REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES
LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
REGULATION S ("REGULATION S") PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN
REGULATION S) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO
AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY OR TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OF SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Regulation S Securities Subscription Agreement (the "Agreement"
or the "Subscription Agreement") is executed by the undersigned (the
"Subscriber") in connection with the offer and subscription by the Subscriber
for shares of Series G Preferred Stock (the "Preferred Stock") of Lasergate
Systems, Inc., a Florida corporation (the "Company"), and offered in units of
not less than 100 shares. The Company is offering an aggregate face amount of
$7,500,000.00 (U.S.) (7,500 shares with a face amount of $1,000 (U.S.) per
share) at an aggregate purchase price of $7,500,000.00 (U.S.). The rights and
preferences of the Preferred Stock, including the terms on which the Preferred
Stock may be converted into Common Stock of the Company ("Shares") are set forth
in the Certificate of Designation of Series G Preferred Stock attached hereto as
Exhibit A (the "Certificate of Designation"). The solicitation of this
Subscription and, if accepted by the Company, the offer and sale of Preferred
Stock, are being made in reliance upon the provisions of Regulation S
("Regulation S") promulgated under the United States Securities Act of 1933, as
amended (the "Act"). The Preferred Stock and the Shares issuable upon conversion
thereof are sometimes referred to herein as the "Securities." The Subscriber
wishes to subscribe for the number of shares of Preferred Stock set forth in
Section 14 in accordance with the terms and conditions of the Certificate of
Designation and this Agreement. It is agreed as follows:
1. Offer to Subscribe; Purchase Price
The Subscriber hereby offers to purchase and subscribe for the
number of shares of Preferred Stock, and at the price, set out in Section 14 of
this Agreement. The Closing shall be deemed to occur when this Agreement has
been executed by both the Subscriber and the Company (the "Closing") and payment
shall have been made by the Subscriber, by wire transfer, as directed in
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writing by the Company on the day so directed against the Company's delivery of
certificates representing the Preferred Stock subscribed for. The payment shall
be made by delivering same day funds in United States Dollars as designated
above.
2. Representations; Access to Information; independent Information;
Independent Investigation
The Subscriber represents and warrants to and covenants with the
Company, on its own behalf and on behalf of each person or entity for which the
Subscriber is acting as a fiduciary, as follows:
2.1 Offshore Transaction. The Subscriber represents and
warrants to the Company that (i) neither the Subscriber
nor any of the investors on whose behalf the Subscriber
may purchase and hold Preferred Stock or Shares (the
"Investors") is a "U.S. person" as that term is defined
in Rule 902(o) of Regulation S (a copy of which
definition is attached as Exhibit B), and neither the
Subscriber nor any Investor is an entity organized or
incorporated under the laws of any foreign jurisdiction
by any "U.S. person" principally for the purpose of
investing in securities not registered under the Act,
unless the Subscriber is or was organized or
incorporated by "U.S. persons" who are accredited
investors (as defined in Rule 501(a) under the Act) and
who are not natural persons, estates or trusts
("Institutional Investors"), and all owners of interests
in such entity who are "U.S. persons" are Institutional
Investors, and not natural persons, estates or trusts;
(ii) the Preferred Stock was not offered to the
Subscriber or to any Investor in the United States and
at the time of execution of this Subscription Agreement
and of any offer to the Subscriber or to the Investors
to purchase the Preferred Stock hereunder, the
Subscriber and each such Investor was physically outside
the United States; (iii) the Subscriber is purchasing
the Securities for its own account and not on behalf of
or for the benefit of any U.S. person and the sale and
resale of the Securities have not been prearranged with
any buyer in the United States; (iv) the Subscriber and
to the best knowledge of the Subscriber each
distributor, if any, participating in the offering of
the Securities, has agreed and the Subscriber hereby
agrees that all offers and sales of the Securities prior
to the expiration of a period commencing on the Closing
of all Preferred Stock offered and ending forty-five
(45) days thereafter (the "Restricted Period") shall not
be made to U.S. persons or for the account or benefit of
U.S. persons and shall otherwise be made in compliance
with the provisions of Regulation S. Subscriber has not
been engaged or acted as or on behalf of a distributor
or dealer (and is not an affiliate of a distributor or
dealer) with respect to this transaction.
