SUBSCRIPTION AGREEMENT
Exhibit
10.2
THIS
SUBSCRIPTION AGREEMENT
(this
“Agreement”),
is
dated as of July
__,
2008,
by and
among Boomj, Inc. (formerly Reel Estate Services, Inc.), a Nevada corporation
(the
“Company”),
and
the subscribers listed on Exhibit
A
hereto
who are signatories of this Agreement (each a “Subscriber”
and
collectively “Subscribers”).
WHEREAS,
the
Company and the Subscribers are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“Commission”)
under
the Securities Act of 1933, as amended (the “1933
Act”).
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscribers, as provided herein,
and the Subscribers, in the aggregate, shall purchase up to $2,500,000 (the
"Purchase
Price")
of
principal amount of promissory notes of the Company (“Note”
or
“Notes”),
a
form of which is annexed hereto as Exhibit
B,
convertible into shares of the Company's Common Stock, $0.001 par value (the
"Common
Stock")
at a
per share conversion price set forth in the Note (“Conversion
Price”);
and
Class A Common Stock Purchase Warrants (the “Warrants”),
in
the form annexed hereto as Exhibit
C,
to
purchase shares of Common Stock (the “Warrant
Shares”).
The
Notes, shares of Common Stock issuable upon conversion of the Notes (the
“Shares”),
the
Warrants and the Warrant Shares are collectively referred to herein as the
"Securities";
and
WHEREAS,
the
aggregate proceeds of the sale of the Notes and the Warrants contemplated hereby
shall be held in escrow pursuant to the terms of a Funds Escrow Agreement to
be
executed by the parties.
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Subscribers hereby agree as follows:
1. Closing
Date.
The
“Closing
Date”
shall
be the date that the Purchase Price is transmitted by wire transfer or otherwise
credited to or for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place at the offices of Boomj,
Inc.,
upon the satisfaction or waiver of all conditions to closing set forth in this
Agreement. Subject to the satisfaction or waiver of the terms and conditions
of
this Agreement, on the Closing Date, each Subscriber shall purchase and the
Company shall sell to each Subscriber a Note in the Principal Amount designated
on the signature page hereto for the Purchase Price indicated thereon, and
Warrants as described in Section 2 of this Agreement. The Closing may occur
on
any date after a minimum of $1,000,000 of Notes are sold to Subscribers pursuant
to this Agreement. If less than all $2,500,000 of Notes are subscribed for
and
sold on the Closing Date, then, subject to the terms and conditions of this
Agreement, for a period of up to 20 days after the Closing Date, the Company
may
sell up to the balance of the unsold Notes to such persons as the Board of
Directors of the Company may determine. Any such sale shall be made upon the
same terms and conditions as those contained herein, and such persons or
entities shall become parties to this Agreement, the Security Agreement and
the
Collateral Agent Agreement.
2. Warrants.
On the
Closing Date, the Company will issue and deliver Warrants to the Subscribers.
One Warrant will be issued for each Share which would be issued on the Closing
Date assuming the complete conversion of the Note on the Closing Date at the
Conversion Price. The exercise price to acquire a Warrant Share upon exercise
of
a Warrant shall be $0.93, subject to reduction as described in the Warrant.
The
Warrants shall be exercisable until five years after the issue date of the
Warrants.
1
Exhibit
10.2
3. Security
Interest.
The
Subscribers will be granted a security interest in the assets of the Company,
including ownership of the Subsidiaries (as defined in Section 5(a) of this
Agreement) and in the assets of the Subsidiaries, which security interest will
be memorialized in a “Security
Agreement,”
a
form
of which is annexed hereto as Exhibit
D.
The
Subsidiaries will guaranty the Company’s obligations under the Transaction
Documents as defined in Section 5(c). Such guaranties will be memorialized
in a
“Subsidiary
Guaranty”,
the
form of which is annexed hereto as Exhibit
E.
The
Company will execute such other agreements, documents and financing statements
reasonably requested by the Subscribers, which will be filed at the Company’s
expense with the jurisdictions, states and counties designated by the
Subscribers. The Company will also execute all such documents reasonably
necessary in the opinion of the Subscribers to memorialize and further protect
the security interest described herein. The Subscribers will appoint a
Collateral Agent to represent them collectively in connection with the security
interests to be granted to the Subscribers. The appointment of the Collateral
Agent in connection with the Security Agreement will be pursuant to a
“Collateral
Agent Agreement,”
a
form
of which is annexed hereto as Exhibit
F.
4. Subscriber
Representations and Warranties.
Each
Subscriber hereby represents and warrants to and agrees with the Company only
as
to such Subscriber that:
(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.
(b) Authorization
and Power.
Such
Subscriber has the requisite power and authority to enter into and perform
this
Agreement and the other Transaction Documents and to purchase the Notes and
Warrants being sold to it hereunder. The execution, delivery and performance
of
this Agreement and the other Transaction Documents by such Subscriber and the
consummation by it of the transactions contemplated hereby and thereby have
been
duly authorized by all necessary corporate or partnership action, and no further
consent or authorization of such Subscriber or its Board of Directors,
stockholders, partners, members, as the case may be, is required. This Agreement
and the other Transaction Documents have been duly authorized, executed and
delivered by such Subscriber and constitutes, or shall constitute when executed
and delivered, a valid and binding obligation of such Subscriber enforceable
against such Subscriber in accordance with the terms thereof.
(c) No
Conflicts.
The
execution, delivery and performance of this Agreement and the other Transaction
Documents and the consummation by such Subscriber of the transactions
contemplated hereby and thereby or relating hereto do not and will not (i)
result in a violation of such Subscriber’s charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
such Subscriber is a party or by which its properties or assets are bound,
or
result in a violation 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.
2
Exhibit
10.2
(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-KSB filed on February 7, 2008 for the fiscal
year ended October 31, 2007, and the financial statements included therein
for
the year ended October 31, 2007, together with all prior and subsequent filings
made with the Commission available at the XXXXX website, including the Form
10-Q
filed on May 15, 2008 (hereinafter referred to collectively as the "Reports").
In
addition, such
Subscriber may have 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. The Subscriber and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and to receive answers thereto
concerning the Company and the transactions contemplated herein.
(e) Information
on Subscriber.
Concurrently herewith, Subscriber is delivering to the Company a completed
and
executed Subscriber Questionnaire, the form of which is attached hereto as
Exhibit
I.
Such
Subscriber is, and will be at the time of the conversion of the Notes and
exercise of the Warrants, an "accredited
investor",
as
such term is defined in Regulation D promulgated by the Commission under the
1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the past and, with
its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable such
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase, which represents a speculative investment.
Such
Subscriber has the authority and is duly and legally qualified to purchase
and
own the Securities. Such
Subscriber is able to bear the risk of such investment for an indefinite period
and to afford a complete loss thereof. The information set forth in the
Subscriber Questionnaire and on the signature page hereto regarding such
Subscriber is accurate.
(f) Purchase
of Notes and Warrants.
On the
Closing Date, such
Subscriber will purchase the Notes and Warrants as principal for its own account
for investment only and not with a view toward, or for resale in connection
with, the public sale or any distribution thereof.
(g) Compliance
with Securities Act.
Such
Subscriber understands and agrees that the Securities have not been registered
under the 1933 Act or any applicable state securities laws, by reason of their
issuance in a transaction that does not require registration under the 1933
Act
(based in part on the accuracy of the representations and warranties of
such
Subscriber contained herein), and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or any
applicable state securities laws or is exempt from such
registration.
(h) Shares
Legend.
The
Shares, and the Warrant Shares shall bear the following or similar
legend:
"THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."
3
Exhibit
10.2
(i) Warrants
Legend.
The
Warrants shall bear the following or
similar legend:
"NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES."
(j) Note
Legend.
The
Note shall bear the following legend:
"NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
"
(k) Communication
of Offer.
The
offer to sell the Securities was directly communicated to such Subscriber by
the
Company. At no time was such Subscriber presented with or solicited by any
leaflet, newspaper or magazine article, radio or television advertisement,
or
any other form of general advertising or solicited or invited to attend a
promotional meeting otherwise than in connection and concurrently with such
communicated offer.
4
Exhibit
10.2
(l) Restricted
Securities.
Such
Subscriber understands that the Securities have not been registered under the
1933 Act and such Subscriber will not sell, offer to sell, assign, pledge,
hypothecate or otherwise transfer any of the Securities unless pursuant to
an
effective registration statement under the 1933 Act, or unless an exemption
from
registration is available. Notwithstanding anything to the contrary contained
in
this Agreement, such Subscriber may transfer (without restriction and without
the need for an opinion of counsel) the Securities to its Affiliates (as defined
below) provided that each such Affiliate is an “accredited investor” under
Regulation D and such Affiliate agrees to be bound by the terms and conditions
of this Agreement. For the purposes of this Agreement, an “Affiliate”
of
any
person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with
such
person or entity. Affiliate includes each Subsidiary of the Company. For
purposes of this definition, “control”
means
the power to direct the management and policies of such person or firm, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise.
(m) No
Governmental Review.
