Exhibit 10.1
IR BIOSCIENCES HOLDINGS, INC.
SUBSCRIPTION AGREEMENT
The undersigned (hereinafter "SUBSCRIBER" or "PURCHASER") hereby confirms
his/her/its subscription for the purchase of units ("UNITS") of IR BioSciences
Holdings, Inc., a Delaware corporation (the "COMPANY"), on the terms described
below, with each Unit consisting of:
(a) a number of shares (the "SHARES") of common stock of the Company,
par value $0.001 per share (the "COMMON STOCK"), determined by dividing: (i) the
Unit Price (as defined below) by (ii) a price (the "COMMON STOCK PURCHASE
PRICE") equal to seventy-five percent (75%) of the five (5) day average of the
closing bid price of the shares of Common Stock on the NASD OTC Bulletin Board
for the trading day ending one day prior to the initial closing ("INITIAL
CLOSING") of the Offering or any subsequent closing (each, a "SUBSEQUENT
CLOSING" and together with the Initial Closing, each, a "CLOSING" and
collectively, the "CLOSINGS"), with a floor on the Common Stock Purchase Price
equal to sixteen cents ($0.16) and a ceiling on the Common Stock Purchase Price
equal to thirty cents ($0.30), as adjusted to reflect forward and reverse stock
splits. If one or more Subsequent Closings occurs, the Common Stock Purchase
Price, for purposes of all the Closings, shall equal the lowest Common Stock
Purchase Price determined at any Closing. If one or more Subsequent Closings
occurs, the Common Stock Purchase Price, for purposes of such Subsequent
Closing, shall be no greater than the lesser of: (i) lowest Common Stock
Purchase Price determined at any prior Closing or (ii) the Common Stock Purchase
Price determined for such Subsequent Closing; and,
(b) a warrant (collectively, the "WARRANTS") to purchase at any time
prior to the fifth (5th) anniversary following the date of the final Closing of
the Offering and at the holder's sole and absolute discretion, fifty percent
(50%) of the shares of Common Stock included within the Unit at a price equal to
fifty cents ($0.50) per share of Common Stock (the "WARRANT EXERCISE PRICE").
All warrants shall be exercised on a cash basis provided that the Company is not
in default of its registration obligations as described in the Memorandum, as
defined below The shares of Common Stock underlying each Warrant are referred to
herein as the "WARRANT SHARES."
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Company's Confidential Private
Placement Memorandum, dated September 7, 2006 (as amended or supplemented, and
together with all exhibits, documents and filings attached thereto, the
"MEMORANDUM"). The Units, the Shares, the Warrants and the Warrant Shares are
sometimes referred to collectively herein as the "SECURITIES."
In connection with this subscription, Subscriber and the Company agree
as follows:
1. PURCHASE AND SALE OF THE UNITS.
(a) The Company hereby agrees to issue and to sell to Subscriber, and
Subscriber hereby agrees to purchase from the Company, a number of Units at a
price equal to $25,000 per Unit (the "UNIT PRICE") and for the aggregate
subscription amount set forth on the signature page hereto. Upon acceptance of
this Subscription Agreement by the Company and promptly after the final Closing
of the Offering, the Company shall issue and deliver to Subscriber a share
certificate and a warrant certificate evidencing the applicable number of Shares
and Warrants subscribed for against payment in U.S. Dollars of the Purchase
Price (as defined below).
(b) Subscriber has hereby delivered and paid concurrently herewith the
aggregate purchase price (the "PURCHASE PRICE") set forth on the signature page
hereof required to purchase the Units subscribed for hereunder which amount has
been paid in U.S. Dollars by cash, wire transfer or check, subject to
collection, to the order of "American Stock Transfer & Trust Ccompany - IR
BioSciences Holdings, Inc. Escrow Account."
(c) Subscriber understands and acknowledges that this subscription is
part of a proposed placement by the Company of up to $6,500,000 of Units, which
offering is being made on a "best efforts all or none" basis for a minimum of 80
Units ($2,000,000 Gross Proceeds) (the "MINIMUM OFFERING") and on a "best
efforts" basis as to an additional 180 Units (additional gross proceeds of
$4,500,000) (the "MAXIMUM OFFERING"). The Maximum Offering may be increased at
the discretion of the company and the Placement agent by an additional
$1,000,000 of gross proceeds and in the event of any such increase, the term
"Maximum Offering" shall include any such increase. Subscriber understands that
subscriptions for the Units will be held in an escrow account established by the
Company and the Placement Agent with American Stock Transfer & Trust Company. No
proceeds shall be released to the company until and unless the Minimum Offering
is reached within the Offering Period (as described in the Memorandum) or any
extended period. If the Minimum Offering is not obtained within the Offering
Period or any extended period, the funds held therein will be returned to the
investors without interest or deduction.
2. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. Subscriber represents and
warrants to the Company and Placement Agent as follows:
(a) Subscriber is an "accredited investor" as defined by Rule 501 under
the Securities Act of 1933, as amended (the "ACT"), and Subscriber is capable of
evaluating the merits and risks of Subscriber's investment in the Company and
has the capacity to protect Subscriber's own interests.
