Attached files
| file | filename |
|---|---|
| 8-K - CONSPIRACY ENTERTAINMENT HOLDINGS INC | v206186_8k.htm |
| EX-4.2 - CONSPIRACY ENTERTAINMENT HOLDINGS INC | v206186_ex4-2.htm |
| EX-4.1 - CONSPIRACY ENTERTAINMENT HOLDINGS INC | v206186_ex4-1.htm |
Exhibit
99.1
SUBSCRIPTION
AGREEMENT
THIS SUBSCRIPTION AGREEMENT
(this “Agreement”),
dated as of December 17, 2010, by and among Conspiracy Entertainment Holdings,
Inc., a Utah corporation (the “Company”), and the subscribers
identified on Schedule 1
hereto (each a “Subscriber” and collectively
“Subscribers”).
WHEREAS, the Company and the
Subscribers are executing and delivering this Agreement in reliance upon an
exemption from securities registration afforded by the provisions of Section
4(2), Section 4(6) and/or Regulation D (“Regulation D”) as promulgated
by the United States Securities and Exchange Commission (the “Commission”) under the
Securities Act of 1933, as amended (the “1933 Act”).
WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Subscribers, as provided herein, and such
Subscriber shall purchase (i) for $150,000 (the “Purchase Price”) of principal
amount (“Principal
Amount”) of promissory notes of the Company (“Note” or “Notes”), a form of which is
annexed hereto as Exhibit
A, 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 (ii)
share purchase warrants (the “Warrants”) in the form
attached hereto as Exhibit B,
to purchase shares of the Company’s Common Stock (the “Warrant Shares”) (the “Offering”). The
Notes, shares of Common Stock issuable upon conversion of the Notes (the “Shares” or “Conversion 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 by Sichenzia Ross Friedman Ference LLP , 61 Broadway, New York
New York 10006 (the “Escrow
Agent”) pursuant to the terms of an Escrow Agreement to be executed by
the parties substantially in the form attached hereto as Exhibit C (the “Escrow
Agreement”).
NOW, THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Subscriber 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 office of Sichenzia
Ross Friedman Ference LLP , 61 Broadway, New York 10006, upon the satisfaction
or waiver of all conditions to closing set forth in this Agreement.
2. Notes and
Warrants.
(a) Notes. 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, and the
Company shall sell to each Subscriber a Note in the Principal Amount designated
on Schedule 1 hereto for
each such Subscriber’s Purchase Price indicated thereon.
(b) Warrants. On
the Closing Date, the Company will issue and deliver the Warrants to the
Subscribers. One Class A Warrant will be issued for every two Shares
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 Class A Warrant
shall be equal to $0.02, subject to reduction as described in the Class A
Warrant. The Class A Warrants shall be exercisable until five years
after the issue date of the Warrants.
1
(c) Allocation of Purchase
Price. The Purchase Price will be allocated among the
components of the Securities so that each component of the Securities will be
fully paid and non-assessable.
3. Subscriber's Representations
and Warranties. Such 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 the 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 and has the requisite
corporate power to own its assets and to carry on its business.
(b) Authorization and
Power. Each Subscriber has the requisite power and authority
to enter into and perform this Agreement and to purchase the Notes being sold to
it hereunder. The execution, delivery and performance of this
Agreement 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 the Subscriber, enforceable against the Subscriber in
accordance with the term hereof.
(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, bylaws or other organizational documents, if applicable; (ii)
conflict with nor constitute a default (or an event which with notice or lapse
of time or both would become a default) under any agreement to which such
Subscriber is a party; nor (iii) 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 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 nor to purchase the Securities in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, such Subscriber is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Information on
Company. Such Subscriber has been furnished with or has
had access at the EDGAR Website of the Commission to the Company's Form 10-K
filed on April 15, 2010 for the fiscal year ended December 31, 2009, and the
financial statements included therein for the year ended December 31, 2009,
together with all subsequent filings made with the Commission available at the
EDGAR website until five days before the Closing Date (hereinafter referred to
collectively as the "Reports"). In
addition, 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.
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(e) Information on
Subscriber. The Subscriber is, and will be at the time of the
conversion of the Notes, an "accredited investor", as such
term is defined in Regulation D promulgated by the Commission under the 1933
Act, is experienced in investments and business matters, has made investments of
a speculative nature and has purchased securities of United States
publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable the Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment. The Subscriber has the authority
and is duly and legally qualified to purchase and own the
Securities. The Subscriber is able to bear the risk of such
investment for an indefinite period and to afford a complete loss
thereof. The information set forth on the signature page hereto
regarding the Subscriber is accurate.
(f) Purchase of Notes and
Warrants. On the Closing Date, the 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, but Subscriber does not agree to hold the Notes for any
minimum amount of time.
(g) Compliance with Securities
Act. The Subscriber understands and agrees that the Securities
have not been registered under the 1933 Act or any applicable state securities
laws, by reason of their issuance in a transaction that does not require
registration under the 1933 Act (based in part on the accuracy of the
representations and warranties of Subscriber contained herein), and that such
Securities must be held indefinitely unless a subsequent disposition is
registered under the 1933 Act or any applicable state securities laws or is
exempt from such registration. 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 when employed in connection with the Company
includes each Subsidiary [as defined in Section 4(a)] 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.
(h) Conversion Shares and
Warrant Shares Legend. The Conversion Shares and 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
(i)
Note and Warrant
Legend. The Note and Warrant 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 –OR-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) Communication of
Offer. The offer to sell the Securities was directly
communicated to the Subscriber by the Company. At no time was the
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
(k) Authority;
Enforceability. This Agreement and other agreements delivered
together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by such Subscriber and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights generally and
to general principles of equity; and Subscriber has full corporate power and
authority necessary to enter into this Agreement and such other agreements and
to perform its obligations hereunder and under all other agreements entered into
by the Subscriber relating hereto.
(l) 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.
(m) Correctness of
Representations. Such Subscriber represents 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.
(n) Survival. The
foregoing representations and warranties shall survive the Closing Date until
three years after the Closing Date.
