SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Endovasc Ltd.
Inc., a Nevada corporation (the "Company") hereby agrees to issue and to sell to
the Subscriber, the number of shares of Series A 8% Cumulative Convertible
Preferred Stock, $.001 par value (the "Preferred Stock") convertible in
accordance with the terms thereof into shares of the Company's $.001 par value
common stock (the "Company Shares") as set forth on the signature page hereof
for the aggregate consideration as set forth on the signature page hereof
("Purchase Price"). The Certificate to Set Forth Designations, Voting Powers,
Preferences, Limitations, Restrictions, and Relative Rights of Series A 8%
Cumulative Convertible Preferred Stock, $.001 Par Value Per Share is annexed
hereto as Exhibit A ("Certificate of Designation"). (The Company Shares are
sometimes referred to herein as the "Shares" or "Common Stock"). (The Preferred
Stock, the Company Shares, and Common Stock Purchase Warrants issuable to the
Warrant Recipients ("Warrants"), identified on Schedule B hereto, and the Common
Stock issuable upon exercise of the Warrants are collectively referred to herein
as, the "Securities"). Upon acceptance of this Agreement by the Subscriber, the
Company shall issue and deliver to the Subscriber the Preferred Stock (and to
the Warrant Recipients the Warrants) against payment, by federal funds (U.S.)
wire transfer of the Purchase Price. This Subscription Agreement and other
similar Subscription Agreements and the Subscription Agreements relating to
Series A Preferred Stock to be issued in connection with the Put described in
Section 11 hereof relate to the offering of a maximum of 45,000shares of
Preferred Stock for the aggregate Purchase Price of $4,500,000.
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber hereby
represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been furnished with and
has read the Company's Form 10SB, 12G/A filed on April 12, 2000 with the
U.S. Securities and Exchange Commission (the "Commission") (collectively,
with exhibits thereto, hereinafter referred to as the "Reports"). In
addition, the Subscriber has received from the Company such other
information concerning its operations, financial condition and other
matters as the Subscriber has requested, and considered all factors the
Subscriber deems material in deciding on the advisability of investing in
the Securities (such information in writing is collectively, the "Other
Written Information").
(b) Information on Subscriber. The Subscriber is an "accredited
investor", as such term is defined in Regulation D promulgated by the
Commission under the Securities Act of 1933, as amended, 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.
(c) Purchase of Company Shares. On the Closing Date, the Subscriber
will purchase the Preferred Stock and Warrants for its own account and not
with a view to any distribution thereof.
(d) Compliance with Securities Act. The Subscriber understands and
agrees that the Securities have not been registered under the Securities
Act of 1933, as amended (the "1933 Act") by reason of their issuance in a
transaction that does not require registration under the 1933 Act, and that
such Securities must be held unless a subsequent disposition is registered
under the 1933 Act or is exempt from such registration.
(e) Preferred Stock and Company Shares Legend. The Preferred Stock,
Company Shares, and the shares of Common Stock issuable upon the exercise
of the Warrants shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
ENDOVASC LTD. THAT SUCH REGISTRATION IS NOT REQUIRED."
(f) Warrants Legend. The Warrants shall bear the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ENDOVASC LTD. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(g) Communication of Offer. The offer to sell the Securities was
directly communicated to the Subscriber. 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.
(h) Correctness of Representations. The Subscriber represents that the
foregoing representations and warranties are true and correct as of the
date hereof, must be true as of the Closing Date (as hereinafter defined),
and unless the Subscriber otherwise notifies the Company prior to the
Closing Date, shall be true and correct as of the Closing Date. The
foregoing representations and warranties shall survive the Closing Date.
2. Company Representations and Warranties. The Company represents and
warrants to and agrees with the Subscriber that:
(a) Due Incorporation. Each of the Company and each of its
subsidiaries is a corporation duly organized, and validly existing under
the laws of the state of its incorporation and has the requisite corporate
power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries 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 on
the business, operations or prospects or condition (financial or otherwise)
of the Company.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of the Company and each of its subsidiaries has been duly authorized
and validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
authorized, executed and delivered by the Company and is a valid and
binding agreement enforceable in accordance with its 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 the Company has
full corporate power and authority necessary to enter into this Agreement
and to perform its obligations hereunder and all other agreements entered
into by the Company relating hereto.
(d) Additional Issuances. Except as described on the Disclosure
Schedule annexed hereto, there are no outstanding agreements or preemptive
or similar rights affecting the Company's common stock and no outstanding
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, or agreements or understandings with respect to the sale
or issuance of any shares of common stock or equity of the Company or other
equity interest in any of the subsidiaries of the Company, except as
described in the Reports or Other Written Information.
(e) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over
the Company, or any of its affiliates or NASDAQ or the Company's
Shareholders is required for execution of this Agreement, and all other
agreements entered into by the Company relating hereto, including, without
limitation issuance and sale of the Securities, and the performance of the
Company's obligations hereunder.
