EXHIBIT 4.9
SUBSCRIPTION AGREEMENT
Dear Subscriber:
You ("Subscriber") hereby agree to purchase, and Famous Fixins, Inc., a
New York corporation (the "Company"), hereby agrees to issue and to sell to the
Subscriber, a Convertible Note convertible in accordance with the terms thereof
into shares of the Company's $0.001 par value common stock (the "Company
Shares") for the consideration as set forth on the signature page hereof
("Purchase Price"). The form of Convertible Note is annexed hereto as Exhibit A
upon the terms and subject to the limitations and conditions set forth in such
Debentures and warrants, in the form attached hereto as Exhibit "B", to purchase
One Million (1,000,000) shares of Common Stock (the "Warrants"). (The Company
Shares included in the Securities (as hereinafter defined) are sometimes
referred to herein as the "Shares", "Common Shares" or "Common Stock"). (The
Notes, Warrants and Company Shares are collectively referred to herein as, the
"Securities"). Upon acceptance of this Agreement by the Subscriber, the Company
shall issue and deliver the Note and Warrants 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-K for the year ended December 31, 2001 as
filed with the Securities and Exchange Commission (the "Commission") together
with all subsequently filed forms, 10-Q, 8-K, and other publicly available
filings made with the Commission (hereinafter referred to collectively 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 (such information in writing is
collectively, the "Other Written Information"), and considered all factors the
Subscriber deems material in deciding on the advisability of investing in the
Securities.
(b) INFORMATION ON SUBSCRIBER. The Subscriber is and
was not a "U.S. person", as defined in Regulation S promulgated under the
Securities Act of 1933 at the time the offer or sale of the Note is made.
Additionally, 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 AND WARRANT. On the Closing
Date, the Subscriber will purchase the Note and
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Warrant for its own account and not with a view to any distribution thereof and
that the purchase of the Note is intended to be made as a "Transaction" as
defined in Regulation D.
(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 shall
bear the following legend, unless same shall have
been included in an effective registration statement under the 1933 Act:
"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 FAMOUS FIXINS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(f) 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 FAMOUS FIXINS,
INC. 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 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, if any, is a corporation duly
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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 financial condition 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 and
other agreements delivered together with this Agreement or in connection
herewith have been duly authorized, executed and delivered by the Company and
are valid and binding agreements enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; and the Company
has full corporate power and authority necessary to enter into this Agreement,
and such other agreements and to perform its obligations hereunder and under all
other agreements entered into by the Company relating hereto.
(d) ADDITIONAL ISSUANCES. Except as set forth on
Schedule 2(d), 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 National
Association of Securities Dealers, Inc. ("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, the issuance and sale of the Securities, and the performance of the
Company's obligations hereunder and under all such other agreements.
(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 the Company's obligations under this Agreement
and all other agreements entered into by the Company relating thereto by the
Company will:
(i) violate, conflict with, result in a
breach of, or constitute a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to constitute a default)
under (A) the certificate of incorporation, charter or bylaws of the Company,
(B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company of any court, governmental
agency or body, or arbitrator having jurisdiction over the Company or 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 except the violation, conflict, breach, or default of which would not
have a material adverse effect on the Company; or
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(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company, its
subsidiaries 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, 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 which
litigation if adversely determined could have a material adverse effect on the
Company.
(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 listed for trading on the 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.
(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 or resold.
(k) INFORMATION CONCERNING COMPANY. The Reports
contain all material information relating to the Company and its operations and
financial condition as of their respective dates 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 or in the
Schedule hereto, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the Reports. The
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Reports do not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances when made.
(l) DILUTION. 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 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, resale
or 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. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board 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. The Company has not conducted and will not
conduct any offer other than the transactions contemplated hereby that will be
integrated with the offer or issuance of the Securities.
(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 the Bulletin Board. The Company has not received any
oral or written notice that its Common Stock will be delisted from the Bulletin
Board or that the Company's 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, 2001 and which, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the Company's financial condition.
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(s) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since
December 31, 2001, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.
(t) CAPITALIZATION. The authorized and outstanding
capital stock of the Company as of the date of this Agreement and the Closing
Date are set forth on Schedule 2(t) hereto. Except as set forth in the Reports
and Other Written Information and Schedule 2(t), 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, 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 reasonably 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 issuance
of the Company Shares.