2.2 Independent Investigation. The Subscriber, in offering
to subscribe for the Securities hereunder, has relied
upon an independent investigation made by it and has,
prior to the date hereof, been given access to and the
opportunity to examine all books and records of the
Company, and all material contracts and documents of the
Company. The Subscriber will keep confidential all
non-public information regarding the Company that the
Subscriber receives from the Company. In making its
investment decision to purchase the Preferred Stock, the
Subscriber is not relying on any oral or written
representations or assurances from the Company or any
other person or any representation of the Company or any
other person other than as set forth in this Agreement,
public filings of the Company or in a document executed
by a duly authorized representative of the Company
making reference to this Agreement. The Subscriber has
such experience in business and financial matters that
it is capable of evaluating the risk of its investment
and determining the suitability of its investment.
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The Subscriber is a sophisticated investor, as defined
in Rule 506(b)(2)(ii) of Regulation D, and an accredited
investor as defined in Rule 501 of Regulation D, a copy
of which definition is attached hereto as Exhibit C.
2.3 Economic Risk. The Subscriber understands and
acknowledges that an investment in the Shares involves a
high degree of risk, including a possible total loss of
investment. The Subscriber represents that the
Subscriber is able to bear the economic risk of an
investment in the Preferred Shares. In making this
statement the Subscriber hereby represents and warrants
that the Subscriber has adequate means of providing for
the Subscriber's current needs and contingencies; the
Subscriber is able to afford to hold the Preferred
Shares for an indefinite period and the Subscriber
further represents that the Subscriber has such
knowledge and experience in financial and business
matters that the Subscriber is capable of evaluating the
merits and risks of the investment in the Preferred
Shares to be received by the Subscriber. Further, the
Subscriber represents that the Subscriber is able to
bear the economic risks of an investment in the
Preferred Shares; the Subscriber has no present need for
liquidity in such Preferred Shares; the Subscriber can
afford a complete loss of such investment in the
Preferred Shares; and the Subscriber is willing to
accept such investment risks.
2.4 No Government Recommendation or Approval. The Subscriber
understands that no United States federal or state
agency or similar agency of any other country has passed
upon or made any recommendation or endorsement of the
Company, this transaction or the subscription of the
Securities.
2.5 No Directed Selling Efforts in Regard to this
Transaction. The Subscriber has not, and to the best of
the Subscriber's knowledge, neither the Company nor any
distributor, if any, participating in the offering of
the Securities nor any person acting for the Company or
any such distributor has conducted any "directed selling
efforts" as that term is defined in Rule 902 of
Regulation S. Such activity includes, without
limitation, the mailing of printed material to investors
residing in the United States, the holding of
promotional seminars in the United States, the placement
of advertisements with radio or television stations
broadcasting in the United States or in publications
with a general circulation in the United States, which
discuss the offering of Shares.
2.6 Reliance on Representation. This Agreement is made by
the Company with the Subscriber in reliance upon such
Subscriber's representations and covenants made in this
Section 2, which by his execution of this Agreement the
Subscriber hereby confirms. If the Subscriber includes
or consists of more than one person or entity, the
obligations of the Subscriber shall be joint and several
and the representations and warranties herein contained
shall be deemed to be made by and be binding upon each
such person or entity and their respective heirs,
executors, administrators, successors and assigns.
2.7 No Registration. Subscriber understands that the
Preferred Stock and the Common Stock issuable upon
conversion of the Preferred Stock have not been
registered under the Act and are being offered and sold
pursuant to an exemption from registration contained in
the Act based in part upon the representations of
Subscriber contained herein. The Common Stock does,
however, carry certain registration rights as set forth
in the Registration Rights Agreement executed by the
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parties hereto (the "Registration Rights Agreement").
2.8 No Public Solicitation. Subscriber knows of no public
solicitation or advertisement of an offer in connection
with the proposed issuance and sale of the Preferred
Stock.
2.9 Investment Intent. Subscriber is acquiring the Preferred
Stock to be issued and sold hereunder (and the Shares
issuable upon conversion of the Preferred Stock) for the
Subscriber's own account (or for beneficiaries, accounts
over which the Subscriber has investment discretion but
no discretionary voting or dispositive authority).