(f) No Violation or Conflict. Assuming the representations and
warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, neither the
issuance and sale of the Securities nor the performance of its obligations
under this Agreement and all other agreements entered into by the Company
relating thereto by the Company will:
(i) violate, conflict with, result in a breach of, or constitute
a default (or an event which with the giving of notice or the lapse of
time or both would be reasonably likely to constitute a default) under
(A) the articles of incorporation, charter or bylaws of the Company,
or any of its affiliates, (B) to the Company's knowledge, any decree,
judgment, order, law, treaty, rule, regulation or determination
applicable to the Company, or any of its affiliates of any court,
governmental agency or body, or arbitrator having jurisdiction over
the Company, or any of its affiliates or over the properties or assets
of the Company, or any of its affiliates, (C) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease,
mortgage, deed of trust or other instrument to which the Company, or
any of its affiliates is a party, by which the Company, or any of its
affiliates is bound, or to which any of the properties of the Company,
or any of its affiliates is subject, or (D) the terms of any "lock-up"
or similar provision of any underwriting or similar agreement to which
the Company, or any of its affiliates is a party; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company,
or any of its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests,
liens, claims or other encumbrances, subject to restrictions upon
transfer under the 1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and on
the date of issuance and on the Closing Date, as hereinafter defined,
and the date the Preferred Stock is converted, and the Warrants and
Placement Warrants are exercised, the Securities will be duly and
validly issued, fully paid and nonassessable (and if registered
pursuant to the 1933 Act, and resold pursuant to an effective
registration statement will be free trading and unrestricted provided
the Subscriber complies with the Prospectus delivery requirements);
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of
the Company;
(iv) will not subject the holders thereof to personal liability
by reason of being such holders; and
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over
the Company, or any of its affiliates that would affect the execution by
the Company or the performance by the Company of its obligations under this
Agreement, and all other agreements entered into by the Company relating
hereto.
(i) Reporting Company. The Company is a publicly-held company whose
common stock is (and has been for the past 90 days) registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company's Common Stock is listed for trading on the
NASD OTC Bulletin Board. Pursuant to the provisions of the Exchange Act,
the Company has timely filed all reports and other materials required to be
filed thereunder with the Securities and Exchange Commission during the
preceding twelve months.
(j) No Market Manipulation. The Company has 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 of the Company to facilitate the sale or
resale of the Securities or affect the price at which the Securities may be
issued.
(k) Information Concerning Company. The Reports and Other Written
Information contain all material information relating to the Company and
its operations and financial condition as of their respective dates which
information is required to be disclosed therein. Since the date of the most
recent financial statements included in the Reports, and except as modified
in the Other Written Information, there has been no material adverse change
in the Company's business, financial condition or affairs not disclosed in
the Reports. The Reports and Other Written Information do not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading.
(l) Dilution. The number of Shares issuable upon Conversion of the
Preferred Stock (as defined in the Certificate of Designation) may increase
substantially in certain circumstances, including, but not necessarily
limited to, the circumstance wherein the trading price of the Common Stock
declines prior to conversion of the Preferred Stock. The Company's
executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has
concluded, in its good faith business judgment, that such issuance is in
the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the Shares upon conversion of the Preferred
Stock and exercise of the Warrants is binding upon the Company and
enforceable, except as otherwise described in this Subscription Agreement,
regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
(m)Stop Transfer. The Securities are restricted securities as of the
date of this Agreement. The Company will not issue any stop transfer order
or other order impeding the sale and delivery of the Securities at such
time as the Securities are registered for public sale or an exemption from
registration is available.
(n) Defaults. Neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or Bylaws. Neither the Company
nor any of its subsidiaries is (i) 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 on the Company, (ii) 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 its knowledge in violation of
any statute, rule or regulation of any governmental authority material to
its business.
(o) 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 offering 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 NASDAQ National Market ("NASDAQ National
Market"), as applicable, nor will the Company or any of its affiliates or
subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.
(p) 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 Act) in connection with the
offer or sale of the Securities.
(q) Listing. The Company's common stock is quoted on, and listed for
trading on NASD OTC Bulletin Board ("Bulletin Board"). The Company has not
received any oral or written notice from the NASD that its Common Stock
will be delisted from the Bulletin Board or that the Common Stock does not
meet all requirements for the continuation of such listing.
(r) 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 Subscriber prior to the Closing Date, shall be true and
correct in all material respects and must be true as of the Closing Date,
as of the Closing Date. The foregoing representations and warranties shall
survive the Closing Date.
3. Regulation D Offering. This Offering is being made pursuant to the
exemption from the registration provisions of the Securities Act of 1933, as
amended, afforded by Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion acceptable to Subscriber from
the Company's legal counsel opining on the availability of the Regulation D
exemption as it relates to the offer and issuance of the Securities. A form of
the legal opinion is annexed hereto as Exhibit C. The Company will provide, at
the Company's expense, such other legal opinions in the future as are reasonably
necessary for the conversion of the Preferred Stock and Warrants.
4. Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Sections 1(e) and
1(f) above at such time as (a) the holder thereof is permitted to dispose of
such Securities pursuant to Rule 144(k) under the Act, or (b) upon resale
subject to an effective registration statement after the Securities are
registered under the Act. The Company agrees to cooperate with the Subscriber in
connection with all resales pursuant to Rule 144(d) and Rule 144(k) and provide
legal opinions necessary to allow such resales provided the Company and its
counsel receive reasonably requested representations from the Subscriber and
selling broker, if any.
5. Redemption. The Company may not redeem the Securities without the
consent of the holder of the Securities, except as described in the Certificate
of Designation.
6. Commissions/Fees. The Company will pay a cash commission of ten percent
(10%) of the Purchase Price designated on the signature page hereto to certain
Placement Agents identified on Schedule B hereto. The cash commissions will be
payable out of funds held pursuant to a Funds Escrow Agreement to be entered
into by the Company, Subscriber and an Escrow Agent. The Company will also issue
and deliver to the Warrant Recipients Warrants designated on Schedule B hereto.
The Commissions and Warrants will be issued only when, as, and if the
corresponding subscription amount is released from escrow to the Company. All
the representations, covenants, warranties and undertakings, including but not
limited to registration rights made or granted to or for the benefit of the
Subscriber and the terms described in Sections 9.2, 9.3, 9.4 and 9.5 hereof are
hereby also made and granted to the Placement Agents in respect of the Warrants
and Company Shares issuable upon exercise of the Warrants. The Company will pay
a fee of $22,500 to the attorney for the Subscribers in connection with
$1,500,000 of subscriber funds to which this Subscription Agreement relates of
which $10,000 has been paid. The Company will reimburse the parties identified
on Schedule B hereto in the aggregate amount of $10,000 ("Reimbursement").
7. Covenants of the Company. The Company covenants and agrees with the
Subscriber as follows:
(a) The Company will advise the Subscriber, promptly after it receives
notice of issuance by the Securities and Exchange 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) The Company shall promptly secure the listing of the Company
Shares, and Common Stock issuable upon the exercise of the Warrants and
Placement Warrants upon each national securities exchange, or automated
quotation system, if any, upon which shares of common stock are then listed
(subject to official notice of issuance) and shall maintain such listing so
long as any other shares of common stock of the Company shall be so listed.
The Company will use its best efforts to maintain the listing and trading
of its Common Stock on the Bulletin Board, and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws
or rules of the National Association of Securities Dealers ("NASD") and
such exchanges, as applicable. The Company will provide the Subscriber
copies of all notices it receives notifying the Company of the actual
delisting of the Common Stock on any exchange or quotation system on which
the Common Stock is listed.
(c) The Company shall notify the SEC, NASD 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
Subscriber and Placement Agents and promptly provide copies thereof to
Subscriber.
(d) Until at least two (2) years after the effectiveness of the
Registration Statement on Form SB-2 or such other Registration Statement
described in Section 10.1(iv) hereof, the Company will (i) cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, (ii) comply in all respects with its reporting and filing
obligations under the Exchange Act, (iii) comply with all reporting
requirements that is applicable to an issuer with a class of Shares
registered pursuant to Section 12(g) of the Exchange Act, and (iv) comply
with all requirements related to any registration statement filed pursuant
to this Agreement. The Company will not take any action or file any
document (whether or not permitted by the Act or the Exchange 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
later of (y) two (2) years after the effective date of the Registration
Statement on Form SB-2 or such other Registration Statement described in
Section 10.1(iv) hereof, or (z) the sale by the Subscribers and Warrant
Recipients of all the Company Shares issuable by the Company pursuant to
this Agreement. Until at least two (2) years after the Warrants have been
exercised, the Company will use its commercial best efforts to continue the
listing or trading of its Common Stock on the Bulletin Board or NASDAQ
SmallCap Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
NASD and NASDAQ.
(e) The Company undertakes to use the proceeds of the Subscriber's
funds for working capital and expenses of this offering.
8. Covenants of the Company and Subscriber Regarding Idemnifications.
(a) The Company agrees to indemnify, hold harmless, reimburse and
defend Subscriber against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by
or imposed upon Subscriber which results, arises out of or is based upon
(i) any misrepresentation by Company or breach of any warranty by Company
in this Agreement or in any Exhibits or Schedules attached hereto, or
Reports or other Written Information; or (ii) any breach or default in
performance by Company of any covenant or undertaking to be performed by
Company hereunder, or any other agreement entered into by the Company and
Subscribers relating hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company at all times against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of
any nature, incurred by or imposed upon the Company which results, arises
out of or is based upon (a) any misrepresentation by Subscriber in this
Agreement or in any Exhibits or Schedules attached hereto; or (b) any
breach or default in performance by Subscriber of any covenant or
undertaking to be performed by Subscriber hereunder, or any other agreement
entered into by the Company and Subscribers relating hereto.
(c) The procedures set forth in Section 10.6 shall apply to the
indemnifications set forth in Sections 8(a) and 8(b) above.
