SUBSCRIPTION AGREEMENT
EXHIBIT
10.1
THIS SUBSCRIPTION AGREEMENT
(this “Agreement”),
dated as of June ___, 2009, by and among BigString Corporation, a Delaware
corporation (the “Company”), and the subscribers
identified on the signature page hereto (each a “Subscriber” and collectively
the “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 such Subscribers, as provided herein, and such
Subscribers, in the aggregate, shall purchase (i) One Hundred and Eighty
Thousand Dollars ($180,000) (the “Purchase Price”) of principal
amount of convertible promissory notes of the Company (“Note” or “Notes”), a form of which is
annexed hereto as Exhibit
A, which Notes are convertible into shares of the Company’s common stock,
$.0001 par value (the “Common
Stock”), at a fixed conversion price of $0.015 per share (the “Conversion Price”), as such
Conversion Price may be adjusted as provided for herein and in the Note, and
(ii) share purchase warrants (the “Warrants”) in the form
attached hereto as Exhibit B,
to purchase up to 6,000,000 shares of the Company’s Common Stock (the
“Warrant
Shares”). The Notes, shares of Common Stock issuable upon
conversion of the Notes (the “Shares”), the Warrants and the
shares issuable upon exercise of the Warrants are collectively referred to
herein as the “Securities.”; and
WHEREAS, the Purchase Price to
be paid by the Subscribers and the Notes and the Warrants to be issued by the
Company as provided herein shall be held in escrow pursuant to the terms of a
Funds Escrow Agreement to 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:
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(a) Organization and Standing of the
Subscribers. If such Subscriber is an entity, such Subscriber is a
corporation, partnership or other entity duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization.
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of any law, rule, or regulation, or any order, judgment
or decree of any court or governmental agency applicable to such Subscriber or
its properties (except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a material adverse effect on such
Subscriber). Such Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement and the other Transaction
Documents or to purchase the Securities in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
such Subscriber is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Information
on Company. Such Subscriber has been furnished with or has had access
at the XXXXX Website of the Commission to the Company’s Form 10-K for the year
ended December 31, 2008, and the amendment thereto on Form 10-K/A as filed with
the Commission, together with all subsequently filed Forms 10-Q, Forms 8-K, and
other reports and filings made with the Commission and made available at the
XXXXX website (hereinafter referred to collectively as the “Reports”). Such
Subscriber has had an opportunity to ask questions and receive answers from
representatives of the Company. In addition, such Subscriber has
received in writing from the Company such other information concerning its
operations, financial condition and other matters as such Subscriber has
requested in writing identified thereon as OTHER WRITTEN INFORMATION (such other
information is collectively, the “Other Written Information”),
and considered all factors such Subscriber deems material in deciding on the
advisability of investing in the Securities.
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net short
position in the Shares and Warrant Shares is not created, such Subscriber may
enter into lawful hedging transactions with respect to the Company’s securities,
otherwise such Subscriber will not conduct any short sales as such term is
defined in Rule 3b-3 of the Securities Exchange Act of 1934, as amended (the
“1934 Act”).
“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 BIGSTRING
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.”
“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 BIGSTRING
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.”
“THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE
AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO BIGSTRING CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.”
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5
“Subsidiary”
means, with respect to any entity at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which more than 25% of
(i) the outstanding capital stock having (in the absence of contingencies)
ordinary voting power to elect a majority of the board of directors or other
managing body of such entity, (ii) in the case of a partnership or limited
liability company, the interest in the capital or profits of such partnership or
limited liability company or (iii) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such
trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity. All the Company’s Subsidiaries as of
the Closing Date and the Company’s ownership interest in such Subsidiaries are
set forth on Schedule
5(a) hereto.
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(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 over the properties or assets
of the Company or any of its Affiliates, (C) the terms of any bond, debenture,
note or any other evidence of indebtedness, or any agreement, stock option or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its Affiliates is a party, by which
the Company or any of its Affiliates is bound, or to which any of the properties
of the Company or any of its Affiliates is subject, or (D) the terms of any
“lock-up” or similar provision of any underwriting or similar agreement to which
the Company, or any of its Affiliates is a party except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect;
or
(ii) result
in the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates except
as described herein; or
(iii) result
in the activation of any anti-dilution rights or a reset or repricing of any
debt, security or other instrument issued or issuable by the Company, nor result
in the acceleration of the due date of any obligation of the foregoing except in
connection with the Prior Offerings or with respect to the Company’s Series A
Preferred Stock; or
(iv) result
in the triggering 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.
(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 upon conversion of the Notes and the Warrant 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;
(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;
(iv) will
not subject the holders thereof to personal liability by reason of being such
holders; and
(v) assuming
the representations and warranties of such Subscribers as set forth in Section 4
hereof are true and correct, will not result in a violation of Section 5 under
the 1933 Act.
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8
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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 the Securities is in the best interests of the
Company and its shareholders. The Company specifically acknowledges
that its obligation to issue the Shares upon conversion of the Notes, and the
Warrant Shares upon exercise of the Warrants is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other stockholders of the Company or parties entitled to receive
equity of the Company.
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subsidiary
has no material assets or liabilities and did not conduct any active business
operations during 2007.
