OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
FOR CONVERTIBLE PREFERRED SHARES
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1993 ACT"), AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN
REGULATION S OF THE 1933 ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS (AS DEFINED IN REGULATION S OR THE 1933 ACT) EXCEPT
PURSUANT TO REGISTRATION UNDER OF AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT.
This Offshore Securities Subscription Agreement ("Agreement") is
executed in reliance upon the transaction exemption afforded by Regulation S
("Regulation S") as promulgated by the Securities and Exchange Commission
("SEC") under the Securities Act of 1993, as amended ("1933 ACT").
This Agreement has been executed by the undersigned in connection with
the private placement of an amount not exceeding $1,750,000 of the Series A
Convertible Preferred Stock of
EDnet, Inc.
Xxx Xxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
National Association of Securities Dealers Automated Quotation System Symbol
(DNET), a corporation organized under the laws of Colorado, United States of
America (the "Issuer" or "Company").
The Undersigned Purchaser:
NAME:
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ADDRESS:
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, a non "U.S. person" (the "Purchaser") hereby represents and warrants to, and
agrees with, Issuer as follows:
1.
1. The Offering.
a. The undersigned hereby subscribes for ____________________ shares of
Series A Convertible Preferred Stock of the Company (the "Shares"), at
the aggregate subscription price of U.S. $1,000 per share, payable in
United States Dollars, for a total consideration of
$____________________ Dollars (the "Subscription Proceeds"). The Shares
shall pay a 6% cumulative dividend compounded annually on the
anniversary of the Closing Date (as that term is defined in Paragraph 9
of the Agreement) payable in common stock at the time of each
conversion. The Shares are subject to a mandatory 36 month conversion
feature at the end of which all Shares outstanding will be
automatically converted based upon the conversion formula set forth in
Paragraph 7 ("Mandatory Conversion"). For purposes of Mandatory
Conversion, the "Conversion Date" shall be that date which is the third
anniversary of the Closing Date
b. Form of Payment. Purchaser shall pay the total Subscription Proceeds
hereunder by delivering good funds by wire transfer in United States
Dollars on or before February ___, 1997 into the escrow account as
follows:
First Union Bank of Connecticut
Stamford Executive Office
000 Xxxx Xxxxxx, X.X. Xxx 000
Xxxxxxxx, XX 00000-0000
ABA# 000000000
Swift # XXXXXX00XXX
Account: 00000-0000000-0
Account Name: Xxxxxx X. XxXxxxx, Esquire - Trustee Account
2. Subscriber Representations: Access to Information: Independent Investigation.
a. Offshore Transaction. Purchaser represents and warrants to Issuer as
follows:
(i) Neither the Purchaser nor any person or entity for whom
the Purchaser is acting as fiduciary is a U.S. person.
A U.S. person means any one of the following:
(1) any natural person resident in the United States
of America;
(2) any partnership or corporation organized or
incorporated under the laws of the United States;
(3) any estate of which any executor or administrator
is a U.S. person;
(4) any trust of which any trustee is a U.S. person;
2.
(5) any agency or branch of a foreign entity located
in the United States;
(6) any non-discretionary account or similar account
(other than an estate or trust) held by a dealer
or other fiduciary for the benefit or account of a
U.S. person;
(7) any discretionary account or similar account
(other than an estate or trust) held by a dealer
or other fiduciary organized, incorporated, or (if
an individual) resident in the United States; and
(8) any partnership or corporation if:
(A) organized or incorporated under the laws of
any foreign jurisdiction; and
(B) formed by a U.S. person, principally for the
purpose of investing in securities not
registered under the 1933 Act, unless it is
organized or incorporated, and owned, by
accredited investors (as defined in Rule
501(a) under the 0000 Xxx) who are not
natural persons, estates or trusts.
(ii) At the time the buy order was originated, Purchaser was
outside the United States and is outside the United
States as of the date of the execution and delivery of
this Agreement. No offer to purchase the Shares was
made to a person in the United States.
(iii) Purchaser is purchasing the Shares for its own account
or for the account of beneficiaries for whom the
Purchaser has full investment discretion with respect
to the Shares and whom the Purchaser has full authority
to bind so that each such beneficiary is bound hereby
as if such beneficiary were a direct purchaser
hereunder and all representations, warranties and
agreements herein were made directly by such
beneficiary. Purchaser is not purchasing the Shares on
behalf of any U.S. person and the sale has not been
prearranged with a purchaser in the United States.
(iv) Each distributor participating in the offering of the
Shares, if any, has agreed in writing, a copy of which
has been delivered to Issuer with this Agreement, that
all offers and sales of the Shares prior to the
expiration of a period commencing on the date of the
Closing of the last purchase and sale of the
Convertible Preferred Shares offered by the Issuer and
ending 40 days thereafter (the "Restricted Period")
shall only be made (A) in compliance with the safe
harbor contained in Regulation S; (B) pursuant to
registration of Shares under the Securities Act; or (C)
pursuant to an exemption from registration.
3.
(v) Purchaser represents and warrants and hereby agrees
that all offers and sales of the Shares shall only be
made (A) in compliance with the safe harbor contained
in Regulation S; (B) pursuant to registration of Shares
under the Securities Act; or (C) pursuant to an
exemption from registration.
(vi) Purchaser understands and acknowledges that the Shares
have not been registered under the 1933 Act and may not
be offered or sold in the United States or to U.S.
persons or for the account or benefit of a U.S. person
(other than distributors as defined in Regulation S)
unless the Shares are registered under the Securities
Act, sold pursuant to Regulation S or an exemption from
the registration requirements is available.
(vii) Purchaser acknowledges that the purchase of the Shares
involves a high degree of risk and further acknowledges
that it can bear the economic risk of the purchase of
the Shares, including the total loss of its investment.
Purchaser acknowledges that it has obtained the advice
of competent legal counsel in its domicile jurisdiction
that Purchaser is qualified under the laws of its
domicile to purchase the securities offered hereunder
and that the offer and sale of said securities will not
violate the laws of its domicile jurisdiction.
(viii) Purchaser understands that the Shares are being offered
and sold to it in reliance on the rules promulgated
under Regulation S and that the Issuer is relying upon
the truth and accuracy of the representations,
warranties, agreements, acknowledgments and
understandings of Purchaser set forth herein in order
to determine the applicability of such rules and the
legality of Purchaser to acquire the Shares.
(ix) Purchaser is sufficiently experienced in financial and
business matters to be capable of evaluating the merits
and risks of its investments, and to make an informed
decision relating thereto.
