FORM OF SUBSCRIPTION AGREEMENT
Exhibit
10.2
THIS SUBSCRIPTION AGREEMENT
(this “Agreement”), is
dated as of ___________, 2011, by and between RxBids, a Nevada corporation (to
be renamed Xsovt Brands, Inc.) (the “Company”), and the subscriber
(“Subscriber”).
WHEREAS, the Company and
Subscriber are executing and delivering this Agreement in reliance upon an
exemption from securities registration afforded by the provisions of Section
4(2) and/ or Regulation D (“Regulation D”) as promulgated
by the United States Securities and Exchange Commission (the “Commission”) under the
Securities Act of 1933, as amended (the “Securities Act”);
and
WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to Subscriber, and Subscriber shall purchase the Company,
Units of the Company (the “Units”), with each Unit
consisting of a Series A 6% Cumulative Convertible Preferred Stock of the
Company (“Series A Preferred
Stock”), a detachable Class A Common Stock Purchase Warrant (“Class A Warrant”) to purchase
one share of common stock, par value $0.01 per share, of the Company (“Common Stock”) and a
detachable Class A Common Stock Purchase Warrant to purchase one share of Common
Stock (“Class B Warrant”
and together with the Class A Warrant, “Warrants”), at a purchase
price of $25,000 for each Unit (the “Purchase Price”);
and
WHEREAS, the offering of the
Units (the “Offering”)
is being conducted on a “best efforts” basis with respect to 40 Units for an
aggregate of $1,000,000 maximum being offered, with a $200,000 minimum amount
being offered. All funds received in the Offering shall be promptly
transmitted to a segregated account of the Company until such time as the
Company conducts a Closing (as defined below) with respect to such funds, at
which time the securities subscribed for as further described below shall be
delivered to the Subscriber. The Company shall have the option to accept up to
an additional $500,000 above the maximum being offered if the Offering is
oversubscribed;
WHEREAS, a form of Certificate
of Designations for the Series A Preferred Stock is attached hereto as Exhibit A (the “Certificate of Designation”),
the form of Class A Warrant is attached hereto as Exhibit B, the form of the
Class B Warrant is attached hereto as Exhibit C, and certain registration
rights granted to Subscriber by the Company are attached hereto as Exhibit D. The
Series A Preferred Stock, the Warrants, and the shares of Common Stock issuable
upon conversion of the Series A Preferred Stock and the exercise of the Warrants
(the “Conversion
Shares”) are collectively referred to herein as the “Securities”;
WHEREAS, this Offering is
being conducted in connection with a series of transactions in which the Company
will merge into or otherwise consolidate with Xsovt, LLC (“Xsovt”), with the business of
Xsovt thereafter being conducted through the Company, as more fully described in
the Executive Summary/Risk Factor Booklet relating to the Offering (the “Executive Summary” and such
transactions, the “Transactions”);
NOW, THEREFORE, in
consideration of the premises above, which are incorporated in this Agreement as
if fully set forth below, and the mutual covenants and other agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and
Subscriber hereby agree as follows:
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1. Acceptance and Rejection;
Closing; Conditions.
(a) Acceptance or
Rejection.
(i) Upon
execution, the Subscriber’s obligation to purchase the Units shall be
irrevocable, and the Subscriber shall be legally bound to purchase the Units
subject to the terms set forth in this Agreement.
(ii) The
Subscriber understands and agrees that the Xsovt and the Company reserve the
right to reject this subscription for the Units in whole or part in any order at
any time prior to the closing of the Offering (the “Closing”) of the purchase and
sale of the Units for any or no reason, notwithstanding the Subscriber’s prior
receipt of notice of acceptance of the Subscriber’s subscription.
(iii) In
the event of rejection of this subscription by Xsovt or the Company in
accordance with Section 1(a), or the sale of the Units is not consummated for
any reason, this Agreement and any other agreement entered into between the
Subscriber and the Company relating to this subscription shall thereafter have
no force or effect, and the Company shall promptly return or cause to be
returned to the Subscriber the purchase price remitted to the Company, without
interest thereon or deduction therefrom.
(b) Closing. Each
Closing shall take place at the offices of Ellenoff Xxxxxxxx & Schole LLP,
000 X. 00xx Xxxxxx,
Xxx Xxxx, XX 00000, or such other place as determined by the Company (including
remotely via deliver of electronic documents). The initial Closing
shall take place on a Business Day promptly following the satisfaction of the
conditions set forth in Section 1(c) below. Each subsequent Closing
shall take place at such times as determined by the Company (each closing date
referred to as a “Closing
Date”). As used herein, “Business Day” shall mean from
the hours of 9:00 a.m., Eastern time, through 5:00 p.m., Eastern time, of a day
other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required to be closed.