(a) Upon
the conversion of a Note or part thereof as provided for in Section 2.1(a) of
the Note, the Company shall, at its own cost and expense, take all necessary
action, including obtaining and delivering, an opinion of counsel to assure that
the Company’s transfer agent shall issue stock certificates in the name of a
Subscriber (or its permitted nominee) or such other persons as designated by
such Subscriber and in such denominations to be specified at conversion
representing the number of shares of Common Stock issuable upon such
conversion. The Company warrants that no instructions other than
these instructions have been or will be given to the transfer agent of the
Company’s Common Stock and that the certificates representing such shares shall
contain no legend other than the usual 1933 Act restriction from transfer
legend. Examples of such legends are provided for in Section 4 of
this Agreement. If and when a Subscriber sells the Shares, assuming
(i) a registration statement including such Shares is effective and the
prospectus, as supplemented or amended, contained therein is current and (ii)
such Subscriber or its agent confirms in writing to the transfer agent that such
Subscriber has complied with the prospectus delivery requirements, the
restrictive legend can be removed and the Shares will be free-trading, and
freely transferable. In the event that the Shares are sold in a
manner that complies with an exemption from registration, the Company will
promptly instruct its counsel to issue to the transfer agent an opinion
permitting removal of the legend (indefinitely, if in accordance with
the relevant provisions of Rule 144 of the 1933 Act).
(b) Subscriber
will give notice of its decision to exercise its right to convert the Note, or
part thereof as provided for in Section 2.1(a) of the Note by telecopying an
executed and completed Notice of Conversion (a form of which is annexed as Exhibit A to the Note) to the
Company via confirmed telecopier transmission or otherwise pursuant to Section
13(a) of this Agreement. The Subscriber will not be required to
surrender the Note until the Note has
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been
fully converted or satisfied. Each date on which a Notice of
Conversion is telecopied to the Company in accordance with the provisions hereof
shall be deemed a Conversion
Date. The Company will itself or cause the Company’s transfer
agent to transmit the Company’s Common Stock certificates representing the
Shares issuable upon conversion of the Note to such Subscriber via express
courier for receipt by such Subscriber within three (3) business days after
receipt by the Company of the Notice of Conversion (such fifth day being the
“Delivery
Date”). In the event the Shares are electronically
transferable, then delivery of the Shares must be made by
electronic transfer provided request for such electronic transfer has been made
by such Subscriber and such Subscriber has complied with all applicable
securities laws in connection with the sale of the Common Stock, including,
without limitation, the prospectus delivery requirements. A
Note representing the balance of the Note not so converted will be provided by
the Company to a Subscriber if requested by such Subscriber, provided such
Subscriber delivers the original Note to the Company. In the event that a
Subscriber elects not to surrender a Note for reissuance upon partial payment or
conversion of a Note, such Subscriber hereby indemnifies the Company against any
and all loss or damage attributable to a third-party claim in an amount in
excess of the actual amount then due under the Note.
(c) The
Company understands that a delay in the delivery of the Shares in the form
required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
described in Section 7.2 hereof, respectively after the Delivery Date or the
Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to a Subscriber. As compensation to such Subscriber for
such loss, the Company agrees to pay (as liquidated damages and not as a
penalty) to such Subscriber for late issuance of Shares in the form required
pursuant to Section 7.1 hereof upon Conversion of the Note in the amount of $100
per business day after the Delivery Date for each $10,000 of Note principal
amount being converted of the corresponding Shares which are not timely
delivered. The Company shall pay any payments incurred under this
Section in immediately available funds upon demand. Furthermore, in
addition to any other remedies which may be available to such Subscriber, in the
event that the Company fails for any reason to effect delivery of the Shares by
the Delivery Date or make payment by the Mandatory Redemption Payment Date, such
Subscriber will be entitled to revoke all or part of the relevant Notice of
Conversion or rescind all or part of the notice of Mandatory Redemption by
delivery of a notice to such effect to the Company whereupon the Company and
such Subscriber shall each be restored to their respective positions immediately
prior to the delivery of such notice, except that the liquidated damages
described above shall be payable through the date notice of revocation or
rescission is given to the Company.
(d) The
Company agrees and acknowledges that despite the pendency of a not yet effective
registration statement which includes for registration the Securities, the
Subscriber is permitted to and the Company will issue to the Subscriber Shares
upon conversion of the Note and Warrant Shares upon exercise of the
Warrants. Such Shares will, if required by law, bear the legends
described in Section 4 above and if the requirements of Rule 144 under the 1933
Act are satisfied be immediately resalable thereunder.