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 reasonably requested
written representations from the Subscriber and selling broker, if any. Provided
the Subscriber provides required certifications and representation letters, 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 by the Company 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,
as liquidated damages and not a penalty 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
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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. REGULATION S. N/A.
6. FEES.
The Company shall pay to counsel to the Subscriber
its fees of $15,000 for services rendered to the
Subscriber in connection with this Agreement for aggregate subscription amounts
of up to $500,000 of principal amount of Notes (the "Offering") and acting as
escrow agent for the Offering.
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 Notes are outstanding.
The Company will maintain the listing of its Common Stock on the NASDAQ SmallCap
Market, NASDAQ National Market System, NASD OTC Bulletin Board, or New York
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock (the "Principal Market")), and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the 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 Commission, NASD,
the Principal Market 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) From the Closing Date and until at least two
(2) years after the effectiveness of the Registration Statement on Form S-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 are 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 use its best efforts not to 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 two (2)
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years after the actual effective date of the Registration Statement on Form S-2
or other Registration Statement described in Section 10.1(iv) hereof. Until the
resale of the Company Shares by the Subscriber, the Company will continue the
listing of the 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 Bulletin Board.
(e) The Company undertakes to reserve, pro rata on
behalf of each holder of a Note, from its authorized but unissued common stock,
at all times that Notes remain outstanding, a number of common shares equal to
not less than the amount of common shares necessary to allow each such holder to
be able to fully convert all such outstanding Notes.
(f) The Purchase Price may not and will not be used
for accrued and unpaid officer and director salaries, payment of financing
related debt, redemption of outstanding notes or equity instruments of the
Company, nor non-trade obligations outstanding on the Closing Date.
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 material 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, directors, agents, affiliates, control persons against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the Company or
any such person which results, arises out of or is based upon (i) any material
misrepresentation by 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 Sections8(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, unless waived by the
Subscriber, 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 or are
otherwise exempt from registration.
(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 (a form of
which is annexed to EXHIBIT A hereto) to the Company via confirmed telecopier
transmission or otherwise pursuant to Section 11(a) of this Agreement. The
Subscriber will not be required to surrender the Note until the Note has been
fully converted or satisfied. Each date on which a Notice of Conversion is
telecopied to the Company in accordance with the provisions hereof shall be
deemed a Conversion Date. The Company will or causes 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"). In the event the
Shares are electronically transferable, then delivery of the Shares must be made
by electronic transfer provided the Subscriber has made request for such
electronic transfer. The Company will provide a Note representing the balance of
the Note not so converted to the Subscriber, if requested by Subscriber provided
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an original Note is delivered to the Company. 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 AT SUBSCRIBER'S ELECTION. In the
event the Company fails to timely deliver Shares on a Delivery Date, or upon the
occurrence of any other 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,
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 (i) multiplying up to
the outstanding principal amount of the Note designated by the Subscriber by
130%, or (ii) multiplying the number of Shares otherwise deliverable upon
conversion of an amount of Note principal and/or interest designated by the
Subscriber (with the date of giving of such designation being a Deemed
9
Conversion Date) at the Conversion Price by the highest closing price of the
Common Stock on the principal market from the Deemed Conversion Date until the
day prior to the receipt of the Mandatory Redemption Payment, whichever is
greater ("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 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 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 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 9.99% 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 9.99% and aggregate conversion by the Subscriber may exceed
9.99%. The Subscriber may void the conversion limitation described in this
Section 9.3 upon 75 days prior written 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 9.99% 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 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 (i) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (ii) 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 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 shall be adjusted to offset the effect of
stock splits, stock dividends and pro rata distributions of property or equity
interests to the Company's shareholders.
10
9.7. REDEMPTION. The Company may not redeem or call the Note
without the consent of the holder of the Note.