(c) Closing
Conditions. Xsovt’s and the Company’s right to accept the
subscription of the Subscriber is conditioned upon satisfaction of the following
conditions precedent on or before the date such subscription is accepted (any or
all of which may be waived by Xsovt or the Company and the Subscriber in his,
her or its sole discretion):
(i) On
the Closing Date, no legal, administrative or regulatory action, suit or
proceeding shall be pending which seeks to restrain or prohibit the transactions
contemplated by this Agreement.
(ii) The
closing of the Transactions (as defined in the introductory paragraph hereof)
shall occur concurrently with the initial closing of the Offering.
(iii) The
Board of Directors of the Company shall have approved the issuance of the
Securities pursuant to this Agreement in accordance with the applicable laws of
the jurisdiction of the Company’s incorporation and expressly approved the
assumption of this Agreement.
(iv) The
representations and warranties of the Company contained in this Agreement shall
have been true and correct on the date of this Agreement and shall be true and
correct on the Closing Date as if made on the Closing Date.
(d) Subscription. Subject
to the conditions set forth in Section 1(c) hereof, the Subscriber hereby
subscribes for and agrees to purchase the number of Units indicated on the
signature page hereof on the terms and conditions described
herein. The minimum number of Units that may be purchased by the
Subscriber is one Unit. Subscriptions for lesser amounts may be
accepted at the sole discretion of Xsovt. The Company must sell at
least 8 Units.
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(e) Purchase of
Securities. The Subscriber understands and acknowledges that
the purchase price to be remitted to the Company in exchange for the Units shall
be $25,000 per Unit, for an aggregate purchase price as set forth on the
signature page hereof (the “Aggregate Purchase
Price”). The Subscriber’s delivery of this Agreement to the
Company shall be accompanied by payment for the Units subscribed for hereunder,
payable in United States dollars, by check or wire transfer to an account
identified by Xsovt. The Subscriber understands and agrees that,
subject to the terms of this Agreement and applicable laws, by executing this
Agreement, he, she or it is entering into a binding agreement.
2. Representations and
Warranties of Subscriber. Subscriber represents and warrants
to the Company and Xsovt as follows:
(a) Subscriber
is an “accredited investor” as defined by Rule 501 (a copy of which definition
is set forth on Annex A attached hereto) under the Securities Act of 1933, as
amended (the “Act”), and
has such knowledge and experience in financial and business matters that
Subscriber is capable of evaluating the merits and risks of Subscriber’s
investment in the Securities, of making an informed investment decision with
respect thereto, and has the ability and capacity to protect Subscriber’s
interests.
(b) Subscriber
understands that the Securities are not presently registered and other than as
set forth herein the Company has no obligation to register the Securities or
assist the Subscriber in obtaining an exemption from
registration. Subscriber understands that the Securities will not be
registered under the Act on the ground that the issuance thereof is exempt under
Section 4(2) of the Act as a transaction by an issuer not involving any public
offering and that, in the view of the Securities and Exchange Commission (the
“SEC”), the statutory
basis for the exception claimed would not be present if any of the
representations and warranties of Subscriber contained in this Subscription
Agreement or those of other purchasers of the Securities are untrue or,
notwithstanding the Subscriber’s representations and warranties, the Subscriber
currently has in mind acquiring any of the Securities for resale upon the
occurrence or non-occurrence of some predetermined event.
(c) Subscriber
is purchasing the Securities subscribed for hereby for investment purposes and
not with a view to distribution or resale, nor with the intention of selling,
transferring or otherwise disposing of all or any part thereof for any
particular price, or at any particular time, or upon the happening of any
particular event or circumstance, except selling, transferring, or disposing the
Securities made in full compliance with all applicable provisions of the Act,
the rules and regulations promulgated by the SEC thereunder, and applicable
state securities laws; and that an investment in the Securities is not a liquid
investment.
(d) Subscriber
acknowledges that there exists no public market for the Securities, that no such
public market may develop in the future, the Securities, when issued, will be
“restricted securities” and as a result, Subscriber acknowledges that the
Securities must be held indefinitely unless subsequently registered under the
Act or unless an exemption from such registration is
available. Subscriber is aware of the provisions of Rule 144
promulgated under the Act which permit resales of common stock purchased in a
private placement subject to certain limitations and to the satisfaction of
certain conditions provided for thereunder, including, among other things, the
existence of a public market for the common stock, the availability of certain
current public information about the Company, the resale occurring not less than
one year after a party has purchased and paid for the security to be sold, the
sale being effected through a “broker’s transaction” or in transactions directly
with a “market maker” and the number of shares of common stock being sold during
any three-month period not exceeding specified limitations.