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4. Company Representations and
Warranties. The Company represents and warrants to and agrees
with each Subscriber that except as set forth in the Reports or the Other
Written Information and as otherwise qualified in the Transaction
Documents:
(a) Due
Incorporation. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation 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 (as
defined herein). 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 direct or indirect corporation, limited
or general partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which (A) 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, or (B) is under the actual control of the
Company. As of the Closing Date, all of the Company’s Subsidiaries
and the Company’s other ownership interests therein are set forth on Schedule
4(a). The
Company represents that it owns all of the equity of the Subsidiaries and rights
to receive equity of the Subsidiaries set forth on Schedule
4(a),
free and clear of all liens, encumbrances and claims, except as set forth on
Schedule
4(a). No
person or entity other than the Company has the right to receive any equity
interest in the Subsidiaries. The Company further represents that
neither the Company nor the Subsidiaries have been known by any other names for
the five (5) years preceding the date of this Agreement.
(b) Outstanding
Stock. All issued and outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid and
nonassessable.
(c) Authority;
Enforceability. This Agreement, the Notes, Warrants, the
Escrow Agreement, and any other agreements delivered or required to be
delivered together with or pursuant to this Agreement or in connection herewith
(collectively “Transaction
Documents”) have been duly authorized, executed and delivered by the
Company and/or the Subsidiaries, as the case may be, and are valid and binding
agreements of the Company and/or the Subsidiaries, as the case may be,
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 and/or the Subsidiaries, as
the case may be, have full corporate power and authority necessary to enter into
and deliver the Transaction Documents and to perform their obligations
thereunder.
(d) Capitalization and
Additional
Issuances. The authorized and outstanding capital stock
of the Company and Subsidiaries on a fully diluted basis and all
outstanding rights to acquire or receive, directly or indirectly, any equity of
the Company and Subsidiaries as of the date of this Agreement and the Closing
Date (not including the Securities) are set forth on Schedule
4(d). Except
as set forth on Schedule
4(d),
there are no options, warrants, or rights to subscribe to, securities, rights,
understandings or obligations convertible into or exchangeable for or granting
any right to subscribe for any shares of capital stock or other equity interest
of the Company or any of the Subsidiaries. The only officer,
director, employee and consultant stock option or stock incentive plan or
similar plan currently in effect or contemplated by the Company is described on
Schedule
4(d). There are no outstanding agreements or preemptive or
similar rights affecting the Company’s Common Stock or equity.
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(e) Consents. No
consent, approval, authorization or order of any court, governmental agency or
body or arbitrator having jurisdiction over the Company, Subsidiaries or any of
their Affiliates, any Principal Market (as defined in Section 9(b)), or the
Company’s stockholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company and
Subsidiaries of their 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 in accordance with the Company’s Certificate of Incorporation and
applicable law. Any such qualifications and filings will, in the case
of qualifications, be effective upon Closing and will, in the case of filings,
be made within the time prescribed by law.
(f) No Violation or
Conflict. Assuming the representations and warranties of the
Subscribers in Section 3 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 in any material respect) 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) except as set
forth in on Schedule 4(f)(i), the terms of any bond, debenture, note or any
other evidence of indebtedness, or any agreement, stock option or other similar
plan, indenture, lease, mortgage, deed of trust or other instrument to which the
Company or any of its Affiliates is a party, by which the Company or any of its
Affiliates is bound, or to which any of the properties of the Company or any of
its Affiliates is subject, or (D) the terms of any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company, or any
of its Affiliates is a party except the violation, conflict, breach, or default
of which would not have a Material Adverse Effect; or
(ii) result
in the creation or imposition of any Lien (as defined in Section
9(n upon the Securities or any of the assets of the Company or any of
its Affiliates other then pursuant to this Agreement and pursuant to
Permitted Liens (as defined in Section 9(n)); or
(iii) except
as set forth on Schedule 4(f)(iii) result in the activation of any anti-dilution
rights or a reset or repricing of any debt or security instrument of any other
creditor or equity holder of the Company, nor result in the acceleration of the
due date of any obligation of the Company; or
(iv) result
in the activation of any piggy-back registration rights of any person or entity
holding securities or debt of the Company or having the right to receive
securities of the Company except as set forth on Schedule
4(f)(iv).
(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 only to restrictions upon transfer under the 1933 Act and
any applicable state securities laws;
6
(ii) have
been, or will be, duly and validly authorized and on the dates of issuance of
the Shares upon conversion of the Note, such 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 or exempt
from registration will be free trading, unrestricted and
unlegended;
(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 or rights to acquire
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. Other
than as set forth on Schedule
4(h), there is no pending or, to the best knowledge of the Company,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates that would affect the execution by the Company of any
of the Transaction Documents or the performance by the Company of its
obligations under the Transaction Documents. 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) Reporting
Company. The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934 (the “1934 Act”)
and has a class of common shares registered pursuant to Section 12(g) of the
1934 Act. Pursuant to the provisions of the 1934 Act, the Company has
filed all reports and other materials required to be filed thereunder with the
Commission during the preceding thirty-six months.
(j) 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, provided,
however, that this provision shall not prevent the Company from engaging in
investor relations/public relations activities consistent with past
practices.
(k) Information Concerning
Company. The Reports contain all material information relating
to the Company and its operations and financial condition as of their respective
dates and all the information required to be disclosed
therein. Since the last day of the fiscal year of the most
recent audited financial statements included in the Reports (“Latest Financial Date”), 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
including the financial statements therein do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances when made.
(l) Stop
Transfer. The Company will not issue any stop transfer order
or other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the
Subscriber.
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(m) Defaults. The
Company is not in violation of its certificate of incorporation or
bylaws. Except as set forth on Schedule 4(m), 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) to the Company’s knowledge not in
violation of any statute, rule or regulation of any governmental authority which
violation would have a Material Adverse Effect.
(n) No Integrated
Offering. Neither the Company, nor any of its Affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offer of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of the OTC Bulletin Board
(“Bulletin Board”) which
would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder. Nor will the
Company or any of its Affiliates 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, which
would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder.
(o) No General
Solicitation. Neither the Company, nor any of its Affiliates,
nor to its knowledge, any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
(p) Listing. The
Company's common stock is quoted on the Bulletin Board under the symbol
CPYE.OB. 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.
(q) No Undisclosed
Liabilities. The Company has no liabilities or obligations
which are material, individually or in the aggregate, which are not disclosed in
the Reports and Other Written Information, other than those incurred in the
ordinary course of the Company’s businesses since the Latest Financial Date and
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed on Schedule 4(q).