(x) The Purchaser acknowledges that all documents, records,
and books pertaining to this investment have been made
available for inspection by (i) the Purchaser, (ii) the
Purchaser's attorney and the Purchaser's account and
(iii) the Purchaser's offeree representative, if any.
(xi) The Purchaser:
(a) has been furnished with any documents which may
have been made available upon request, and the
Purchaser has carefully read these documents and
understands and has evaluated the risks of a
purchase of Shares and has relied solely and
exclusively on such information; and
4.
(b) has the capacity to protect its own interests in
purchasing the Shares and has determined that the
Shares are a suitable investment for the Purchaser
and that at this time the Purchaser has no need
for liquidity of this investment and could bear a
complete loss of this investment.
(xii) In evaluating its investment, Purchaser has consulted
with its own investment and/or legal and/or tax
advisors.
(xiii) Purchaser understands that in the view of the SEC the
statutory basis for the exemption claimed for this
transaction would not be present if the offering of
Shares, although in technical compliance with
Regulation S, is part of a plan or scheme to evade the
registration provision of the Securities Act.
Purchaser is acquiring the Shares for investment
purposes and has no present intention to sell the
Shares in the United States, to a U.S. person or for
the account or benefit of a U.S. Person. Purchaser
hereby confirms that the purpose of including the
Purchaser Representation Letter (see Exhibit B
attached hereto) to facilitate the transfer of the
certificates representing the Shares into a specified
street name, is to enable Purchaser to comply with the
requirements of certain offshore portfolio management
regulations and the security requirements of offshore
lenders for margin loans.
(xiv) Purchaser is neither an underwriter of, nor a dealer
in, the Shares. Purchaser is not participating,
pursuant to a contractual agreement, in the
distribution of the Shares.
(xv) Purchaser represents and warrants that neither it nor
any of its affiliates will directly or indirectly
maintain any short position in Shares, Common Stock or
any other securities of the Issuer or engage in any
other hedging transactions (such as option writing,
equity swaps or other types of derivative
transactions) so long as any of the shares have not
been converted into Common Stock;
(xvi) All invitations, offers and sales of or in respect of
any of the Shares, by Purchaser and any distribution
by Purchaser of any documents relating to any offer by
it of any of the Shares will be in compliance with
applicable laws and regulations and will be made in
such a manner that no prospectus need be filed and no
other filing need be made by Issuer with any
regulatory authority or stock exchange in any country
or any political subdivision of any country, excepting
such filing on form 8-K as is required in accordance
with SEC Release No. 34-37801 as same relates to
disclosure regarding Regulation S offerings.
(xvii) Purchaser will not make any offer or sale of the
Securities by any means which would not comply with
the laws and regulation of the territory in
5.
which such offer or sale takes place or to which such
offer or sale is subject or which would in connection
with any such offer or sale impose upon Seller any
obligation to satisfy any public filing or
registration requirement or provide or publish any
information of any kind whatsoever or otherwise
undertake or become obligated to do any act, except
as indicated in (xvi) above;
(xviii) Purchaser represents and warrants that it is an
"accredited investor" as that term is defined in
Regulation D.
If Purchaser is purchasing the Shares
subscribed for hereby in representative or fiduciary
capacity, the representations and warranties in this
Offshore Securities Subscription Agreement shall be
deemed to have been made on behalf of the person or
persons for whom Purchaser is so purchasing.
The foregoing representations and warranties
are true and accurate as of the date hereof, shall be
true and accurate as of the date of the acceptance by
the Issuer of Purchaser's subscription, and shall
survive thereafter. If Purchaser has knowledge, prior
to the acceptance of its Offshore Securities
Subscription Agreement by the Issuer, that any such
representations and warrants shall not be true and
accurate in any respect, the Purchaser, prior to such
acceptance, will give written notice of such fact to
the Issuer specifying which representations and
warranties are not true and accurate and the reasons
therefor.
b. Current Public Information. Purchaser acknowledges that Purchaser
has acquired and carefully reviewed the Issuer's Form 10-SB filed on
October 31, 1996 and a copy of the letter from the Securities and
Exchange Commission dated December 30, 1996 commenting on the Form
10-SB, which letter the Company is in the process of responding to,
(the "SEC Reports"). Except as set forth in this Agreement and the SEC
Reports, no representations or warranties have been made to Purchaser
by the Issuer or any agent, employee or affiliate of the Issuer, and in
entering into this transaction Purchaser is not relying upon any
information, other than that provided pursuant to this Agreement and
the SEC Reports and the results of independent investigation by
Purchaser.
c. Independent Investigation; Access. Purchaser acknowledges that
Purchaser, in making the decision to purchase the Shares subscribed
for, has relied upon independent investigations made by it and its
Purchaser representative, if any, and Purchaser and such
representatives, if any, have, prior to any sale to Purchaser, had an
opportunity to ask questions of, and to receive answers from Issuer or
any person acting on its behalf concerning the terms and conditions of
this offering. Purchaser and its advisors, if any, have been furnished
with access to all publicly available materials relating to the
business, finances and operations of the Issuer and materials relating
to the offer and sale
6.
of the Shares which have been requested. Purchaser and its advisors, if
any, have received complete and satisfactory answers to any such
inquiries.
d. No Government Recommendations or Approval. Purchaser understands
that no federal or state agency has made or will make any finding or
determination relating to the fairness for public investment in the
Shares, or has passed or made, or will pass on or make, any
recommendation or endorsement of the Shares.
e. Entity Purchases. If Purchaser is a partnership, corporation or
trust, estate, employee benefit plan, governmental plan, a governmental
unit, or other entity the person executing this Agreement on its behalf
represent and warrants that:
(i) He or she has made due inquiry to determine the
truthfulness of the representations and warranties made
pursuant to this Agreement;
(ii) He or she is duly authorized (if the undersigned is a
trust, by the trust agreement) to make this investment and to
enter into and execute this Agreement on behalf of such
entity.