Such
Subscriber understands that no United States federal or state agency or any
other governmental or state agency has passed on or made recommendations or
endorsement of the Securities or the suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of
the
offering of the Securities.
(n) Correctness
of Representations.
Such
Subscriber represents as to such Subscriber that the foregoing representations
and warranties are true and correct as of the date hereof and, unless such
Subscriber otherwise notifies the Company prior to the Closing Date shall be
true and correct as of the Closing Date.
(o) Survival.
The
foregoing representations and warranties shall survive the Closing
Date.
(p) No
Short Sales.
Such
Subscriber has not directly or indirectly, nor has any person or entity acting
on behalf of or pursuant to any understanding with such Subscriber, engaged
in
any transactions in the securities of the Company (including, without
limitations, any “short sales,” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act, involving the Company’s securities) since
the time that such Subscriber was first contacted by the Company or placement
agent engaged by the Company regarding an investment in the
Company.
5. Company
Representations and Warranties.
Subject
to the Disclosure Schedules attached hereto, the Company represents and warrants
to and agrees with each Subscriber that:
(a) Due
Incorporation.
The
Company is a corporation or other entity duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite corporate power to own
its
properties and to carry on its business as presently
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary, other
than
those jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. For purposes of this Agreement, a “Material
Adverse Effect”
shall
mean a material adverse effect on the financial condition, results of
operations, prospects, properties or business of the Company and its
Subsidiaries taken as a whole. For purposes of this Agreement, “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 30% 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. 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).
5
Exhibit
10.2
(b) Outstanding
Stock.
All
issued and outstanding shares of capital stock of the Company and Subsidiary
have been duly authorized and validly issued and are fully paid and
non-assessable.
(c) Authority;
Enforceability.
This
Agreement, the Note, the Warrants, the Security Agreement, Subsidiary Guaranty,
the Escrow Agreement, and any other agreements delivered together with this
Agreement or in connection herewith (collectively “Transaction
Documents”)
have
been duly authorized, executed and delivered by the Company and Subsidiaries
(as
applicable) and are valid and binding agreements of the Company enforceable
in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity. The Company has full corporate power and authority necessary to
enter
into and deliver the Transaction Documents and to perform its obligations
thereunder.
(d) Additional
Issuances.
There
are
no outstanding agreements or preemptive or similar rights affecting the
Company's Common Stock or equity and no outstanding rights, warrants or options
to acquire, or instruments convertible into or exchangeable for, or agreements
or understandings with respect to the sale or issuance of any shares of Common
Stock or equity of the Company or Subsidiaries or other equity interest in
the
Company except as described on Schedule
5(d).
The
Common Stock of the Company on a fully diluted basis outstanding as of the
last
Business Day preceding the Closing Date is set forth on Schedule
5(d).
(e) Consents.
No
consent, approval, authorization or order of any court, governmental agency
or
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, the OTC Bulletin Board (the “Bulletin
Board”)
or the
Company's shareholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation,
the
issuance and sale of the Securities. The Transaction Documents and the Company’s
performance of its obligations thereunder has been unanimously approved by
the
Company’s Board of Directors.
(f) No
Violation or Conflict.
Assuming the representations and warranties of the Subscribers in Section 4
are
true and correct, neither the issuance and sale of the Securities nor the
performance of the Company’s obligations under this Agreement and all other
agreements entered into by the Company relating thereto by the Company
will:
(i) violate,
conflict with, result in a breach of, or constitute a default (or an event
which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the 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
6
Exhibit
10.2
(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) except
as
described in Schedule
5(d),
result
in the activation of any anti-dilution rights or a reset or repricing of any
debt or security instrument of any other creditor or equity holder of the
Company, nor result in the acceleration of the due date of any obligation of
the
Company; or
(iv) will
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, except as described in Schedule
5(f).
(g) The
Securities.
The
Securities upon issuance:
(i) are,
or
will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and
any
applicable state securities laws;
(ii) have
been, or will be, duly and validly authorized and on the date of issuance of
the
Shares 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 non-assessable 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 warranties of the 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.
(h) Litigation.
There
is no pending or, to the best knowledge of the Company, threatened action,
suit,
proceeding or investigation before any court, governmental agency or body,
or
arbitrator having jurisdiction over the Company, or any of its Affiliates that
would affect the execution by the Company or the performance by the Company
of
its obligations under the Transaction Documents. Except as disclosed in the
Reports, there is no pending or, to the best knowledge of the Company, basis
for
or threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates which litigation if adversely determined would have
a
Material Adverse Effect.
(i) No
Market Manipulation.
The
Company and its Affiliates have not taken, and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected to,
cause or result in stabilization or manipulation of the price of the Common
Stock to
facilitate the sale or resale of the Securities or affect the price at which
the
Securities may be issued or resold.
(j) Information
Concerning Company.
The
Reports and Other Written Information contain all material information relating
to the Company and its operations and financial condition as of their respective
dates which information is required to be disclosed therein. Since March 31,
2008 and except as modified in the Other Written Information or in the Schedules
hereto, there has been no Material Adverse Event relating to the Company's
business, financial condition or affairs not disclosed in the Reports. The
Reports and Other Written Information do not contain any untrue statement of
a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein, taken as a whole, not misleading
in
light of the circumstances when made.
7
Exhibit
10.2
(k) Solvency.
Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of all of
the
Notes hereunder, (i) the Company’s fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities)
as
they mature; (ii) the Company’s assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on
or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on
or
in respect of its debt).
(l) Defaults.
The
Company is not in violation of its articles of incorporation or bylaws. The
Company is (i) not in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
Material Adverse Effect,
(ii)
not in default with respect to any order of any court, arbitrator or
governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under
any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) not in violation of any statute, rule
or regulation of any governmental authority which violation would have a
Material Adverse Effect.
(m) No
Integrated Offering.
Other
than the offer and sale of (i) $2,280,000 of 12% Convertible Secured Promissory
Notes to the Prior Investors (as defined below), and (ii) the other offers
and
sales disclosed in Schedule
5(o),
neither
the Company, nor any of its Affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would cause
the offer of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of the Bulletin Board. No prior integrated offering will impair
the exemptions relied upon in this Offering or the Company’s ability to timely
comply with its obligations hereunder. Neither the Company nor any of its
Affiliates will take any action or steps that would cause the offer or issuance
of the Securities to be integrated with other offerings which would impair
the
exemptions relied upon in this Offering or the Company’s ability to timely
comply with its obligations hereunder. The Company will not conduct any offering
other than the transactions contemplated hereby that will be integrated with
the
offer or issuance of the Securities that would impair the exemptions relied
upon
in this Offering or the Company’s ability to timely comply with its obligations
hereunder.
(n) No
General Solicitation.
Neither
the Company, nor any of its Affiliates, nor to its knowledge, any person acting
on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the 0000 Xxx)
in
connection with the offer or sale of the Securities.
(o) No
Undisclosed Liabilities.
The
Company has no liabilities or obligations which are material, individually
or in
the aggregate, other than those incurred in the ordinary course of the Company
businesses since March 31, 2008 and which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect,
except
as disclosed in the Reports or on Schedule
5(o).
8
Exhibit
10.2
(p) No
Undisclosed Events or Circumstances.
Since
March 31, 2008, except as disclosed in the Reports or on Schedule
5(p),
no
event or circumstance has occurred or exists with respect to the Company or
its
businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(q) Capitalization.
The
authorized and outstanding capital stock of the Company and Subsidiaries as
of
the date of this Agreement and the Closing Date (not including the Securities)
are set forth in the Reports or on Schedule
5(d).
Except
as set forth on Schedule
5(d),
there
are no options, warrants, or rights to subscribe to, securities, rights or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company or any of its
Subsidiaries. The
only
officer, director, employee and consultant stock option or stock incentive
plan
currently in effect or contemplated by the Company is described on Schedule
5(d).
(r) Dilution.
The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders
of
the Company’s equity or rights to receive equity of the Company. The board of
directors of the Company has concluded, in its good faith business judgment
that
the issuance of the Securities is in the best interests of the Company. 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 shareholders of the
Company or parties entitled to receive equity of the Company.
(s) No
Disagreements with Accountants and Lawyers.
There
are no material disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise between the Company and the accountants
and
lawyers presently employed by the Company, including but not limited to disputes
or conflicts over payment owed to such accountants and lawyers, nor have there
been any such disagreements during the two years prior to the Closing
Date.
(t) Investment
Company.
Neither
the Company nor any Affiliate of the Company is an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.
(u) Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds, (iii)
failed to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in violation
of law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(v) Reporting
Company.
The
Company is a publicly-held company subject to reporting obligations pursuant
to
Section 13 of the Securities Exchange Act of 1934, as amended (the "1934
Act")
and
has a class of Common Stock registered pursuant to Section 12(g) of the 1934
Act. Pursuant to the provisions of the 1934 Act, the Company has timely filed
all reports and other materials required to be filed thereunder with the
Commission during the preceding twelve months.
(w) Listing.
The
Company's Common Stock is quoted on the Bulletin Board under the symbol BOMJ.