(r) No Undisclosed Events or
Circumstances. Since the Latest Financial Date, 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.
(s) Capitalization. The
authorized and outstanding capital stock of the Company as of the date of this
Agreement and the Closing Date (not including the Securities) are set forth on
Schedule
4(d). Except as set forth on Schedule 4(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. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
nonassessable.
8
(t) 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 is binding upon the Company and
enforceable against the Company 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.
(u) No Disagreements with
Accountants and Lawyers. There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers, nor have there been any such
disagreements during the two years prior to the Closing Date.
(v) 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 4(v) hereto.
(w) Investment
Company. Neither the Company nor any Affiliate is an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended.
(x) Subsidiary
Representations. The Company makes each of the
representations contained in Sections 4(a), (b), (c), (d), (e), (f), (h), (k),
(m), (q), (r), (u) and (w) of this Agreement, as same relate to each Subsidiary
of the Company.
(y) Company
Predecessor. 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, if any.
(z) 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 the
Securities hereunder and subject to the Company’s working capital deficiency and
its being in default on certain notes which give rise to its ability to continue
as a going concern, (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).
9
(AA) Preservation of Corporate
Existence. The Company shall preserve and maintain its
corporate existence, rights, privileges and franchises in the jurisdiction of
its incorporation, and qualify and remain qualified, as a foreign corporation in
each jurisdiction in which such qualification is necessary in view of its
business or operations and where the failure to qualify or remain qualified
might reasonably have a Material Adverse Effect upon the financial condition,
business or operations of the Company and its Subsidiaries taken as a
whole.
(BB) 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.
(CC) Survival. The
foregoing representations and warranties shall survive the Closing
Date.
5. Regulation D
Offering. The offer and issuance of the Securities to the
Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion reasonably acceptable to
Subscriber from the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers. A form of the legal opinion is annexed hereto as Exhibit D. At
the Company’s option, the Company will provide, at the Company's expense or
reimburse Subscribers, such other legal opinions in the future as are reasonably
necessary for the issuance and resale of the Common Stock issuable upon
conversion of the Notes pursuant to an effective registration statement, Rule
144 under the 1933 Act or an exemption from registration.
6.1. 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 usual 1933 Act restriction from transfer
legend. If and when the 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) the Subscriber
confirms in writing to the transfer agent that the Subscriber has complied with
the prospectus delivery requirements, the restrictive legend can be removed and
the Shares will be free trading, and freely transferable. In the
event that the Shares are sold in a manner that complies with an exemption from
registration, the Company will promptly instruct its counsel to issue to the
transfer agent an opinion permitting removal of the legend, indefinitely, if
pursuant to Rule 144(b)(1) of the 1933 Act, or for ninety 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
(b) Subscriber
will give notice of its decision to exercise its right to convert the Note,
interest, any sum due to the Subscriber under the Transaction Documents or part
thereof by telecopying an executed and completed Notice of Conversion (a form
of which is annexed as Exhibit
A to the Note) to the Company via confirmed telecopier transmission or
otherwise pursuant to Section 13(a) of this Agreement. The Subscriber
will not be required to surrender the Note until the Note has been fully
converted or satisfied. Each date on which a Notice of Conversion is
telecopied to the Company in accordance with the provisions hereof shall be
deemed a Conversion
Date. The Company will itself or cause the Company’s transfer
agent to transmit the Company's Common Stock certificates representing the
Shares issuable upon conversion of the Note to the Subscriber via express
courier for receipt by such Subscriber within three (3) business days after
receipt by the Company of the Notice of Conversion (such 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 and the Subscriber has complied with all applicable securities
laws in connection with the sale of the Common Stock, including, without
limitation, the prospectus delivery requirements. A Note
representing the balance of the Note not so converted will be provided by the
Company to the Subscriber if requested by Subscriber, provided the 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, the
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. “Business day” and “trading day” as employed in
the Transaction Documents is a day that the New York Stock Exchange is open for
trading for three or more hours.
(c) The
Company understands that a delay in the delivery of the Shares in the form
required pursuant to Section 6.1 hereof, or the Mandatory Redemption Amount
described in Section 6.2 hereof, respectively after the Delivery Date or the
Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber. As compensation to the Subscriber
for such loss, the Company agrees to pay (as liquidated damages and not as a
penalty) to the Subscriber for late issuance of Shares in the form required
pursuant to Section 6.1 hereof upon Conversion of the Note in the amount of $100
per business day after the Delivery Date for each $10,000 of Note principal
amount being converted of the corresponding Shares which are not timely
delivered. The Company shall pay any payments incurred under this
Section in immediately available funds upon demand. Furthermore, in
addition to any other remedies which may be available to the Subscriber, in the
event that the Company fails for any reason to effect delivery of the Shares by
the Delivery Date or make payment by the Mandatory Redemption Payment Date, the
Subscriber may 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 the Subscriber
shall each be restored to their respective positions immediately prior to the
delivery of such notice, except that the liquidated damages described above
shall be payable through the date notice of revocation or rescission is given to
the Company.
(d) 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.
11
6.2. Mandatory Redemption at
Subscriber’s Election. In the event (i) the Company is
prohibited from issuing Shares, (ii) the Company fails to timely deliver
Shares on a Delivery Date, (iii) upon the occurrence of any other Event of
Default (as defined in the Note or in this Agreement), any of the foregoing that
continues for more than twenty (20) business days, (iv) a Change in Control (as
defined below), or (v) of the liquidation, dissolution or winding up of the
Company, then at the Subscriber's election, the Company must pay to the
Subscriber ten (10) business days after request by the Subscriber (“Calculation Period”), a sum of
money determined by multiplying up to the outstanding principal amount of the
Note designated by the Subscriber by 120%, together with accrued but unpaid
interest thereon ("Mandatory
Redemption Payment"). The Mandatory Redemption Payment must be received
by the Subscriber on the same date as the Shares otherwise deliverable or within
ten (10) business days after request, whichever is sooner ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal and interest will be deemed paid and no longer
outstanding. Liquidated damages calculated pursuant to Section 6.1(c)
hereof, that have been paid or accrued for the ten day period prior to the
actual receipt of the Mandatory Redemption Payment by the Subscriber shall be
credited against the Mandatory Redemption Payment. For purposes of
this Section 6.2, “Change in
Control” shall mean (i) the Company no longer having a class of shares
publicly traded, included for quotation or listed on a Principal Market, (ii)
the Company becoming a Subsidiary of another entity (other than a
corporation formed by the Company for purposes of reincorporation in another
U.S. jurisdiction), (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, (iv) the sale, lease or transfer of substantially all the assets
of the Company or Subsidiaries, (v) if the holders of the Company’s Common Stock
as of the Closing Date beneficially own at any time after the Closing Date less
than forty percent of the Common Stock owned by them on the Closing Date, or
(vi) if the Chief Executive Officer of the Company, as of the Closing Date, no
longer serves as Chief Executive Officer of the Company.
