Exhibit 10.1.1
Subscription Agreement
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of November 11,
2004, by and among VoIP, Inc., a Texas corporation (the "Company"), and the
subscribers identified on the signature page hereto (each a "Subscriber" and
collectively "Subscribers").
WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the provisions of Section 4(2), Section 4(6) and/or Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers shall purchase, in the
aggregate, up to $1,550,000 (the "Purchase Price") of the Company's common
stock, $.001 par value (the "Common Stock" or "Shares"), and share purchase
warrants in the form attached hereto as Exhibit A and Exhibit B (the
"Warrants"), to purchase shares of Common Stock (the "Warrant Shares"). The per
Share Purchase Price shall be $0.80, subject to adjustment as described in this
Agreement. The Purchase Price shall be payable to the Company on the Closing
Date. The Common Stock, the Warrants and the Warrant Shares are collectively
referred to herein as the "Securities"; and
WHEREAS, the aggregate proceeds of the sale of the Common Stock and the
Warrants contemplated hereby may be held in escrow pursuant to the terms of a
Funds Escrow Agreement which may be executed by the parties substantially in the
form attached hereto as Exhibit C (the "Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement, the Company and the Subscribers hereby
agree as follows:
1. Purchase and Sale of Shares and Warrants.
Subject to the satisfaction (or waiver) of the conditions to Closing set
forth in this Agreement and the Escrow Agreement, each Subscriber shall purchase
the Shares and Warrants for the portion of the Purchase Price indicated on the
signature page hereto, and the Company shall sell such Shares and Warrants to
the Subscriber. The Purchase Price for the Shares and Warrants shall be paid in
cash. The entire Purchase Price shall be allocated to the Shares.
2. Escrow Arrangements; Form of Payment.
Upon execution hereof by the parties and pursuant to the terms of the
Escrow Agreement, each Subscriber agrees to make the deliveries required of such
Subscriber as set forth in the Escrow Agreement and the Company agrees to make
the deliveries required of the Company as set forth in the Escrow Agreement.
3. (a) A Warrants.
On the Closing Date the Company will issue A Warrants to the Subscribers.
Thirty (30) A Warrant will be issued for each one hundred (100) Shares issued on
the Closing Date. The per Warrant Share exercise price to acquire a Warrant
Share upon exercise of an A Warrant shall be $1.75. The A Warrants shall be
exercisable until five (5) years after the Closing Date, will have a cashless
exercise as described in Exhibit A hereto.
(b) B Warrants. On the Closing Date the Company will issue B Warrants to
the Subscribers. One (1) B Warrant will be issued for each (2) Shares issued on
the Closing Date. The per Warrant Share exercise price to acquire a Warrant
Share upon exercise of a B Warrant shall be $1.20. The B Warrants shall be
exercisable from the date an effective registration statement which includes the
Warrant Shares issuable upon exercise of the B Warrants is declared effective
through the thirtieth (30th) day of such effectiveness.
4. Subscriber's Representations and Warranties.
Each Subscriber hereby represents and warrants to and agrees with the
Company only as to such Subscriber that:
(a) Information on Company. The Subscriber has been furnished with or has
had access at the XXXXX Website of the Commission to the Company's Form 10-KSB
for the year ended December 31, 2003 as filed with the Commission, together with
all subsequently filed Forms 10-QSB, 8-K, and filings made with the Commission
available at the XXXXX website (hereinafter referred to collectively as the
"Reports"). In addition, the Subscriber has received in writing from the Company
such other information concerning its operations, financial condition and other
matters as the Subscriber has requested in writing (such other information 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, and will be at the time
of the issuance of the Common Stock and exercise of any of the Warrants, an
"accredited investor", as such term is defined in Regulation D promulgated by
the Commission under 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 Common Stock and Warrants. On the closing date, the
Subscriber will purchase the Common Stock and Warrants as principal 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 any
applicable 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 indefinitely unless a subsequent
disposition is registered under the 1933 Act or any applicable state securities
laws or is exempt from such registration. In any event, and subject to
compliance with applicable security laws, the Subscriber may not for a period of
nine (9) months commencing from the date hereof enter into hedging transactions,
short positions or other derivative transactions relating to the Securities or
interests in the Securities.
(e) Shares Legend. The Shares and the Warrant Shares shall bear the
following or similar 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 ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO VOIP, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED."
(f) Warrants Legend. The Warrants shall bear the following or similar
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 ANY APPLICABLE STATE SECURITIES
LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
VOIP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(g) Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber by the Company. 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.
(h) Authority; Enforceability. This Agreement and other agreements
delivered together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by the Subscriber and are valid and binding
agreements enforceable in accordance with their 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 Subscriber has full corporate power and
authority necessary to enter into this Agreement and such other agreements and
to perform its obligations hereunder and under all other agreements entered into
by the Subscriber relating hereto.
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(i) Restricted Securities. Subscriber understands that the Securities have
not been registered under the 1933 Act and such Subscriber will not sell, offer
to sell, assign, pledge, hypothecate or otherwise transfer any of the Securities
unless (i) pursuant to an effective registration statement under the 1933 Act,
(ii) such Subscriber provides the Company with an opinion of counsel, in a form
reasonably acceptable to the Company, to the effect that a sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
or (iii) Subscriber provides the Company with reasonable assurances (in the form
of seller and broker representation letters) that the Shares or the Warrant
Shares, as the case may be, can be sold pursuant to (A) Rule 144 promulgated
under the 1933 Act, or (B) Rule 144(k) promulgated under the 1933 Act, in each
case following the applicable holding period set forth therein. Notwithstanding
anything to the contrary contained in this Agreement, such Subscriber may
transfer (without restriction and without the need for an opinion of counsel)
the Securities to its Affiliates (as defined below) provided that each such
Affiliate is an "accredited investor" under Regulation D and such Affiliate
agrees to be bound by the terms and conditions of this Agreement. For the
purposes of this Agreement, an "Affiliate" of any specified Subscriber means any
other person or entity directly or indirectly controlling, controlled by or
under direct or indirect common control with such specified Subscriber. For
purposes of this definition, "control" means the power to direct the management
and policies of such person or firm, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
(j) No Governmental Review. Each Subscriber understands that no United
States federal or state agency or any other governmental or state agency has
passed on or made recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
(k) Correctness of Representations. Each Subscriber represents as to such
Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and, unless a Subscriber otherwise notifies the
Company prior to the Closing Date (as hereinafter defined), shall be true and
correct as of the Closing Date.
