EXHIBIT 10.3
SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Select Media
Communications, Inc., a New York corporation (the "Company") hereby agrees to
issue and to sell to the Subscriber, 7% Secured Convertible Notes convertible in
accordance with the terms thereof into shares of the Company's $.001 par value
common stock (the "Company Shares") for the aggregate consideration as set forth
on the signature page hereof ("Purchase Price"). The form of Secured Exchange
Convertible Note is annexed hereto as Exhibit A. The form of Secured SMTV
Convertible Note is annexed hereto as Exhibit B. Collectively, the Secured
Exchange Convertible Note and Secured SMTV Convertible Note are referred to as
"Note" or "Notes". (The Company Shares included in the Securities (as
hereinafter defined) are sometimes referred to herein as the "Shares" or "Common
Stock"). (The Notes, the Company Shares, Common Stock Purchase Warrants
("Warrants") issuable to the Subscribers, and the Common Stock issuable upon
exercise of the Warrants are collectively referred to herein as, the
"Securities"). Upon acceptance of this Agreement by the Subscriber, the Company
shall issue and deliver the Note and Warrants against payment, by federal funds
wire transfer of the Purchase Price. The Purchase Price of the Secured Exchange
Convertible Notes will be paid by surrender to the Company of Secured
Convertible Notes and Put Secured Convertible Notes (collectively "Antra Notes")
issued to the Subscriber by Antra Holdings Group, Inc., a Delaware corporation
("Antra"), on or about July 20, 1999, November 19, 1999 and March 2, 2000.
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber
hereby represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been
furnished with the Company's Form 10-KSB for the year ended December 31, 2000 as
filed with the Securities and Exchange Commission (the "Commission") together
with all subsequently filed forms 10-QSB, and other publicly available filings
made with the Commission (hereinafter referred to as the "Reports"). In
addition, the Subscriber has received from the Company such other information
concerning its operations, financial condition and other matters as the
Subscriber has requested in writing (such information in writing is
collectively, the "Other Written Information"), and considered all factors the
Subscriber deems material in deciding on the advisability of investing in the
Securities.
(b) Information on Subscriber. The Subscriber is an
"accredited investor", as such term is defined in Regulation D promulgated by
the Commission under the Securities Act of 1933, as amended (the "1933 Act"), is
experienced in investments and business matters, has made investments of a
speculative nature and has purchased securities of United States publicly-owned
companies in private placements in the past and, with its representatives, has
such knowledge and experience in financial, tax and other business matters as to
enable the Subscriber to utilize the information made available by the Company
to evaluate the merits and risks of and to make an informed investment decision
with respect to the proposed purchase, which represents a speculative
investment. The Subscriber has the authority and is duly and legally qualified
to purchase and own the Securities. The Subscriber is able to bear the risk of
such investment for an indefinite period and to afford a complete loss thereof.
The information set forth on the signature page hereto regarding the Subscriber
is accurate.
(c) Purchase of Note. On the Closing Date, the
Subscriber will purchase the Note for its own account and not with a view to any
distribution thereof.
(d) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act or State Securities laws, by reason of their issuance in a transaction
that does not require registration under the 1933 Act (based in part on the
accuracy of the representations and warranties of Subscriber contained herein),
and that such Securities must be held unless a subsequent disposition is
registered under the 1933 Act or State Securities laws or is exempt from such
registration.
(e) Company Shares Legend. The Company Shares, and
the shares of Common Stock issuable upon the exercise of the Warrants, shall
bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO SELECT MEDIA COMMUNICATIONS, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
(f) Warrants Legend. The Warrants shall bear the
following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SELECT
MEDIA COMMUNICATIONS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(g) Note Legend. The Note shall bear the following
legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO SELECT MEDIA
COMMUNICATIONS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
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(h) Communication of Offer. The offer to sell the
Securities was directly communicated to the Subscriber. At no time was the
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
(i) Correctness of Representations. The Subscriber
represents that the foregoing representations and warranties are true and
correct as of the date hereof and, unless the Subscriber otherwise notifies the
Company prior to the Closing Date (as hereinafter defined), shall be true and
correct as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date.
(j) Authority; Enforceability. This Agreement has
been duly authorized, executed and delivered by the Subscriber and is a valid
and binding agreement enforceable against the Subscriber in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; and the
Subscriber has full corporate power and authority necessary to enter into this
Agreement and to perform its obligations hereunder and all other agreements
entered into by the Subscriber relating hereto.
(k) Consents. No consent, approval, authorization or
order of any court, governmental agency or body or arbitrator having
jurisdiction over the Subscriber, or any of its affiliates, is required for
execution of this Agreement, and all other agreements entered into by the
Subscriber relating thereto, and the performance of the Subscriber's obligations
hereunder.
2. Company Representations and Warranties. The
Company represents and warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdictions of their incorporation
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. The Company and each of its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or financial condition of the
Company.
(b) Outstanding Stock. All issued and outstanding
shares of capital stock of the Company and each of its subsidiaries has been
duly authorized and validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has
been duly authorized, executed and delivered by the Company and is a valid and
binding agreement enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity; and the Company has full
corporate power and authority necessary to enter into this Agreement and to
perform its obligations hereunder and all other agreements entered into by the
Company relating hereto.
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(d) Additional Issuances. Except as set forth on
Schedule 2(d), there are no outstanding agreements or preemptive or similar
rights affecting the Company's common stock or equity and no outstanding rights,
warrants or options to acquire, or instruments convertible into or exchangeable
for, or agreements or understandings with respect to the sale or issuance of any
shares of common stock or equity of the Company or other equity interest in any
of the subsidiaries of the Company except as described in the Reports or Other
Written Information.
(e) Consents. No consent, approval, authorization or
order of any court, governmental agency or body or arbitrator having
jurisdiction over the Company, or any of its affiliates, the NASD, NASDAQ or the
Company's Shareholders is required for execution of this Agreement, and all
other agreements entered into by the Company relating thereto, including,
without limitation issuance and sale of the Securities, and the performance of
the Company's obligations hereunder.
(f) No Violation or Conflict. Assuming the
representations and warranties of the Subscriber in Paragraph 1 are true and
correct and the Subscriber complies with its obligations under this Agreement,
neither the issuance and sale of the Securities nor the performance of its
obligations under this Agreement and all other agreements entered into by the
Company relating thereto by the Company will:
(i) violate, conflict with, result in a
breach of, or constitute a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to constitute a default)
under (A) the certificate of incorporation, charter or bylaws of the Company,
(B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company of any court, governmental
agency or body, or arbitrator having jurisdiction over the Company or any of its
affiliates or over the properties or assets of the Company or any of its
affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its affiliates is a party, by which the Company or any of its affiliates is
bound, or to which any of the properties of the Company or any of its affiliates
is subject, or (D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company, or any of its affiliates
is a party except the violation, conflict, breach, or default of which would not
have a material adverse effect on the Company; or
(ii) result in the creation or imposition of
any lien, charge or encumbrance upon the Securities or any of the assets of the
Company, or any of its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any
security interests, liens, claims or other encumbrances of the Company, subject
to restrictions upon transfer under the 1933 Act and State laws;
(ii) have been, or will be, duly and validly
authorized and on the date of issuance and on the Closing Date, as hereinafter
defined, and the date the Note is converted, and the Warrants are exercised, the
Securities will be duly and validly issued, fully paid and nonassessable (and if
registered pursuant to the 1933 Act, and resold pursuant to an effective
registration statement will be free trading and unrestricted, provided that the
Subscriber complies with the Prospectus delivery requirements);
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(iii) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders of any
securities of the Company; and
(iv) will not subject the holders thereof to
personal liability by reason of being such holders.
(h) Litigation. There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its affiliates that would affect the execution by
the Company or the performance by the Company of its obligations under this
Agreement, and all other agreements entered into by the Company relating hereto.
Except as disclosed in the Reports or Other Written Information, there is no
pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its affiliates which
litigation if adversely determined could have a material adverse effect on the
Company.
(i) Reporting Company. The Company is a publicly-held
company subject to reporting obligations pursuant to Sections 15(d) and 13 of
the Securities Exchange Act of 1934, as amended (the "1934 Act") and has a class
of common shares registered pursuant to Section 12(g) of the 1934 Act. The
Company's common stock is trading on the OTC Bulletin Board ("Bulletin Board").
Pursuant to the provisions of the 1934 Act, the Company has filed all reports
and other materials required to be filed thereunder with the Securities and
Exchange Commission during the preceding twelve months except as set forth in
the Reports.
(j) No Market Manipulation. The Company has not
taken, and will not take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the common stock of the Company to facilitate the
sale or resale of the Securities or affect the price at which the Securities may
be issued.
(k) Information Concerning Company. The Reports
contain all material information relating to the Company and its operations and
financial condition as of their respective dates which information is required
to be disclosed therein. Since the date of the financial statements included in
the Reports, and except as modified in the Other Written Information or in the
Schedule hereto, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the Reports. The
Reports do not contain any untrue statement of a material fact or omit to state
a material fact in light of the circumstances when made required to be stated
therein or necessary to make the statements therein not misleading.
(l) Dilution. The number of Shares issuable upon
conversion of the Notes may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines prior to conversion of the Note. The
Company's executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon conversion of the Note and exercise of the Warrants is
binding upon the Company and enforceable, except as otherwise described in this
Subscription Agreement or the Note, regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company.
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(m)Stop Transfer. The Securities are restricted
securities as of the date of this Agreement. The Company will not issue any stop
transfer order or other order impeding the sale and delivery of the Securities,
except as may be required by federal securities laws.
(n) Defaults. Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation or ByLaws.
Neither the Company nor any of its subsidiaries is (i) in default under or in
violation of any other material agreement or instrument to which it is a party
or by which it or any of its properties are bound or affected, which default or
violation would have a material adverse effect on the Company, (ii) in default
with respect to any order of any court, arbitrator or governmental body or
subject to or party to any order of any court or governmental authority arising
out of any action, suit or proceeding under any statute or other law respecting
antitrust, monopoly, restraint of trade, unfair competition or similar matters,
or (iii) to its knowledge in violation of any statute, rule or regulation of any
governmental authority which violation would have a material adverse effect on
the Company.
(o) No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would cause the offering of
the Securities pursuant to this Agreement to be integrated with prior offerings
by the Company for purposes of the 1933 Act or any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of OTC Bulletin Board ("Bulletin Board") nor will the Company or any
of its affiliates or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings. The Company
has not conducted and will not conduct any offering other than the transactions
contemplated hereby that will be integrated with the issuance of the Securities.
(p) No General Solicitation. Neither the Company, nor
any of its affiliates, nor to its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Act) in connection with the offer
or sale of the Securities.
(q) Listing. The Company's common stock is quoted on,
and listed for trading on the OTC Bulletin Board. Except as disclosed in the
Other Written Information, the Company has not received any oral or written
notice that its Common Stock will be delisted from the Bulletin Board or that
the Common Stock does not meet all requirements for the continuation of such
listing.
(r) No Undisclosed Liabilities. The Company has no
liabilities or obligations which are material, individually or in the aggregate,
which are not disclosed in the Reports and Other Written Information, other than
those incurred in the ordinary course of the Company's businesses since June 30,
2001 and which, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the Company's financial condition.
