Exhibit 99.1
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "AGREEMENT"), dated as of December
____, 2006, by and among Datascension, Inc., a Nevada corporation (the
"COMPANY"), and the subscribers identified on the signature page hereto (each a
"SUBSCRIBER" and collectively "SUBSCRIBERS").
WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement in reliance upon an exemption from securities registration
afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D
("REGULATION D") as promulgated by the United States Securities and Exchange
Commission (the "COMMISSION") under the Securities Act of 1933, as amended (the
"1933 ACT").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers, in the aggregate, shall
purchase up to $2,169,123.00 (the "PRINCIPAL AMOUNT") of principal amount of
promissory notes of the Company ("NOTE" or "NOTES"), a form of which is annexed
hereto as EXHIBIT A, the interest payable on which, under certain
circumstances, is convertible into shares of the Company's $.001 par value
common stock (the "COMMON STOCK"), at a per share conversion price set forth in
the Note ("CONVERSION PRICE"); and share purchase warrants (the "WARRANTS"), in
the form annexed hereto as EXHIBIT B, to purchase shares of Common Stock (the
"WARRANT SHARES"). The Notes, shares of Common Stock issuable upon conversion
of the Notes (the "SHARES"), the Warrants and the Warrant Shares are
collectively referred to herein as the "SECURITIES"; and
WHEREAS, the aggregate proceeds of the sale of the Notes and the Warrants
contemplated hereby shall be held in escrow pending the closing of the
transactions contemplated by this Agreement pursuant to the terms of a Funds
Escrow Agreement to be executed by the parties substantially in the form
attached hereto as EXHIBIT C (the "ESCROW AGREEMENT").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscribers hereby
agree as follows:
1. Closing. Subject to the satisfaction or waiver of the terms
and conditions of this Agreement, on the Closing Date, each Subscriber shall
purchase and the Company shall sell to each Subscriber a Note in the principal
amount designated on the signature page hereto. The principal amount of the
Notes to be purchased by the Subscribers on the Closing Date shall, in the
aggregate, be equal to the Principal Amount. The "CLOSING DATE" shall be the
date that subscriber funds representing the net amount due the Company from the
Closing Purchase Price of the Offering as defined in Section 8 is transmitted
by wire transfer or otherwise to or for the benefit of the Company. The
consummation of the transactions contemplated herein for all Closings shall
take place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
1601, New York, New York 10176, upon the satisfaction of all conditions to
Closing set forth in this Agreement.
2. Warrants. On the Closing Date, the Company will issue and
deliver Warrants to the Subscribers as set forth on the signature page hereto.
One Warrant will be issued for each $1.25 of Purchase Price, not including
Principal Amount derived from outstanding interest and default interest. The
per Warrant Share exercise price to acquire a Warrant Share upon exercise of a
Warrant shall be $0.45. The Warrants shall be exercisable commencing on the
Closing Date and shall continue to be exercisable until five years after the
Closing Date.
3. Security Interest. On November 17, 2004, the Subscribers
were granted a security interest in certain assets of the Company and
Subsidiaries (as defined in Section 5(a) of this Agreement), including
ownership of the Subsidiaries. The security interest was memorialized in
Security Agreements which were amended as of June 12, 2006. Each Subsidiary
executed and delivered to the Subscribers a form of Guaranty. The Company will
execute such other agreements, documents and financing statements reasonably
requested by Subscribers, which will be filed at the Company's expense with
such jurisdictions, states and counties designated by the Subscribers. The
Company will also execute all such documents reasonably necessary in the
opinion of Subscribers to memorialize and further protect the security interest
described herein. The Subscribers appointed a Collateral Agent to represent
them collectively in connection with the Security Agreement. The appointment
was pursuant to a Collateral Agent Agreement. The Notes and all sums due under
the Notes and the Transaction Documents (as defined in Section 5(c) below) are
included in the term "OBLIGATIONS" as defined in the Security Agreements and
are secured by the Collateral (as defined in the Security Agreements) in the
same manner and having the same priority as granted to the Subscribers pursuant
to the Security Agreements. The Subsidiaries by signing this Agreement consent
and agree that the Guaranties provided by them on or about November 17, 2004,
include as guaranteed obligations all sums which may become due to the
Subscribers under the Notes and the Transaction Documents .
4. Subscriber's Representations and Warranties. Each Subscriber
hereby represents and warrants to and agrees with the Company only as to such
Subscriber that:
(a) Organization and Standing of the Subscribers. If the
Subscriber is an entity, such Subscriber is a corporation, partnership or other
entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
the requisite corporate power to own its assets and to carry on its business.
(b) Authorization and Power. Each Subscriber has the
requisite power and authority to enter into and perform this Agreement and to
purchase the Securities being sold to it hereunder. The execution, delivery
and performance of this Agreement by such Subscriber and the consummation by it
of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate or partnership action, and no further consent or
authorization of such Subscriber or its Board of Directors, stockholders,
partners, members, as the case may be, is required. This Agreement has been
duly authorized, executed and delivered by such Subscriber and constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of
the Subscriber enforceable against the Subscriber in accordance with the terms
thereof.
(c) No Conflicts. The execution, delivery and performance
of this Agreement and the consummation by such Subscriber of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of such Subscriber's charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
such Subscriber is a party or by which its properties or assets are bound, or
result in a violation of any law, rule, or regulation, or any order, judgment
or decree of any court or governmental agency applicable to such Subscriber or
its properties (except for such conflicts, defaults and violations as would
not, individually or in the aggregate, have a material adverse effect on such
Subscriber). Such Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of
its obligations under this Agreement or to purchase the Notes or acquire the
Warrants in accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, such Subscriber is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
(d) Information on Company. The Subscriber has been
furnished with or has had access at the EDGAR Website of the Commission to the
Company's Form 10-KSB for the year ended December 31, 2005 and all periodic
reports filed with the Commission thereafter, but not later than five business
days before the Closing Date (and in connection with all other documents and
reports filed with the Commission and available through EDGAR, hereinafter
referred to as the "REPORTS"). In addition, the Subscriber has received in
writing from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested in
writing (such other information is collectively, the "OTHER WRITTEN
INFORMATION"), and considered all factors the Subscriber deems material in
deciding on the advisability of investing in the Securities.
(e) Information on Subscriber. The Subscriber is, and will
be at the time of the conversion of the Notes and exercise of the Warrants, an
"accredited investor", as such term is defined in Regulation D promulgated by
the Commission under the 1933 Act, is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to
utilize the information made available by the Company to evaluate the merits
and risks of and to make an informed investment decision with respect to the
proposed purchase of the Securities, which represents a speculative investment.
The Subscriber has the authority and is duly and legally qualified to purchase
and own the Securities. The Subscriber is able to bear the risk of such
investment for an indefinite period and to afford a complete loss thereof. The
information set forth on the signature page hereto regarding the Subscriber is
accurate.
(f) Purchase of Notes and Warrants. On the Closing Date,
the Subscriber will purchase the Notes and Warrants as principal for its own
account for investment only and not with a view toward, or for resale in
connection with, the public sale or any distribution thereof, but Subscriber
does not agree to hold the Securities for any minimum amount of time.
(g) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act or any applicable state securities laws, by reason of their issuance
in a transaction that does not require registration under the 1933 Act (based
in part on the accuracy of the representations and warranties of Subscriber
contained herein), and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration. Notwithstanding anything
to the contrary contained in this Agreement, such Subscriber may transfer
(without restriction and without the need for an opinion of counsel) the
Securities to its Affiliates (as defined below) provided that each such
Affiliate is an "accredited investor" under Regulation D and such Affiliate
agrees to be bound by the terms and conditions of this Agreement. For the
purposes of this Agreement, an "AFFILIATE" of any person or entity means any
other person or entity directly or indirectly controlling, controlled by or
under direct or indirect common control with such person or entity. Affiliate
when employed in connection with the Company includes each Subsidiary [as
defined in Section 5(a)] of the Company. For purposes of this definition,
"CONTROL" means the power to direct the management and policies of such person
or firm, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
(h) Shares Legend. The Shares and the Warrant Shares shall
bear the following or similar legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO
DATASCENSION, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(i) Warrants Legend. The Warrants shall bear the following
or similar legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO
DATASCENSION, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(j) Notes Legend. The Notes 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
AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO DATASCENSION,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(k) Communication of Offer. The offer to sell the
Securities was directly communicated to the Subscriber by the Company. At no
time was the Subscriber presented with or solicited by any leaflet, newspaper
or magazine article, radio or television advertisement, or any other form of
general advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such communicated offer.
(l) 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 Subscriber and are
valid and binding agreements enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; and Subscriber
has full corporate power and authority necessary to enter into this Agreement
and such other agreements and to perform its obligations hereunder and under
all other agreements entered into by the Subscriber relating hereto.
