EXHIBIT 4.35
SERIES B CONVERTIBLE PREFERRED STOCK
SUBSCRIPTION AGREEMENT
DATED AS OF FEBRUARY 3, 2006
BY AND BETWEEN
REALITY WIRELESS NETWORKS, INC.
AND
XXXXXXX XXXXXXX
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR THE SECURITIES
COMMISSION OF ANY STATE, NOR HAS ANY SUCH COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS SERIES B CONVERTIBLE PREFERRED STOCK SUBSCRIPTION AGREEMENT OR
ITS EXHIBITS OR SCHEDULES (THE "PURCHASE AGREEMENT"). ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE PURCHASE OF THE SECURITIES OFFERED HEREBY AND DESCRIBED IN THIS SUBSCRIPTION
AGREEMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" SET FORTH IN THE
MEMORANDUM TO WHICH THIS SUBSCRIPTION AGREEMENT IS ATTACHED. THE PROSPECTIVE
INVESTOR SHOULD CAREFULLY READ THIS SUBSCRIPTION AGREEMENT AND THE MEMORANDUM IN
ORDER TO EVALUATE THE RISKS INVOLVED IN LIGHT OF THE INVESTOR'S INVESTMENT
OBJECTIVES AND FINANCIAL RESOURCES. IN MAKING AN INVESTMENT DECISION, THE
PROSPECTIVE INVESTOR MUST RELY ON HIS OR HER OWN EVALUATION OF THE COMPANY, THE
SECURITIES OFFERED HEREBY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THIS SUBSCRIPTION AGREEMENT AND ASSOCIATED OR SUPPLEMENTAL
DOCUMENTS (COLLECTIVELY, THE "INVESTMENT DOCUMENTS") CONTAINS FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES ACT") AND THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND THE RULES
AND REGULATIONS PROMULGATED THEREUNDER. THE COMPANY'S ACTUAL RESULTS AND
ACTIVITIES COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF THE RISK FACTORS DESCRIBED HEREIN AND OTHER FACTORS
INCLUDED ELSEWHERE IN THE INVESTMENT DOCUMENTS.
NO REPRESENTATIONS, WARRANTIES, OR ASSURANCES OF ANY KIND ARE MADE OR SHOULD BE
INFERRED WITH RESPECT TO THE ECONOMIC RETURN OR THE TAX CONSEQUENCES WHICH MAY
BE REALIZED BY A PURCHASER OF THE UNITS OFFERED HEREBY. PROSPECTIVE INVESTORS
SHOULD NOT CONSTRUE THE CONTENTS OF THESE INVESTMENT DOCUMENTS OR ANY
COMMUNICATIONS, WHETHER WRITTEN OR ORAL, FROM THE COMPANY OR ITS OFFICERS,
DIRECTORS, EMPLOYEES OR AGENTS, AS PROVISION OF LEGAL, TAX, ACCOUNTING OR OTHER
EXPERT ADVICE. THE PROSPECTIVE INVESTOR SHOULD CONSULT THEIR COUNSEL,
ACCOUNTANTS AND OTHER PROFESSIONAL ADVISORS AS TO THE LEGAL, TAX, ACCOUNTING AND
RELATED MATTERS CONCERNING HIS OR HER INVESTMENT IN THE SECURITIES OFFERED
HEREBY.
THE SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK ARE BEING OFFERED PURSUANT TO
AND EXEMPTION TO THE REGISTRATION REQUIREMENTS AS PROMULGATED UNDER SECTION 4(2)
AND RULE 506 UNDER THE SECURITIES ACT ONLY TO ACCREDITED INVESTORS WHO ARE
CAPABLE OF BEARING THE ECONOMIC RISKS OF THIS INVESTMENT, INCLUDING THE RISK OF
LOSING THEIR ENTIRE ORIGINAL INVESTMENT AND WHO, INDIVIDUALLY OR THROUGH A
PURCHASER REPRESENTATIVE, HAVE SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND
BUSINESS MATTERS THAT THEY ARE CAPABLE OF EVALUATING THE MERITS AND RISKS OF AN
INVESTMENT IN THESE SECURITIES.