Subscriber and each other party acquiring Preferred
Stock and the shares issuable upon conversion of the
Preferred Stock pursuant to this Agreement are acquiring
such securities for investment and not with a view to
the distribution thereof. Subscriber understands that
Subscriber must bear the economic risk of this
investment indefinitely unless the sale of such
Preferred Stock or such Shares is registered pursuant to
the Act, or an exemption from such registration is
available, and that except as set forth in the
Registration Rights Agreement, the Company has no
present intention of registering any such sale of the
Preferred Stock or such Shares. Subscriber represents
and warrants to the Company that it has no present plan
or intention of selling the Preferred Stock or the
Shares in the United States, has made no predetermined
arrangements to sell the Preferred Stock or the Shares
other than as provided in the Registration Rights
Agreement and that the offering by the Company of its
securities to the Subscriber, as contemplated in this
Subscription Agreement (the "Offering"), together with
any subsequent resale of the Preferred Stock or the
Shares, is not part of a plan or scheme to evade the
registration provisions of the Act. Subscriber currently
has no short position in the Shares, including any short
call position or any long put position or any contract
or arrangement that has the effect of eliminating or
substantially diminishing the risk of ownership of the
Preferred Stock or the Shares, nor has engaged in any
hedging transaction with respect to the Preferred Stock
or the Shares. Subscriber covenants that neither
Subscriber nor its affiliates nor any person acting on
its or their behalf has the intention of entering, or
will enter during the Restricted Period, into any put
option, short position or any hedging transaction or
other similar instrument or position with respect to the
Shares or securities of the same class as the Shares and
neither Subscriber nor any of its affiliates nor any
person acting on its or their behalf will use at any
time Shares acquired pursuant to this Agreement to
settle any put option, short position or other similar
instrument or position that may have been entered into
prior to the execution of this Agreement.
2.10 No Sale in Violation of the Act. Subscriber further
covenants that Subscriber will not make any sale,
transfer or other disposition of the Preferred Stock or
the Shares in violation of the Act (including Regulation
S), the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the rules and regulations of the
Securities and Exchange Commission (the "Commission")
promulgated thereunder.
2.11 Incorporation and Authority. Subscriber has the full
power and authority to execute, deliver and perform this
Agreement and to perform its obligations hereunder. This
Agreement has been duly approved by all necessary action
of Subscriber, including any necessary shareholder
approval, has been executed by persons duly authorized
by Subscriber, and constitutes a valid and legally
binding obligation of Subscriber, enforceable in
accordance with its terms.
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2.12 No Reliance on Tax Advice. Subscriber has reviewed with
his, her or its own tax advisors the foreign, federal,
state and local tax consequences of this investment,
where applicable, and the transactions contemplated by
this Agreement. Subscriber is relying solely an such
advisors and not on any statements or representations of
the Company or any of its agents and understands that
Subscriber (and not the Company) shall be responsible
for the Subscriber's own tax liability that may arise as
a result of this investment or the transactions
contemplated by this Agreement.
2.13 Independent Legal Advice. Subscriber acknowledges that
Subscriber has had the opportunity to review this
Agreement and the transactions contemplated by this
Agreement with his or her own legal counsel. Subscriber
is relying solely on such counsel and not on any
statements or representations of the Company or any of
its agents for legal advice with respect to this
investment or the transactions contemplated by this
Agreement, except for the representations, warranties
and covenants set forth herein and in the opinion
provided for in Section 7.S herein.
2.14 Compliance. If Subscriber becomes subject to Section
13(d) of the Exchange Act, Subscriber will duly file the
required Schedule thereunder.
2.15 Not an Affiliate. Neither Subscriber nor any investor
for which Subscriber is acting as nominee ("Investor")
is an officer, director or affiliate (as that term is
defined for purposes of Section 16 of the Exchange Act)
of the Company. For this purpose, it is hereby
represented (and such representation is hereby accepted
by the Company) that neither Subscriber nor any Investor
will beneficially own, at any time more than 4.9% of the
total issued and outstanding shares of Common Stock of
the Company upon conversion of all the Preferred Stock.
Subscriber does not have voting control or power of
disposition over securities owned by the Investors and
no Investor is an affiliate of any other Investor or
Subscriber.
2.16 No Pledges. Subscriber has not pledged the Securities,
and will not pledge the Securities during the Restricted
Period (as defined below), as collateral in a margin
account or otherwise with a U.S. person.