(b) Subscriber understands that the Securities are not presently
registered, but Subscriber is entitled to certain rights with respect to the
registration of the Shares and Warrant Shares (see Section 5 below).
(c) Subscriber acknowledges and understands that the Securities are
being purchased for investment purposes and not with a view to distribution or
resale, nor with the intention of selling, transferring or otherwise disposing
of all or any part thereof for any particular price, or at any particular time,
or upon the happening of any particular event or circumstances, except selling,
transferring, or disposing the Securities made in full compliance with all
applicable provisions of the Act, the rules and regulations promulgated by the
Securities and Exchange Commission ("SEC") thereunder, and applicable state
securities laws; and that an investment in the Securities is not a liquid
investment.
(d) Subscriber acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from such registration is available. Subscriber is aware of the provisions of
Rule 144 promulgated under the Act which permit limited resale of common stock
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the common stock, the availability of certain current public information about
the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" and
the number of shares of common stock being sold during any three-month period
not exceeding specified limitations.
(e) Subscriber acknowledges that Subscriber has had the opportunity to
ask questions of, and receive answers from the Company or any person acting on
its behalf concerning the Company and its business and to obtain any additional
information, to the extent possessed by the Company (or to the extent it could
have been acquired by the Company without unreasonable effort or expense)
necessary to verify the accuracy of the information received by Subscriber. In
connection therewith, Subscriber acknowledges that Subscriber has had the
opportunity to discuss the Company's business, management and financial affairs
with the Company's management or any person acting on its behalf. Subscriber has
received and reviewed the Memorandum, and all the information, both written and
oral, that it desires. Without limiting the generality of the foregoing,
Subscriber has been furnished with or has had the opportunity to acquire, and to
review: (i) copies of all of the Company's publicly available documents,
including but not limited to, those attached to the Memorandum, and (ii) all
information, both written and oral, that it desires with respect to the
Company's business, management, financial affairs and prospects. In determining
whether to make this investment, Subscriber has relied solely on Subscriber's
own knowledge and understanding of the Company and its business based upon
Subscriber's own due diligence investigations and the information furnished
pursuant to this paragraph. Subscriber understands that no person has been
authorized to give any information or to make any representations which were not
furnished pursuant to this paragraph and Subscriber has not relied on any other
representations or information.
(f) Subscriber has all requisite legal and other power and authority to
execute and deliver this Subscription Agreement and to carry out and perform
Subscriber's obligations under the terms of this Subscription Agreement. This
Subscription Agreement constitutes a valid and legally binding obligation of
Subscriber, enforceable in accordance with its terms, and subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
general principals of equity, whether such enforcement is considered in a
proceeding in equity or law.
(g) Subscriber has carefully considered and has discussed with the
Subscriber's professional legal, tax, accounting and financial advisors, to the
extent the Subscriber has deemed necessary, the suitability of this investment
and the transactions contemplated by this Subscription Agreement for the
Subscriber's particular federal, state, local and foreign tax and financial
situation and has determined that this investment and the transactions
contemplated by this Subscription Agreement are a suitable investment for the
Subscriber. Subscriber relies solely on such advisors and not on any statements
or representations of the Company or any of its agents. Subscriber understands
that Subscriber (and not the Company) shall be responsible for Subscriber's own
tax liability that may arise as a result of this investment or the transactions
contemplated by this Subscription Agreement.
(h) This Subscription Agreement and the Confidential Purchase
Questionnaire accompanying this Subscription Agreement does not contain any
untrue statement of a material fact or omit any material fact concerning
Subscriber.
(i) There are no actions, suits, proceedings or investigations pending
against Subscriber or Subscriber's properties before any court or governmental
agency (nor, to Subscriber's knowledge, is there any threat thereof) which would
impair in any way Subscriber's ability to enter into and fully perform
Subscriber's commitments and obligations under this Subscription Agreement or
the transactions contemplated hereby.
(j) The execution, delivery and performance of and compliance with this
Subscription Agreement and the issuance of the Securities will not result in any
material violation of, or conflict with, or constitute a material default under,
any of Subscriber's articles of incorporation or bylaws, if applicable, or any
of Subscriber's material agreements nor result in the creation of any mortgage,
pledge, lien, encumbrance or charge against any of the assets or properties of
Subscriber or the Securities.
(k) Subscriber acknowledges that the Securities are speculative and
involve a high degree of risk and that Subscriber can bear the economic risk of
the purchase of the Securities, including a total loss of his/her/its
investment.
(l) Subscriber acknowledges that he/she/it has carefully reviewed and
considered the risk factors discussed in the "Risk Factors" section of the
Memorandum.
(m) Subscriber recognizes that no federal, state or foreign agency has
recommended or endorsed the purchase of the Securities.
(n) Subscriber is aware that the Securities are and will be, when
issued, "restricted securities" as that term is defined in Rule 144 of the
general rules and regulations under the Act.
(o) Subscriber understands that any and all certificates representing
the Securities and any and all securities issued in replacement thereof or in
exchange therefor shall bear the following legend or one substantially similar
thereto, which Subscriber has read and understands:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT
AND SUCH LAWS WHICH, IN THE OPINION OF
COUNSEL FOR THIS CORPORATION, IS AVAILABLE."