9.1. Conversion/Liquidated Damages.
(a) The Preferred Stock and accrued dividends will be convertible
according to the procedure set forth in the Certificate of Designation.
(b) The Company understands that a delay in the delivery of the
Company Shares after Conversion, and delivery of Preferred Stock
certificates representing the unconverted balance of a Preferred Stock
certificate tendered for conversion beyond the date described for such
delivery set forth in the Certificate of Designation, or late delivery of a
Mandatory Redemption Payment (as defined herein), as the case may be, (each
of the foregoing a "Delivery Date") could result in economic loss to the
Subscriber. As compensation to the Subscriber for such loss, the Company
agrees to pay late payments to the Subscriber for late delivery of Shares
upon Conversion and late delivery of a Preferred Stock certificate for the
unconverted portion of Preferred Stock or late delivery of a Mandatory
Redemption Payment, in the amount of $75 per business day after the
Delivery Date for each $10,000 of Stated Value of Preferred Stock being
converted and Preferred Stock certificate remaining undelivered or
Mandatory Redemption Payment not paid. The Company shall pay any payments
incurred under this Section in immediately available funds upon demand.
Furthermore, in addition to any other remedies which may be available to
the Subscriber, in the event that the Company fails for any reason to
effect delivery of the Shares within three business days after the Delivery
Date, the Subscriber will be entitled to revoke the relevant Notice of
Conversion by delivery of a notice of revocation 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 of revocation,
except that late payment charges described above shall be payable through
the date notice of revocation is given to the Company.
(c) 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.
9.2. Mandatory Redemption. In the event the Company may not issue Shares on
a Delivery Date for any reason (except in relation to the Shares not deliverable
pursuant to Section 9.3 of this Subscription Agreement), then at the
Subscriber's election, the Company must pay to the Subscriber on the Delivery
Date a sum of money determined by the greater of (i) multiplying the Stated
Value of Preferred Stock not convertible by 130% together with accrued but
unpaid dividends thereon; or (ii) the closing bid price of the common stock as
reported by the Bulletin Board or the principal exchange or market where traded
for the Delivery Date multiplied by the amount of Shares not deliverable,
together with accrued but unpaid dividends thereon, ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by the Subscriber
on the same date as the Company Shares otherwise deliverable. Upon receipt of
the Mandatory Redemption Payment, the corresponding Preferred Stock will be
cancelled and no longer outstanding, and if the Holder is in possession of the
corresponding Preferred Stock, same will be returned to the Company.
9.3. Maximum Conversion. The Company and Subscriber shall not be entitled
to convert on a Conversion Date that amount of the Preferred Stock in connection
with that number of shares of Common Stock which would be in excess of the sum
of (i) the number of shares of Common Stock beneficially owned by the Subscriber
and its affiliates on a Conversion Date, and (ii) the number of shares of Common
Stock issuable upon the conversion of the Preferred Stock with respect to which
the determination of this proviso is being made on a Conversion Date, which
would result in beneficial ownership by the Subscriber and its affiliates of
more than 9.99% of the outstanding shares of Common Stock of the Company. For
the purposes of the proviso to 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 Regulation 13d-3 thereunder, except as
otherwise provided in clause (i) of such proviso. The Subscriber may revoke the
restriction described in this paragraph upon 75 days prior notice to the
Company. The Subscriber may allocate which of the equity of the Company deemed
beneficially owned by the Subscriber shall be included in the 9.9% amount
described above and which shall be allocated to the excess above 9.99%.
9.4. Injunction - Posting of Bond. In the event a Subscriber shall elect to
convert Preferred Stock and/or accrued dividends, 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 said Preferred Stock and/or dividends
shall have been sought and obtained and the Company posts a surety bond for the
benefit of such Subscriber in the amount of 150% of the amount of the stated
value of the Preferred Stock which is 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 it obtains judgment.
9.5. Buy-In. In addition to any other rights available to the Subscriber,
if the Company fails to deliver to the Subscriber Company Shares issuable upon
conversion of Preferred Stock and/or dividends by the Delivery Date and if after
the Delivery Date the Subscriber purchases (in an open market transaction or
otherwise) shares of common stock to deliver in satisfaction of a sale by such
Subscriber of the Company Shares which the Subscriber anticipated receiving 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 stated value of the Preferred Stock 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 stated value of Preferred Stock and/or
dividends, 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.
10.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 91 days after the Closing
Date, but not later than three years after the Closing Date, the Company,
upon a written request therefor from any record holder or holders of more
than 50% of the aggregate of the Company's Shares issued and issuable upon
Conversion of the Preferred Stock issued in the Company's offering of up to
$1,500,000 of stated value of Preferred Stock on the same terms and
conditions as in this Subscription Agreement (the Securities and securities
issued or issuable by virtue of ownership of the Securities, including the
Put Securities, are the "Registrable Securities"), shall prepare and file
with the SEC a registration statement under the Act covering the
Registrable Securities which are the subject of such request, unless such
Registrable Securities are the subject of an effective registration
statement. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of the Registrable
Securities that such registration statement is to be filed and shall
include in such registration statement Registrable Securities for which it
has received written requests within 10 days after the Company gives such
written notice. Such other requesting record holders shall be deemed to
have exercised their demand registration right under this Section 10.1(i).
