days after so mailed, when telecopied or telexed shall be
deemed to be given when transmitted if transmitted during business hours on
a
business day or on the next succeeding business day if transmitted other than
during business hours on a business day, or when delivered by hand or overnight
shall be deemed to be given when delivered.
9. Successors
and Assigns.
Except
as otherwise expressly provided herein, this Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
Company and each of the Holders.
10. Amendment
and Waiver.
This
Agreement may be amended, and the observance of any term of this Agreement
may
be waived, but only with the written consent of the Company and the Holders
of
securities representing a majority of the Registrable Securities; provided,
however, that no such amendment or waiver shall take away any registration
right
of any Holder of Registrable Securities or reduce the amount of reimbursable
costs to any Holder of Registrable Securities in connection with any
registration hereunder without the consent of such Holder; further provided,
however, that without the consent of any other Holder of Registrable Securities,
any Holder may from time to time enter into one or more agreements amending,
modifying or waiving the provisions of this Agreement if such action does not
adversely affect the rights or interest of any other Holder of Registrable
Securities. No delay on the part of any party in the exercise of any right,
power or remedy shall operate as a waiver thereof, nor shall any single or
partial exercise by any party of any right, power or remedy preclude any other
or further exercise thereof, or the exercise of any other right, power or
remedy.
6
11. Counterparts.
One or
more counterparts of this Agreement may be signed by the parties, each of which
shall be an original but all of which together shall constitute one and the
same
instrument.
12. Governing
Law.
This
Agreement shall be construed in accordance with and governed by the internal
laws of the State of New York, without giving effect to conflicts of law
principles.
13. Invalidity
of Provisions.
If any
provision of this Agreement is or becomes invalid, illegal or unenforceable
in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby.
14. Pronouns;
Headings.
Unless
the context otherwise requires, all personal pronouns used in this Agreement,
whether in the masculine, feminine or neuter gender, shall include all other
genders, and if in the singular shall include the plural, and in the plural,
the
singular. The headings in this Agreement are for convenience of reference only
and shall not be deemed to alter or affect the meaning or interpretation of
any
provisions hereof.
IN
WITNESS WHEREOF,
the
undersigned have executed this Agreement as of first provided above
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Future
Now, Inc.
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Xxxxxxx Xxxxxxxxx, CEO |
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[Counterpart
Signature Page to
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7
Counterpart
Signature Page to Registration Rights Agreement
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Print
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8
SUBSCRIPTION
DOCUMENT
AND
ACCREDITED
INVESTOR QUESTIONNARIE
FUTURE
NOW, INC.
Total
Offering:
$1,500,000
in 10.5% Convertible Promissory Notes
&
480,000 Warrants (Offered in 30 Units of $50,000 Notes and 16,000
Warrants)
Name
of Purchaser: _____________________
Offering
Log #: ___________
9
Future
Now, Inc.
SUBSCRIPTION
DOCUMENT
1.
Instructions to Subscribers for Units
For
those
persons and entities who wish to subscribe for Units, set forth below is certain
information which is intended to enable subscribers to more easily and quickly
complete the necessary subscription documents.
Subscription
Agreement:
Complete
and sign the signature page for individuals, on page 10, or for organizations,
on page 11, whichever is appropriate; and
Accredited
Investor Questions:
Be
sure
to initial the relevant sections of item (2) (d) represented the Accredited
Investor Status, page 4 or 5, whichever is appropriate.
Payment
for Subscription:
Payment
for the number of Units subscribed for should accompany the executed documents
described above and should be in the form of a check payable to “Xxxx Xxxxxx,
Esq. Attorney Trust Account for Future Now, Inc.”
The
aforementioned documents, executed and completed as described above, must be
promptly delivered to Southridge Investment Group, LLC, 00 Xxxxx Xxxxxx,
Xxxxxxxxxx, XX 00000. Attn: Xxxxxxx Xxxxxxx (i.e.,
complete,
execute and return the Subscription Agreement)
together with the purchase price for the number of Units for which you are
subscribing. It is suggested that the foregoing be sent by Overnight Express
or
Express Mail.