(p) In addition, the certificates representing the Securities, and any
and all securities issued in replacement thereof or in exchange therefor, shall
bear such legend as may be required by the securities laws of the jurisdiction
in which Subscriber resides.
(q) Because of the restrictions imposed on resale, Subscriber
understands that the Company shall have the right to note stop-transfer
instructions in its stock transfer records, and Subscriber has been informed of
the Company's intention to do so. Any sales, transfers, or any other
dispositions of the Securities by Subscriber, if any, will be in compliance with
the Act.
(r) Subscriber acknowledges that Subscriber has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of an investment in the Securities and of making an
informed investment decision. Subscriber is not being represented in the
Offering or in his purchase of the Securities by counsel to the Company or
counsel to the Placement Agent and has consulted with his own personal advisors.
(s) Subscriber represents that: (i) Subscriber is able to bear the
economic risks of an investment in the Securities and to afford the complete
loss of the investment, and (ii) (A) Subscriber could be reasonably assumed to
have the capacity to protect his/her/its own interests in connection with this
subscription; or (B) Subscriber has a pre-existing personal or business
relationship with either the Company or any affiliate thereof or the Placement
Agent of such duration and nature as would enable a reasonably prudent purchaser
to be aware of the character, business acumen and general business and financial
circumstances of the Company or such affiliate and is otherwise personally
qualified to evaluate and assess the risks, nature and other aspects of this
subscription.
(t) Subscriber further represents that the address set forth below is
his/her principal residence (or, if Subscriber is a company, partnership or
other entity, the address of its principal place of business); that Subscriber
is purchasing the Securities for Subscriber's own account and not, in whole or
in part, for the account of any other person; Subscriber is purchasing the
Securities for investment and not with a view to resale or distribution; and
that Subscriber has not formed any entity for the purpose of purchasing the
Securities.
(u) Subscriber understands that the Company and the Placement Agent
shall have the unconditional right to accept or reject this subscription, in
whole or in part, for any reason or without a specific reason, in the sole and
absolute discretion of the Company (even after receipt and clearance of
Subscriber's funds). This Subscription Agreement is not binding upon the Company
until accepted by an authorized officer of the Company. In the event that the
subscription is rejected, then Subscriber's subscription funds will be returned
without interest thereon or deduction therefrom.
(v) Subscriber has not been furnished with any oral representation or
oral information in connection with the offering of the Securities that is not
contained in the Memorandum and this Subscription Agreement.
(w) Subscriber represents that Subscriber is not subscribing for
Securities as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over the Internet, television or radio or presented at any seminar or
meeting.
(x) Subscriber has carefully read this Subscription Agreement and the
Memorandum, and Subscriber has accurately completed the Confidential Purchaser
Questionnaire which accompanies this Subscription Agreement.
(y) No representations or warranties have been made to Subscriber by
the Company, or any officer, employee, agent, affiliate or subsidiary of the
Company, other than the representations of the Company contained herein, and in
subscribing for the Securities the Subscriber is not relying upon any
representations other than those contained in the Memorandum or in this
Subscription Agreement.
(z) Subscriber represents and warrants, to the best of its knowledge,
that other than the Placement Agent, no finder, broker, agent, financial advisor
or other intermediary, nor any purchaser representative or any broker-dealer
acting as a broker, is entitled to any compensation in connection with the
transactions contemplated by this Subscription Agreement.
(aa) Subscriber represents and warrants that Subscriber has: (i) not
distributed or reproduced the Memorandum, in whole or in part, at any time,
without the prior written consent of the Company and the Placement Agent, (ii)
kept confidential the existence of the Memorandum and the information contained
therein or made available in connection with any further investigation of the
Company and (iii) refrained and shall refrain from trading in the
publicly-traded securities of the Company (including any short sales, or other
hedging structures) or any other relevant company for so long as such recipient
has been in possession of the material non-public information contained in the
Memorandum.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to Subscriber as follows:
(a) The Company is duly organized and validly exists as a corporation
in good standing under the laws of the State of Delaware.
(b) The Company has all such corporate power and authority to enter
into, deliver and perform this Subscription Agreement.
(c) All necessary corporate action has been duly and validly taken by
the Company to authorize the execution, delivery and performance of this
Subscription Agreement by the Company, and the issuance and sale of the
Securities to be sold by the Company pursuant to this Subscription Agreement.
This Subscription Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(d) In addition to the foregoing, Subscriber shall be entitled to rely
on all of the representations and warranties made by the Company to the
Placement Agent in that certain Placement Agency Agreement, as the same may be
amended, entered into between the Placement Agent and the Company in connection
with the Offering as if such representations and warranties were made directly
to the Subscriber.
4. INDEMNIFICATION. Subscriber agrees to indemnify and hold harmless the
Company, the Placement Agent, and their respective officers, directors,
employees, shareholders, agents representatives and affiliates, and any person
acting on behalf of the Company or Placement Agent, from and against any and all
damage, loss, liability, cost and expense (including reasonable attorneys' fees)
which any of them may incur by reason of the failure by Subscriber to fulfill
any of the terms and conditions of this Subscription Agreement, or by reason of
any breach of the representations and warranties made by Subscriber herein, or
in any other document provided by Subscriber to the Company. All
representations, warranties and covenants of each of Subscriber and the Company
contained herein shall survive the acceptance of this subscription.