2.17 No inquiries. Subscriber has not been the subject of a
regulatory inquiry by the Commission.
2.18 Subscriber acknowledges that the Company does not
currently have a sufficient number of authorized shares
of Common Stock to give effect to the conversion of all
the outstanding shares of Series F Preferred Stock and
Series G Preferred Stock being subscribed for hereby.
The Company agrees to use its best efforts to effect an
amendment to its Articles of Incorporation whereby the
authorized number of shares of Common Stock is increased
so as to permit conversions of all shares of Series F
Preferred Stock and Series G Preferred Stock and the
Subscriber agrees not to request conversions of shares
of Series F or Series G Preferred Stock into more than
8,000,000 shares of Common Stock until such time as such
amendment is effected; provided, however, that the
Company acts in good faith to effect such amendment.
2.19 Warranties of Other Parties. If Subscriber is purchasing
the Preferred Stock for the accounts of parties other
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than Subscriber (as contemplated by Section 2.9 above),
Subscriber has full power and authority to make the
representations, warranties and agreements made pursuant
to this Agreement on behalf of the owners of such
accounts, and agrees that each representation, warranty
and agreement made by Subscriber herein is also made by
and on behalf of each owner of each such account.
3. Resales
Subscriber acknowledges and agrees that the Securities may and will
only be resold (a) in compliance with Regulation S; (b) pursuant to a
Registration Statement under the Act; or (c) pursuant to an exemption from
registration under the Act.
4. Legends; Subsequent Transfer of Securities
4.1 Legends. The certificates) representing the Preferred
Stock shall bear the legend set forth below and any
other legend, if such legend or legends are reasonably
required by the Company to comply with state, federal or
foreign law. Assuming that there are no changes in the
material facts set forth in Section 2 of this Agreement
or applicable law from the date hereof until the date of
conversion, and subject to the Company's transfer
agent's receipt of a legal opinion from legal counsel to
the Company, the certificate representing the Shares
into which the Preferred Stock is converted after the
Restricted Period shall not bear a legend.
"The shares of preferred stock of Lasergate
Systems, Inc. (the "Issuer") represented by this
certificate have been issued pursuant to
Regulation S, promulgated under the Securities Act
of 1933, as amended (the "Act"), and have not been
registered under the Act or any applicable state
securities laws. These shares may not be offered
or sold within the United States or to or for the
account of a "U.S. Person" (as that term is
defined in Regulation S) during the period
commencing on the sale of these securities and
ending on the forty-fifth (45th) day following
completion of the Regulation S offering of the
Issuer pursuant to which these shares have been
issued (the "Restricted Period"). The Issuer will
notify the transfer agent of the date of
completion of such offering and of the expiration
of such Restricted Period. Following expiration of
the Restricted Period, these shares may not be
offered or sold unless such offer or sale is
registered or exempt from registration under the
Act."
5. Transfers
5.1 Transfers After Restricted Period. Subject to receipt of
a legal opinion from the Subscriber's counsel reasonably
acceptable in form and substance to the Company and its
transfer agent, the Company agrees, and shall instruct
its agents, that the Securities may be transferred to
any person or entity who is not an affiliate of the
Company if such transfer occurs after the Restricted
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Period, without (a) any further restriction on transfer
(provided the transfer is made in compliance with the
Act) or (b) the entry of a "stop transfer" order against
such Securities, and the Securities delivered to the
transferee shall not bear a legend. The Company may
place a stop transfer order on any Common Stock issued
upon conversion of Preferred Stock during the Restricted
Period for the duration of the Restricted Period and
thereafter in the absence of the aforementioned legal
opinion. Upon election by the Subscriber to convert the
Preferred Stock into Shares, the Subscriber shall
deliver to the Company a duly completed Notice of
Conversion (a "Notice of Conversion") in the form
attached to this Agreement.