6.3. Maximum
Conversion. A Subscriber shall not be entitled to convert on a
Conversion Date that amount of a Note nor may the Company make any payment
including principal, interest, or liquidated or other damages by delivery of
Conversion Shares in connection with that number of Conversion Shares which
would be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by such Subscriber and its Affiliates on a Conversion Date or
payment date, and (ii) the number of Conversion Shares issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a calculation date, which would result in beneficial ownership
by Subscriber and its Affiliates of more than 4.99% of the outstanding shares of
Common Stock of the Company on such Conversion Date. For the purposes
of the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Rule 13d-3 thereunder. Subject to the foregoing, the
Subscriber shall not be limited to aggregate conversions of only 4.99% and
aggregate conversions by the Subscriber may exceed 4.99%. The
Subscriber shall have the authority to determine whether the restriction
contained in this Section 6.3 will limit any conversion of a Note and the extent
such limitation applies and to which convertible or exercisable instrument or
part thereof such limitation applies. The Subscriber may increase the
permitted beneficial ownership amount up to 9.99% upon and effective after 61
days prior written notice to the Company. Subscriber may allocate
which of the equity of the Company deemed beneficially owned by Subscriber shall
be included in the 4.99% amount described above and which shall be allocated to
the excess above 4.99%.
6.4. Injunction Posting of
Bond. In the event a Subscriber shall elect to convert a Note
or part thereof, the Company may not refuse conversion 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.
12
6.5. Buy-In. In
addition to any other rights available to the Subscriber, if the Company fails
to deliver to the Subscriber such shares issuable upon conversion of a Note by
the Delivery Date and if after seven (7) business days after the Delivery Date
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 Common Stock which the
Subscriber was entitled to receive upon such conversion (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 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 the
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 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.
6.6. Adjustments. The
Conversion Price, Warrant Exercise Price and amount of Shares issuable upon
conversion of the Notes and exercise of the Warrants shall be adjusted as
described in this Agreement, the Notes and the Warrants.
7. Redemption. The
Note shall not be redeemable or mandatorily convertible except as described in
the Note.
8. Reserved
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 two
hours after the Company receives notice of issuance by the Commission, any state
securities commission or any other regulatory authority of any stop order or of
any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b) Listing. The
Company shall promptly secure the listing or the inclusion for quotation of the
Conversion Shares and Warrant Shares upon each national securities exchange, or
electronic or automated quotation system upon which they are or become eligible
for listing or quotation and shall maintain such listing or quotation so long as
any Notes and Warrants are outstanding. The Company will maintain the
listing or quotation of its Common Stock on the NYSE Amex, Nasdaq Capital
Market, Nasdaq National Market System, Bulletin Board, Pink Sheets 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 or exclusion from
quotation of the Common Stock from any Principal Market. As of the
date of this Agreement, the Bulletin Board is and will be the Principal
Market.
(c) Market
Regulations. The Company shall notify the Commission, the
Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to the Subscribers and promptly provide copies thereof to
Subscriber.
13
(d) Filing
Requirements. From the date of this Agreement and until the
last to occur of (i) two (2) years after the Closing Date, or (ii) until all the
Shares have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to 144(b)(1)(i), or (iii) the Note and
Warrants 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 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 use its best efforts to 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.
(e) Use of
Proceeds. The proceeds of the Offering will be employed by the
Company for working capital and general business purposes as further described
on 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,
litigation related expenses or settlements, brokerage fees, nor non-trade
obligations outstanding on a Closing Date.
(f) Reservation. The
Company undertakes to reserve on behalf of Subscribers from its authorized
but unissued Common Stock, a number of shares of Common Stock equal to 150% of
the amount of Common Stock necessary to allow Subscribers to be able to convert
the entire Note and 100% of the amount of Warrant Shares issuable upon exercise
of the Warrants (“Required
Reservation”). 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. If at any time Notes and Warrants are outstanding the
Company has insufficient Common Stock reserved on behalf of the Subscribers in
an amount less than 150% of the amount necessary for full conversion of the
outstanding Note principal and interest at the conversion price that would be in
effect on every such date and 100% of the Warrant Shares (“Minimum Required
Reservation”), the Company will promptly reserve the Minimum Required
Reservation, or if there are insufficient authorized and available shares of
Common Stock to do so, the Company will take all action necessary to increase
its authorized capital to be able to fully satisfy its reservation requirements
hereunder, including the filing of a preliminary proxy with the Commission not
later than fifteen days after the first day the Company has less than the
Minimum Required Reservation. The Company agrees to provide notice to
the Subscribers not later than three days after the date the Company has less
than the Minimum Required Reservation reserved on behalf of the
Subscribers.
(g) Taxes. From
the date of this Agreement and until the conversion or satisfaction of the Note,
in its entirety, 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.
14
(h) 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, 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 to
the extent available on commercially reasonable terms.
(i) 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.
(j) 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.
(k) 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. Schedule
9(k)
hereto identifies all of the intellectual property owned by the Company and
Subsidiaries, which schedule includes but is not limited to patents, patents
pending, patent applications, trademarks, tradenames, service marks and
copyrights.
(l) 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.
(m) 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 Subscriber’s Securities
or in correspondence with the SEC regarding same, it will not disclose publicly
or privately the identity of the Subscriber unless expressly agreed to in
writing by a Subscriber or only to the extent required by law and then only upon
not less than three days prior notice to Subscriber. In any event and
subject to the foregoing, the Company undertakes to file a Form 8-K describing
the Offering not later than the fourth (4th)
business day after the Closing Date. Prior to the filing date of such
Form 8-K, a draft in the final form will be provided to Subscriber for
Subscriber’s review and approval. In the Form 8-K, the Company will
specifically disclose the amount of Common Stock outstanding immediately after
the Closing. Upon delivery by the Company to the Subscriber after the
Closing Date of any notice or information, in writing, electronically or
otherwise, and while a Note is held by Subscriber, 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. In the event that the Company
believes that a notice or communication to Subscriber contains material,
nonpublic information relating to the Company or Subsidiaries, the Company shall
so indicate to 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,
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 Subsidiaries.