NOTE:
If you wish to wire your subscription funds, kindly wire same
to:
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Bank
Name:
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Peoples
Bank
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ABA#:
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000-000-000
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ACCT#:
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0027011182
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Acct
Name:
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Kaiser,
LLC. Attorney Trust Account for Future Now,
Inc.
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10
SUBSCRIPTION
AGREEMENT
Future
Now, Inc.
000
Xxxxxxx Xxxxxx, 0xx
Xxx
Brooklyn,
NY. 11231
Ladies
and Gentlemen:
Future
Now, Inc, a Delaware corporation (the "Company"), desires to sell up $1,500,000
in 10.5% promissory notes payable semi-annual in arrears (“Notes”), convertible
into shares of the Company’s common stock (the “Shares” or the “Common Stock”),
each $50,000 in Notes to include the issuance of seven year warrants to purchase
16,000 shares of Common Stock, or like security issued in a Qualified Financing
or Acquisition, at an exercise price of $0.75 per share (the “Warrants” and
along with the Notes per $50,000 investment, a “Unit”) (the “Offering”). Through
an over-allotment option, the Company may elect to sell up to additional 10
units in the Offering for a total of $500,000. The Notes shall be redeemed
at
the earlier of either (i) repayment from the sales escrow redemption feature
(the “Redemption Feature”) or; (ii) three years from the date of issuance or;
(iii) a financing transaction of at least $2,500,000 (the “Qualified
Financing”), or (iv) the closing of a material acquisition of the Company,
whether by merger, recapitalization, sale of assets or other similar material
transaction (an “Acquisition”). At the Note holder’s option, all, or a portion
of, the principal and accrued interest on the Notes may be converted into shares
of the Company’s Common Stock along with a Qualified Financing or Acquisition.
The number of shares into which the Notes are convertible into will equal the
quotient of the converted principal and interest divided by the lower of; (i)
the price per share issued in a Qualified Financing or Acquisition, at a 20%
discount, or (ii) $3.25. If the holder elects the conversion option the minimum
number of shares each Unit will convert into is 15,385 shares of the Company’s
Common Stock. As additional protection against repayment of the Notes, under
the
Redemption Feature, the Company will escrow three and one-half (3.5%) of its
gross revenues in a separate bank account and pay-down the Notes, on a
semi-annual basis, until such a time that the total principal of has been
repaid. Unless the Notes are fully paid off, the first payment under the
Redemption Feature will be due within thirty (“30”) days of the 1st
anniversary of the Notes and then on a semi-annual basis
thereafter.
The
minimum investment is $50,000, although the Company may accept, at its
discretion, fractional Units. A member will be nominated to the Company’s Board
of Directors by; (i) any investor that contributes in excess of $750,000, or
(ii) by a majority of the investors once $250,000 is raised. The Offering will
close on or before May 15, 2007 but the Company may elect, at its discretion
to
extend the Offering for an additional 60 days. The Offering is a “best efforts”
offering and the Company may use the funds upon acceptance of a subscription.
Refer to the attached Exhibit A for a summary of the terms and conditions.
Refer
to the attached Exhibit B for the Company’s current capitalization table. The
undersigned ("Subscriber") desires to purchase the number of Units set forth
on
the signature page of this Agreement (the "Agreement"). Accordingly, the Company
and Subscriber agree as follows:
1. Sale
and Purchase.
Subject
to the terms and conditions set forth in this Agreement, Subscriber hereby
tenders the amount set forth on the signature page of this Agreement for the
purchase of the number of Units set forth on said signature page.
2. Representations,
Warranties, and Agreements of Subscriber. In
connection with this subscription, Subscriber hereby makes the following
representations, warranties, and agreements and confirms the following
understandings, each of which are made or confirmed, as the case may be, with
respect to Units subscribed for herein:
(a) Investment
Purpose. Subscriber
is acquiring Units for Subscriber's own account and for investment purposes
only.