3. Issuer Representations.
Issuer represents and warrants to the Purchaser as follows:
a. Reporting Company Status. Issuer is a reporting Issuer as defined by
Rule 902 of Regulation S. Issuer has filed the information required by
the reporting obligations under Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended.
b. Offshore Transaction. Prior to the offering, which is the subject of
this Agreement, Issuer has not offered Convertible Preferred Shares to
any person in the United States or to any U.S. person or for the
account or benefit of any U.S. person. At the time the buy order was
originated, Issuer and/or its agent reasonably believed that Purchaser
was outside of the United States and was not a U.S. Person. Issuer
and/or its agent reasonably believe that the transaction has not been
prearranged with a Purchaser in the United States.
c. No Directed Selling Efforts. In regard to this transaction, Issuer
has not conducted any "directed selling efforts" as that term is
defined in Rule 902 of Regulation S nor has Issuer conducted any
general solicitation relating to the offer and sale of Shares to U.S.
persons residing with in the United States or elsewhere.
d. Shares. The Shares and shares of Common Stock issuable upon
conversion of the Shares, when issued and delivered against payment in
full to the Company of the consideration due less placement fees, will
be duly and validly authorized and issued, fully paid and
non-assessable and will not subject the holders thereof to any
liability by reason of being such holders. The stock certificates
representing Common Stock issued
7.
upon conversion of the Shares shall be unlegended and there shall be no
stop transfer instructions issued in relation to such common stock.
e. Subscription Agreement. This Agreement, when acknowledged by the
signature of an officer of the Issuer, has been duly authorized,
validly executed and delivered on behalf of the Issuer and is a valid
and binding agreement of the Issuer in accordance with its terms.
f. Non-contravention. The execution and delivery of this Agreement, the
consummation of the issuance of the Shares and the transactions
contemplated hereunder do not and will not conflict with or result in a
breach by the Issuer of any of the terms or provisions of, or
constitute a default under, the certificate of incorporation or by-laws
of the Issuer (or any equivalent documents thereto) or any indenture,
mortgage, deed of trust, or other material agreement or instrument to
which the Issuer is a party or by which it or any of its properties or
assets are bound, or any existing applicable law, rule or regulation or
any applicable decrees, judgment, or order of any court, federal or
state regulatory body, administrative agency or other governmental body
having jurisdictions over the Issuer or any of its properties or
assets.
g. Prior Shares Issued Under Regulation S. Prior to the transactions
contemplated by this Agreement, Issuer has not issued any shares of
stock under Regulation S. Issuer is currently pursuing an offering of
Company Common Stock under Regulation D.
h. Securities Law Compliance. Based upon the representations and
warranties of the Purchaser in Section 2 and of all other Purchasers
executing similar agreements in connection with this offering, with
respect to the Company's actions, (i) the offer and the sale of Share
has been made so as to conform in all respects with the requirements of
Regulation S and with the requirements of all other published rules and
regulations of the SEC currently in effect relating to "private
offerings" to non-residents of the United States of the type
contemplated herein; and (ii) neither the offer, sale or delivery of
the Shares under the terms of this Agreement will violate Section 5 of
the Securities Act, as presently in effect.
i. Filings. Issuer undertakes and agrees pursuant to the sale of its
securities under Regulation S to make all necessary filings in
connection with the sale of its securities as required by the laws and
regulations of the United States, including, if necessary, Form 8-K and
mandatory NASDAQ notification. Issuer agrees, with respect to the
filing of Form 8-K, that it will only identify Purchaser as an
"accredited investor" as that term is defined in Regulation D and will
not disclose Purchaser's name in Form 8-K or otherwise unless such
disclosure is required by law.
j. Use of Proceeds. Issuer represents that the net proceeds of this
offering shall be used primarily for working capital requirements, as
reasonably determined by the Company's officers.
8.
k. Concerning the Securities. The issuance, sale and delivery of the
Shares have been duly authorized by all required corporate action on
the part of Issuer,and when issued, sold and delivered in accordance
with the terms hereof and thereof for the consideration expressed
herein and therein, will be duly and validly issued, fully paid and
non-assessable. A sufficient number of shares of Common Stock issuable
upon conversion f the Shares has been duly and validly reserved for
issuance and upon issuance in accordance with the terms of the Shares,
shall be duly and validly issued, fully paid, and non-assessable and
will not subject the holders thereof, if such persons are non-U.S.
persons, to personal liability beyond the amounts paid for such Shares
by reason of being such holders. There are no pre-emptive rights of any
of Issuer.
l. Intellectual Property. The Company, to the best of its knowledge,
has valid, unrestricted and exclusive patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology and other
intellectual property necessary to the conduct of its business. The
Company, to the best of its knowledge, also has trade secrets necessary
to the conduct of its business which are necessarily secret and cannot
be disclosed to Purchasers. The Issuer, to the best of its knowledge,
has granted licenses or has assigned or otherwise transferred a portion
of (or all of) such valid, unrestricted and exclusive patents,
trademarks, trademark registrations, trade names, copyrights, know-how,
technology and other intellectual property necessary to the conduct of
its business. The Company, to the best of its knowledge, has granted
licenses or has been assigned or has otherwise had transferred to it
from other persons or entities the use of patents, trademarks,
trademarks registrations, trade names, copyrights, know-how, technology
and/or other intellectual property necessary to the conduct of its
business.
To the best of the Company's knowledge, the Company is not
infringing on the intellectual property rights of any third party, nor
is any third party infringing on the Company's intellectual property
rights. There are no restrictions in any agreements, licenses,
franchises, or other instruments that have a material adverse effect on
the Company's business as presently conducted or as planned to be
conducted in the future.
4. Restricted Period: Conversion.
Rule 903(c) under Regulation S restricts Purchaser from offering and
selling the Shares or the shares of Common Stock into which the Shares may be
converted to U.S. persons or for the account or benefit of a U.S. person during
the forty (40) day Restricted Period.
5. Reliance on Representations.
Purchaser understands that the offer and sale of the Shares is not
being registered under the Securities Act. Issuer is relying on the
representations of Purchaser and on the rules governing offers and sales made
outside the United States pursuant to Regulation S. Rules 901 through 903 of
Regulation S govern this transaction.
9.
6. Transfer Agent Instructions.
a. Legends on Certificate. Purchaser may transfer the Shares to persons
other than U.S. persons in accordance with Regulation S prior to the
expiration of the 40 day restricted period. Accordingly, Purchaser
acknowledges that the Company will instruct its transfer agent to place
a stop transfer order with respect to certificates representing the
Shares and that such certificates will bear the following legend:
"The shares represented by this certificate have been issued
pursuant to Regulation S promulgated under the Securities Act
of 1933, as amended ("Act"),and have not been registered under
the Act. These shares may not be offered or sold within the
United States or to or for the account of a "U.S. Person" as
that term is defined in Regulation S) until after
________________________________________, 1997, [the 40th day
following completion of the offering]. The terms of conversion
are subject to a Subscription Agreement that was entered into
with EDnet, Inc.
b. Purchaser Representation Letter. Issuer agrees to accept a
Purchaser's Representation Letter from the Purchaser in the form of
Exhibit "B" attached, as sole and sufficient evidence that the
Purchaser has complied with applicable securities laws and upon receipt
of such a letter and a properly executed form of assignment, if
Purchaser makes an assignment, shall promptly transfer, or instruct the
transfer agent, for the Convertible Preferred Shares, if any, to
transfer the Shares into "Street Name", if so requested by Purchaser,
as expeditiously as practical after receipt of the certificates and the
Purchaser Representation Letter.
c. Transfer Agent Instructions. Issuer shall issue, or instruct the
transfer agent for the Shares, if any, to issue one or more share
certificates representing Shares, in the names of qualified purchasers
to be specified prior to Closing. All of the Shares so issued will be
issued pursuant to Regulation S. Issuer warrants further that the
Shares shall be freely transferable on the books and records of Issuer
subject to compliance with Regulation S and other applicable securities
laws and the terms of this Agreement.