6. Representations, Warranties and Covenants of Company
The Company represents and warrants to and covenants with the
Subscriber as follows:
6.1 Organization, Good Standing, and Qualification. The
Company is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Florida and has all requisite corporate power
and authority to carry on its business as now conducted
and as proposed to be conducted. The Company is duly
qualified to transact business and is in good standing
in each jurisdiction in which the failure to so qualify
would have a material adverse effect on the business or
properties of the Company and its subsidiaries taken as
a whole. The Company to its knowledge is not the subject
of any pending or threatened investigation or
administrative or legal proceeding by the Internal
Revenue Service, the taxing authorities of any state or
local jurisdiction, or the Securities and Exchange
Commission which have not been disclosed in the reports
referred to in Section 6.5 below.
6.2 Corporate Condition. None of the Company's filings
made pursuant to the Exchange Act, including, but not
limited to, those reports referenced in Section 6.5
below, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to
make the statements made, in light of the circumstances
under which they were made, not misleading. There have
been no material adverse changes in the Company's
financial condition or business since the date of those
reports which have not been disclosed to Subscriber in
writing.
6.3 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders
necessary for the authorization, execution and delivery
of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance
(or reservation for issuance) and delivery of the
Preferred Stock being sold hereunder and the Common
Stock issuable upon conversion of the Preferred Stock
have been taken subject to the provisions of Section
2.18 hereof and the filing of the amendment contemplated
thereby, and this Agreement constitutes a valid and
legally binding obligation of the Company, enforceable
in accordance with its terms.
6.4 Valid Issuance of Preferred Stock and Common Stock. The
Preferred Stock, when issued, sold and delivered in
accordance with the terms hereof for the consideration
expressed herein, will be validly issued, fully paid and
nonassessable and, based in part upon the
representations of the Subscriber in this Agreement,
will be issued in compliance with all applicable U.S.
federal and state securities laws. The Common Stock
issuable upon conversion of the Preferred Stock when
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issued in accordance with the terms of the Certificate
of Designation, shall be duly and validly issued and
outstanding, fully paid and nonassessable, and based in
part on the representations and warranties of Subscriber
and any transferee of the Preferred Stock, will be
issued in compliance with all applicable U.S. federal
and state securities laws.
6.5 Current Public Information. The Company represents and
warrants to the Subscriber that the Company is a
"reporting issuer" as defined in Rule 902(l) of
Regulation S and it has a class of securities registered
under Section 12(g) of the Exchange Act and has filed
all the materials required to be filed as reports
pursuant to the Exchange Act for a period of at least
twelve months preceding the date hereof (or for such
shorter period as the Company was required by law to
file such material). The Subscriber has obtained copies
of the Company's Form 10-KSB Annual Report for the year
ended December 31, 1996 and Form 10-QSB for the fiscal
quarters ended March 31, 1997 and June 30, 1997. The
Company undertakes to furnish the Subscriber with copies
of such other information as may be reasonably requested
by the Subscriber prior to consummation of this
Offering.
6.6 No Directed Selling Efforts in Regard to this
Transaction. The Company has not, and to the best of the
Company's knowledge neither the Subscriber nor any
distributor, if any, participating in the offering of
the Securities nor any person acting for the Company or
any such distributor has conducted any "directed selling
efforts" as that term is defined in Rule 902 of
Regulation S. Such activity includes, without
limitation, the mailing of printed material to investors
residing in the United States, the holding of
promotional seminars in the United States, the placement
of advertisements with radio or television stations
broadcasting in the United States or in publications
with a general circulation in the United States, which
discuss the offering of Shares. The Company represents
and warrants that the Offering is not part of a plan or
scheme to evade the registration provisions of the Act.
6.7 No Conflicts. The execution and delivery of this
Agreement and the consummation of the issuance of the
Securities and the transactions contemplated by this
Agreement do not and will not conflict with or result in
a breach by the Company of any of the terms or
provisions of, or constitute a default under, the
Certificate of Incorporation or bylaws of the Company,
or any indenture, mortgage, deed of trust or other
material payment or instrument to which the Company is a
party or by which it or any of its properties or assets
are bound, or any existing applicable decree, judgment
or order of any court, Federal or State regulatory body,
administrative agency or other governmental body having
jurisdiction over the Company or any of its properties
or assets.