11
(b) Review
and Evaluation of Information Regarding the Company.
(i) Subscriber
is familiar with the Company’s financial condition and proposed operations.
Without limiting the foregoing, the Subscriber acknowledges that the undersigned
has reviewed the corporate documents regarding the Company, the power point
presentation, and the terms of this Offering.
(ii) In
addition to the foregoing, Subscriber acknowledges that Subscriber has
conducted, or has been afforded the opportunity to conduct, an investigation
of
the Company and has been offered the opportunity to ask representatives of
the
Company questions about the Company’s financial condition and proposed business
and that Subscriber has obtained such available information as Subscriber has
requested, to the extent Subscriber has deemed necessary, to permit Subscriber
to fully evaluate the merits and risks of an investment in the Company.
Representatives of the Company have answered all inquiries that Subscriber
has
put to them concerning the Company and its activities, and the offering and
sale
of the Units.
(c) Risks.
Subscriber recognizes that the purchase of Units involves a high degree of
risk
and is suitable only for persons of adequate financial means who have no need
for liquidity in this investment in that (i) Subscriber may not be able to
liquidate the investment in the event of an emergency; (ii) transferability
is
limited; and (iii) in the event of a disposition, Subscriber could sustain
a
complete loss of the entire investment.
(d) Accredited
Investor Status. Subscriber
represents that Subscriber is an “accredited investor” as such term is defined
in Rule 501 of Regulation D promulgated under the Securities Act of 1933,
amended (the “Securities Act”). Specifically, the Subscriber is (check
appropriate items):
_________ (i) A
bank,
savings and loan association or other similar institution (as defined in
Sections 3(a)(2) and 3(a)(5)(A) of the Securities Act);
_________ (ii)
A broker
or dealer registered pursuant to Section 15 of the Securities Exchange Act
of
1934, as amended;
_________ (iii) An
insurance company (as defined in Section 2(13) of the Securities
Act);
_________ (iv)
An
investment company registered under the Investment Company Act of 1940 (the
“Investment Company Act”);
_________ (v) A
Small
Business Investment Company licensed by the U.S. Small Business Administration
under Sections 301(c) or (d) of the Small Business Investment Act of
1958;
_________ (vi) Any
plan
established and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its subdivisions for the benefit to its
employees, which plan has total assets in excess of $5,000,000;
_________ (vii) An
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 (“ERISA”), if the investment decision is made by a “Plan
Fiduciary”, as defined in Section 3(21) of ERISA, which is either a bank,
savings and loan association, insurance company or registered investment
adviser;
_________ (viii) An
employee benefit plan within the meaning of ERISA having total assets in excess
of $5,000,000;
12
_________ (ix) A
self-directed employee benefit plan within the meaning of ERISA, with investment
decisions made solely by persons who are accredited investors as defined in
Rule
501(a) of Regulation D;
_________ (x) A
business development company (as defined in Section 2(a)(48) of the Investment
Company Act) or a private business development company (as defined in Section
202(a)(22) of the Investment Advisers Act of 1940);
_________ (xi) A
corporation, partnership, Massachusetts or similar business trust, or
organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (tax exempt organization), not formed for the specific purpose
of acquiring the Shares having total assets in excess of
$5,000,000;
_________ (xii) Any
executive officer or director of the Company;
_________ (xiii) An
individual having an individual net worth or a joint net worth with spouse
at
the time of purchase in excess of $1,000,000;
_________ (xiv) An
individual whose net income was in excess of $200,000 in each of the two most
recent years, or whose joint income with spouse was in excess of $300,000 in
each of those years, and who reasonably expects his net income to reach such
level in the current year;
_________ (xv)
A trust
with total assets in excess of $5,000,000 not formed for the specific purpose
of
acquiring the Shares whose purchase is directed by a sophisticated person (i.e.,
person who has such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of any securities);
or
_________ (xvi) Any
entity in which all of the entity owners are “accredited
investors.”