The Company has not received any oral or written notice that its Common Stock
is
not eligible nor will become ineligible for quotation on the Bulletin Board
nor
that its Common Stock does not meet all requirements for the continuation of
such quotation. The Company satisfies all the requirements for the continued
quotation of its Common Stock on the Bulletin Board.
9
Exhibit
10.2
(x) DTC
Status.
The
Company’s transfer agent is a participant in, and the Common Stock is eligible
for transfer pursuant to, the Depository Trust Company Automated Securities
Transfer Program. The name, address, telephone number, fax number, contact
person and email address of the Company transfer agent is set forth on
Schedule
5(x)
hereto.
(y) Company
Predecessor and Subsidiaries.
The
Company makes each of the representations contained in Sections 5(a), (b),
(c),
(d), (e), (f), (h), (j), (k), (l), (o), (p), (q), (s), (t) and (u) of this
Agreement, as same relate to the Subsidiary of the Company. All representations
made by or relating to the Company of a historical or prospective nature and
all
undertakings described in Sections 9(g) through 9(l) shall relate, apply and
refer to the Company and its predecessors. The Company represents that it owns
the equity of the Subsidiaries and rights to receive equity of the Subsidiaries
as set forth on Schedule
5(a),
free
and clear of all liens, encumbrances and claims, except as set forth on
Schedule
5(d).
No
person or entity other than the Company has the right to receive any equity
interest in the Subsidiaries.
(z) Correctness
of Representations.
The
Company represents that the foregoing representations and warranties are true
and correct as of the date hereof in all material respects, and, unless the
Company otherwise notifies the Subscribers prior to the Closing Date, shall
be
true and correct in all material respects as of the Closing Date; provided,
that, if such representation or warranty is made as of a different date in
which
case such representation or warranty shall be true as of such date.
(AA) Survival.
The
foregoing representations and warranties shall survive the Closing
Date.
6. Regulation
D Offering/Legal Opinions.
The
offer and issuance of the Securities to the Subscribers is being made pursuant
to the exemption from the registration provisions of the 1933 Act afforded
by
Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
D
promulgated thereunder. The Company will provide, at the Company's expense,
such
legal opinions, if any, as are reasonably necessary in each Subscriber’s opinion
for the issuance and resale of the Common Stock issuable upon conversion of
the
Notes and exercise of the Warrants pursuant to an effective registration
statement, Rule 144 under the 1933 Act or an exemption from
registration.
7.1. Conversion
of Note.
(a) Upon
the
conversion of a Note or part thereof, 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 Subscriber (or its permitted nominee) or such other
persons as designated by Subscriber and in such denominations to be specified
at
conversion representing the number of shares of Common Stock issuable upon
such
conversion. The Company warrants that no instructions other than these
instructions have been or will be given to the transfer agent of the Company's
Common Stock and that the certificates representing such shares shall contain
no
legend other than the legend set forth in Section 4(h). If and when a Subscriber
sells the Shares, assuming (i) the Registration Statement (as defined below)
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 Company will reissue the Shares without restrictive legend
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 pursuant to Rule
144(b)(1)(i) of the 1933 Act, or for 90 days if pursuant to the other provisions
of Rule 144 of the 1933 Act, provided that Subscriber delivers all reasonably
requested representations in support of such opinion).
10
Exhibit
10.2
(b) A
Subscriber will give notice of its decision to exercise its right to convert
the
Note, interest, or part thereof by telecopying, or otherwise delivering a
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. Such Subscriber will not be
required to surrender the Note
until
the Note has been fully converted or satisfied. Each date on which a Notice
of
Conversion is telecopied to the Company in accordance with the provisions hereof
by 6 PM Eastern Time (“ET”) (or if received by the Company after 6 PM ET then
the next business day) 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 the Notice of Conversion
is
given by the Subscriber (such third 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 the Subscriber.
A Note representing the balance of the Note not so converted will be provided
by
the Company to such Subscriber if requested by 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 later than the Delivery Date
or
the Mandatory Redemption Payment Date (as hereinafter defined) could result
in
economic loss to the Subscriber. As compensation to a 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 (and
proportionately for other amounts) 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 the Subscriber, in
the
event that the Company fails for any reason to effect delivery of the Shares
within seven (7) business days after the Delivery Date or make payment within
seven (7) business days after the Mandatory Redemption Payment Date (as defined
in Section 7.2 below), 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.
7.2. Mandatory
Redemption at Subscriber’s Election.
In the
event (a) the Company is prohibited from issuing Shares, (b) fails to timely
deliver Shares on a Delivery Date, (c) upon the occurrence of any other Event
of
Default (as defined in the Note or in this Agreement), and if any event listed
in subparagraph (a), (b) or (c) is not cured during any applicable cure period
and an additional twenty (20) days thereafter, or (d) upon a Change in Control
(as defined below), then at such Subscriber’s election, the Company must pay to
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 120%, 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”)
by
either the Conversion Price that would be in effect on the Deemed Conversion
Date or 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 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”).
The
Subscriber must make a request for a Mandatory Redemption Payment within 30
business days after the event listed in this Section 7.2 that triggered the
right to cause the Company to make a Mandatory Redemption Payment. 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 (other
than in connection with a reincorporation), (iii) a majority of the board of
directors of the Company as of the Closing Date no longer serving as directors
of the Company except due to natural causes (which shall include, a director’s
election not to seek re-election, or the termination of such directors by the
holders of more than 50% of the equity outstanding as of the Closing Date),
or
(iv) the sale, lease, license or transfer of substantially all the assets of
the
Company and its Subsidiaries.
11
Exhibit
10.2
7.3. Injunction
Posting of Bond.
In the
event a Subscriber shall elect to convert a Note or part thereof, the Company
may not refuse conversion or exercise based on any claim that such Subscriber
or
any one associated or affiliated with such Subscriber has been engaged in any
violation of law, or for any other reason, unless, an injunction from a court,
on notice, restraining and or enjoining conversion of all or part of such Note
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 outstanding principal and interest of the Note, or
aggregate purchase price of the Shares which are sought to be subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s
favor.
7.4. Buy-In.
In
addition to any other rights available to a Subscriber, if the Company fails
to
deliver to a Subscriber such shares issuable upon conversion of a Note by the
Delivery Date and if after seven (7) business days after the Delivery Date
such
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 Common Stock which such Subscriber was entitled
to receive upon such conversion (a "Buy-In"),
then
in addition to the delivery of the shares issuable upon conversion of a Note,
the Company shall pay in cash to such Subscriber (in addition to any remedies
available to or elected by the 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 principal
and/or interest amount of the Note for which such conversion was not timely
honored 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 an attempted
conversion of $10,000 of note principal and/or interest, the Company shall
be
required to pay such Subscriber $1,000 plus interest. Such Subscriber shall
provide the Company written notice and evidence indicating the amounts payable
to such Subscriber in respect of the Buy-In.
7.5 Adjustments.
The
Conversion Price, Warrant exercise price and amount of Shares issuable upon
conversion of the Notes and exercise of the Warrants shall be equitably adjusted
and as otherwise described in this Agreement, the Notes and
Warrants.
7.6. Redemption.
The
Notes shall not be redeemable or callable by the Company.
12
Exhibit
10.2
8. Broker/Due
Diligence.
(a) Broker.
The
Company on the one hand, and each Subscriber (for himself only) on the other
hand, agree to indemnify the other against and hold the other harmless from
any
and all liabilities to any persons other than those listed on Schedule
8(a)
claiming
brokerage commissions, finder’s fees or due diligence 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 or in
connection with any investment in the Company at any time, whether or not such
investment was consummated and arising out of such party’s actions. The Company
represents that there are no parties entitled to receive fees, commissions,
due
diligence fees, or similar payments in connection with the Offering except
as
described on Schedule
8(a).
The
Company is solely responsible for payment of the fees described on Schedule
8(a).
9. Covenants
of the Company.
The
Company covenants and agrees with the Subscribers as follows:
(a) Stop
Orders.
The
Company will advise the Subscribers, within twenty-four hours after it receives
notice of issuance by the Commission, any state securities commission or any
other regulatory authority of any stop order or of any order preventing or
suspending any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock of the Company for offering or sale
in
any jurisdiction, or the initiation of any proceeding for any such purpose.
The
Company will not issue any stop transfer order or other order impeding the
sale,
resale or delivery of any of the Securities, except as may be required by any
applicable federal or state securities laws and unless contemporaneous notice
of
such instruction is given to the Subscriber.
(b) Listing/Quotation.
The
Company shall promptly secure the quotation or listing of the Shares and Warrant
Shares upon each national securities exchange, or automated quotation system
upon which they are or become eligible for quotation or listing (subject to
official notice of issuance) and shall maintain same so long as any Warrants
are
outstanding. The Company will maintain the quotation or listing of its Common
Stock on the American Stock Exchange, Nasdaq Capital Market, Nasdaq Global
Market, Nasdaq Global Select Market, Bulletin Board, or New York Stock Exchange
(whichever of the foregoing is at the time the principal trading exchange or
market for the Common Stock (the “Principal
Market”),
and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened 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.
(c) Market
Regulations.
If
required, the Company shall notify the Commission, the Principal Market and
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law,
rule
and regulation, for the legal and valid issuance of the Securities to the
Subscribers and promptly provide copies thereof to the Subscribers.