(l) Survival. The foregoing representations and warranties shall survive
the Closing Date for a period of two years.
(m) Subscriber has had an opportunity to ask questions of and receive
satisfactory answers from the Company, or any person or persons acting on the
Company's behalf, concerning the terms and conditions of the Offering (as
defined in Section 7 (b) of this Agreement) and all such questions have been
answered to the full satisfaction of the undersigned.
(n) Subscriber acknowledges that the Company has made available to the
Subscriber or the Subscriber's personal advisors the opportunity to obtain
additional information to evaluate the merits and risks of this investment,
including, but not limited to, the income tax consequences of the investment.
The undersigned represents that, by reason of Subscriber's business and
financial experience, Subscriber has acquired the capacity to protect
Subscriber's own interest in investments similar to the Offering. In reach the
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conclusion that Subscriber desires to acquire the Securities, the Subscriber has
carefully evaluated Subscriber's financial resources and investment position and
the risks associated with the Offering and acknowledges that Subscriber is able
to bear the economic risks of the Offering.
(o) If Subscriber is a pension, profit sharing or other employee benefit
plan (a "Plan"), an investment in the Securities will not cause the Company's
assets to become assets of the Plan, and the subscription hereby will not
violate any duty Subscriber owes to the Plan.
5. Company Representations and Warranties.
The Company represents and warrants to and agrees with each 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. For purposes of this
Agreement, a "material adverse effect" shall mean a material adverse effect on
the financial condition, results of operations, properties or business of the
Company taken as a whole.
(b) Outstanding Stock. All issued and outstanding shares of capital stock
of the Company and each of its subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable.
(c) Authority; Enforceability. This Agreement, the Common Stock, the
Warrants and the Escrow Agreement and any other agreements delivered together
with this Agreement or in connection herewith (collectively "Transaction
Documents") have been duly authorized, executed and delivered by the Company and
are valid and binding agreements enforceable in accordance with their 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. The Company has
full corporate power and authority necessary to enter into and deliver the
Transaction Documents and to perform its obligations thereunder.
(d) Additional Issuances. 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.
(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 American Stock Exchange, the National Association
of Securities Dealers, Inc., Nasdaq SmallCap Market, the OTC Bulletin Board
("Bulletin Board") nor the Company's shareholders is required for the execution
by the Company of the Transaction Documents and compliance and performance by
the Company of its obligations under the Transaction Documents, including,
without limitation, the issuance and sale of the Securities.
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(f) No Violation or Conflict. Assuming the representations and warranties
of the Subscribers in Section 4 are true and correct, neither the issuance and
sale of the Securities nor the performance of the Company's obligations under
the Transaction Documents 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
articles or 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 subsidiaries 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 or subsidiaries is a party, by
which the Company or any of its affiliates or subsidiaries is bound,
or to which any of the properties of the Company or any of its
affiliates or subsidiaries 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 or
subsidiaries 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,
its subsidiaries or any of its affiliates; or
(iii)result in the activation of any anti-dilution rights or a reset or
repricing of any debt or security instrument of any other creditor or
equity holder of the Company, nor result in the acceleration of the
due date of any obligation of the Company; or
(iv) result in the activation of any piggy-back registration rights of any
person or entity holding securities of the Company or having the right
to receive securities of the Company.
(v) result in a violation of Section 5 under the 0000 Xxx.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer
under the 1933 Act and any applicable state securities laws;
(ii) have been, or will be, duly and validly authorized and on the date of
issuance of the Shares and upon exercise of the Warrants, the Shares
and Warrant Shares 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 each Subscriber complies with the
prospectus delivery requirements of the 0000 Xxx);
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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. Except as described in Schedule 5 (h), 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 the Transaction Documents. Except as disclosed in the Schedule
5(h), there is no pending or, to the best knowledge of the Company, basis for or
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 would have a
material adverse effect on the Company.
(i) Reporting Company. The Company is a publicly-held company subject to
reporting obligations pursuant to Section 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. Pursuant to the provisions of the
1934 Act, the Company has timely filed all reports and other materials required
to be filed thereunder with the Commission during the preceding twelve months.
(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 or resold.
(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 Schedules 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
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made.
(l) Stop Transfer. The Securities, when issued, will be restricted
securities. The Company will not issue any stop transfer order or other order
impeding the sale, resale or delivery of any of the Securities, except as may be
required by any applicable federal or state securities laws and unless
contemporaneous notice of such instruction is given to the Subscriber.
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(m) Defaults. The Company is not in violation of its articles of
incorporation or bylaws. The Company is (i) not 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) not 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 not in violation of any statute, rule or regulation of any
governmental authority which violation would have a material adverse effect on
the Company.
(n) 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 offer 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 the Bulletin Board which
if so integrated would eliminate the exemption for the Offering as described in
the second paragraph of this Agreement. The Company will not conduct any
offering other than the transactions contemplated hereby that will be integrated
with the offer or issuance of the Securities which if so integrated would
eliminate the exemption for the Offering as described in the second paragraph of
this Agreement.
(o) 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 0000 Xxx) in connection with the offer or sale
of the Securities.
(p) Listing. The Company's common stock is quoted on the Bulletin Board.
The Company has not received any oral or written notice that its common stock is
not eligible nor will become ineligible for quotation on the Bulletin Board nor
that its common stock does not meet all requirements for the continuation of
such quotation and the Company satisfies and as of the Closing Date, the Company
will satisfy all the requirements for the continued quotation of its common
stock on the Bulletin Board.
(q) 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, 2004
and which, individually or in the aggregate, would reasonably be expected to
have a material adverse effect on the Company's financial condition.
(r) No Undisclosed Events or Circumstances. Since June 30, 2004, 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.
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(s) Capitalization. The authorized and outstanding capital stock of the
Company as of the date of this Agreement and the Closing Date is set forth on
Schedule 5(s). 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 except as
set forth in Schedule 5(s). 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.
(t) 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, and, unless the Company otherwise notifies the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date.
(u) Survival. The foregoing representations and warranties shall survive
the Closing Date for a period of two years.