(m) No Governmental Review. Each Subscriber understands
that no United States federal or state agency or any other governmental or
state agency has passed on or made recommendations or endorsement of the
Securities or the suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(n) Correctness of Representations. Each Subscriber
represents as to such Subscriber that the foregoing representations and
warranties are true and correct as of the date hereof and, unless a Subscriber
otherwise notifies the Company prior to the Closing Date, shall be true and
correct as of the Closing Date.
(o) Survival. The foregoing representations and warranties
shall survive the Closing Date until three years after the Closing Date.
5. Company Representations and Warranties. The Company
represents and warrants to and agrees with each Subscriber that except as set
forth in the Reports or the Other Written Information and as otherwise
qualified in the Transaction Documents:
(a) Due Incorporation. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power to own
its properties and to carry on its business as disclosed in the Reports. The
Company is duly qualified as a foreign corporation to do business and is in
good standing in each jurisdiction where the nature of the business conducted
or property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. For purpose of this Agreement, a "MATERIAL ADVERSE EFFECT"
shall mean a material adverse effect on the financial condition, results of
operations, properties or business of the Company, taken either individually,
or in the aggregate, as a whole. For purposes of this Agreement, "SUBSIDIARY"
means, with respect to any entity at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity) of which more than 50% of (i) the
outstanding capital stock having (in the absence of contingencies) ordinary
voting power to elect a majority of the board of directors or other managing
body of such entity, (ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership or limited
liability company or (iii) in the case of a trust, estate, association, joint
venture or other entity, the beneficial interest in such trust, estate,
association or other entity business is, at the time of determination, owned or
controlled directly or indirectly through one or more intermediaries, by such
entity. All the Company's Subsidiaries as of the Closing Date are set forth on
SCHEDULE 5(A) hereto.
(b) Outstanding Stock. All issued and outstanding shares
of capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable.
(c) Authority; Enforceability. This Agreement, the Notes,
the Warrants, the Escrow Agreement, and any other agreements delivered together
with this Agreement or in connection herewith (collectively "TRANSACTION
DOCUMENTS") have been duly authorized, executed and delivered by the Company
and Subsidiaries (as the case may be) 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. The Company and Subsidiaries have full corporate
power and authority necessary to enter into and deliver the Transaction
Documents and to perform their obligations thereunder.
(d) Additional Issuances. There are no outstanding
agreements or preemptive or similar rights affecting the Company's common stock
or equity and no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of any shares of common
stock or equity of the Company or other equity interest in any of the
Subsidiaries of the Company except as described on SCHEDULE 5(D). The Common
stock of the Company on a fully diluted basis outstanding as of the last
trading day preceding the Closing Date is set forth on SCHEDULE 5(D).
(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, any Principal Market (as defined in
Section 9(b) of this Agreement), nor the Company's shareholders is required for
the execution by the Company of the Transaction Documents and compliance and
performance by the Company of its obligations under the Transaction Documents,
including, without limitation, the issuance and sale of the Securities.
(f) No Violation or Conflict. Assuming the representations
and warranties of the Subscribers in Section 4 are true, complete and correct,
neither the issuance and sale of the Securities nor the performance of the
Company's obligations under this Agreement and all other agreements entered
into by the Company relating thereto by the Company, except as described on
SCHEDULE 5(F) or in this Agreement, will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default in any
material respect) under (A) the articles or certificate of incorporation,
charter or bylaws of the Company, (B) to the Company's knowledge, any decree,
judgment, order, law, treaty, rule, regulation or determination applicable to
the Company of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company or over the properties or assets of the Company
or any of its Affiliates, (C) the terms of any bond, debenture, note or any
other evidence of indebtedness, or any agreement, stock option or other similar
plan, indenture, lease, mortgage, deed of trust or other instrument to which
the Company or any of its Affiliates is a party, by which the Company or any of
its Affiliates is bound, or to which any of the properties of the Company or
any of its Affiliates is subject, or (D) the terms of any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company, or any
of its Affiliates is a party except the violation, conflict, breach, or default
of which would not have a Material Adverse Effect; or
(ii) result in the creation or imposition of any lien,
charge or encumbrance upon the Securities or any of the assets of the Company
or any of its Affiliates; or
(iii) result in the activation of any anti-dilution
rights or a reset or repricing of any debt or security instrument of any
current, former or future creditor or equity holder of the Company, nor result
in the acceleration of the due date of any obligation of the Company; or
(iv) result in the activation of any piggy-back
registration rights of any person or entity holding securities or debt of the
Company or having the right to receive securities of the Company.
(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 any applicable state securities laws;
(ii) have been, or will be, duly and validly
authorized and on the date of conversion of the Notes and upon exercise of the
Warrants, the Shares and Warrant Shares 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;
(iii) will not have been issued or sold in violation of
any preemptive or other similar rights of the holders of any securities of the
Company;
(iv) will not subject the holders thereof to personal
liability by reason of being such holders provided Subscriber's representations
herein are true and accurate and Subscribers take no actions or fail to take
any actions required for their purchase of the Securities to be in compliance
with all applicable laws and regulations; and
(v) will have been issued in reliance upon an
exemption from the registration requirements of and will not result in a
violation of Section 5 under the 1933 Act.
(h) Litigation. Other than as described in the Reports,
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 the Transaction Documents. Except as
disclosed in the Reports, there is no pending or, to the best knowledge of the
Company, basis for or threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having
jurisdiction over the Company, or any of its Affiliates which litigation if
adversely determined would have a Material Adverse Effect.
(i) Reporting Company. The Company is a publicly-held
company subject to reporting obligations pursuant to Section 13 of the
Securities Exchange Act of 1934 (the "1934 ACT") and has a class of common
shares registered pursuant to Section 12(g) of the 1934 Act. Pursuant to the
provisions of the 1934 Act, the Company has timely filed all reports and other
materials required to be filed thereunder with the Commission during the
preceding twenty-four months.
(j) No Market Manipulation. The Company and its Affiliates
have not taken, and will not take, directly or indirectly, any action designed
to, or that might reasonably be expected to, cause or result in stabilization
or manipulation of the price of the Common Stock to facilitate the sale or
resale of the Securities or affect the price at which the Securities may be
issued or resold, provided, however, that this provision shall not prevent the
Company from engaging in investor relations/public relations activities
consistent with past practices.
(k) Information Concerning Company. The Reports contain
all material information relating to the Company and its operations and
financial condition as of their respective dates and all the information
required to be disclosed therein. Since the last day of the fiscal year of
the most recent audited financial statements included in the Reports ("LATEST
FINANCIAL DATE"), and except as modified in the Other Written Information or in
the Schedules hereto, there has been no Material Adverse Event relating to the
Company's business, financial condition or affairs not disclosed in the
Reports. The Reports 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. The Company has not provided to the Subscribers any material non-public
information.
(l) Stop Transfer. The Company will not issue any stop
transfer order or other order impeding the sale, resale or delivery of any of
the Securities, except as may be required by any applicable federal or state
securities laws and unless contemporaneous notice of such instruction is given
to the Subscriber.
(m) Defaults. The Company is not in violation of its
articles of incorporation or bylaws. The Company is (i) not in default under
or in violation of any other material agreement or instrument to which it is a
party or by which it or any of its properties are bound or affected, which
default or violation would have a Material Adverse Effect, (ii) not subject to
nor in default with respect to any order of any court, arbitrator or
governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) to the Company's knowledge not in
violation of any statute, rule or regulation of any governmental authority
which violation would have a Material Adverse Effect.
(n) Not an Integrated Offering. Neither the Company, nor
any of its Affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would cause the offer
of the Securities pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of the OTC Bulletin Board ("BULLETIN BOARD") which would impair
the exemptions relied upon in this Offering or the Company's ability to timely
comply with its obligations hereunder. Nor will the Company or any of its
Affiliates take any action or steps that would cause the offer or issuance of
the Securities to be integrated with other offerings which would impair the
exemptions relied upon in this Offering or the Company's ability to timely
comply with its obligations hereunder. The Company will not conduct any
offering other than the transactions contemplated hereby that will be
integrated with the offer or issuance of the Securities, which would impair the
exemptions relied upon in this Offering or the Company's ability to timely
comply with its obligations hereunder.
(o) No General Solicitation. Neither the Company, nor any
of its Affiliates, nor to its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 1933 Act) in connection with the
offer or sale of the Securities.
(p) Listing. The Company's common stock is listed on the
Bulletin Board under the symbol DSEN. The Company has not received any oral or
written notice that the Common Stock is not eligible nor will become ineligible
for listing on the Bulletin Board nor that the Common Stock does not meet all
requirements for the continuation of such listing. The Company satisfies all
the requirements for the continued quotation of the Common Stock on the
Bulletin Board.
(q) No Undisclosed Liabilities. The Company has no
liabilities or obligations which are material, individually or in the
aggregate, which are not disclosed in the Reports and Other Written
Information, other than those incurred in the ordinary course of the Company's
businesses since the Latest Financial Date, and which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect,
except as disclosed on SCHEDULE 5(Q).
(r) No Undisclosed Events or Circumstances. Since the
Latest Financial Date, no event or circumstance has occurred or exists with
respect to the Company or its businesses, properties, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which
has not been so publicly announced or disclosed in the Reports.