(d) Filing
Requirements.
From
the
date of this Agreement and until the last to occur of (i) two (2) years after
the Closing Date, (ii) until all the Shares have been resold or transferred
by
all the Subscribers pursuant to a registration statement or pursuant to Rule
144(b)(1)(i), or (iii) the Notes are no longer outstanding (the date of such
latest occurrence being the “End
Date”),
the
Company will (A) cause its Common Stock to continue to be registered under
Section 12(b) or 12(g) of the 1934 Act, (B) comply in all respects with its
reporting and filing obligations under the 1934 Act, (C) voluntarily comply
with
all reporting requirements that are applicable to an issuer with a class of
shares registered pursuant to Section 12(g) of the 1934 Act, if the Company
is
not subject to such reporting requirements, and (D) comply with all requirements
related to any registration statement filed pursuant to this Agreement. The
Company will use its best efforts not to take any action or file any document
(whether or not permitted by the 1933 Act or the 1934 Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said acts until the End Date. Until
the End Date, the Company will continue the listing or quotation of the Common
Stock on a Principal Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Principal Market. The Company agrees to timely file a Form D with respect to
the
Securities if required under Regulation D and to provide a copy thereof to
each
Subscriber promptly after such filing.
13
Exhibit
10.2
(e) Use
of
Proceeds.
The
proceeds of the Offering will be employed by the Company as described on
Schedule
9(e).
Except
as set forth in Schedule 9(e), the Purchase Price may not and will not be used
for accrued and unpaid officer and director salaries, payment of financing
related debt, redemption of outstanding notes or equity instruments of the
Company nor non-trade obligations outstanding on a Closing Date. For so long
as
any Notes are outstanding, the Company will not prepay any financing related
debt obligations nor redeem any equity instruments of the Company without the
prior Consent of the Subscribers.
(f) Reservation.
Prior
to the Closing, the Company undertakes to reserve, pro rata,
on
behalf of each holder of a Note or Warrant, from its authorized but unissued
Common Stock, a number of common shares reasonably necessary to allow each
holder of a Note to be able to convert all such outstanding Notes and reserve
the amount of Warrant Shares issuable upon exercise of the Warrants. Failure
to
have sufficient shares reserved pursuant to this Section 9(f) at any time shall
be a material default of the Company’s obligations under this Agreement and an
Event of Default under the Note.
(g)
DTC
Program.
At all
times that Notes or Warrants are outstanding, the Company will employ as the
transfer agent for the Common Stock, Shares and Warrant Shares a participant
in
the Depository Trust Company Automated Securities Transfer Program.
(h) Taxes.
From
the date of this Agreement and until the End Date, the Company will promptly
pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company; provided, however, that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Company will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefore.
(i) Insurance.
From
the date of this Agreement and until the End Date, the Company will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company’s line of business and
location, in amounts sufficient to prevent the Company from becoming a
co-insurer and not in any event less than one hundred percent (100%) of the
insurable value of the property insured less reasonable deductible amounts;
and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated and located and to the extent available on commercially
reasonable terms.
(j) Books
and Records.
From the
date of this Agreement and until the End Date, the Company will keep true
records and books of account in which full, true and correct entries will be
made of all dealings or transactions in relation to its business and affairs
in
accordance with generally accepted accounting principles applied on a consistent
basis.
14
Exhibit
10.2
(k) Governmental
Authorities.
From the
date of this Agreement and until the End Date, the Company shall duly observe
and conform in all material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its properties or
assets.
(l) Intellectual
Property.
From
the date of this Agreement and until the End Date, the Company shall maintain
in
full force and effect its corporate existence, rights and franchises and all
licenses and other rights to use intellectual property owned or possessed by
it
and reasonably deemed to be necessary to the conduct of its business, unless
it
is sold for value.
(m) Properties.
From the
date of this Agreement and until the End Date, the Company will keep its
properties in good repair, working order and condition, reasonable wear and
tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases to which it is a party or under
which it occupies property if the breach of such provision could reasonably
be
expected to have a Material Adverse Effect.
(n) Confidentiality/Public
Announcement.
From the
date of this Agreement and until the End Date, the Company agrees that except
in
connection with a Form 8-K and the registration statement or statements
regarding the Subscribers’ securities or in correspondence with the SEC
regarding same, it will not disclose publicly or privately the identity of
the
Subscribers unless expressly agreed to in writing by a Subscriber or only to
the
extent required by law and then only upon five days prior notice to Subscriber.
In any event and subject to the foregoing, the Company undertakes to file a
Form
8-K or make a public announcement describing the Offering not later than the
business day after the Closing Date. Prior to filing or announcement, such
Form
8-K or public announcement will be provided to Subscribers for their review
and
approval. In the Form 8-K or public announcement, the Company will specifically
disclose the amount of Common Stock outstanding immediately after the Closing.
Upon delivery by the Company to the Subscribers after the Closing
Date of any notice or information, in writing, electronically or otherwise,
and
while a Note, Shares, Warrants, or Warrant Shares are held by such Subscribers,
unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, nonpublic
information relating to the Company or
Subsidiaries, the Company shall within one business day after
any such delivery publicly disclose such material, nonpublic
information on a Report on Form 8-K or otherwise.
In
the event that the Company believes that a
notice or communication to a Subscriber contains material, nonpublic
information, relating to the Company or Subsidiaries, the Company shall so
indicate to such Subscriber prior to delivery of such notice or information.
Subscriber will be granted sufficient time to notify the Company that Subscriber
elects not to receive such information. In such case, the Company will not
deliver such information to Subscriber. In the absence of any such
indication, such Subscriber shall be allowed to presume that all matters
relating to such notice and information do not constitute material,
nonpublic information relating to the Company or its
Subsidiaries.
(o) Non-Public
Information.
The
Company covenants and agrees that except for the Reports, Other Written
Information and schedules and exhibits to this Agreement and any other
disclosure required under the Transaction Documents, which information the
Company undertakes to publicly disclose not later than the sooner of the
required or actual filing date of the Form 8-K described in Section 9(n) above,
neither it nor any other person acting on its behalf will at any time provide
any Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto
such
Subscriber shall have agreed in writing to accept such information. The Company
understands and confirms that each Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.
(p) Negative
Covenants.
So long
as a Note is outstanding, without the Consent of the Subscribers, the Company
will not and will not permit any of its Subsidiaries to directly or
indirectly:
15
Exhibit
10.2
(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: (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 new 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”);
(ii) amend
its
certificate of incorporation, bylaws or its charter documents so as to
materially and adversely affect any rights of the Subscriber;
(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; or
(iv) engage
in
any transactions with any officer, director, employee or any Affiliate 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 other than (i) for
an
aggregate amount that is less than $100,000 and pursuant to the terms that
are
no less favorable to the Company than those that can be obtained from the third
party in an armed length transaction for payment of salary, or consulting fees
for services rendered, (ii) reimbursement for expenses incurred on behalf of
the
Company, and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
The
Company agrees to provide Subscribers not less than ten (10) days notice prior
to becoming obligated to or effectuating a Permitted Lien.
16
Exhibit
10.2
(q) Offering
Restrictions.
For so
long as the Notes are outstanding, the Company will not enter into any Equity
Line of Credit or similar agreement, nor issue nor agree to issue any floating
or Variable Priced Equity Linked Instruments nor any of the foregoing or equity
with price reset rights (collectively, the “Variable
Rate Restrictions”).
For
purposes hereof, “Equity
Line of Credit”
shall
include any transaction involving a written agreement between the Company and
an
investor or underwriter whereby the Company has the right to “put” its
securities to the investor or underwriter over an agreed period of time and
at
an agreed price or price formula, and “Variable
Priced Equity Linked Instruments”
shall
include: (A) any debt or equity securities which are convertible into,
exercisable or exchangeable for, or carry the right to receive additional shares
of Common Stock either (1) at any conversion, exercise or exchange rate or
other
price that is based upon and/or varies with the trading prices of or quotations
for Common Stock at any time after the initial issuance of such debt or equity
security, or (2) with a fixed conversion, exercise or exchange price that is
subject to being reset at some future date at any time after the initial
issuance of such debt or equity security due to a change in the market price
of
the Company’s Common Stock since date of initial issuance, and (B) any
amortizing convertible security which amortizes prior to its maturity date,
where the Company is required or has the option to (or any investor in such
transaction has the option to require the Company to) make such amortization
payments in shares of Common Stock which are valued at a price that is based
upon and/or varies with the trading prices of or quotations for Common Stock
at
any time after the initial issuance of such debt or equity security (whether
or
not such payments in stock are subject to certain equity
conditions).
(r) Seniority.
Except
for Permitted Liens and as otherwise provided for herein, until the Notes are
fully satisfied or converted, the Company shall not grant any security interest
to be taken in the assets of the Company or any Subsidiary; nor issue any debt,
equity or other instrument which would give the holder thereof directly or
indirectly, a right in any assets of the Company or any Subsidiary equal to
or
superior to any right of the holder of a Note in or to such assets.
(s) Notices.