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(e) Subscriber
acknowledges that Subscriber has had the opportunity to ask questions of, and
receive answers from Xsovt, the Company or any authorized person acting on their
behalf concerning Xsovt and the Company and Xsovt’s proposed business plan
(including, without limitation, as described in the Executive Summary) and to
obtain any additional information, to the extent possessed by Xsovt or the
Company (or to the extent it could have been acquired by Xsovt or the Company
without unreasonable effort or expense) necessary to verify the accuracy of the
information received by Subscriber. In connection therewith,
Subscriber acknowledges that Subscriber has had the opportunity to discuss the
Company’s business, management and financial affairs with the Company’s
management or any authorized person acting on its behalf. Subscriber
has received and reviewed all the information concerning Xsovt, the Company and
the Securities, both written and oral, that Subscriber desires (including,
without limitation, the Executive Summary). Without limiting the
generality of the foregoing, Subscriber has been furnished with or has had the
opportunity to acquire, and to review all information, both written and oral,
that Subscriber desires with respect to Xsovt’s the Company’s business,
management, financial affairs, prospects and risks. In determining
whether to make this investment, Subscriber has relied solely on (i)
Subscriber’s own knowledge and understanding of Xsovt and the Company and their
businesses based upon Subscriber’s own due diligence investigations and the
information furnished pursuant to this paragraph, and (ii) the information
described in subparagraph 2(g) below.
(f) Subscriber
has all requisite legal and other power and authority to execute and deliver
this Subscription Agreement and to carry out and perform Subscriber’s
obligations under the terms of this Subscription Agreement. This
Subscription Agreement constitutes a valid and legally binding obligation of
Subscriber, enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other general
principals of equity, whether such enforcement is considered in a proceeding in
equity or law.
(g) Subscriber
has carefully considered and has discussed with the Subscriber’s legal, tax,
accounting and financial advisors, to the extent the Subscriber has deemed
necessary, the suitability of this investment and the transactions contemplated
by this Subscription Agreement for the Subscriber’s particular federal, state,
local and foreign tax and financial situation and has independently determined
that this investment and the transactions contemplated by this Subscription
Agreement are a suitable investment for the Subscriber. Subscriber
has relied solely on such advisors and not on any statements or representations
of Xsovt, the Company or any of its agents. Subscriber understands
that Subscriber (and not Xsovt or the Company) shall be responsible for
Subscriber’s own tax liability that may arise as a result of this investment or
the transactions contemplated by this Subscription Agreement.
(h) This
Subscription Agreement does not contain any untrue statement of a material fact
or omit any material fact concerning Subscriber.
(i) There
are no actions, suits, proceedings or investigations pending against Subscriber
or Subscriber’s assets before any court or governmental agency (nor, to
Subscriber’s knowledge, is there any threat thereof) which would impair in any
way Subscriber’s ability to enter into and fully perform Subscriber’s
commitments and obligations under this Subscription Agreement or the
transactions contemplated hereby.
(j) The
execution, delivery and performance of and compliance with this Subscription
Agreement and the issuance of the Securities will not result in any violation
of, or conflict with, or constitute a default under, any of Subscriber’s
articles of incorporation, by-laws, operating agreement, partnership agreement,
or trust agreement, if applicable, or any agreement to which Subscriber is a
party or by which it is bound, nor result in the creation of any mortgage,
pledge, lien, encumbrance or charge against any of the assets or properties of
Subscriber or the Securities. If Subscriber is an individual,
Subscriber has legal capacity to execute and deliver this Subscription
Agreement.
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(k) Subscriber
acknowledges that an investment in the Securities is speculative and involves a
high degree of risk and that Subscriber can bear the economic risk of the
purchase of the Securities, including a total loss of his/her/its
investment.
(l) Subscriber
acknowledges and agrees that such Subscriber’s investment in the Company is
reasonable in relation to Subscriber’s net worth and financial needs and
Subscriber is able to bear the economic risk of losing their entire investment
in the Securities.
(m) Subscriber
recognizes that no federal, state or foreign agency has reviewed, recommended or
endorsed the purchase of the Securities or any facts or circumstances related
thereto.
(n) Subscriber
is aware that: (i) Xsovt is a recently-formed development stage company with no
operations and no commitments for any additional capital that may be needed in
the future and (ii) the Company is a shell company (although it is agreed that
Xsovt or its affiliates make no representation or warranty regarding the past
history or operations of the Company). Subscriber has experience in
evaluating the risks of investing in early stage development
companies.
(o) Subscriber
understands that any and all certificates representing the Securities and any
and all securities issued in replacement thereof or in exchange therefor shall
bear the following legend or one substantially similar thereto, which Subscriber
has read and understands:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS
WHICH, IN THE OPINION OF COUNSEL FOR THIS CORPORATION, IS
AVAILABLE.”
In
addition, the certificates representing the Securities, and any and all
securities issued in replacement thereof or in exchange therefor, shall bear
such legend as may be required by the securities laws of the jurisdiction in
which Subscriber resides.
(p) Because
of the legal restrictions imposed on resale, Subscriber understands that the
Company shall have the right to note stop-transfer instructions in its stock
transfer records, and Subscriber has been informed of the Company’s intention to
do so. Any sales, transfers, or other dispositions of the Securities
by Subscriber, if any, will be made in compliance with the Act and all
applicable rules and regulations promulgated thereunder.