(a)Capitalization. The authorized and outstanding capital
stock of the Company and Subsidiaries as of the date of
this Agreement and the Closing Date (not including the
Securities) are set forth on SCHEDULE 5(D). Except as set
forth on SCHEDULE 5(D), there are no options, warrants, or
rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right
to subscribe for any shares of capital stock of the
Company or any of its Subsidiaries. All of the
outstanding shares of Common Stock of the Company have
been duly and validly authorized and issued and are fully
paid and nonassessable.
(b)Dilution. The Company's executive officers and directors
understand the nature of the Securities being sold hereby
and recognize that the issuance of the Securities will
have a potential dilutive effect on the equity holdings of
other holders of the Company's equity or rights to receive
equity of the Company. The board of directors of the
Company has concluded, in its good faith business
judgment, that the issuance of the Securities is in the
best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon
conversion of the Notes, and the Warrant Shares upon
exercise of the Warrants is binding upon the Company and
enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of
the Company or parties entitled to receive equity of the
Company.
(c)No Disagreements with Accountants and Lawyers. There are
no disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise, between
the Company and the accountants and lawyers formerly or
presently employed by the Company, including but not
limited to disputes or conflicts over payment owed to such
accountants and lawyers.
(v) DTC Status/Transfer Agent. The Company's transfer
agent is eligible to participate in and the Common Stock is eligible for
transfer pursuant to the Depository Trust Company Automated Securities Transfer
Programs. The name, address, telephone number, fax number, contact person and
email address of the Company transfer agent are set forth on SCHEDULE 5(V)
hereto.
(w) Investment Company. Neither the Company nor any
Affiliate is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(x) Subsidiary Representations. The Company makes each of
the representations contained in Sections 5(a), (b), (d), (e), (f), (h), (k),
(m), (q), (r), (s), (u) and (w) of this Agreement, as same relate to each
Subsidiary of the Company, with the same qualifications to each such
representation.
(y) Correctness of Representations. The Company represents
that the foregoing representations and warranties are true and correct as of
the date hereof in all material respects, and, unless the Company otherwise
notifies the Subscribers prior to the Closing Date, shall be true and correct
in all material respects as of the Closing Date.
(z) Survival. The foregoing representations and warranties
shall survive until three years after the Closing Date.
6. Regulation D Offering. The offer and issuance of the
Securities to the Subscribers is being made pursuant to the exemption from the
registration provisions of the 1933 Act afforded by Section 4(2) or Section
4(6) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder.
On the Closing Date, the Company will provide an opinion reasonably acceptable
to Subscriber from the Company's legal counsel opining on the availability of
an exemption from registration under the 1933 Act as it relates to the offer
and issuance of the Securities and other matters reasonably requested by
Subscribers. A form of the legal opinion is annexed hereto as EXHIBIT D. The
Company will provide, at the Company's expense, such other legal opinions in
the future as are reasonably necessary for the issuance and resale of the
Common Stock issuable upon conversion of the Notes and exercise of the Warrants
pursuant to an effective registration statement, rule 144 under the 1933 Act,
or an exemption from registration.
7. Broker. The Company on the one hand, and each Subscriber
(for itself only) on the other hand, agrees to indemnify the other against and
hold the other harmless from any and all liabilities to any persons claiming
brokerage commissions or similar fees on account of services purported to have
been rendered on behalf of the indemnifying party in connection with this
Agreement or the transactions contemplated hereby and arising out of such
party's actions. Anything in this Agreement to the contrary notwithstanding,
each Subscriber is providing indemnification only for such Subscriber's own
actions and not for any action of any other Subscriber. The Company represents
that there are no party entitled to receive fees, commissions, or similar
payments in connection with the Offering.
8. Legal Fees and Closing Purchase Price. The Company shall
pay to Grushko & Mittman, P.C., a cash fee of $25,000 ("LEGAL FEES") as
reimbursement for services rendered to the Subscribers in connection with this
Agreement and the purchase and sale of the Notes and Warrants (the "OFFERING").
The Legal Fees and reimbursement for estimated UCC search fees, if any, (less
any amounts paid prior to Closing) to be paid by the Company will be payable on
the Closing Date out of funds held pursuant to the Escrow Agreement.
9. Covenants of the Company. The Company covenants and agrees
with the Subscribers as follows:
(a) Stop Orders. The Company will advise the Subscribers,
within two hours after the Company receives notice of issuance by the
Commission, any state securities commission or any other regulatory authority
of any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
(b) Listing. If applicable, the Company shall promptly
secure the listing of the shares of Common Stock and the Warrant Shares upon
each national securities exchange, or electronic or automated quotation system
upon which they are or become eligible for listing and shall maintain such
listing so long as any Notes or Warrants are outstanding. The Company will
maintain the listing or quotation of its Common Stock on the American Stock
Exchange, Nasdaq Capital Market, Nasdaq National Market System, Bulletin Board,
or New York Stock Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Common Stock (the "PRINCIPAL
MARKET")), and will comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the Principal Market, as
applicable. The Company will provide the Subscribers copies of all notices it
receives notifying the Company of the threatened and actual delisting of the
Common Stock from any Principal Market. As of the date of this Agreement, the
Bulletin Board is the Principal Market.
(c) Market Regulations. If applicable, the Company shall
notify the Commission, the Principal Market and applicable state authorities,
in accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Securities to the Subscribers and promptly provide
copies thereof to Subscriber.
(d) Filing Requirements. From the date of this Agreement
and until the sooner of (i) two (2) years after the Closing Date, or (ii) until
all the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will (A) cause its Common
Stock to continue to be registered under Section 12(b) or 12(g) of the 1934
Act, (B) comply in all respects with its reporting and filing obligations under
the 1934 Act, (C) voluntarily comply with all reporting requirements that are
applicable to an issuer with a class of shares registered pursuant to Section
12(g) of the 1934 Act, if Company is not subject to such reporting
requirements, and (D) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will use its best
efforts not to take any action or file any document (whether or not permitted
by the 1933 Act or the 1934 Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said acts until two (2) years after the Closing Date. Until
the earlier of the resale of the Shares and the Warrant Shares by each
Subscriber or two (2) years after the Closing Date, the Company will use its
best efforts to continue the listing or quotation of the Common Stock on a
Principal Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market.
The Company agrees to timely file a Form D with respect to the Securities if
required under Regulation D and to provide a copy thereof to each Subscriber
promptly after such filing.
(e) Use of Proceeds. The proceeds of the Offering will be
employed by the Company for the purposes set forth on SCHEDULE 9(E) hereto.
Except as set forth on SCHEDULE 9(E), the Purchase Price may not and will not
be used for accrued and unpaid officer and director salaries, payment of
financing related debt, redemption of outstanding notes or equity instruments
of the Company, litigation related expenses or settlements, brokerage fees, nor
non-trade obligations outstanding on a Closing Date. For so long as any Notes
are outstanding, the Company will not prepay any financing related debt
obligations, nor redeem any equity instruments of the Company.
(f) Reservation. Prior to the Closing Date, the Company
undertakes to reserve, pro rata, on behalf of the Subscribers from its
authorized but unissued Common Stock, a number of shares equal to the amount of
Warrant Shares issuable upon exercise of the Warrants. Failure to have
sufficient shares reserved pursuant to this Section 9(f) shall be a material
default of the Company's obligations under this Agreement and an Event of
Default under the Note.
(g) Taxes. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until the later of
the payment of the Note or until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume limitations, the
Company will promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Company;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefore.
(h) Insurance. From the date of this Agreement and until
the sooner of (i) two (2) years after the Closing Date, or (ii) until the later
of the payment of the Note or until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume limitations, the
Company will keep its assets which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire,
explosion and other risks customarily insured against by companies in the
Company's line of business, in amounts sufficient to prevent the Company from
becoming a co-insurer and not in any event less than one hundred percent (100%)
of the insurable value of the property insured less reasonable deductible
amounts; and the Company will maintain, with financially sound and reputable
insurers, insurance against other hazards and risks and liability to persons
and property to the extent and in the manner customary for companies in similar
businesses similarly situated and to the extent available on commercially
reasonable terms.
(i) Books and Records. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until the
later of the payment of the Note or until all the Shares and Warrant Shares
have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will keep true records and books of account in which
full, true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.
(j) Governmental Authorities. From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until the later of the payment of the Note or until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company shall duly observe and conform in all material
respects to all valid requirements of governmental authorities relating to the
conduct of its business or to its properties or assets.
(k) Intellectual Property. From the date of this Agreement
and until the sooner of (i) two (2) years after the Closing Date, or (ii) until
the later of the payment of the Note or until all the Shares and Warrant Shares
have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business, unless it is sold for value.
