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Exhibit 4.10
JAWZ INC.
SUBSCRIPTION AGREEMENT made as of this 27th day of December, 2000
between JAWZ Inc., a corporation organized under the laws of the State of
Delaware with offices at 000, 000 - 0xx Xxxxxx XX, Xxxxxxx, XX Xxxxxx X0X 0X0
(the "Company") and Thomson Kernaghan & Co. Limited, a corporation organized
under the laws of the Province of Ontario (the "Subscriber").
WHEREAS, the Company desires to issue in a private placement (this
"Offering") 2,666,667 shares of common stock of the Company, par value $0.001
per share (the "Common Stock") at a total cost of to the Subscriber of One
Million Dollars ($1,000,000), in a private placement in accordance with an
exemption provided by Regulation S from the registration provisions of the
Securities Act of 1933 (the "Act"), on the terms and conditions hereinafter set
forth and the Subscriber desires to acquire the Common Stock as set forth on the
signature page hereof;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
I. SUBSCRIPTION FOR COMMON STOCK AND REPRESENTATIONS BY AND
COVENANTS OF SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set
forth, the Subscriber hereby subscribes for and agrees to purchase from the
Company 2,666,667 shares of Common Stock at a price equal to $0.375 per share
(for a total purchase cost of $1,000,000), and the Company agrees to sell such
Common Stock to the Subscriber for said purchase price subject to the Company's
right to sell to the Subscriber such lesser number of shares of Common Stock as
the Company may, in its sole discretion, deem necessary or desirable. The
purchase price is payable by certified or bank check made payable to the
Company or by wire transfer of funds, contemporaneously with the execution and
delivery of this Subscription Agreement.
1.2 The Subscriber recognizes that the purchase of Common
Stock involves a high degree of risk in that (i) an investment in the Company is
highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Common Stock; (ii)
it may not be able to liquidate its investment; (iii) transferability of the
securities comprising the Common Stock is extremely limited; and (iv) the
Subscriber could suffer the loss of its entire investment, as well as other risk
factors as more fully set forth herein and in the Company's filings (the "34 Act
Filings") with the United States Securities and Exchange Commission (the "SEC")
filed in accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
1.3 The Subscriber represents and warrants that:
1.3.1 No offer or sale of the Common Stock was made to
the Subscriber in the United States;
1.3.2 The Subscriber is not purchasing the Common Stock
for the account or on behalf of any U.S. Person;
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1.3.3 The Subscriber has not made any pre-arrangement
to transfer the Common Stock to a U.S. Person or
to return the Common Stock to the United States
securities markets (which includes short sales in
the United States within the one-year restricted
period under Regulation S to be covered by
delivery of the Common Stock) and is not
purchasing the Common Stock as part of any plan
or scheme to evade the registration requirements
of the Securities Act;
1.3.4 All offers and sales of the Common Stock by the
Subscriber in the United States or to U.S.