As a condition precedent to the inclusion of Registrable Securities, the
holder thereof shall provide the Company with such information as the
Company reasonably requests. The obligation of the Company under this
Section 10.1(i) shall be limited to one registration statement.
(ii) If the Company at any time proposes to register any of its
securities under the 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 the Registrable Securities for sale to the
public, provided the Registrable Securities are not otherwise registered
for resale by the Subscriber or Holder pursuant to an effective
registration statement, each such time it will give at least 30 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 30 days after the giving of any such notice by the Company,
to register any of the Registrable Securities, 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"). In the event that any registration pursuant to this Section
10.1(ii) shall be, in whole or in part, an underwritten public offering of
common stock of the Company, (i) Seller shall enter into the underwriting
agreement with the underwriter, and (ii) 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 forgoing
provisions, the Company may withdraw any registration statement referred to
in this Section 10.1(ii) without thereby incurring any liability to the
Seller.
(iii) If, at the time any written request for registration is received
by the Company pursuant to Section 10.1(i), the Company has determined to
proceed with the actual preparation and filing of a registration statement
under the 1933 Act in connection with the proposed offer and sale for cash
of any of its securities for the Company's own account, such written
request shall be deemed to have been given pursuant to Section 10.1(ii)
rather than Section 10.1(i), and the rights of the holders of Registrable
Securities covered by such written request shall be governed by Section
10.1(ii) except that the Company or underwriter, if any, may not withdraw
such registration or limit the amount of Registrable Securities included in
such registration.
(iv) The Company shall file with the Commission within 60 days of the
Closing Date (the "Filing Date"), and use its reasonable commercial efforts
to cause to be declared effective a Form SB-2 registration statement (or
such other form that it is eligible to use) within 90 days of the Closing
Date in order to register the Registrable Securities for resale and
distribution under the Act. The registration statement described in this
paragraph must be declared effective by the Commission within 120days of
the Closing Date (as defined herein) ("Effective Date"). The Company will
register not less than a number of shares of Common Stock in the
aforedescribed registration statement that is equal to 200% of the Company
Shares issuable at the Conversion Price that would be in effect on the
Closing Date or the date of filing of such registration statement,
whichever is greater, assuming the conversion of all the Preferred Stock
and Put Stock set forth in the signature page hereto, and one share of
common stock for each common share issuable upon exercise of the Warrants,
and Put Warrants. The Registrable Securities shall be reserved and set
aside exclusively for the benefit of the Subscriber and Warrant Recipients,
as the case may be, and not issued, employed or reserved for anyone other
than the Subscriber and Warrant Recipients. Such registration statement
will be promptly amended or additional registration statements will be
promptly filed by the Company as necessary to register additional Company
Shares to allow the public resale of all Common Stock included in and
issuable by virtue of the Registrable Securities. No securities of the
Company other than the Registrable Securities will be included in the
registration statement described in this Section 10.1(iv).
10.2. Registration Procedures. If and whenever the Company is required by
the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and
promptly provide to the holders of Registrable Securities copies of all
filings and Commission letters of comment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective until the latest of: (i) six months after the exercise
period of the Warrants and Placement Warrants; or (ii) two years after the
Closing Date, and comply with the provisions of the Act with respect to the
disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Seller's intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if any, 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;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller and in
the case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any
such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the
Company is then listed;
(f) immediately notify the Seller and each underwriter under such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 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;
(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement,
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, underwriter, attorney, accountant or agent in connection with
such registration statement.
10.3. Provision of Documents.
(a) At the request of the Seller, provided a demand for registration
has been made pursuant to Section 10.1(i) or a request for registration has
been made pursuant to Section 10.1(ii), the Registrable Securities will be
included in a registration statement filed pursuant to this Section 10.
(b) In connection with each registration hereunder, the 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. In connection with each registration
pursuant to Section 10.1(i) or 10.1(ii) covering an underwritten public
offering, the Company and the Seller agree to enter into a written
agreement with the managing underwriter in such form and containing such
provisions as are customary in the securities business for such an
arrangement between such underwriter and companies of the Company's size
and investment stature.