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election,
the Company must pay to such Subscriber ten (10) business days after request by
such Subscriber, at such Subscriber’s election, a sum of money determined by (i)
multiplying up to the outstanding principal amount of the Note designated by
such Subscriber by 100%, or (ii) multiplying the number of Shares otherwise
deliverable upon conversion of an amount of Note principal and/or interest
designated by such Subscriber (with the date of giving of such designation being
a “Deemed Conversion
Date”) at the Conversion Price that would be in effect on the Deemed
Conversion Date by the highest closing price of the Common Stock on the
Principal Market for the period commencing on the Deemed Conversion Date until
the day prior to the receipt of the Mandatory Redemption Payment, whichever is
greater; together with accrued but unpaid interest thereon and any other sums
arising and outstanding under the Transaction Documents (“Mandatory Redemption
Payment”). The Mandatory Redemption Payment must be received by such
Subscriber within ten (10) business days after request (“Mandatory Redemption Payment
Date”). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal and interest will be deemed paid and no longer
outstanding. “Change
in Control” shall mean (i) the Company no longer having a class of shares
publicly traded or listed on a Principal Market (as hereinafter defined), (ii)
the Company becoming a Subsidiary of another entity or merging into or with
another entity, (iii) if Xx. Xxxxx X. Xxxxx beneficially owns and holds at any
time after the Closing Date less than ten percent (10%) of the Company’s Common
stock, or (iv) the sale, lease, license or transfer of substantially all the
assets of the Company and its Subsidiaries.
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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.
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Mandatory
Conversion shall be reduced to an amount that would not cause a Subscriber to
exceed the limitation described in Section 7.3 of this
Agreement. Each Mandatory Conversion Date shall be a deemed
Conversion Date and the Company will be required to deliver the Shares issuable
pursuant to a Mandatory Conversion Notice in the same manner and time period as
described in Section 7.1(b) of this Agreement.
(a) Finder. The
Company on the one hand, and each Subscriber (for himself, herself or itself
only) on the other hand, agrees 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 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. The Company and each Subscriber represents that there are no
parties entitled to receive fees, commissions, or similar payments in connection
with the Offering (as such term is defined below) arising out of such party’s
actions except as described on Schedule 8.
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and
actual delisting of the Common Stock from any Principal Market. As of
the date of this Agreement and the Closing Date, the Bulletin Board is and will
be the Principal Market.
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assessment,
charge or levy need not be paid if the validity thereof shall 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.
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Form 8-K
or public announcement to be employed in connection with the Closing is annexed
hereto as Exhibit
D.
(i) create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”) upon any of its property, whether now owned or
hereafter acquired except for: (i) the Excepted Issuances (as defined
in Section 12 hereof, (ii) (a) Liens imposed by law for taxes that are not yet
due or are being contested in good faith and for which adequate reserves have
been established in accordance with generally accepted accounting principles;
(b) carriers’, warehousemen’s, mechanics’, material men’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or that are being
contested in good faith and by appropriate proceedings; (c) pledges and deposits
made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations; (d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business; (e) Liens created with respect to the financing of the purchase of
property in the ordinary course of the Company’s business up to the amount of
the purchase price of such property; and (f) easements, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected
property (each of (a) through (f), a “Permitted Lien”) and (iii) indebtedness
for borrowed money which is not senior or pari passu in right of payment to the
payment of the Notes or distribution of the Company’s assets;
(ii) amend
its certificate of incorporation, by-laws or its charter documents so as to
adversely affect any rights of the Subscribers;
(iii) repay,
repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred stock,
or other equity securities other than to the extent permitted or required under
the Transaction Documents;
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(iv) prepay
or redeem any financing related debt or past due obligations outstanding as of
the Closing Date;
(v) engage
in any transactions with any officer, director, employee or any Affiliate
(excluding a Subsidiary) of the Company, including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner, in
each case in excess of $100,000 other than (i) for payment of salary and bonuses
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company, (iii) for other employee benefits, including
stock option agreements under any stock option plan of the Company, and (iv)
pursuant to existing contractual agreements; or
(vi) the
Company agrees to provide Subscribers not less than ten (10) days notice prior
to becoming obligated to or effectuating a Permitted Lien or Excepted
Issuance.
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(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 the Company
or breach of any warranty by the Company in this Agreement or in any Exhibits or
Schedules attached hereto, or other Transaction Documents delivered pursuant
hereto, or (ii) after any applicable notice and/or cure periods, any breach or
default in performance by the Company of any covenant or undertaking to be
performed by the Company hereunder, or any other Transaction Documents entered
into by the Company and Subscriber relating hereto.
(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 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 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
Transaction Documents 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 Transaction Documents 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 Transaction Document or 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 Securities.
(d) The
procedures set forth in Section 11.6 of the Subscription Agreement (“Prior
Subscription Agreement”) employed in the Prior Offering shall apply to the
indemnification set forth in Sections 10(a) and 10(b) above.
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11.1. Registration
Rights. The Company hereby grants to the holders of the
Securities the same registration rights granted to the Subscribers to the Prior
Offering dated May 1, 2007 as described in and related to Section 11.1(ii) of
the Prior Subscription Agreement dated May 1, 2007. The Subscribers
are granted the same notice remedies, indemnification, liquidated damages and
rights granted to the Subscribers to the Prior Offering in connection with such
registration rights and assume the same obligations to the Company as such other
subscribers under Section 11.1(ii) of the Prior Subscription Agreement dated May
1, 2007. Notwithstanding this Section 11.1, no provisions regarding
demand registration rights contained in the Prior Subscription Agreement dated
May 1, 2007 shall be applicable to the holders of the Securities or otherwise
incorporated herein.
11.2. Delivery of Unlegended
Shares.