Persons or otherwise whether prior to the
expiration or after the expiration of the
one-year restricted period shall be made only
pursuant to a registration of the Common Stock,
as the case may be, under the Securities Act or
an exemption from registration. The Subscriber
also understands that the Company will, in order
to approve removal of the restrictive legend from
certificates evidencing the Common Stock, require
from the Subscriber certain written
representations to indicate that the sale of the
Common Stock was made in a transaction that
complies with the provisions of Regulation S and
may require a legal opinion that removal of the
legend is appropriate;
1.3.5 The Subscriber has not engaged in any "directed
selling efforts" (as defined in Regulation S) in
the United States regarding the Common Stock, nor
has it engaged in any act intended to or which
reasonably might have the effect of
preconditioning the U.S. market for the resale of
the Common Stock being subscribed;
1.3.6 The Subscriber is not a "distributor" as defined
in Regulation S. However, if the Subscriber
should be deemed to be a distributor prior to
reselling the Common Stock to a non-U.S. Person
during the one-year restricted period, the
Subscriber will send a notice to each new
Subscriber of the Common Stock, as the case may
be, that such new Subscriber is subject to the
restrictions of Regulation S during the
restricted period;
1.3.7 The Subscriber is not an officer, director or
"affiliate" (as that term is defined in Rule 405
under the Securities Act) with the Company or an
"underwriter" or "dealer" (as such terms are
defined in the federal securities laws of the
United States), and the purchase of the Common
Stock by the Subscriber is not a transaction (or
part of a series of transactions) that is part of
any plan or scheme to evade the registration
provisions of the Securities Act. If the
Subscriber becomes an affiliate of Company at any
time after purchasing the Common Stock, the
Subscriber understands and agrees that every sale
made by it thereafter must be made in compliance
with the provisions of Rule 144 of the
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Securities Act (expect for the two-year holding
period requirement), including the filing of Form
144 with the U.S. Securities and Exchange
Commission at the time of the sale, as required
under Rule 144. The Subscriber understands and
agrees that the provisions of Rule 144, if at any
time applicable to it, are separate and apart
from and independent of any restrictions imposed
by Regulation S and will apply even after the
expiration of the applicable one-year restricted
period under Regulation S;
1.3.8 The Subscriber does not have a short position in
the Common Stock and will not have a short
position in such securities at any time prior to
the expiration of the restricted period; and
1.3.9 If at any time after the expiration of the
one-year restricted period under Regulation S the
Subscriber wishes to transfer or attempts to
transfer the Common Stock to a U.S. Person,
Subscriber agrees to notify the Company if at
such time it is an "affiliate" the Company or is
then acting as an "underwriter," "dealer" or
"distributor" as to the Common Stock (as such
terms are defined in the federal securities laws
of the United States or the regulations
promulgated thereunder, including, but not
limited to, Regulation S), or if such transfer is
being made as part of a plan or scheme to evade
the registration provisions of the Securities
Act.
1.4 The Subscriber acknowledges that it has prior investment
experience, including investment in non-listed and non-registered securities and
that it recognizes the highly speculative nature of this investment.
1.5 The Subscriber that it has reviewed the Company's 34 Act
Filings and it has been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of the Company
concerning the terms and conditions of this Offering.
1.6 The Subscriber acknowledges that this Offering may
involve tax consequences. The Subscriber acknowledges that it must retain his
own professional advisors to evaluate the tax and other consequences of an
investment in the Common Stock.
1.7 The Subscriber acknowledges that this Offering has not
been reviewed by the SEC (or any other regulatory body) because of the Company's
representations that this is intended to be a nonpublic offering.
1.8 The Subscriber understands that Rule 144 (the "Rule")
promulgated under the Act requires, among other conditions, a one year holding
period prior to the resale (in limited amounts) of securities acquired in a
non-public offering without having to satisfy the registration requirements
under the Act. The Subscriber understands that the Company makes no
representation or warranty regarding its fulfillment in the future of any
reporting requirements under the Exchange Act, or its dissemination to the
public of any current financial or other information concerning the Company, as
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is required by the Rule as one of the conditions of its availability. The
Subscriber understands and hereby acknowledges that the Company is under no
obligation to register the securities comprising the Common Stock under the Act,
with the exception of certain registration rights set forth in Article III
herein. The Subscriber consents that the Company may, if it desires, permit the
transfer of the Common Stock out of its name only when its request for transfer
is accompanied by an opinion of counsel reasonably satisfactory to the Company
that neither the sale nor the proposed transfer results in a violation of the
Act or any applicable state "blue sky" laws (collectively "Securities Laws").
1.9 The Subscriber consents to the placement of a legend on
any share certificate evidencing the Common Stock stating that the shares have
not been registered under the Act and setting forth or referring to the
restrictions on transferability and sale thereof.
1.10 The Subscriber acknowledges that if it is a NASD member
firm, it must give the notice required by the NASD's Rules of Fair Practice.
1.11 The Subscriber is a corporation, and represents and
warrants that: (i) it was not formed for the purpose of investing in the
Company; (ii) it is authorized and otherwise duly qualified to purchase and hold
the Common Stock; and (iii) that this Subscription Agreement has been duly and
validly authorized, executed and delivered constitutes the legal, binding and
enforceable obligation of the undersigned.