(s) No Undisclosed Events or Circumstances. Since
June 30, 2001, no event or circumstance has occurred or exists with respect to
the Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.
(t) Capitalization. The authorized and outstanding
capital stock of the Company as of the date of this Agreement and the Closing
Date are set forth on Schedule 2(t) hereto. Except as set forth in the Reports
and Other Written Information and Schedule 2(t), there are no options, warrants,
or rights to subscribe to, securities, rights or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares of capital
stock of the Company. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
nonassessable.
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(u) Correctness of Representations. The Company
represents that the foregoing representations and warranties are true and
correct as of the date hereof in all material respects, will be true and correct
as of the Closing Date in all material respects, and, unless the Company
otherwise notifies the Subscriber prior to the Closing Date, shall be true and
correct in all material respects as of the Closing Date. The foregoing
representations and warranties shall survive the Closing Date.
3. Regulation D Offering. This Offering is being made pursuant
to the exemption from the registration provisions of the Securities Act of 1933,
as amended, afforded by Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion reasonably acceptable to
Subscriber from the Company's legal counsel opining on the availability of the
Regulation D exemption as it relates to the offer and issuance of the
Securities. A form of the legal opinion is annexed hereto as Exhibit C. The
Company will provide, at the Company's expense, such other legal opinions in the
future as are reasonably necessary for the conversion of the Note and exercise
of the Warrants.
4. Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Sections 1(e) and 1(f) above at such time as (a) the holder thereof is permitted
to and disposes of such Securities pursuant to Rule 144(d) and/or Rule 144(k)
under the 1933 Act in the opinion of counsel reasonably satisfactory to the
Company, or (b) upon resale subject to an effective registration statement after
the Securities are registered under the 0000 Xxx. The Company agrees to
cooperate with the Subscriber in connection with all resales pursuant to Rule
144(d) and Rule 144(k) and provide legal opinions necessary to allow such
resales provided the Company and its counsel receive all reasonably requested
written representations from the Subscriber and selling broker, if any. Provided
the Subscriber provides required certifications and representation letters, if
any, if the Company fails to remove any legend as required by this Section 4 (a
"Legend Removal Failure"), then beginning on the tenth (10th) day following the
date that the Subscriber has requested the removal of the legend and delivered
all items reasonably required by the Company to be delivered by the Subscriber,
the Company continues to fail to remove such legend, the Company shall pay to
each Subscriber or assignee holding shares subject to a Legend Removal Failure
an amount equal to one percent (1%) of the Purchase Price of the shares subject
to a Legend Removal Failure per day that such failure continues. If during any
twelve (12) month period, the Company fails to remove any legend as required by
this Section 4 for an aggregate of forty-five (45) days, each Subscriber or
assignee holding Securities subject to a Legend Removal Failure may, at its
option, require the Company to purchase all or any portion of the Securities
subject to a Legend Removal Failure held by such Subscriber or assignee at a
price per share equal to 120% of the applicable Purchase Price.
5. Redemption. The Company may not redeem the Securities
without the consent of the holder of the Securities except as otherwise
described herein.
6. Fees/Warrants.
(a) The Company shall pay to counsel to the
Subscriber its fees of $10,000 for services rendered to Subscribers in
connection with this Agreement and the other Subscription Agreements for
aggregate subscription amounts of up to $7,000,000 of principal amount of
Secured Exchange Convertible Notes and up to $250,000 of Secured SMTV
Convertible Notes (the "Offering") and acting as escrow agent for the Offering.
The Company will pay to the Finders identified on Schedule D hereto a cash fee
equal to 7% of the Purchase Price of the Secured SMTV Convertible Notes as
designated on Schedule D ("Finder's Fee"). The Finder's Fee must be paid on the
Purchase Price Closing Date. The legal fees will be paid on the Purchase Price
Closing Date out of funds held pursuant to a Funds Escrow Agreement to be
entered into by the Company, Subscriber and Escrow Agent.
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(b) The Company will also issue and deliver on the
Closing Date to the Subscribers to the Secured Exchange Convertible Notes,
Warrants in the amounts designated on the signature page hereto. A form of
Warrant is annexed hereto as Exhibit E. The per share "Purchase Price" of Common
Stock as defined in the Warrant shall be $2.50. The Warrants shall be
exercisable for five years after the Issue Date (as defined in the Warrant).
(c) All the representations, covenants, warranties,
undertakings, remedies, liquidated damages, indemnification, rights in Section 9
hereof, and other rights including but not limited to registration rights made
or granted to or for the benefit of the Subscriber are hereby also made and
granted to the Subscribers in respect of the Warrants and Company Shares
issuable upon exercise of the Warrants.
(d) The Company on the one hand, and the Subscriber
on the other hand, agree to indemnify the other against and hold the other
harmless from any and all liabilities to any other persons claiming brokerage
commissions or finder's fees except as identified on Schedule D hereto on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party's actions. Except as set forth
on Schedule D hereto, the Company represents that there are no other parties
entitled to receive fees, commissions, or similar payments in connection with
the offering described in the Subscription Agreement.
7.1 Covenants of the Company. The Company covenants and agrees
with the Subscriber as follows:
(a) The Company will advise the Subscriber, promptly
after it receives notice of issuance by the Securities and Exchange Commission,
any state securities commission or any other regulatory authority of any stop
order or of any order preventing or suspending any offering of any securities of
the Company, or of the suspension of the qualification of the Common Stock of
the Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b) The Company shall promptly secure the listing of
the Company Shares, and Common Stock issuable upon the exercise of the Warrants
upon each national securities exchange, or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain such listing so long as any Notes are outstanding.
The Company will maintain the listing of its Common Stock on the Bulletin Board,
the NASDAQ SmallCap Market, NASDAQ National Market System, American Stock
Exchange, or New York Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Common Stock (the "Principal
Market"), and will comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable. The Company will
provide the Subscriber copies of all notices it receives notifying the Company
of the threatened and actual delisting of the Common Stock from any Principal
Market.
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(c) The Company shall notify the SEC, NASD, the
Principal Market and applicable state authorities, in accordance with their
requirements, if any, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscriber and promptly provide copies thereof
to Subscriber.
(d) From the Closing Date and until at least two (2)
years after the effectiveness of the Registration Statement on Form X-0, XX-0 or
such other Registration Statement described in Section 10.1(iv) hereof, the
Company will (i) cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, (ii) comply in all respects with
its reporting and filing obligations under the Exchange Act, (iii) comply with
all reporting requirements that is applicable to an issuer with a class of
Shares registered pursuant to Section 12(g) of the Exchange Act, and (iv) comply
with all requirements related to any registration statement filed pursuant to
this Agreement. The Company will use its reasonable best efforts not to take any
action or file any document (whether or not permitted by the Act or the Exchange
Act or the rules thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under said Acts until
the later of two (2) years after the actual effective date of the Registration
Statement on Form X-0, XX-0 or such other Registration Statement described in
Section 10.1(iv) hereof. Until the earlier of the resale of the Shares by the
Subscriber or at least two (2) years after the Warrants have been exercised, the
Company will use its commercial best efforts to continue the listing of the
Common Stock on the Bulletin Board and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the NASD and NASDAQ.
(e) The Company undertakes to use the proceeds of the
Secured SMTV Convertible Note Purchase Price for working capital for Antra
Holdings Group, Inc. or Antra's subsidiaries, which will be subsidiaries of the
Company as of the Closing.
(f) The Company undertakes to reserve, from its
authorized but unissued Common Stock from July 1, 2002 and thereafter, for such
time that the Note or Warrants remain outstanding, a number of Common Shares
equal to not less than 175% of the amount of Common Shares necessary to allow
Subscriber to be able to convert all its outstanding Note, at the then
applicable Conversion Price (such amount being the "Required Reserve"), and one
Common Share for each Common Share issuable upon exercise of the Warrants. It
shall be deemed an Event of Default under the Note if at any time prior to July
1, 2002 there are less than 11,000,000 Common Shares reserved pro rata for all
Subscribers to the Offering, for issuance upon conversion of the Notes and
exercise of the Warrants. At the Subscriber's written request, Common Stock
reserved for issuance upon exercise of Warrants will be allocated for issuance
upon conversion of Notes held by the Subscriber or any other Subscriber to the
Offering. The Company undertakes to amend its Certificate of Incorporation no
later than July 1, 2002 to increase its authorized but unissued Common Stock and
to reserve the Required Reserve by July 1, 2002.
(g) The Company covenants and agrees that it will not
request the effectiveness of any registration statement prior to the
effectiveness of the Registration Statement described in Section 10.1(iv) to be
filed on behalf of the Subscriber and other Subscribers to the Offering.
7.2 Covenant of the Subscriber. Provided an Event of Default
(as defined in the Note) has not occurred, the Subscriber agrees for himself
only that until four years after the Closing Date, the Subscriber will sell
common stock of the Company not more than the greater of (i) on any trading day
15% of the trading volume of the Common Stock as reported by the Principal
Market for such trading day, and (ii) during any five consecutive trading days
not more than 15% of the trading volume of the Common Stock as reported by the
Principal Market for such five consecutive trading days. For purposes of this
Section 7.2, "short sales" will be considered sales subject to the foregoing
sales limitation.
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8. Covenants of the Company and Subscriber Regarding
Indemnification.
(a) The Company agrees to indemnify, hold harmless,
reimburse and defend Subscriber, Subscriber's officers, directors, agents,
affiliates, control persons, and principal shareholders, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon Subscriber or any such person
which results, arises out of or is based upon (i) any material misrepresentation
by Company or breach of any warranty by Company in this Agreement or in any
Exhibits or Schedules attached hereto, or other agreement delivered pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any breach or
default in performance by the Company of any covenant or undertaking to be
performed by the Company hereunder, or any other agreement entered into by the
Company and Subscribers relating hereto.
(b) Subscriber agrees to indemnify, hold harmless,
reimburse and defend the Company and each of the Company's officers, directors,
agents, affiliates, control persons against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company or any such person which results, arises
out of or is based upon (i) any material misrepresentation by Subscriber in this
Agreement or in any Exhibits or Schedules attached hereto, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice and/or cure
periods, any breach or default in performance by Subscriber of any covenant or
undertaking to be performed by Subscriber hereunder, or any other agreement
entered into by the Company and Subscribers relating hereto.
(c) The procedures set forth in Section 10.6 shall
apply to the indemnifications set forth in Sections 8(a) and 8(b) above.
9.1. Conversion of Note.
(a) Upon the conversion of the Note or part thereof,
the Company shall, at its own cost and expense, take all necessary action
(including the issuance of an opinion of counsel) to assure that the Company's
transfer agent shall issue stock certificates in the name of Subscriber (or its
nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of shares of
common stock issuable upon such conversion. The Company warrants that no
instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that the Shares will be
unlegended, free-trading, and freely transferable, and will not contain a legend
restricting the resale or transferability of the Company Shares provided the
Shares are being sold pursuant to an effective registration statement covering
the Shares to be sold or are otherwise exempt from registration when sold as
stated in an opinion of counsel reasonably satisfactory to the Company and
Subscriber complies with prospectus delivery requirements.