For so
long as the Subscribers hold any Securities, the Company will maintain a United
States address and United States fax number for notices purposes under the
Transaction Documents.
(t) Investor
Relations.
During
the term of the Notes, the Company shall at all times engage one or more
investor relations firms to provide after market support for the Company’s
securities.
10. Covenants
of the Company Regarding Indemnification.
(a) The
Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers' officers, directors, agents, Affiliates, members,
managers, control persons, and principal shareholders, against any claim, cost,
expense, liability, obligation, loss or damage (including reasonable legal
fees)
of any nature, incurred by or imposed upon the Subscriber or any such person
which results, arises out of or is based upon (i) any material misrepresentation
by Company or breach of any representation or warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice and/or cure
periods, any breach or default in performance by the Company of any covenant
or
undertaking to be performed by the Company hereunder, or any other agreement
entered into by the Company and Subscriber relating hereto.
(b) The
procedures set forth in Section 11.5 shall apply to the indemnification set
forth in Section 10(a).
11.1. Registration
Rights.
The
Company hereby grants the following registration rights to holders of the
Securities.
17
Exhibit
10.2
(i) On
one
occasion, for a period commencing 180 days after the Closing Date and ending
two
years after the Closing Date, upon a written request therefor from any record
holder(s) of more than 50% of the Shares issued and issuable upon conversion
of
the outstanding Notes and outstanding Warrant Shares (the “Initiating
Holders”),
the
Company shall prepare and file with the Commission a registration statement
under the 1933 Act registering shares
of
Common Stock issued and issuable to the Subscribers upon conversion or exercise
of all of the Notes and Warrants (collectively the “Registrable
Securities”),
which
are the subject of such request for unrestricted public resale by the holder
thereof. Notwithstanding the definition in Section 1.11(iv), for purposes of
Sections 11.1(i) and 11.1(ii), Registrable Securities shall not include
Securities which are (A) registered for resale in an effective registration
statement, (B) included for registration in a pending registration statement,
(C) which have been issued without further transfer restrictions after a sale
or
transfer pursuant to Rule 144 under the 1933 Act or (D) which may be resold
under Rule 144(b)(1)(i). Upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of the Registrable
Securities that such registration statement is to be filed and shall include
in
such registration statement Registrable Securities for which it has received
written requests within ten days after the Company gives such written notice.
Such other requesting record holders shall be deemed to have exercised their
demand registration right under this Section 11.1(i). Any registration statement
filed under this Section 11.1(i) may include shares of Common Stock held by
other securityholders of the Company. If, for any reason, the amount of the
Registrable Securities to be included in the offering shall be reduced, the
Registrable Securities and the other shares to be included in any registration
statement shall participate in such offering as follows: (i) first, the
Registrable Securities requested to be included in such registration by the
Initiating Holders, and if two or more Initiating Holders are included in the
registration, pro rata among the Initiating Holders on the basis of the number
of Registrable Securities owned by each such Initiating Holder, (ii) second,
the
Registrable Securities requested to be included in such registration by any
holder other than the Initiating Holders, pro rata among such holders on the
basis of the number of Registrable Securities owned by such holder, (iii) third,
any other securities of the Company requested to be registered by the holders
of
such other securities pursuant to agreements with the Company granting such
other securityholders certain registration rights, and (iv) any other Common
Stock requested to be registered by holders of Common Stock, pro-rata among
such
holders.
(ii) If
the
Company at any time during the first 18 months following the Closing Date,
proposes to register any of its securities under the 1933 Act for sale to the
public, whether for its own account or for the account of other security holders
or both, except with respect to registration statements on Forms X-0, X-0 or
another form not available for registering the Registrable Securities for sale
to the public, each such time it will give at least ten (10) days' prior written
notice to the record holder of the Registrable Securities of its intention
so to
do. Upon the written request of the holder, received by the Company within
ten
(10) days after the giving of any such notice by the Company, to register any
of
the Registrable Securities, the Company will cause the Registrable Securities
as
to which registration shall have been so requested (up to the maximum number
of
such shares registrable pursuant
to Rule 415 of the 0000 Xxx)
to be
included with the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent required to permit the
sale or other disposition of the Registrable Securities so registered by the
holder of such Registrable Securities (the “Seller”
or
“Sellers”).
In
the event that any registration pursuant to this Section 11.1(ii) shall be,
in
whole or in part, an underwritten public offering of common stock of the
Company, the number of shares of Registrable Securities to be included in such
an underwriting may be reduced by the managing underwriter if and to the extent
that the Company and the underwriter shall reasonably be of the opinion that
such inclusion would adversely affect the marketing of the securities to be
sold
by the Company therein. The Company shall so advise all holders requesting
to be
included in the registration and underwriting and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall, unless the Company has agreed otherwise with any shareholder, be
allocated among all the shareholders requesting to be included in the
registration and underwriting in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by them at the time of filing
the registration statement and among all other holders of registration rights
with the Company in accordance with their agreements. Notwithstanding the
foregoing provisions, or Section 11.4 hereof, the Company may withdraw or delay
or suffer a delay of any registration statement referred to in this Section
11.1(ii) without thereby incurring any liability to the Seller.
(iii) If,
at
the time any written request for registration is received by the Company
pursuant to Section 11.1(i), the Company has determined to proceed with the
actual preparation and filing of a registration statement under the 1933 Act
in
connection with the proposed offer and sale for cash of any of its securities
for the Company's own account and the Company actually does file such other
registration statement, such written request shall be deemed to have been given
pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of
the
holders of Registrable Securities covered by such written request shall be
governed by Section 11.1(ii).
18
Exhibit
10.2
(iv) As
a
condition to having the Seller’s Registrable Securities included in any
Registration Statement, a Seller shall answer the questions set forth in Selling
Shareholder Questionnaire (“Shareholder
Questionnaire”)
in the
form attached as Exhibit
I
and
deliver such completed questionnaire to the Company prior to the Company’s
filing of any Registration Statement.
11.2. Registration
Procedures.
If and
whenever the Company is required by the provisions of Sections 11.1(i) or
11.1(ii) to effect the registration of any Registrable Securities under the
1933
Act, the Company will, as expeditiously as possible:
(a) prepare
and file with the Commission a registration statement required by Section 11,
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and upon
request from any Subscriber, provide to such Subscriber with copies of all
filings and Commission letters of comment;
(b) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be
necessary to keep such registration statement effective until the End Date
and
comply with the provisions of the 1933 Act with respect to the disposition
of
all of the Registrable Securities covered by such registration statement in
accordance with the Sellers’ intended method of disposition set forth in such
registration statement for such period;
(c) furnish
to the Sellers, at the Company’s expense, such number of copies of the
registration statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement or make them electronically available;
(d) use
its
reasonable
best efforts to register or qualify the Registrable Securities covered by such
registration statement under the securities or “blue sky” laws of such
jurisdictions as the Sellers shall request in writing, provided, however, that
the Company shall not for any such purpose be required to qualify generally
to
transact business as a foreign corporation in any jurisdiction where it is
not
so qualified or to consent to general service of process in any such
jurisdiction;
(e) if
applicable, list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Company
is then listed;
(f) notify
the Subscribers within twenty-four hours of the Company’s becoming aware that a
prospectus relating thereto is required to be delivered under the 1933 Act,
of
the happening of any event of which the Company has knowledge as a result of
which the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing or which
becomes subject to a Commission, state or other governmental order suspending
the effectiveness of the registration statement covering any of the Registrable
Securities;
(g) provided
same would not be in violation of the provision of Regulation FD under the
1934
Act, make available for inspection by the Sellers during reasonable business
hours, and any attorney, accountant or other agent retained by the Seller or
underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company solely
in
connection with the preparation such registration statement; and
19
Exhibit
10.2
(h) provide
to the Sellers copies of the registration statement and amendments thereto
two
business days prior to the filing thereof with the Commission. Any Subscriber’s
failure to comment on any registration statement or other document provided
to a
Subscriber or its counsel shall not be construed to constitute approval thereof
nor the accuracy thereof.
11.3. Provision
of Documents.
In
connection with each registration statement described in this Section 11, each
Seller will furnish to the Company in writing such information and
representation letters with respect to itself and the proposed distribution
by
it as reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws.
11.4. Expenses.
All
expenses incurred by the Company in complying with Section 11, including,
without limitation, all registration and filing fees, printing expenses (if
required), fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including reasonable counsel fees) incurred
in connection with complying with state securities or “blue sky” laws, fees of
the NASD, transfer taxes, and fees of transfer agents and registrars, are called
“Registration
Expenses.”
All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities are called "Selling
Expenses."
The
Company will pay all Registration Expenses in connection with the registration
statement under Section 11. Selling Expenses in connection with each
registration statement under Section 11 shall be borne by the Seller and may
be
apportioned among the Sellers in proportion to the number of shares sold by
the
Seller relative to the number of shares sold under such registration statement
or as all Sellers thereunder may agree.
11.5. Indemnification
and Contribution.