6.8 Issuance of Securities. The Company will issue one or
more certificates representing the Preferred Shares in
the name of Subscriber in such denominations to be
specified by the Company prior to closing. Upon
conversion of the Preferred Shares in accordance with
their terms, the Company will issue one or more
certificates representing Shares in the name of
Subscriber and in such denominations to be specified by
Subscriber prior to conversion. Subject to the Company's
transfer agent's receipt of a legal opinion from legal
counsel to the Subscriber reasonably acceptable in form
and substance to the Company and its transfer agent, the
Shares to be issued upon conversion of the Preferred
Shares shall not bear any restrictive legends. The
Company further warrants that no instructions other than
these instructions, and instructions for a "stop
transfer" until the end of the Restricted Period, have
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been given to the transfer agent and also warrants that
the Shares shall otherwise be freely transferable by
Subscriber on the books and records of the Company
subject to compliance with Federal and State securities
laws, the receipt of a legal opinion from legal counsel
to the Subscriber reasonably acceptable in form and
substance to the Company and its transfer agent and the
terms of the Preferred Shares. The Company will notify
the transfer agent of the date of completion of the
offering and of the date of expiration of the Restricted
Period. Nothing in this section shall affect in any way
Subscriber's obligations and agreement to comply with
all applicable securities laws upon resale of the
Securities.
6.9 No Action. The Company has not taken and will not take
any action that will affect in any way the running of
the Restricted Period or the ability of Subscriber to
resell freely the Securities in accordance with
applicable securities laws and the Agreement.
6.10 Compliance with Laws. As of the date hereof, the conduct
of the business of the Company complies in all material
material respects with all material statutes, laws,
regulations, ordinances, rules, judgments, orders or
decrees applicable thereto. The Company has not received
notice of any alleged violation of any statute, law,
regulations, ordinance, rule, judgement, order or decree
from any governmental authority. The Company shall
comply with all applicable securities laws with respect
to the sale of the Securities, including but not limited
to the filing of all reports required to be filed in
connection therewith with the Securities and Exchange
Commission or any stock exchange or the NASDAQ Stock
Market or any other regulatory authority.
6.11 Litigation. Except as disclosed in the Company's Annual
Report on Form 10- KSB and the Company's most recently
filed Form 10-QSB, there is no action, suit or
proceeding before or by any court or governmental agency
or body, domestic or foreign, now pending or, to the
knowledge of the Company, threatened, against or
affecting the Company, or any of its properties, which
could reasonably be expected to result in any material
adverse change in the business, financial condition or
results of operations of the Company, or which could
reasonably be expected to materially and adversely
affect the properties or assets of the Company.
6.12 No U.S. Offering. The Company represents that it has not
offered the Securities to the Subscriber or any Investor
in the U.S. or to any person in the United States or any
U.S. person.
6.13 Disclosures. There is no fact known to the Company
(other than general economic conditions known to the
public generally) that has not been disclosed in writing
to the Subscriber that (a) could reasonably be expected
to have a material adverse effect on the business,
financial condition or results of operations of the
Company, or which could reasonably be expected to
materially and adversely affect the properties or assets
of the Company, other than the Company's low cash
position which has been disclosed to the Subscriber or
(b) could reasonably be expected to materially and
adversely affect the ability of the Company to perform
its obligations pursuant to this Subscription Agreement
and the issuance of the Preferred Stock hereunder.
6.14 Capitalization. The Company, as of the date of the
Closing, will have outstanding the number of shares of
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Common Stock, Preferred Stock and Warrants as set forth
on Exhibit D.
7. Additional Covenants of Company
7.1 Accountants. The Company shall, until at least the
second anniversary of the date of the Closing (the
"Closing Date"), maintain as its independent auditors an
accounting firm that is authorized to practice before
the SEC.
7.2 Corporate Existence and Taxes. The Company shall, until
at least the second anniversary of the Closing Date,
maintain its corporate existence in good standing, and
shall pay all its taxes when due except for taxes which
the Company disputes.