(q) Subscriber
represents that (i) Subscriber has (and could be reasonably assumed to have) the
ability and capacity to protect his/her/its interests in connection with this
subscription; or (ii) Subscriber has a pre-existing personal or business
relationship with either Xsovt, the Company or any affiliate thereof of such
duration and nature as would enable a reasonably prudent purchaser to be aware
of the character, business acumen and general business and financial
circumstances of Xsovt, the Company or such affiliate and is otherwise
personally qualified to evaluate and assess the risks, nature and other aspects
of this subscription.
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(r) Subscriber
further represents that the address of Subscriber set forth below is his/her
principal residence (or, if Subscriber is a company, partnership or other
entity, the address of its principal place of business); that Subscriber is
purchasing the Securities for Subscriber’s own account and not, in whole or in
part, for the account of any other person; and that Subscriber has not formed
any entity, and is not an entity formed, for the purpose of purchasing the
Securities.
(s) Subscriber
understands that Xsovt and the Company shall have the unconditional right to
accept or reject this subscription, in whole or in part, for any reason or
without a specific reason, in the sole and absolute discretion of the Company
(even after receipt and clearance of Subscriber’s funds). This
Subscription Agreement is not binding upon Xsovt or the Company until accepted
in writing by an authorized officer of the Company. In the event that
this subscription is rejected, then Subscriber’s subscription funds (to the
extent of such rejection) will be promptly returned in full without interest
thereon or deduction therefrom.
(t) Subscriber
has not been furnished with any oral representation or oral information in
connection with or in any way relating to the Offering or the business or
prospects of Xsovt or the Company (including the actual or anticipated officers
or directors of the Company following the Offering) that is not contained in, or
is in any way contrary to or inconsistent with, statements made in this
Subscription Agreement or the disclosure contained in the Executive
Summary.
(u) Subscriber
represents that Subscriber is not subscribing for the Securities as a result of
or subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over the
Internet, television or radio or presented at any seminar or meeting or any
public announcement or filing of or by Xsovt or the Company or any of their
affiliates, agents or representatives.
(v) Subscriber
has carefully read each of the terms and provisions of this Subscription
Agreement.
(w) No
representations or warranties have been made to Subscriber by the Company, or
any officer, employee, agent, affiliate or subsidiary of the Company, other than
the representations of the Company contained herein, and in subscribing for the
Securities the Subscriber is not relying upon any representations other than
those contained in this Subscription Agreement.
(x) Subscriber
represents and warrants, to the best of Subscriber’s knowledge, that no finder,
broker, agent, financial advisor or other intermediary, nor any purchaser
representative or any broker-dealer acting as a broker, is entitled to any
compensation in connection with the transactions contemplated by this
Subscription Agreement.
(y) Subscriber
represents and warrants that Subscriber has kept and will keep confidential any
information made available in connection with its investigation of Xsovt or the
Company and its intended business and agrees that all such information shall be
kept in confidence by the Subscriber and neither be used by the Subscriber for
the Subscriber’s personal benefit (other than in connection with this
Subscription) nor disclosed to any third party for any reason (other than
Subscriber’s legal and tax advisors) notwithstanding that the Subscriber’s
Subscription may not be accepted by the Company. Subscriber will not
undertake any purchases of the Company’s securities while in possession of
material non-public information regarding Xsovt or the Company (it being agreed
and acknowledged by the Subscriber that the contents of the Executive Summary
constitute material non-public information within the meaning of the U.S.
federal securities laws).
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(z) If
the Subscriber is a corporation, partnership, limited liability company, trust,
or other entity, the person executing this Subscription Agreement hereby
represents and warrants that the above representations and warranties shall be
deemed to have been made on behalf of such entity and the Subscriber has made
the same after due inquiry to determine the truthfulness of such representations
and warranties.
(aa) If
the Subscriber is a corporation, partnership, limited liability company, trust,
or other entity, it represents that: (i) it is duly organized, validly existing
and in good standing in its jurisdiction of incorporation or organization and
has all requisite power and authority to execute and deliver this Subscription
Agreement and purchase the Securities as provided herein; (ii) its purchase of
the Securities will not result in any violation of, or conflict with, any term
or provision of the charter, by-laws or other organizational documents of
Subscriber or any other instrument or agreement to which the Subscriber is a
party or is subject; (iii) the execution and delivery of this Subscription
Agreement and Subscriber’s purchase of the Securities has been duly authorized
by all necessary action on behalf of the Subscriber; (iv) all of the documents
relating to the Subscriber’s subscription to the Securities have been duly
executed and delivered on behalf of the Subscriber and constitute a legal, valid
and binding agreement of the Subscriber; and (v) has not been organized for the
specific purpose of purchasing the Securities (unless all beneficial owners of
the Subscriber are “accredited investors”) and is not prohibited from so
purchasing the Securities.