(a) Within
three (3) business days (such third business day being the “Unlegended Shares Delivery
Date”) after the business day on which the Company has received (i) a
notice that Shares or Warrant Shares or any other Common Stock held by a
Subscriber have been sold pursuant to the registration statement described in
Section 11.1 or Rule 144 under the 1933 Act, (ii) a representation that the
prospectus delivery requirements, or the requirements of Rule 144, as applicable
and if required, 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 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 legend
set forth in Section 4(i) above (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 submitted
Shares certificate, 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.
(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 such 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 11.2 hereof later than two business days after 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 such 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 11.2 for an aggregate of thirty (30) days, then each
Subscriber or assignee holding Securities subject to such default may, at its
option, require
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the
Company to redeem all or any portion of the Shares and Warrant Shares subject to
such default at a price per share equal to the greater of (i) the actual
purchase price of such Shares or Warrant Shares, or (ii) the highest closing
price of the Common Stock during the aforedescribed thirty day period and the
denominator of which is the lowest conversion price during such thirty day
period (“Unlegended Redemption
Amount”). 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 seven (7) business days after the Unlegended Shares Delivery
Date and a Subscriber or a broker on such Subscriber’s behalf, 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
such Subscriber was entitled to receive from the Company (a “Buy-In”), then the Company
shall pay in cash to such Subscriber (in addition to any remedies available to
or elected by such Subscriber) the amount by which (A) such 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 such Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to such Subscriber in respect of the
Buy-In.
(e) In
the event a Subscriber shall request delivery of Unlegended Shares as described
in Section 11.2 or Warrant Shares upon exercise of Warrants and the Company is
required to deliver such Unlegended Shares pursuant to Section 11.2 or the
Warrant Shares pursuant to the Warrants, the Company may not refuse to deliver
Unlegended Shares or Warrant 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 by the Company or at the Company’s request or with the
Company’s assistance, and the Company has posted a surety bond for the benefit
of such Subscriber in the amount of 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.
11.3. In
the event commencing one hundred and eighty-one (181) days after the Closing
Date, a Subscriber is not permitted to resell any of the Shares or Warrant
Shares without any restrictive legend or if such sales are permitted but subject
to volume limitations or further restrictions on resale as a result of the
unavailability to Subscriber of Rule 144(b)(1)(i) under the 1933 Act or any
successor rule (a “144
Default”), for any reason except for Subscriber’s status as an Affiliate
or “control person” of the Company, then the Company shall pay such
Subscriber
22
as
liquidated damages and not as a penalty an amount equal to two percent (2%) for
each thirty (30) days (or such lesser pro-rata amount for any period less than
thirty (30) days) thereafter of the purchase price of the Shares and Warrant
Shares owned by such Subscriber during the pendency of the 144
Default. Liquidated Damages that accrue pursuant to Section 11.4 of
the Prior Subscription Agreement and liquidated damages that accrue pursuant to
this Section 11.3 for contemporaneous periods shall be payable only in
connection with the higher of such amounts (and not both of such amounts) as
shall have accrued. Liquidated damages shall not be payable pursuant
to this Section 11.3 in connection with Shares and Warrant Shares for such times
as such Shares and Warrant Shares may be sold by the holder thereof without
restriction pursuant to Section 144(b)(1)(i) of the 1933 Act.
12. (a) Right of First
Refusal. Subject to the rights of the holders of the Company’s
Series A Preferred Stock as existing and described in the Reports as of the
Closing Date and without any amendment or enlargement thereof and the rights of
the Subscribers to the Prior Offerings, until one year after the Closing Date
(which period shall be tolled during the pendency of an Event of Default that is
not cured during any applicable cure period), the Subscribers shall be given not
less than seven (7) business days prior written notice of any proposed sale by
the Company of its Common Stock or other securities or equity linked debt
obligations, except in connection with (i) full or partial consideration in
connection with a strategic merger, acquisition, consolidation or purchase of
substantially all of the securities or assets of corporation or other entity
which holders of such securities or debt are not at any time granted
registration rights, (ii) the Company’s issuance of securities in connection
with strategic license agreements and other partnering arrangements so long as
such issuances are not for the purpose of raising capital and, (iii) the
Company’s issuance of Common Stock or the issuances or grants of options to
purchase Common Stock pursuant to stock option plans and employee stock purchase
plans described on Schedule 5(d) hereto, and (iv) as a result of the exercise of
Warrants or conversion of Notes which are granted or issued pursuant to this
Agreement (collectively the foregoing are “Excepted
Issuances”). The Subscribers who exercise their rights
pursuant to this Section 12(a) shall have the right during the seven (7)
business days following receipt of the notice to purchase some or all of 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 Notes in the Offering. A Subscriber may elect to
purchase less than the maximum amount purchasable by such Subscriber in which
event other Subscribers who have fully exercise their rights pursuant to this
Section 12(a) may elect during the following additional seven (7) days to
purchase in proportion to their initial Note purchase hereunder the amounts not
purchased by the Subscribers who did not purchase the maximum amount otherwise
available to them. 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 seven (7) business days
following the notice of modification to exercise such right.