1.12 The Subscriber is not a United States person, but is a
resident of Ontario, Canada. As such, the Subscriber hereby represents that it
has satisfied itself as to the full observance of the laws of its jurisdiction
in connection with any invitation to subscribe for the securities comprising the
Common Stock or any use of this Agreement, including (i) the legal requirements
within its jurisdiction for the purchase and resale of the Common Stock, (ii)
any foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the securities comprising the Common
Stock. Such Subscriber's subscription and payment for, and its continued
ownership of the Common Stock, will not violate any applicable securities or
other laws of the Subscriber's jurisdiction.
II. REPRESENTATIONS BY THE COMPANY
2.1 The Company represents and warrants to the Subscriber
that prior to the consummation of this Offering and at the Closing Date:
(a) The Company is a corporation duly organized,
existing and in good standing under the laws of the State of Delaware and has
the corporate power to conduct the business which it conducts and proposes to
conduct.
(b) The execution, delivery and performance of this
Subscription Agreement by the Company will have been duly approved by the Board
of Directors of the Company and all other actions required to authorize and
effect the offer and sale of the Common Stock and the securities contained
therein will have been duly taken and approved.
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(c) The shares of Common Stock subscribed for have been
duly and validly authorized and when issued and paid for in accordance with the
terms hereof, will be duly and validly issued and fully paid and non-assessable.
III. REGISTRATION RIGHTS
3.1 Required Registration. The Company hereby agrees with the
Subscriber or its transferees (collectively, the "Holders") to include the
Common Stock in the registration statement to be filed with the SEC covering the
resale of the securities sold by the Company in this Offering on Form S-1 or
such other form as the Company desires, pursuant to the Act on or before June
30, 2001, and to use its best efforts to cause such registration to become
effective as soon as practicable thereafter.
The Company shall pay the expenses described in Section 3.3 for the
registration statements filed pursuant to this Section 3.1, except for
underwriting discounts and commissions and legal fees of the Holders, which
shall be borne by the Holders.
3.2 Registration Procedures. If and whenever the Company is
required by the provisions of Section 3.1 to effect the registration of the
Common Stock offered hereby (the "Registrable Shares") under the Act, the
Company will:
(a) prepare and file with the SEC a registration
statement with respect to such securities, and use its best efforts to cause
such registration statement to become and remain effective until the Registrable
Shares are freely tradable without the volume limitations of Rule 144;
(b) prepare and file with the SEC such amendments to
such registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective until the
Registrable Shares are freely tradable without the volume limitations of Rule
144;
(c) furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such participating Holders may reasonably
request in writing within 20 days following the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(e) notify the Holders participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
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(f) notify the Placement Agent promptly of any request
by the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the SEC, promptly upon the
request of any such Holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such Holders (and
concurred in by counsel for the Company), is required under the Act or the rules
and regulations thereunder in connection with the distribution of the
Registrable Shares by such Holders;
(h) prepare and promptly file with the SEC and promptly
notify such Holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading; and
(i) advise such Holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order by
the SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
3.3 Expenses.
(a) With respect to the registration required pursuant
to Section 3.1 hereof, all fees, costs and expenses of and incidental to such
registration, inclusion and public offering (as specified in paragraph (b)
below) in connection therewith shall be borne by the Company, provided, however,
that Holders participating in such registration shall bear their pro rata share
of the underwriting discount and commissions and transfer taxes.
(b) The fees, costs and expenses of registration to be
borne by the Company as provided in paragraph (a) above shall include, without
limitation, all registration, filing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered and qualified (except as provided in 3.3(a) above). Fees and
disbursements of counsel and accountants for the participating Holders and any
other expenses incurred by the participating Holders not expressly included
above shall be borne by the such Holders.
3.4 Indemnification.
(a) The Company will indemnify and hold harmless each
Holder of Registrable Shares which are included in a registration statement
pursuant to the provisions of Section 3.1 hereof,
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its directors and officers, and any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or such underwriter
within the meaning of the Act, from and against, and will reimburse such Holder
and each such underwriter and controlling person with respect to, any and all
loss, damage, liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expenses arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by or on behalf of such Holder,
its directors and officers, such underwriter or such controlling person in
writing specifically for use in the preparation thereof.