THE SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
AN EXEMPTION THEREFROM. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THEIR INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
THE PROSPECTIVE INVESTOR IS ENCOURAGED TO AVAIL ITSELF OF THE OPPORTUNITY TO ASK
QUESTIONS OF, AND RECEIVE ANSWERS FROM, THE COMPANY CONCERNING ITS BUSINESS
OPERATIONS, THE TERMS AND CONDITIONS OF THIS OFFERING, AND TO OBTAIN ADDITIONAL
INFORMATION, TO THE EXTENT THAT IT IS POSSESSED OR OBTAINABLE WITHOUT
UNREASONABLE EFFORT OR EXPENSE, NECESSARY TO VERIFY THE ACCURACY OF THE
INFORMATION IN THIS PURCHASE AGREEMENT. ANY PROSPECTIVE INVESTORS HAVING ANY
QUESTIONS REGARDING THIS OFFERING OR DESIRING ANY ADDITIONAL INFORMATION OR
DOCUMENTS TO VERIFY OR SUPPLEMENT THE INFORMATION CONTAINED HEREIN SHOULD
CONTACT XXXXX XXXXXXX, AND OR COUNSEL TO THE COMPANY AT REALITY WIRELESS
NETWORKS, INC., 0000 XXXXX XXXXXXX XXXXX, XXXXX 000, XXX XXXXXX, XX 00000 OR THE
XXXX LAW GROUP, PLLC, 000 XXXXX XXXXXX, XXXXXX 0000, XXXXXXX, XX, 00000,
RESPECTIVELY.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS SUBSCRIPTION AGREEMENT, AND ANY INFORMATION OR
REPRESENTATIONS NOT CONTAINED HEREIN OR IN THE DOCUMENTS FURNISHED BY THE
COMPANY AS CONTEMPLATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY OR ON BEHALF OF THE COMPANY. THE DELIVERY OF THIS SUBSCRIPTION AGREEMENT AT
ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
THE DISTRIBUTION OF THIS SUBSCRIPTION AGREEMENT AND MEMORANDUM AND THE OFFERING
OF THE SECURITIES OFFERED THEREBY IN CERTAIN JURISDICTIONS MAY BE RESTRICTED BY
LAW. PERSONS INTO WHOSE POSSESSION THIS SUBSCRIPTION AGREEMENT COMES ARE
REQUIRED BY THE COMPANY TO INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH
RESTRICTIONS. THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
LAWFUL, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO.
NO ACTION HAS BEEN OR WILL BE TAKEN BY THE COMPANY THAT WOULD PERMIT A PUBLIC
OFFERING OF THE SECURITIES OFFERED HEREBY OR THE CIRCULATION OR DISTRIBUTION OF
THIS SUBSCRIPTION AGREEMENT OR ANY OFFERING MATERIAL IN RELATION TO THE
SECURITIES OFFERED HEREBY IN ANY COUNTRY OR JURISDICTION WHERE ACTION FOR THAT
PURPOSE IS REQUIRED.
THIS SUBSCRIPTION AGREEMENT AND MEMORANDUM HAS BEEN PREPARED SOLELY FOR THE
BENEFIT OF PROSPECTIVE INVESTORS INTERESTED IN THE PROPOSED PRIVATE PLACEMENT OF
THE SHARES OF SERIES CONVERTIBLE PREFERRED STOCK AND CONSTITUTES AN OFFER ONLY
IF THE NAME OF THE PROSPECTIVE INVESTOR APPEARS IN THE APPROPRIATE SPACE
PROVIDED IN THE HEADING TO THIS DOCUMENT. DISTRIBUTION OF THIS SUBSCRIPTION
AGREEMENT OR THE MEMORANDUM TO ANY PERSON OTHER THAN SUCH PROSPECTIVE INVESTOR
AND THOSE PERSONS RETAINED TO ADVISE SUCH PROSPECTIVE INVESTOR WITH RESPECT
THERETO IS UNAUTHORIZED, AND ANY REPRODUCTION OF THIS SUBSCRIPTION AGREEMENT OR
THE MEMORANDUM, IN WHOLE OR IN PART, OR THE DIVULGENCE OF ANY OF ITS CONTENTS,
WITHOUT THE PRIOR WRITTEN CONSENT OF REALITY WIRELESS NETWORKS, INC., IS
PROHIBITED.
