Exhibit 10.57
SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and iBIZ Technology
Corp., a Florida corporation (the "Company") hereby agrees to issue and to sell
to the Subscriber, Secured 8% Convertible Notes (the "Notes") convertible in
accordance with the terms thereof into shares of the Company's $.001 par value
common stock (the "Company Shares") for the aggregate consideration as set forth
on the signature page hereof ("Purchase Price"). The form of Convertible Note is
annexed hereto as Exhibit A. (The Company Shares included in the Securities (as
hereinafter defined) are sometimes referred to herein as the "Shares" or "Common
Stock"). (The Notes, the Company Shares, Common Stock Purchase Warrants
("Warrants") issuable to the recipients 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 Note
against payment, by federal funds wire transfer of the Purchase Price.
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 the
Company's Form 10-KSB for the year ended October 31, 2000 as filed with the
Securities and Exchange Commission (the "Commission") together with all
subsequently filed forms 10-QSB, and other publicly available filings made with
the Commission (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 in writing, 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 (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.
(c) Purchase of Note. On the Closing Date, the Subscriber will purchase the
Note 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 1933 Act, 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 unless a
subsequent disposition is registered under the 1933 Act or is exempt from such
registration.
(e) Company Shares Legend. The 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 UNDER SUCH SECURITIES ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IBIZ
TECHNOLOGY CORP. 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. THIS WARRANT AND THE
COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IBIZ TECHNOLOGY CORP. THAT SUCH REGISTRATION
IS NOT REQUIRED."
(g) Note Legend. The Note shall bear the following legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON
SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IBIZ TECHNOLOGY CORP. THAT SUCH REGISTRATION
IS NOT REQUIRED."
(h) 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.
(i) Correctness of Representations. The Subscriber represents that the
foregoing representations and warranties are true and correct as of the date
hereof and, unless the Subscriber otherwise notifies the Company prior to the
Closing Date (as hereinafter defined), 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. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the respective jurisdictions of their incorporation and have the requisite
corporate power to own their properties and to carry on their 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. There are no outstanding agreements or preemptive
or similar rights affecting the Company's common stock or equity and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of common stock or equity of the Company or 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, the NASD, NASDAQ or the Company's Shareholders is
required for execution of this Agreement, and all other agreements entered into
by the Company relating thereto, 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
certificate 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 Note is converted, and the 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 that
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;
and
(iv) will not subject the holders thereof to personal liability by
reason of being such holders.
(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. Except as
disclosed in the Reports or Other Written Information, 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.
(i) Reporting Company. The Company is a publicly-held company subject to
reporting obligations pursuant to Sections 15(d) and 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and has a class of common
shares registered pursuant to Section 12(g) of the 1934 Act. The Company's
common stock is trading on the NASD OTC Bulletin Board ("Bulletin Board").
Pursuant to the provisions of the 1934 Act, the Company has filed all reports
and other materials required to be filed thereunder with the Securities and
Exchange Commission during the preceding twelve months except as set forth in
the Reports.
(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 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 Note 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 Note. 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 Note and exercise of the Warrants is binding upon the Company
and enforceable, except as otherwise described in this Subscription Agreement or
the Note, 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, except as may be
required by federal securities laws.
(n) Defaults. Neither the Company nor any of its subsidiaries is in
violation of its Certificate 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 which violation would have a material adverse effect on the Company.
(o) No Integrated Offering. To the best of its knowledge after due inquiry
with regulatory authorities, 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 Bulletin Board, 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 listed for trading on the
Bulletin Board and satisfies all requirements for the continuation of such
listing. The Company has not received any notice 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) 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 December 31,
2000 and which, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the Company's financial condition.
(s) No Undisclosed Events or Circumstances. Since December 31, 2000, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, 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.
(t) Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of 100,000,000 shares of Common Stock ($.001 par value).
Except as set forth in the Reports and Other Written Information, 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. 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.