(b) Subscriber will give notice of its decision to
exercise its right to convert the Note or part thereof by telecopying an
executed and completed Notice of Conversion (as defined in the Note) to the
Company via confirmed telecopier transmission. The Subscriber will not be
required to surrender the Note until the Note has been fully converted or
satisfied. Each date on which a Notice of Conversion is telecopied to the
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Company will or cause the transfer agent to transmit the Company's
Common Stock certificates representing the Shares issuable upon conversion of
the Note to the Subscriber via express courier for receipt by such Subscriber
within five (5) business days after receipt by the Company of the Notice of
Conversion (the "Delivery Date"). A Note representing the balance of the Note
not so converted will be provided to the Subscriber, if requested by Subscriber
provided an original Note is delivered to the Company. To the extent that a
Subscriber elects not to surrender a Note for reissuance upon partial payment or
conversion, the Subscriber hereby indemnifies the Company against any and all
loss or damage attributable to a third-party claim in an amount in excess of the
actual amount then due under the Note.
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(c) The Company understands that a delay in the
delivery of the Shares in the form required pursuant to Section 9 hereof, or the
Mandatory Redemption Amount described in Section 9.2 hereof, beyond the Delivery
Date or Mandatory Redemption Payment Date (as hereinafter defined) could result
in economic loss to the Subscriber. As compensation to the Subscriber for such
loss, the Company agrees to pay late payments to the Subscriber for late
issuance of Shares in the form required pursuant to Section 9 hereof upon
Conversion of the Note or late payment of the Mandatory Redemption Amount, in
the amount of $100 per business day after the Delivery Date or Mandatory
Redemption Payment Date, as the case may be, for each $10,000 of Note principal
amount being converted or redeemed. The Company shall pay any payments incurred
under this Section in immediately available funds upon demand. Furthermore, in
addition to any other remedies which may be available to the Subscriber, in the
event that the Company fails for any reason to effect delivery of the Shares by
the Delivery Date or make payment by the Mandatory Redemption Payment Date, the
Subscriber will be entitled to revoke all or part of the relevant Notice of
Conversion or rescind all or part of the notice of Mandatory Redemption by
delivery of a notice to such effect to the Company whereupon the Company and the
Subscriber shall each be restored to their respective positions immediately
prior to the delivery of such notice, except that late payment charges described
above shall be payable through the date notice of revocation or rescission is
given to the Company.
(d) Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest or dividends required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Subscriber and thus refunded
to the Company.
9.2. Mandatory Redemption. In the event the Company is
prohibited from issuing Shares, or fails to timely deliver Shares on a Delivery
Date, or upon the occurrence of any other Event of Default (as defined in the
Note) or for any reason other than pursuant to the limitations set forth in
Section 9.3 hereof, then at the Subscriber's election, the Company must pay to
the Subscriber ten (10) business days after request by the Subscriber or on the
Delivery Date (if requested by the Subscriber) a sum of money determined by (i)
multiplying up to the outstanding principal amount of the Note designated by the
Subscriber by 115%, or (ii) multiplying the number of Shares otherwise
deliverable upon conversion of an amount of Note principal and/or interest
designated by the Subscriber (with the date of giving of such designation being
a Deemed Conversion Date) at the then Conversion Price that would be in effect
on the Deemed Conversion Date by the highest closing price of the Common Stock
on the Principal Market from the Deemed Conversion Date until the day prior to
the receipt of the Mandatory Redemption Payment, whichever is greater, together
with accrued but unpaid interest thereon ("Mandatory Redemption Payment"). The
Mandatory Redemption Payment must be received by the Subscriber on the same date
as the Company Shares otherwise deliverable or within ten (10) business days
after request, whichever is sooner ("Mandatory Redemption Payment Date"). Upon
receipt of the Mandatory Redemption Payment, the corresponding Note principal
and interest will be deemed paid and no longer outstanding.
9.3. Maximum Conversion. The Subscriber shall not be entitled
to convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Subscriber and its
affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Subscriber and its affiliates of more than 9.99% of
the outstanding shares of Common Stock of the Company on such Conversion Date.
For the purposes of the provision to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 9.99% and aggregate conversion by the Subscriber may exceed
9.99%. The Subscriber may void the conversion limitation described in this
Section 9.3 upon 75 days prior written notice to the Company. The Subscriber may
allocate which of the equity of the Company deemed beneficially owned by the
Subscriber shall be included in the 9.99% amount described above and which shall
be allocated to the excess above 9.99%.
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9.4. Injunction - Posting of Bond. In the event a Subscriber
shall elect to convert a Note or part thereof, the Company may not refuse
conversion based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law, or for
any other reason, unless, an injunction from a court, on notice, restraining and
or enjoining conversion of all or part of said Note shall have been sought and
obtained and the Company posts a surety bond for the benefit of such Subscriber
in the amount of 130% of the amount of the Note, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Subscriber to the extent Subscriber obtains judgment.
9.5. Buy-In. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if ten (10) days
after the Delivery Date the Subscriber purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
such Subscriber of the Common Stock which the Subscriber anticipated receiving
upon such conversion (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored, together with interest thereon
at a rate of 12% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if the Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of $10,000 of note principal and/or interest, the
Company shall be required to pay the Subscriber $1,000, plus interest. The
Subscriber shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In. The delivery date by which
Common Stock must be delivered pursuant to this Section 9.5 shall be tolled for
the amount of days that the Subscriber does not deliver information reasonably
requested by the Company's transfer agent.
9.6 Adjustments. The Conversion Price and amount of Shares
issuable upon conversion of the Notes shall be adjusted to offset the effect of
stock splits, stock dividends and pro rata distributions of property or equity
interests to the Company's shareholders.
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9.7. Optional Redemption. The Company will have the option of
redeeming any portion of the outstanding Secured Exchange Convertible Notes
("Optional Redemption") by paying to the Subscriber a sum of money equal to 115%
of the principal amount of the Exchange Convertible Note together with accrued
but unpaid interest thereon and any and all other sums due, accrued or payable
to the Subscriber arising under this Subscription Agreement relating to the
Exchange Convertible Note, the Exchange Convertible Note or any other document
delivered herewith ("Redemption Amount") outstanding on the day notice of
redemption ("Notice of Redemption) is given to a Subscriber ("Redemption Date").
A Notice of Redemption may not be given in connection with any portion of
Secured Exchange Convertible Note for which notice of conversion has been given
by the Subscriber at any time before receipt of a Notice of Redemption. The
Subscriber may elect within five (5) business days after receipt of a Notice of
Redemption to give the Company Notice of Conversion in connection with some or
all of the Exchange Convertible Note principal and interest which was the
subject of the Notice of Redemption provided the Conversion Price elected by the
Subscriber is the Maximum Base Price set forth in Section 2.1(b)(i) of the
Exchange Convertible Note. A Notice of Redemption must be accompanied by a
certificate signed by the chief executive officer or chief financial officer of
the Company stating that the Company has on deposit and segregated ready funds
equal to the Redemption Amount. The Redemption Amount must be paid in good funds
to the Subscriber no later than the seventh (7th) business day after the
Redemption Date ("Optional Redemption Payment Date"). In the event the Company
fails to pay the Redemption Amount by the Optional Redemption Payment Date, then
the Redemption Notice will be null and void and the Company will thereafter have
no further right to effect an Optional Redemption, and at the Subscription's
election, the Redemption Amount will be deemed a Mandatory Redemption Payment
and the Optional Redemption Payment Date will be deemed a Mandatory Redemption
Payment Date. Such failure will also be deemed an Event of Default under the
Notes. Any Notice of Redemption must be given to all holders of Secured Exchange
Convertible Notes issued in connection with the Offering, in proportion to their
holdings of Exchange Convertible Note principal on a Redemption Date. A Notice
of Redemption may be given by the Company, provided (i) no Event of Default, as
described in the Notes shall have occurred or be continuing and (ii) the Company
Shares issuable upon conversion of the entire outstanding Note principal are
included for unrestricted resale in a registration statement effective as of the
Redemption Date. Purchase Price proceeds may not be used to effect an Optional
Redemption.
9.8. Redemption. The Company may not redeem or call the Note
without the consent of the holder of the Securities except as otherwise
described herein.
10.1. Registration Rights. The Company hereby grants the
following registration rights to holders of the Securities.
(i) On one occasion, for a period commencing one year
after the Purchase Price Closing Date, but not later than three years after the
Purchase Price Closing Date ("Request Date"), the Company, upon a written
request therefor from any record holder or holders of more than 50% of the
aggregate of the Company's Shares issued and issuable upon Conversion of the
Notes (the Common Stock issued or issuable upon conversion of the Notes or
issuable by virtue of ownership of the Note, and one share of Common Stock for
each Share issuable upon exercise of the Warrants being, the "Registrable
Securities"), shall prepare and file with the SEC a registration statement under
the Act covering the Registrable Securities which are the subject of such
request, unless such Registrable Securities are the subject of an effective
registration statement or included for registration in a pending registration
statement. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of the Registrable
Securities that such registration statement is to be filed and shall include in
such registration statement Registrable Securities for which it has received
written requests within 10 days after the Company gives such written notice.
Such other requesting record holders shall be deemed to have exercised their
demand registration right under this Section 10.1(i). As a condition precedent
to the inclusion of Registrable Securities, the holder thereof shall provide the
Company with such information as the Company reasonably requests. The obligation
of the Company under this Section 10.1(i) shall be limited to one registration
statement.
13
(ii) If the Company at any time proposes to register
any of its securities under the Act for sale to the public, whether for its own
account or for the account of other security holders or both, except with
respect to registration statements on Forms X-0, X-0 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale by
the Subscriber or Holder pursuant to an effective registration statement, each
such time it will give at least 25 days' prior written notice to the record
holder of the Registrable Securities of its intention so to do. Upon the written
request of the holder, received by the Company within 15 days after the giving
of any such notice by the Company, to register any of the Registrable
Securities, the Company will cause such Registrable Securities as to which
registration shall have been so requested to be included with the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent required to permit the sale or other disposition of the
Registrable Securities so registered by the holder of such Registrable
Securities (the "Seller"). In the event that any registration pursuant to this
Section 10.1(ii) shall be, in whole or in part, an underwritten public offering
of common stock of the Company, the number of shares of Registrable Securities
to be included in such an underwriting may be reduced by the managing
underwriter if and to the extent that the Company and the underwriter shall
reasonably be of the opinion that such inclusion would adversely affect the
marketing of the securities to be sold by the Company therein; provided,
however, that the Company shall notify the Seller in writing of any such
reduction. Notwithstanding the foregoing provisions, or Section 10.4 hereof, the
Company may withdraw or delay or suffer a delay of any registration statement
referred to in this Section 10.1(ii) without thereby incurring any liability to
the Seller.
(iii) If, at the time any written request for
registration is received by the Company pursuant to Section 10.1(i), the Company
has determined to proceed with the actual preparation and filing of a
registration statement under the 1933 Act in connection with the proposed offer
and sale for cash of any of its securities for the Company's own account, such
written request shall be deemed to have been given pursuant to Section 10.1(ii)
rather than Section 10.1(i), and the rights of the holders of Registrable
Securities covered by such written request shall be governed by Section
10.1(ii).