3.
Representations and
Warranties of the Company. The Company represents and warrants
to Subscriber as follows:
(a) The
Company is duly organized and validly existing as corporations in good standing
under the laws of its state of incorporation.
(b) The
Company has the corporate power and authority to enter into, deliver and perform
this Subscription Agreement and the agreements to be entered into
therewith.
(c) All
necessary corporate action has been duly and validly taken by the Company or
Xsovt, as applicable, to authorize the execution, delivery and performance of
this Subscription Agreement by the Company, and the issuance and sale of the
Securities to be sold by the Company pursuant to this Subscription
Agreement. This Subscription Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles.
(d) The
Securities. The Securities upon issuance:
(i) are,
or will be, free and clear of any security interests, liens, claims or other
encumbrances, subject only to restrictions upon transfer under the Act and any
applicable state securities laws and the Certificate of
Designation;
(ii) have
been, or will be, duly and validly authorized and on their respective dates of
issuance of the Units and the Conversion Shares, such Units and Conversion
Shares will be duly and validly issued, fully paid and
non-assessable;
(iii) will
not subject the holders thereof to personal liability by reason of being such
holders; and
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(iv) assuming
the representations and warranties of Subscriber as set forth in Section 2
hereof are true and correct, will not result in a violation of Section 5 under
the Act.
(e) No General
Solicitation. Neither Xsovt, the Company, nor to its
knowledge, any person acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D
under the Act) in connection with the offer or sale of the
Securities.
(f) Private
Placement. Assuming the accuracy of Subscriber’s
representations and warranties set forth in Section 2, no registration under the
Act is required for the offer and sale of the Securities by the Company to
Subscriber as contemplated hereby.
4. Indemnification; Xxxxxxx
Xxxxxxx Prohibition.
(a) Subscriber
agrees to indemnify, hold harmless, reimburse and defend the Company, Xsovt,
their respective officers, directors, agents, counsel, members, managers,
control persons, and principal stockholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Company or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
Subscriber or breach of any representation or warranty by Subscriber in this
Agreement or in any Exhibits or Schedules attached hereto in any transaction
document, or other agreement delivered pursuant hereto or in connection
herewith, now or after the date hereof; or (ii) after any applicable notice and/
or cure periods, any breach or default in performance by Subscriber of any
covenant or undertaking to be performed by Subscriber hereunder, or any other
agreement entered into by Subscriber and the Company or Xsovt relating
hereto.
(b) If
any action shall be brought against an indemnified party in respect of which
indemnity may be sought pursuant to this Agreement, the indemnified shall
promptly notify the indemnifying party in writing, and indemnifying party shall
have the right to assume the defense thereof with counsel of its own choosing
reasonably acceptable to the indemnified party. Any indemnified party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of indemnified party except to the extent that (i) the
employment thereof has been specifically authorized by indemnifying party in
writing, (ii) the indemnifying party has failed after a reasonable period of
time to assume such defense and to employ counsel or (iii) in such action there
is, in the reasonable opinion of counsel, a material conflict on any material
issue between the position of the indemnifying party and the position of
indemnified party, in which case the indemnifying party shall be responsible for
the reasonable fees and expenses of no more than one such separate
counsel. The indemnifying party will not be liable to the indemnified
party under this Agreement (y) for any settlement by an indemnified party
effected without the indemnifying party’s prior written consent, which shall not
be unreasonably withheld or delayed; or (z) to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to the
indemnified party’s breach of any of the representations, warranties, covenants
or agreements made by the indemnified party in this Agreement.
(c) Until
the public disclosure by the Company of the Transactions and the Offering, the
Subscriber hereby agrees to (i) refrain from (a) engaging in any transactions
with respect to the publicly traded capital stock of the Company or securities
exercisable or convertible into or exchangeable for any shares of capital stock
of the Company and (b) entering into any transaction which would have the same
effect, or entering into any swap, hedge or other arrangement that transfers, in
whole or in part, any of the economic consequences of ownership of the publicly
traded capital stock capital stock of the Company and (ii) indemnify and hold
harmless Xsovt, the Company and their respective officers and directors,
employees, members, managers, agents, sub-agents and affiliates and each other
person, if any, who controls any of the foregoing, against any loss, liability,
claim, damage and expense whatsoever (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any litigation commenced or threatened or any claim whatsoever) arising
out of or based upon any violation of this Section 4(c) by the
Subscriber.
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(d) The
Subscriber, whether in its own capacity or through a representative, agent or
affiliate, agrees that it will not enter into or effect any “short sales” of any
publicly traded capital stock of the Company or any hedging, stabilization or
other similar transaction, whether on a U.S. domestic exchange, Over-the-Counter
Bulletin Board or the Pink Sheets or any foreign exchange for a period
commencing on the issuance of the Securities and ending one year after any
registration statement covering the shares of Conversion Shares has been
declared effective by the SEC.