(v) Dilution. The Company's executive officers and directors understand the
nature of the Securities being sold hereby and recognize that the issuance of
the Securities will have a potential dilutive effect on the equity holdings of
other holders of the Company's equity or rights to receive equity of the
Company. The board of directors of the Company has concluded, in its good faith
business judgment, that the issuance of Securities is in the best interests of
the Company. The Company specifically acknowledges that its obligation to issue
the Securities is binding upon the Company and enforceable regardless of the
dilution such issuance may have on the ownership interests of other shareholders
of the Company or parties entitled to receive equity of the Company.
(w) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise between the Company and the accountants and lawyers formerly or
presently employed by the Company, including but not limited to disputes or
conflicts over payment owed to such accountants and lawyers.
(x) Investment Company. The Company is not, and is not an Affiliate (as
defined in Rule 405 under the 1933 Act ) or, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.6. Regulation D
Offering. The offer and issuance of the Securities to the Subscribers is being
made pursuant to the exemption from the registration provisions of the 1933 Act
afforded by Section 4(2) or Section 4(6) of the 1933 Act and/or 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 an exemption from registration under the
1933 Act as it relates to the offer and issuance of the Securities and other
matters reasonably requested by Subscribers. 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
resale of the Common Stock and exercise of the Warrants and resale of the
Warrant Shares.
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7. Finder/Legal Fees.
(a) Finder's Fee. The Company on the one hand, and each Subscriber (for
himself only) on the other hand, agree to indemnify the other against and hold
the other harmless from any and all liabilities to any persons claiming
brokerage commissions or finder's fees other than the parties identified on
Schedule 7 hereto (each a "Finder") 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. Anything to the contrary in this Agreement notwithstanding,
each Subscriber is providing indemnification only for such Subscriber's own
actions and not for any action of any other Subscriber. Each Subscriber's
liability hereunder is several and not joint. The Company agrees that it will
pay the Finders a fee as identified in Schedule 7 hereto. The Company represents
that there are no other parties entitled to receive fees, commissions, or
similar payments in connection with the Offering except the Finders.
(b) Legal Fees. The Company shall pay to Grushko & Xxxxxxx, P.C., a fee of
$20,000 and Xxxxxxx & Xxxxxx, P.C., a fee of $2,821.50 ("Legal Fees") as
reimbursement for services rendered to the Subscribers in connection with this
Agreement and the purchase and sale of the Shares and Warrants (the "Offering").
The Legal Fees will be payable on the Closing Date out of funds held pursuant to
the Escrow Agreement.
8. Covenants of the Company.
The Company covenants and agrees with the Subscribers as follows:
(a) Stop Orders. The Company will advise the Subscribers, promptly after it
receives notice of issuance by the 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) Listing. The Company will maintain the listing of its Common Stock on
the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market
System, Bulletin Board, or New York Stock 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
Principal Market, as applicable.
(c) Market Regulations. The Company shall notify the Commission, the
Principal Market and applicable state authorities, in accordance with their
requirements, 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 Subscribers and promptly provide copies thereof to Subscriber.
(d) Reporting Requirements. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
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to volume limitation, the Company will (v) cause its Common Stock to continue to
be registered under Section 12(b) or 12(g) of the 1934 Act, (x) comply in all
respects with its reporting and filing obligations under the 1934 Act, (y)
comply with all reporting requirements that are applicable to an issuer with a
class of shares registered pursuant to Section 12(b) or 12(g) of the 1934 Act,
as applicable, and (z) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will use its best
efforts not to take any action or file any document (whether or not permitted by
the 1933 Act or the 1934 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 two (2) years after the Closing Date. Until
the earlier of the resale of the Common Stock and the Warrant Shares by each
Subscriber or at least two (2) years after the Warrants have been exercised, the
Company will use its best efforts to continue the listing or quotation of the
Common Stock on the Principal Market or other market with the reasonable consent
of Subscribers holding a majority of the Shares and Warrant Shares, and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market. The Company
agrees to timely file a Form D with respect to the Securities if required under
Regulation D and to provide a copy thereof to each Subscriber promptly after
such filing.
(e) Use of Proceeds. The Company undertakes to use the proceeds of the
Subscribers' funds for the purposes set forth on Schedule 8(e) hereto. Except as
set forth on Schedule 8(e), the Purchase Price may not and will not be used for
accrued and unpaid officer and director salaries, payment of financing related
debt, redemption of outstanding notes or equity instruments of the Company nor
non-trade obligations outstanding on the Closing Date.
(f) Reservation. Prior to the Closing Date, the Company undertakes to
reserve, pro rata, on behalf of each Subscriber and holder of a Warrant, from
its authorized but unissued common stock, a number of common shares equal to the
amount of Warrant Shares issuable upon exercise of the Warrants. Failure to have
sufficient shares reserved pursuant to this Section 8(g) for three (3)
consecutive business days or ten (10) days in the aggregate shall be a material
default of the Company's Obligations under this Agreement.
(g) Taxes. From the date of this Agreement and until the sooner of (i) two
(2) years after the Closing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.
11
(h) Insurance. From the date of this agreement and until the sooner of (i)
two (2) years after the Second Closing Date, or (ii) until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than one
hundred percent (100%) of the insurable value of the property insured, and the
Company will maintain, with financially sound and reputable insurers, insurance
against other hazards and risks and liability to persona and property to the
extent and in the manner customary for the companies in similar businesses
similarly situated and to the extent available on commercially reasonable terms.
(i) Books and Records. From the date of this Agreement and until the sooner
of (i) two (2) years after the Closing Date, or (ii) until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will keep true records and books of account in which
full, true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.
(j) Governmental Authorities. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company shall duly observe and conform in all
material respects to all valid requirements of governmental authorities relating
to the conduct of its business or to its properties or assets.
(k) Intellectual Property. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company shall maintain in full force and effect its
corporate existence, rights and franchises and all licenses and other rights to
use intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business.
(l) Properties. From the date of this Agreement and until the sooner of (i)
two (2) years after the Closing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to volume
limitation, the Company will keep its properties in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company will at all times comply with each provision of all
leases to which it is a party or under which it occupies property if the breach
of such provision could reasonably be expected to have a material adverse
effect.