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SERIES B CONVERTIBLE PREFERRED STOCK
SUBSCRIPTION AGREEMENT
THIS SERIES B CONVERTIBLE PREFERRED STOCK SUBSCRIPTION AGREEMENT (the
"Agreement") is made as of the 3rd day of February 2006, by and between Reality
Wireless Networks, Inc., a Nevada corporation (the "Company"), and Xxxxx Xxxxxxx
(the "Investor"):
WHEREAS, the Investor has served as Chief Executive Officer, Principal
Financial Officer, and has served on the Board of Directors since February of
2004; and
WHEREAS, in his capacity as Chief Executive Officer and Principal
Financial Officer, and for his service on the Board of Directors since February
of 2004, the Investor has deferred substantially all of the compensation that
the Investor earned for these services commencing in 2004; and
WHEREAS, the Investor desires, as payment in full for such deferred
compensation, to purchase, and the company desires to sell and issue to the
Investor in exchange for cancellation of the deferred compensation, shares of
the Company's Series B Convertible Preferred Stock.
NOW, THEREFORE, in consideration of the foregoing premises and for
other food and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Purchase and Sale of Preferred Shares.
a. Certificate of Designation. The Company shall adopt and
file with the Secretary of State of the State of Nevada the Amended and Restated
Certificate of Designation of Series B Convertible Preferred Stock of the
Company (the "Certificate of Designation") substantially in the form attached
hereto as Appendix A.
b. Sale of Preferred Shares. Upon the terms and subject to the
terms and conditions hereof, the Investor agrees to purchase and the Company
agrees to issue, sell, transfer and deliver to the Investor all right, title and
interest in and to 1,050,000 shares of Series B Convertible Preferred Stock (the
"Preferred Shares"), free and clear of all liens, security interests, claims and
encumbrances of any nature whatsoever created by or on account of the Company.
The Preferred Shares shall have the rights, preferences, privileges and
restrictions set forth in the Amended Certificate of Designation. The Company
will authorize the issuance and reservation of shares of its common stock
("Common Stock") upon and for the total amount of Common Stock issuable upon
conversion of the Preferred Shares (the "Conversion Shares").
c. Purchase Price. The purchase price payable by the Investor
to the Company for the Preferred Shares shall be $0.08 per share or an aggregate
of one hundred fifty-seven thousand dollars ($157,000.00) (the "Purchase
Price"), which the Company and the Investor acknowledge has been paid in
deferred salary.
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d. Delivery of Preferred Shares. Promptly after Closing, the
Company shall issue instructions to its transfer agent to issue and deliver a
certificate representing the number of shares of Preferred Shares to which the
Investor has subscribed to the address provided by the Investor herein.
e. Termination. This Offering will continue through February
15, 2006 (the "Offering Termination Date").
f. Closings. The Offering shall close upon execution of this
Agreement (the "Closing"). The consummation of the purchase and sale of the
Preferred Shares contemplated by this Agreement shall take place at The Xxxx Law
Group, PLLC, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000, upon
receipt of subscriptions acceptable by the Company; provided, however, that all
Closings shall take place no later than the Offering Termination Date. Upon
Closing, the Company shall deliver to the Investor a certificate representing
the Preferred Shares in accordance with paragraph (b) above, against delivery to
the Company by the Investor of the Purchase Price, a fully completed Statement
of Accredited Investor attached as Memorandum as Appendix B and an original,
executed signature page of this Agreement. Execution and delivery of this
Agreement and the other documents to be delivered at Closing may be by facsimile
transmission.
g. [Omitted]
h. Binding and Enforceable. This Subscription Agreement will
be binding upon and enforceable against the Company only when countersigned by
an authorized agent of the Company and delivered to Investor.
i. No Antidilution Provision. The Investor acknowledges that
this Agreement does not provide any antidilution protection either prior to or
following the conversion from Preferred Shares to shares of common stock in the
Company.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor as follows:
a. Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada, and has all requisite power and authority to carry
on its business as now conducted. The Company is duly qualified to transact
business, and is in good standing, in each U.S. jurisdiction in which the
failure to so qualify would have a material adverse effect on its business.
b. Capitalization. The authorized capital of the Company
consists of 500,000,000 shares of common stock and 100,000,000 shares of
preferred stock. Immediately prior to the Offering, approximately 498,140,212
shares of Common Stock are issued and outstanding, and no shares of preferred
stock are issued and outstanding.
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c. Authorization. All action on the part of the Company
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and the authorization,
issuance and delivery of the Preferred Shares being sold hereunder, to the
extent that the foregoing requires performance on or prior to the Closing, has
been taken or will be taken on or prior to the Closing, and the Company has all
requisite power and authority to enter into this Agreement.
3. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company as follows:
a. Organization; Good Standing; Power and Authority; Binding
Obligation. The Investor has full power and authority to enter into this
Agreement, and, if the Investor is a corporation (i) such Investor is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite power and
authority to carry on its business as now conducted, and (ii) all action on the
part of the Investor necessary for the authorization, execution and delivery of
this Agreement, the performance of all obligations of the Investor hereunder,
including, without limitation, the payment of the purchase price for the
Preferred Shares being sold such Investor hereunder has been taken, and the
Investor has all requisite power and authority to enter into this Agreement.
This Agreement has been duly executed and delivered by the Investor and,
assuming due authorization, execution and delivery by the Company, constitutes
the Investor's valid and legally binding obligation enforceable against the
Investor in accordance with its terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency (including, without limitation, all laws
relating to fraudulent transfers), moratorium or similar laws affecting
creditors' rights generally, subject, as to enforceability, to the effect of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and subject to the effect of
applicable securities laws as to rights of indemnification.
b. Purchase Entirely for Own Account. The Preferred Shares and
shares of Common Stock underlying the Preferred Shares (the "Conversion Shares")
to be purchased by Investor hereunder will be acquired for investment for
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof. Investor has no present intention of
selling, granting any participation in, or otherwise distributing the Preferred
Shares or Conversion Shares. Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to any person with respect to the Preferred Shares or the
Conversion Shares. The Investor has not construed the contents of this
Agreement, or any additional agreement with respect to the proposed investment
in the Preferred Shares or any prior or subsequent communications from the
Company, or any of its officers, employees or representatives, as investment,
tax or legal advice or as information necessarily applicable to such Investor's
particular financial situation. The Investor has consulted its own financial
advisor, tax advisor, legal counsel and accountant, as necessary or desirable,
as to matters concerning his investment in the Preferred Shares and Conversion
Shares.
c. Disclosure. Investor has received or reviewed all the
information which such Investor has requested for the purposes of determining
the merits of the Preferred Shares as an investment. Investor has read and
understands the Risk Factors and other information presented in the Memorandum
and the Company's publicly-available filings with the SEC. The Investor
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acknowledges that the Memorandum and the Company's publicly-available filings
with the SEC contain a discussion of certain financial and other developments
which have occurred since the date of the last audited financial statements
provided to the Investor (the "Audited Financials"), the effects of which are
not reflected in the Audited Financials and which may have a material adverse
effect on the Company and its respective business, financial conditions and
results of operations.
The Investor has had an opportunity to ask questions and
receive answers from the Company regarding the Company and its respective
business, operations and financial condition and the terms and conditions of
this offering of Preferred Shares, and answers have been provided to the
Investor's full satisfaction. The Investor has fully reviewed all corporate and
governance documents of the Company and such other documents, which the Investor
feels is necessary or appropriate prior to purchase of the Preferred Shares,
understands all relevant terms and has asked all questions and received answers
thereto to the Investor's full satisfaction. If deemed necessary by the
Investor, the Investor has consulted with a professional advisor who has
provided the Investor with advice concerning terms. THE INVESTOR ACKNOWLEDGES
AND AGREES THAT THE PURCHASE OF THE PREFERRED SHARES INVOLVES A HIGH DEGREE OF
RISK, INCLUDING, WITHOUT LIMITATION, THOSE SET FORTH IN THE MEMORANDUM, AND MAY
RESULT IN A LOSS OF THE ENTIRE AMOUNT INVESTED. THE INVESTOR FURTHER
ACKNOWLEDGES AND AGREES THAT THERE IS NO ASSURANCE THAT THE COMPANY'S OPERATIONS
WILL RESULT IN REVENUES OR BE PROFITABLE.
d. Accredited Investor. Investor is an "accredited investor"
as defined in Rule 501(a) of Regulation D promulgated under the 1933 Act. The
information provided by Investor on the Statement of Accredited Investor,
attached as Appendix B, is true, correct and complete in all respects. The
Investor is capable of bearing the economic risk of an investment in the
Preferred Shares, including the possible loss of Investor's entire investment.