(l) Properties. From the date of this Agreement and until
the sooner of (i) two (2) years after the Closing Date, or (ii) until the later
of the payment of the Note or until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration
Statement (as defined in Section 11.1(ii) hereof) or pursuant to Rule 144,
without regard to volume limitations, the Company will keep its properties in
good repair, working order and condition, reasonable wear and tear excepted,
and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases to which it is a party or under
which it occupies property if the breach of such provision could reasonably be
expected to have a Material Adverse Effect.
(m) Confidentiality/Public Announcement. From the date of
this Agreement and until the sooner of (i) two (2) years after the Closing
Date, or (ii) until the later of the payment of the Note or until all the
Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company agrees that except in
connection with a Form 8-K or the Registration Statement or as otherwise
required in any other Commission filing, it will not disclose publicly or
privately the identity of the Subscribers unless expressly agreed to in writing
by a Subscriber, only to the extent required by law and then only upon five
days prior notice to Subscriber. In any event and subject to the foregoing,
the Company shall file a Form 8-K or make a public announcement describing the
Offering not later than the first business day after the Closing Date. In the
Form 8-K or public announcement, the Company will specifically disclose the
amount of common stock outstanding immediately after the Closing. A form of
the proposed Form 8-K or public announcement to be employed in connection with
the Closing is annexed hereto as EXHIBIT E.
(n) Further Registration Statements. The Company will not
file any registration statements, including but not limited to Forms S-8
[except as described in Section 12(a)], with the Commission or with state
regulatory authorities without the consent of the Subscriber until the
expiration of the "EXCLUSION PERIOD", which is defined as the sooner of until
all the Shares and Warrant Shares have been resold or transferred by the
Subscribers pursuant to a registration statement or Rule 144(k) under the 1933
Act, without regard to volume limitations, or the Note is no longer
outstanding. The Exclusion Period will be tolled during the pendency of an
Event of Default (as defined in the Note).
(o) Non-Public Information. The Company covenants and
agrees that neither it nor any other person acting on its behalf will provide
any Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Subscriber shall have agreed in writing to receive such information. The
Company understands and confirms that each Subscriber shall be relying on the
foregoing representations in effecting transactions in securities of the
Company. In any event, the Company will offer to the Subscriber an opportunity
to review and comment on the Registration Statement thereto between three and
five business days prior to the proposed filing date thereof.
(p) Offering Restrictions. For so long as Notes remain
outstanding, except for the Excepted Issuances, the Company will not enter into
an agreement to, nor issue any equity, convertible debt or other securities
convertible into Common Stock or equity of the Company nor modify any of the
foregoing which may be outstanding at anytime, without the prior written
consent of the Subscriber, which consent may be withheld for any reason. For
so long as Notes remain outstanding, the Company will not enter into any equity
line of credit or similar agreement, nor issue nor agree to issue any floating
or variable priced equity linked instruments nor any of the foregoing or equity
with price reset rights.
(q) Negative Covenants. So long as the Notes are
outstanding, without the consent of the Subscribers, the Company will not and
will not permit any of its Subsidiaries to directly or indirectly:
(i) create, incur, assume or suffer to exist any
pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, security title, mortgage, security deed or deed of trust,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Uniform
Commercial Code or comparable law of any jurisdiction) (each, a "LIEN") upon
any of its property, whether now owned or hereafter acquired except for (A) the
Excepted Issuances (as defined in Section 12(a) hereof), (B) (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers', warehousemen's, mechanics',
material men's, repairmen's and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business
in compliance with workers' compensation, unemployment insurance and other
social security laws or regulations; (d) deposits to secure the performance of
bids, trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing of
the purchase of new property in the ordinary course of the Company's business
up to the amount of the purchase price of such property, or (f) easements,
zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially detract from the value of the
affected property (each of (a) through (f), a "PERMITTED LIEN") and (C)
indebtedness for borrowed money which is not senior or pari passu in right of
payment to the payment of the Notes;
(ii) amend its certificate of incorporation, bylaws or
its charter documents so as to adversely affect any rights of the Subscriber;
(iii) repay, repurchase or offer to repay, repurchase
or otherwise acquire or make any dividend or distribution in respect of any of
its Common Stock, preferred stock, or other equity securities other than to the
extent permitted or required under the Transaction Documents; or
(iv) engage in any transactions with any officer,
director, employee or any Affiliate of the Company, including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $10,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company, and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the Company.
(r) Limited Standstill. The Company will deliver to the
Subscribers on or before the Closing Date and enforce the provisions of
irrevocable lockup agreements ("LIMITED STANDSTILL AGREEMENTS") in the forms
annexed hereto as EXHIBIT F, with the parties identified on SCHEDULE 9.1(R).
(s) Investment. Until all the Notes have been fully
satisfied, the Company agrees that it will not directly or indirectly sell or
spin-off, nor encumber, hypothecate or suffer a lien to be placed on any equity
of any subsidiary of the Company or assets of any subsidiary of the Company
without the consent of Subscribers.
(t) Board of Directors. Immediately upon the occurrence
of an Event of Default, which is subject to cure, that is not cured within any
applicable cure period, the Subscriber holding the largest amount of
Obligations shall have the right to appoint a number of directors to the
Company's board of directors which shall comprise, after such appointment, a
majority of the board of directors.
10. Covenants of the Company and Subscriber Regarding
Indemnification.
(a) The Company agrees to indemnify, hold harmless,
reimburse and defend the Subscribers, the Subscribers' 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 the
Subscriber or any such person which results, arises out of or is based upon (i)
any material misrepresentation by Company or material 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 material 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 Subscriber
relating hereto.
(b) Each Subscriber agrees to indemnify, hold harmless,
reimburse and defend the Company and each of the Company's officers, directors,
agents, Affiliates, control persons against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Company or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
such Subscriber in this Agreement or in any Exhibits or Schedules attached
hereto, or other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or cure periods, any material breach or default in
performance by such Subscriber of any covenant or undertaking to be performed
by such Subscriber hereunder, or any other agreement entered into by the
Company and Subscribers, relating hereto.
(c) In no event shall the liability of any Subscriber or
permitted successor hereunder or under any Transaction Document or other
agreement delivered in connection herewith be greater in amount than the dollar
amount of the net proceeds actually received by such Subscriber upon the sale
of Registrable Securities (as defined herein).
(d) The procedures set forth in Section 11.6 of the
Subscription Agreement entered into in connection with the November 17, 2004
transactions described in Section 3 above shall apply to the indemnification
set forth in Sections 10(a) and 10(b) above.
11.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities. 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 Warrant Shares and the
Settlement Shares as defined in Section 13(c) ("REGISTRABLE SECURITIES") for
sale to the public, provided the Registrable Securities are not otherwise
registered for resale by the Subscribers or Holder pursuant to an effective
registration statement, each such time it will give at least fifteen (15) days'
prior written notice to the record holder of the Registrable Securities of its
intention so to do. Upon the written request of the holder, received by the
Company within ten (10) days after the giving of any such notice by the
Company, to register any of the Registrable Securities not previously
registered, the Company will cause such Registrable Securities as to which
registration shall have been so requested to be included with the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent required to permit the sale or other disposition of the
Registrable Securities so registered by the holder of such Registrable
Securities (the "SELLER" or "SELLERS"). Unless instructed in writing to the
contrary, the Subscribers hereby automatically exercise the registration rights
granted in this Section 11.1. The Seller is hereby given the same rights and
benefits as any other party identified in such registration. In the event
that any registration pursuant to this Section 11.1 shall be, in whole or in
part, an underwritten public offering of common stock of the Company, the
number of shares of Registrable Securities to be included in such an
underwriting may be reduced by the managing underwriter if and to the extent
that the Company and the underwriter shall reasonably be of the opinion that
such inclusion would adversely affect the marketing of the securities to be
sold by the Company therein; provided, however, that the Company shall notify
the Seller in writing of any such reduction. Notwithstanding the foregoing
provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer
a delay of any registration statement referred to in this Section 11.1 without
thereby incurring any liability to the Seller due to such withdrawal or delay.
11.2. Registration Procedures. If and whenever the Company is
required by the provisions of Section 11.1 to effect the registration of any
Registrable Securities under the 1933 Act, the Company will, as expeditiously
as possible:
(a) subject to the timelines provided in this Agreement,
prepare and file with the Commission a registration statement required by
Section 11, with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective for the period of
the distribution contemplated thereby (determined as herein provided), promptly
provide to the holders of the Registrable Securities copies of all filings and
Commission letters of comment and notify Subscribers (by telecopier and by e-
mail addresses provided by Subscribers) and Grushko & Mittman, P.C. (by
telecopier and by email to Counslers@aol.com) on or before the first business
day thereafter that the Company receives notice that (i) the Commission has no
comments or no further comments on the Registration Statement, and (ii) the
registration statement has been declared effective (failure to timely provide
notice as required by this Section 11.2(a) shall be a material breach of the
Company's obligation and an Event of Default as defined in the Notes and a Non-
Registration Event as defined in Section 11.4 of this Agreement);
(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 such registration statement has been effective for a period of
two (2) years, and comply with the provisions of the 1933 Act with respect to
the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Sellers' intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Sellers, at the Company's expense, such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement or make them electronically
available;
(d) use its commercially reasonable best efforts to
register or qualify the Registrable Securities covered by such registration
statement under the securities or "blue sky" laws of New York and such
jurisdictions as the Sellers shall request in writing, provided, however, that
the Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;
(e) if applicable, list the Registrable Securities covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(f) notify the Subscribers within two hours of the
Company's becoming aware that a prospectus relating thereto is required to be
delivered under the 1933 Act, of the happening of any event of which the
Company has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing or which becomes subject to a Commission, state or
other governmental order suspending the effectiveness of the registration
statement covering any of the Registrable Securities;
(g) provided same would not be in violation of the
provision of Regulation FD under the 1934 Act, make available for inspection by
the Sellers, and any attorney, accountant or other agent retained by the
Seller or underwriter, all publicly available, non-confidential financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration statement;
and
(h) provide to the Sellers copies of the Registration
Statement and amendments thereto five business days prior to the filing thereof
with the Commission.