10.4. Non-Registration Events. The Company and the Subscriber agree that
the Seller will suffer damages if any registration statement required under
Section 10.1(i) or 10.1(ii) above is not filed within 60 days after request by
the Holder and not declared effective by the Commission within 120days after
such request [or the Filing Date and Effective Date, respectively, in reference
to the Registration Statement on Form SB-2 or such other form described in
Section 10.1(iv)], and maintained in the manner and within the time periods
contemplated by Section 10 hereof, and it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if (i) the Registration
Statement described in Sections 10.1(i) or 10.1(ii) is not filed within 60 days
of such request, or is not declared effective by the Commission on or prior to
the date that is 120days after such request, or (ii) the registration statement
on Form SB-2 or such other form described in Section 10.1(iv) is not filed on or
before the Filing Date or not declared effective on or before the sooner of the
Effective Date, or within five days of receipt by the Company of a communication
from the Commission that the registration statement described in Section
10.1(iv) will not be reviewed, or (iii) any registration statement described in
Sections 10.1(i), 10.1(ii) or 10.1(iv) is filed and declared effective but shall
thereafter cease to be effective (without being succeeded immediately by an
additional registration statement filed and declared effective) for a period of
time which shall exceed 30 days in the aggregate per year but not more than 20
consecutive calendar days (defined as a period of 365 days commencing on the
date the Registration Statement is declared effective) (each such event referred
to in clauses (i), (ii) and (iii) of this Section 10.4 is referred to herein as
a "Non-Registration Event"), then, for so long as such Non-Registration Event
shall continue, the Company shall pay in cash as Liquidated Damages to each
holder of any Registrable Securities an amount equal to one percent (1%) for the
first month or part thereof and two (2%) percent per month or part
thereof after the first thirty days, of the pendency of such Non-Registration
Event, of the stated value of the Preferred Stock, whether or not converted, and
of the aggregate amount of the exercise prices of the Warrants, whether or not
exercised, then owned of record by such holder as of the occurrence of such
Non-Registration Event. Payments to be made pursuant to this Section 10.4 shall
be due and payable immediately upon demand in immediately available funds. In
the event a Mandatory Redemption payment is demanded from the Company by the
Holder of Preferred Stock, pursuant to Section 9.2 of this Subscription
Agreement, then the Liquidated Damages described in this Section 10.4 shall no
longer accrue on the portion of the Purchase Price underlying the Mandatory
Redemption Payment, from and after the date the Holder receives the Mandatory
Redemption Payment. It shall be deemed a Non-Registration Event to the extent
that any Shares into which Preferred Stock and Put Stock (if issued) are
convertible, assuming complete conversion of all Preferred Stock, and Put Stock
(if issued) and dividends thereon, are not included in an effective registration
statement as of and after the Effective Date at the Conversion Price in effect
from and after the Effective Date.
10.5. Expenses. All expenses incurred by the Company in complying with
Section 10, 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, and costs of insurance are called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Registrable Securities, including any fees and
disbursements of any special counsel to the Seller, are called "Selling
Expenses". The Seller shall pay the fees of its own additional counsel, if any.
The Company will pay all Registration Expenses in connection with the
registration statement under Section 10. All Selling Expenses in connection with
each registration statement under Section 10 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.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under
the Act pursuant to Section 10, the Company will 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 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which such Registrable Securities was registered under the
Act pursuant to Section 10, 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 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 will not be liable in any such case if and 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, the underwriter or any such controlling person in writing
specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Section 10, the Seller will indemnify
and hold harmless the Company, and each person, if any, who controls the
Company within the meaning of the 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 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 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
Act pursuant to Section 10, 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, or the Seller's failure to comply with
prospectus delivery requirements, 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 proportion of any such loss,
claim, damage, liability or expense which is equal to the proportion that
the public offering price of the Registrable Securities sold by the Seller
under such registration statement bears to the total public offering price
of all securities sold thereunder, but not in any event to exceed the gross
proceeds 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 10.6(c)
and shall only relieve it from any liability which it may have to such
indemnified party under this Section 10.6(c) 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 10.6(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 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. The
indemnifying party shall not be liable for amounts paid in settlement by
the indemnified party unless the indemnifying party has consented to the
settlement, which consent shall not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the Act in any case in which either (i) the
Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 10.6 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 10.6 provides for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of the Seller or controlling person of the Seller in
circumstances for which indemnification is provided under this Section
10.6; 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, (A) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (B) no person or entity guilty
of fraudulent misrepresentation (within the meaning of Section 10(f) of the
Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
11.1. Obligation To Purchase.
(a) The Subscriber agrees to purchase from the Company Preferred Stock
("Put Stock") in the amounts set forth on the signature page hereof for up
to the aggregate amount of Put Purchase Price designated on the signature
page hereof (the "Put"). Collectively the Put Stock, and Put Warrants and
Common Stock issuable upon conversion of the Put Stock, and Put Warrants
are referred to as the "Put Securities".) The Holders of the Put Securities
are granted all the rights, undertakings, remedies, liquidated damages and
indemnification granted to the Subscriber and Warrant Recipients in
connection with the Securities, including but not limited to, the rights
and procedures set forth in Sections 9.1, 9.2, 9.3, 9.4, 9.5, and the
registration rights described in Section 10 hereof.
(b) The agreement to purchase the Put Securities is contingent on the
following, as of the Put Date and Put Closing Date, any, some or all of
which may be waived by the Subscriber:
(i) The non-occurrence of a Non-Registration Event.
(ii) The non-occurrence (whether or not continuing) of an Event
of Default as described in the Certificate of Designation.