(b) Each Holder of Registrable Shares included in a
registration pursuant to the provisions of Section 3.1 hereof will indemnify and
hold harmless the Company, its directors and officers, any controlling person
and any underwriter from and against, and will reimburse the Company, its
directors and officers, any controlling person and any underwriter with respect
to, any and all loss, damage, liability, cost or expense to which the Company or
any controlling person and/or any underwriter may become subject under the Act
or otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in conformity with written information furnished by
or on behalf of such Holder specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this Section 3.4 of notice
of the commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those available
to the indemnified party, or if there is a conflict of interest which would
prevent counsel for the indemnifying
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party from also representing the indemnified party, the indemnified party or
parties have the right to select separate counsel to participate in the defense
of such action on behalf of such indemnified party or parties. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a) or (b) for
any legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice of the
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
IV. MISCELLANEOUS
4.1 Any notice or other communication given hereunder shall
be deemed sufficient if in writing and sent by registered or certified mail,
return receipt requested, addressed to the Company, at its registered office,
000, 000 - 0xx Xxxxxx XX, Xxxxxxx, XX Xxxxxx X0X 0X0, Attention: Chief Financial
Officer and to the Subscriber at its address indicated on the last page of this
Subscription Agreement. Notices shall be deemed to have been given on the date
of mailing, except notices of change of address and notices sent from outside
the continental United States, which shall be deemed to have been given when
received.
4.2 This Subscription Agreement shall not be changed,
modified or amended except by a writing signed by the parties to be charged, and
this Subscription Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
4.3 This Subscription Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter thereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
4.4 Notwithstanding the place where this Subscription
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be construed in accordance
with and governed by the laws of the Province of Ontario, Canada. The parties
hereby agree that any dispute which may arise between them arising out of or in
connection with this Subscription Agreement shall be adjudicated before a court
located in Xxxxxxx, Xxxxxxx, Xxxxxx and they hereby submit to the exclusive
jurisdiction of the courts of the Province of Ontario located in the City of
Toronto, Ontario with respect to any action or legal proceeding commenced by any
party, and irrevocably waive any objection they now or hereafter may have
respecting the venue of any such action or proceeding brought in such a court or
respecting the fact that such court is an inconvenient forum, relating to or
arising out of this Subscription Agreement or any acts or omissions relating to
the sale of the securities hereunder, and consent to the service of process in
any such action or legal proceeding
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by means of registered or certified mail, return receipt requested, in care of
the address set forth below or such other address as the undersigned shall
furnish in writing to the other.
4.5 This Subscription Agreement may be executed in
counterparts. Upon the execution and delivery of this Subscription Agreement by
the Subscriber, this Subscription Agreement shall become a binding obligation of
the Subscriber with respect to the purchase of Common Stock as herein provided;
subject, however, to the right hereby reserved to the Company to enter into the
same agreements with other subscribers and to add and/or to delete other persons
as subscribers.
4.6 The holding of any provision of this Subscription
Agreement to be invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provision of this Subscription Agreement, which shall
remain in full force and effect.
4.7 It is agreed that a waiver by either party of a breach
of any provision of this Subscription Agreement shall not operate, or be
construed, as a waiver of any subsequent breach by that same party.
4.8 The parties agree to execute and deliver all such
further documents, agreements and instruments and take such other and further
action as may be necessary or appropriate to carry out the purposes and intent
of this Subscription Agreement.
4.9 The Company agrees not to disclose the name, address or
any other information about the Subscriber, except as required by law, provided,
that the Company may use information relating to the Subscriber in any
registration statement under the Act with respect to the Warrant Shares.
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[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
THOMSON KERNAGHAN & CO. LIMITED
By:
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Name:
Title:
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Address of Subscriber
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Social Security or Taxpayer Identification
Number of Subscriber
US$ 1,000,000.00
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Dollar Amount of Common Stock Subscribed For
2,666,667
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Number of Shares of Common Stock Subscribed For
Subscription Accepted:
JAWZ INC.
By:
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Name:
Title:
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