15
(n) Negative
Covenants. So long as the Note is outstanding, without
the consent of the Subscriber, the Company will not and will not permit any of
its Subsidiaries to directly or indirectly:
(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) the
Excepted Issuances (as defined in Section 12 hereof), and (B) (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 (an increase in the
amount of authorized shares and an increase in the number of directors will not
be deemed adverse to the 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.
(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 in excess of $100,000
other than (i) for payment of salary, or 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; or
(v) prepay
or redeem any financing related debt or past due obligations or securities
outstanding as of the Closing Date, or past due obligations (except with respect
to vendor obligations, any such obligations which in management’s good faith,
reasonable judgment must be repaid to avoid disruption of the Company’s
businesses.
16
The
Company agrees to provide Subscribers not less than ten (10) days notice prior
to becoming obligated to or effectuating a Permitted Lien or Excepted
Issuance.
(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 the Transaction Documents, which information
the Company undertakes to publicly disclose on the Form 8-K described in Section
9(m) above, neither it nor any other
person acting on its behalf will at any time provide Subscriber or its agents or
counsel with any information that the Company believes constitutes material
non-public information, unless prior thereto Subscriber shall have agreed in
writing to accept such information. The Company understands and
confirms that Subscriber shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
(p) Seniority. Except
for Permitted Liens, until the Note is fully satisfied or converted, the Company
shall not grant nor allow any security interest to be taken in the assets of the
Company or any Subsidiary or any Subsidiary’s assets; 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 or any right to payment
equal to or superior to any right of the Subscriber as a holder of the Note in
or to such assets or payment, nor issue or incur any debt not in the ordinary
course of business.
(q) Notices. For
so long as the Subscribers hold any Securities, the Company will maintain a
United States address and United States fax number for notice purposes under the
Transaction Documents.
(r) Transactions With
Insiders. So long as the Note is outstanding, the Company
shall not, and shall cause each of its subsidiaries not to, enter into, amend,
modify or supplement, or permit any subsidiary to enter into, amend, modify or
supplement any agreement, transaction, commitment, or arrangement relating to
the sale, transfer or assignment of any of the Company’s tangible or intangible
assets with any of its Insiders (as defined below)(or any persons who were
Insiders at any time during the previous two (2) years), or any Affiliates (as
defined below) thereof, or with any individual related by blood, marriage, or
adoption to any such individual. Affiliate for purposes of this
Section 9(r) means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. “Control” or
“Controls” for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity. For purposes hereof, “Insiders” shall mean any officer,
director or manager of the Company, including but not limited to the Company’s
president, chief executive officer, chief financial officer and chief operations
officer, and any of their affiliates or family members.
(s) Stock
Splits. For so long as the Notes are outstanding, the Company
undertakes and covenants that without the consent of a majority of the
Subscribers, the Company will not enter into any stock splits without the
consent of Subscribers.
(t) Notice of Event of
Default. The Company agrees to notify Subscriber of the
occurrence of an Event of Default (as defined and employed in the Transaction
Documents) not later than ten (10) days after any of the Company’s officers or
directors becomes aware of such Event of Default.
17
10. Covenants of the Company and
Subscriber Regarding Indemnification.
(a) Indemnification. The
Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers’ officers, directors, agents, counsel, 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
Subscribers 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 in any Transaction Document, or other agreement delivered pursuant hereto
or in connection herewith, now or after the date hereof; 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 Subscribers
relating hereto.
(b) Indemnification
Procedures. Promptly after receipt by an indemnified
party hereunder of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to such indemnified party other than under this
Section 10(b) and shall only relieve it from any liability which it may have to
such indemnified party under this Section 10(b), except and only if and to the
extent the indemnifying party is prejudiced by such omission. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 10(b) 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.
(c) Indemnification from the
Subscriber Each Subscriber agrees to indemnify, hold harmless,
reimburse and defend the Company and each of the Company’s officers, directors,
agents, Affiliates, control persons against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company or any such person which results, arises
out of or is based upon (i) any material misrepresentation by such Subscriber in
this Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
cure periods, any material breach or default in performance by such Subscriber
of any covenant or undertaking to be performed by such Subscriber
hereunder, or any other agreement entered into by the Company and Subscribers,
relating hereto. 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 (as defined herein). The procedures set forth in Section
10(b) shall apply to the indemnification set forth in this
Sections.
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11. Registration
11.1(a) Registration
Rights. The Company hereby grants the following registration
rights to holders of the Securities. If the Company at any time
proposes to file a registration statement 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 S-4, S-8 or another form not available for
registering other shares of Common Stock held by or purchasable by Subscriber as
set forth on Schedule
11.1 (“Registrable
Securities”), provided the Registrable Securities are not otherwise
registered for resale by the Subscribers or Holder pursuant to an effective
registration statement or may be sold pursuant to Rule 144 without respect to
volume limitations in which case they shall be deemed to no longer be
Registrable Securities, each such time it will give at least fifteen (15) 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 not previously registered as
permitted by the SEC Guidance for an offering to be made on a continuous basis
pursuant to Rule 415, the Company will cause such Registrable Securities as to
which registration shall have been so requested to be included with the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent required to permit the sale or other disposition
of the Registrable Securities so registered by the holder of such Registrable
Securities (the “Seller”
or “Sellers”). Unless
instructed in writing to the contrary, the Subscribers hereby automatically
exercise the registration rights granted in this Section 11.1. The
Seller is hereby given the same rights and benefits as any other party
identified in such registration. In the event that any
registration pursuant to this Section 11.1 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; provided, however, that the Company shall notify the Seller in writing
of any such reduction. 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 without thereby incurring any
liability to the Seller due to such withdrawal or delay. Notwithstanding
anything to the contrary herein, in the event that the Commission, limits the
amount of Registrable Securities that may be sold by selling security holders in
a particular Registration Statement, the Company may scale back (i.e. remove)
from such registration statement such number of Registrable Securities on behalf
of all selling security holders on a pro-rata basis based on the total number of
Registrable Securities held by such selling security holder.