12
(m) Confidentiality/Public Announcement. From the date of this Agreement
and until the sooner of (i) two (2) years after the Closing Date, or (ii) until
all the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company agrees that except in
connection with a Form 8-K or the Registration Statement, it will not disclose
publicly or privately the identity of the Subscribers unless expressly agreed to
in writing by a Subscriber or only to the extent required by law and then only
upon five days prior notice to Subscriber. In any event and subject to the
foregoing, the Company undertakes to file a Form 8-K or make a public
announcement describing the Offering not later than the first business day after
the Closing Date. In the Form 8-K or public announcement, the Company will
specifically disclose the amount of common stock outstanding immediately after
each Closing. A form of the proposed Form 8-K or public announcement to be
employed in connection with the Closing is annexed hereto as Exhibit D.
(n) Further Registration Statements. Except for a registration statement
filed on behalf of the Subscribers pursuant to Section 10 of this Agreement or
in connection with the securities identified on Schedule 10.1 hereto, which may
include only the Additional Offering (as defined in Section 11(a) hereof, the
Company will not file any registration statements, including but not limited to
Form S-8, with the Commission or with state regulatory authorities until
thirty-one (31) days after the Closing Date. Nor will the Company allow any
registration statement except for the Registration Statement to be declared
effective by the Commission prior to the date the Registration Statement
described in Section 10.1 (iv) is declared effective by the Commission ("Actual
Effective Date"). In the event the Company is in breach of the terms of this
Section 8(n), each Subscriber within thirty (30) days of the discovery of such
breach, at its option, may require the Company to purchase all or any portion of
the Shares and Warrant Shares held by the Subscriber at a price per share equal
to one hundred ten percent (110%) of the Purchase Price of such Common Stock and
Warrant Shares. The Company shall pay any payments incurred under this Section
in immediately available funds upon demand.
(o) Blackout. The Company undertakes and covenants that until the first to
occur of (i) the end of the Exclusion Period defined in Section 11(a) hereof, or
(ii) until all the Shares and Warrant Shares have been resold pursuant to such
registration statement, the Company will not enter into any acquisition, merger,
exchange or sale or other transaction that could have the effect of delaying the
effectiveness of any pending registration statement or causing an already
effective registration statement to no longer be effective or current.
(p) Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Subscriber or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Subscriber shall have
agreed in writing to receive such information. The Company understands and
confirms that each Subscriber shall be relying on the foregoing representations
in effecting transactions in securities of the Company.
(q) Lockup. The Company will deliver to the Subscribers on or before the
Closing date and enforce the provisions of irrevocable lockup agreements
("Lockup Agreements") in the forms annexed hereto as Exhibit D, with the parties
identified on Schedule 8 (q) hereto for the period stated therein.
13
9. Covenants of the Company and Subscriber Regarding Indemnification.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend
the Subscribers, the Subscribers' 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 the 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 any of the Transaction
Documents; 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 under any Transaction Documents other than its
obligations under Section 10 of this Agreement.
(b) Each 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 such 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 such Subscriber of any
covenant or undertaking to be performed by such Subscriber hereunder, or any
other agreement entered into by the Company and Subscribers, relating hereto.
(c) In no event shall the liability of any Subscriber or permitted
successor hereunder or under any other agreement delivered in connection
herewith be greater in amount than the dollar amount of the net proceeds
actually received by such Subscriber upon the sale of Registrable Securities (as
defined herein).
(d) The procedures set forth in Section 10.6 shall apply to the
indemnifications set forth in Sections 9(a) and 9(b) above.
10.1 Registration Rights.
(i) On one occasion, for a period commencing one hundred and
twenty-one (121) days after the Closing Date, but not later than
two (2) years after the Closing Date ("Request Date"), upon a
written request therefore from any record holder or holders of
more than 50% of the Shares issued and Warrant Shares actually
issued upon exercise of the Warrants, the Company shall prepare
and file with the Commission a registration statement under the
1933 Act registering the Shares and Warrant Shares (collectively
"Registrable Securities") which are subject of such request for
unrestricted public resale by the holder thereof. For the
purposes of Sections 10.1 (i) and 10.1 (ii), Registrable
Securities shall not include Securities which are registered for
resale in an effective registration statement or included for
registration in a pending registration statement, or which have
been issued without further transfer restrictions after a sale or
14
transfer pursuant to Rule 144 under the 1933 Act. 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 with ten (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).
(ii) If the Company at any time proposes to register any of its
securities under the 1933 Act for sale to the public, whether for
its own account or for the account of other security holders or
both, except with respect to registration statements on Forms
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 Subscribers or Holder pursuant to an effective registration
statement, each such time it will give at least fifteen (15)
days' prior 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 ten (10) days after
the giving of any such notice by the Company, to register any of
the Registrable Securities not previously registered, 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" or
"Sellers"). 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 effect 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 and the Company actually does file such
other registration statement, 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 (11).
(iv) Registration Rights. The Company shall file with the Commission
not later than thirty (30) days after the Closing Date (the
"Filing Date"), and use commercially reasonable efforts to cause
to be declared effective within one hundred and twenty (120) days
after the Closing Date ("Effective Date"), a Form SB-2
registration statement (the "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 1933
Act. The Company will register not less than a number of shares
of common stock in the aforedescribed registration statement that
is equal to all of the Shares and Warrant Shares issuable
pursuant to this Agreement. The Registrable Securities shall be
reserved and set aside exclusively for the benefit of each
Subscriber and Warrant holder, pro rata, and not issued, employed
15
or reserved for anyone other than each such Subscriber and
Warrant holder. The Registration Statement will immediately be
amended or additional registration statements will be immediately
filed by the Company as necessary to register additional shares
of Common Stock to allow the public resale of all Common Stock
included in and issuable by virtue of the Registrable Securities.
Without the written consent of the Subscriber, no securities of
the Company other than the Registrable Securities will be
included in the Registration Statement except as described on
Schedule 10.1. The Company shall use the services of counsel Xxxx
X. Xxxx of Sichenzia Xxxx Xxxxxxxx Xxxxxxx, LLP located at 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, (T)
212.398.5541 to review the Registration Statement described
herein.
10.2.Registration Procedures.