(u) 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, will be true and correct as of the Closing
Date, and, unless the Company otherwise notifies the Subscriber prior to the
Closing Date, shall be true and correct in all material respects 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 Note and exercise of the 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 and disposes
of such Securities pursuant to Rule 144(d) and/or Rule 144(k) under the 1933 Act
in the opinion of counsel reasonably satisfactory to the Company, or (b) upon
resale subject to an effective registration statement after the Securities are
registered under the 1933 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 all reasonably requested written representations
from the Subscriber and selling broker, if any. If the Company fails to remove
any legend as required by this Section 4 (a "Legend Removal Failure"), then
beginning on the tenth (10th) day following the date that the Subscriber has
requested the removal of the legend and delivered all items reasonably required
to be delivered by the Subscriber, the Company continues to fail to remove such
legend, the Company shall pay to each Subscriber or assignee holding shares
subject to a Legend Removal Failure an amount equal to one percent (1%) of the
Purchase Price of the shares subject to a Legend Removal Failure per day that
such failure continues. If during any twelve (12) month period, the Company
fails to remove any legend as required by this Section 4 for an aggregate of
thirty (30) days, each Subscriber or assignee holding Securities subject to a
Legend Removal Failure may, at its option, require the Company to purchase all
or any portion of the Securities subject to a Legend Removal Failure held by
such Subscriber or assignee at a price per share equal to 120% of the applicable
Purchase Price.
5. Redemption. The Company may not redeem the Securities without the
consent of the holder of the Securities except as otherwise described herein.
6. Fees/Warrants.
(a) The Company shall pay to counsel to the Subscriber its fees of $2,500
for services rendered to Subscribers in connection with this Agreement and the
other Subscription Agreements for aggregate subscription amounts of up to
$34,723 (the "Initial Offering"). The Company will pay the escrow agent for the
Initial Offering a fee of $750. The Company will pay to the Fund Managers
identified on Schedule B hereto a cash fee in the amount of: ten percent (10%)
of the Purchase Price ("Fund Manager's Fee") and of the actual cash proceeds
received by the Company in connection with the exercise of the Warrants issued
in connection with the Initial Offering ("Warrant Exercise Compensation"). The
Fund Manager's Fee must be paid each Closing Date with respect to the Notes
issued on such date. The Warrant Exercise Compensation must be paid to the Fund
Managers identified on Schedule B hereto, within ten (10) days of receipt of the
Warrant exercise "Purchase Price" (as defined in the Warrant). The Fund
Manager's Fee and legal fees 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.
(b) The Company will also issue and deliver to the Warrant Recipients
identified on Schedule B hereto, Warrants in the amounts designated on Schedule
B hereto in connection with the Initial Offering. A form of Warrant is annexed
hereto as Exhibit D. The per share "Purchase Price" of Common Stock as defined
in the Warrant shall be equal to the lesser of (i) $[ ] or (ii) 105% of the
average of the three lowest closing bid prices of the Common Stock as reported
by Bloomberg Financial for the Pink Sheets, the NASD OTC Bulletin Board, NASDAQ
SmallCap Market, NASDAQ National Market, American Stock Exchange, or New York
Stock Exchange (each of the foregoing the Principal Market") for the ten trading
days prior to but not including the date the Warrant is exercised. The Warrants
designated on Schedule B hereto must be delivered to the Warrant Recipients on
the Closing Date. Failure to timely deliver the Warrant Exercise Compensation,
the Warrants or Fund manager's Fee shall be an Event of Default as defined in
Article III of the Note.
(c) The Fund Manager's Fee, legal fees and escrow agent's fee will be paid
to the Fund Managers and attorneys only when, as, and if a corresponding
subscription amount is released from escrow to the Company and out of the escrow
proceeds. All the representations, covenants, warranties, undertakings,
remedies, liquidated damages, indemnification, rights in Section 9 hereof, and
other rights but not including registration rights made or granted to or for the
benefit of the Subscriber are hereby also made and granted to the Warrant
Recipients in respect of the Warrants and Company Shares issuable upon exercise
of the Warrants.
(d) The Company on the one hand, and the Subscriber on the other hand,
agree to indemnify the other against and hold the other harmless from any and
all liabilities to any other persons claiming brokerage commissions or fund
manager's fees except as identified on Schedule B hereto on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby and
arising out of such party's actions. Except as set forth on Schedule B hereto,
the Company represents that there are no other parties entitled to receive fees,
commissions, or similar payments in connection with the offering described in
the Subscription Agreement.
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 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 shall be so
listed. The Company will maintain the listing of its 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 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 threatened and actual delisting of the Common Stock from any Principal
Market.