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 ("Request Date"), the Company, upon a written request therefore 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 of the Notes or issuable by virtue of ownership of
the Notes are collectively the "Registrable Securities"), shall prepare and file
with the Commission 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 or
included for registration in a pending 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 1933 Act for sale to the public,
whether for its own account or for the account of other security holders or
both, except with respect to registration statements on Forms S-4, S-8 or
another form not available for registering 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 25 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 15 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
11
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 and the Company actually does file such other
registration statement, 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
not later than sixty (60) days after the Closing Date (the "Filing Date"), and
use its reasonable commercial efforts to cause to be declared effective within
one hundred twenty (120) days after the Closing Date, a Form S-2 registration
statement (or such other form that it is eligible to use) in order to register
the Registrable Securities for issuance to the Subscriber and distribution under
the Act. The Commission must declare the registration statement described in
this paragraph effective no later than one hundred twenty (120) days after the
Closing Date ("Effective Date"). The Company will register a number of shares of
Common Stock in the afore described registration statement that is equal to the
number of Company Shares issuable at the Conversion Price in effect at the
Closing Date, or actual filing date of the registration statement or any
amendment thereto assuming conversion of 200% of the Notes (whichever results in
the greatest number of Company shares). Such registration statement will
immediately be amended or additional registration statements will be immediately
filed by the Company as necessary in order to register additional Company Shares
to allow the unlegended reissuance of all Common Stock included and issuable by
virtue of the Registrable Securities. The Registrable Securities shall be
reserved and set aside exclusively for the benefit of each Subscriber in
proportion to each Subscriber's interest in the Registrable Securities, and not
issued, employed or reserved for anyone other than the Subscriber. 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 described on
SCHEDULE 10.1.
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) until six months after all the Company Shares are
eligible for resale pursuant to Rule 144(k) of the 1933 Act; or (iii) until such
registration statement has been effective for a period of not less than 365
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, such number of copies of
the registration statement and the prospectus included therein (including each
preliminary prospectus) as such Seller 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 shall
reasonably designate, 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;
12
(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 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, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, attorney,
accountant or agent in connection with such registration statement;
(h) will notify the Subscriber of the effectiveness
of the registration statement within one business
day of such event.
10.3. PROVISION OF DOCUMENTS. 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
written request by the Holder and not declared effective by the Commission
within 120 days after such request [or the Filing Date and Effective Date,
respectively, in reference to the Registration Statement on Form S-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 written request, or is not declared effective by
the Commission on or prior to the date that is 120 days after such request, or
(ii) the registration statement on Form S-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 ten 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 or 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 for
each month or part thereof during the pendency of such Non-Registration Event,
of the principal of the Notes issued in the Offering, whether or not converted,
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
13
10.4 shall be due and payable within ten (10) 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 be deemed a Non-Registration Event if at
any time the Company has registered for unrestricted resale fewer than 125% of
the amount of Common Shares issuable upon full conversion of all sums due under
the Note.
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 in light of the circumstances when made, 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.
14
(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
15
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.
11. MISCELLANEOUS.
(a) NOTICES. All notices, demands, requests,
consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be: (i) if to the
Company to Famous fixins Inc., 1325 Howard Avenue, Suite #422, Burlingame,
California 94010, telecopier number: (650) 340-8015 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 to Naccarato & Associates, 19600
Fairchild, Suite 260, Irvine, CA 92612, Attn: Owen M. Naccarato, Esq.,
telecopier number: (949) 851-9262.
(b) CLOSING. The consummation of the transactions
contemplated herein shall take place at the offices of Feldman Weinstein, LLP,
420 Lexington Avenue, Suite 2620, New York, New York 10170, 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 of the Offering is transmitted by wire
transfer or otherwise 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. That party shall assign no right or obligation of either 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.
16
(e) LAW GOVERNING THIS AGREEMENT. This Agreement
shall be governed by and construed in accordance with the laws of the State of
California 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 California or in the
federal courts located in the state of California. 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 11(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.
17
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.
FAMOUS FIXINS, INC.
A New York Corporation
B: /S/ S. MICHAEL RUDOLPH
-------------------------------
Name: S. Michael Rudolph
Title: Chief Executive officer
Dated: December 27, 2002
18
SUBSCRIBERS
- -------------------------------------------- ----------------------------------
Purchase Price of Note: $500,000
Number of Warrants: 1,000,000
Aggregate purchase Price: $500,000
/s/ David Firestone
- --------------------------------------
(Signature)
Mercator Momentum Fund, LP
Address: 555 South Flower Street, Suite 4500
Los Angeles, CA 9071
Attn: David Firestone
Telecopier: 213-599-8285
- -------------------------------------------- ----------------------------------
19
LIST OF SCHEDULES AND EXHIBITS
--------------------------------
Exhibit A Form of Note
Exhibit B Form of Warrrant
Exhibit C Form of Legal Opinion
Schedule 2(d) Additional Issuances
Schedule 2(t) Capitalization
Schedule 10.1 Other Securities to be Registered
20