(e) Subscriber's
Financial Experience. Subscriber
is sufficiently experienced in financial and business matters to be capable
of
evaluating the merits and risks of an investment in the Company or, if he or
she
has utilized the services of a purchaser representative, together with such
representative, are sufficiently experienced in financial and business matter
to
be capable of evaluating the merits and risks of an investment in the
Company.
(f) Suitability
of Investment. Subscriber
has evaluated the merits and risks of Subscriber's proposed investment in the
Company, including those risks particular to Subscriber's situation, and has
determined that this investment is suitable for Subscriber. Subscriber has
adequate financial resources for an investment of this character, and at this
time Subscriber can bear a complete loss of Subscriber's investment. Further,
Subscriber will continue to have, after making an investment in Units, adequate
means of providing for Subscriber's current needs, the needs of those dependent
on Subscriber, and possible personal contingencies. Subscriber specifically
represents that he or she has a net worth at least five times greater than
the
investment made herein.
(g) Exempt
Offering. Notwithstanding
that the Company intends to register the Shares underlying the Units for
resale, Subscriber
understands that the sale of Units is not being registered on the basis that
this issuance is exempt from registration under the Securities Act, and the
applicable state securities laws, and the rules and regulations promulgated
thereunder, and that reliance on such exemptions is predicated, in part, on
Subscriber's representations and warranties contained in this Agreement.
13
(h) Limitations
on Disposition. Subscriber
understands that there are substantial restrictions on the transferability
of
the Shares underlying the Units pursuant to the Securities Act; the Shares
underlying the Units will not be, and, except as provided in Section 3
herein, Subscriber
has no right to require that the Shares underlying the Units be registered
under
the Securities Act; and, accordingly, Subscriber may have to hold the Shares
underlying the Units for an indefinite period of time until the Shares
underlying the Units have been registered by the Company or are subject to
an
exemption from registration. Subscriber represents that Subscriber can afford
to
hold the Shares underlying the Units for an indefinite period of time.
Subscriber further understands that an opinion of counsel and other documents
may be required to transfer the Shares underlying the Units. Subscriber
acknowledges that the Shares underlying the Units shall bear the following,
or a
substantially similar, legend:
"THE
SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY
BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S, OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT."
(i) Absence
of Official Evaluation. Subscriber
understands that no federal or state agency has made any finding or
determination as to the fairness of the terms of an investment in the Company,
or any recommendation for or endorsement of the Units offered
hereby.
(j) Additional
Financing.
Subscriber further acknowledges that nothing hereunder shall preclude the
Company from seeking and/or procuring additional equity and/or debt
financing.
(k) Nonreliance.
Subscriber is not relying on the Company or any representation contained herein
or in the documents referred to herein with respect to the tax and economic
effect of Subscriber's investment in the Company.
(l) Acceptance.
Subscriber acknowledges that the Company shall, in its sole discretion, have
the
right to accept or reject this subscription, in whole or in part, for any reason
or for no reason. If Subscriber’s subscription is accepted by the Company,
Subscriber shall, and Subscriber hereby elects to, execute any and all further
documents necessary in the opinion of the Company to complete his subscription
and become a shareholder of the Company.
(m) Authority
to Enter into Agreement. Subscriber
has the full right, power, and authority to execute and deliver this Agreement
and perform Subscriber's obligations hereunder.
(n) Entity
as a Subscriber.
If
Subscriber is a corporation, partnership, trust, or other entity, (i) Subscriber
is authorized and qualified to become a shareholder of, and is authorized to,
make its investment in the Company; (ii) Subscriber has not been formed for
the
purpose of acquiring an interest in the Company; (iii) Subscriber has not been
in existence for less than 90 days prior to the date hereof; and (iv) the person
signing this Agreement on behalf of such entity has been duly authorized by
such
entity to do so.
(o) Prohibitions
on Cancellation, Termination, Revocation, Transferability, and Assignment.
