OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of October __,
1997 (the "Agreement"), is executed in reliance upon the exemption from
registration afforded by Regulation S ("Regulation S") as promulgated by the
Securities and Exchange Commission ("SEC"), under the Securities Act of 1933, as
amended (the "1933 Act"). Capitalized terms used herein and not defined shall
have the meanings given to them in Regulation S.
This Agreement has been executed by the undersigned "Buyer" in
connection with the private placement of 6.0% Convertible Debentures of Xxxxx
Xxxxxx Multimedia Company, Inc., a corporation organized under the laws of New
York, with its principal executive offices located at 00 X. 00xx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, X.X. 10010 (hereinafter referred to as "Seller"). Buyer hereby
represents and warrants to, and agrees with Seller that:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN
REGULATION S OF THE 1933 ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS (AS DEFINED IN REGULATION S OF THE 1933 ACT) EXCEPT
PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT.
1. Agreement To Subscribe; Purchase Price.
(a) Subscription. The undersigned Buyer hereby subscribes for
and agrees to purchase the Sellers 6.0% Convertible Debentures substantially in
the form of Debentures attached as Exhibit A hereto and having an aggregate
original principal amount of up to Four Hundred Thousand United States Dollars
(U.S. $400,000) (singly, a "Debenture," and collectively, the "Debentures"), at
an aggregate purchase price as set forth in subsection (b) herein.
(b) Payment. The Purchase Price for the Buyer's portion of the
Debenture shall be up to Four Hundred Thousand United States Dollars (U.S.
$400,000) (the "Purchase Price"), which shall be payable at each closing
pursuant to Section 1(c) herein by delivering immediately available funds in
United States Dollars by wire transfer to the designated depository of Seller
for closing by delivery of securities versus payment.
(c) Closing. Subject to the satisfaction of the conditions set
forth in Sections 7 and 8 hereof, the closing of the transactions contemplated
by this Agreement shall occur from time to time in denominations of not less
than $50,000 but in any event up to $400,000 shall close on or before November
4, 1997, or such earlier or later date as is mutually agreed to in writing by
Buyer and Seller.
2. Buyer Representations and Covenants; Access to Information.
Offshore Transaction. In connection with the purchase and sale
of the Debentures, Buyer represents and warrants to, and covenants and agrees
with Seller as follows:
(i) Buyer is not a natural person and is not
organized under the laws of any jurisdiction within the United
States (as defined in Regulation S), was not formed by a U.S.
Person (as defined in Section 902(o) of Regulation S) for the
purpose of investing in securities not registered under the
1933 Act and is not otherwise a U.S. Person. Buyer is not, and
on the closing date will not be, an affiliate of Seller;
(ii) At the time the buy order was originated, Buyer
was outside the United States and is outside of the United
States as of the date of the execution and delivery of this
Agreement;
(iii) No offer to purchase the Debentures or the
common stock of Seller issuable upon conversion of the
Debentures (collectively, the "Securities"), was made by Buyer
in the United States;
(iv) Buyer is purchasing the Securities for its own
account and Buyer is qualified to purchase the Securities
under the laws of its jurisdiction of residence, and the offer
and sale of the Securities will not violate the securities or
other laws of such jurisdiction;
(v) All offers and sales of any of the Securities by
Buyer prior to the end of the Restricted Period (as
hereinafter defined) shall be made in compliance with any
applicable securities laws of any applicable jurisdiction and
in accordance with Rule 903 and 904, as applicable, of
Regulation S or pursuant to registration of the Securities
under the 1933 Act or pursuant to an exemption from
registration. In any case, none of the Securities have been
and will be offered or sold by Buyer to, or for the account or
benefit of, a U.S. Person or within the United States until
after the end of the forty (40) day period commencing on the
later of (x) the date of closing of the offering of the
Securities or (y) the date of the first offer of the
Securities to persons other than distributors (the "Restricted
Period"), as certified by Buyer to Seller, and thereafter only
pursuant to a Registration Statement or an applicable
exemption from registration;
(vi) The transactions contemplated by this Agreement
(a) have not been and will not be pre-arranged by Buyer with a
purchaser located in the United States or a purchaser which is
a U.S. Person, and (b) are not and will not be part of a plan
or scheme by Buyer, to evade the registration provisions of
the 1933 Act;
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(vii) Buyer understands that the Securities are not
registered under the 1933 Act and are being offered and sold
to it in reliance on specific exclusions from the registration
requirements of Federal and State securities laws of the