5. REGISTRATION RIGHTS. In consideration of the investment in the Company
described in this Agreement and the Memorandum, the Company hereby grants to the
Subscriber the registration rights set forth on Annex A, attached hereto.
6. MISCELLANEOUS.
(a) Subscriber agrees not to transfer or assign this Subscription
Agreement or any of Subscriber's interest herein and further agrees that the
transfer or assignment of the Securities acquired pursuant hereto shall be made
only in accordance with all applicable laws.
(b) Subscriber agrees that Subscriber cannot cancel, terminate, or
revoke this Subscription Agreement or any agreement of Subscriber made
hereunder, and this Subscription Agreement shall survive the death or legal
disability of Subscriber and shall be binding upon Subscriber's heirs,
executors, administrators, successors, and permitted assigns.
(c) Subscriber has read and has accurately completed this entire
Subscription Agreement.
(d) This Subscription Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof and may be amended
only by a written execution by all parties.
(f) Subscriber acknowledges that it has been advised to consult with
his/her/its own attorney regarding this subscription and Subscriber has done so
to the extent that Subscriber deems appropriate.
(g) Any notice or other document required or permitted to be given or
delivered to the Subscriber shall be in writing and sent: (i) by fax if the
sender on the same day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), or (b) by registered or certified
mail with return receipt requested (postage prepaid) or (c) by a recognized
overnight delivery service (with charges prepaid).
If to the Company, at:
IR BioSciences Holdings, Inc.
4021 N. 75th Street, Suite 201
Scottsdale, Arizona 85251
Attn: John Fermanis
Tel: (480) 922-3926; Fax: (480) 922-4781
If to the Subscriber, at its address set forth on the
signature page to this Subscription Agreement, or such other address as it shall
have specified to the Company in writing, with a copy (which shall not
constitute notice) to each of the following:
Joseph Stevens & Company, Inc.
59 Maiden Lane, 32nd Floor
New York, NY 10038
Attn: Joseph Sorbara
Tel: (212) 361-3020, Fax: (212) 361-3333
(h) Failure of the Company to exercise any right or remedy under this
Subscription Agreement or any other agreement between the Company and the
Subscriber, or otherwise, or delay by the Company in exercising such right or
remedy, will not operate as a waiver thereof. No waiver by the Company will be
effective unless and until it is in writing and signed by the Company.
(i) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by the New York courts except with respect to the
conflicts of law provisions thereof, and shall be binding upon the Subscriber,
the Subscriber's heirs, estate, legal representatives, successors and assigns
and shall inure to the benefit of the Company, its successors and assigns.
(j) Any legal suit, action or proceeding arising out of or relating to
this Subscription Agreement or the transactions contemplated hereby shall be
instituted exclusively in New York Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York. The parties
hereto hereby: (i) waives any objection which they may now have or hereafter
have to the venue of any such suit, action or proceeding, and (ii) irrevocably
consents to the jurisdiction of the New York Supreme Court, County of New York,
and the United States District Court for the Southern District of New York in
any such suit, action or proceeding. The parties further agree to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York Supreme Court, County of New York, or in
the United States District Court for the Southern District of New York and agree
that service of process upon a party mailed by certified mail to such party's
address shall be deemed in every respect effective service of process upon such
party in any such suit, action or proceeding.
(k) If any provision of this Subscription Agreement is held to be
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed modified to conform with such statute or rule of law.
Any provision hereof that may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provisions hereof.
(l) The parties understand and agree that money damages would not be a
sufficient remedy for any breach of the Subscription Agreement by the Company or
the Subscriber and that the party against which such breach is committed shall
be entitled to equitable relief, including injunction and specific performance,
as a remedy for any such breach. Such remedies shall not be deemed to be the
exclusive remedies for a breach by either party of the Subscription Agreement
but shall be in addition to all other remedies available at law or equity to the
party against which such breach is committed.
(m) All pronouns and any variations thereof used herein shall be deemed
to refer to the masculine, feminine, singular or plural, as identity of the
person or persons may require.
(n) This Subscription Agreement may be executed in counterparts and by
facsimile, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
The undersigned understands that the information provided herein and in the
Questionnaire may be forwarded to the NASD and may be used in connection with
the Registration Statement to be filed by the Company with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, covering
the proposed resale offerings of securities by the Subscriber. Further, the
undersigned will promptly notify you of any changes in such information which
may occur subsequent hereto and prior to the effective date of the Registration
Statement. The undersigned understands and agrees that the Subscription
Agreement and Questionnaire, as completed by the undersigned, and further
communications regarding the matters contemplated herein, will be relied upon by
the Company, the Placement Agent and its respective counsel in connection with
obtaining clearance for any offering from the NASD.
[Signature Pages Follow]
Signature Page for Individuals:
IN WITNESS WHEREOF, Subscriber has caused this Subscription Agreement
to be executed as of the date indicated below.