(iv) The Company shall file with the Commission not
later than March 4, 2002 (the "Filing Date"), and use its reasonable commercial
efforts to cause to be declared effective a Form S-1 or SB-2 registration
statement (or such other form that it is eligible to use) in order to register
the Registrable Securities for resale and distribution under the Act. The
registration statement described in this paragraph must be declared effective by
the Commission ("Effective Date") by the later of (i) sixty (60) days after the
Filing Date, or (ii) forty-five (45) days after the filing of an amendment to
such registration statement or other written response, responsive to letters of
comment from the SEC received with respect to the filing of such registration
statement or amendment thereto (the "SEC comments"), provided that the Company's
obligation hereunder shall be deemed satisfied and the Effective Date
continuously deferred if the Company shall file an amendment or written response
in good faith responsive to the SEC Comments within fourteen (14) days after
receipt thereof by the Company. Otherwise, the Effective Date shall be
forty-five (45) days after receipt by the Company of the SEC Comments. The
Company will register not less than a number of shares of Common Stock in the
aforedescribed registration statement that is equal to 200% of the Company
Shares issuable at the Conversion Price that would be in effect on the Purchase
Price Closing Date, the Exchange Closing Date, or the date of filing of such
registration statement (employing the Conversion Price which would result in the
greater number of Shares), assuming the conversion of 100% of the Notes and one
share of Common Stock for each of the shares issuable upon exercise of the
Warrants. The Registrable Securities shall be reserved and set aside exclusively
for the benefit of the Subscriber, and not issued, employed or reserved for
anyone other than the Subscriber. Such registration statement will immediately
be amended or additional registration statements will be immediately filed by
the Company as necessary to register additional Company Shares to allow the
public resale of all Common Stock included in and issuable by virtue of the
Registrable Securities. No securities of the Company other than the Registrable
Securities will be included in the registration statement described in this
Section 10.1(iv) except as described on Schedule 10.1.
14
10.2. Registration Procedures. If and whenever the Company is
required by the provisions hereof to effect the registration of any shares of
Registrable Securities under the Act, the Company will, as expeditiously as
possible:
(a) prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for the
period of the distribution contemplated thereby (determined as herein provided),
and promptly provide to the holders of Registrable Securities ("Sellers") copies
of all filings and Commission letters of comment;
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective until the latest of: (i) twelve months after the latest
Maturity Date of a Note; (ii) thirty months after the Closing Date; or (iii)
until such registration statement has been effective for a period of not less
than 270 days, and comply with the provisions of the Act with respect to the
disposition of all of the Registrable Securities covered by such registration
statement in accordance with the Seller's intended method of disposition set
forth in such registration statement for such period;
(c) furnish to the Seller, such number of copies of
the registration statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement;
(d) use its best efforts to register or qualify the
Seller's Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller, provided,
however, that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction;
(e) list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify the Seller when a prospectus
relating thereto is required to be delivered under the Act, of the happening of
any event of which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(g) make available for inspection by the Seller, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, attorney,
accountant or agent in connection with such registration statement.
15
10.3. Provision of Documents.
(a) At the request of the Seller, provided a demand
for registration has been made pursuant to Section 10.1(i) or a request for
registration has been made pursuant to Section 10.1(ii), the Registrable
Securities will be included in a registration statement filed pursuant to this
Section 10.
(b) In connection with each registration hereunder,
the Seller will furnish to the Company in writing such information and
representation letters with respect to itself and the proposed distribution by
it as reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws. In connection with each registration
pursuant to Section 10.1(i) or 10.1(ii) covering an underwritten public
offering, the Company and the Seller agree to enter into a written agreement
with the managing underwriter in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
10.4. Non-Registration Events. The Company and the Subscriber
agree that the Seller will suffer damages if any registration statement required
under Section 10.1(i) above is not filed within 30 days after written request by
the Holder and not declared effective by the Commission within 90 days after
such request [or the Filing Date and Effective Date, respectively, in reference
to the Registration Statement on Form S-1 or SB-2 or such other form described
in Section 10.1(iv)], and maintained in the manner and within the time periods
contemplated by Section 10 hereof, and it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if (i) the Registration
Statement described in Section 10.1(i) is not filed within 30 days of such
written request, or is not declared effective by the Commission on or prior to
the date that is 90 days after such request, or (ii) the registration statement
on Form X-0, XX-0 or such other form described in Section 10.1(iv) is not filed
on or before the Filing Date or not declared effective on or before the sooner
of the Effective Date, or within five business days of receipt by the Company of
a written or oral communication from the Commission that the registration
statement described in Section 10.1(iv) will not be reviewed, or (iii) any
registration statement described in Sections 10.1(i), or 10.1(iv) is filed and
declared effective but shall thereafter cease to be effective (without being
succeeded immediately by an additional registration statement filed and declared
effective) for a period of time which shall exceed 30 days in the aggregate per
year but not more than 20 consecutive calendar days (defined as a period of 365
days commencing on the date the Registration Statement is declared effective)
(each such event referred to in clauses (i), (ii) and (iii) of this Section 10.4
is referred to herein as a "Non-Registration Event"), then, for so long as such
Non-Registration Event shall continue, the Company shall pay, at the
Subscriber's option, in cash or stock at the applicable Conversion Price, as
Liquidated Damages to each holder of any Registrable Securities an amount equal
to two (2%) percent per month or part thereof for each month or part thereof
thereafter during the pendency of such Non-Registration Event, of the principal
of the Notes issued in connection with the Offering, whether or not converted,
then owned of record by such holder or issuable as of or subsequent to the
occurrence of such Non-Registration Event. Payments to be made pursuant to this
Section 10.4 shall be due and payable within ten (10) business days after demand
in immediately available funds. In the event a Mandatory Redemption Payment is
demanded from the Company by the Holder pursuant to Section 9.2 of this
Subscription Agreement, then the Liquidated Damages described in this Section
10.4 shall no longer accrue on the portion of the Purchase Price underlying the
Mandatory Redemption Payment, from and after the date the Holder receives the
Mandatory Redemption Payment. It shall also be deemed a Non-Registration Event
if at any time a Note is outstanding subsequent to June 30, 2002, there is less
than 125% of the amount of Common Shares necessary to allow full conversion of
such Note at the then applicable Conversion Price registered for unrestricted
resale in an effective registration statement.
16
10.5. Expenses. All expenses incurred by the Company in
complying with Section 10, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and costs
of insurance are called "Registration Expenses". All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities, including
any fees and disbursements of any special counsel to the Seller, are called
"Selling Expenses". The Seller shall pay the fees of its own additional counsel,
if any. The Company will pay all Registration Expenses in connection with the
registration statement under Section 10. All Selling Expenses in connection with
each registration statement under Section 10 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable
Securities under the Act pursuant to Section 10, the Company will indemnify and
hold harmless the Seller, each officer of the Seller, each director of the
Seller, each underwriter of such Registrable Securities thereunder and each
other person, if any, who controls such Seller or underwriter within the meaning
of the 1933 Act, against any losses, claims, damages or liabilities, joint or
several, to which the Seller, or such underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
was registered under the Act pursuant to Section 10, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances when made, and
will reimburse the Seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company shall not be liable to the Seller to
the extent that any such damages arise out of or are based upon an untrue
statement or omission made in any preliminary prospectus if (i) the Seller
failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the
Registrable Securities under the Act pursuant to Section 10, the Seller will
indemnify and hold harmless the Company, and each person, if any, who controls
the Company within the meaning of the Act, each officer of the Company who signs
the registration statement, each director of the Company, each underwriter and
each person who controls any underwriter within the meaning of the Act, against
all losses, claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Act pursuant to Section 10, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the gross proceeds received by the Seller from the sale of Registrable
Securities covered by such registration statement.
17
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 10.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 10.6(c), except and only if and to
the extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 10.6(c)
for any legal expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of investigation
and of liaison with counsel so selected, provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified parties shall have the right to
select one separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable
contribution in the event of joint liability under the Act in any case in which
either (i) the Seller, or any controlling person of the Seller, makes a claim
for indemnification pursuant to this Section 10.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10.6 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of the
Seller or controlling person of the Seller in circumstances for which
indemnification is provided under this Section 10.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Seller is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (y) the Seller will not be required to
contribute any amount in excess of the public offering price of all such
securities offered by it pursuant to such registration statement; and (z) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 10(f) of the Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
18
11. Security Interest. The Subscribers will be granted a
security interest in certain assets of the Company to be memorialized in a
Security Agreement. The Company will execute Forms UCC-1 to be filed at the
Company's expense with such states and counties designated by the Subscribers.
The Company will also execute all such documents reasonably necessary in the
opinion of Subscriber to memorialize and further protect the security interest
described above.
12. Miscellaneous.
(a) Notices. All notices or other communications
given or made hereunder shall be in writing and shall be personally delivered or
deemed delivered the first business day after being telecopied (provided that a
copy is delivered by first class mail) to the party to receive the same at its
address set forth below or to such other address as either party shall hereafter
give to the other by notice duly made under this Section: (i) if to the Company,
to Select Media Communications, Inc., 000 Xxxxxxx Xxxxxx, Xxxxx 0000,Xxx Xxxx,
XX 00000, telecopier number: (000) 000-0000, with a copy by telecopier only to:
Wolf, Block, Xxxxxx & Xxxxx-Xxxxx, 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000, Attn: Xxxxxx Bring, Esq., telecopier number: (000) 000-0000, and (ii) if
to the Subscriber, to the name, address and telecopy number set forth on the
signature page hereto, with a copy by telecopier only to Grushko & Xxxxxxx,
P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, telecopier number:
(000) 000-0000. Any notice that may be given pursuant to this Agreement, or any
document delivered in connection with the foregoing may be given by the
Subscriber on the first business day after the observance dates in the United
States of America by Orthodox Jewry of Rosh Hashanah, Yom Kippur, the first two
days of the Feast of Tabernacles, Shemini Atzeret, Simchat Torah, the first two
and final two days of Passover and Pentecost, with such notice to be deemed
given and effective, at the election of the Subscriber on a holiday date that
precedes such notice. Any notice received by the Subscriber on any of the
aforedescribed holidays may be deemed by the Subscriber to be received and
effective as if such notice had been received on the first business day after
the holiday.
(b) Closing. The consummation of the transactions
contemplated herein shall take place at the offices of Grushko & Xxxxxxx, P.C.,
000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of
all conditions to Closing set forth in this Agreement. The closing date in
connection with the SMTV Convertible Note and Warrants shall be the date that
subscriber funds representing the net amount due the Company from the Purchase
Price are transmitted by wire transfer to the Company (the "Purchase Price
Closing Date"). The closing date in connection with the Secured Exchange
Convertible Notes shall be the soonest of (i) the first business day following
the merger of Antra into the Company; (ii) the date of release to the
Subscribers from escrow by the Escrow Agent referred to in Section 6 above after
request by Subscribers holding the right to receive not less than 51% of the
principal amount of the Secured Exchange Convertible Notes; or (iii) one year
after the Purchase Price Closing Date ("Exchange Closing Date"). The foregoing
closing dates are referred to herein collectively as "Closing Date".
(c) Entire Agreement; Assignment. This Agreement
represents the entire agreement between the parties hereto with respect to the
subject matter hereof and may be amended only by a writing executed by both
parties. No right or obligation of either party shall be assigned by that party
without prior notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by
facsimile transmission, and in counterparts, each of which will be deemed an
original.