The Investor has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of an investment in the
Preferred Shares offered hereby. If other than an individual, the Investor has
not been organized solely for the purpose of acquiring the Preferred Shares.
e. Restricted Securities. Investor understands that the
Preferred Shares being purchased hereunder, as well as the Conversion Shares,
are "restricted securities" as defined in the Securities Act, and that under
federal and state securities laws the Preferred Shares and Conversion Shares may
be resold without registration under the Securities Act only in certain limited
circumstances. The Investor is familiar with Rule 144 promulgated by the SEC
under the Securities Act, and understands the resale limitations imposed thereby
and by the Securities Act generally. The Investor also acknowledges that the
Preferred Shares and Conversion Shares are subject to significant restrictions
on transfer, pledge or hypothecation.
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f. Legends. It is understood that certificates or other
evidence of the Preferred Shares will, and the Conversion Shares may, bear the
following legend, as well as any legend required by the laws of any state:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO
THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED PURSUANT TO A VALID
EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933."
g. Consents and Approvals; No Conflict. The execution and
delivery of this Agreement by the Investor does not, and the performance of this
Agreement by the Investor will not, require any consent, approval, authorization
or other action by, or filing with or notification to, any governmental or
regulatory authority. The execution, delivery and performance of this Agreement
by the Investor does not (i) in the case of any Investor that is not an
individual, conflict with or violate the charter or by-laws, partnership or
other governing documents of such Investor, or (ii) conflict with or violate any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award applicable to the Investor.
4. Covenant of Investor. The Investor hereby covenants with the Company
that, without in any way limiting the representations set forth in Section 3
above, Investor shall not make any disposition of all or any portion of the
Preferred Shares or Conversion Shares unless and until: (i) there is then in
effect a registration statement under the Securities Act covering such proposed
disposition, and such disposition is made in accordance with such registration
statement; or (ii) such Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and, if requested by the
Company, such Investor shall have furnished the Company with an opinion of
counsel, in form and substance satisfactory to the Company, that such
disposition will not require registration of Preferred Shares or Conversion
Shares, as the case may be, under the Securities Act.
5. Conditions of Investor's Obligations at Closing. The obligations of
the Investor hereunder are subject to, and contingent upon, the fulfillment, on
or before each Closing, of each of the following conditions, the waiver of which
shall not be effective against the Investor unless consented to in writing by
the Investor:
a. Representations and Warranties. The representations and
warranties of the Company contained in Section 2 hereof shall be true and
correct on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.
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b. Performance. The Company shall have performed and complied
with all agreements, obligations and covenants contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Investor hereunder are subject to and contingent upon the
fulfillment by the Investor, on or before the Closing, of each of the following
conditions:
a. Representations and Warranties. The representations and
warranties of the Investor contained herein shall be true and correct on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
b. Payment of Purchase Price by Investors. The Investor shall
have delivered to the Company the Purchase Price, in the manner specified in
this Agreement.
c. Statement of Accredited Investor. The Investor shall have
delivered to the Company a Statement of Accredited Investor in the form set
forth in Appendix B, and the information provided therein shall be true, correct
and complete on and as of the Closing with the same effect as though such
information had been provided as of the date of such Closing.
7. Registration of Conversion Shares.
x. Xxxxx of Registration Rights. The Company agrees to assist
the Investor in causing common stock into which the Preferred Shares convert to
be freely tradable within 365 days of the closing off this agreement, whether
through an exemption under Rule 144 of the Securities Act, through registration
on Form S-8 other registration statement. Should the Company use a method of
registration other than by registration on Form S-8, then subject to the terms
and conditions of this Agreement, should the Company undertake to register the
common stock into which the Preferred Shares convert, (i) the Company agrees to
file a registration statement under the Securities Act covering the Conversion
Shares issuable upon exercise of the conversion of the Preferred Shares (the
"Registrable Securities"), in accordance with the intended method or methods of
distribution thereof and shall include all financial statements required by the
SEC to be filed therewith (referred to herein, together with all amendments
thereto and the related prospectus, as amended, a "Registration Statement");
provided, however, that the Company is not obligated to file any Registration
Statement until the date which is within one year following the completion of
the closing of the purchase and sale of Preferred Shares in this Offering or the
termination of the Offering by the Company; (ii) the Company agrees to undertake
commercially reasonable efforts to cause such Registration Statement to be
declared effective by the SEC within one hundred eighty (180) days after such
filing; and (iii) if the Company is eligible to incorporate periodic reports by
reference into such Registration Statement, and such Registration Statement is
declared effective, undertake commercially reasonable efforts to keep the
Registration Statement continuously effective, supplemented and amended for a
period of one year. Any other provision of this Agreement notwithstanding, the
Company shall not be obligated to file or maintain the effectiveness of any
registration statement if the Company, in the exercise of its reasonable good
faith judgment, determines:
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(i) that such registration would have a material adverse effect on the
business, prospects, finances or operations of the Company (without regard to
the costs directly related to preparing and filing the registration statement);
or
(ii) that such registration would interfere with any material
financing, acquisition, disposition, corporate reorganization or other material
transaction involving the Company or any of its subsidiaries or because public
disclosure thereof would be required prior to the time such disclosure might
otherwise be required, or when the Company is in possession of material
non-public information that it deems advisable not to disclose in a registration
statement.