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Purchase Price Number of Units ($25,000 per Unit)
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Print or Type Name Print or Type Name (Joint-owner)
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Signature Signature (Joint-owner)
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Date Date (Joint-owner)
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Social Security Number Social Security Number (Joint-owner)
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Address Address (Joint-owner)
Please check if applicable:
_______ Joint Tenancy ______ Tenants in Common
Wiring Instructions:
Bank Name: J.P. Morgan Chase
ABA #: 021 000 021
Acct. #: 323 890121
Acct. Name: American Stock Transfer & Trust
Company as Escrow Agent for IR
BioSciences Holdings, Inc.
Partnerships, Corporations or Other Entities:
IN WITNESS WHEREOF, Subscriber has caused this Subscription Agreement
to be executed as of the date indicated below.
$ -------------------------- -----------------------------
Total Purchase Price Number of Units ($25,000 per Unit)
- -----------------------------------------------
Print or Type Name of Entity
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- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Address
- ------------------------------------ ------------------------------------
Taxpayer I.D. No. (if applicable) Date
By:
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Signature Print or Type Name and Indicate
Title or Position with Entity
By:
-------------------------------- ------------------------------------
Signature Print or Type Name and Indicate
Title or Position with Entity
Wiring Instructions:
Bank Name: J.P. Morgan Chase
ABA #: 021 000 021
Acct. #: 323 890121
Acct. Name: American Stock Transfer & Trust
Company as Escrow Agent for IR
BioSciences Holdings, Inc.
IN WITNESS WHEREOF, the Company has caused this Subscription Agreement
to be executed, and the foregoing subscription accepted, as of the date
indicated below.
IR BIOSCIENCES HOLDINGS, INC.
By:
-------------------------------
Name: Michael K. Wilhelm
Title: President and CEO
Date: ___________________, 2006
Annex A
Registration Rights
IR BioSciences Holdings, Inc. hereby grants to the Subscriber the
following registration rights.
1. DEFINITIONS.
Capitalized terms used herein without definition shall have the
respective meanings given such terms as set forth in the Subscription Agreement
between IR BioSciences Holdings, Inc. and the subscriber signatory thereto (the
"SUBSCRIPTION AGREEMENT") or in the Company's Confidential Private Placement
Memorandum, dated as of September 7, 2006 (as amended or supplemented, and
together with all exhibits, documents and filings attached thereto, the
"MEMORANDUM"). As used herein, the following terms shall have the following
meanings:
BUSINESS DAY: Any day other than a day on which banks are
authorized or required to be closed in the State of New York.
COMMISSION: The United States Securities and Exchange
Commission.
COMMON STOCK: The common stock, par value $.001 per share, of
the Company.
EXCHANGE ACT: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission
promulgated thereunder.
HOLDER OR HOLDERS: Any holder of the Registrable Securities.
PERSON: Any individual, corporation, partnership, joint
venture, association, joint stock company, trust,
unincorporated organization or government or other agency or
political subdivision thereof.
PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus
filed as part of an effective registration statement in
reliance upon Rule 430A promulgated under the Securities
Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and
supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
REGISTRABLE SECURITIES: The Shares and the Warrant Shares,
until such time as (1) a Registration Statement covering such
Registrable Securities has been declared effective by the
Commission and such Registrable Securities have been disposed
of pursuant to such effective Registration Statement or (2)
such Registrable Securities are saleable pursuant to Rule 144
(or any similar provision then in force) under the Securities
Act, without any restriction, whichever is earlier. The term
Registrable Securities shall also include any shares issued
as a result of any stock split or dividend or shares issued
in payment of the penalties as referred to in Section 2
below.
REGISTRATION STATEMENT: Any registration statement of the
Company that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration
statements, including post effective amendments, all
exhibits, and all material incorporated by reference or
deemed to be incorporated by reference in such registration
statement.
SECURITIES ACT: The Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated
thereunder.
UNITS: The units of the Company sold pursuant to the
Subscription Agreement consisting of Common Stock and
Warrants.
WARRANTS: The Warrant included in the Units exercisable for
shares of Common Stock.
WARRANT SHARES: The shares of Common Stock issuable upon
exercise of the Warrants
2. REGISTRATION RIGHTS.
(a) REQUIRED REGISTRATION. Not before 180 days following the
final Closing date but prior to 190 days following the final Closing
date (the "Filing Period") the Company shall file with the Commission a
Registration Statement on appropriate form for the purpose of
registering for public resale the Registrable Securities sold to the
Subscriber pursuant to the Subscription Agreement or held by a Holder.