(a) In
the
event of a registration of any Registrable Securities under the 1933 Act
pursuant to Section 11, the Company will, to the extent permitted by law,
indemnify and hold harmless the Seller, each of the officers, directors, agents,
Affiliates, members, managers, control persons, and principal shareholders
of
the Seller, each underwriter of such Registrable Securities thereunder and
each
other person, if any, who controls such Seller or underwriter within the meaning
of the 1933 Act, against any losses, claims, damages or liabilities, joint
or
several, to which the Seller, or such underwriter or controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
was registered under the 1933 Act pursuant to Section 11, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission
to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading in light of the circumstances when made,
and will subject to the provisions of Section 11.5(c) reimburse the Seller,
each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable to the Seller to the extent that any such
damages arise out of or are based upon an untrue statement or omission made
in
any preliminary prospectus if (i) the Seller failed to send or deliver a copy
of
the final prospectus delivered by the Company to the Seller with or prior to
the
delivery of written confirmation of the sale by the Seller to the person
asserting the claim from which such damages arise, (ii) the final prospectus
would have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission, or (iii) to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such Seller in writing specifically for use
in
such registration statement or prospectus.
20
Exhibit
10.2
(b) In
the
event of a registration of any of the Registrable Securities under the 1933
Act
pursuant to Section 11, each Seller severally but not jointly will, to the
extent permitted by law, indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of the 1933 Act,
each officer of the Company who signs the registration statement, each director
of the Company, each underwriter and each person who controls any underwriter
within the meaning of the 1933 Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Registrable Securities were registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director, underwriter
and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage
or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such Seller, as such, furnished in
writing to the Company by such Seller specifically for use in such registration
statement or prospectus, and provided, further, however, that the liability
of
the Seller hereunder shall be limited to the net proceeds actually received
by
the Seller from the sale of Registrable Securities pursuant to such registration
statement.
(c) Promptly
after receipt by an indemnified party hereunder of notice of the commencement
of
any action, such indemnified party shall, if a claim in respect thereof is
to be
made against the indemnifying party hereunder, notify the indemnifying party
in
writing thereof, but the omission so to notify the indemnifying party shall
not
relieve it from any liability which it may have to such indemnified party other
than under this Section 11.5(c) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 11.5(c), except
and only if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified
party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake
the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 11.5(c) for any legal expenses subsequently incurred
by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both
the
indemnified party and the indemnifying party and the indemnifying party shall
have reasonably concluded that there may be reasonable defenses available to
indemnified party which are different from or additional to those available
to
the indemnifying party or if the interests of the indemnified party reasonably
may be deemed to conflict with the interests of the indemnifying party, the
indemnified parties, as a group, shall have the right to select one separate
counsel, reasonably satisfactory to the indemnified and indemnifying party,
and
to assume such legal defenses and otherwise to participate in the defense of
such action, with the reasonable expenses and fees of such separate counsel
and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In
order
to provide for just and equitable contribution in the event of joint liability
under the 1933 Act in any case in which either (i) a Seller, or any controlling
person of a Seller, makes a claim for indemnification pursuant to this Section
11.5 but it is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or
the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 11.5 provides
for indemnification in such case, or (ii) contribution under the 1933 Act may
be
required on the part of the Seller or controlling person of the Seller in
circumstances for which indemnification is not provided under this Section
11.5;
then, and in each such case, the Company and the Seller will contribute to
the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Seller is
responsible only for the portion represented by the percentage that the public
offering price of its securities offered by the registration statement bears
to
the public offering price of all securities offered by such registration
statement, provided, however, that, in any such case, (y) the Seller will not
be
required to contribute any amount in excess of the public offering price of
all
such securities sold by it pursuant to such registration statement; and (z)
no
person or entity guilty of fraudulent misrepresentation (within the meaning
of
Section 11(f) of the 0000 Xxx) will be entitled to contribution from any person
or entity who was not guilty of such fraudulent misrepresentation and
provided, further, however, that the liability of the Seller hereunder shall
be
limited to the net proceeds actually received by the Seller from the sale of
Registrable Securities pursuant to such registration statement..
21
Exhibit
10.2
11.7. Delivery
of Unlegended Shares.
(a) Within
three (3) business (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 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, if required, Subscriber’s broker
regarding compliance with the requirements of Rule 144 and Form 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, upon
request of a Subscriber, so long as the certificates therefor do not bear a
legend and the Subscriber is not obligated to return such certificate for the
placement of a legend thereon, the Company shall cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the account of
Subscriber’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission system, if such transfer agent participates in
such
DWAC 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 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 the Subscriber
for
late delivery of Unlegended Shares in the amount of $100 per business day after
the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
subject to the delivery default. If during any 360 day period, the Company
fails
to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
of thirty (30) days, then each Subscriber or assignee holding Securities subject
to such default may, at its option, require the Company to 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) 120%, or (ii) a fraction in which the
numerator is 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, multiplied by the Purchase
Price
of such Common Stock and exercise price of such Warrant Shares (“Unlegended
Redemption Amount”).
The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand.
22
Exhibit
10.2
(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 the Subscriber or a broker on the 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
the Subscriber was entitled to receive from the Company (a "Buy-In"),
then
the Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any)
for
the shares of common stock so purchased exceeds (B) the aggregate purchase
price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together
with interest thereon at a rate of 15% per annum accruing until such amount
and
any accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber
$1,000,
plus interest. The
Subscriber shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In.
(e) In
the
event a Subscriber shall request delivery of Unlegended Shares as described
in
Section 11.7 or Warrant Shares upon exercise of Warrants and the Company is
required to deliver such Unlegended Shares pursuant to Section 11.7 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.
11.8. In
the
event commencing on January 4, 2009 and ending 18 months thereafter, the
Subscriber is not permitted to resell (i) any of the Shares or (ii) any Warrant
Shares that were purchased for cash at least six months before the proposed
date
of sale or pursuant to cashless exercise as described in Section 2 of the
Warrant, 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 or change in current applicable securities laws, then the Company
shall pay such Subscriber 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 the Subscriber during the
pendency of the 144 Default. Liquidated Damages that accrue pursuant to Section
11.4 and liquidated damages that accrue pursuant to this Section 11.8 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 11.8 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.
23
Exhibit
10.2
12. Miscellaneous.
(a) Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Company, to: Boomj, Inc., 0000 Xxxxx
Xxxxx Xxxx, Xxxxx 0000, Xxxxxxxxx, XX 00000, Attn: Xxxxxx X. XxXxxxx, CEO,
fax
number:
(000)
000-0000 with
a
copy by fax only to: TroyGould, 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000, Xxx Xxxxxxx,
XX 00000-0000, Attn: Xxxxxx Xxxxx, Esq., fax number: (000) 000-0000, and (ii)
if
to the Subscriber, to: the one or more addresses and fax numbers indicated
on
the signature pages hereto.
(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.
(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 Nevada without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of
Nevada or in the federal courts located in Xxxxx County, Nevada. The parties
to
this Agreement 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
parties executing this Agreement and other agreements referred to herein or
delivered in connection herewith on behalf of the Company agree to submit to
the
in personam jurisdiction of such courts and hereby irrevocably 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.
Each party hereby irrevocably waives personal service of process and consents
to
process being served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in
any way any right to serve process in any other manner permitted by
law.
24
Exhibit
10.2
(e) Specific
Enforcement, Consent to Jurisdiction.
The
Company and Subscriber acknowledge and agree that irreparable damage would
occur
in the event that any of the provisions of this Agreement were not performed
in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction
or
injunctions to prevent or cure breaches of the provisions of this Agreement
and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
Subject to Section 12(d) hereof, each party hereby irrevocably 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 Nevada 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.
(f) Independent
Nature of Subscribers.
The
Company acknowledges that the obligations of each Subscriber under the
Transaction Documents are several and not joint with the obligations of any
other Subscriber, and no Subscriber shall be responsible in any way for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The
Company acknowledges that each Subscriber has represented that the decision
of
each Subscriber to purchase Securities has been made by such Subscriber
independently of any other Subscriber and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company which may have been made or given by
any
other Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The
Company acknowledges that nothing contained in any Transaction Document, and
no
action taken by any Subscriber pursuant hereto or thereto (including, but not
limited to, the (i) inclusion of a Subscriber in the Registration Statement
and
(ii) review by, and consent to, such Registration Statement by a Subscriber)
shall be deemed to constitute the Subscribers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Subscribers are in any way acting in concert or as a group with respect to
such
obligations or the transactions contemplated by the Transaction Documents.
The Company acknowledges that each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of the Transaction Documents, and it shall not be necessary for
any other Subscriber to be joined as an additional party in any proceeding
for
such purpose. The Company acknowledges that it has elected to provide all
Subscribers with the same terms and Transaction Documents for the convenience
of
the Company and not because Company was required or requested to do so by the
Subscribers. The Company acknowledges that such procedure with respect to
the Transaction Documents in no way creates a presumption that the Subscribers
are in any way acting in concert or as a group with respect to the Transaction
Documents or the transactions contemplated thereby.
(g) Damages.
In the
event the Subscriber is entitled to receive any liquidated damages pursuant
to
the Transactions, the Subscriber may elect to receive the greater of actual
damages or such liquidated damages.
(h) Consent.