United States, and that Seller is relying upon the truth and
accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Buyer set forth herein
in order to determine the applicability of such exclusions and
the suitability of Buyer and any purchaser from Buyer to
acquire the Securities;
(viii) Buyer shall take all reasonable steps to
ensure its compliance with Regulation S and shall promptly
send to each purchaser who acts as a distributor, dealer or a
person receiving a selling concession, fee or other
remuneration in respect of any of the Securities, who
purchases prior to the expiration of the Restricted Period
referred to in subparagraph (v) above, a confirmation or other
notice to the purchaser stating that the purchaser is subject
to the same restrictions on offers and sales as Buyer pursuant
to Section 903(c)(2)(iv) of Regulation S;
(ix) Buyer has not conducted and shall not conduct
any "directed selling efforts" as that term is defined in Rule
902(b) of Regulation S; nor has Buyer conducted any general
solicitation relating to the offer and sale of any of the
Securities in the United States or elsewhere;
(x) This Agreement has been duly authorized, validly
executed and delivered on behalf of Buyer and is a valid and
binding agreement in accordance with its terms, subject to
general principals of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally;
(xi) The execution and delivery of this Agreement and
the consummation of the purchase of the Securities, and the
transactions contemplated by this Agreement do not and will
not conflict with or result in a breach by Buyer of any of the
terms or provisions of, or constitute a default under, the
articles of incorporation or by-laws (or similar constitutive
documents) of Buyer or any indenture, mortgage, deed of trust,
or other material agreement or instrument to which Buyer is a
party or by which it or any of its properties or assets are
bound, or any existing applicable law, rule or regulation of
the United States or any State thereof or any applicable
decree, judgment or order of any Federal or State court,
Federal or State regulatory body, administrative agency or
other United States governmental body having jurisdiction over
Buyer or any of its properties or assets;
(xii) All invitations, offers and sales of or in
respect of, any of the Securities, by Buyer and any
distribution by Buyer of any documents relating to any offer
by it of any of the Securities will be in compliance with
applicable laws and regulations and will be made in such a
manner that no prospectus need be
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filed and no other filing need be made by Seller with any
regulatory authority or stock exchange in any country or any
political sub-division of any country;
(xiii) Buyer will not make any offer or sale of the
Securities by any means which would not comply with the laws
and regulations of the territory in which such offer or sale
takes place or to which such offer or sale is subject or which
would in connection with any such offer or sale impose upon
Seller any obligation to satisfy any public filing or
registration requirement or provide or publish any information
of any kind whatsoever or otherwise undertake or become
obligated to do any act;
(xiv) Neither the Buyer nor any of its affiliates has
entered, has the intention of entering, or will during the
Restricted Period enter into any put option, short position or
other similar instrument or position with respect to any of
the Securities or securities of the same class as the
Securities;
(xv) the Buyer (or others for whom it is contracting
hereunder) has been advised to consult its own legal and tax
advisors with respect to applicable resale restrictions and
applicable tax considerations and it (or others for whom it is
contracting hereunder) is solely responsible (and the Seller
is not in any way responsible) for compliance with applicable
resale restrictions and applicable tax legislation;
(xvi) No Government Recommendation or Approval. Buyer
understands that no Federal or State or foreign government
agency has passed on or made any recommendation or endorsement
of the Securities;
(xvii) Current Public Information. Buyer acknowledges
that it and its advisors, if any, have been furnished with all
publicly available materials relating to the business,
finances and operations of Seller and all publicly available
materials relating to the offer and sale of the Securities, in
each case which have been requested by Buyer. Buyer further
acknowledges that it and its advisors, if any, have had the
opportunity to ask questions of the Seller regarding the
business, operations and financial condition of Seller, and
have received complete and satisfactory answers to such
inquiries;
(xviii) Buyer's Sophistication. Buyer acknowledges
that the purchase of the Securities involves a high degree of
risk, including the total loss of Buyer's investment. Buyer
has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks
of purchasing the Securities and is capable of bearing a
complete loss of its investment hereunder; and
(xix) Tax Status. Buyer is not a "10-percent
Shareholder" (as defined in Section 871(h)(3)(B) of the U.S.