7. Conversion Procedures.
a. The Purchaser is entitled, at its option to convert up to one-third
of the Shares into shares of Common Stock, $0.001 par value per share,
of the Issuer (the "Common Stock") at anytime commencing 90 days after
the Closing Date (as defined in paragraph 9). The number of shares of
the Company's Common Stock issuable upon conversion of the Shares held
by the Purchaser under the terms of this Agreement shall equal the
Subscription Proceeds plus the amount of the accrued dividends through
the Conversion Date (as that term is hereinafter defined) related to
the Shares, eligible for conversion as of the Conversion Date divided
by the lesser of (i) seventy percent (70%) of the Market Price (as
hereinafter defined) of the Issuer's Common Stock or (ii) seventy
percent (70%) of the average of the closing bid prices for the five (5)
trading days
10.
preceding the Closing Date (the "Closing Price"). Up to an additional
one-third (two-thirds cumulatively) of the original number of Shares is
convertible 120 days after the Closing Date and up to an additional
one-third (the entire amount cumulatively) of the original Shares is
convertible 150 days after the Closing Date. Such conversion shall be
effectuated by sending to the Company, or its attorney, the certificate
or certificates representing the Shares to be converted, a facsimile or
original of the signed Notice of Conversion and a facsimile or original
of the signed Purchaser Representation Letter, see Exhibits A and B
attached hereto, which evidences Purchaser's intention to convert the
Shares or a specified portion thereof, and accompanied by proper
assignment, if applicable. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded down or up, as the case may be, to the
nearest whole share. The date on which notice of conversion is
effective ("Conversion Date") shall be deemed to be the date on which
the Purchaser has delivered to the Company, the Certificate or
certificates representing the Shares to be converted, a facsimile or
original of the signed Notice of Conversion, a facsimile or original of
the signed Purchaser Representation Letter and an executed form of
proper assignment, if such assignment is being made. "Market Price"
shall mean the average of the five (5) trading day closing bid prices
for the common Stock for the five (5) trading days immediately
preceding the conversion Date, as reported by NASDAQ. Notwithstanding
any other provision in this Agreement, for purposes of this Agreement,
in no event shall the Purchaser be able to convert Shares into the
Company's Common Stock at a value of less than one dollar ($1.00) per
share of the Company's Common Stock. In the event that seventy percent
(70%) of the Market Price or the closing Price is below one dollar
($1.00), then in such event the Purchaser shall still be permitted to
convert its Shares, but the Company's Common Stock (after application
of the discounting factor) shall be valued at one dollar ($1.00) per
share. Purchaser shall exercise the conversion option pursuant to the
Notice of Conversion attached hereto as Exhibit "A" and the Purchaser
Representation Letter attached hereto as Exhibit "B".
b. Within five (5) business days after receipt of the documentation
referred to above in this Section 7a, the Company shall deposit with a
nationally recognized courier or overnight service, including Express
Mail, per the Purchaser's written delivery instructions, a certificate,
without restrictive legend or stop transfer instructions, for the
number of shares of Common Stock issuable upon the conversion. It shall
be the Company's responsibility to take all necessary actions and to
bear all such costs to issue the Common Stock as provided herein,
including the delivery of an opinion letter to the transfer agent, if
so required. The person in whose name the certificate of Common Stock
is to be registered shall be treated as a shareholder of record on and
after the Conversion Date. No payment or adjustment shall be made for
accrued interest until the earlier of the Conversion Date or the
mandatory conversion date. Upon surrender of any Shares that are to be
converted in part, the Company shall issue to the Purchaser a
certificate representing the unconverted Shares, if so requested by
Purchaser. In the event the Company does not deposit with a nationally
recognized courier or overnight service, including Express Mail,
certificates representing the Common Stock, per the Purchaser's written
deliver instructions, within 5 business days after the Conversion
11.
Date, then in such event the Company shall pay to Purchaser an amount,
in cash in accordance with the following schedule, wherein "No.
Business Days Late" is defined as the number of business days beyond
the 5 business days deliver period.
Late Payment for Each
$10,000 of Preferred Principal
No. Business Days Late Amount Being Converted
---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
greater than 10 $1,000 + $200 for each
Business Day Late Beyond 10 Days
To the extent that the failure of the Company to issue the
Common Stock pursuant to this Section 7b is due to the unavailability
of authorized but unissued shares of Common Stock,the provisions of
this Section 7b shall not apply but instead the provisions of Section
7c shall apply.
The Company shall pay any payment incurred under this Section
7b in immediately available funds within three (3) business days from
the date of issuance of the applicable Common Stock. Nothing herein
shall limit a Purchaser's right to pursue actual damages for the
Company's failure to issue and deposit with a nationally recognized
courier or overnight service including Express Mail, certificates for
the Common Stock, per the Purchaser's written delivery instructions,
within 5 business days after the Conversion Date.
c. If, at any time Purchaser submits a Notice of Conversion and the
Company does not have sufficient authorized but unissued shares of
Common Stock available to effect, in full, a conversion of the Shares
(a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to
the Purchaser all of the shares of Common Stock which are available,
and the Notice of Conversion as to any Shares requested to be converted
but not converted (the "Unconverted Shares") shall become null and
void. The Company shall provide notice of such Conversion Default
("Notice of Conversion Default") to all existing Purchasers of
outstanding Shares, by facsimile, within one (1) business day of
knowledge of such default (with the original delivered by overnight or
two day courier). No Holder may submit a Notice of Conversion after
receipt of a Notice of Conversion Default until the date additional
shares of Common Stock are authorized by the Company.
12.
The Company agrees to pay to all Purchasers of outstanding
Shares payments for a Conversion Default ("Conversion Default
Payments") in the amount of (N/365) x (.24) x the initial issuance
price of the outstanding Shares held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient number
of shares of Common Stock to effect conversion of all remaining Shares.