11.3. Provision of Documents. In connection with each registration
described in this Section 11, each Seller will furnish to the Company in
writing such information and representation letters with respect to itself and
the proposed distribution by it as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities laws.
11.4. Non-Registration Events. The Company and the Subscribers
agree that the Sellers will suffer damages if the Company does not comply with
its obligations set forth in Section 11.1.
11.5. Expenses. All expenses incurred by the Company in complying
with Section 11, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including reasonable
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
fee of one counsel for all Sellers are called "REGISTRATION EXPENSES." All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of any additional
counsel to the Seller, are called "SELLING EXPENSES." The Company will pay all
Registration Expenses in connection with the registration statement under
Section 11. Selling Expenses in connection with each registration statement
under Section 11 shall be borne by the Seller and may be apportioned among the
Sellers in proportion to the number of shares sold by the Seller relative to
the number of shares sold under such registration statement or as all Sellers
thereunder may agree.
11.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable
Securities under the 1933 Act pursuant to Section 11, the Company will, to the
extent permitted by law, indemnify and hold harmless the Seller, each officer
of the Seller, each director of the Seller, each underwriter of such
Registrable Securities thereunder and each other person, if any, who controls
such Seller or underwriter within the meaning of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, to which the Seller,
or such underwriter or controlling person may become subject under the 1933 Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities were registered under the
1933 Act pursuant to Section 11, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances when made, and will subject to the
provisions of Section 11.6(c) reimburse the Seller, each such underwriter and
each such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable to the Seller to the extent that any such damages arise out of or
are based upon an untrue statement or omission made in any preliminary
prospectus if (i) the Seller failed to send or deliver a copy of the final
prospectus delivered by the Company to the Seller with or prior to the delivery
of written confirmation of the sale by the Seller to the person asserting the
claim from which such damages arise, (ii) the final prospectus would have
corrected such untrue statement or alleged untrue statement or such omission or
alleged omission, or (iii) to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by any such Seller, or any such controlling person in
writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the
Registrable Securities under the 1933 Act pursuant to Section 11, each Seller
severally but not jointly will, to the extent permitted by law, indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the 1933 Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the 1933 Act, against
all losses, claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Registrable
Securities were registered under the 1933 Act pursuant to Section 11, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and each such officer, director, underwriter and controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the Seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
information pertaining to such Seller, as such, furnished in writing to the
Company by such Seller specifically for use in such registration statement or
prospectus, and provided, further, however, that the liability of the Seller
hereunder shall be limited to the net proceeds actually received by the Seller
from the sale of Registrable Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 11.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 11.6(c), except and only if and to
the extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate in and, to the extent it shall wish, to assume
and undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 11.6(c) for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties,
as a group, shall have the right to select one separate counsel and to assume
such legal defenses and otherwise to participate in the defense of such action,
with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
(d) In order to provide for just and equitable contribution
in the event of joint liability under the 1933 Act in any case in which either
(i) a Seller, or any controlling person of a Seller, makes a claim for
indemnification pursuant to this Section 11.6 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 11.6 provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of the Seller or controlling person of the Seller in circumstances for which
indemnification is not provided under this Section 11.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Seller is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (y) the Seller will not be required to
contribute any amount in excess of the public offering price of all such
securities sold by it pursuant to such registration statement; and (z) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) will be entitled to contribution from any person
or entity who was not guilty of such fraudulent misrepresentation.
11.7. Delivery of Unlegended Shares.
(a) Within three (3) business days (such third business day
being the "UNLEGENDED SHARES DELIVERY DATE") after the business day on which
the Company has received (i) a notice that Shares, Warrant Shares or Settlement
Shares have been sold pursuant to a registration statement or Rule 144 under
the 1933 Act, (ii) a representation that the prospectus delivery requirements,
or the requirements of Rule 144, as applicable and if required, have been
satisfied, and (iii) the original share certificates representing the shares of
Common Stock that have been sold, and (iv) in the case of sales under Rule 144,
customary representation letters of the Subscriber and/or Subscriber's broker
regarding compliance with the requirements of Rule 144, the Company at its
expense, (y) shall deliver, and shall cause legal counsel selected by the
Company to deliver to its transfer agent (with copies to Subscriber) an
appropriate instruction and opinion of such counsel, directing the delivery of
shares of Common Stock without any legends including the legend set forth in
Section 4 above, reissuable pursuant to any effective and current Registration
Statement described in Section 11 of this Agreement or pursuant to Rule 144
under the 1933 Act (the "UNLEGENDED SHARES"); and (z) cause the transmission of
the certificates representing the Unlegended Shares together with a legended
certificate representing the balance of the submitted Warrant Shares
certificate, if any, to the Subscriber at the address specified in the notice
of sale, via express courier, by electronic transfer or otherwise on or before
the Unlegended Shares Delivery Date.
(b) In lieu of delivering physical certificates
representing the Unlegended Shares, if the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of a Subscriber, so long as the certificates
therefor do not bear a legend and the Subscriber is not obligated to return
such certificate for the placement of a legend thereon, the Company must cause
its transfer agent to electronically transmit the Unlegended Shares by
crediting the account of Subscriber's prime Broker with DTC through its Deposit
Withdrawal Agent Commission system. Such delivery must be made on or before
the Unlegended Shares Delivery Date.
(c) The Company understands that a delay in the delivery of
the Unlegended Shares pursuant to Section 11 hereof after the Unlegended Shares
Delivery Date could result in economic loss to Subscriber. As compensation to
Subscriber for such loss, the Company agrees to pay late payment fees (as
liquidated damages and not as a penalty) to the Subscriber for late delivery of
Unlegended Shares in the amount of $100 per business day after the Delivery
Date for each $10,000 of Purchase Price (as defined in the Warrants) of the
Unlegended Shares subject to the delivery default. If during any 360 day
period, the Company fails to deliver Unlegended Shares as required by this
Section 11.7 for an aggregate of thirty (30) days, then each Subscriber or
assignee holding Securities subject to such default may, at its option, require
the Company to redeem all or any portion of the Shares, Warrant Shares or
Settlement Shares subject to such default at a price per share equal to 115% of
the Purchase Price or consideration paid for such shares less any liquidated
damages accrued and actually paid for the first fifteen days of such default
("UNLEGENDED REDEMPTION AMOUNT").
(d) In addition to any other rights available to a
Subscriber, if the Company fails to deliver to a Subscriber Unlegended Shares
as required pursuant to this Agreement, within seven (7) business days after
the Unlegended Shares Delivery Date and the Subscriber or a broker on the
Subscriber's behalf, purchases (in an open market transaction or otherwise)
shares of common stock to deliver in satisfaction of a sale by such Subscriber
of the shares of Common Stock which the Subscriber was entitled to receive from
the Company (a "Buy-In"), then the Company shall pay in cash to the Subscriber
(in addition to any remedies available to or elected by the Subscriber) the
amount by which (A) the Subscriber's total purchase price (including brokerage
commissions, if any) for the shares of common stock so purchased exceeds (B)
the aggregate purchase price of the shares of Common Stock delivered to the
Company for reissuance as Unlegended Shares together with interest thereon at a
rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if a Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect
to $10,000 of purchase price of shares of Common Stock delivered to the Company
for reissuance as Unlegended Shares, the Company shall be required to pay the
Subscriber $1,000, plus interest. The Subscriber shall provide the Company
written notice indicating the amounts payable to the Subscriber in respect of
the Buy-In.
(e) In the event a Subscriber shall request delivery of
Unlegended Shares as described in Section 11.7 and the Company is required to
deliver such Unlegended Shares pursuant to Section 11.7, the Company may not
refuse to deliver Unlegended Shares based on any claim that such Subscriber or
any one associated or affiliated with such Subscriber has been engaged in any
violation of law, or for any other reason, unless, an injunction or temporary
restraining order from a court, on notice, restraining and or enjoining
delivery of such Unlegended Shares or exercise of all or part of said Warrant
shall have been sought and obtained by the Company or at the Company's request
or with the Company's assistance, and the Company has posted a surety bond for
the benefit of such Subscriber in the amount of 120% of the amount of the
aggregate purchase price of the Common Stock and Warrant Shares which are
subject to the injunction or temporary restraining order, which bond shall
remain in effect until the completion of arbitration/litigation of the dispute
and the proceeds of which shall be payable to such Subscriber to the extent
Subscriber obtains judgment in Subscriber's favor.