As used
in the Agreement, “Consent
of the Subscribers”
or
similar language means the consent of holders of not less than 50% of the total
of the Shares issued and issuable upon conversion of outstanding Notes owned
by
Subscribers on the date consent is requested.
(i) Equal
Treatment.
No
consideration shall be offered or paid to any person to amend or consent to
a
waiver or modification of any provision of the Transaction Documents unless
the
same consideration is also offered and paid to all the Subscribers and their
permitted successors and assigns who agree or are deemed to have agreed to
such
amendment or consent.
25
Exhibit
10.2
(j) Maximum
Payments.
Nothing
contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of
a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required
to
be paid or other charges hereunder exceed the maximum permitted by such law,
any
payments in excess of such maximum shall be credited against amounts owed by
the
Company to the Subscriber and thus refunded to the Company.
(k) Calendar
Days.
All
references to “days” in the Transaction Documents shall mean calendar days
unless otherwise stated. The terms “business days” and “trading days” shall mean
days that the New York Stock Exchange is open for trading for three or more
hours. Time periods shall be determined as if the relevant action, calculation
or time period were occurring in Nevada. Any deadline that falls on a
non-business day in any of the Transaction Documents shall be automatically
extended to the next business day and interest, if any, shall be calculated
and
payable through such extended period.
(l) Maximum
Liability.
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 Registrable
Securities.
(m) Captions:
Certain Definitions.
The
captions of the various sections and paragraphs of this Agreement have been
inserted only for the purposes of convenience; such captions are not a part
of
this Agreement and shall not be deemed in any manner to modify, explain, enlarge
or restrict any of the provisions of this Agreement. As used in this Agreement
the term “person”
shall
mean and include an individual, a partnership, a joint venture, a corporation,
a
limited liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.
(n) Severability.
In the
event that any term or provision of this Agreement shall be finally determined
to be superseded, invalid, illegal or otherwise unenforceable pursuant to
applicable law by an authority having jurisdiction and venue, that determination
shall not impair or otherwise affect the validity, legality or enforceability:
(i) by or before that authority of the remaining terms and provisions of this
Agreement, which shall be enforced as if the unenforceable term or provision
were deleted, or (ii) by or before any other authority of any of the terms
and
provisions of this Agreement.
(o) Successor
Laws.
References in the Transaction Documents to laws, rules, regulations and forms
shall also include successors to and functionally equivalent replacements of
such laws, rules, regulations and forms. A successor rule to Rule 144(b)(1)(i)
shall include any rule that would be available to a non-Affiliate of the Company
for the sale of Common Stock not subject to volume restrictions and after a
six
month holding period.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
26
Exhibit
10.2
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
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.
| BOOMJ, INC. | |
| a Nevada corporation | |
| By: |
|
|
Name:
Xxxxxx X. XxXxxxx
|
|
|
Title:
CEO
|
|
| Dated: July __, 2008 | |
|
SUBSCRIBER
|
PURCHASE
PRICE AND NOTE PRINCIPAL
|
|
|
Name
of Subscriber:
__________________________________________________________
Address:
__________________________________________________
_________________________________________________________
Fax
No.: __________________________________________________
Taxpayer
ID# (if applicable): __________________________________
_________________________________________________________
(Signature)
By:
|
$
_________________
|
27
Exhibit
10.2
LIST
OF EXHIBITS AND SCHEDULES
|
Exhibit
A
|
List
of Subscribers
|
|
Exhibit
B
|
Form
of Note
|
|
Exhibit
C
|
Form
of Class A Warrant
|
|
Exhibit
D
|
Form
of Security Agreement
|
|
Exhibit
E
|
Form
of Subsidiary Guaranty
|
|
Exhibit
F
|
Form
of Collateral Agent Agreement
|
|
Exhibit
G
|
[INTENTIONALLY
DELETED]
|
|
Exhibit
H
|
Subscriber
Questionnaire
|
|
Exhibit
I
|
Selling
Shareholder Questionnaire
|
|
Schedule
5(a)
|
Subsidiaries
|
|
Schedule
5(d)
|
Additional
Issuances / Capitalization / Reset Rights
|
|
Schedule
5(f)
|
Other
Registration Rights
|
|
Schedule
5(o)
|
Undisclosed
Liabilities
|
|
Schedule
5(x)
|
Transfer
Agent
|
|
Schedule
8(a)
|
Fees
|
|
Schedule
9(e)
|
Use
of Proceeds
|
|
Schedule
11.1
|
Other
Registrable Shares
|
28
EXHIBIT A
|
Name
And Address of Purchaser
|
Principal Amount
of
Note
|
Number
Of Warrants
|
Purchase
Price
|
|||||||
29
EXHIBIT
H
SUBSCRIBER
QUESTIONNAIRE
I. The
Subscriber represents and warrants that he or it comes within one category
marked
below,
and
that for any category marked, he or it has truthfully set forth, where
applicable, the factual basis or reason the Subscriber comes within that
category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY
CONFIDENTIAL. The undersigned shall furnish any additional information which
Boomj, Inc. (the “Company”) deems necessary in order to verify the answers set
forth below.
|
Category
A ___
|
The
undersigned is an individual (not a partnership, corporation, etc.)
whose
individual net worth, or joint net worth with his or her spouse,
presently
exceeds $1,000,000.
|
|
Explanation.
In calculating net worth you may include equity in personal
property
and real estate, including your principal residence, cash, short-term
investments, stock and securities. Equity in personal property and
real
estate should be based on the fair market value of such property
less debt
secured by such property.
|
|
|
Category
B ___
|
The
undersigned is an individual (not a partnership, corporation, etc.)
who
had an individual income in excess of $200,000 in each of the two
most
recent years, or joint income with his or her spouse in excess of
$300,000
in each of those years (in each case including foreign income, tax
exempt
income and full amount of capital gains and losses but excluding
any
income of other family members and any unrealized capital appreciation)
and has a reasonable expectation of reaching the same income level
in the
current year.
|
|
Category
C ___
|
The
undersigned is a director or executive officer of the Company which
is
issuing and selling the Company’s $.001 par value Common Stock (the
“Shares”) and common stock purchase warrants (the
“Warrants”) (collectively referred to as the
“Securities”).
|
|
Category
D ___
|
The
undersigned is a bank; savings and loan association; registered
broker-dealer; insurance company; registered investment company;
registered business development company; licensed small business
investment company (“SBIC”); any plan established and maintained by
a state, its political subdivisions, or any agency or instrumentality
of a
state or its political subdivisions, for the benefit of its employees,
if
such plan has total assets in excess of $5,000,000; or employee benefit
plan within the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank, savings
and
loan association, insurance company or registered investment advisor,
or
(b) the plan has total assets in excess of $5,000,000 or is a self
directed plan with investment decisions made solely by persons that
are
accredited investors.
|
|
____________________________________________
|
|
|
____________________________________________
|
|
|
(describe
entity)
|
|
Category
E ___
|
The
undersigned is a private business development company as defined
in
section 202(a)(22) of the Investment Advisors Act of
1940.
|
|
____________________________________________
|
|
|
____________________________________________
|
|
|
(describe
entity)
|
|
|
Category
F ___
|
The
undersigned is either a corporation, partnership, Massachusetts business
trust, or non-profit organization within the meaning of Section 501(c)(3)
of the Internal Revenue Code, in each case not formed for the specific
purpose of acquiring the Securities and with total assets in excess
of
$5,000,000.
|
|
____________________________________________
|
|
|
____________________________________________
|
|
|
(describe
entity)
|
|
|
Category
G ___
|
The
undersigned is a trust with total assets in excess of $5,000,000,
not
formed for the specific purpose of acquiring the Securities, where
the
purchase is directed by a “sophisticated person” as defined in Regulation
506(b)(2)(ii) under the Securities Act.
|
|
Category
H ___
|
The
undersigned is an entity (other than a trust) all the equity owners
of
which are “accredited investors” within one or more of the above
categories. If relying upon this Category alone, each equity owner
must
complete a separate copy of this Agreement.
|
|
____________________________________________
|
|
|
____________________________________________
|
|
|
(describe
entity)
|
|
|
Category
I ___
|
The
undersigned is not within any of the categories above and is therefore
not
an accredited investor.
|
(a)
As
used herein, the term “net worth” means the excess of total assets at fair
market value (including home and personal property) over total liabilities
(including mortgage). For purposes hereof, “individual income” means adjusted
gross income less any income attributable to a spouse or to property owned
by a
spouse, increased by the following amounts (but not including any amounts
attributable to a spouse or to property owned by a spouse): (i) the amount
of
any interest income received which is tax-exempt under Section 103 of the
Internal Revenue Code of 1986, as amended (the “Code”),
(ii)
the amount of losses claimed as a limited partner in a limited partnership
(as
reported on Schedule E of Form 1040), (iii) any deduction claimed for depletion
under Section 611 et seq. of the Code, and (iv) any amount by which income
from
long-term capital gains has been reduced in arriving at adjusted gross income
pursuant to the provisions of Section 12.02 of the Code.
The
undersigned agrees that the undersigned will notify the Company at any time
on
or prior to the execution of this Agreement in the event that the
representations and warranties in this Agreement shall cease to be true,
accurate and complete.