b. Number of Registrations. The Company shall be obligated to
prepare, file and cause to become effective pursuant to this Section no more
than one Registration Statement; provided, however, that the filing of a
Registration Statement shall not be deemed to satisfy the Company's obligations
hereunder unless it becomes effective and is maintained effective in accordance
with the requirements specified in this Section.
c. Underwriter's Cutback. If the registration of Registrable
Securities is to be underwritten and, in the good faith judgment of the managing
underwriter, the inclusion of all the Registrable Securities requested to be
registered hereunder would interfere with the successful marketing of a smaller
number of such shares of Registrable Securities, the number of shares of
Registrable Securities to be included shall be reduced to such smaller number
with the participation in such offering to be pro rata among the holders of
Registrable Securities (the "Holders") requesting such registration, based upon
the number of shares of Registrable Securities owned by such Holders; provided,
however, that shares held by officers and directors of the Company shall be
subject to reduction prior to any reduction of Registrable Securities. Any
shares that are thereby excluded from the offering shall be withheld from the
market by the Holders thereof for a period (not to exceed 90 days prior to the
effective date and 90 days thereafter) that the managing underwriter reasonably
determines is necessary in order to effect the underwritten public offering.
d. Managing Underwriter. The managing underwriter or
underwriters of any underwritten public offering covered by these demand
registration rights shall be selected by the Company.
e. Black-Out Periods of Investor. The Company shall have the
right exercisable on one or more occasions, in addition to its rights set forth
in Section 7(a)(i) and (ii), to require upon written notice to the Holders that
the Holders not sell any Registrable Securities during the period specified in
the notice, provided that such periods do not exceed 180 days in any calendar
year, if (i) the Company determines, in its good faith judgment, that such
offering would interfere with any material financing, acquisition, disposition,
corporate reorganization or other material transaction involving the Company or
any of its subsidiaries or public disclosure thereof would be required prior to
the time such disclosure might otherwise be required, or when the Company is in
possession of material non-public information that it deems advisable not to
disclose in a registration statement, or (ii) the Registration Statement ceases
to be current, provided, however, that the Company shall exercise reasonable
efforts to file an amendment to the Registration Statement in order to cause the
Registration Statement to become current as soon as practicable.
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f. Expenses. The cost of the registration of the Registrable
Securities will be at the Company's expense, except for the Investor's attorneys
fees and underwriting discounts, which shall be borne by the Investor.
g. Underwriting Agreement Governs. In the event the terms of
this Agreement conflict with the terms of any underwriting agreement in
connection with any registration hereunder, the terms of such underwriting
agreement shall control but shall not materially impair or reduce Holder's
rights as granted in this Section 7.
h. Information. If the Investor's Registrable Securities are
to be included in any Registration Statement, the Investor shall furnish to the
Company such information as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification or
compliance referred to in this Agreement.
i. Non-Assignment. The registration rights granted under this
Agreement are non-assignable, and shall become null and void with respect to any
Registrable Securities transferred other than pursuant to a then-effective
Registration Statement, upon such transfer.
j. Indemnification.
(i) Indemnification by Investor. The Investor agrees to
indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Registrable Securities, each person or
entity who controls the Company or such underwriter within the meaning
of Section 15 of the Securities Act, and each other such holder, each
of its officers and directors and each person or entity controlling
such holder within the meaning of Section 15 of the Securities Act,
against all claims, costs, fees (including reasonable attorney's fees),
losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, and its directors,
officers, representatives, underwriters and control persons for any
legal or any other expenses reasonably incurred, as such expenses are
incurred, in connection with investigating or defending any such claim,
loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in reliance upon and in
conformity with written information furnished to the Company by the
Investor or Investor's representative or agent for inclusion in such
registration statement. The Investor's indemnification obligations
hereunder are limited to the amount paid by the Investor for the
Preferred Shares in this Offering, except in cases of Investor's
intentional or willful misconduct.