12. (a) Right of First Refusal. Until one year after the
Closing Date, the Subscribers shall be given not less than seven (7) business
days prior written notice of any proposed sale by the Company of its common
stock or other securities or debt obligations, except in connection with (i)
full or partial consideration in connection with a strategic merger,
acquisition, consolidation or purchase of substantially all of the securities
or assets of corporation or other entity which holders of such securities or
debt are not at any time granted registration rights, (ii) the Company's
issuance of securities in connection with strategic license agreements and
other partnering arrangements so long as such issuances are not for the purpose
of raising capital which holders of such securities or debt are not at any time
granted registration rights, (iii) the Company's issuance of Common Stock or
the issuances or grants of options to purchase Common Stock pursuant to stock
option plans and employee stock purchase plans described on SCHEDULE 5(D)
hereto at prices equal to or higher than the closing price of the Common Stock
on the issue date of any of the foregoing (in connection with which 500,000
shares of Common Stock may be registered on a Form S-8), (iv) as a result of
the exercise of Warrants or conversion of Notes which are granted or issued
pursuant to this Agreement or that have been issued prior to the Closing Date,
the issuance of which has been disclosed in a Report filed not less than five
(5) days prior to the Closing Date, (v) the payment of any interest on the
Notes and liquidated damages or other damages pursuant to the Transaction
Documents or other securities instruments that have been issued prior to the
Closing Date, the issuance of which has been disclosed in a Report filed not
less than five days prior to the Closing Date, and (vi) any payment or issuance
to the Subscribers in connection with the Prior Fundings (as defined in Section
13 below) (collectively the foregoing are "EXCEPTED ISSUANCES"). The
Subscribers who exercise their rights pursuant to this Section 12(a) shall have
the right during the seven (7) business days following receipt of the notice to
purchase such offered common stock, debt or other securities in accordance with
the terms and conditions set forth in the notice of sale in the same proportion
to each other as their purchase of Notes in the Offering. In the event such
terms and conditions are modified during the notice period, the Subscribers
shall be given prompt notice of such modification and shall have the right
during the seven (7) business days following the notice of modification to
exercise such right.
(b) Favored Nations Provision. Other than in connection
with the Excepted Issuances, if at any time Warrants are outstanding, the
Company shall offer, issue or agree to issue any common stock or securities
convertible into or exercisable for shares of common stock (or modify any of
the foregoing which may be outstanding) to any person or entity at a price per
share or conversion or exercise price per share which shall be less than the
Warrant exercise price, without the consent of each Subscriber holding Notes,
Warrants, or Warrant Shares, then the Company shall issue, for each such
occasion, additional shares of Common Stock to each Subscriber so that the
average per share purchase price of the shares of Common Stock issued to the
Subscriber (of only the Warrant Shares still owned by the Subscriber) is equal
to such other lower price per share and the Warrant exercise price shall
automatically be adjusted to such other lower price. The delivery to the
Subscriber of the additional shares of Common Stock shall be not later than the
closing date of the transaction giving rise to the requirement to issue
additional shares of Common Stock. The Subscriber is granted the registration
rights described in Section 11 hereof in relation to such additional shares of
Common Stock or at the election of the Subscriber, registration rights, if any,
granted in connection with the dilutive issuance. For purposes of the issuance
and adjustment described in this paragraph, the issuance of any security of the
Company carrying the right to convert such security into shares of Common Stock
or of any warrant, right or option to purchase Common Stock shall result in the
issuance of the additional shares of Common Stock upon the sooner of the
agreement to or actual issuance of such convertible security, warrant, right or
option and again at any time upon any subsequent issuances of shares of Common
Stock upon exercise of such conversion or purchase rights if such issuance is
at a price lower than the Warrant exercise price in effect upon such issuance.
The rights of the Subscriber set forth in this Section 12 are in addition to
any other rights the Subscriber has pursuant to this Agreement, any Transaction
Document, and any other agreement referred to or entered into in connection
herewith.
(c) Maximum Exercise of Rights. In the event the exercise
of the rights described in Section 12(a) would or could result in the issuance
of an amount of common stock of the Company that would exceed the maximum
amount that may be issued to a Subscriber calculated in the manner described in
Section 10 of the Warrant, then the issuance of such additional shares of
common stock of the Company to such Subscriber will be deferred in whole or in
part until such time as such Subscriber is able to beneficially own such common
stock without exceeding the applicable maximum amount set forth calculated in
the manner described in Section 10 of the Warrant. The determination of when
such common stock may be issued shall be made by each Subscriber as to only
such Subscriber. This section shall not be applicable to Longview Fund L.P.
and its Affiliates.
13. Modification of Prior Fundings.
(a) Initial Funding. On November 17, 2004, the Company
issued to the Subscribers, Longview Equity Fund, L.P. ("LEF") and Longview
International Equity Fund, L.P. ("LIEF"), convertible promissory notes
("INITIAL NOTES") and common stock purchase warrants ("INITIAL WARRANTS") (such
transaction is the "INITIAL FUNDING"). On April 4, 2005, the Company issued a
note and common stock purchase warrants to Longview Fund L.P., a Subscriber
herein (the "2005 FUNDING" and "2005 NOTE" and "2005 WARRANTS", respectively).
On June 12, 2006, the Company issued notes and common stock purchase warrants
to the Subscribers (the "2006 FUNDING" and "2006 NOTE" and "2006 WARRANTS",
respectively). Collectively, the Initial Funding, 2005 Funding and 2006
Funding are referred to as the "PRIOR FUNDINGS". In consideration of entering
into this Agreement, and other good and valuable mutual consideration, receipt
of which is acknowledged, the Company, Subscribers, LEF and LIEF agree to the
following modifications of the terms of the Prior Fundings.
(b) Outstanding Amounts. The Company acknowledges and
agrees that the amount of principal, interest, default interest and accrued
liquidated damages in connection with the Prior Fundings and the promissory
notes issued on October 3, 2006 and November 15, 2006 to Longview Fund, L.P.
(such promissory notes referred to herein as "2006 PROMISSORY NOTES"), is set
forth on SCHEDULE 13(B) hereto.
(c) Settlement Shares. The Company shall issue to the
Subscribers the amount of shares of Common Stock set forth on Section 13(c)
hereto ("SETTLEMENT SHARES") in lieu of and in payment for the accrued
Liquidated Damages accrued as set forth in SCHEDULE 13(C) hereto. The Company
acknowledges that the holding period of such Settlement Shares as determined
for purposes of Rule 144 under the 1933 Act is as set forth on SCHEDULE 13(C).
The Subscriber, LEF and LIEF agree that unless and until an Event of Default
occurs under the Notes, interest payable in connection with notes issued in
connection with the Prior Fundings or 2006 Promissory Notes shall not accrue at
the default rate of interest set forth in the Transaction Documents.
(d) Derivative Accounting. The Subscribers and Company
desire to avoid the perceived negative impact of "DERIVATIVE ACCOUNTING"
methods required pursuant to EITF 00-19. Therefore, the Subscribers, LEF and
LIEF hereby agree that anything to the contrary notwithstanding in any of the
Transaction Documents, the Liquidated Damages payable by the Company in
connection with Non-Registration Events, occurrences and events similar to
those described in Section 11.7 hereof, Sections 7.1(c) and 11.4 of the
Transaction Documents relating to the Prior Fundings shall be limited to twenty
percent of the aggregate amount of the Obligations (as calculated pursuant to
the Security Agreement after giving effect to the Offering) as of the Closing
Date.
(e) Holding Period. The modifications described in this
Section 13 do not result in the interruption of, nor require a new holding
period to begin for purposes of Rule 144 under the 1933 Act for any securities
of the Company held by or issuable to the Subscriber, LEF or LIEF in connection
with the Prior Fundings.
(f) Blocker. The Company and Subscribers agree that
anything to the contrary notwithstanding in the transaction documents employed
in connection with the Prior Fundings or the Transaction Documents, there shall
be no limitation on the amount of Common Stock issuable to Longview Fund, L.P.,
LEF and LIEF upon conversion of any convertible notes, warrants, other
instruments convertible, exercisable or exchangeable for Common stock or any
other basis for issuance of Common stock to Longview Fund, L.P., LEF and LIEF.
The "blocker percentage" of 4.99% in connection with the Prior Fundings is
hereby amended to 9.99% for Alpha Capital Anstalt and its Affiliates.
(g) Statement of Modification. A copy of this Section 13
annexed to notes and warrants issued in connection with the Prior Fundings
shall be sufficient evidence of the effectiveness of the modifications
described in this Section 13.