7.3 Reserved Shares and Listings. For so long as any shares
of Preferred Stock held by the Subscriber remain
outstanding subject to the provisions of Section 2.18
hereof and adoption of the amendment to the Company's
Articles of Incorporation contemplated thereby, the
Company will reserve from its authorized but unissued
shares of Common Stock ("Common Stock") a sufficient
number of Shares to permit the conversion in full of the
outstanding shares of Series G Preferred Stock; and
7.4 Liquidated Damages for Failure to Authorize Conversion
Shares. Subject to the terms and provisions hereof, the
Company shall use its best efforts to issue and deliver,
within three (3) business days after the Subscriber has
fulfilled all conditions and submitted all necessary
documents duly executed and in proper form required for
conversion (the "Deadline"), to the Subscriber or any
party receiving Preferred Stock by transfer from the
Subscriber (together with the Subscriber, a "Holder"),
at the address of the Holder on the books of the
company, a certificate or certificates for the number of
Shares of Common Stock to which the Holder shall be
entitled. The Company understands that a delay in the
issuance of the Shares of Common Stock beyond the
Deadline could result in economic loss to the Holder
and, accordingly, that it is important that the Company
act swiftly to obtain the authorization of its
stockholders to amend its Articles of Incorporation and
that such an amendment be effected so that enough shares
of Common Stock are authorized to permit conversion of
all shares of Preferred Stock (the "Amendment"). As
compensation to the Holder for the Company's failure to
affect the Amendment, the Company agrees to pay
liquidated damages to the Holder in accordance with the
following schedule (where "No. Days Late" is defined as
the number of days following the date hereof until the
Amendment is effected).
No. Days Late Liquidated Damages
120-240 $375,000
240-360 $750,000
An additional $750,000 for
each 120 days thereafter.
The Company shall pay the Holder any liquidated damages
incurred under this Section, by check within 10 days
after the date such liquidated damages are incurred;
provided, however, that if in the good faith
determination of the Company's Board of Directors the
Company does not have sufficient cash balances to pay
such penalty in cash and continue its operations as then
being conducted, it may pay such penalty with a
promissory note which will accrue interest at the rate
of 20% per annum until paid in full. Nothing herein
shall limit the Subscriber's right to pursue actual
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damages for the Company's failure to issue and deliver
shares of Common Stock to the Subscriber in accordance
with the terms of the Certificate of Designation.
7.5 Conversion Notice. The Company agrees that, in addition
to any other remedies which may be available to the
Subscriber, including, but not limited to, remedies
available under Section 7.4 of this Agreement, in the
event the Company fails for any reason to effect
delivery to the Subscriber of certificates representing
Shares within three business days following receipt by
the Company of a Notice of Conversion, the Investor will
be entitled to revoke the Notice of Conversion by
delivering a notice to such effect to the Company
whereupon the Company and the Subscriber shall each be
restored to their respective positions immediately prior
to delivery of such Notice of Conversion.
7.6 Opinion of Counsel. Subscriber shall, upon purchase of
the shares of Preferred Stock, receive an opinion letter
from Parker, Chapin, Flattau & Klimpl, LLP, counsel to
the Company, to the effect that (i) the Company is duly
incorporated and validly existing; (ii) this Agreement
has been duly approved by all required corporate action;
and (iii) this Agreement and the Registration Rights
Agreement are valid and binding obligations of the
Company, enforceable in accordance with their terms,
except as enforceability of any indemnification
provisions may be limited by principles of public
policy, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of
debtors and rules of laws governing specific performance
and other equitable remedies.
7.7 Consultation with Legal Counsel. The Company shall
consult with its legal counsel regarding its Exchange
Act filing requirements including, but not limited to,
the possible obligation of the Company to file Forms
10-C and Form S-K in connection with the offering, and
will timely make any and all such filings deemed
necessary by such counsel.
7.8 Registration Rights. The Company will grant the
Subscriber the registration rights covering the Shares
issuable on conversion of the Preferred Stock on
substantially the terms of the Registration Rights
Agreement attached hereto as Exhibit B on the Closing
Date.
8. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida, U.S.A., applicable to agreements made in and
wholly to be performed in that jurisdiction, except for matters arising under
the Act or the Exchange Act which matters shall be construed and interpreted in
accordance with such laws. Any action brought to enforce, or otherwise arising
out of, this Agreement shall be heard and determined in either a federal or
state court sitting in the State of Florida, U.S.A.
9. Entire Agreement; Amendment
This Agreement, the Certificate of Designation, the Registration
Rights Agreement and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein or therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
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discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
10. Notices, Etc.
Any notice, demand or request required or permitted to be given by
either the Company or the Subscriber pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or by
facsimile, with a hard copy to follow by two day courier addressed to the
parties at the addresses of the parties set forth at the end of this Agreement
or such other address as a party may request by notifying the other in writing.