19
(e) Law Governing this Agreement. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to principles of conflicts of laws. Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction.
The Company and Subscriber acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 12(e) hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(g) Confidentiality. The Company agrees that it will
not disclose publicly or privately the identity of the Subscriber unless
expressly agreed to in writing by the Subscriber or only to the extent required
by law.
(h) Automatic Termination. This Agreement shall
automatically terminate without any further action of either party hereto if the
Closing shall not have occurred by the tenth (10th) business day following the
date this Agreement is accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
20
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
SELECT MEDIA COMMUNICATIONS, INC.
A New York Corporation
By: /s/ Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman & CEO
Dated: November 16, 2001
SUBSCRIBERS
------------------------------------------------------- ----------------------- ------------------------- ----------------------
Purchase Price of
/s/ Secured SMTV
------------------------------------ Convertible Notes
(Signature) (cash): $222,500.00
ALPHA CAPITAL AKTIENGESELLSCHAFT
Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Xxxxx, Lichtenstein
Fax: 000-00-00000000
------------------------------------------------------- ----------------------- ------------------------- ----------------------
Purchase Price of Purchase Price of Warrants to Purchase
/s/ Secured SMTV Secured Exchange 38,100 Common Shares
------------------------------------ Convertible Notes Convertible Notes
(Signature) (cash): $11,550.00 payable by surrender of
UNITED SECURITIES SERVICES, INC. "Antra Notes" in the
000 Xxxx 00xx Xxxxxx, Xxxxx 0000 principal amount of
Xxx Xxxx, XX 00000 $175,846.00 for which
Fax: 000-000-0000 Secured Exchange
Convertible Notes having
a principal amount of
$265,527.00 will be
issued.
------------------------------------------------------- ----------------------- ------------------------- ----------------------
21
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
SELECT MEDIA COMMUNICATIONS, INC.
A New York Corporation
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman & CEO
Dated: November 16, 2001
------------------------------------------------------- ----------------------- ------------------------- ----------------------
SUBSCRIBERS
------------------------------------------------------- ----------------------- ------------------------- ----------------------
Purchase Price of Purchase Price of Warrants to Purchase
/s/ Secured SMTV Secured Exchange 50,820 Common Shares
------------------------------------ Convertible Notes Convertible Notes
(Signature) (cash): $15,950.00 payable by surrender of
NESHER LTD. "Antra Notes" in the
Xxxxxxx Xxxxx, 00 Xxxx Xxxx principal amount of
Douglas, Isle of Man $234,547 for xxxxx
0X0 0X0, Xxxxxx Xxxxxxx Secured Exchange
Fax: 000-00-0000-000000 Convertible Notes
having a principal
amount of $354,166.00
will be issued.
------------------------------------------------------- ----------------------- ------------------------- ----------------------
Purchase Price of Warrants to Purchase
/s/ Secured Exchange 438,360 Common Shares
------------------------------------ Convertible Notes
(Signature) Convertible Notes
AUSTOST ANSTALT XXXXXX payable by surrender of
7440 Fuerstentum "Antra Notes" in the
Xxxxxxxxxxx, Xxxxxxxxxxx 000 principal amount of
Fax: 000-000-000000000 $2,022,940 for which
Secured Exchange
Convertible Notes having
a principal amount of
$3,054,639.00 will be
issued.
------------------------------------------------------- ----------------------- ------------------------- ----------------------
22
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
SELECT MEDIA COMMUNICATIONS, INC.
A New York Corporation
By: /s/ Xxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman & CEO
Dated: November 16, 2001
------------------------------------------------------- ----------------------- ------------------------- ----------------------
SUBSCRIBERS
------------------------------------------------------- ----------------------- ------------------------- ----------------------
/s/ Purchase Price of Warrants to Purchase
------------------------------------ Secured Exchange 438,360 Common Shares
(Signature) Convertible Notes
BALMORE FUND, S.A. "Antra Notes" in the
X.X. Xxx 0000 principal amount of
Zurich, Switzerland $2,022,940.00 for which
Fax: 000-000-000-0000 Secured Exchange
Convertible Notes
having a principal
amount of $3,054,639.00
will be issued.
------------------------------------------------------- ----------------------- ------------------------- ----------------------
/s/ Purchase Price of Warrants to Purchase
------------------------------------ Secured Exchange 21,660 Common Shares
(Signature) Convertible Notes
B.B.Y. ENTERPRISES, INC. payable by surrender of
000 Xxxx 00xx Xxxxxx, Xxxxx 0000 "Antra Notes" in the
Xxx Xxxx, XX 00000 principal amount of
Fax: 000-000-0000 $100,000.00 for which
Secured Exchange
Convertible Notes
having a principal
amount of $151,000.00
will be issued.
------------------------------------------------------- ----------------------- ------------------------- ----------------------
23
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
SELECT MEDIA COMMUNICATIONS, INC.
A New York Corporation
By: /s/ Xxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman & CEO
Dated: November 16, 2001
------------------------------------------------------- ----------------------- ------------------------- ----------------------
SUBSCRIBERS
------------------------------------------------------- ----------------------- ------------------------- ----------------------
Purchase Price of Warrants to Purchase
/s/ Secured Exchange 12,700 Common Shares
----------------------------------------------- Convertible Notes
(Signature) payable by surrender of
XXXXX ENTERPRISES, LTD. "Antra Notes" in the
00X Xxxxxxxx Xxxx xxxxxxxxx xxxxxx xx
Xxxxxx, Xxxxxxx $234,418.00 for which
XX0, 0XX Secured Exchange
Fax: 000-000-000000000 Convertible Notes having
a principal amount of
$88,443.00 will be
issued.
------------------------------------------------------- ----------------------- ------------------------- ----------------------
24
EXHIBIT F
COLLATERAL AGENT AGREEMENT
COLLATERAL AGENT AGREEMENT (this "Agreement") dated as of November ___,
2001 among Xxxxxxx X. Xxxxxxx (the "Collateral Agent"), the parties identified
on Schedule A hereto (each, individually, a "Lender" and collectively, the
"Lenders"), who hold or have subscribed for 7% Secured Convertible Notes and
Secured Exchange Convertible Notes on or about November__, 2001 in the principal
amounts set forth on Schedule A hereto (collectively, the Notes") issued or to
be issued by Select Media Communications, Inc., a New York corporation
("Select").
WHEREAS, the Lenders have made or are making loans to Select to be
secured by certain collateral; and
WHEREAS, it is desirable to provide for the orderly administration of
such collateral by requiring each Lender to appoint the Collateral Agent, and
the Collateral Agent has agreed to accept such appointment and to receive, hold
and deliver such collateral, all upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, it is desirable to allocate the enforcement of certain rights
of the Lenders under the Notes for the orderly administration thereof.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the parties hereto agree as follows:
1. Collateral.
(a) Contemporaneously with the execution and delivery of this
Agreement by the Collateral Agent and the Lenders, (i) the Collateral Agent has
or will have entered into a Security Agreement between the Collateral Agent and
Select (the "Security Agreement"), regarding the grant of a security interest in
certain assets owned by Select presently consisting of shares of common stock of
Antra Holdings Group, Inc. (such assets are referred to herein as the
"Collateral") to the Collateral Agent, for the benefit of the Lenders and (ii)
Select is issuing the Notes to the Lenders.
(b) For purposes solely of perfection of the security
interests granted to the Collateral Agent, as agent on behalf of the Lenders,
and on its own behalf under the Security Agreement, the Collateral Agent hereby
acknowledges that any Collateral held by the Collateral Agent is held for the
benefit of the Lenders in accordance with this Agreement and the Security
Agreement. No reference to the Security Agreement or any other instrument or
document shall be deemed to incorporate any term or provision thereof into this
Agreement unless expressly so provided.
(c) The Collateral Agent is to distribute in accordance with
the Security Agreement any proceeds received from the Collateral which are
distributable to the Lenders in proportion to their respective interests in the
Obligations (as defined in the Security Agreement).
25
2. Appointment of the Collateral Agent.
The Lenders hereby appoint the Collateral Agent (and the
Collateral Agent hereby accepts such appointment) to take any action including,
without limitation, the registration of any Collateral in the name of the
Collateral Agent or its nominees prior to or during the continuance of an Event
of Default (as defined in the Security Agreement), the exercise of voting rights
upon the occurrence and during the continuance of an Event of Default, the
application of any cash collateral received by the Collateral Agent to the
payment of the Obligations, the exercise of any remedies given to the Collateral
Agent pursuant to the Security Agreement and the exercise of any authority
pursuant to the appointment of the Collateral Agent as an attorney-in-fact
pursuant to the Security Agreement that the Collateral Agent deems necessary or
proper for the administration of the Collateral pursuant to the Security
Agreement. Upon disposition of the Collateral in accordance with the Security
Agreement, the Collateral Agent shall promptly distribute any cash or Collateral
in accordance with Section 10.1(d) of the Security Agreement.
3. Action by the Majority in Interest.
(a) Certain Actions. Each of the Lenders covenants and agrees
that only a Majority in Interest shall have the right, but not the obligation,
to undertake the following actions (it being expressly understood that less than
a Majority in Interest hereby expressly waive the following rights that they may
otherwise have under the Notes, but only insofar as such waiver affects their
right to receive proceeds from the Collateral):
(i) Acceleration. If an Event of Default occurs,
after the applicable cure period, if any, a Majority in Interest may, on behalf
of all the Lenders, instruct the Collateral Agent to provide to Select notice to
cure such default and/or declare the unpaid principal amount of the Notes to be
due and payable, together with any and all accrued interest thereon and all
costs payable pursuant to such Notes;
(ii) Enforcement. Upon the occurrence of any Event of
Default after the applicable cure period, if any, a Majority in Interest may
instruct the Collateral Agent to proceed to protect, exercise and enforce, on
behalf of all the Lenders, their rights and remedies under the Notes against
Select, and such other rights and remedies as are provided by law or equity;
(iii) Waiver of Past Defaults. A Majority in Interest
may instruct the Collateral Agent to waive any Event of Default by written
notice to Select, and the other Lenders; and
26
(iv) Amendment. A Majority in Interest may instruct
the Collateral Agent to waive, amend, supplement or modify any term, condition
or other provision in the Notes or Security Agreement in accordance with the
terms of the Notes or Security Agreement so long as such waiver, amendment,
supplement or modification is made with respect to all of the Notes and with the
same force and effect with respect to each of the Notes.
(b) Permitted Subordination. A Majority in Interest may
instruct the Collateral Agent to agree to subordinate any Collateral to any
claim and may enter into any agreement with Select to evidence such
subordination; provided, however, that subsequent to any such subordination,
each Note shall remain pari passu with the other Notes held among the Lenders.
(c) Further Actions. A Majority in Interest may instruct the
Collateral Agent to take any action that it may take under this Agreement by
instructing the Collateral Agent in writing to take such action on behalf of all
the Lenders.
(d) Majority in Interest. For so long as any obligations
remain outstanding on the Secured Notes, Majority in Interest shall mean Lenders
who hold not less than sixty percent (60%) of the Obligations.