(e) The
Subscriber agrees to indemnify and hold harmless Xsovt, the Company and their
respective officers and directors, employees, members, managers, agents,
sub-agents, attorneys, accountants and affiliates and each other person, if any,
who controls any of the foregoing, against any loss, liability, claim, damage
and expense whatsoever (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation commenced or threatened or any claim whatsoever) arising out of
or based upon any false representation or warranty (or any omission which
results in any representation or warranty being false) by the Subscriber, or the
Subscriber’s breach of, or failure to comply with, any covenant or agreement
made by the Subscriber herein or in any other document furnished by the
Subscriber to Xsovt, the Company and their respective officers and directors,
employees, members, managers, agents, sub-agents and affiliates and each other
person, if any, who controls any of the foregoing in connection with the
Offering.
5. Registration
Rights. The Company hereby grants to the Subscriber the
registration rights with respect to the Conversion Shares set forth on Exhibit D hereto.
6. Miscellaneous.
(a) Notices. Any
notice or other document required or permitted to be given or delivered to the
parties hereto shall be in writing and sent: (i) by fax if the sender on the
same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (b) by registered or certified mail with
return receipt requested (postage prepaid) or (c) by a recognized overnight
delivery service (with charges prepaid).
If to the
Company, at:
Xsovt
Brands, Inc.
00-X Xxxx
Xxxxx
Xxxxxxxxx,
XX 00000
Attention:
Avi Koschitzki
Fax:
(000) 000-0000
With a
copy to:
Ellenoff
Xxxxxxxx & Schole LLP
000 Xxxx
00xx
Xxxxxx, 00xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxxx X. Xxxxxxxxxx, Esq.
Fax:
(000) 000-0000
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If to the
Subscriber, at its address set forth on the signature page to this Subscription
Agreement, or such other address as Subscriber shall have specified to the
Company in writing.
(b) Entire Agreement;
Assignment. This Agreement represents the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
terminated, modified, waived or amended only by a writing executed and delivered
by both parties. Neither the Company nor Subscriber has relied on any
representations not contained or referred to in this
Agreement. No right or obligation of a party shall be assigned
or otherwise transferred without prior notice to and the written consent of the
other party. Any assignment or transfer in violation of the foregoing
shall be null and void.
(c) Counterparts/Execution. This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument. This Agreement may be executed by facsimile
transmission, PDF, electronic signature or other similar electronic means with
the same force and effect as if such signature page were an original
thereof.
(d) Law Governing this
Agreement. This Subscription Agreement shall be enforced,
governed and construed in all respects in accordance with the laws of the State
of New York, as such laws are applied by the New York courts within the borders
of such state, except with respect to the conflicts of law provisions thereof,
and shall be binding upon the Subscriber and the Subscriber’s heirs, estate,
legal representatives, successors and permitted assigns and shall inure to the
benefit of the Company and their respective successors and assigns.
(e) Arbitration. Except
as otherwise provided in Section 6(f) below, a dispute between the parties with
respect to the provisions set forth herein shall be settled by arbitration in
accordance with the Expedited Procedures of the Commercial Arbitration Rules of
the American Arbitration Association (the “AAA Rules”) by an arbitrator
who is mutually agreeable to the parties to such dispute. If the
parties are unable to agree upon an arbitrator, one arbitrator shall be selected
in accordance with the AAA Rules and any judgment upon the award rendered by
such arbitrator may be entered in any court of competent
jurisdiction. All proceedings in any such arbitration shall be
conducted in New York, New York. Each party to such arbitration shall
be responsible for their respective costs and expenses associated
therewith. Upon a final determination by the arbitrator with respect
to the dispute, the arbitrator shall notify the parties thereto in
writing. Jurisdiction of such arbitrator shall be exclusive to the
disputes arising out of or relating to this Agreement between the
parties. The parties to such dispute shall not have the right to
appeal such determination or to otherwise submit a dispute hereunder to a court
of law, except as otherwise provided in Section 6(f) below. Each of
the parties expressly agrees and acknowledges that all disputes between the
parties are subject to the alternative dispute resolution procedures of this
Section 6(e), except as otherwise provided in Section 6(f)
below. EACH PARTY HERETO (INCLUDING ITS AFFILIATES, AGENTS, OFFICERS,
DIRECTORS AND EMPLOYEES) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
10
(f) Specific Enforcement,
Consent to Jurisdiction. The Company and Subscriber
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to seek an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which any of them may be entitled by law or equity. Any action
brought by either party against the other to compel arbitration or for specific
enforcement or injunction relief shall be brought only in the state courts of
New York or in the federal courts located in the state and county of New
York. The parties to this Agreement hereby irrevocably waive any
objection to jurisdiction and venue of any such action instituted under this
Section 6(f) and shall not assert any defense based on lack of jurisdiction or
venue or based upon forum non
conveniens. The parties executing this Agreement
and other agreements referred to herein or delivered in connection herewith on
behalf of the Company agree to submit to the in
personam jurisdiction of
such courts and hereby irrevocably waive trial by jury with respect to any such
actions. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding under this Section 6(f) by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for 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 other manner permitted by law. The
Company and Subscriber hereby irrevocably waive and agree not to assert in any
such suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction in New York of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper.