Subscriber
hereby acknowledges and agrees that, except as may be specifically provided
herein or by applicable law, Subscriber is not entitled to cancel, terminate,
or
revoke this Agreement, and this Agreement shall survive Subscriber's death
or
disability or any assignment of Units. Subscriber further agrees that Subscriber
may not transfer or assign Subscriber's rights under this Agreement, and
Subscriber understands that, if Subscriber's subscription is accepted, the
transferability of Shares will be restricted.
14
(p) Obligation.
This
Agreement constitutes a valid and legally binding obligation of Subscriber
and
neither the execution of this Agreement nor the consummation of the transactions
contemplated herein will constitute a violation of or default under, or conflict
with, any judgment, decree, statutes or regulation of any governmental authority
applicable to Subscriber, or any contract, commitment, agreement, or restriction
of any kind to which Subscriber is a party or by which Subscriber's assets
are
bound. The execution and delivery of this Agreement does not, and the
consummation of the transactions described herein will not, violate applicable
laws, or any mortgage, lien, agreement, indenture, lease or understanding
(whether oral or written) of any kind outstanding relative to
Subscriber.
(q) Required
Approvals.
No
approval, authorization, consent, order, or other action of, or filing with,
any
person, firm or corporation or any court, administrative agency or other
governmental authority is required in connection with the execution and delivery
of this Agreement by Subscriber or the purchase of the Units.
(r) No
General Solicitation.
Subscriber is not subscribing for Units because of or following any
advertisement, article, notice, or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or
presented at any seminar or meeting, or any solicitation or a subscription
by a
person other than an authorized representative of the Company.
3. Representations,
Warranties and Agreements of the Company. In
connection with this subscription, the Company makes the following
representations, warranties and agreements and confirms the following
understandings:
(a) Company's
Good Standing.
The
Company is a corporation organized and validly existing under the laws of the
State of Delaware, and it has all corporate authority and power to conduct
its
business and to own its properties.
(b) Legal
and Other Proceedings. Neither
the Company, nor any of its affiliates or its executive officers or directors
(in their capacity as executive officers or directors), is a party to any
pending or, to the best knowledge of the Company, threatened, or unasserted
but
considered by it to be probable of assertion, claim, action, suit,
investigation, arbitration or proceeding, or is subject to any order, judgment
or decree that is reasonably expected by management of the Company to have,
either individually or in the aggregate, a material adverse effect on the
condition (financial or otherwise), earnings or results of operations of the
Company. The Company is not, as of the date hereof, a party to or subject to
any
enforcement action instituted by, or any agreement or memorandum of
understanding with, any federal or state regulatory authority restricting its
operations or requiring that actions be taken, and no such regulatory authority
has threatened any such action, memorandum or order against the Company and
the
Company has not received any report of examination from any federal or state
regulatory agency which requires that the Company address any problem or take
any action which has not already been addressed or taken in a manner
satisfactory to the regulatory agency.
(c) Authorization;
Conflict; Xxxxx and Binding Obligation. This
Agreement and the transactions contemplated herein have been duly and validly
authorized by all requisite corporate action of the Company. The Company has
full right, power and capacity to execute, deliver and perform its obligations
under this Agreement. No governmental license, permit or authorization and
no
registration or filings with any court, governmental authority or regulatory
agency is required in connection with the Company's execution, delivery and/or
performance of this Agreement, other than any filings required by applicable
federal and state securities laws. The execution, delivery and performance
of
this Agreement, the consummation of the transactions herein contemplated and
the
compliance with the terms of this Agreement by the Company will not violate
or
conflict with any provision of the Articles of Incorporation, as amended or
By-laws of the Company, or any agreement, instrument, law or regulation to
which
the Company is a party or by which the Company may be bound. This Agreement,
upon execution and delivery by the Company, will represent the valid and binding
obligation of the Company enforceable in accordance with its terms.
15
(d) Use
of Proceeds.
The
Company will be using the funds raised in this Offering for general working
capital and to pursue its business plan, including, but not limited to,
acquiring another business or effecting a business combination.
4.
Survival of Representations, Warranties, Agreements and Acknowledgments.
The
representations, warranties, agreements, and acknowledgments of the Company
and
Subscriber shall survive the offering and purchase of Units.