4. Power of Attorney.
(a) To effectuate the terms and provisions hereof, the Lenders
hereby appoint the Collateral Agent as their attorney-in-fact (and the
Collateral Agent hereby accepts such appointment) for the purpose of carrying
out the provisions of this Agreement including, without limitation, taking any
action on behalf of, or at the instruction of, the Majority in Interest at the
written direction of the Majority in Interest and executing any consent
authorized pursuant to this Agreement and taking any action and executing any
instrument that the Collateral Agent may deem necessary or advisable (and
lawful) to accomplish the purposes hereof.
(b) All acts done under the foregoing authorization are hereby
ratified and approved and neither the Collateral Agent nor any designee nor
agent thereof shall be liable for any acts of commission or omission, for any
error of judgment, for any mistake of fact or law except for acts of gross
negligence or willful misconduct.
(c) This power of attorney, being coupled with an interest, is
irrevocable while this Agreement remains in effect.
5. Expenses of the Collateral Agent. The Lenders shall pay any and all
costs and expenses incurred by the Collateral Agent, all waivers, releases,
discharges, satisfactions, modifications and amendments of this Agreement, the
administration and holding of the Collateral, insurance expenses, and the
enforcement, protection and adjudication of the parties' rights hereunder by the
Collateral Agent, including, without limitation, the reasonable disbursements,
expenses and fees of the attorneys the Collateral Agent may retain, if any, each
of the foregoing in proportion to their holdings of the Notes.
27
6. Reliance on Documents and Experts. The Collateral Agent shall be
entitled to rely upon any notice, consent, certificate, affidavit, statement,
paper, document, writing or communication (which may be by telegram, cable,
telex, telecopier, or telephone) reasonably believed by it to be genuine and to
have been signed, sent or made by the proper person or persons, and upon
opinions and advice of its own legal counsel, independent public accountants and
other experts selected by the Collateral Agent.
7. Duties of the Collateral Agent; Standard of Care.
(a) The Collateral Agent's only duties are those expressly set
forth in this Agreement, and the Collateral Agent hereby is authorized to
perform those duties in accordance with commercially reasonable practices. The
Collateral Agent may exercise or otherwise enforce any of its rights, powers,
privileges, remedies and interests under this Agreement and applicable law or
perform any of its duties under this Agreement by or through its officers,
employees, attorneys, or agents.
(b) The Collateral Agent shall act in good faith and with that
degree of care that an ordinarily prudent person in a like position would use
under similar circumstances.
(c) Any funds held by the Collateral Agent hereunder need not
be segregated from other funds except to the extent required by law. The
Collateral Agent shall be under no liability for interest on any funds received
by it hereunder.
8. Resignation. The Collateral Agent may resign and be discharged of
its duties hereunder at any time by giving written notice of such resignation to
the other parties hereto, stating the date such resignation is to take effect.
Within 15 days of the giving of such notice, a successor collateral agent shall
be appointed by the Majority in Interest; provided, however, that if the Lenders
are unable so to agree upon a successor within such time period, the successor
collateral agent may be a person designated by the Collateral Agent, and any and
all fees of such successor collateral agent shall be the joint and several
obligation of the Lenders. The Collateral Agent shall continue to serve until
the effective date of the resignation or until its successor accepts the
appointment and receives the Collateral held by the Collateral Agent but shall
not be obligated to take any action hereunder. The Collateral Agent may deposit
any Collateral with the Supreme Court of the State of New York for New York
County or any such other court in New York State that accepts such Collateral.
28
9. Exculpation. The Collateral Agent and its officers, employees,
attorneys and agents, shall not incur any liability whatsoever for the holding
or delivery of documents or the taking of any other action in accordance with
the terms and provisions of this Agreement, for any mistake or error in
judgment, for compliance with any applicable law or any attachment, order or
other directive of any court or other authority (irrespective of any conflicting
term or provision of this Agreement), or for any act or omission of any other
person engaged by the Collateral Agent in connection with this Agreement, unless
occasioned by the exculpated person's own gross negligence or willful
misconduct; and each party hereto hereby waives any and all claims and actions
whatsoever against the Collateral Agent and its officers, employees, attorneys
and agents, arising out of or related directly or indirectly to any or all of
the foregoing acts, omissions and circumstances.
10. Indemnification. The Lenders hereby agree to indemnify, reimburse
and hold harmless the Collateral Agent and its directors, officers, employees,
attorneys and agents, jointly and severally, from and against any and all
claims, liabilities, losses and expenses that may be imposed upon, incurred by,
or asserted against any of them, arising out of or related directly or
indirectly to this Agreement or the Collateral, except such as are occasioned by
the indemnified person's own gross negligence or willful misconduct.
11. Miscellaneous.
(a) Rights and Remedies Not Waived. No act, omission or delay
by the Collateral Agent shall constitute a waiver of the Collateral Agent's
rights and remedies hereunder or otherwise. No single or partial waiver by the
Collateral Agent of any default hereunder or right or remedy that it may have
shall operate as a waiver of any other default, right or remedy or of the same
default, right or remedy on a future occasion.
(b) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts or choice of law (or any other law that would make
any substantive laws of any state other than the State of New York applicable
hereto).
(c) Waiver of Jury Trial and Setoff; Consent to Jurisdiction;
Etc.
(i) In any litigation in any court with respect to,
in connection with, or arising out of this Agreement or any instrument or
document delivered pursuant to this Agreement, or the validity, protection,
interpretation, collection or enforcement hereof or thereof, or any other claim
or dispute howsoever arising, between the Collateral Agent and the Lenders or
any Lender, then each Lender, to the fullest extent it may legally do so, (i)
waives the right to interpose any setoff, recoupment, counterclaim or
cross-claim in connection with any such litigation, irrespective of the nature
of such setoff, recoupment, counterclaim or cross-claim, unless such setoff,
recoupment, counterclaim or cross-claim could not, by reason of any applicable
federal or state procedural laws, be interposed, pleaded or alleged in any other
action; and (ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. EACH LENDER AGREES THAT THIS SECTION 11(c) IS A
SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGE THAT THE
COLLATERAL AGENT WOULD NOT ENTER THIS AGREEMENT IF THIS SECTION 11(c) WERE NOT
PART OF THIS AGREEMENT.
29
(ii) Each Lender irrevocably consents to the
exclusive jurisdiction of any State or Federal Court located within the County
of New York, State of New York, in connection with any action or proceeding
arising out of or relating to this Agreement or any document or instrument
delivered pursuant to this Agreement or otherwise. In any such litigation, each
Lender waives, to the fullest extent it may effectively do so, personal service
of any summons, complaint or other process and agree that the service thereof
may be made by certified or registered mail directed to such Lender at its
address for notice determined in accordance with Section 11(e) hereof. Each
Lender hereby waives, to the fullest extent it may effectively do so, the
defenses of forum non conveniens and improper venue.
(d) Admissibility of this Agreement. Each of the Lenders
agrees that any copy of this Agreement signed by it and transmitted by
telecopier for delivery to the Collateral Agent shall be admissible in evidence
as the original itself in any judicial or administrative proceeding, whether or
not the original is in existence.
(e) Address for Notices. Any notice or other communication
under the provisions of this Agreement shall be given in writing and delivered
in person, by reputable overnight courier or delivery service, by facsimile
machine (receipt confirmed) with a copy sent by first class mail on the date of
transmissions, or by registered or certified mail, return receipt requested,
directed to its addresses set forth below (or to any new address of which any
party hereto shall have informed the others by the giving of notice in the
manner provided herein):
In the case of the Collateral Agent, to it at:
Xxxxxxx X. Xxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
In the case of the Lenders, to the addresses and telecopier
numbers set forth on Schedule A and Schedule B hereto.
In the case of Select, to:
Select Media Communications, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
30
With a copy by telecopier only to:
Wolf, Block, Xxxxxx & Xxxxx-Xxxxx
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Bring, Esq.
Fax: (000) 000-0000
(f) Amendments and Modification; Additional Lender. No
provision hereof shall be modified, altered, waived or limited except by written
instrument expressly referring to this Agreement and to such provision, and
executed by the parties hereto. Any transferee of a Note who acquires a Note
after the date hereof will become a party hereto by signing the signature page
and sending an executed copy of this Agreement to the Collateral Agent.
(g) Fee. Upon the occurrence of an Event of Default, the
Lenders collectively shall pay the Collateral Agent the sum of $5,000 to apply
against an hourly fee of $350 to be paid to the Collateral Agent by the Lenders
for services rendered pursuant to this Agreement. All payments due to the
Collateral Agent under this Agreement including reimbursements must be paid when
billed. The Collateral Agent may refuse to act on behalf of or make a
distribution to any Lender who is not current in payments to the Collateral
Agent. Payments required pursuant to this Agreement shall be pari passu to the
Lenders' interests in the Notes. The Collateral Agent is hereby authorized to
deduct any sums due the Collateral Agent from Collateral in the Collateral
Agent's possession.
(h) Counterparts. This Agreement may be executed by the
parties hereto individually or in any combination, in one or more counterparts,
and by facsimile signature and transmission, each of which shall be an original
and all of which shall together constitute one and the same agreement.
(i) Successors and Assigns. Whenever in this Agreement
reference is made to any party, such reference shall be deemed to include the
successors, assigns, heirs and legal representatives of such party. No party
hereto may transfer any rights under this Agreement, unless the transferee
agrees to be bound by, and comply with all of the terms and provisions of this
Agreement, as if an original signatory hereto on the date hereof.
(j) 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 and a government or any department or agency thereof.
31
(k) 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.
(l) Entire Agreement. This Agreement contains the entire
agreement of the parties and supersedes all other agreements and understandings,
oral or written, with respect to the matters contained herein.
(m) Schedules. The Collateral Agent is authorized to annex
hereto any schedules referred to herein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
32
IN WITNESS WHEREOF, the parties hereto have caused this
Collateral Agent Agreement to be signed, by their respective duly authorized
officers or directly, as of the date first written above.
------------------------------------ --------------------------------------
AUSTOST ANSTALT XXXXXX - "Lender" BALMORE FUNDS, S.A. - "Lender"
------------------------------------ --------------------------------------
NESHER, INC. - "Lender" UNITED SECURITIES SERVICES, INC.
"Lender"
------------------------------------ --------------------------------------
XXXXX ENTERPRISES LTD. - "Lender" - "Lender"
--------------------------------------
XXXXXXX X. XXXXXXX - Collateral Agent
Acknowledged:
SELECT MEDIA COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
This Collateral Agent Agreement may be signed by facsimile signature and
delivered by confirmed facsimile transmission.
33
SCHEDULE A TO COLLATERAL AGENT AGREEMENT
------------------------------------------------------- ---------------------------------- -------------------------------------
LENDERS 7% PRINCIPAL AMOUNT OF SECURED PRINCIPAL AMOUNT OF SECURED
CONVERTIBLE NOTES EXCHANGE CONVERTIBLE NOTES
------------------------------------------------------- ---------------------------------- -------------------------------------
AUSTOST ANSTALT XXXXXX
7440 Fuerstentum
Xxxxxxxxxxxx, Xxxxxxxxxxx 000
Fax: 000-000-000000000
------------------------------------------------------- ---------------------------------- -------------------------------------
BALMORE FUNDS, S.A.