11.1(b). Registration
Procedures. If and whenever the Company is required by the provisions of
Section 11.1 to effect the registration of any Registrable Securities under the
1933 Act, the Company will, as expeditiously as possible:
(i) subject
to the timelines provided in this Agreement, 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), promptly provide to the holders of the
Registrable Securities copies of all filings and Commission letters of comment
and notify Subscribers (by telecopier and by e-mail addresses provided by
Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email to
Counslers@aol.com) on
or before the first business day thereafter that the Company receives notice
that (i) the Commission has no comments or no further comments on the
Registration Statement, and (ii) the registration statement has been declared
effective (failure to timely provide notice as required by this Section 11.2(a)
shall be a material breach of the Company’s obligation and an Event of Default
as defined in the Notes and a Non-Registration Event as defined in Section 11.4
of this Agreement);
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(ii) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective until such registration
statement has been effective for a period of two (2) years, and comply with the
provisions of the 1933 Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in accordance with
the Sellers’ intended method of disposition set forth in such registration
statement for such period;
(iii) 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;
(iv) use
its commercially reasonable best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or “blue
sky” laws of New York and 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;
(v) 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;
(vi) notify
the Subscribers within two 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;
(vii) provided
same would not be in violation of the provision of Regulation FD under the 1934
Act, make available for inspection by the Sellers, and any attorney,
accountant or other agent retained by the Seller or underwriter, all publicly
available, non-confidential financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all publicly available, non-confidential
information reasonably requested by the seller, attorney, accountant or agent in
connection with such registration statement; and
(viii) provide
to the Sellers copies of the Registration Statement and amendments thereto five
business days prior to the filing thereof with the Commission.
11.2. 144
Default. In the event commencing six months after the
Closing Date and ending twenty-four months thereafter, the Subscriber is not
permitted to resell any of the Conversion Shares without any restrictive legend
or if such sales are permitted but subject to volume limitations or further
restrictions on resale as a result of the unavailability to Subscriber of
Rule 144(b)(1)(i) under the 1933 Act or any successor rule (a “144 Default”), for any reason
except for Subscriber’s status as an Affiliate or “control person” of the
Company, or as a result of a 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 days) thereafter of the purchase
price of the Conversion Shares subject to such 144 Default during the pendency
of the 144 Default. Liquidated Damages shall not be payable pursuant to this
Section 11.2 in connection with Shares for such times as such Shares may be sold
by the holder thereof without volume or other restrictions pursuant to Section
144(b)(1)(i) of the 1933 Act or pursuant to an effective registration
statement.
20
11.3. Provision of
Documents. In connection with each registration 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. Non-Registration
Events. The Company and the Subscribers agree that the Sellers
will suffer damages if the Company does not comply with its obligations set
forth in Section 11.1.
11.5. Expenses. All
expenses incurred by the Company in complying with Section 11, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent public accountants for the Company,
fees and expenses (including reasonable counsel fees) incurred in connection
with complying with state securities or “blue sky” laws, fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
and registrars, costs of insurance and fee of one counsel for all Sellers are
called “Registration
Expenses.” All underwriting discounts and selling commissions applicable
to the sale of Registrable Securities, including any fees and disbursements of
any additional counsel to the Seller, are called "Selling
Expenses." The Company will pay all Registration Expenses in
connection with the registration statement under Section 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.
11.6. 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 officer of the Seller, each
director of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities 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
in light of the circumstances when made, and will subject to the provisions of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
21
(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 covered by such registration
statement.
(c) Promptly
after receipt by an indemnified party hereunder of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party other
than under this Section 11.6(c) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 11.6(c), except
and only if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
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 11.6(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 indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties,
as a group, shall have the right to select one separate counsel and to assume
such legal defenses and otherwise to participate in the defense of such action,
with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
22
(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 11.6 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 11.6 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not provided under this Section 11.6; then, and in each such case, the Company
and the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities 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 1933 Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
11.7. Delivery of Unlegended
Shares.
(a) Within
three (3) business days (such third business day being the “Unlegended Shares Delivery
Date”) after the business day on which the Company has received (i) a
representation that the prospectus delivery requirements, or the requirements of
Rule 144, as applicable and if required, have been satisfied, and (ii) the
original share certificates representing the shares of Common Stock that have
been sold, and (iii) in the case of sales under Rule 144, customary
representation letters of the Subscriber and/or Subscriber’s broker regarding
compliance with the requirements of Rule 144, the Company at its expense, (y)
shall deliver, and shall cause legal counsel selected by the Company to deliver
to its transfer agent (with copies to Subscriber) an appropriate instruction and
opinion of such counsel, directing the delivery of shares of Common Stock
without any legends including the legend set forth in Section 4 above,
reissuable pursuant to any effective and current Registration Statement
described in Section 11 of this Agreement or pursuant to Rule 144 under the 1933
Act (the “Unlegended
Shares”); and (z) cause the transmission of the certificates representing
the Unlegended Shares together with a legended certificate representing the
balance of the submitted Shares certificate, if any, to the Subscriber at the
address specified in the notice of sale, via express courier, by electronic
transfer or otherwise on or before the Unlegended Shares Delivery
Date.
(b) In
lieu of delivering physical certificates representing the Unlegended Shares, if
the Company’s transfer agent is participating in the Depository Trust Company
(“DTC”) Fast Automated
Securities Transfer program, upon request of a Subscriber, so long as the
certificates therefor do not bear a legend and the Subscriber is not obligated
to return such certificate for the placement of a legend thereon, the Company
must cause its transfer agent to electronically transmit the Unlegended Shares
by crediting the account of Subscriber’s prime Broker with DTC through its
Deposit Withdrawal Agent Commission system. Such delivery must be
made on or before the Unlegended Shares Delivery Date.
(c) The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof after the Unlegended Shares Delivery Date could
result in economic loss to Subscriber. As compensation to 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 subject to such default at a price per share equal to 120% of the
Purchase Price of such Shares (“Unlegended Redemption
Amount”).
23
(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 and the Company is required to deliver such Unlegended Shares
pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
Shares based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law, or for
any other reason, unless, an injunction or temporary restraining order from a
court, on notice, restraining and or enjoining delivery of such Unlegended
Shares 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 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.