(g) Drafting. This
Agreement shall not be construed for or against a party based upon
authorship.
(h) Captions; Certain
Definitions. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement. As used in this Agreement the term
“person” shall mean and
include an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an unincorporated organization or any other legal
entity and a government or any department or agency thereof.
(i) Severability. In
the event that any term or provision of this Agreement shall be finally
determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by an authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality or
enforceability: (i) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted, or (ii) by or before any other authority of any
of the terms and provisions of this Agreement.
(j) No
Assignment. Subscriber agrees not to transfer or assign this
Subscription Agreement or any of Subscriber’s interest herein and further agrees
that the transfer or assignment of the Securities acquired pursuant hereto shall
be made only in accordance with all applicable laws.
(k) No
Revocation. Subscriber agrees that Subscriber cannot cancel,
terminate, or revoke this Subscription Agreement or any agreement of Subscriber
made hereunder, and this Subscription Agreement shall survive the death or legal
disability of Subscriber and shall be binding upon Subscriber’s heirs,
executors, administrators, successors, and permitted assigns.
(l) Counsel. Subscriber
acknowledges that it has been advised and has had the opportunity to consult
with Subscriber’s own attorney and other advisors regarding this Subscription
Agreement and Subscriber has done so to the extent that Subscriber deems
appropriate.
11
Signature
Page for Individuals:
IN WITNESS WHEREOF, Subscriber has
caused this Subscription Agreement to be executed as of the date indicated
below.
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$
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Purchase
Price
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Number
of Units
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Print
or Type Name
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Print
or Type Name (Joint-owner)
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Signature
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Signature
(Joint-owner)
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Date
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Date
(Joint-owner)
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Social
Security Number
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Social
Security Number (Joint-owner)
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Address
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Address
(Joint-owner)
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_______
Joint Tenancy
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______
Tenants in
Common
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S-1
Signature
Page for Partnerships, Corporations or Other Entities:
IN WITNESS WHEREOF, Subscriber has
caused this Subscription Agreement to be executed as of the date indicated
below.
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$
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Total
Purchase Price
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Number
of Units
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Print
or Type Name of Entity
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Address
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Taxpayer
I.D. No. (if applicable)
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Date
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By:
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Signature:
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Name:
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or Type Name and Indicate
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Title:
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Title
or Position with
Entity
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S-2
Acceptance:
IN WITNESS WHEREOF, the Company has
caused this Subscription Agreement to be executed, and the foregoing
subscription accepted, as of the date indicated below, as to _______
Shares.
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By:
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Name:
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Title:
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Date:
_____________, 2011
S-3
EXHIBIT
D
REGISTRATION
RIGHTS
All
shares of Common Stock issuable upon conversion of the Series A Preferred Stock,
the Class A Warrants and the Class B Warrants will be deemed “Registrable Securities”
subject to the provisions of this Exhibit D. All capitalized terms
used but not defined in this Exhibit D shall have the meanings ascribed to such
terms in the Subscription Agreement to which this Exhibit is
attached.
1. Piggy-Back
Registration.
1.1 Piggy-Back
Rights. If at any time on or after the date the Company
consummates the Transaction (but prior to the date that is five years from the
effective date of the Transaction) the Company proposes to file a Registration
Statement (a “Registration
Statement”) under the Act with respect to an offering of equity
securities, or securities or other obligations exercisable or exchangeable for,
or convertible into, equity securities, by the Company for its own account or
for shareholders of the Company for their account (or by the Company and by
shareholders of the Company), other than a Registration Statement (i) filed in
connection with any employee stock option or other benefit plan, (ii) for a
dividend reinvestment plan, then the Company shall (x) give written notice of
such proposed filing to the holders of Registrable Securities appearing on the
books and records of the Company as such a holder as soon as practicable but in
no event less than ten (10) days before the anticipated filing date, which
notice shall describe the amount and type of securities to be included in such
Registration Statement, the intended method(s) of distribution, and the name of
the proposed managing Underwriter or Underwriters, if any, of the offering, and
(y) offer to the holders of Registrable Securities in such notice the
opportunity to register the sale of such number of shares of Registrable
Securities as such holders may request in writing within five (5) days following
receipt of such notice (a “Piggy-Back
Registration”). Subject to Section 1.2 below, the Company
shall cause such Registrable Securities to be included in such registration and
shall use its commercially reasonable efforts to cause the managing underwriter
or underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration on the same
terms and conditions as any similar securities of the Company and to permit the
sale or other disposition of such Registrable Securities in accordance with the
intended method(s) of distribution thereof. All holders of
Registrable Securities proposing to distribute their securities through a
Piggy-Back Registration that involves an Underwriter or Underwriters shall enter
into an underwriting agreement in customary form with the Underwriter or
Underwriters selected for such Piggy-Back Registration.