The Company shall use its good faith best efforts to ensure that the
Registration Statement is declared effective within 120 days of the
filing date. In the event that the registration statement covering all
of the Registrable Securities is not filed within the Filing Period
then Subscriber shall be entitled to liquidated damages equal to 1% of
the Subscriber's original subscription amount in the Offering for each
30 day period (or pro rata amount of each 30 day period). The amount of
damages may be paid by the Company in cash or in additional shares of
Common Stock (the number of shares to be based upon the final
subscription price of the Common Stock in the Offering). The Company
will agree to take all actions as are necessary to keep the
Registration Statement effective until the later of: (i) the third
anniversary of the first date that no Warrants remain unexercised or
unexpired or (ii) the date on which all Registrable Securities
purchased by the Subscriber or held by a Holder may be sold without any
restriction, under Rule 144(k) during any 90-day period in accordance
with all rules and regulations regarding sales of securities pursuant
to Rule 144 (such period, the "Effectiveness Period"). The Company
shall bear all expenses of the Registration Statement, including fees
and expenses of its counsel and accountants and any blue sky filing
fees. Further, the Company shall pay the firm of Ellenoff Grossman &
Schole, as counsel to the Placement Agent, up to $15,000 for review of
the Registration Statement. The Company shall also pay all expenses of
its counsel and transfer agent for any "144 opinions" or other opinions
which are required in connection with any transfers of Securities made
by such parties under Rule 144 or any other applicable sale or transfer
(including, without limitation, sales made pursuant to prospectus
delivery).
(b) EXCEPTIONS. Notwithstanding the foregoing, the Company may
delay the registration of Registrable Securities pursuant to Section
2(a) hereof for the time periods described in Section 2(e) hereof upon
the occurrence of any of the following:
(i) The Company shall have previously entered into an
agreement or letter of intent contemplating an underwritten
public offering on a firm commitment basis of Common Stock or
securities convertible into or exchangeable for Common Stock
and the managing underwriter of such proposed public offering
advises the Company in writing that in its opinion such
proposed underwritten offering would be materially and
adversely affected by a concurrent registered offering of
Registrable Securities (such opinion to state the reasons
thereof);
(ii) During the two (2) month period immediately
preceding such request, the Company shall have entered into an
agreement or letter of intent, which has not expired or
otherwise terminated, contemplating a material business
acquisition by the Company or its subsidiaries whether by way
of merger, consolidation, acquisition of assets, acquisition
of securities or otherwise;
(iii) The Company is in possession of material
nonpublic information that the Company would be required to
disclose in the Registration Statement and that is not, but
for the registration, otherwise required to be disclosed at
the time of such registration, the disclosure of which, in its
good faith judgment, would have a material adverse effect on
the business, operations, prospects or competitive position of
the Company;
(iv) The Company shall receive the written opinion of
the managing underwriter of the underwritten public offering
pursuant to which Common Stock has been registered within the
three (3) month period prior to the receipt of a registration
request that the registration of additional Common Stock will
materially and adversely affect the market for the Common
Stock (such opinion to state the reasons thereof); or
(v) At the time of receipt of a registration request,
the Company is engaged, or its board of directors has adopted
by resolution a plan to engage, in any program for the
purchase of Common Stock or securities convertible into or
exchangeable for Common Stock and, in the opinion of counsel,
reasonably satisfactory to the requesting Holders, the
distribution of the Common Stock to be registered would cause
such purchase to be in violation of Regulation M promulgated
under the Exchange Act.
(e) PERIOD OF DELAY. If an event described in clauses (i)
through (iv) of Section 2(b) shall occur, the Company may, by written
notice to the Holders, delay the filing of a Registration Statement
with respect to the Registrable Securities to be covered thereby for a
period of time not exceeding 60 days. If an event described in clause
(v) of Section 2(b) shall occur, the filing of a Registration Statement
with respect to the Registrable Securities to be covered thereby shall
be delayed until the first date that the Registrable Securities to be
covered thereby can be sold without violation of Regulation M of the
Exchange Act.
3. REGISTRATION PROCEDURES.
In connection with the registration obligations of the
Company pursuant to the terms and conditions of this Agreement, the Company
shall:
(a) prior to filing a Registration Statement or Prospectus or
any amendments or supplements thereto, including documents incorporated
by reference after the initial filing of the Registration Statement,
the Company will furnish to the Holders covered by such Registration
Statement (the "Selling Holders"), Ellenoff Grossman and Schole, LLP
("EGS"), the Placement Agent and the underwriters, if any, draft copies
of all such documents proposed to be filed at least three (3) Business
Days prior thereto, which documents will be subject to the review of
EGS and the Placement Agent. The Company shall use its good faith
efforts to make such changes to the Registration Statement as are
reasonably requested by EGS and/or the Placement Agent including any
changes requested by any regulatory agency.