(iii) As of a Put Date and Put Closing Date, the Company will be
a full reporting company with the class of Shares registered pursuant
to Section 12(g) of the Exchange Act of 1934, and the Company will be
in compliance with all such reporting obligations applicable to an
issuer with a class of Shares registered pursuant to Section 12(g) of
the Exchange Act.
(iv) No material adverse change in the Company's business or
business prospects shall have occurred after the date of the most
recent financial statements included in the Reports. Material adverse
change is defined as any effect on the business, operations,
properties, prospects, or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise interfere with the ability
of the Company to enter into and perform any of its obligations under
this Agreement, or any other agreement entered into or to be entered
into in connection herewith, in any material respect.
(v) The execution and delivery to the Subscriber of a certificate
signed by the Company's chief executive officer representing the truth
and accuracy of all the Company's representations and warranties
contained in this Subscription Agreement as of the Put Date, and Put
Closing Date and confirming the covenants and undertakings contained
herein, and representing the satisfaction of all contingencies and
conditions required for the exercise of the Put.
(vi) The Company's continued listing on and compliance at all
times after the date hereof with the listing requirements of the
Bulletin Board.
(vii) The Company's not having received notice from the Bulletin
Board (or any principal market on which the Company's common stock is
listed for trading) that the Company is not in compliance with the
requirements for continued listing.
(viii) The execution by the Company and delivery to the
Subscriber of all documents reasonably necessary to memorialize the
rights and obligations of each of the parties in relation to the Put.
(ix) The average closing bid price of the Common Stock on the
Bulletin Board for the three trading days preceding a Put Date is not
less than 150% of the average closing bid price of the Common Stock as
reported by the Bulletin Board for the three trading days preceding
the Closing Date, provided that this condition shall apply only to the
portion of the Put Purchase Price payable up to 90 days after the
Actual Effective Date.
11.2. Exercise of Put.
(a) The Company's right to exercise the Put commences on the actual
effective date of the registration statement described Section 10.1(iv)
hereof in relation to all the Securities and Put Securities ("Actual
Effective Date") and expires fifteen (15) business days thereafter ("Put
Exercise Period").
(b) The Put may be exercised by the Company by the giving to the
Subscriber of a written notice of exercise ("Put Notice") during the Put
Exercise Period in relation to the subject Put Securities. The date a Put
Notice is given is a Put Date. Each Put Notice must be accompanied by the
(i) officer's certificate described in Section 11.1(b)(v) above; (ii) the
original legal opinion described in Section 7.1(e); (iii) a legal opinion
relating to the Put Securities in form reasonably acceptable to Subscriber;
and (iv) proof of effectiveness of the registration statement in which the
Securities and Put Securities are registered together with five copies of
the prospectus relating to the Securities and Put Securities.
(c) Unless otherwise agreed to by the Subscribers, Put Notices must be
given to all Subscribers in proportion to the amounts agreed to be
purchased by all Subscribers undertaking to purchase Put Shares in the
initial $1,500,000 installment of the aggregate $4,500,000 offering to
which this and other identical Subscription Agreements relate. The
aggregate amount of all Put Notices may not exceed $1,500,000. In the event
the Company does not exercise the Put during the Put Exercise Period for
the entire Put amount, then the Subscriber may exercise the Put on behalf
of the Company in relation only to such Subscriber, by giving notice to the
Company of such exercise during the seven (7) business days following the
Put Exercise Period.
(d) After receipt by Subscriber of a Put Notice and the items set
forth in Section 11.2(b) above the Subscriber must pay an amount equal to
50% of the Purchase Price set forth on the signature page hereto within ten
(10) business days after the Actual Effective Date ("First Put Payment
Date"), and an amount equal to 50% of the Purchase Price within one hundred
and twenty (120) days after the Actual Effective Date ("Second Put Payment
Date"). Payment will be made against delivery to the Subscriber or an
escrow agent to be agreed upon by the Company and Subscriber, of the Put
Securities, and delivery to the Warrant Recipients of the Put Warrants and
Put Commissions set forth on Schedule B hereto.
(e) An additional precondition to the exercise of the Put and payment
of the initial 50% of the Put Purchase Price in that the average reported
trading volume of the Common Stock on the Bulletin Board for the thirty
trading days prior to the Actual Effective Date is not less than 100,000
Shares per day. Additional preconditions to the payment of the final 50% of
Put Purchase Price are that the average reported trading volume of the
Common Stock on the Bulletin Board for the thirty trading days prior to the
Second Put Payment Date is not less than 150,000 Common Shares per day at
an average reported closing bid price during such thirty day period of not
less than 150% of the Conversion Price set forth in Paragraph 4(b)(ii)(x)
of the Certificate of Designation.