The Company shall send notice ("Authorization Notice") to each
Purchaser of outstanding Shares that additional shares of Common Stock
have been authorized, the Authorization Date and the amount of Holder's
accrued Conversion Default Payments. The accrued Conversion Default
shall be paid in cash or shall be convertible into Common Stock at the
Conversion Rate which would have been in effect had the conversion
taken place, at the Purchaser's option, payable as follows: (i) in the
event Purchaser elects to take such payment in cash, cash payments
shall be made to such Purchaser of outstanding Shares by the fifth
business day of the following calendar month, or (ii) in the event
Purchaser elects to take such payment in stock, the Purchaser may
convert such payment amount into Common Stock at the Conversion Rate
anytime after the 5th business day of the calendar month following the
month in which the Authorization Notice was received, until the
expiration of the mandatory 36 month conversion period.
Nothing herein shall limit the Purchaser's right to pursue
actual damages for the Company's failure to maintain a sufficient
number of authorized shares of Common Stock.
8. Assignment.
a. The Company recognizes the right of Purchaser to assign any portion
of the Shares to another non-U.S. Person during the 40 day restricted
period, subject to: (i) receipt by the Company prior to the assignment
of written acknowledgment by assignee that the subscriber
representations in Paragraph 2 of this Agreement are true and correct
as of the date of the assignment when applied to assignee; (ii) receipt
by the Company of an executed form or proper assignment; and (iii)
receipt by the Company of the original certificate representing the
Shares to be transferred.
b. The Company recognizes the right of Purchaser to assign any portion
of the Shares to another person or entity after expiration of the 40
day restricted period, subject to: (i) receipt by the Company of an
executed form of proper assignment, and (ii) receipt by the Company of
the original certificate representing the Shares to be transferred.
9. Closing Date and Escrow Agent.
The date of the issuance of the Shares in the name of the Purchaser
(the "Closing Date") shall be the date an executed copy of the Agreement and
funds are received by the Issuer, and certificates are delivered to the Escrow
Agent. Purchaser shall forthwith deliver the necessary funds as indicated in
Paragraph 1 to the Escrow Agent. Share Certificates will be delivered at
13.
the instructions of the Issuer to the Escrow Agent: Xxxxxx X. XxXxxxx, Esquire,
0000 Xxxxxxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000. Purchaser
herein instructs the Escrow Agent, and gives the Escrow Agent its good and
sufficient authority to release the Subscription Proceeds to the Issuer, less
placement fees to which the Issuer has agreed in writing, in connection with the
purchase of the Shares, upon receipt by the Escrow Agent of said Shares
subscribed for. Purchaser and Issuer agree that the Escrow Agent, in his
capacity as Escrow Agent, has no liability as a result of any fraudulent or
unlawful conduct of any party other than the Escrow Agent and agree to hold the
Escrow Agent harmless in such event. In the event the Share Certificates are not
received by the Escrow Agent from the Issuer within Five (5) Business Days of
notification by Escrow Agent to Company of the date of receipt of the Escrowed
Funds, the Escrow Agent shall return the Escrowed Funds without interest to the
Purchaser by wire transfer pursuant to written instructions.
10. Conditions to the Company's Obligation to Sell.
Issuer reserves the right to reject this Agreement prior to signing by
Issuer. Purchaser understands that Issuer's obligation to sell the Shares
subscribed for hereunder is conditioned upon:
a. The receipt and acceptance by Issuer of this Agreement for all the
Shares as evidenced by execution of this subscription agreement by the
Chief Executive Officer or Chief Financial Officer of the Issuer. The
acceptance of funds by the Issuer's counsel shall be deemed to be
constructive acceptance of this Agreement. Purchaser understands this
Agreement is irrevocable; and
b. Delivery into the Escrow Agent by Purchaser of good U.S. funds as
payment in full for the purchase of the Shares and all fees.
11. Conditions to Purchaser's Obligation to Purchase.
Issuer understand that Purchaser's obligation to purchase the Shares
subscribed for hereunder is conditioned upon the following:
a. execution and delivery of this Agreement; and
b. delivery of Shares.
12. Governing Law.
This Agreement shall be governed by and construed under the laws of the
State of California without regard to its choice of law principles.
14.
13. Registration Rights.
a. Piggyback Registrations. The Company shall notify all persons owning
of record Shares or shares of Common Stock issuable upon conversion f
the Shares that have not been sold to the public ("Holders") in writing
at least thirty (30) days prior to the filing of any registration
statement under the Securities Act of 1933, as amended (the "Securities
Act") for purposes of any public offering of securities by the Company,
on Form S-1 or any other available form, initiated by the Company (but
excluding registration statements relating to employee benefit plans or
with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an
opportunity to include in such registration statement all or part of
such shares of Common Stock issuable upon conversion of the Shares held
by such Holder ("Registrable Shares"). Each Holder desiring to include
in any such registration statement all or any part of its Registrable
Shares shall, within fifteen (15) days after the above-described notice
from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of such Registrable Shares. If
a Holder decides not to include all of its Registrable Shares in any
registration statement thereafter filed by the Company, such Holder
shall nevertheless continue to have the right to include its
Registrable Shares in any subsequent such registration statement or
registration statements as may be filed by the Company with respect to
offerings of its securities, all upon the terms and conditions set
forth herein.
(i) Underwriting. If the registration statement under which
the Company gives notice under this Subparagraph a is for an
underwritten offering, the Company shall so advise the
Holders. In such event, the right of any such Holder to be
included in a registration pursuant to this Subparagraph a
shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable
Shares in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Shares
through such underwriting shall enter into an underwriting
agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of the Agreement, if the
underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the
underwriting, shall be allocated, first, to the Company; and
second, to the Holders on a pro rata basis based on the total
number of Registrable Shares held by the Holders. No such
reduction shall reduce the securities being offered by the
Company for its own account to be included in the registration
and underwriting.
(ii) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated
by it under this Subparagraph a prior to the effectiveness of
such registration whether or not any Holder has elected to
include securities in such registration. The Registration
Expenses (as
15.
defined below) of such withdrawn registration shall be borne
by the Company in accordance with Paragraph 13 hereof.