(b) as promptly as practicable prepare and file with the
Commission such amendments and post-effective amendments to the
Registration Statement as may be necessary to keep such Registration
Statement effective for the period required pursuant to Section 2;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and, as so supplemented, to be filed pursuant to Rule 424
under the Securities Act; and comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
Registrable Securities covered by such Registration Statement during
the applicable period in accordance with the intended methods of
disposition by the Selling Holders set forth in such Registration
Statement or supplement to the Prospectus;
(c) as promptly as practicable furnish to any Selling Holder
and the Placement Agent, if any, without charge, such number or
conformed copies of such Registration Statement and any post-effective
amendment thereto and such number of copies of the Prospectus
(including each preliminary Prospectus) and any amendments or
supplements thereto, and any documents incorporated by reference
therein, as such Selling Holder or underwriter may reasonably request
in order to facilitate the disposition of the Registrable Securities
being sold by such Selling Holder (it being understood that the Company
consents to the use of the Prospectus and any amendment or supplement
thereto by each Selling Holder and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities
covered by the Prospectus or any amendment or supplement thereto);
provided, that before filing a Registration Statement or Prospectus
relating to the Registrable Securities or any amendments or supplements
thereto, the Company will furnish to Holders' Counsel copies of all
documents proposed to be filed at least three (3) Business Days prior
to the filing thereof, which documents will be subject to the review of
such counsel;
(d) on or prior to the date on which the Registration
Statement is declared effective, register or qualify such Registrable
Securities under such other securities or "blue sky" laws of such
jurisdictions as any Selling Holder, Holders' Counsel or underwriter
reasonably requests and do any and all other acts and things which may
be necessary or advisable to enable such Selling Holder to consummate
the disposition in such jurisdictions of such Registrable Securities
owned by such Selling Holder; keep each such registration or
qualification (or exemption therefrom) effective during the period
which the Registration Statement is required to be kept effective; and
do any and all other acts or things reasonably necessary or advisable
to enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement; provided
that the Company shall not be required to (i) qualify to do business as
a foreign corporation or as a broker-dealer in any jurisdiction where
it is not then so qualified or (ii) take any action which would subject
it to general service of process or to taxation in any jurisdiction
where it is not then so subject;
(e) cause the Registrable Securities covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of
the business and operations of the Company to enable the Selling
Holders to consummate the disposition of such Registrable Securities;
(f) as promptly as practicable notify each Selling Holder, EGS
and the Placement Agent (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed and, with respect
to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission or any
other federal or state governmental authority for amendments or
supplements to a Registration Statement or related Prospectus or for
additional information to be included in any Registration Statement or
Prospectus or otherwise, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of a Registration Statement or
the initiation or threatening of any proceedings for that purpose, (iv)
of the issuance by any state securities commission or other regulatory
authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Securities under state
securities or "blue sky" laws or the initiation of any proceedings for
that purpose and (v) of the happening of any event which makes any
statement made in a Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated by reference therein
untrue or which requires the making of any changes in such Registration
Statement, Prospectus or documents so that they will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; and, as promptly as practicable thereafter,
prepare and file with the Commission and furnish a supplement or
amendment to such Prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Securities, such Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(g) make available to the Holders and the Placement Agent a
final prospectus (or file same under Commission Rule 424(b) within five
(5) days after the date that the Registration Statement is declared
effective.
(h) use its reasonable efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement, and, if
one is issued, to obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement at the earliest possible
moment.
Each Selling Holder, upon receipt of any notice from the Company of the
happening of any event of the kind described in subsection (f) of this Section
3, shall forthwith discontinue disposition of the Registrable Securities until
such Selling Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by subsection (f) of this Section 3 or until it is
advised in writing (the "Advice") by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated by reference in the Prospectus, and, if so
directed by the Company, such Selling Holder will, or will request the managing
underwriter or underwriters, if any, to, deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Selling Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event that the
Company shall give any such notice, the time periods for which a Registration
Statement is required to be kept effective pursuant to Section 2 hereof shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each Selling Holder
shall have received (i) the copies of the supplemented or amended Prospectus
contemplated by Section 2(f) or (ii) the Advice.
4. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of, or
compliance with, the provisions hereof, including without limitation,
all Commission and securities exchange or NASD registration and filing
fees, fees and expenses of compliance with securities or "blue sky"
laws (including fees and disbursements of counsel in connection with
"blue sky" qualifications of the Registrable Securities), printing
expenses, messenger and delivery expenses, internal expenses
(including, without limitation, all salaries and expenses of the
Company's officers and employees performing legal or accounting
duties), fees and expenses incurred in connection with the listing of
the securities to be registered, if any, on each securities exchange on
which similar securities issued by the Company are then listed, fees
and disbursements of counsel for the Company and its independent
certified public accountants (including the expense of any special
audit or "cold comfort" letters required by, or incident to, such
performance), Securities Act liability insurance (if the Company elects
to obtain such insurance), reasonable fees and expenses of any special
experts retained by the Company in connection with such registration,
fees and expenses of other persons retained by the Company in
connection with each registration hereunder and including the fees and
expense of legal counsel retained by a Holder or Holders and the
Placement Agent of $20,000, (but not or any underwriting fees,
discounts or commissions attributable to the sale of Registrable
Securities) are herein called "Registration Expenses."
(b) The Company will pay all Registration Expenses in
connection with each Registration Statement filed pursuant to Section 2
except as otherwise set forth therein. Other than as specifically
provided for in Section 2(a) hereto, all expenses to be borne by the
Holders in connection with any Registration Statement filed pursuant to
Section 2 (including, without limitation, all underwriting fees,
discounts or commissions attributable to such sale of Registrable
Securities) shall be borne by the participating Holders pro rata in
relation to the number of Units of Registrable Securities to be
registered by each Holder.
5. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnity and hold harmless, to the full extent permitted by law, each
Holder, its officers, directors and each Person who controls such
Holder (within the meaning of the Securities Act), and any agent or
investment adviser thereof, against all losses, claims, damages,
liabilities and expenses (including reasonable attorneys' fees and
costs of investigation) arising out of or based upon any untrue or
alleged untrue statement of material fact contained in any Registration
Statement, any amendment or supplement thereto, any Prospectus or
preliminary Prospectus or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as the same
arise out of or are based upon any such untrue statement or omission
based upon information with respect to such Holder furnished in writing
to the Company by or on behalf of such Holder expressly for use
therein; provided that, in the event that the Prospectus shall have
been amended or supplemented and copies thereof as so amended or
supplemented, shall have been furnished to a Holder prior to the
confirmation of any sales of Registrable Securities, such indemnity
with respect to the Prospectus shall not inure to the benefit of such
Holder if the Person asserting such loss, claim, damage or liability
and who purchased the Registrable Securities from such holder did not,
at or prior to the confirmation of the sale of the Registrable
Securities to such Person, receive a copy of the Prospectus as so
amended or supplemented and the untrue statement or omission of a
material fact contained in the Prospectus was corrected in the
Prospectus as so amended or supplemented.
(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In
connection with any Registration Statement in which a Holder is
participating, each such Holder will furnish to the Company in writing
such information with respect to the name and address of such Holder
and such other information as may be reasonably required for use in
connection with any such Registration Statement or Prospectus and
agrees to indemnity, to the full extent permitted by law, the Company,
its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue statement
of a material fact in the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or necessary to make the
statements therein not misleading, to the extent, but only to the
extent, that such untrue or alleged untrue statement relates to any
information with respect to such Holder so furnished in writing by such
Holder specifically for inclusion in any Prospectus or Registration
Statement; provided, however, that such Holder shall not be liable in
any such case to the extent that prior to the filing of any such
Registration Statement or Prospectus or amendment thereof or supplement
thereto, such Holder has furnished in writing to the Company
information expressly for use in such Registration Statement or
Prospectus or any amendment thereof or supplement thereto which
corrected or made not misleading information previously furnished to
the Company. In no event shall the liability of any Selling Holder
hereunder be greater in amount than the dollar amount of the proceeds
received by such Selling Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of
any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such
Person will claim indemnification or contribution pursuant to the
provisions hereof and, unless in the judgment of counsel of such
indemnified party a conflict of interest may exist between such
indemnified party and the indemnifying party with respect to such
claim, permit the indemnifying party to assume the defense of such
claim. Whether or not such defense is assumed by the indemnifying
party, the indemnifying party will not be subject to any liability for
any settlement made without its consent (but such consent will not be
unreasonably withheld). No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of
such claim or litigation. If the indemnifying party is not entitled to,
or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one counsel (plus
such local counsel, if any, as may be reasonably required in other
jurisdictions) with respect to such claim, unless in the judgment of
any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or
counsels. For the purposes of this Section 5(c), the term "conflict of
interest" shall mean that there are one or more legal defenses
available to the indemnified party that are different from or
additional to those available to the indemnifying party or such other
indemnified parties, as applicable, which different or additional
defenses make joint representation inappropriate.
(d) CONTRIBUTION. If the indemnification from the indemnifying
party provided for in this Section 5 is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities
or expenses referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact,
has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties intent,
knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
Section 5(c), any reasonable legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) If indemnification is available under this Section 5, the
indemnifying parties shall indemnity each indemnified party to the full
extent provided in Sections 5(a) and (b) without regard to the relative
fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 5.
6. TRANSFER OF RIGHTS.
The rights to cause the Company to register Registrable
Securities granted pursuant to the provisions hereof may be transferred or
assigned by any Holder to a transferee or assignee; provided; however, that the
transferee or assignee of such rights assumes the obligations of such transferor
or assignor, as the case may be, hereunder.
7. AMENDMENT
Except as otherwise provided herein, the provisions hereof may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of at least a majority of the aggregate number of the
Registrable Securities then outstanding.
SCHEDULE OF INVESTORS
Name of Investor Common Shares Warrants
- ---------------- ------------- --------
Yombo Aderinto 37,500 18,750
Daniel Anderson 62,500 31,250
Jan Arnett 156,250 78,125
Delaware Charter Guarantee &
Trust Co. F/B/O
Roger Bradshaw R/O IRA 237,500 118,750
Patrick Gallagher 100,000 50,000
The Hariri Family
Limited Partnership 625,000 312,500
Antonio Hernandez 156,250 78,125
Neil Herskowitz 156,250 78,125
Christopher C. Jensen 62,500 31,250
Martin L. Karlov 156,250 78,125
Stephen N. Kitchens &
Martha M. Kitchens JT WROS 312,500 156,250
Daniel J. Labrie 125,000 62,500
Dwight E. Long 100,000 50,000
David P. Nichols 125,000 62,500
David Jerome Raab 156,250 78,125
Suzette T. Seigel 156,250 78,125
William Strawbridge 100,000 50,000
Timothy Stritter 156,250 78,125
Thomas Wiles 93,750 46,875
Mark A. Wilson 106,250 53,125
--------- ---------
Total 3,181,250 1,590,625
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