5. Indemnification
of the Company. Subscriber
agrees to indemnify and hold harmless the Company against and in respect of
any
and all loss, liability, claim, damage, deficiency, and all actions, suits,
proceedings, demands, assessments, judgments, costs and expenses whatsoever
(including, but not limited to, attorneys' fees reasonably incurred in
investigating, preparing, or defending against any litigation commenced or
threatened or any claim whatsoever through all appeals) arising out of or based
upon any false representation or warranty or breach or failure by Subscriber
to
comply with any covenant or agreement made by it herein or in any other document
furnished by it in connection with this subscription.
6. Miscellaneous.
(a) Entire
Agreement. This
Agreement constitutes the entire agreement between the parties hereto, and
supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
(b) Amendments.
This
Agreement may not be amended, supplemented, or modified in whole or in part
except by an instrument in writing signed by the party or parties against whom
enforcement of any such amendment, supplement, or modification is
sought.
(c) Notices.
Any
notice, demand, or other communication that any party hereto may be required,
or
may elect, to give to anyone interested hereunder shall be deemed given on
the
date initially received if delivered by facsimile transmission followed by
registered or certified mail confirmation; on the date delivered by an overnight
courier service; on the third business day after it is mailed if mailed by
registered or certified mail (return receipt requested, with postage and other
fees prepaid) addressed to such addresses as provided herein.
(d) Successors
and Assigns.
Except
as otherwise provided herein, this Agreement shall be binding upon and inure
to
Subscriber’s benefit and the benefit of Subscriber’s heirs, executors,
administrators, successors, legal representatives, and permitted assigns. If
the
undersigned is more than one person, the obligation of the undersigned shall
be
joint and several and the agreements, representations, warranties, and
acknowledgements herein contained shall be deemed to be made by and be binding
upon each such person and his heirs, executors, successors, administrators,
legal representatives, and permitted assigns.
(e) Choice
of Law; Venue. This
Agreement will be interpreted, construed, and enforced in accordance with the
laws of the State of New York, without giving effect to the application of
the
principles pertaining to conflicts of laws. Any proceeding arising between
the
parties in any manner pertaining or relating to this Agreement shall, to the
extent permitted by law, be held in New York.
16
(f) Effect
of Waiver. The
failure of any party at any time or times to require performance of any
provision of this Agreement will in no manner affect the right to enforce the
same. The waiver by any party of any breach of any provision of this Agreement
will not be construed to be a waiver by any such party of any succeeding breach
of that provision or a waiver by such party of any breach of any other
provision.
(g) Severability.
The
invalidity, illegality, or unenforceability of any provision or provisions
of
this Agreement will not affect any other provision of this Agreement, which
will
remain in full force and effect, nor will the invalidity, illegality, or
unenforceability of a portion of any provision of this Agreement affect the
balance of such provision. In the event that any one or more of the provisions
contained in this Agreement or any portion thereof shall for any reason be
held
to be invalid, illegal, or unenforceable in any respect, this Agreement shall
be
reformed, construed, and enforced as if such invalid, illegal, or unenforceable
provision had never been contained herein.
(h) Enforcement.
Should
it become necessary for any party to institute legal action to enforce this
Agreement, the successful party will be awarded reasonable attorneys' fees
at
all trial and appellate levels, expenses, and costs.
(i) Counterparts.
This
Agreement may be executed in one or more counterparts, each of which will be
deemed an original and all of which together will constitute one and the same
instrument.
(j) Further
Assurances. The
parties hereto will execute and deliver such further instruments and do such
further acts and things as may be reasonably required to carry out the intent
and purposes of this Agreement.
[SIGNATURES
ON THE FOLLOWING PAGE]
17
Future
Now, Inc.