12. (a) Favored Nations
Provision. Other than in connection with (i) full or
partial consideration in connection with a strategic merger, acquisition,
consolidation or purchase of substantially all of the securities or assets of
corporation or other entity provided such issuances are not for the purpose of
raising capital which holders of such securities or debt are not at any time
granted registration rights, (ii) the Company’s issuance of securities in
connection with strategic license agreements and other partnering arrangements
so long as such issuances are not for the purpose of raising capital and which
holders of such securities or debt are not at any time granted registration
rights, (iii) the Company’s issuance of Common Stock or the issuances or grants
of options to purchase Common Stock pursuant to stock option plans and employee
stock purchase plans described on Schedule 12(a) hereto at prices equal to or
higher than the closing price of the Common Stock on the issue date of any of
the foregoing, (iv) as a result of the conversion of Notes which are granted or
issued pursuant to this Agreement or that have been issued prior to the Closing
Date, the issuance of which has been disclosed in a Report filed not less than
five (5) days prior to the Closing Date, (v) the payment of any interest on the
Notes and Liquidated Damages pursuant to the Transaction Documents and the
issuance of common stock as set forth on Schedule 12(a) (collectively the
foregoing are “Excepted
Issuances”), if at any time the Subscriber owns any Common Stock from the
conversion of the Notes or exercise of the Warrants, the Company shall agree to
or issue (the “Lower Price
Issuance”) any Common Stock or securities convertible into or exercisable
for shares of Common Stock (or modify any of the foregoing which may be
outstanding) to any person or entity at a price per share or conversion or
exercise price per share which shall be less than the Conversion Price in effect
at such time, or if less than the Warrant exercise price in effect at such time,
without the consent of the Subscriber, then the Company shall issue, for each
such occasion, additional shares of Common Stock to the Subscriber respecting
those Conversion Shares and Warrants Shares that are then still owned by the
Subscriber at the time of the Lower Price Issuance so that the average per share
purchase price of the Shares or Warrant Shares purchased and owned by the
Subscriber on the date of the Lower Price Issuance is equal to such other lower
price per share. Other than in connection with Excepted Issuances, if
at any time the Notes or Warrants are outstanding, if the Company shall agree to
a Lower Price Issuance, then the Conversion Price and Warrant exercise price
shall automatically be reduced to such other lower price. The average
Purchase Price of the Conversion Shares and average exercise price in relation
to the Warrant Shares shall be calculated separately for the Shares and Warrant
Shares. The delivery to Subscriber of the additional shares of Common
Stock shall be not later than the closing date of the transaction giving rise to
the requirement to issue additional shares of Common
Stock. Subscriber is granted the registration rights described in
Section 11 hereof in connection with such additional shares of Common
Stock. For purposes of the issuance and adjustment described in this
paragraph, the issuance of any security of the Company carrying the right to
convert such security into shares of Common Stock or of any warrant, right or
option to purchase Common Stock shall result in the issuance of the additional
shares of Common Stock upon the sooner of the agreement to or actual issuance of
such convertible security, warrant, right or option and again at any time upon
any subsequent issuances of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price lower than the
Conversion Price or Warrant exercise price in effect upon such
issuance. Common Stock issued or issuable by the Company for no
consideration or for consideration that cannot be determined at the time of
issue will be deemed issuable or to have been issued for $0.001 per share of
Common Stock. The rights of Subscriber set forth in this Section 12
are in addition to any other rights the Subscriber has pursuant to this
Agreement, the Note, any Transaction Document, and any other agreement referred
to or entered into in connection herewith or to which Subscriber and Company are
parties.
24
(b) Right of First
Refusal. Until the earlier of (i) two years following the
Closing Date, or (ii) the Notes are no longer outstanding, the Subscribers shall
be given not less than fifteen (15) days prior written notice of any proposed
sale by the Company of its common stock or other securities or equity linked
debt obligations (“Other
Offering”), except in connection with the Excepted
Issuances. If Subscribers elect to exercise their rights pursuant to
this Section 12(b), the Subscribers shall have the right during the fifteen (15)
days following receipt of the notice, to purchase in the aggregate up to all of such offered
common stock, debt or other securities in accordance with the terms and
conditions set forth in the notice of sale, relative to each other in proportion
to the amount of Note Principal issued to them on the Closing
Date. Subscribers who participate in such Other Offering shall be
entitled at their option to purchase, in proportion to each other, the amount of
such Other Offering that could have been purchased by Subscribers who do not
exercise their rights hereunder until up to the entire Other Offering is
purchased by Subscribers. In the event such terms and conditions are
modified during the notice period, Subscribers shall be given prompt notice of
such modification and shall have the right during the fifteen (15) days
following the notice of modification to exercise such right.
(c) Maximum Exercise of
Rights. In the event the exercise of the rights
described in Section 12(a) and Section 12(b) would result in the issuance of an
amount of common stock of the Company that would exceed the maximum amount that
may be issued to a Subscriber calculated in the manner described in Section 6.3
of this Agreement, then the issuance of such additional shares of common stock
of the Company to such Subscriber will be deferred in whole or in part until
such time as such Subscriber is able to beneficially own such common stock
without exceeding the maximum amount set forth calculated in the manner
described in Section 6.3 of this Agreement. The determination of when
such common stock may be issued shall be made by each Subscriber as to only such
Subscriber.
13. Security
Interest. On or about August 31, 2004 and January 31,
2005, the Subscribers were granted a security interest in assets of the Company,
as amended pursuant to the Amendment and Security Interest Agreements on August
5, 2005, August 11, 2006, March 30, 2007 and the Transaction Documents dated
July 9, 2007, May 21, 2009, December 11, 2009 and June 30, 2010 and October 25,
2010, respectively (collectively the “Security
Agreements”). The Company will execute such other agreements,
documents and financing statements reasonably requested by Subscribers to affirm
the Security Agreements, which will be filed at the Company’s expense with such
jurisdictions, states and counties designated by the Subscribers. The
Company will also execute all such documents reasonably necessary in the opinion
of Subscribers to memorialize and further protect the security interest
described herein. The Subscribers appointed a Collateral Agent to
represent them collectively in connection with the security
interest. The appointment was pursuant to a Collateral Agent
Agreement. The Notes and all sums due under the Notes and the
Transaction Documents are included in the term “Obligations” as defined in the
Security Agreements and are secured by the Collateral (as defined in the
Security Agreements) in the same manner and having the same priority as granted
to the Subscribers pursuant to the Security Agreements.