(b) Favored Nations
Provision. Other than in connection with the Excepted
Issuances, if at any time the Notes or Warrants are outstanding, 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) to any person or entity at a price per share or
conversion or exercise price per share which shall be less than the Conversion
Price in respect of the Shares, or if less than the Warrant exercise price in
respect of the Warrant Shares, without the consent of each Subscriber, then the
Company shall issue, for
23
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 such
Subscriber (of only the Common Stock or Warrant Shares still owned by such
Subscriber) is equal to such other lower price per share and the Conversion
Price and Warrant exercise price shall automatically be reduced to such other
lower price. The average Purchase Price of the Shares and average
exercise price in relation to the Warrant Shares shall be calculated separately
for the Shares and Warrant Shares. The foregoing calculation and
issuance shall be made separately for Shares received upon conversion of the
Notes and separately for Warrant Shares. The delivery to such
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 Section 11 hereof in relation to such
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 sooner of the
agreement to or actual issuance of such convertible security, warrant, right or
option and again at any time upon any subsequent issuances of shares of Common
Stock upon exercise of such conversion or purchase rights if such issuance is at
a price lower than the Conversion Price or Warrant exercise price in effect upon
such issuance. The rights of such Subscriber set forth in this
Section 12 are in addition to any other rights such Subscriber has pursuant to
this Agreement, the Note, any Transaction Document, and any other agreement
referred to or entered into in connection herewith. The Subscriber is
also given the right to elect to substitute any term or terms of any other
offering in connection with which such Subscriber has rights as described in
Section 12(a), for any term or terms of the Offering in connection with
Securities owned by Subscriber as of the date the notice described in Section
12(a) is required to be given to Subscriber.
(c) Maximum Exercise of
Rights. In the event the exercise of the rights described in
Sections 12(a) or 12(b) would or could 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 7.3 of this
Agreement, 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 applicable maximum amount set forth calculated in the manner
described in Section 7.3 of this Agreement. The determination of when
such Common Stock may be issued shall be made by each Subscriber as to only such
Subscriber.
(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 overnight 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
24
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), (b) on the first business day following the date
deposited with an overnight courier service with charges prepaid, or (c) on the
third business day following the date of mailing pursuant to subpart (a)(ii)
above, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be: (i) if to the
Company, to: BigString Corporation, 0 Xxxxxxx Xxxx, Xxxxx X, Xxx Xxxx, XX 00000,
Attn: Xxxxx X. Xxxxx, President and Chief Executive Officer, telecopier: (000)
000-0000, with a copy by telecopier only to: Xxxxxxxx, Xxxxxxxx & Xxxxxx,
P.C., 000 Xxxx Xxxx Xxxx, X.X. Xxx 000, Xxxxxxxxxx, XX 00000, Attn: Xxxx X.
Xxxxxxx, Esq., telecopier: (000) 000-0000, and (ii) if to a Subscriber, 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: (000)
000-0000.
(b) 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 the Company shall be assigned without prior notice to and the
written consent of the Subscribers. A Subscriber shall promptly
provide the Company with written notice of the assignment or delegation of any
of its rights or obligations under this Agreement.
(c) Counterparts/Execution. This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument. This Agreement may be executed by facsimile
signature and delivered by facsimile transmission.
(d) Law Governing this
Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey without regard to
conflicts of laws principles that
would result in the application of the substantive laws of another
jurisdiction. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the civil or state courts of New Jersey or in the federal courts located in
the State of New Jersey. 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.
25
their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to one or more preliminary and final
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 13(d) hereof, each of the Company,
Subscriber and any signator hereto in his or her 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.
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.
BIGSTRING
CORPORATION
|
||
a
Delaware corporation
|
||
By:
|
|
|
Name:
Xxxxx X. Xxxxx
|
||
Title:
President and Chief Executive Officer
|
||
Dated:
June ___, 2009
|
SUBSCRIBER
|
PURCHASE
PRICE AND
NOTE
PRINCIPAL
|
ALPHA
CAPITAL ANSTALT
Pradafant
7
9490
Furstentums
Vaduz,
Lichtenstein
Fax:
000-00-00000000
_______________________________________________
(Signature)
By:
|
$75,000.00
|
WARRANT
SHARES
2,500,000
|
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.
BIGSTRING
CORPORATION
|
||
a
Delaware corporation
|
||
By:
|
|
|
Name:
Xxxxx X. Xxxxx
|
||
Title:
President and Chief Executive Officer
|
||
Dated:
June ___, 2009
|
SUBSCRIBER
|
PURCHASE
PRICE AND NOTE PRINCIPAL
|
WHALEHAVEN
CAPITAL FUND LIMITED
000
Xxxxxx Xxxxxx
Xxxxxxxxx
Xxxxxx, X.X. 00000
Fax:
(000) 000-0000
________________________________________
(Signature)
By:
|
$75,000.00
|
WARRANT
SHARES
2,500,000
|
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.