11. Counterparts
This Agreement may be executed in any number of counterparts, each
of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
12. Severability
In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
13. Title and Subtitles
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
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14. Amount
The undersigned Subscriber hereby subscribes for 7,500 shares of
Preferred Stock with a face value of One Thousand Dollars ($1,000.00 (U.S.)) per
share and pays herewith funds in the amount of Seven Million Five Hundred
Thousand Dollars ($7,500,000 (U.S.)).
The undersigned Subscriber acknowledges that this subscription shall
not be effective unless accepted by the Company as indicated below.
Dated this 31st day of October, 1997.
RBB Bank Aktiengesellschaft (as agent for independent clients)
--------------------------------------------------------------
(Name) (Please Print)
Xxxxxxx Xxxxxxx
---------------
(Signature)
Xxxxxxxx 00, 0000 Xxxx, Xxxxxxx
-------------------------------
(Mailing Address)
Austria
-------------------------------
(Place of Execution)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 31st DAY OF
October, 1997.
LASERGATE SYSTEMS, INC.
By: /s/ Xxxxxxxxxx X. Xxxxxxxx
------------------------------
Print Name: Xxxxxxxxxx X. Xxxxxxxx
---------------------------
Title: Chairman, CEO & President
------------------------------
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NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the share(s) of Series G Preferred Stock)
The undersigned hereby irrevocably elects to convert shares of Series G
Preferred Stock ("Preferred Stock"), represented by stock certificate No(s).
_______ (the "Preferred Stock Certificate(s)") into shares of common stock
("Common Stock") of Lasergate Systems, Inc. (the "Company") according to the
conditions of the Certificate of Designation of Series G Preferred Stock, as of
the date written below. If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee will be
charged to the undersigned for any conversion, except for transfer taxes, if
any.
The undersigned represents that it and each person or entity on whose behalf it
holds shares of Preferred Stock to be converted into Common Stock (each an
"Investor"): (i) is familiar with and understands the terms, conditions and
requirements contained in Regulation S ("Regulation S") and Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act"); (ii) is not a "U.S.
Person" or "distributor" as defined in Regulation S; (iii) purchased the shares
,of Preferred Stock for which conversion is being elected, and is purchasing the
Common Stock referenced herein, for its own account and for the account of each
Investor and not for the account or benefit of any U.S. Person; (iv) will comply
with the transfer restrictions contained in Section 4(l) of the Act and Rule 144
promulgated thereunder to the extent they are applicable; (v) has not had a
"short" position in the Company's securities at any time since the Purchase of
the Preferred Stock (including any short call position or any long put position
or any contract or arrangement that had the effect of eliminating or
substantially diminishing the risk of ownership of the Preferred Stock) nor has
it engaged in any hedging transaction with respect to the Preferred Stock or the
Common Stock; (vi) has no prior understanding with respect to the sale of the
Common Stock to any third party; (vii) has not engaged in any "directed selling
efforts" (as such term is defined in Regulation S) with respect to the Preferred
Stock or the Common Stock issuable upon conversion of the Preferred Stock;
(viii) purchased the Preferred Stock with investment intent, is purchasing the
Common Stock with investment intent and presently has no intent to sell, dispose
of or otherwise transfer the Common Stock; (ix) will make any sale, transfer or
other disposition of the Common Stock in full compliance with the Act, the
Exchange Act, as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder; and (x) received the offer to
purchase the Preferred Stock outside the United States and, at the time the
Subscription Agreement pursuant to which the Preferred Stock was executed was,
and upon execution of this Notice of Conversion is, outside the United States.
The undersigned has obtained representations from each Investor with respect to
compliance with paragraphs (i) - (x) of this Notice.
Conversion Formula: ------------------------------
Date of Conversion
------------------------------
Applicable Conversion Price
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------------------------------
Signature
------------------------------
Name
Address:
------------------------------
------------------------------
* No shares of Common Stock will be issued until the original Preferred Stock
Certificate(s) to be converted and the Notice of Conversion are received by the
Company or its Transfer Agent. The original Preferred Stock Certificate(s) to be
converted and the Notice of Conversion must be received by the Company or its
Transfer Agent by the third business day following the Date of Conversion, or
such Notice of Conversion shall become null and void in the discretion of the
Company.
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