(c) The Company shall notify the SEC, NASD and applicable state
authorities, in accordance with their requirements, if any, 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 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 actual 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 and Securities 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 of the Common Stock on the Bulletin Board, NASDAQ
SmallCap Market, New York Stock Exchange, American Stock Exchange, or NASDAQ
National Market System 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 the purposes set forth on Schedule 7(e) hereto. Purchase Price may not and
will not be used to pay debt or non-trade obligations outstanding on or after
the Closing Date.
(f) The Company undertakes to use its best efforts to acquire, within three
months of the Closing Date, at a commercially reasonable cost, a standard
officers and directors errors and omissions liability insurance policy covering
the transactions contemplated in this Agreement.
(g) The Company undertakes to reserve pro rata on behalf of each holder of
a Note or Warrant, from its authorized but unissued Common Stock, at all times
that Notes or Warrants remain outstanding, a number of Common Shares equal to
not less than 200% of the amount of Common Shares necessary to allow each such
holder to be able to convert all such outstanding Notes, at the then applicable
Conversion Price and one Common Share for each Common Share issuable upon
exercise of the Warrants.
(h) The Company and Subscriber agree that until the Company obtains the
approval of its shareholders to increase the authorized Common Stock of the
Company to 500,000,000 Common Shares (the "Approval"), the Company shall have no
obligation to issue upon conversion or exercise, as applicable, of the Notes and
Warrants more than the number of Company Shares presently unissued and
unreserved. The Company covenants to obtain the Approval to allow conversion of
all the Notes and exercise of all the Warrants. The Company covenants to obtain
the Approval no later than sixty days after the Closing Date ("Approval Date").
The Company's failure to obtain the Approval on or before the Approval Date (an
"Approval Default") shall be deemed an Event of Default pursuant to the Note.
8. Covenants of the Company and Subscriber Regarding Indemnification.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend
Subscriber, Subscriber's officers, directors, agents, affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon Subscriber or any such person 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 other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance by
the Company of any covenant or undertaking to be performed by the Company
hereunder, or any other agreement entered into by the Company and Subscribers
relating hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and defend the
Company and each of the Company's officers and directors 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 or
any such person which results, arises out of or is based upon (i) any
misrepresentation by 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 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 of Note.
(a) Upon the conversion of the Note or part thereof, the Company shall, at
its own cost and expense, take all necessary action (including the issuance of
an opinion of counsel) to assure that the Company's transfer agent shall issue
stock certificates in the name of Subscriber (or its 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 Shares will be unlegended, free-trading, and freely
transferable, and will not contain a legend restricting the resale or
transferability of the Company Shares provided the Shares are being sold
pursuant to an effective registration statement covering the Shares to be sold
or are otherwise exempt from registration when sold.
(b) Subscriber will give notice of its decision to exercise its right to
convert the Note or part thereof by telecopying an executed and completed Notice
of Conversion (as defined in the Note) to the Company via confirmed telecopier
transmission. 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 or cause the 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 (the "Delivery Date"). A Note representing
the balance of the Note not so converted will be provided to the Subscriber, if
requested by Subscriber. To the extent 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.
(c) The Company understands that a delay in the delivery of the Shares in
the form required pursuant to Section 9 hereof, or the Mandatory Redemption
Amount described in Section 9.2 hereof, beyond the Delivery Date or 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 late payments to the Subscriber for late issuance of Shares in the
form required pursuant to Section 9 hereof upon Conversion of the Note or late
payment of the Mandatory Redemption Amount, in the amount of $100 per business
day after the Delivery Date or Mandatory Redemption Payment Date, as the case
may be, for each $10,000 of Note principal amount being converted or redeemed.
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 will be
entitled to revoke all or part of the relevant Notice of Conversion or rescind
all or part of the notice of Mandatory Redemption by delivery of a notice to
such effect to the Company whereupon the Company and the Subscriber shall each
be restored to their respective positions immediately prior to the delivery of
such notice, except that late payment charges 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.