SUBSCRIPTION
AGREEMENT
SIGNATURE
PAGE FOR INDIVIDUALS
IN
WITNESS WHEREOF,
the
undersigned has caused this Agreement to be executed as of this ____ day of
___________________, 2007.
Total
Number of Units Subscribed for: _______________
Total
Purchase Price: $__________
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of Subscriber)
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of Spouse or Joint Tenant, If Any)
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(Print
Name of Subscriber)
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(Print
Name of Spouse or Joint Tenant, If Any)
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(Address)
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(Address)
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(Telephone
Number)
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(Telephone
Number)
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(Social
Security Number)
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(Social
Security Number)
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(Date)
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(Date)
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Note: If
two
purchasers are signing, please check the manner in which the ownership is to
be
legally held (the indicated manner shall be construed as if written out in
full
accordance with applicable laws or regulations):
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_________
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JT
TEN:
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As
joint tenants with right of survivorship and not as tenants in
common.
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_________
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TEN
COM:
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As
tenants in common.
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_________
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TENENT:
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As
tenants by the entireties.
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18
Future
Now, Inc.
SUBSCRIPTION
AGREEMENT
SIGNATURE
PAGE FOR CORPORATIONS, TRUSTS, PARTNERSHIPS OR RETIREMENT
PLANS
IN
WITNESS WHEREOF,
the
undersigned has caused this Agreement to be executed as of this ____ day of
___________________, 2007.
Total
Number of Units Subscribed for: _______________
Total
Purchase Price: $__________
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(Signature
of Subscriber)
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(Print
Name of Subscriber)
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(Address)
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(Telephone
Number)
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(Social
Security Number)
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(Date)
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(Federal
Employer Identification Number
or
Other Tax Identification Number)
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19
[TO
BE COMPLETED BY THE COMPANY]
Subscription
Acceptance Page
Future
Now, Inc.
APPROVED
AND ACCEPTED
in
accordance with the terms of this Subscription Agreement on this ____ day of
_________________, 2007.
On
behalf
of Future Now, Inc.
By:
Print
Name:
Title:
20
EXHIBIT
A: SUMMARY TERM SHEET
This
term
sheet summarizes the principal terms of the proposed bridge financing of Future
Now Inc. (the “Company”)
of
Convertible Promissory Notes (“Notes”),
and
warrants to purchase certain securities of the Company (“Warrants”).
This
term sheet has been incorporated by reference into the Company’s subscription
agreement and as such does not constitute either an offer to sell or an offer
to
purchase securities on a standalone basis.
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Securities:
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Issued
in Units (“Unit”), each unit consisting of; $50,000 Face Value Promissory
Notes and Warrants to Purchase 16,000 shares of the Company’s Common Stock
(or like security issued in a Qualified Financing or Acquistion),
at $0.75
per share. If the Note conversion option is elected, each Unit will
convert into a minimum of 15,385 shares of the Company’s Common Stock at
$3.25 per share
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Financing
Amount:
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Up
to $1,500,000 in aggregate principal amount of Notes to be funded
in
tranches provided that the principal amount of each tranche shall
not be
less than $50,000. The Company may elect to accept up to an additional
$500,000 in principal amount of Notes under an over-allotment
option.
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Use
of Proceeds:
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The
net proceeds of the Offering (after legal, placement and other fees)
will
be used for further product development and market launch, marketing,
advertising, human resources hiring and for general recurring working
capital purposes. No proceeds will be used for the repayment of any
existing debt.
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Documents:
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The
investment shall be made pursuant to a Note and Warrant Purchase
Agreement. Investors will complete Subscription Agreement and Accredited
Investor Questionnaire.
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The
Notes:
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Maturity:
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Unless
otherwise paid off through the Gross Sales Escrow Account, all the
principal and interest on the Notes will be due and payable upon
the
earlier of (i) upon demand made any time after the date that is 36
months from initial issuance of a Note, (ii) the date upon which the
Company completes the sale of Common Stock (or like security) for
aggregate gross proceeds of at least $2.5 million (a “Qualified
Financing”),
or (iii) the closing of an acquisition of the Company, and Change of
Control, as defined, whether by material merger, reorganization,
sale of
assets or other similar material transaction (an “Acquisition”).