BIGSTRING
CORPORATION
|
||
a
Delaware corporation
|
||
By:
|
|
|
Name:
Xxxxx X. Xxxxx
|
||
Title:
President and Chief Executive Officer
|
||
Dated:
June ___, 2009
|
SUBSCRIBER
|
PURCHASE
PRICE AND NOTE PRINCIPAL
|
EXCALIBUR
SPECIAL OPPORTUNITIES LP
000
Xxxxx Xxxxxx Xxxx, Xxxxx 00
Xxxxxxx,
XX X0X0X0, Xxxxxx
Fax:
(416) _______________
_______________________________________
(Signature)
By:
|
$30,000.00
|
WARRANT
SHARES
1,000,000
|
LIST OF EXHIBITS AND
SCHEDULES
Exhibit
A
|
Form
of Note
|
Exhibit
B
|
Form
of Warrant
|
Exhibit
C
|
Escrow
Agreement
|
Exhibit
D
|
Form
8-K
|
Exhibit
E
|
Form
of Lockup Agreement
|
Schedule
5(a)
|
Subsidiaries
|
Schedule
5(d)
|
Additional
Issuances / Capitalization
|
Schedule
5(f)
|
Conflicts
|
Schedule
5(q)
|
Undisclosed
Liabilities
|
Schedule
5(v)
|
Transfer
Agent
|
Schedule
8
|
Finder’s
Fee
|
Schedule
9.1(s)
|
Lockup
Agreement
Provider
|
Exhibit
B
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 UNDER SAID
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO BIGSTRING CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED.
Right
to Purchase __________
shares of Common Stock of BigString Corporation (subject to adjustment as
provided herein)
|
COMMON
STOCK PURCHASE WARRANT
No. 2009-____
|
Issue
Date: June ___, 2009
|
BIGSTRING
CORPORATION, a corporation organized under the laws of the State of Delaware
(the “Company”), hereby certifies that, for value received, _______________, or
its assigns (the “Holder”), is entitled, subject to the terms set forth below,
to purchase from the Company at any time after the Issue Date until 5:00 p.m.,
E.S.T on the fifth anniversary of the Issue Date (the “Expiration Date”), up to
_______________ fully paid and nonassessable shares of Common Stock at a per
share exercise price of $0.015. The aforedescribed exercise price per
share, as adjusted from time to time as herein provided, is referred to herein
as the "Exercise Price." The number and character of such shares of
Common Stock and the Exercise Price are subject to adjustment as provided
herein. The Company may reduce the Exercise Price without the consent
of the Holder. The Company may reduce the Exercise Price without the
consent of the Holder. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Subscription
Agreement (the “Subscription
Agreement”), dated as of June ___, 2009, entered into by the Company and
the initial Holder of this Warrant.
As used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:
(a) The
term “Company” shall include BigString Corporation and any corporation which
shall succeed or assume the obligations of BigString Corporation
hereunder.
(b) The
term “Common Stock” includes (a) the Company's Common Stock, $0.0001 par
value per share, as authorized on the date of the Subscription Agreement, and
(b) any other securities into which or for which any of the securities described
in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
1
(c) The
term “Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received, on the exercise of the Warrant, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 4 or otherwise.
(d) The
term “Warrant Shares” shall mean the Common Stock issuable upon exercise of this
Warrant.
1. Exercise of
Warrant.
1.1. Number of Shares Issuable
upon Exercise. From and after the Issue Date through and
including the Expiration Date, the Holder hereof shall be entitled to receive,
upon exercise of this Warrant in whole in accordance with the terms of
subsection 1.2 or upon exercise of this Warrant in part in accordance with
subsection 1.3, shares of Common Stock of the Company, subject to
adjustment pursuant to Section 4.
1.2. Full
Exercise. This Warrant may be exercised in full by the Holder
hereof by delivery of this Warrant an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the “Subscription Form”) duly
executed by such Holder and delivery within two days thereafter of payment, in
cash, wire transfer or by certified or official bank check payable to the order
of the Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercisable by the Exercise Price
then in effect. The original Warrant is not required to be
surrendered to the Company until it has been fully exercised.
1.3. Partial
Exercise. This Warrant may be exercised in part (but not for a
fractional share) by the Holder hereof by delivery, an original or facsimile
copy of the Subscription Form duly executed by such Holder and payment, in cash,
wire transfer or by certified or official bank check payable to the order of the
Company. The amount payable by the Holder on such partial exercise
shall be the amount obtained by multiplying (a) the number of whole shares
of Common Stock designated by the Holder in the Subscription Form by
(b) the Exercise Price then in effect. On any such partial
exercise provided the Holder has surrendered the original Warrant, the Company,
at its expense, will forthwith issue and deliver to or upon the order of the
Holder hereof a new Warrant of like tenor, in the name of the Holder hereof or
as such Holder (upon payment by such Holder of any applicable transfer taxes)
may request, the whole number of shares of Common Stock for which such Warrant
may still be exercised.
1.4. Fair Market
Value. Fair Market Value of a share of Common Stock as of a
particular date (the "Determination Date") shall mean:
(a) If
the Company's Common Stock is traded on an exchange or is quoted on the NASDAQ
Global Market, NASDAQ Global Select Market, the NASDAQ Capital Market, the New
York Stock Exchange or the American Stock Exchange, LLC, then the closing or
last sale price, respectively, reported for the last business day immediately
preceding the Determination Date;
2
(b) If
the Company's Common Stock is not traded on an exchange or on the NASDAQ Global
Market, NASDAQ Global Select Market, the NASDAQ Capital Market or the American
Stock Exchange, Inc., but is traded in the over-the-counter market, then the
average of the closing bid and ask prices reported for the last business day
immediately preceding the Determination Date;
(c) Except
as provided in clause (d) below and Section 3.1, if the Company's Common
Stock is not publicly traded, then as the Holder and the Company agree, or in
the absence of such an agreement, by arbitration in accordance with the rules
then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided; or
(d) If
the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to
the Company's charter, then all amounts to be payable per share to holders of
the Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.