If and whenever the Company is required by the provisions of Section 10.1
to effect the registration of any Registrable Securities under the 1933 Act, the
Company will, as expeditiously as possible:
(a) subject to the timelines provided in this Agreement, prepare and file
with the Commission a registration statement required by Section 10, 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 (as herein provided), and promptly provide to the holders
of the Registrable Securities copies of all filings and Commission letters of
comment and notify Subscribers and Grushko & Xxxxxxx, P.C. (by telecopier and by
email to Xxxxxxxxx@xxx.xxx) within two (2) business days of (i) notice that the
Commission has no comments or no further comments on the Registration Statement,
(ii) request by the Company of acceleration of effectiveness of any registration
statement which includes Registrable Securities, and (iii) the declaration of
effectiveness of the registration statement;
(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 such
registration statement has been effective for a period of two (2) years, and
comply with the provisions of the 1933 Act with respect to the disposition of
all of the Registrable Securities covered by such registration statement in
accordance with the Sellers' intended method of disposition set forth in such
registration statement for such period;
(c) furnish to the Sellers, at the Company's expense, such number of copies
of the registration statement and the prospectus included therein 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 Sellers' Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws in up to five (5) jurisdictions as the Sellers shall request in
writing, 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;
16
(e) if applicable, 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 Sellers when a prospectus relating thereto is
required to be delivered under the 1933 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; and
(g) provided same would not be in violation of the provision of Regulation
FD under the 1934 Act, make available for inspection by the Sellers, 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.
10.3.Provision of Documents.
In connection with each registration described in this Section 10, each
Subscriber 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.
10.4.Non-Registration Events.
The Company and the Subscribers agree that the Sellers will suffer damages
if the Registration Statement is not filed by the Filing Date and not declared
effective by the Commission by the Effective Date, 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 is not filed on or before the Filing Date,
(ii) the Registration Statement is not declared effective on or before the
Effective Date, or (iii) the Registration Statement is not declared effective
within five (5) business days after receipt by the Company of a written or oral
communication from the Commission that the Registration Statement will not be
reviewed or that the Commission has no further comments, or (iv) the
Registration Statement is filed and declared effective but shall thereafter
cease to be effective (without being succeeded within ten (10) business days by
an effective replacement or amended registration statement) for a period of time
which shall exceed 30 days in the aggregate per year (defined as a period of 365
days commencing on the date the Registration Statement is declared effective) or
more than 20 consecutive days (each such event referred to in clauses (i), (ii),
(iii) and (iv) of this Section 10.4 is referred to herein as a "Non-Registration
Event"), then for each thirty (30) days of the pendency of such Non-Registration
Event, the Company shall deliver to the holder of Registrable Securities, as
Liquidated Damages, an amount equal to one and one-half percent (1.5%) of the
Purchase Price of the Shares and Warrant Shares owned of record by such holder
as of and during the pendency of such Non-Registration Event which are subject
to such Non-Registration Event. Liquidated Damages payable in connection with a
Filing Date Non-Registration Event will be waived if the Actual Filing Date
occurs within forty five (45) days after the Closing Date. The Company must pay
17
the Liquidated Damages in cash within ten (10) days after the end of each thirty
(30) day period or shorter part thereof for which Liquidated Damages are
payable. In the event a Registration Statement is filed by the Filing Date but
is withdrawn prior to being declared effective by the Commission, then such
Registration Statement will be deemed to have not been filed. All oral or
written comments received from the Commission relating to the Registration
Statement must be responded to within fifteen (15) business days. Failure to
timely respond is a Non-Registration Event for which Liquidated Damages will
accrue and be payable by the Company to the holders of Registrable Securities at
the same rate set forth above.
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, 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
additional counsel to the Seller, are called "Selling Expenses." The Company
will pay all Registration Expenses in connection with the registration statement
under Section 10. 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. Additionally, the parties agree that each will
be responsible for their respective legal fees in connection with this
transaction.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under the
1933 Act pursuant to Section 10, the Company will, to the extent permitted by
law, 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 1933 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 1933 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 subject to the provisions of
Section 10.6(c) 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,
18
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 1933 Act pursuant to Section 10, each Seller severally but not jointly
will, to the extent permitted by law, indemnify and hold harmless the Company,
and each person, if any, who controls the Company within the meaning of the 1933
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 1933 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 1933
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 1933
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 net proceeds actually
received by the Seller from the sale of Registrable Securities covered by such
registration statement.
(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
19
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, as a group, 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 1933 Act in any case in which either (i) a Seller, or
any controlling person of a 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 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not 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 11(f) of the 0000
Xxx) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
10.7. Delivery of Unlegended Shares.
(a) Within seven (7) business days (such seventh (7th)) business day, the
"Unlegended Shares Delivery Date") after the business day on which the Company
has received (i) a notice that Registrable Securities have been sold either
pursuant to the Registration Statement or Rule 144 under the 1933 Act, (ii) a
representation that the prospectus delivery requirements, or the requirements of
Rule 144, as applicable, have been satisfied, and (iii) the original share
certificates representing the shares of Common Stock that have been sold, and
(iv) in the case of sales under Rule 144, customary representation letters of
the Subscriber and/or Subscriber's broker and opinion of counsel reasonably
acceptable to the Company regarding compliance with the requirements of Rule
144, the Company at its expense, (y) shall deliver, and shall cause legal
counsel selected by the Company to deliver, to its transfer agent (with copies
to Subscriber) an appropriate instruction and opinion of such counsel, directing
the delivery of shares of Common Stock without any legends including the legends
20
set forth in Sections 4(e) and 4(f) above, issuable pursuant to any effective
and current Registration Statement described in Section 10 of this Agreement or
pursuant to Rule 144 under the 1933 Act (the "Unlegended Shares"); and (z) cause
the transmission of the certificates representing the Unlegended Shares together
with a legended certificate representing the balance of the unsold shares of
Common Stock, if any, to the Subscriber at the address specified in the notice
of sale, via express courier, by electronic transfer or otherwise on or before
the Unlegended Shares Delivery Date. Transfer fees shall be the responsibility
of the Seller.
(b) In lieu of delivering physical certificates representing the Unlegended
Shares, if the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, upon request of a
Subscriber, so long as the certificates therefor do not bear a legend and the
Subscriber is not obligated to return such certificate for the placement of a
legend thereon, the Company shall cause its transfer agent to electronically
transmit the Unlegended Shares by crediting the account of Subscriber's prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. Such
delivery must be made on or before the Unlegended Shares Delivery Date.