9.2. Mandatory Redemption. In the event the Company is prohibited from
issuing Shares, or fails to timely deliver Shares on a Delivery Date, or upon
the occurrence of an Event of Default (as defined in the Note) or for any reason
other than pursuant to the limitations set forth in Section 9.3 hereof, or upon
the occurrence of an Event of Default as defined in Article III of the Note,
then at the Subscriber's election, the Company must pay to the Subscriber ten
(10) business days after request by the Subscriber or on the Delivery Date (if
requested by the Subscriber) a sum of money determined by multiplying up to the
outstanding principal amount of the Note designated by the Subscriber by 125%,
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 Company 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.
9.3. Maximum Conversion. The Subscriber shall not be entitled to convert on
a Conversion Date that amount of the Note and Put Note 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 Note and Put Note with respect to which the
determination of this provision is being made on a Conversion Date, which would
result in beneficial ownership by the 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 provision 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. Subject to the foregoing, the Subscriber shall not be limited to
aggregate conversions of only 4.99%. The Subscriber may void the conversion
limitation described in this Section 9.3 upon 75 days prior written notice to
the Company or upon an Event of Default under the Note. The Subscriber may
allocate which of the equity of the Company deemed beneficially owned by the
Subscriber shall be included in the 4.99% amount described above and which shall
be allocated to the excess above 4.99%.
9.4. 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 said Note shall have been sought and obtained and
the Company posts a surety bond for the benefit of such Subscriber in the amount
of 130% of the amount of the Note, 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 Subscriber 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 such shares issuable upon
conversion of a Note by the Delivery Date and if ten (10) days 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 Common Stock 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 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.
9.6 Adjustments. The Conversion Price and amount of Shares issuable upon
conversion of the Notes and Put Notes shall be adjusted consistent with
customary anti-dilution adjustments.
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 60 days after the Closing
Date, but not later than three years after the Closing Date ("Request 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 Notes (the Common Stock issued or issuable upon
conversion or exercise of the Notes or issuable by virtue of ownership of the
Note, being, 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 20 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, 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 10.4
hereof, the Company may withdraw or delay or suffer a delay of 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).
(iv) The Company shall file with the Commission within 60 days after the
Closing Date (the "Filing Date"), and use its reasonable commercial efforts to
cause to be declared effective Form SB-2 registration statement (or such other
form that it is eligible to use) 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 90 days 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 (employing the Conversion Price which
would result in the greater number of Shares), assuming the conversion of 100%
of the Notes. The Registrable Securities shall be reserved and set aside
exclusively for the benefit of the Subscriber, and not issued, employed or
reserved for anyone other than the Subscriber. 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) except as set forth on Schedule 10.1 hereto, if any.
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 ("Sellers") 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) twelve months after the latest Maturity Date of a Note; (ii) two years
after the Closing Date; or (iii) until such registration statement has been
effective for a period of not less than 270 days, 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 30 days after written
request by the Holder and not declared effective by the Commission within 90
days 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 30 days of such written request, or is not declared effective by the
Commission on or prior to the date that is 90 days 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 business days of
receipt by the Company of a written or oral 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, at the Subscriber's option, in cash or
stock at the applicable Conversion Price, as Liquidated Damages to each holder
of any Registrable Securities an amount equal to two percent (2%) per month or
part thereof during the pendency of such Non-Registration Event, of the
principal of the Notes issued in connection with the Initial Offering, whether
or not converted, whether or not converted, then owned of record by such holder
or issuable as of or subsequent to the occurrence of such Non-Registration
Event. Payments to be made pursuant to this Section 10.4 shall be due and
payable within five (5) business days after demand in immediately available
funds. In the event a Mandatory Redemption Payment is demanded from the Company
by the Holder 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 also be deemed a Non-Registration Event if at any time a Note is
outstanding, there is less than 125% of the amount of Common Shares necessary to
allow full conversion of such Note at the then applicable Conversion Price
registered for unrestricted resale in an effective registration statement.
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 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.
(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,
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 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), 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 10.6(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.
(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, (y) 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 (z) 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.
10.7. Underwriter Liability. Nothing contained in this Agreement or any
document delivered herewith shall require or imply that the Subscriber is or be
an Underwriter as defined in the 1933 Act of 1934 Act, nor a "statutory
underwriter." The Subscriber shall not be required to take any action or assume
any liability or obligation which would or could impose Underwriter or
"statutory underwriter" status or liability on the Subscriber.