1.5. Company
Acknowledgment. The Company will, at the time of the exercise
of the Warrant, upon the request of the Holder hereof acknowledge in writing its
continuing obligation to afford to such Holder any rights to which such Holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such Holder any such rights.
1.6. Trustee for Warrant
Holders. In the event that a bank or trust company shall have
been appointed as trustee for the Holder of the Warrants pursuant to
Subsection 3.2, such bank or trust company shall, to the extent permitted
by applicable law, have all the powers and duties of a warrant agent (as
hereinafter described) and shall accept, in its own name for the account of the
Company or such successor person as may be entitled thereto, all amounts
otherwise payable to the Company or such successor, as the case may be, on
exercise of this Warrant pursuant to this Section 1.
3
Common
Stock, together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise. The Company understands that
a delay in the delivery of the Warrant Shares after the Warrant Share Delivery
Date could result in economic loss to the Holder. As compensation to
the Holder for such loss, the Company agrees to pay (as liquidated damages and
not as a penalty) to the Holder for late issuance of Warrant Shares upon
exercise of this Warrant the amount of $100 per business day after the Warrant
Share Delivery Date for each $10,000 of Exercise Price of Warrant Shares for
which this Warrant is exercised which are not timely delivered. The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other
remedies which may be available to the Holder, in the event that the Company
fails for any reason to effect delivery of the Warrant Shares by the Warrant
Share Delivery Date, the Holder may revoke all or part of the relevant Warrant
exercise by delivery of a notice to such effect to the Company whereupon the
Company and the Holder shall each be restored to their respective positions
immediately prior to the exercise of the relevant portion of this Warrant,
except that the liquidated damages described above shall be payable through
the date notice of revocation or rescission is given to the
Company.
2. Cashless
Exercise.
(a) If
a registration statement (as described in Section 11 of the Subscription
Agreement) (the “Registration Statement”) is effective and the Holder may sell
its shares of Common Stock upon exercise hereof pursuant to the Registration
Statement, this Warrant may be exercisable in whole or in part for cash only as
set forth in Section 1 above. If the Registration Statement is not
available, then commencing one year after the Issue Date, payment upon exercise
may be made at the option of the Holder either in (i) cash, wire transfer
or by certified or official bank check payable to the order of the Company equal
to the applicable aggregate Exercise Price, (ii) by delivery of Common Stock
issuable upon exercise of the Warrants in accordance with
Section (b) below or (iii) by a combination of any of the
foregoing
4
methods,
for the number of Common Stock specified in such form (as such exercise number
shall be adjusted to reflect any adjustment in the total number of shares of
Common Stock issuable to the holder per the terms of this Warrant) and the
holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.
(b) Subject
to the provisions herein to the contrary, if the Fair Market Value of one share
of Common Stock is greater than the Exercise Price (at the date of calculation
as set forth below), in lieu of exercising this Warrant for cash, the holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being cancelled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Subscription
Form in which event the Company shall issue to the holder a number of shares of
Common Stock computed using the following formula:
X=Y (A-B)
A
|
Where
|
X= the
number of shares of Common Stock to be issued to the
holder
|
|
Y=
|
the
number of shares of Common Stock purchasable under the Warrant or, if only
a portion of the Warrant is being exercised, the portion of the Warrant
being exercised (at the date of such
calculation)
|
|
A=
|
the
average Fair Market Value of a share of Common stock for the five (5)
trading days immediately prior to (but not including) the Exercise
Date
|
|
B=
|
Exercise
Price (as adjusted to the date of such
calculation)
|
For purposes of Rule 144 promulgated
under the 1933 Act, it is intended, understood and acknowledged that the Warrant
Shares issued in a cashless exercise transaction shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares shall be
deemed to have commenced, on the date this Warrant was originally issued
pursuant to the Subscription Agreement.
3. Adjustment for
Reorganization, Consolidation, Merger, etc.
3.1. Reorganization,
Consolidation, Merger, etc. In case at any time or from time
to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person or (c) transfer
all or substantially all of its properties or assets to any other person under
any plan or arrangement contemplating the dissolution of the Company, then, in
each such case, as a condition to the consummation of such a transaction, proper
and adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after
the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Common Stock (or Other Securities) issuable on such exercise prior to
such consummation or such effective date, the stock and other securities and
property (including
5
cash) to
which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2. Dissolution. In
the event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the Holder of the Warrants after the effective date of such dissolution pursuant
to this Section 3 to a bank or trust company (a "Trustee") having its
principal office in New York, New York, as trustee for the Holder of the
Warrants.
3.3. Continuation of
Terms. Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not
continue in full force and effect after the consummation of the transaction
described in this Section 3, then only in such event will the Company's
securities and property (including cash, where applicable) receivable by the
Holder of the Warrants be delivered to the Trustee as contemplated by
Section 3.2.