(h) No Other Changes. Except as described in this Section
13, all other terms of the Prior Fundings remain in full force and effect and
no other waiver or consent of any other agreement to which Subscribers and
Company are parties is implied hereby.
14. Miscellaneous.
(a) Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile,
addressed as set forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be: (i) if to the Company, to:
Datascension, Inc., 145 S. State College Blvd., Suite 350, Brea, CA 92821,
Attn: Scott Kincer, President and CEO, telecopier: (714) 482-9751, with a copy
by telecopier only to: Jolie G. Kahn, Esq., 17 Battery Place, Suite 300, New
York, NY 10004, telecopier: (866) 705-3071, and (ii) if to the Subscriber, to:
the one or more addresses and telecopier numbers indicated on the signature
pages hereto, with an additional copy by telecopier only to: Grushko & Mittman,
P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier
number: (212) 697-3575.
(b) Entire Agreement; Assignment. This Agreement and other
documents delivered in connection herewith and in connection with the Prior
Fundings represent the entire agreement between the parties hereto with respect
to the subject matter hereof and may be amended only by a writing executed by
both parties. Neither the Company nor the Subscribers have relied on any
representations not contained or referred to in this Agreement and the
documents delivered herewith. No right or obligation of the Company shall be
assigned without prior notice to and the written consent of the Subscribers.
(c) Counterparts/Execution. This Agreement may be
executed in any number of counterparts and by the different signatories hereto
on separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. This Agreement may be executed by facsimile signature and
delivered by facsimile transmission.
(d) Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to conflicts of laws principles that would result in the
application of the substantive laws of another jurisdiction. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the civil or state
courts of New York County, New York or in the federal courts located in New
York County. THE PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND
OTHER AGREEMENTS REFERRED TO HEREIN OR DELIVERED IN CONNECTION HEREWITH 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.
(e) Specific Enforcement, Consent to Jurisdiction. To the
extent permitted by law, the Company and Subscriber acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to one or more preliminary and final injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity. Subject to Section 14(d)
hereof, each of the Company, Subscriber and any signator hereto in his personal
capacity hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
New York of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.
(f) Damages. In the event the Subscriber is entitled to
receive any liquidated damages pursuant to the Transactions, the Subscriber may
elect to receive the greater of actual damages or such liquidated damages.
(g) Independent Nature of Subscribers. The Company
acknowledges that the obligations of each Subscriber under the Transaction
Documents are several and not joint with the obligations of any other
Subscriber, and no Subscriber shall be responsible in any way for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The Company acknowledges that each Subscriber has represented that
the decision of each Subscriber to purchase Securities has been made by such
Subscriber independently of any other Subscriber and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made
or given by any other Subscriber or by any agent or employee of any other
Subscriber, and no Subscriber or any of its agents or employees shall have any
liability to any Subscriber (or any other person) relating to or arising from
any such information, materials, statements or opinions. The Company
acknowledges that nothing contained in any Transaction Document, and no action
taken by any Subscriber pursuant hereto or thereto (including, but not limited
to, the (i) inclusion of a Subscriber in the Registration Statement and (ii)
review by, and consent to, such Registration Statement by a Subscriber) shall
be deemed to constitute the Subscribers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Subscribers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. The
Company acknowledges that each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation, the rights
arising out of the Transaction Documents, and it shall not be necessary for any
other Subscriber to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all
Subscribers with the same terms and Transaction Documents for the convenience
of the Company and not because Company was required or requested to do so by
the Subscribers. The Company acknowledges that such procedure with respect to
the Transaction Documents in no way creates a presumption that the Subscribers
are in any way acting in concert or as a group with respect to the Transaction
Documents or the transactions contemplated thereby.
(h) Consent. As used in the Agreement, "consent of the
Subscribers" or similar language means the consent of holders of not less than
70% of the total of the Shares issued and issuable upon conversion of
outstanding Notes owned by Subscribers on the date consent is requested.
(i) Equal Treatment. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of the Transaction Documents unless the same consideration is also
offered and paid to all the parties to the Transaction Documents.
12/5/2006, 10:05 AM
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
DATASCENSION, INC.
a Nevada corporation
By:_________________________________
Name:
Title:
Dated: December _____, 2006
SUBSCRIBER NOTE PURCHASE PRICE *WARRANTS
ALPHA CAPITAL ANSTALT $103,665.00 -0-
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196
___________________________________________
(Signature)
* A portion of the Note Purchase Price will be deemed paid by the payment of
interest and default interest owed to Alpha Capital Anstalt set forth on
Schedule 13(b) hereto. The agreed upon amount of the credit against the Note
Purchase Price is $103,665.00, representing outstanding accrued interest and
default interest through December 8, 2006.
APPROVED AND AGREED:
DATASCENSION INTERNATIONAL, INC.
By: ________________________________________
Name:
Title
12/5/2006, 10:05 AM
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
DATASCENSION, INC.
a Nevada corporation
By:_________________________________
Name:
Title:
Dated: November _____, 2006
SUBSCRIBER NOTE PURCHASE PRICE *WARRANTS
LONGVIEW FUND, LP $2,065,458.00 1,280,000
600 Montgomery Street, 44th Floor
San Francisco, CA 94111
Fax: (415) 981-5301
____________________________________________
(Signature)
* A portion of the Note Purchase Price will be paid by the deemed surrender and
cancellation of Notes issued by the Company to Longview Fund, LP on October 3,
2006, November 15, 2006 and interest and default interest set forth on Schedule
13(b) hereto. The agreed upon amount of the credit against the Note Purchase
Price is $1,615,458.00, representing outstanding principal and accrued interest
through December 8, 2006.
APPROVED AND AGREED:
DATASCENSION INTERNATIONAL, INC.
By: ________________________________________
Name:
Title
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)
LONGVIEW EQUITY FUND, L.P. hereby acknowledges and consents to Section 13
of the foregoing Subscription Agreement. Longview Equity Fund, L.P. hereby
assigns all of its right, title and interest in and related to the Prior
Fundings to Longview Fund, L.P.
LONGVIEW EQUITY FUND, LP
600 Montgomery Street, 44th Floor
San Francisco, CA 94111
Fax: (415) 981-5301
By: _______________________________________
Name:
Title:
APPROVED AND AGREED:
Datascension, Inc. acknowledges the foregoing assignment.
DATASCENSION, INC.
By: ________________________________________
Name:
Title
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)
LONGVIEW INTERNATIONAL EQUITY FUND, L.P. hereby acknowledges and consents
to Section 13 of the foregoing Subscription Agreement. Longview International
Equity Fund, L.P. hereby assigns all of its right, title and interest in and
related to the Prior Fundings to Longview Fund, L.P.
LONGVIEW INTERNATIONAL EQUITY FUND, LP
600 Montgomery Street, 44th Floor
San Francisco, CA 94111
Fax: (415) 981-5301
By: _______________________________________
Name:
Title:
APPROVED AND AGREED:
Datascension, Inc. acknowledges the foregoing assignment.
DATASCENSION, INC.
By: ________________________________________
Name:
Title
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Escrow Agreement
Exhibit D Form of Legal Opinion
Exhibit E Form of Form 8-K or Public Announcement
Exhibit F Limited Standstill Agreement
Schedule 5(a) Subsidiaries
Schedule 5(d) Additional Issuances / Capitalization
Schedule 5(f) Resets
Schedule 5(q) Undisclosed Liabilities
Schedule 5(v) Transfer Agent
Schedule 9(e) Use of Proceeds
Schedule 9(r) Limited Standstill Providers
Schedule 13(b) Outstanding Amounts
Schedule 13(c) Settlement Shares
EXHIBIT F
LIMITED STANDSTILL AGREEMENT
This AGREEMENT (the "Agreement") is made as of the ____ day of December,
2006, by the signators hereto (each a "Holder"), in connection with his
ownership of shares of Datascension, Inc., a Nevada corporation (the
"Company").
NOW, THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which consideration are hereby acknowledged, Holder agrees as
follows:
1. BACKGROUND.
a. Holder is the beneficial owner of the amount of shares of the
Common Stock, $.001 par value, of the Company ("Common Stock") designated on
the signature page hereto.
b. Holder acknowledges that the Company has entered into on
November 17, 2004, June 12, 2006 and at or about the date hereof will enter
into agreements with subscribers to the Company's Notes, some of which are
convertible into Common Stock ("Notes") and Warrants (the "Subscribers") (the
December transactions being the "Offering"). Holder understands that, as a
condition to proceeding with the Offering, the Subscribers have required, and
the Company has agreed to assist the Subscribers in obtaining, an agreement
from the Holder to refrain from selling any securities of the Company from the
date of the Subscription Agreement until the end of the Exclusion Period as
defined in the Subscription Agreement (the "Restriction Period"), except as
described below.