(c) The Company understands that a delay in the delivery of the Unlegended
Shares pursuant to Section 10 hereof beyond the Unlegended Shares Delivery Date
could result in economic loss to a Subscriber. As compensation to a Subscriber
for such loss, the Company agrees to pay late payment fees (as liquidated
damages and not as a penalty) to the Subscriber for late delivery of Unlegended
Shares in the amount of $100 per business day after the Delivery Date for each
$10,000 of purchase price of the Unlegended Shares subject to the delivery
default. If during any 360 day period, the Company fails to deliver Unlegended
Shares as required by this Section 10.7 for an aggregate of thirty (30) days,
then each Subscriber or assignee holding Securities subject to such default may,
at its option, require the Company to purchase all or any portion of the Shares
and Warrant Shares subject to such default at a price per share equal to one
hundred twenty percent (120%) of the Purchase Price of such Common Stock and
Warrant Shares. The Company shall pay any payments incurred under this Section
in immediately available funds upon demand.
(d) In addition to any other rights available to a Subscriber, if the
Company fails to deliver to a Subscriber Unlegended Shares as required pursuant
to this Agreement, within ten (10) calendar days after the Unlegended Shares
Delivery Date and 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 shares of Common Stock which the Subscriber anticipated
receiving from the Company (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 purchase price of the shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, together with
interest thereon at a rate of 15% 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 a Subscriber purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to $10,000 of purchase price of shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, 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.
21
(e) In the event a Subscriber shall request delivery of Unlegended Shares
as described in Section 10.7(e) and the Company is required to deliver such
Unlegended Shares pursuant to Section 10.7(e), the Company may not refuse to
deliver Unlegended Shares 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 or temporary restraining
order from a court, on notice, restraining and or enjoining delivery of such
Unlegended Shares or exercise of all or part of said Warrant shall have been
sought and obtained and the Company has posted a surety bond for the benefit of
such Subscriber in the amount of one hundred twenty percent (120%) of the amount
of the aggregate purchase price of the Common Stock and Warrant Shares which are
subject to the injunction or temporary restraining order, 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 in Subscriber's favor.
11. (a) Right of First Refusal.
Until the Registration Statement has been effective for one hundred twenty
(120) days ("Exclusion Period"), the Subscribers shall be given not less than
ten (10) business days prior written notice of any proposed sale by the Company
of its common stock or other securities or debt obligations, except in
connection with (i) employee stock options or compensation plans, (ii) public
offering on behalf of the Company conducted by a member of the National
Association of Securities Dealers, Inc. to be conducted pursuant to a
registration statement filed with the Commission, (iii) up to $500,000.00 of
Common Stock and Warrants on terms not more favorable to the Purchasers than the
terms of the Offering which sale may close after the Closing Date but which
shares may not be registered prior to the Actual Effective Date ("Additional
Offering"), (iv) as full or partial consideration in connection with merger,
consolidation or purchase of substantially all of the securities or assets of
any corporation or other entity, or (iv) as has been described in the Reports or
Other Written Information filed with the Commission or delivered to the
Subscribers prior to the Closing Date (collectively the foregoing are "Excepted
Issuances"). The Subscribers who exercise their rights pursuant to this Section
11(a) shall have the right during the five (5) business days following receipt
of the notice to purchase such offered common stock, debt or other securities in
accordance with the terms and conditions set forth in the notice of sale in the
same proportion to each other as their purchase of Shares in the Offering. In
the event such terms and conditions are modified during the notice period, the
Subscribers shall be given prompt notice of such modification and shall have the
right during the five (5) business days following the notice of modification,
whichever is longer, to exercise such right.
(b) Favored Nations Provision. Other than the Excepted Issuances, if at any
time that a Subscriber is still holding Shares or Warrant Shares and during the
entire warrant exercise period, if the Company shall offer, issue or agree to
issue any common stock or securities convertible into or exercisable for shares
of common stock (or modify any of the foregoing which may be outstanding at any
time prior to the Closing Date) to any person or entity at a price per share or
conversion or exercise price per share which shall be less than the Per Share
Purchase Price, without the consent of each Subscriber holding Shares, then the
Company shall issue, for each such occasion, additional shares of Common Stock
to each Subscriber so that the average Per Share Purchase Price of the shares of
Common Stock issued to the Subscriber (of only the Common Stock or Warrant
Shares still owned by the Subscriber) is equal to such other lower price per
share but not less than $.001 per share. The delivery to the Subscriber of the
additional shares of Common Stock shall be not later than the closing date of
the transaction giving rise to the requirement to issue additional shares of
Common Stock. The Subscriber is granted the registration rights described in
22
Section 10 hereof in relation to such additional shares of Common Stock except
that the Filing Date and Effective Date vis-a-vis such additional common shares
shall be, respectively, the sixtieth (60th) and one hundred and twentieth
(120th) date after the closing date giving rise to the requirement to issue the
additional shares of Common Stock. For purposes of the issuance and adjustment
described in this paragraph, the issuance of any security of the Company
carrying the right to convert such security into shares of Common Stock or of
any warrant, right or option to purchase Common Stock shall result in the
issuance of the additional shares of Common Stock upon the issuance of such
convertible security, warrant, right or option. The rights of the Subscriber set
forth in this Section 11 are in addition to any other rights the Subscriber has
pursuant to this Agreement and any other agreement referred to or entered into
in connection herewith.
(c) Reset. If during the period commencing on the Closing Date through the
Actual Effective Date ("Reset Period") the volume weighted average price of the
Common stock as reported by the Bloomberg LP using the AQR function for the
Principal Market ("VWAP") is less than $.80 for any five consecutive trading
days then for the lowest such average during the Reset Period, each Subscriber
shall receive additional shares of Common Stock ("Reset Shares") sufficient an
amount to make the average purchase price of the Shares received by the
Subscriber on the Closing Date together with such Reset Shares equal to the
average of the lowest five (5) day VWAP during the Reset Period but not less
than $.001 per share. The Reset Shares must be delivered to each Subscriber
together with the calculation supporting the number of Reset Shares issued, not
later than seven (7) days after the Closing Date. The Subscriber is granted in
connection with the Reset Shares the same registration rights, undertakings and
indemnification granted and made by the Company in connection with the Shares,
except that in connection with the Reset Shares the Actual Effective Date shall
be deemed the Closing Date for purposes of calculating the Filing Date and
Effective Date.