1.2 Reduction of
Offering. If the managing Underwriter or Underwriters for a
Piggy-Back Registration that is to be an underwritten offering advises the
Company and the holders of Registrable Securities in writing that the dollar
amount or number of Common Stock which the Company desires to sell, taken
together with the Common Stock, if any, as to which registration has been
demanded pursuant to written contractual arrangements with persons other than
the holders of Registrable Securities hereunder, the Registrable Securities as
to which registration has been requested under this Section 1, and the Common
Stock, if any, as to which registration has been requested pursuant to the
written contractual piggy-back registration rights of other shareholders of the
Company, exceeds the maximum dollar amount or maximum number of shares that can
be sold in such offering without adversely affecting the proposed offering
price, the timing, the distribution method, or the probability of success of
such offering (such maximum dollar amount or maximum number of shares, as
applicable, the “Maximum Number
of Shares”), then the Company shall include in any such
registration:
D-1
(a) If
the registration is undertaken for the Company’s account: (A) first, the share
of Common Stock or other securities that the Company desires to sell that can be
sold without exceeding the Maximum Number of Shares; (B) second, to the extent
that the Maximum Number of Shares has not been reached under the foregoing
clause (A), the share of Common Stock or other securities, if any, comprised of
Registrable Securities, as to which registration has been requested pursuant to
the applicable written contractual piggy-back registration rights of such
security holders, pro rata in accordance with the number of shares that each
such Person has requested be included in such registration, regardless of the
number of shares held by each such Subscriber (“Pro Rata”), that can be sold
without exceeding the Maximum Number of shares of Common Stock; and (C) third,
to the extent that the Maximum Number of shares has not been reached under the
foregoing clauses (A) and (B), the shares of Common Stock or other securities
for the account of other persons that the Company is obligated to register
pursuant to written contractual piggy-back registration rights with such persons
and that can be sold without exceeding the Maximum Number of Shares;
and
(b) If
the registration is a “demand” or “piggyback” registration undertaken at the
demand of holders of shares of Common Stock, (A) first, the shares of Common
Stock or other securities for the account of the demanding persons, Pro Rata,
that can be sold without exceeding the Maximum Number of Shares; (B) second, to
the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (A), the shares of Common Stock or other securities that the
Company desires to sell that can be sold without exceeding the Maximum Number of
Shares; (C) third, to the extent that the Maximum Number of Shares has not been
reached under the foregoing clauses (A) and (B), the shares of Registrable
Securities, Pro Rata, as to which registration has been requested pursuant to
the terms hereof, that can be sold without exceeding the Maximum Number of
Shares; and (D) fourth, to the extent that the Maximum Number of Shares has not
been reached under the foregoing clauses (A), (B) and (C), the shares of Common
Stock or other securities for the account of other persons that the Company is
obligated to register pursuant to written contractual arrangements with such
persons, that can be sold without exceeding the Maximum Number of
Shares.
1.3 Withdrawal. Any
holder of Registrable Securities may elect to withdraw such holder’s request for
inclusion of Registrable Securities in any Piggy-Back Registration by giving
written notice to the Company of such request to withdraw prior to the
effectiveness of the Registration Statement. The Company (whether on
its own determination or as the result of a withdrawal by persons making a
demand pursuant to written contractual obligations) may withdraw a Registration
Statement at any time prior to the effectiveness of such Registration
Statement. Notwithstanding any such withdrawal, the Company shall pay
all expenses incurred by the holders of Registrable Securities in connection
with such Piggy-Back Registration as provided in Section 1.6 below.
1.4 The
Company shall notify the Subscriber at any time when a prospectus relating to
such Subscriber’s Registrable Securities is required to be delivered under the
Act, upon discovery that, or upon the happening of any event 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 any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then
existing. At the request of the Subscriber, the Company shall also
prepare, file and furnish to the Subscriber a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing. The
Subscriber agrees not to offer or sell any Registrable Securities covered by the
Registration Statement after receipt of such notification until the receipt of
such supplement or amendment.
D-2
1.5 The
Company may request the Subscriber to furnish the Company such information with
respect to the Subscriber and the Subscriber’s proposed distribution of the
Registrable Securities pursuant to the Registration Statement as the Company may
from time to time reasonably request in writing or as shall be required by law
or by the SEC in connection therewith, and the Subscriber agrees to furnish the
Company with such information.
1.6 The
Company agrees to bear all SEC registration and filing fees, printing and
mailing expenses, and fees and disbursements of counsel and accountants for the
Company in connection with the registration of Registrable Securities called for
hereunder.
[End
of Exhibit D]
D-3