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(ii) Indemnification by the Company. The Company agrees to
indemnify the Investor against all claims, costs, fees (including
reasonable attorney's fees), losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, and
its directors, officers, representatives, underwriters and control
persons for any legal or any other expenses reasonably incurred, as
such expenses are incurred, in connection with investigating or
defending any such claim, loss, damage, liability or action except to
the extent that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in reliance upon and in
conformity with written information furnished by the Investor or
Investor's representative or agent for inclusion in such registration
statement.
(iii) Indemnification Procedure. Each party entitled to
indemnification under this Section (for the purposes of this Section,
the "Indemnified Party") shall give notice to the party required to
provide indemnification (for the purposes of this Section, the
"Indemnifying Party") after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement, unless the failure to give such
notice is materially prejudicial to an Indemnifying Party's ability to
defend such action, and provided further that the Indemnifying Party
shall not assume the defense for matters as to which there is a
conflict of interest or separate and different defenses. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
k. Contribution. If the indemnification provided for in this
Section 7 is unavailable, then each Indemnifying Party shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Investor on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities, or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Investor, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and
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whether a party breached a representation or warranty or covenant or agreement
contained in this Agreement. The Company and Investor agree that it would not be
just and equitable if contribution were determined by pro rata allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to above. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such claim. Notwithstanding the
provisions of this paragraph, (i) Investor shall not be required to contribute
any amount in excess the amount paid by Investor for Preferred Shares in this
Offering, except in cases of Investor's willful or intentional misconduct, and
(ii) the Company shall not be required to contribute any amount in excess the
total net proceeds actually received by the Company in connection with the
Offering. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
l. Termination. The Company may withdraw the registration
statement earlier than the periods prescribed herein (i) if all of the
Registrable Securities covered by the Registration Statement are sold, or (ii)
such Registrable Securities could be sold pursuant to an exemption from
registration including, without limitation, Rule 144 and Rule 144(k),
promulgated under the Securities Act, as Rule 144 may be subsequently amended,
modified, or supplemented.
8. Miscellaneous.
a. Survival of Warranties. The representations, warranties and
covenants of the Investor contained in this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
b. Successors and Assigns. This Agreement may not be assigned
by any party hereto. The terms and conditions of this Agreement shall inure to
the benefit of, and be binding upon, the respective successors of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto or their respective successors, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
c. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflict of laws thereof.
d. Counterparts; Delivery by Facsimile. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. Delivery
of this Agreement may be effected by facsimile.
e. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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f. Notices. Unless otherwise provided, any notice required or
permitted hereunder shall be given by personal service upon the party to be
notified, by nationwide overnight delivery service or upon deposit with the
United States Post Office, by certified mail, return receipt requested and:
i. if to the Company, addressed to Reality Wireless Networks,
Inc., 0000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxxx, XX 00000 or at
such other address as the Company may designate by notice to each of
the Investors in accordance with the provisions of this Section; and
ii. if to the Investor, at its respective addresses indicated
on the signature pages hereof, or at such other addresses as any one or
more Investors may designate by notice to the Company in accordance
with the provisions of this Section.
g. Expenses. Irrespective of whether a Closing is effected,
the Company and the Investor shall pay all of its own costs and expenses
incurred with respect to the negotiation, execution, delivery and performance of
this Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
h. Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either prospectively or
retroactively), only with the written consent of the Company and a majority in
interest of all of the Investors who have subscribed for Preferred Shares in the
offering the subject of the Memorandum.
i. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provisions shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded, and this Agreement shall be
otherwise enforceable in accordance with its terms.
j. Entire Agreement. This Agreement (including the exhibits
and schedules hereto) constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
The Company: REALITY WIRELESS NETWORKS, INC.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Its: President
The Investor: Name: /s/ Xxxxx Xxxxxxx
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(if applicable)
By (Signature):
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Name (Print):
-------------------------
Title (if applicable):
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Address for Notices:
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Telephone No.:
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Facsimile No.:
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