(d) Maximum Exercise of Rights. In the event the exercise of the rights
described in Section 11(a) would result in the issuance of an amount of common
stock of the Company that would exceed the maximum amount that may be issued to
a Subscriber calculated in the manner described in Section 10 of the Warrant,
then the issuance of such additional shares of common stock of the Company to
such Subscriber will be deferred in whole or in part until such time as such
Subscriber is able to beneficially own such common stock without exceeding the
maximum amount set forth calculated in the manner described in Section 10 of the
Warrant. The determination of when such common stock may be issued shall be made
by each Subscriber as to only such Subscriber.
12. Covenants of the Subscriber.
The Subscribers to the Offering, each for itself, covenant and agree with
the Company that provided no Event of Default (as defined in the Note) has
occurred, then until 120 days after the Actual Effective Date (as defined in
Section 8(n) of this Agreement), each Subscriber will not, without prior
approval of the Company and each other Subscriber sell in open market
transactions during each of the four (4) subsequent thirty-day periods
commencing on the Actual Effective Date Shares in excess of twenty-five percent
(25%) of the Shares purchased by such Subscriber. Any Shares not sold during any
thirty-day period may be sold in any subsequent thirty-day period in addition to
the twenty-five percent (25%) of the shares that may otherwise be sold.
23
13. Miscellaneous.
(a) Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Company, to: VoIP, Inc., 00000 XX00
Xxxxxx, Xxxxx 000, Xxxxxx Xxxx Xxxxxxx 00000, Attn: Xxxxxx Xxxxxxx, President
and CEO, telecopier: (000) 000-0000, with a copy by telecopier only to: Xxxxxx
X. Xxxxx, Xxxxxxx Xxxxx LLP, 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000,
telecopier: (000) 000-0000, (ii) if to the Subscribers, to: the one or more
addresses and telecopier numbers indicated on the signature pages hereto, with
an additional copy by telecopier only to: Grushko & Xxxxxxx, P.C., 000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, telecopier number: (000) 000-0000,
and (iii) if to the Finder, to: the one or more addresses and telecopier numbers
indicated on Schedule 7 hereto.
(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.
(c) Entire Agreement; Assignment. This Agreement and other documents
delivered in connection herewith represent 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. Neither the Company nor the Subscribers
have relied on any representations not contained or referred to in this
Agreement and the documents delivered herewith. 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) 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.
24
(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. The parties and the individuals executing this Agreement
and other agreements referred to herein or delivered in connection herewith 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, 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, Subscriber and any
signator hereto in his personal capacity 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 in New York 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) Independent Nature of Subscribers. The Company acknowledges that the
obligations of each Subscriber under the Transaction Documents are several and
not joint with the obligations of any other Subscriber, and no Subscriber shall
be responsible in any way for the performance of the obligations of any other
Subscriber under the Transaction Documents. The Company acknowledges that the
decision of each Subscriber to purchase Securities has been made by such
Subscriber independently of any other Subscriber and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or
given by any other Subscriber or by any agent or employee of any other
Subscriber, and no Subscriber or any of its agents or employees shall have any
liability to any Subscriber (or any other person) relating to or arising from
any such information, materials, statements or opinions. The Company
acknowledges that nothing contained in any Transaction Document, and no action
taken by any Subscriber pursuant hereto or thereto (including, but not limited
to, the (i) inclusion of a Subscriber in the SB-2 Registration Statement and
25
(ii) review by, and consent to, such Registration Statement by a Subscriber)
shall be deemed to constitute the Subscribers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Subscribers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. The
Company acknowledges that each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of the Transaction Documents, and it shall not be necessary for any other
Subscriber to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all Subscribers
with the same terms and Transaction Documents for the convenience of the Company
and not because Company was required or requested to do so by the Subscribers.
The Company acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Subscribers are in any way
acting in concert or as a group with respect to the Transaction Documents or the
transactions contemplated thereby.
(h) Equitable Adjustment. The Securities and the purchase
prices of Securities shall be equitably adjusted to offset the effect of stock
splits, stock dividends, and distributions of property or equity interests of
the Company to its shareholders.
[THIS SPACE INTENTIONALLY LEFT BLANK]
26
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
--------------------------------------------
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.
VoIP, INC.,
a Texas corporation
By:/s/ Xxxxxx Xxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxx
Title: President
Dated: as of November 11, 2004
----------------------------------------------------------------------------------------------
SUBSCRIBER PURCHASE PRICE SHARES A WARRANTS B WARRANTS
----------------------------------------------------------------------------------------------
WHALEHAVEN CAPITAL FUND LTD.3RD Floor, 14 $300,000 375,000 112,500 187,500
Xxx-Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx XX00
Fax: (000) 000-0000
/s/ Xxxx Xxxxxxxxxxx
--------------------
(Signature)
By: Xxxx Xxxxxxxxxxx
----------------------------------------------------------------------------------------------
27
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
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.
VoIP, INC.,
a Texas corporation
By:/s/ Xxxxxx Xxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxx
Title: President
Dated: as of November 11, 2004
---------------------------------------------------------------------------------
SUBSCRIBER PURCHASE PRICE SHARES A WARRANTS B WARRANTS
---------------------------------------------------------------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT $500,000 625,000 187,500 312,500
Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Xxxxx, Lichtenstein
Fax: 000-00-00000000
/s/ Illegible
-------------
(Signature)
By:
---------------------------------------------------------------------------------
28
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)
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.
VoIP, INC.,
a Texas corporation
By:/s/ Xxxxxx Xxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxx
Title: President
Dated: as of November 11, 2004
--------------------------------------------------------------------------------------------------
SUBSCRIBER PURCHASE PRICE SHARES A WARRANTS B WARRANTS
--------------------------------------------------------------------------------------------------
CORDILLERA FUND L.P. $500,000 625,000 187,500 312,500
/s/ Xxxxx Xxxxxx
----------------
(Signature)
By: Xxxxx X. Xxxxxx
Co-CEO of Xxxxxx Xxxxxx Capital, Inc. the General
Partner of ACCR GenPar, L.P.
The General Partner of the Cordillera Fund L.P.
--------------------------------------------------------------------------------------------------
29
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)
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.