(iii) Expiration. A Holder's registration rights under this
Subparagraph a shall expire if all Registrable Shares held by
such Holder may be sold under Rule 144 during any ninety (90)
day period.
b. Form S-3 Registration. Subject to the conditions of this
Subparagraph b, if the Company shall receive a written request from the
Holders of more than sixty-six and two-thirds percent (66-2/3%) of the
Registrable Shares then outstanding that the Company effect a
registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Shares
owned by such Holder or Holders, the Company will:
(i) promptly give written notice of the proposed
registration, and any related qualification or
compliance, to all other Holders of Shares; and
(ii) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale
and distribution of all or such portion of such
Holder's or Holders' Registrable Shares as are
specified in such request, provided, however, that
the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to
this Subparagraph b;
(1) if Form S-3 (or any successor or similar
form) is not available for such offering by
the Holders; or
(2) if the Holders, together with the holders of
any other securities of the Company entitled
to inclusion in such registration, proposed
to sell Registrable Shares and such other
securities (if any) at an aggregate price to
the public of less than $500,000; or
(3) if the Company shall furnish to the Holders
a certificate signed by the Chairman of the
Board of Directors of the Company stating
that in the good faith judgment of the Board
of Directors of the Company, it would be
seriously detrimental to the Company and its
shareholders for such Form S-3 Registration
to be effected at such time, in which event
the Company shall have the right to defer
the filing of the Form S-3 registration
statement for a period of not more than
ninety (90) days after receipt of the
request of the Holder or Holders under this
Subparagraph b; or
16.
(4) if the Company shall have previously filed a
registration on Form S-3 at the request of
the Holders with respect to the same
Registrable Shares; or
(5) if any particular jurisdiction in which the
Company would be required to qualify to do
business or to execute a general consent to
service of process in effecting such
registration, qualification or compliance.
(iii) A Holder's registration rights under this
Subparagraph b shall expire if all Registrable Shares
held by such Holder may be sold under Rule 144 during
any ninety (90) day period.
c. Expenses of Registration. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration
under Subparagraphs a and b shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall
be borne by the holders of the securities so registered pro rata on the
basis of the number of shares so registered. The Company shall not,
however, be required to pay for expenses of any registration proceeding
begun pursuant to Subparagraph b, the request of which has been
subsequently withdrawn by the Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which
the Holders were not aware at the time of such request or (b) the
Holders of a majority of Registrable Shares agree to forfeit their
right to registration pursuant to Subparagraph b (in which event such
right shall be forfeited by all Holders). If the Holders are required
to pay the Registration Expenses, such expenses shall be borne by the
Holders of securities (including Registrable Shares) requesting such
registration in proportion to the number of shares for which
registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a)
above, then the Holders shall not forfeit their rights pursuant to
Subparagraph b to a demand registration. As used herein, "Registration
Expenses" means all expenses incurred by the Company in complying with
Subparagraphs a and b, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel
for the Company, reasonable fees and disbursements of a single special
counsel for the Holders, blue sky fees and expenses and the expense of
any special audits incident to or required by any such registration
(but excluding the compensation for regular employees of the Company
which shall be paid in any event by the Company), and "Selling
Expenses" means all underwriting discounts and selling commissions
applicable to the sale of Registrable Shares.
d. Obligations of the Company. Whenever required to effect the
registration of any Registrable Shares, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement with
respect to such Registrable Shares and use all
reasonable efforts to cause such registration
statement to
17.
become effective, and, upon request of the Holders of
a majority of the Registrable Shares registered
thereunder, keep such registration statement
effective for up to ninety (90) days or, if earlier,
until the Holder or Holders have completed the
distribution related thereto.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection with such registration
statement as may be necessary to comply with the
provisions of the Securities Act with respect to the
disposition of all securities covered by such
registration statement.
(iii) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities
Act, and such other documents as they may reasonably
request in order to facilitate the disposition of
Registrable Shares owned by them.
(iv) Use all reasonable efforts to register and qualify
the securities covered by such registration statement
under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be
required in connection therewith or as a condition
thereto to qualify to do business or to file a
general consent to service of process in any such
states or jurisdictions.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an
underwriting agreement, in usual and customary form,
with the managing underwriter(s) of such offering.
Each Holder participating in such underwriting shall
also enter into and perform its obligations under
such an agreement.
(vi) Notify each Holder of Registrable Shares covered by
such registration statement at any time when a
prospectus relating thereto is required to be
delivered under the Securities Act of the happening
of an event as a result of which the prospectus
included in such registration statement, as then in
effect, included 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 the light of the
circumstances then existing.
(vii) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that
such Registrable Shares are delivered to the
underwriters for sale, if such securities are being
sold through underwriters, or if such securities are
not being sold through underwriters, on the date that
the registration statement with respect to such
securities becomes effective, (a) an opinion, dated
as of such date, of the counsel representing the
Company for the purposes of such registration, in
form
18.
and substance as is customarily given to underwriters
in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders
requesting registration, addressed to the
underwriters, if any, and to the Holders requesting
registration of Registrable Shares and (b) a letter
dated as of such date, from the independent certified
public accountants of the Company, in form and
substance as is customarily given by independent
certified public accounts to underwriters in an
underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders
requesting registration, addressed to the
underwriters, if any, and if permitted by applicable
accounting standards, to the Holders requesting
registration of Registrable Shares.
x. Xxxxx of Registration; Furnishing Information. No Holder shall have
any right to obtain or seek an injunction restraining or otherwise
delaying any such registration as the result of any controversy that
might arise with respect to the interpretation or implementation of
this Paragraph 13. It shall be a condition precedent to the obligations
of the Company to take any action pursuant to Subparagraph a and b that
the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Shares held by them and the
intended method of disposition of such securities as shall be required
to effect the registration of their Registrable Shares.
f. Indemnification. In the event any Registrable Shares are included in
a registration statement under Subparagraph a and b:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the
partners, officers, directors and legal counsel of
each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if
any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages, or
liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any
of the following statements, omissions or violations
(collectively a "Violation") by the Company, (i) any
untrue statement or alleged untrue statement of a
material fact contained in such registration
statement, including any preliminary prospectus or
final prospectus contained therein or any amendments
or supplements thereto, (ii) 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, or (iii) any
violation or alleged violation by the Company of the
Securities Act, the Exchange Act, or any securities
law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state
securities law in connection with the offering
covered by such registration statement; and the
Company will reimburse
19.
each such Holder, partner, officer or director,
underwriter or 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 indemnity agreement contained int
his Subparagraph (f)(i) shall not apply to amounts
paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected
without the consent of the Company, which consent
shall not be unreasonably withheld, nor shall the
Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that
it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with
written information furnished expressly for use in
connection with such registration by such Holder,
partner, officer, director, underwriter or
controlling person of such Holder.