4. Extraordinary Events
Regarding Common Stock. In the event that the Company shall
(a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Exercise Price by a fraction,
the
6
numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Exercise Price then in effect. The Exercise
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 4. The
number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof, be entitled to receive shall be adjusted to
a number determined by multiplying the number of shares of Common Stock that
would otherwise (but for the provisions of this Section 4 be issuable on such
exercise by a fraction of which (a) the numerator is the Exercise Price that
would otherwise (but for the provisions of this Section 4 be in effect, and (b)
the denominator is the Exercise Price in effect on the date of such
exercise.
5. Certificate as to
Adjustments. In each case of any adjustment or readjustment in
the shares of Common Stock (or Other Securities) issuable on the exercise of
this Warrant, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Exercise Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail a
copy of each such certificate to the Holder of this Warrant and any Warrant
Agent of the Company (appointed pursuant to Section 11
hereof).
6. Reservation of Stock, etc.
Issuable on Exercise of Warrant; Financial Statements. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the
Warrant. This Warrant entitles the Holder hereof to receive copies of
all financial and other information distributed or required to be distributed to
the holders of the Company's Common Stock.
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loss,
theft or destruction of this Warrant, on delivery of an indemnity agreement or
security reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, on surrender and cancellation of this Warrant, the
Company at its expense, twice only, will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
8
normal
business hours where such notice is to be received), (ii) on the first business
day following the date deposited with an overnight courier service with charges
prepaid, or (iii) on the third business day following the date of mailing
pursuant to subpart (b) above, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall
be: if to the Company, to: BigString Corporation, 0 Xxxxxxx Xxxx,
Xxxxx X, Xxx Xxxx, XX 00000, Attn: Xxxxx X. Xxxxx, President and Chief Executive
Officer, telecopier: (000) 000-0000, with a copy by telecopier only to:
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.C., 000 Xxxx Xxxx Xxxx, X.X. Xxx 000,
Xxxxxxxxxx, XX 00000, Attn: Xxxx X. Xxxxxxx, Esq., telecopier: (000) 000-0000,
and (ii) if to the Holder, to the address and telecopier number listed on the
first paragraph of this Warrant, with a copy by telecopier only to: Grushko
& Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000,
telecopier number: (000) 000-0000.
14. Miscellaneous. This
Warrant shall be governed by and construed in accordance with the laws of the
State of New Jersey without regard to principles of conflicts of
laws. Any action brought by either party against the other concerning
the transactions contemplated by this Warrant shall be brought only in the state
courts of New Jersey or in the federal courts located in the State of New
Jersey. The parties to this Warrant hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
forum non
conveniens. The Company and Holder 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 Warrant 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.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
BIGSTRING
CORPORATION
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||
By:
|
|
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Name:
Xxxxx X. Xxxxx
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||
Title:
President and Chief Executive
Officer
|
10
Exhibit A
FORM OF
SUBSCRIPTION
(to be
signed only on exercise of Warrant)
TO: BIGSTRING
CORPORATION
The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____) (the “Warrant”), hereby irrevocably elects to purchase (check
applicable box):
___ ________
shares of the Common Stock covered by the Warrant; or
___ the
maximum number of shares of Common Stock covered by the Warrant pursuant to the
cashless exercise procedure set forth in Section 2 of the
Warrant.
The
undersigned herewith makes payment of the full Exercise Price for such shares at
the price per share provided for in the Warrant, which is
$___________. Such payment takes the form of (check applicable box or
boxes):
___ $__________
in lawful money of the United States; and/or
___ the
cancellation of such number of shares of Common Stock as is necessary, in
accordance with the formula set forth in Section 2 of the Warrant, to
exercise the Warrant with respect to the maximum number of shares of Common
Stock purchasable pursuant to the cashless exercise procedure set forth in
Section 2 of the Warrant.
The
undersigned requests that the certificates for such shares be issued in the name
of, and delivered to _____________________________________________________ whose
address is
_____________________________________________________________________________.
The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the Warrant shall be made
pursuant to registration of the Common Stock covered by the Warrant under the
Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an
exemption from registration under the Securities Act.
Dated:___________________
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|
(Signature
must conform to name of holder as specified on the face of the
Warrant)
|
|
(Address)
|
11
Exhibit B
FORM OF
TRANSFEROR ENDORSEMENT
(To be
signed only on transfer of Warrant)
For value
received, the undersigned transferor (the “Transferor”) hereby sells, assigns,
and transfers unto the person(s) named below under the heading "Transferees" the
right represented by the attached Warrant (No. _____) (the “Warrant”) to
purchase the percentage and number of shares of Common Stock of BIGSTRING
CORPORATION to which the Warrant relates specified under the headings
"Percentage Transferred" and "Number Transferred," respectively, opposite the
name(s) of such person(s) and appoints each such person attorney to transfer its
respective right on the books of BIGSTRING CORPORATION with full power of
substitution in the premises.
Transferees
|
Percentage
Transferred
|
Number
Transferred
|
[TRANSFEROR] | |||
Dated:______________,
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|||
(Signature
must conform to name of Holder as specified on the face of the
Warrant)
|
|||
Signed
in the presence of:
|
|||
(Signature)
|
|||
(address)
|
|||
(Print
Name)
|
|||
ACCEPTED
AND AGREED:
[TRANSFEREE]
|
|||
Dated:______________,
|
(Signature)
|
||
Signed
in the presence of:
|
|||
(Print
Name)
|
|||
(Signature)
|
|||
(Print
Name)
|
(address)
|
12