VoIP, INC.,
a Texas corporation
By:/s/ Xxxxxx Xxxxxxx
---------------------------
Title: President
Dated: as of November 11, 2004
--------------------------------------------------------------------------------
SUBSCRIBER PURCHASE PRICE SHARES A WARRANTS B WARRANTS
--------------------------------------------------------------------------------
XXXXXX XXXX $250,000 312,000 93,750 156,250
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Fax: (000)000-0000
/s/ Xxxxxx Xxxx
---------------
(Signature)
By: Xxxxxx Xxxx
--------------------------------------------------------------------------------
30
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Warrant
Exhibit B Escrow Agreement
Exhibit C Form of Legal Opinion
Exhibit D Form 8-K or Public Announcement
Exhibit E Form of Modification Agreement
Schedule 5(h) Litigation
Schedule 5(s) Capitalization
Schedule 7 Finder
Schedule 8(e) Use of Proceeds
Schedule 10.1 Other Securities to be Registered
SCHEDULE 5(h)
LITIGATION
VOIP Corp. v. VoIP, Inc., Case No. 04-CA-8140-35, in the Circuit Court of the
Ninth Judicial Circuit, Orange County, Florida. Plaintiff accuses VOIP of
deceptive trade practices and unfair competition in using a name deceptively
similar to Plaintiff's and seeks unspecified damages and injunctive relief. VoIP
intends to defend the case and believes it has meritorious defenses based upon
(i) VoIP, Inc. is qualified to do business in Florida under the name VoIP
Holdings; (ii) VoIP also conducts business in Florida under the name VoIP
Solutions; (iii) VoIP is a generic and unprotectible term - every federal
trademark using "VOIP" requires that the applicant disaffirm any protection of
"VOIP"; (iv) there are 24 other Florida companies using the name "VOIP" as part
of its name; and (v) the original Florida corporation known as "VOIP, Inc.",
which predates the Plaintiff's name filing, is now owned by VoIP.
SCHEDULE 5(s)
CAPITALIZATION
100,000,000 shares of common stock, par value $0.001 per share, of which
20,859,434 shares are issued and outstanding. In addition, there are 5,000,000
shares are reserved for issuance under outstanding options and warrants.
31
SCHEDULE 7
FINDERS
Xxxxxxx Xxxxx
MZM Capital Management Inc.,
MANAGEMENT
000 X. Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx, XX 00000
(000) 000-0000 Office
(000) 000-0000 Fax
xxxxxxx@xxxxxxxxxx.xxx
----------------------
Xxxxxx Olshanksy
Granite Enterprises
0000-X0 Xxxxxx Xxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
(000) 000-0000 Office
(000) 000-000-0000 Fax
xxxxxxxxxx@xxxxxxxx.xxx
-----------------------
Xxxxxx Xxxxxx
Granite Enterprises
0000-X0 Xxxxxx Xxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
(000) 000-0000
xxxxxxx@xxx.xxx
---------------
Xxxx Xxxxxxxx
President & CEO
Xxxxxxx Xxxxxx LLC
000 Xxxx Xxx 0xx xx.
Xxx Xxxx, XX 00000
000-000-0000 tel
000-000-0000 fax
xxxxxxxxx@xxxxxxxxxxxxx.xxx
---------------------------
32
SCHEDULE 8(e)
USE OF PROCEEDS
(Thousands $)
Use of funds
o Expand network equipment for customer growth 22% Amount in US dollars $0.65
million
The purpose of this program is to expand the network to stay ahead of
subscriber acquisitions.
o Purchase of inventory 22%
Amount in US dollars $0.65 million
The objective of this program is to purchase inventory for two
subsidiaries: VoIP Solutions, Inc., and DTNet Technologies, Inc.
o Fixed assets 9%
Amount in US dollars $0.28
This program is to improve our fixed assets facilities.
o Sales and marketing 21%
Amount in US dollars $0.625 million This program is to expand the on-line
advertising and marketing campaign. In addition of the extensive mass
campaign design for eGlobalphone.
o Reserve 13%
Amount in US dollars $0.39 million
Pending specific application of the net proceeds, we intend to use them to
purchase short-term marketable securities.
o Technical and customer support 5%
Amount in US dollars $0.08 million
This program is to expand our current technical and customer service
support, to provide adequate assistance to our customers.
o Reduction of current liabilities 8%
Amount in US dollars $0.25 million
This program is mainly to reduce current liabilities of the fully owned
subsidiary, DTNet Technologies, Inc.
33
SCHEDULE 10.1
OTHER SECURITIES TO BE REGISTERED
Xxxxxx Xxxx 50,000
Xxxxxx Xxxxxx 10,000
Xxxxx Xxxxx 25,000
Xxxxx X. Xxxxxxxxx 25,000
Xxxxxxx Xxxxx 25,000
Xxxx Xxxxxxx 25,000
W. W. Gay 25,000
Xxxxxx X. Xxxxxxx 10,000
Xxxxxx Xxxx 8,000
Xxxxx Xxxxxx 7,500
Xxxxx Xxxxxx 5,000
Xxxxxx X. Gear 25,000
Xxxx Xxxxxxx 5,000
Xxxxx Xxxxxxxx 5,000
Xxxxxx Xxxxxx 5,000
Xxxxxx Group 5,000
Chance Xxxxxx 4,000
Xxxxx X. Xxxxxx 4,000
Xxxxxx Xxxxx 3,500
Zereisah Hall 3,500
Xxxxxx Xxxxxxx 2,000
Xxxxx Xxxxxxx 2,000
Xxxxxx O'Dell 2,000
Xxxxx Xxxxxxx 2,000
C. Xxx Xxxxx Jr. 1,500
Xxxxx X. Xxxxxxxxx 1,500
Xxxx X. Xxxxxxx Xx. 1,500
Xxxxx X. Xxxxxxx 1,500
Xxxxxx Xxxxx 1,500
Xxxxxx Xxxxxx 1,000
Xxxxx X. Xxxxxxxxx 1,000
Xxxxx Xxxxx 1,000
Xxxxxxx X. Xxxxxx 1,000
Xxxxxx X. Xxxxx 1,000
Xxxxxx X. Xxxxxxxxx 1,000
Van Xxx Xxxxxxxxx 1,000
Xxxxx X. Xxxxxxx 500
Xxxxxx Xxxxx 500
-------
Total 299,000
34