Note; (ii), (iii) and (iv) collectively referred to as “Maturity
Events.”
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Interest
Rate:
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Interest
shall accrue on all outstanding principal amounts of the Notes at
a rate
of 10.5% per annum based on a 365-day year. Interest shall be due
and
payable semi-annually, in arrears.
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Conversion:
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At
the Note holder’s option, all or a portion of, the principal and accrued
interest on the Notes may be converted into shares of Common Stock
(or a
like security); (i) issued in a Qualified Financing at the closing
of the
Qualified Financing (determined as if such conversion were gross
proceeds
to the Company of such financing); or (ii) at the market value of
an
Acquisition. The number of shares into which the Notes are convertible
will be equal the quotient of the converted principal and interest
divided
by the Lower or (i) the price per share issued in the Qualified Financing
or the Acquisition, at a 20% discount or (ii) $3.25. Each Note shall
also
convert into securities of the Company on any other terms agreed
upon by
the Company and the holders of a majority of the outstanding principal
amount of the Notes (a “Majority”).
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Equal
Treatment of
Holders:
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No
payments of principal or interest shall be made on any Note unless
such
payment is made pro-rata to all holders of the Notes.
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Transfer
Restrictions:
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The
Notes will not be transferable without the prior written consent
of the
Company.
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Gross
Sales Escrow
Account:
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The
Notes will be automatically repaid by the Company on a pro-rata basis
through the following: To the extent that the Company generates revenues
the holders of the Notes shall receive re-payment of a portion of
their
investment amount at the end of each semi-annual period until they
have
received their entire investment amount plus the ten and one-half
percent
(10.5%) annual coupon. In order to provide for such redemption, the
Company will place three and one-half percent (3.5%) of the gross
revenues
derived by the Company into a separate bank account (the “Redemption
Funds”). The Redemption Funds will be distributed pro-rata among the
holders of the Notes within thirty (30) business days after the end
of
each semi-annual measurement period.
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The
Warrants:
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Shares
Underlying
Warrants:
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The
Warrants will be exercisable for shares of Common Stock (or like
security)
issued with a Qaulified Financing or Acquisition.
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Number
of Shares:
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Each
Warrant shall be exercisable into one share of the Company’s voting Common
Stock (or like security) issued with a Qualified Financing or Acquisition
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Exercise
Price:
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$0.75
per share and contain a cashless exercise option.
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Exercise
Period:
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The
Warrants may not be exercised prior to the earlier of any Maturity
Event.
The Warrants may not be exercised from and after earlier of seven
(7)
years form the date of issuance or a public offering of the Company’s
stock.
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Transfer
Restrictions:
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The
Warrants will not be transferable without the prior written consent
of the
Company.
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Other
Terms:
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Registration
Rights:
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The
Common Stock (or a like security) issuable upon the conversion of
the
Notes and the exercise of the Warrants will be entitled to “piggyback”
registration rights with respect to certain registrations of equity
securities of the Company under the Securities Act, subject to underwriter
“cutbacks”. There shall be no registration rights for the Common Stock
with respect to the Company’s registration statement for an IPO, or in the
event that the Company files a registration statement on Form S-4
(mergers) or S-8 (stock option plans). There can be no assurance
that the
Company will ever file a registration statement to register the Common
Stock, or if filed, that such registration statement will become
effective, or that once effective, that such effectiveness will be
maintained.
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Board
Representation:
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A
member will be nominated to the Company’s Board of Directos, by, (i) an
investor who subscribes for in excess of $750,000, or (ii) a majority
of
the investors once $250,000 is raised.
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Placement
Agent:
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The
Company has elected to use the services of a Placement Agent. As
part of
such engagement the Company has agreed to a 10% placement fee, a
2%
non-accountable expense allowance as well as placement agent warrants
equal to 10% of the capital raised, exercisable over five years at
a price
equal to $3.25 per shares with standard anti-dilution rights in terms
of
time and price. No compensation will be received by the Placement
Agent if
an investor is introduced directly by current management of the
Company.
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22