II. SUITABILITY
(please
answer each question)
(a) For
an
individual Subscriber, please describe your current employment, including the
company by which you are employed and its principal business:
(b) For
an
individual Subscriber, please describe any college or graduate degrees held
by
you:
(c) For
all
Subscribers, please list types of prior investments:
(d) For
all
Subscribers, please state whether you have you participated in other
private
placements
before:
|
YES_______
|
NO_______
|
(e) If
your
answer to question (d) above was “YES”, please indicate frequency of such prior
participation in private
placements
of:
|
Public
Companies
|
Private
Companies
|
||||||
|
Frequently
|
___________ | _______________ | |||||
|
Occasionally
|
___________ | _______________ | |||||
|
Never
|
___________ | _______________ | |||||
(f) For
individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
|
YES_______
|
NO_______
|
(g) For
trust, corporate, partnership and other institutional Subscribers, do you expect
your total assets to significantly decrease in the foreseeable future:
|
YES_______
|
NO_______
|
(h) For
all
Subscribers, do you have any other investments or contingent liabilities which
you reasonably anticipate could cause you to need sudden cash requirements
in
excess of cash readily available to you:
|
YES_______
|
NO_______
|
(i) For
all
Subscribers, are you familiar with the risk aspects and the non-liquidity of
investments such as the Securities for which you seek to subscribe?
|
YES_______
|
NO_______
|
(j) For
all
Subscribers, do you understand that there is no guarantee of financial return
on
this investment and that you run the risk of losing your entire
investment?
|
YES_______
|
NO_______
|
III. MANNER
IN WHICH TITLE IS TO BE HELD.
(circle one)
(a) Individual
Ownership
(b) Community
Property
(c) Joint
Tenant with Right of Survivorship (both parties must sign)
(d) Partnership*
(e) Tenants
in Common
(f) Corporation*
(g) Trust*
(h) Limited
Liability Company*
(i) Other
*If
Securities are being subscribed for by an entity, the attached Certificate
of
Signatory must also be completed.
IV. NASD
AFFILIATION.
Are
you
affiliated or associated with an NASD member firm (please
check one):
|
Yes
_________
|
No
__________
|
If
Yes,
please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
*If
Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The
undersigned NASD member firm acknowledges receipt of the notice required by
Rule
3050 of the NASD Conduct Rules.
|
Name
of NASD Member Firm
|
|
By:
|
|
|
Authorized
Officer
|
|
|
Date:
|
V. The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor Questionnaire
contained herein and such answers have been provided under the assumption that
the Company will rely on them.
33
VI. In
furnishing the above information, the undersigned acknowledges that the Company
will be relying thereon in determining, among other things, whether there are
reasonable grounds to believe that the undersigned qualifies as a Purchaser
under Section 4(2), Section 4(6) and/or Regulation D as promulgated by the
United States Securities and Exchange Commission under the Securities Act of
1933 and applicable state securities laws for the purposes of the proposed
investment.
VII. The
undersigned understands and agrees that the Company may request further
information of the undersigned in verification or amplification of the
undersigned's knowledge of business affairs, the undersigned's assets and the
undersigned's ability to bear the economic risk involved in an investment in
the
securities of the Company.
VIII. The
undersigned represents to you that (a) the information contained herein is
complete and accurate on the date hereof and may be relied upon by you and
(b)
the undersigned will notify you immediately of any change in any such
information occurring prior to the acceptance of the subscription and will
promptly send you written confirmation of such change. The undersigned hereby
certifies that he, she or it has read and understands the Subscription Agreement
related hereto.
IX. In
order
for the Company to comply with applicable anti-money laundering/U.S. Treasury
Department Office of Foreign Assets Control (“OFAC”)
rules
and regulations, Subscriber is required to provide the following
information:
1. Payment
Information
(a)
Name
and address (including country) of the bank from which Subscriber’s payment to
the Company is being wired (the “Wiring
Bank”):
_______________________________________
_______________________________________
_______________________________________
_______________________________________
(b)
Subscriber’s
wiring instructions at the Wiring Bank:
_______________________________________
_______________________________________
_______________________________________
(c)
Is
the Wiring Bank located in the U.S. or another “FATF
Country”*?
|
_____
Yes
|
______
No
|
*
As of
the date hereof, countries that are members of the Financial Action Task Force
on Money Laundering (“FATF
Country”)
are:
Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland,
France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg,
Mexico, Kingdom of the Netherlands, New Zealand, Norway, Portugal, Russian
Federation, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, United
Kingdom and the United States of America.
Subscription Agreement
34
(d)
Is
Subscriber a customer of the Wiring Bank?
|
_____
Yes
|
______
No
|
2. Additional
Information
(N.B.:
this Section applies only to prospective investors who responded “no” to either
of Question I(c) or I(d) above.)
The
following materials must be provided to the Company (forms will be provided
by
the Company upon request):
For
Individual Investors:
____
A
government issued form of picture identification (e.g., passport or drivers
license).
____
Proof of the individual’s current address (e.g., current utility xxxx), if not
included in the form of picture identification.
For
Funds of Funds or Entities that Invest on Behalf of Third Parties Not Located
in
the U.S. or Other FATP Countries:
|
_____
|
A
certificate of due formation and organization and continued authorization
to conduct business in the jurisdiction of its organization (e.g.,
certificate of good standing).
|
|
|
|
|
_____
|
An
“incumbency certificate” attesting to the title of the individual
executing these subscription materials on behalf of the prospective
investor.
|
|
|
|
|
_____
|
A
completed copy of a certification that the entity has adequate anti-money
laundering policies and procedures (“AML Policies and Procedures”)
in place that are consistent with the USA PATRIOT Act, OFAC and other
relevant federal, state or non-U.S. anti-money laundering laws and
regulations (with a copy of the entity’s current AML Policies and
Procedures to which such certification relates).
|
|
|
|
|
_____
|
A
letter of reference from the entity’s local office of a reputable bank or
brokerage firm that is incorporated, or has its principal place of
business located, in the U.S. or other FATF Country certifying that
the
prospective investor maintains an account at such bank/brokerage
firm for
a length of time and containing a statement affirming the prospective
investor’s integrity.
|
For
all other Entity Investors:
|
_____
|
A
certificate of due formation and organization and continued authorization
to conduct business in the jurisdiction of its organization (e.g.,
certificate of good standing).
|
|
_____
|
An
“incumbency certificate” attesting to the title of the individual
executing these subscription materials on behalf of the prospective
investor.
|
|
_____
|
A
letter of reference from the entity’s local office of a reputable bank or
brokerage firm that is incorporated, or has its principal place of
business located, in the U.S. or other FATF Country certifying that
the
prospective investor maintains an account at such bank/brokerage
firm for
a length of time and containing a statement affirming the prospective
investor’s integrity.
|
Subscription Agreement
35
|
_____
|
If
the prospective investor is a privately-held entity, a certified
list of
the names of every person or entity who is directly or indirectly
the
beneficial owner of 25% or more of any voting or non-voting class
of
equity interests of the Subscriber, including (i) country of citizenship
(for individuals) or principal place of business (for entities) and,
(ii)
for individuals, such individual’s principal employer and
position.
|
|
_____
|
If
the prospective investor is a trust, a certified list of (i) the
names of
the current beneficiaries of the trust that have, directly or indirectly,
25% or more of any interest in the trust, (ii) the name of the settler
of
the trust, (iii) the name(s) of the trustee(s) of the trust, and
(iv) the
country of citizenship (for individuals) or principal place of business
(for entities).
|
ARTICLE
X. ADDITIONAL
INFORMATION
A
TRUST
MUST ATTACH A COPY OF ITS DECLARATION OF TRUST OR OTHER GOVERNING INSTRUMENT,
AS
AMENDED, AS WELL AS ALL OTHER DOCUMENTS THAT AUTHORIZE THE TRUST TO INVEST
IN
THE SECURITIES. ALL RESOLUTIONS AND DOCUMENTATION MUST BE COMPLETE AND CORRECT
AS OF THE DATE HEREOF.
Subscription Agreement
36
EXECUTION
PAGE
PURCHASE
PRICE/
PRINCIPAL AMOUNT OF NOTES
= $_____________ (US Dollars)
NUMBER
OF WARRANTS = __________________
|
Signature
|
Signature
(if purchasing jointly)
|
|
|
Name
Typed or Printed
|
Name
Typed or Printed
|
|
|
Entity
Name
|
Entity
Name
|
|
|
Address
|
Address
|
|
|
City,
State and Zip Code
|
City,
State and Zip Code
|
|
|
Telephone-Business
|
Telephone-Business
|
|
|
Telephone-Residence
|
Telephone-Residence
|
|
|
Facsimile-Business
|
Facsimile-Business
|
|
|
Facsimile-Residence
|
Facsimile-Residence
|
|
|
Tax
ID # or Social Security #
|
Tax
ID # or Social Security #
|
|
|
Email
Address
|
Name
in which the Securities should be issued: _________________________
Dated:
________________, 2008
This
Confidential Subscriber Questionnaire is executed as of ___________________,
2008.
|
Name:
|
|
|
Title:
|
Subscription
Agreement
37