(ii) To the extent permitted by law, each Holder will, if
Registrable Shares held by such Holder are included
in the Securities as to which such registration
qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its
directors, its officers, and legal counsel and each
person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and
any other Holder selling securities under such
registration statement or any of such other Holder's
partners, directors or officers or any person who
controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which
the Company or any such director, officer,
controlling person, underwriter or other such Holder,
or partner, director, officer, or controlling person
of such other Holder may become subject under the
Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to
the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity
with written information furnished by such Holder
under an instrument duly executed by such Holder and
stated to be specifically for use in connection with
such registration; and each such Holder will
reimburse any legal or other expenses reasonably
incurred by the Company or any such director,
officer, controlling person, underwriter or other
Holder, or partner, officer, director or controlling
person of such other Holder in connection with
investigating or defending any such loss, claim,
damage, liability or action if it is judicially
determined that there was a Violation; provided,
however, that the indemnity agreement contained in
this Subparagraph (f)(ii) shall not apply to amounts
paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected
without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further,
that in no event shall
20.
any indemnity under this Subparagraph f exceed the
proceeds from the offering received by such Holder.
(iii) Promptly after receipt by an indemnified party under
this Subparagraph f of notice of the Commencement of
any action (including any governmental action), such
indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under
this Subparagraph f, deliver to the indemnifying
party a written notice of the commencement thereof
and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party
shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by
the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing
interest between such indemnified party and any other
party represented by such counsel in such proceeding.
The failure to deliver written notice to the
indemnifying party within a reasonable time of the
commencement of any such action, if materially
prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any
liability to the indemnified party under this
Subparagraph f, but the omission so to deliver
written notice to the indemnifying party will not
relieve it of any liability that it may have to any
indemnified party otherwise than under this
Subparagraph f.
(iv) If the indemnification provided for in this
Subparagraph f is held by a court of competent
jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or
liabilities referred to herein, the indemnifying
party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by
applicable law contribute to the amount paid or
payable by such indemnified party as a result of such
loss, claim, damage or liability in such proportion
as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the
indemnified party on the other in connection with the
Violation(s) that resulted in such loss, claim,
damage or liability, as well as any other relevant
equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall
be determined by a court of law by reference to,
among other things, whether the untrue or alleged
untrue statement of a material fact or the omission
to state a material fact relates to information
supplied by the indemnifying party or by the
indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to
correct or prevent such statement of omission;
provided, however, that in no event shall any
contribution by a Holder hereunder exceed the
proceeds from the offering received by such Holder.
21.
(v) The obligation of the Company and Holders under this
Subparagraph f shall survive completion of any
offering of Registrable Shares in a registration
statement. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry
of any judgment or enter into any settlement which
does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability to
such Indemnified Party of a release from all
liability in respect to such claim or litigation. In
the event any offering of Registrable Shares is
underwritten, and the underwriting agreement provides
for indemnification and/or contribution by the
Company and the Holders offering securities
thereunder, the indemnification and/or contribution
obligations of the Company and the Holders hereunder
shall in no event exceed the obligations of the
parties set forth in such underwriting agreement.
g. Assignment of Registration Rights. The rights to cause the Company
to register Registrable Shares pursuant to this Paragraph 13 may not be
assigned by a Holder without prior written consent of the Company.
h. Amendment of Registration Rights. Any provision of this Paragraph 13
may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
Holders of at least sixty-six and two-thirds percent (66-2/3%) of the
Registrable Shares. Any amendment or waiver effected in accordance with
this Subparagraph h shall be binding upon each Holder and the Company.
By acceptance of any benefits under this Paragraph 13, Holders of
Registrable Shares hereby agree to be bound by the provisions
thereunder.
i. "Market Stand-Off" Agreement. If requested by the Company as the
representative of the underwriters of Registrable Shares (or other
securities) of the Company, each Holder shall not sell or otherwise
transfer or dispose of any Registrable Shares (or other securities) of
the Company held by each such Holder (other than those included in the
registration) for a period specified by the representative of the
underwriters not to exceed one hundred eighty (180) days following the
effective date of a registration statement of the Company filed under
the Securities Act. The obligations described in this Subparagraph i
shall not apply to a registration relating solely to employee benefit
plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Commission Rule
145 transaction on Form S-4 or similar forms that may be promulgated in
the future. The Company may impose stop-transfer instructions with
respect to the Registrable Shares (or other securities) subject to the
foregoing restriction until the end of said one hundred eighty (180)
day period.
22.
j. Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Shares to the public without
registration, the Company agrees to use its best efforts to: (i) make
and keep public information available, as those terms are understood
and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective
date of the first registration filed by the Company for an offering of
its securities to the general public; (ii) so long as a Holder owns any
Registrable Shares, furnish to such Holder forthwith upon request a
written statement by the Company as to its compliance with the
reporting requirements of said Rule 144 of the Securities Act, and of
the Exchange Act (at any time after it has become subject to such
reporting requirements), a copy of the most recent annual or quarterly
report of the Company and such other reports and documents as a Holder
may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
14. Entire Agreement.
This Agreement constitutes the entire agreement among the parties
hereof with respect to the subject matter hereof and supersedes any and all
prior or contemporaneous representations, warranties, agreements and
understandings in connection therewith. This Offshore Securities Subscription
Agreement may be amended only in writing executed by all parties hereto.
15. Independent Counsel.
The undersigned acknowledge that they have been advised to consult with
their own attorneys and financial advisors regarding this Agreement.
16. Arbitration.
The parties shall resolve any dispute arising hereunder before a panel
of three arbitrators selected pursuant to and run in accordance with the rules
of the American Arbitration Association. The arbitration shall be held in New
York, New York. Each party shall bear their own attorney's fees and costs of
such arbitration. Disputes under this Agreement as well as all of the terms and
conditions of this Agreement shall be governed in accordance with and by the
laws of the State of California.
17. Notices.
Unless otherwise provided, notice required or permitted to be given to
a party pursuant to the provisions of this Agreement will be in writing and will
be effective and deemed given under this Agreement on the earliest of (i) the
date of personal delivery, or (ii) the date of delivery by facsimile, or (iii)
the business day after deposit in the United States with a nationally-recognized
courier or overnight service, including Express Mail, for United States
deliveries or five (5) business days after such deposits for international
deliveries, or (iv) five
23.
(5) business days after deposit in the United States mail by registered or
certified mail for United States deliveries. All notices not delivered
personally or by facsimile will be sent with postage and other charges prepaid
and properly addressed to the party to be notified at the address set forth in
Paragraph 21 of this Agreement (in the case of Purchaser) or below issuer's
signature on this Agreement or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties hereto. All
notices for delivery internationally will be sent by facsimile, or by nationally
recognized courier or overnight service, including Express Mail. Any notice
given hereunder to more than one person will be deemed to have been given, for
purposes of counting time periods hereunder, on the date given to the last party
required to be given such notice. Notices to the Company will be marked to the
attention of the President.
18. Counterparts; Facsimiles.
This Agreement may be executed through the use of separate signature
pages or in any number of counterparts, and each of such counterpart shall, for
all purposes, constitute one agreement binding on all the parties,
notwithstanding that all parties are not signatories to the same counterpart. An
executed telecopy or facsimile version of this Agreement shall be construed by
the parties as an original.