11. Offering Restrictions. Except (i) as disclosed in the Reports or Other
Written Information prior to the date of this Subscription Agreement, and (ii)
stock or stock options granted to employees or directors of the Company pursuant
to a plan which has been approved by the shareholders of the Company (these
exceptions hereinafter referred to as the "Excepted Issuances"), the Company
will not issue any equity, convertible debt or other securities, prior to the
expiration of a period equal to (x) 180 days during which the registration
statement described in Section 10.1(iv) above has been effective, or (y) 24
months after the Closing Date. The Excepted Issuances (other than (i) above) may
be issued provided such securities are not transferable for a time period equal
to one year during which the registration statement described in Section
10.1(iv) above has been effective.
12. Security Interest. The Company has delivered to Laurus Master Fund,
Ltd. Common Shares of the Company owned by one or more shareholders of the
Company, together with signature guaranteed stock powers pursuant to a Security
Agreement dated April 26, 2001. It is hereby agreed by Moorea Trust, a trust
organized under the laws of Arizona and acknowledged by the Company that the
Note and any and all monetary obligations arising under the Note or this
Agreement are included in the Obligations as defined in the Security Agreement,
dated April 26, 2001. The Subscriber has also been granted a security interest
in certain assets of the Company memorialized in the Security Agreement dated
June 22, 2001. It is hereby agreed by the Company that the Note and any and all
monetary obligations arising under the Note or this Agreement are included in
the Obligations as defined in the Security Agreement dated June 22, 2001.
13. 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 iBIZ
Technology Corp., 1919 West Lone Cactus, Phoenix, AZ 85021, telecopier number:
(623) 492-9921, with a copy by telecopier only to: Sichenzia, Ross, Friedman &
Ference, LLP, 135 West 50th Street, 20th Floor, New York, NY 10020, Attn: Greg
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 Daniel M. Laifer, Esq., 135 West
50th Street, Suite 1700, New York, New York 10020, telecopier number: (212)
541-4434.
(b) Closing. The consummation of the transactions contemplated herein shall
take place at the offices of Daniel M. Laifer, Esq., 135 West 50th Street, Suite
1700, New York, New York 10020, 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").
(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 injunction 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 13(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) Confidentiality. The Company agrees that it will not disclose publicly
or privately the identity of the Subscriber unless expressly agreed to in
writing by the Subscriber or only to the extent required by law.
(h) 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.
IBIZ TECHNOLOGY CORP.
A Florida Corporation
By:_________________________________
Ken Schilling
President and CEO
Dated: June 22, 2001
ATTEST:
By:___________________________________
- --------------------------------------------------------------------------------
Purchase Price: $325,000.00
-----------
ACCEPTED: Dated as of June 22, 2001
THE KESHET FUND L.P. - Subscriber
A New York limited partnership 135 West 50th Street, Suite 1700 New York, NY
10020 Fax: 212-541-4434
By:______________________________
Consented and Agreed as to Section 12:
MOOREA TRUST
By:____________________________________
Ken Schilling, as Trustee of Moorea Trust
SCHEDULE B TO SUBSCRIPTION AGREEMENT
- -------------------------------------------------------------------- ----------------------------------------------------------
FUND MANAGER INITIAL OFFERING - CASH FUND MANAGER'S FEES
- -------------------------------------------------------------------- ----------------------------------------------------------
KESHET MANAGEMENT LIMITED 10% Fund Manager's Fees and Warrant Exercise Ragnall
House, 18 Peel Road Compensation payable in connection with investment and
Douglas, Isle of Man warrant exercise by The Keshet Fund L.P. for which 1M1 4L2,
United Kingdom Keshet Management Limited is the Fund Manager.
Fax: 011-44-1624-661594
- -------------------------------------------------------------------- ----------------------------------------------------------
WARRANTS
- -------------------------------------------------------------------- ----------------------------------------------------------
WARRANT RECIPIENT WARRANTS IN CONNECTION WITH INITIAL OFFERING
- -------------------------------------------------------------------- ----------------------------------------------------------
THE KESHET FUND L.P. Warrants issuable in connection with investment by The
A New York limited partnership Keshet Fund, L.P.
135 West 50th Street, Suite 1700
New York, NY 10020
Fax: 212-541-4434
- -------------------------------------------------------------------- ----------------------------------------------------------
TOTAL 1,500,000 Warrants
- -------------------------------------------------------------------- ----------------------------------------------------------