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxx
Fax: 000-000-000-0000
------------------------------------------------------- ---------------------------------- -------------------------------------
NESHER, INC.
Ragnall House
00 Xxxx Xxxx
Xxxxxxx, Xxxx xx Xxx
0X0, 0X0, Xxxxxx Xxxxxxx
Fax:
------------------------------------------------------- ---------------------------------- -------------------------------------
UNITED SECURITIES SERVICES, INC.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
------------------------------------------------------- ---------------------------------- -------------------------------------
XXXXX ENTERPRISES, LTD.
00X Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxx
XX0 0XX
Fax: 000-000-000000000
------------------------------------------------------- ---------------------------------- -------------------------------------
TOTAL
------------------------------------------------------- ---------------------------------- -------------------------------------
34
EXHIBIT G
SECURITY AGREEMENT
1. Identification.
This Security Agreement (the "Agreement"), dated November ___, 2001, is
entered into by and between Select Media Communications, Inc., a New York
corporation ("Debtor"), and Xxxxxxx Xxxxxxx, as collateral agent [acting in the
manner and to the extent described in the Collateral Agent Agreement defined
below] (the "Collateral Agent"), for the benefit of the parties identified on
Schedule A hereto (collectively, the "Lenders").
2. Recitals.
2.1 The Lenders have made or are making loans to Debtor (the "Loans").
2.2 The Loans are evidenced by those certain 7% Secured Convertible
Notes and to the extent same are issued Secured Exchange Convertible Notes dated
at, about or after November ___, 2001 described on Schedule A hereto
(collectively "Notes") and executed by Debtor as the "Borrower" thereof, for the
benefit of each individual Lender as the "Holder" thereof which were issued
pursuant to Subscription Agreements entered into between Debtor and each holder
of Notes ("Subscription Agreements").
2.3 In order to induce Lenders to make the Loans, and as security for
Debtor's performance of its obligations under the Notes and as security for the
repayment of the Loans and any and all other sums due from Debtor to Lender
arising under the Notes issued pursuant to a Subscription Agreement, including
all of the Debtor's obligations arising under the Notes and the Subscription
Agreement relating thereto (collectively, the "Obligations"), Debtor, for good
and valuable consideration, receipt of which is acknowledged, has agreed to
grant to the Collateral Agent, for the benefit of the Lenders, a security
interest in the Collateral (as such term is hereinafter defined), on the terms
and conditions hereinafter set forth.
2.4 The Lenders have appointed Xxxxxxx Xxxxxxx as Collateral Agent
pursuant to that certain Collateral Agent Agreement dated as of November ___,
2001 ("Collateral Agent Agreement"), among the Lenders and Collateral Agent.
Defined Terms. The following defined terms which are defined
in the Uniform Commercial Code in effect in the State of New York on the date
hereof are used herein as so defined: Accounts, Chattel Paper, Documents,
Equipment, General Intangibles, Instruments, Inventory and Proceeds.
35
3. Grant of General Security Interest in Collateral.
3.1 As security for the Obligations, Debtor hereby grants the
Collateral Agent, for the benefit of the Lenders, a security interest in the
Collateral.
3.2 "Collateral" shall mean all of the following property of Debtor:
__________ common shares of Antra Holdings Group, Inc., a Delaware corporation,
$.001 par value common stock registered in Debtor's name ("Security Shares")
(the "Collateral"). Such Collateral shall include, but not be limited to, all
the Debtor's right, title and interest in and to the Collateral, together with
the proceeds of any sale, exchange, liquidation or other disposition, whether
voluntary or involuntary, and including but not limited to any securities,
instruments, and all benefits and entitlements evidenced by or arising out of
the Collateral and all other securities, instruments and other property (whether
real or personal, tangible or intangible) issued or accepted in substitution
for, or in addition to, the foregoing, and all dividends, interest, cash,
instruments, distributions, income, securities and any other property (whether
real or personal, tangible or intangible) at any time received, receivable or
otherwise distributed in respect of, or in exchange for, the foregoing, whether
now owned or hereafter acquired, and any and all improvements, additions,
replacements, substitutions and any and all Proceeds arising out of or derived
from the foregoing.
3.3 The Collateral Agent is hereby specifically authorized, after an
Event of Default, to transfer any Collateral into the name of the Collateral
Agent and to take any and all action deemed advisable to the Collateral Agent to
remove any transfer restrictions affecting the Collateral.
4. Perfection of Security Interest.
Debtor shall execute and deliver to the Collateral Agent UCC-1
Financing Statements ("Financing Statements") relating to the security interests
in Debtor's right, title and interest in and to the Collateral. The Collateral
Agent is instructed to file the Financing Statements in the following
jurisdictions: State of New York and New York County. These Financing Statements
are deemed to have been filed for the benefit of the Lenders identified on
Schedule A hereto.
5. Distribution on Liquidation.
5.1 If any sum is paid as a liquidating distribution on or with respect
to the Collateral, Debtor shall deliver same to the Collateral Agent to be
applied to the Obligations then due, in accordance with the terms of the Notes.
5.2 Prior to any Event of Default (as defined herein), Debtor shall be
entitled to exercise all voting power pertaining to any of the Collateral,
provided such exercise is not contrary to the interests of the Lenders and does
not impair the Collateral.
36
6. Further Action By Debtor; Covenants and Warranties.
6.1 Collateral Agent at all times shall have a perfected security
interest in the Collateral. Subject to the security interest described herein,
Debtor has and will continue to have full title to the Collateral free from any
liens, leases, encumbrances, judgments or other claims. Collateral Agent's
security interest in the Collateral constitutes and will continue to constitute
a first, prior and indefeasible security interest in favor of Collateral Agent.
Debtor will do all acts and things, and will execute and file all instruments
(including, but not limited to, security agreements, financing statements,
continuation statements, etc.) reasonably requested by Collateral Agent to
establish, maintain and continue the perfected security interest of Collateral
Agent in the Collateral, and will promptly on demand, pay all costs and expenses
of filing and recording, including the costs of any searches reasonably deemed
necessary by Collateral Agent from time to time to establish and determine the
validity and the continuing priority of the security interest of Collateral
Agent, and also pay all other claims and charges that, in the opinion of
Collateral Agent, exercised in good faith, is reasonably likely to materially
prejudice, imperil or otherwise affect the Collateral or its security interest
therein.
6.2 Other than in the ordinary course of business, and except for
Collateral which has become obsolete or is of inconsequential in value, Debtor
will not sell, transfer, assign or pledge those items of Collateral (or allow
any such items to be sold, transferred, assigned or pledged), without the prior
written consent of Collateral Agent. Although Proceeds of Collateral are covered
by this Security Agreement, this shall not be construed to mean that Collateral
Agent consents to any sale of the Collateral, except as provided herein.
6.3 Debtor will, at all reasonable times, allow Collateral Agent or its
representatives free and complete access to all of Debtor's records which in
any way relate to the Collateral, for such inspection and examination as
Collateral Agent reasonably deems necessary.
6.4 Debtor, at its sole cost and expense, will protect and defend this
Security Agreement, all of the rights of Collateral Agent hereunder, and the
Collateral against the claims and demands of all other parties.
6.5 Debtor will promptly notify Collateral Agent of any levy, distraint
or other seizure by legal process or otherwise of any part of the Collateral,
and of any threatened or filed claims or proceedings that are reasonably likely
to affect or impair any of the rights of Collateral Agent under this Security
Agreement.
6.6 Debtor, at its own expense, will obtain and maintain in force
insurance policies covering losses or damage to those items of Collateral which
constitute physical personal property. The insurance policies to be obtained by
Debtor shall be in form and amounts reasonably acceptable to Collateral Agent.
Debtor shall make the Collateral Agent a loss payee thereon to the extent of its
interest. Collateral Agent is hereby irrevocably (until the Obligations are paid
in full) appointed Debtor's attorney-in-fact to endorse any check or draft that
may be payable to Debtor so that Collateral Agent may collect the proceeds
payable for any loss under such insurance. The proceeds of such insurance, less
any costs and expenses incurred or paid by Collateral Agent in the collection
thereof, shall be applied either toward the cost of the repair or replacement of
the items damaged or destroyed, or on account of any sums secured hereby,
whether or not then due or payable. Insurance will not be required for the
Security Shares.
37
6.7 Collateral Agent may, at its option, and without any obligation to
do so, pay, perform and discharge any and all amounts, costs, expenses and
liabilities herein agreed to be paid or performed by Debtor, upon Debtor's
failure to do so, and all amounts expended by Collateral Agent in so doing shall
become part of the Obligations secured hereby, and shall be immediately due and
payable by Debtor to Collateral Agent upon demand and shall bear interest at 14%
per annum from the dates of such expenditures until paid.
6.8 Upon the request of Collateral Agent, Debtor will furnish within
five (5) days thereafter to Collateral Agent, or to any proposed assignee of
this Security Agreement, a written statement in form reasonably satisfactory to
Collateral Agent, duly acknowledged, certifying the amount of the principal and
interest then owing under the Obligations, whether to its knowledge any claims,
offsets or defenses exist against the Obligations or against this Security
Agreement, or any of the terms and provisions of any other agreement of Debtor
securing the Obligations. In connection with any assignment by Collateral Agent
of this Security Agreement, Debtor hereby agrees to cause the insurance policies
required hereby to be carried by Debtor, if any, to be endorsed in form
satisfactory to Collateral Agent or to such assignee, with loss payable clauses
in favor of such assignee, and to cause such endorsements to be delivered to
Collateral Agent within ten (10) calendar days after request therefor by
Collateral Agent.
6.9 The Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments and take further steps relating to the
Collateral and other property or rights covered by the security interest hereby
granted, as the Collateral Agent may reasonably require to perfect its security
interest hereunder.
6.10 Debtor represents and warrants that it is the true and lawful
exclusive owner of the Collateral, free and clear of any liens and encumbrances.
6.11 Debtor hereby agrees not to divest itself of any right under the
Collateral absent prior written approval of the Collateral Agent.
6.12 Debtor represents and warrants that the Security Shares represent
not less than ___ percent (____%) of the outstanding Common Stock and
instruments convertible into common stock of Antra Holdings Group, Inc. as of
the date of this Agreement. Debtor further represents and warrants that it will
not issue any additional common stock or instrument convertible into common
stock of Antra Holdings Group, Inc. for so long as any sums remain outstanding
on the Notes.
38
7. Power of Attorney.
Debtor hereby irrevocably constitutes and appoints the Collateral Agent
as the true and lawful attorney of Debtor, with full power of substitution, in
the place and stead of Debtor and in the name of Debtor or otherwise, at any
time or times, in the discretion of the Collateral Agent, to take any action and
to execute any instrument or document which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement which Debtor
fails to take or fails to execute within five (5) business days of the
Collateral Agent's reasonable written request therefor. This power of attorney
is coupled with an interest and is irrevocable.
8. Performance By The Collateral Agent.
If Debtor fails to perform any material covenant, agreement, duty or
obligation of Debtor under this Agreement, the Collateral Agent may, after any
applicable cure period, at any time or times in its discretion, take action to
effect performance of such obligation. All reasonable expenses of the Collateral
Agent incurred in connection with the foregoing authorization shall be payable
by Debtor as provided in Paragraph 12.1 hereof. No discretionary right, remedy
or power granted to the Collateral Agent under any part of this Agreement shall
be deemed to impose any obligation whatsoever on the Collateral Agent with
respect thereto, such rights, remedies and powers being solely for the
protection of the Collateral Agent.