19. Binding Effect.
Except as otherwise provided herein, this Agreement shall be binding
upon and inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives, and assigns. If the Purchaser
is more than one person or entity, the obligations of the Purchaser shall be
joint and several, and the other agreements, representations; warranties, and
acknowledgements herein contained shall be deemed to be made by and be binding
upon each and his or her heirs, executors, administrators, and successors.
20. Assignability.
This Agreement is not transferable or assignable by the Purchaser
except as may be provided herein.
21. Full Name and Address of Purchaser for Registration Purposes:
NAME:
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ADDRESS:
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TELE.
NO.
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24.
FAX
NO.
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CONTACT
NAME:
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22. Delivery Instructions: (If different from Registration Name):
NAME:
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ADDRESS:
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TELE.
NO.
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FAX
NO.
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SPECIAL
INSTRUCTIONS:
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23. Issuer's Acceptance Based Upon Purchaser Representations.
Issuer is accepting this subscription based upon and in reliance upon
the representations and warranties of Purchaser contained herein, including
without limitation, those contained in section 2 of this Agreement would not be
accepted by Issuer in the absence of such representations and warranties.
24. Limits on Amount of Conversion and Ownership.
Other than the Mandatory Conversion provisions contained in Paragraph 1
which are not limited by the following, in no other even shall the holder be
entitled to convert any Shares in excess of that number of Shares upon
conversion of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Shares), and (2) the number of shares of Common Stock
issuable upon the conversion of the Shares with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Purchaser and its affiliates of more than 4.9% of the
outstanding shares of Common Stock of the Company. For purposes of this proviso
to the immediately preceding sentence, beneficial ownership shall be determined
in accordance
25.
with Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13D-G thereunder, except as otherwise provided in clause (1) of such
proviso.
IN WITNESS WHEREOF, this Offshore Securities Subscription Agreement was
duly executed as of the _____ day of _______________, 1997.
Company
Name:
--------------------------------------------------------------------------------
Purchaser
EDnet, Inc.
By:
--------------------------------------
Official Signatory of Purchaser
Name
(Printed):
----------------------------------------------------------------------
Title:
-------------------------------------------------------------------------
Country of
Execution:
---------------------------------------------------------------------
Accepted this _____ day of the month of _______________, 1997.
By:
----------------------------------------
Xxx Xxxxxxxxx its CEO, duly authorized
26.
EXHIBIT "A"
NOTICE OF CONVERSION
EDnet, Inc. _______________, 199_
Xxx Xxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
The undersigned, _________________________ (the "Holder"), does hereby
give notice that it wishes to convert __________ shares of Series A Convertible
Preferred Stock (the "Shares") of EDnet, Inc. (the "Issuer") held by it into
shares of Common Stock of the Issuer, which have been reserved for issuance upon
such conversion. The Holder represents and warrants that (i) all of the
requirements of Regulation S promulgated under the Securities Act of 1933, as
amended (the "Act") applicable to the Holder have been complied with by the
Holder and (ii) the Holder has not engaged in any transaction or series of
transactions that, although in technical compliance with all of the requirements
of Regulation S, is part of a plan or scheme to evade the registration
requirements of the Act. The number of shares of the Company's common stock, par
value $.0001 per share ("Common Stock") issuable upon conversion of the Shares
held by an investor under the terms of the Offshore Securities Subscription
Agreement ("Agreement") shall equal the Subscription Proceeds plus the amount of
the accrued dividends through the Conversion Date related to the Shares being
converted, (as that term is defined in Paragraph 7a of the Agreement), divided
by the lesser of (i) seventy percent (70%) of the Market Price (as defined
below) of the Issuer's Common Stock or (ii) seventy percent (70%) of the average
closing bid prices for the five (5) trading days preceding the Closing Date as
defined in paragraph 9 of the Agreement (the "Closing Price") "Market Price"
shall mean the five (5) trading day average closing bid price for the Common
Stock for the five (5) trading days immediately preceding the Conversion Date,
as reported by NASDAQ. Notwithstanding any other provision in the Agreement, for
purposes of the Agreement, seventy percent (70%) of the Market Price or Closing
Price shall not be less than $1.00, and if less than that amount, shall be
deemed to be $1.00. The undersigned has not taken any short position or hedge
position including, but not limited to option writing, equity swaps or other
types of derivative transactions in the Company's Common Stock to be covered by
any of the Shares or the Underlying Common Stock nor has the undersigned made
any promissory notes and/or pledges to that effect on the Company's Common
Stock. Accompanying this Notice of Conversion is a signed Purchaser
Representation Letter.
[Holder]
By:
-------------------------------------
27.
EXHIBIT "B"
PURCHASER REPRESENTATION LETTER
Dear Sirs:
The undersigned ____________________, has purchased on __________,
1997, _____ Convertible Preferred Shares of EDnet, Inc. (the "Company") at a per
share subscription price of $1,000 per share, (the Convertible Preferred Shares
referred to herein as the "Shares"). In connection with such purchase, the
undersigned, has executed and delivered a subscription agreement ("Subscription
Agreement") of your design. As the applicable restriction period has expired,
the undersigned hereby requests that the Shares be transferred into the
following name:
-------------------------.
The undersigned represents and warrants as follows:
(1) The offer to purchase the Shares was made to it outside of the United States
and the undersigned was, at the time the Subscription Agreement was executed and
delivered, and is now, outside the United States;
(2) It is not a U.S. Person (as such term is defined in Section 902(a) of
Regulation S promulgated under the United States Securities Act of 1933 (the
"Securities Act"); and it has not purchased the Shares for its own account and
not for the account or benefit of any U.S. person;
(3) All offers and sales by the undersigned of the Shares shall be made pursuant
to an effective registration statement under the Securities Act or pursuant to
an exemption from, or in a transaction not subject to the registration
requirements of, the Securities Act;
(4) It is familiar with and understands the terms, conditions and requirements
contained in Regulation S and definitions of U.S. persons contained in
Regulation S;
(5) The undersigned has not engaged in any "directed selling efforts" (as such
term is defined in Regulation S) with respect to the Shares; and
(6) If the Purchaser purchased the Shares during the 40 day restricted period,
such Purchaser hereby represents that the representations and warranties made in
paragraph 2 of the Offshore Securities Subscription Agreement were true at the
time of the purchase of the Shares, as if they had been made by the Purchaser.
Dated this _____ day of the month of _______________, 1997.
By:
---------------------------------------- ---------------------------------
Official Signature of Purchaser Title
28.