25
14. 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:
Conspiracy Entertainment Holdings, Inc., 612 Santa Monica Boulevard, Santa
Monica, CA 90401, Attn: Keith Tanaka, CFO, facsimile: (310) 260-1450, with a
copy by facsimile only to: Sichenzia Ross Friedman Ference LLP, 61 Broadway,
32nd
Floor, New York, NY 10006, Attn: Marc J. Ross, Esq., facsimile: (212) 930-9725,
and (ii) if to the Subscribers, to: the addresses and fax numbers indicated on
Schedule
1 hereto, with an additional copy by fax only to (which shall not
constitute notice): Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley
Stream, New York 11581, facsimile: (212) 697-3575.
(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.
26
(d) Law Governing this
Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state and county of New York. 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.
(e) Specific Enforcement,
Consent to Jurisdiction. To the extent permitted by law, 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 one or more
preliminary and final injunctions to prevent or cure breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which any of them may be entitled
by law or equity. Subject to Section 14(d) hereof, each of the
Company, Subscriber and any signator hereto in his personal capacity hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction in New York of such
court, that the suit, action or proceeding is brought in an inconvenient forum
or that the venue of the suit, action or proceeding is
improper. Nothing in this Section shall affect or limit any right to
serve process in any other manner permitted by law.
(f) 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.
(g) Independent Nature of
Subscribers. The Company acknowledges that the
obligations of each Subscriber under the Transaction Documents are several and
not joint with the obligations of any other Subscriber, and no Subscriber shall
be responsible in any way for the performance of the obligations of any other
Subscriber under the Transaction Documents. The Company acknowledges that 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.
27
(h) Consent. As
used in the Agreement, “consent of the Subscribers” or similar language means
the consent of holders of not less than 75% 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 parties to the Transaction Documents.
(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 New York City. 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)
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.
(m)
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.
(n) 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.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
28
SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT (A)
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
|
CONSPIRACY
ENTERTAINMENT HOLDINGS, INC.
|
|
|
a
Utah corporation
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Dated:
December ____,
2010
|
|
|
SUBSCRIBER
|
NOTE PRINCIPAL
AND PURCHASE
PRICE
|
WARRANTS
|
||||||
|
ALPHA
CAPITAL ANSTALT
|
$ | 60,000 | ||||||
|
Pradafant
7
|
||||||||
|
9490
Furstentums
|
||||||||
|
Vaduz,
Lichtenstein
|
||||||||
|
Fax:
011-42-32323196
|
||||||||
|
(Signature)
|
|
By:
|
29
SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT (B)
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
|
CONSPIRACY
ENTERTAINMENT HOLDINGS, INC.
|
|
|
a
Utah corporation
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Dated:
December ____,
2010
|
|
|
SUBSCRIBER
|
NOTE PRINCIPAL
AND PURCHASE
PRICE
|
WARRANTS
|
||||||
|
WHALEHAVEN
CAPITAL FUND LIMITED
|
$ | 60,000 | ||||||
|
560
Sylvan Avenue
|
||||||||
|
Englewood
Cliffs, N.J. 07632
|
||||||||
|
Fax:
(201) 586-0258
|
||||||||
|
(Signature)
|
|
By:
|
2
30
SIGNATURE PAGE TO SUBSCRIPTION
AGREEMENT (C)
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
|
CONSPIRACY
ENTERTAINMENT HOLDINGS, INC.
|
|
|
a
Utah corporation
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Dated:
December ____,
2010
|
|
|
SUBSCRIBER
|
NOTE PRINCIPAL
AND PURCHASE
PRICE
|
WARRANTS
|
||||||
|
Brio
Capital LP
|
$ | 30,000 | ||||||
|
401
E. 34th Street –
Suite South 33C
|
||||||||
|
New
York, NY 10016
|
||||||||
|
Attn:
Shaye Hirsch
|
||||||||
|
Fax:
(646) 390-2158
|
||||||||
|
(Signature)
|
|
By:
|
2
31
LIST OF EXHIBITS AND
SCHEDULES
|
Exhibit
A
|
Form
of Note
|
|
|
Exhibit
B
|
Escrow
Agreement
|
|
|
Exhibit
C
|
Escrow
Agreement
|
|
|
Exhibit
D
|
Form
of Legal Opinion
|
|
|
Schedule
1
|
List
of Subscribers
|
|
|
Schedule
4(a)
|
Subsidiaries
|
|
|
Schedule
4(d)
|
Capitalization
and Additional Issuances
|
|
|
Schedule
4(f)(iv)
|
Registration
Rights
|
|
|
Schedule
4(h)
|
Litigation
|
|
|
Schedule
4(m)
|
Defaults
|
|
|
Schedule
4(q)
|
Undisclosed
Liabilities
|
|
|
Schedule
4(v)
|
Transfer
Agent
|
|
|
Schedule
9(e)
|
Use
of Proceeds
|
|
|
Schedule
9(k)
|
Intellectual
Property
|
|
|
Schedule
11.1
|
Other
Registrable Securities
|
|
|
Schedule
12(a)
|
|
Excepted
Issuances
|
32
SCHEDULE 1
|
SUBSCRIBERS
|
NOTE
PRINCIPAL AND
PURCHASE
PRICE
|
WARRANTS
|
||||||
|
ALPHA
CAPITAL ANSTALT
|
$ | 60,000.00 | ||||||
|
Pradafant
7
|
||||||||
|
9490
Furstentums
|
||||||||
|
Vaduz,
Lichtenstein
|
||||||||
|
Fax:
011-42-32323196
|
||||||||
|
WHALEHAVEN
CAPITAL FUND LIMITED
|
$ | 60,000.00 | ||||||
|
560
Sylvan Avenue
|
||||||||
|
Englewood
Cliffs, N.J. 07632
|
||||||||
|
Fax:
(201) 586-0258
|
||||||||
|
Brio
Capital L.P.
|
$ | 30,000 | ||||||
|
401
E. 34th
Street –Suite South 33 C
|
||||||||
|
New
York, New York 10016
|
||||||||
|
Attn: Shaye
Hirsch
|
||||||||
|
Fax
(646) 390-2158
|
||||||||
|
TOTAL
|
$ | 150,000 | ||||||
33