2. SHARE RESTRICTION.
a. Holder hereby agrees that during the Restriction Period, the
Holder will not sell or otherwise dispose of any shares of Common Stock or any
options, warrants or other rights to purchase shares of Common Stock or any
other security of the Company which Holder owns or has a right to acquire as of
the date hereof, other than in connection with an offer made to all
shareholders of the Company in connection with merger, consolidation or similar
transaction involving the Company. Holder further agrees that the Company is
authorized to and the Company agrees to place "stop orders" on its books to
prevent any transfer of shares of Common Stock or other securities of the
Company held by Holder in violation of this Agreement. The Company agrees not
to allow to occur any transaction inconsistent with this Agreement.
b. Any subsequent issuance to and/or acquisition by Holder of
Common Stock or options or instruments convertible into Common Stock will be
subject to the provisions of this Agreement.
c. Notwithstanding the foregoing restriction on transfer, the
Holder may sell annually during the Restriction Period up to five percent (5%)
of the amount of shares of Common Stock actually owned by the Holder on the
Closing Date (as defined in the Subscription Agreement). However, not more
than one percent (1%) of the outstanding Common Stock of the Company on the
first calendar day of a month may be sold during such calendar month.
d. Notwithstanding the foregoing restrictions on
transfer, the Holder may, at any time and from time to time during the
Restriction Period, transfer the Common Stock (i) as bona fide gifts or
transfers by will or intestacy, (ii) to any trust for the direct or indirect
benefit of the undersigned or the immediate family of the Holder, provided that
any such transfer shall not involve a disposition for value, (iii) to a
partnership which is the general partner of a partnership of which the Holder
is a general partner, provided, that, in the case of any gift or transfer
described in clauses (i), (ii) or (iii), each donee or transferee agrees in
writing to be bound by the terms and conditions contained herein in the same
manner as such terms and conditions apply to the undersigned. For purposes
hereof, "immediate family" means any relationship by blood, marriage or
adoption, not more remote than first cousin.
3. MISCELLANEOUS.
a. At any time, and from time to time, after the signing of this
Agreement Holder will execute such additional instruments and take such action
as may be reasonably requested by the Subscribers to carry out the intent and
purposes of this Agreement.
b. This Agreement shall be governed, construed and enforced in
accordance with the laws of the State of New York without regard to conflicts
of laws principles that would result in the application of the substantive laws
of another jurisdiction, except to the extent that the securities laws of the
state in which Holder resides and federal securities laws may apply. Any
proceeding brought to enforce this Agreement may be brought exclusively in
courts sitting in New York County, New York.
c. The restrictions on transfer described in this Agreement are
in addition to and cumulative with any other restrictions on transfer otherwise
agreed to by the Holder or to which the Holder is subject to by applicable law.
d. This Agreement shall be binding upon Holder, its legal
representatives, successors and assigns.
e. This Agreement may be signed and delivered by facsimile and
such facsimile signed and delivered shall be enforceable.
f. The Company agrees not to take any action or allow any act to
be taken which would be inconsistent with this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
Holder has executed this Agreement as of the day and year first above written.
HOLDER:
________________________________
(Signature of Holder)
________________________________
(Print Name of Holder)
________________________________
Number of Shares of Common Stock
Beneficially Owned
COMPANY:
DATASCENSION, INC.
By:______________________________
EXHIBIT F
LIMITED STANDSTILL AGREEMENT (SCOTT KINCER)
This AGREEMENT (the "Agreement") is made as of the ____ day of December,
2006, by the signators hereto (each a "Holder"), in connection with his
ownership of shares of Datascension, Inc., a Nevada corporation (the
"Company").
NOW, THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which consideration are hereby acknowledged, Holder agrees as
follows:
1. BACKGROUND.
a. Holder is the beneficial owner of the amount of shares of the
Common Stock, $.001 par value, of the Company ("Common Stock") designated on
the signature page hereto.
b. Holder acknowledges that the Company has entered into on
November 17, 2004, June 12, 2006 and at or about the date hereof will enter
into agreements with subscribers to the Company's Notes, some of which are
convertible into Common Stock ("Notes") and Warrants (the "Subscribers") (the
December transactions being the "Offering"). Holder understands that, as a
condition to proceeding with the Offering, the Subscribers have required, and
the Company has agreed to assist the Subscribers in obtaining, an agreement
from the Holder to refrain from selling any securities of the Company from the
date of the Subscription Agreement until the end of the Exclusion Period as
defined in the Subscription Agreement (the "Restriction Period"), except as
described below.
2. SHARE RESTRICTION.
a. Holder hereby agrees that during the Restriction Period, the
Holder will not sell or otherwise dispose of any shares of Common Stock or any
options, warrants or other rights to purchase shares of Common Stock or any
other security of the Company which Holder owns or has a right to acquire as of
the date hereof, other than in connection with an offer made to all
shareholders of the Company in connection with merger, consolidation or similar
transaction involving the Company. Holder further agrees that the Company is
authorized to and the Company agrees to place "stop orders" on its books to
prevent any transfer of shares of Common Stock or other securities of the
Company held by Holder in violation of this Agreement. The Company agrees not
to allow to occur any transaction inconsistent with this Agreement.
b. Any subsequent issuance to and/or acquisition by Holder of
Common Stock or options or instruments convertible into Common Stock will be
subject to the provisions of this Agreement.
c. Notwithstanding the foregoing restriction on transfer, the
Holder may sell annually during the Restriction Period up to five percent (5%)
of the amount of shares of Common Stock actually owned by the Holder on the
Closing Date (as defined in the Subscription Agreement) or which the Holder
purchased in open market transactions as unrestricted Common Stock. However,
not more than one percent (1%) of the outstanding Common Stock of the Company
on the first calendar day of a month may be sold during such calendar month.
d. Notwithstanding the foregoing restrictions on
transfer, the Holder may, at any time and from time to time during the
Restriction Period, transfer the Common Stock (i) as bona fide gifts or
transfers by will or intestacy, (ii) to any trust for the direct or indirect
benefit of the undersigned or the immediate family of the Holder, provided that
any such transfer shall not involve a disposition for value, (iii) to a
partnership which is the general partner of a partnership of which the Holder
is a general partner, provided, that, in the case of any gift or transfer
described in clauses (i), (ii) or (iii), each donee or transferee agrees in
writing to be bound by the terms and conditions contained herein in the same
manner as such terms and conditions apply to the undersigned. For purposes
hereof, "immediate family" means any relationship by blood, marriage or
adoption, not more remote than first cousin.
3. MISCELLANEOUS.
a. At any time, and from time to time, after the signing of this
Agreement Holder will execute such additional instruments and take such action
as may be reasonably requested by the Subscribers to carry out the intent and
purposes of this Agreement.
b. This Agreement shall be governed, construed and enforced in
accordance with the laws of the State of New York without regard to conflicts
of laws principles that would result in the application of the substantive laws
of another jurisdiction, except to the extent that the securities laws of the
state in which Holder resides and federal securities laws may apply. Any
proceeding brought to enforce this Agreement may be brought exclusively in
courts sitting in New York County, New York.
c. The restrictions on transfer described in this Agreement are
in addition to and cumulative with any other restrictions on transfer otherwise
agreed to by the Holder or to which the Holder is subject to by applicable law.
d. This Agreement shall be binding upon Holder, its legal
representatives, successors and assigns.
e. This Agreement may be signed and delivered by facsimile and
such facsimile signed and delivered shall be enforceable.
f. The Company agrees not to take any action or allow any act to
be taken which would be inconsistent with this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
Holder has executed this Agreement as of the day and year first above written.
HOLDER:
________________________________
(Signature of Holder)
SCOTT KINCER
--------------------------------
(Print Name of Holder)
________________________________
Number of Shares of Common Stock
Beneficially Owned
COMPANY:
DATASCENSION, INC.
By:______________________________
SCHEDULE 13(B)
Principal outstanding in connection with Prior Fundings immediately prior to
Closing
Issue DateAlpha Capital AnstaltLongview Fund, L.P.
11/17/2004 $350,000.00 $1,525,000.00
4/1/2005 -0- $125,000.00
6/12/2006 $571,429.00 $1,702,859.00
10/3/2006 -0- $250,000.00
11/16/2006 -0- $900,000.00
Interest and Default Interest Accrued in connection with the Prior Fundings as
of December 8, 2006
Alpha Capital Anstalt $103,665.00
Longview Fund, L.P. $465,458.00
Accrued Liquidated Damages in connection with Non-Registration Events under the
Prior Fundings
Alpha Capital Anstalt $150,355.00
Longview Fund, L.P. $588,810.00
Principal Amount of Notes to be Credited Against Purchase Price
Longview Fund, L.P.
Note dated October 3, 2006 $250,000.00
Note dated November 15, 2006 $900,000.00
$1,150,000.00
SCHEDULE 13(C)
SETTLEMENT SHARES
Liquidated Damages in connection with Non-Registration Events occurring
in connection with the Prior Fundings will be paid by the issuance of 1,004,615
shares of Common Stock to Alpha Capital Anstalt and the issuance of 3,959,711
shares of Common Stock to Longview Fund, L.P.
The commencement date for the holding periods for purposes of Rule 144
under the 1933 Act for such shares of Common Stock are set forth on the
following pages.