9. Event of Default.
An event of default ("Event of Default") shall be deemed to have
occurred hereunder upon the occurrence of any event of default as defined in the
Notes or Subscription Agreement. Upon and after any Event of Default, after the
applicable cure period, if any, any or all of the Obligations shall become
immediately due and payable at the option of the Collateral Agent, for the
benefit of the Lenders, and the Collateral Agent may dispose of Collateral as
provided below. A default by Debtor of any of its obligations pursuant to this
Agreement shall be deemed an Event of Default hereunder and an event of default
as defined in the Obligations.
10. Disposition of Collateral.
Upon and after any Event of Default which is then continuing,
10.1 The Collateral Agent may exercise its rights with respect to each
and every component of the Collateral, without regard to the existence of any
other security or source of payment for the Obligations. In addition to other
rights and remedies provided for herein or otherwise available to it, the
Collateral Agent shall have all of the rights and remedies of a lender on
default under the Uniform Commercial Code then in effect in the State of New
York.
39
10.2 If any notice to Debtor of the sale or other disposition of
Collateral is required by then applicable law, five (5) days' prior notice (or,
if longer, the shortest period of time permitted by then applicable law) to
Debtor of the time and place of any public sale of Collateral or of the time
after which any private sale or any other intended disposition is to be made,
shall constitute reasonable notification.
10.3 The Collateral Agent is authorized, at any such sale, if the
Collateral Agent deems it advisable to do so, in order to comply with any
applicable securities laws, to restrict the prospective bidders or purchasers to
persons who will represent and agree, among other things, that they are
purchasing the Collateral for their own account for investment, and not with a
view to the distribution or resale thereof, or otherwise to restrict such sale
in such other manner as the Collateral Agent deems advisable to ensure such
compliance. Sales made subject to such restrictions shall be deemed to have been
made in a commercially reasonable manner.
10.4 All cash proceeds received by the Collateral Agent for the benefit
of the Lenders in respect of any sale, collection or other enforcement or
disposition of Collateral, shall be applied (after deduction of any amounts
payable to the Collateral Agent pursuant to Paragraph 12.1 hereof) against the
Obligations pro rata among the Lenders in proportion to their interests in the
Obligations. Upon payment in full of all Obligations, Debtor shall be entitled
to the return of all Collateral, including cash, which has not been used or
applied toward the payment of Obligations or used or applied to any and all
costs or expenses of the Collateral Agent incurred in connection with the
liquidation of the Collateral (unless another person is legally entitled
thereto). Any assignment of Collateral by the Collateral Agent to Debtor shall
be without representation or warranty of any nature whatsoever and wholly
without recourse. Each Lender may purchase the Collateral and pay for such
purchase by offsetting any sums owed to such Lender by Debtor arising under the
Obligations or any other source.
10.5 Provided an Event of Default has not occurred, the Collateral
shall be released to the Debtor upon the timely compliance by the Debtor with
its registration obligations set forth in Section 10.1(iv) of the Subscription
Agreement and this Agreement shall be of no further force or effect; otherwise
the Collateral shall remain subject to this Agreement and retained by the
Collateral Agent until the complete satisfaction of the Obligations.
40
11. Waiver of Automatic Stay. The Debtor acknowledges and agrees that should a
proceeding under any bankruptcy or insolvency law be commenced by or against the
Debtor, or if any of the Collateral (as defined in this Security Agreement)
should become the subject of any bankruptcy or insolvency proceeding, then the
Collateral Agent should be entitled to, among other relief to which the
Collateral Agent may be entitled under the Note, Security Agreement,
Subscription Agreement and any other agreement to which the Debtor, Lenders or
Collateral Agent are parties, (collectively "Loan Documents") and/or applicable
law, an order from the court granting immediate relief from the automatic stay
pursuant to 11 U.S.C. Section 362 to permit the Collateral Agent to exercise all
of its rights and remedies pursuant to the Loan Documents and/or applicable law.
THE DEBTOR EXPRESSLY WAIVE THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11
U.S.C. SECTION 362. FURTHERMORE, THE DEBTOR EXPRESSLY ACKNOWLEDGES AND AGREES
THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE
OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105)
SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF
THE COLLATERAL AGENT TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN
DOCUMENTS AND/OR APPLICABLE LAW. The Debtor hereby consents to any motion for
relief from stay which may be filed by the Collateral Agent in any bankruptcy or
insolvency proceeding initiated by or against the Debtor, and further agrees not
to file any opposition to any motion for relief from stay filed by the
Collateral Agent. The Debtor represents, acknowledges and agrees that this
provision is a specific and material aspect of this Agreement, and that the
Collateral Agent would not agree to the terms of this Agreement if this waiver
were not a part of this Agreement. The Debtor further represents, acknowledges
and agrees that this waiver is knowingly, intelligently and voluntarily made,
that neither the Collateral Agent nor any person acting on behalf of the
Collateral Agent has made any representations to induce this waiver, that the
Debtor has been represented (or has had the opportunity to be represented) in
the signing of this Agreement and in the making of this waiver by independent
legal counsel selected by the Debtor and that the Debtor has had the opportunity
to discuss this waiver with counsel. The Debtor further agrees that any
bankruptcy or insolvency proceeding initiated by the Debtor will only be brought
in the Federal Court within the Southern District of New York.
12. Miscellaneous.
12.1 Expenses. Debtor shall pay to the Collateral Agent, on demand, the
amount of any and all reasonable expenses, including, without limitation,
attorneys' fees, legal expenses and brokers' fees, which the Collateral Agent
may incur in connection with (a) sale, collection or other enforcement or
disposition of Collateral; (b) exercise or enforcement of any the rights,
remedies or powers of the Collateral Agent hereunder or with respect to any or
all of the Obligations; or (c) failure by Debtor to perform and observe any
agreements of Debtor contained herein which are performed by the Collateral
Agent.
12.2 Waivers, Amendment and Remedies. No course of dealing by the
Collateral Agent and no failure by the Collateral Agent to exercise, or delay by
the Collateral Agent in exercising, any right, remedy or power hereunder shall
operate as a waiver thereof, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy or power of the Collateral Agent. No amendment, modification or
waiver of any provision of this Agreement and no consent to any departure by
Debtor therefrom, shall, in any event, be effective unless contained in a
writing signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. The rights, remedies and powers of the Collateral Agent, not only
hereunder, but also under any instruments and agreements evidencing or securing
the Obligations and under applicable law are cumulative, and may be exercised by
the Collateral Agent from time to time in such order as the Collateral Agent may
elect.
41
12.3 Notices. Any notice or other communications under the provisions
of this Agreement shall be given in writing and delivered to the recipient in
person, by reputable overnight courier or delivery service, by facsimile machine
(receipt conformed) with a copy sent by first class mail on the date of
transmission, or by registered or certified mail, return receipt requested,
directed to its address set forth below (or to any new address of which a party
hereto shall have informed the others by the giving of notice in the manner
provided herein):
To Debtor: Select Media Communications, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
With a copy to: Wolf, Block, Xxxxxx & Xxxxx-Xxxxx
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Bring, Esq.
Fax: (000) 000-0000
To Lenders: To the addresses and telecopier
numbers Set forth on Schedule
A hereto
To the Collateral Agent: Xxxxxxx X. Xxxxxxx
Grushko & Xxxxxxx, P.C.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Any party may change its address by written notice in accordance with this
paragraph.
12.4 Term; Binding Effect. This Agreement shall (a) remain in full
force and effect until payment and satisfaction in full of all of the
Obligations; (b) be binding upon Debtor, and its successors and permitted
assigns; and (c) inure to the benefit of the Collateral Agent, for the benefit
of the Lenders and their respective successors and assigns.
12.5 Captions. The captions of Paragraphs, Articles and Sections in
this Agreement have been included for convenience of reference only, and shall
not define or limit the provisions hereof and have no legal or other
significance whatsoever.
42
12.6 Governing Law; Venue; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts or choice of law, except to the extent
that the perfection of the security interest granted hereby in respect of any
item of Collateral may be governed by the law of another jurisdiction. Any legal
action or proceeding against the Debtor with respect to this Agreement may be
brought in the courts of the State of New York or of the United States for the
Southern District of New York, and, by execution and delivery of this Agreement,
the Debtor hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts. The
Debtor hereby irrevocably waives any objection which they may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement brought in the aforesaid
courts and hereby further irrevocably waives and agrees not to plead or claim in
any such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum. If any provision of this Agreement, or
the application thereof to any person or circumstance, is held invalid, such
invalidity shall not affect any other provisions which can be given effect
without the invalid provision or application, and to this end the provisions
hereof shall be severable and the remaining, valid provisions shall remain of
full force and effect.
12.7 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 signature and delivered by facsimile
transmission.
43
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Security Agreement, as of the date first written above.
"DEBTOR" "THE COLLATERAL AGENT"
SELECT MEDIA COMMUNICATIONS, INC. XXXXXXX X. XXXXXXX
a New York corporation
By:
-------------------------------- --------------------------------------
Its:
-------------------------------
APPROVED BY "LENDERS":
------------------------------------ --------------------------------------
AUSTOST ANSTALT XXXXXX - "Lender" BALMORE FUNDS, S.A. - "Lender"
------------------------------------ --------------------------------------
NESHER, INC. - "Lender" UNITED SECURITIES SERVICES, INC.
"Lender"
------------------------------------ --------------------------------------
XXXXX ENTERPRISES LTD. - "Lender" - "Lender"
This Security Agreement may be executed by facsimile signature and
delivered by confirmed facsimile transmission.
44
SCHEDULE A TO SECURITY AGREEMENT
------------------------------------------------------- ---------------------------------- -------------------------------------
LENDERS 7% PRINCIPAL AMOUNT OF SECURED PRINCIPAL AMOUNT OF SECURED
CONVERTIBLE NOTES EXCHANGE CONVERTIBLE NOTES
------------------------------------------------------- ---------------------------------- -------------------------------------
AUSTOST ANSTALT XXXXXX
7440 Fuerstentum
Xxxxxxxxxxxx, Xxxxxxxxxxx 000
Fax: 000-000-000000000
------------------------------------------------------- ---------------------------------- -------------------------------------
BALMORE FUNDS, S.A.
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxx
Fax: 000-000-000-0000
------------------------------------------------------- ---------------------------------- -------------------------------------
NESHER, INC.
Ragnall House
00 Xxxx Xxxx
Xxxxxxx, Xxxx xx Xxx
0X0, 0X0, Xxxxxx Xxxxxxx
Fax:
------------------------------------------------------- ---------------------------------- -------------------------------------
UNITED SECURITIES SERVICES, INC.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
------------------------------------------------------- ---------------------------------- -------------------------------------
XXXXX ENTERPRISES, LTD.
00X Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxx
XX0 0XX
Fax: 000-000-000000000
------------------------------------------------------- ---------------------------------- -------------------------------------
TOTAL
------------------------------------------------------- ---------------------------------- -------------------------------------
45