(f) Maximum Put Exercise. The Company may not give the Subscriber a
Put Notice in connection with that amount of Put Securities which could be
converted as of the Put Date into a number of shares of Common Stock which
would be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by the Subscriber and its affiliates on such Put Date,
and (ii) the number of shares of Common Stock issuable upon the conversion
of the Put Stock and exercise of the Put Warrants with respect to which the
determination of this proviso is being made on a Put Date, which would
result in beneficial ownership by the Subscriber and its affiliates of more
than 9.99% of the outstanding shares of Common Stock of the Company on such
Put Date. For the purposes of the proviso to 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
Regulation 13d-3 thereunder.
11.3. Put Commissions/Fees. The Placement Agents identified on Schedule B
hereto shall receive aggregate finder's fees in connection with the closing of
the Put of cash equal to ten (10%) percent of the Put Purchase Price and the
recipients of Put Warrants as set forth on Schedule B hereto. Collectively, the
foregoing are referred to as Put Commissions. Put Commissions shall be payable
only in connection with the Put Purchase Price actually paid by a Subscriber.
11.4. Assignment of Put. Anything to the contrary herein or in the
Certificate of Designation notwithstanding either before or after exercise of
the Put by the Company or the Subscriber, the Subscriber may assign to another
party the Subscriber's right to pay all or some of the Put Purchase Price and
receive the corresponding Put Securities. Such assignment must be in writing and
will not be binding on the Company until the Company receives a copy of the
assignment. The assignment will be effective only if the assignee consents in
writing to be bound by all of the Subscriber's obligations to the Company set
forth herein, in connection with such assignment. Upon an effective assignment,
the assignee will succeed to all of the Subscriber's rights under this
Subscription Agreement, the Certificate of Designation and all other agreements
relating to the assigned portion of the Put.
12. Offering Restrictions. Until 120 days after the Actual Effective Date,
the Company agrees not to issue any equity, convertible debt or other securities
at a per common share equivalent price less than the Closing Ask price of the
Company's common stock in effect as of the date of such issuance as reported by
the Bulletin Board or such other principal market or exchange where the
Company's common stock is listed for trading. The restriction described in this
Section 12 shall not apply if the Subscriber fails to timely pay to the Company
funds payable in connection with a Put exercise.
14. Miscellaneous.
(a) Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being telecopied (provided that a
copy is delivered by first class mail) to the party to receive the same at
its address set forth below or to such other address as either party shall
hereafter give to the other by notice duly made under this Section: (i) if
to the Company, to Endovasc Ltd., 15001 Walden Road, Suite 108, Montgomery,
TX 77356, Attn: Dr. David P. Summers, telecopier number: (936) 5828250,
with a copy by telecopier only to Sichenzia, Ross & Friedman LLP, 135 West
50th Street, 20th Floor, New York, NY 10020, Attn: Gregory Sichenzia, Esq.,
telecopier number: (212) 664-7329, and (ii) if to the Subscriber, to the
name, address and telecopy number set forth on the signature page hereto,
with a copy by telecopier only to Grushko & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, NY 10176, telecopier number: 212-697-3575.
Any notice that may be given pursuant to this Agreement, or any document
delivered in connection with the foregoing may be given by the Subscriber
on the first business day after the observance dates in the United States
of America by Orthodox Jewry of Rosh Hashanah, Yom Kippur, the first two
days of the Feast of Tabernacles, Shemini Atzeret, Simchat Torah, the first
two and final two days of Passover and Pentecost, with such notice to be
deemed given and effective, at the election of the Subscriber on a holiday
date that precedes such notice. Any notice received by the Subscriber on
any of the aforedescribed holidays may be deemed by the Subscriber to be
received and effective as if such notice had been received on the first
business day after the holiday.
(b) Closing. The consummation of the transactions contemplated herein
shall take place at the offices of Grushko & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, NY 10176, upon the satisfaction of all
conditions to Closing set forth in this Agreement. The closing date shall
be the date that subscriber funds representing the net amount due the
Company from the Purchase Price are transmitted by wire transfer to the
Company (the "Closing Date"). The closing date for the Put shall be the
date on which Subscriber funds representing the net amount due the Company
from the Put Purchase Price is transmitted to or on behalf of the Company
("Put Closing Date").
(c) Entire Agreement; Assignment. This Agreement represents 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. No
right or obligation of either party shall be assigned by that party without
prior notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by facsimile
transmission, and in counterparts, each of which will be deemed an
original.
(e) 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 of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial
by jury. The prevailing party shall be entitled to recover from the other
party its reasonable attorney's fees and costs. In the event that any
provision of this Agreement or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability
of any other provision of any agreement.
(f)Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof or thereof,
this being in addition to any other remedy to which any of them may be
entitled by law or equity. Subject to Section 12(e) hereof, each of the
Company and Subscriber 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 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.
(g)Automatic Termination. This Agreement shall automatically terminate
without any further action of either party hereto if the Closing shall not
have occurred by the tenth (10th) business day following the date this
Agreement is accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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.
ENDOVASC LTD. INC.
By:____________________________________
Name:
Title:
Dated: May _____, 2000
Purchase Price: $
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Preferred Shares Purchased: (at $100 per share)
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ACCEPTED: Dated as of May _____, 2000
PUT
Put Stock:
Put Purchase Price: $
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