Internal Revenue Code) of Seller.
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3. Seller Representations and Covenants.
(a) Reporting Company Status. Seller is a "Reporting Issuer"
as defined by Rule 902 of Regulation S. Seller has registered its Common Stock,
$.001 par value per share (the "Common Stock"), pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Common
Stock is listed and trades on NASDAQ Small Cap Market. Seller has filed all
reports required to be filed pursuant to all reporting obligations under either
Section 13(a) or 15(d) of the Exchange Act for a period of at least twelve (12)
months immediately preceding the offer or sale of the Securities (or for such
shorter period that Seller has been required to file such material). The Seller
will file a Form 8-K relating to this transaction in accordance with its
obligations under the Exchange Act.
(b) Current Public Information. Seller has furnished Buyer
with copies of its most recent reports, as amended, filed under the Exchange Act
referred to in Section 3(a) above, and such other publicly available documents
as requested by Buyer. There has not occurred any event which has had a material
adverse effect on the business, properties and operations of the Seller since
the filing of the Seller's Form 10-QSB for the quarterly period ended June 30,
1997.
(c) Offshore Transaction. Seller has not offered any of the
Securities to any person in the United States, or any identifiable groups of
U.S. citizens abroad as such terms are used in Regulation S.
(i) At the time the buy order was originated, Seller
and/or its agents reasonably believe the Buyer was outside of
the United States and was not a U.S.
person, based on the representations of Buyer.
(ii) Seller and/or its agents reasonably believe that
the transaction has not been pre-arranged with a buyer in the
United States, based on the representations of Buyer.
(iii) No offer to buy or sell the Securities was or
will be made by Seller to any person in the United States.
(iv) The sale of the Securities by Seller pursuant to
this Agreement will be made in accordance with the provisions
and requirements of Regulation S provided that the
representations and warranties of (i) Buyer in Section 2
hereof and (ii) the Broker contained in the Agreement dated
October __, 1997 between Seller and __________________________
(the "Broker Agreement") are true and correct.
(v) The transactions contemplated by this Agreement
(a) have not been and will not be pre-arranged by Seller with
a purchaser located in the United States or a purchaser which
is a U.S. Person, and (b) are not and will not be part of a
plan or scheme by Seller to evade the registration provisions
of the 1933 Act.
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(d) No Directed Selling Efforts. In regard to this
transaction, Seller has not conducted any "directed selling efforts" as that
term is defined in Rule 902 of Regulation S nor has Seller conducted any general
solicitation relating to the offer and sale of any of the Securities in the
United States or elsewhere based in part upon the representations and warranties
of Broker in the Broker Agreement.
(e) Concerning the Securities. The issuance, sale and delivery
of the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued, fully paid and non-assessable. The Common Stock
issuable upon conversion of the Debenture has been or will be duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Debentures, shall be duly and validly issued, fully paid, and non-assessable and
will not subject the holders thereof, if such persons are non-U.S. Persons, to
personal liability by reason of being such holders. There are no pre-emptive
rights of any shareholder of Seller except as otherwise disclosed in the reports
filed by the Company with the Securities and Exchange Commission.
(f) Subscription Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(g) Non-contravention. The execution and delivery of this
Agreement and the consummation of the issuance of the Securities and the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by Seller of any of the terms or provisions of, or constitute
a default under, the articles of incorporation or by-laws of Seller, or any
material indenture, mortgage, deed of trust, or other material agreement or
instrument to which Seller is a party or by which it or any of its material
properties or assets are bound, or any existing applicable law, rule or
regulation of the United States or any State thereof or any applicable decree,
judgment or order of any Federal or State court, Federal or State regulatory
body, administrative agency or other United States governmental body having
jurisdiction over Seller or any of its properties or assets, the violation of
which would have a material adverse effect on Seller.
(h) Approvals. Other than any additional listing application
for the issuance of the shares of Common Stock upon conversion of the
Debentures, Seller is not aware of any authorization, approval or consent of any
governmental body which is legally required for the issuance and sale of the
Debentures and the Common Stock issuable upon conversion thereof to persons who
are non-U.S. Persons, as contemplated by this Agreement, so long as the sale of
the Debenture and Common Stock are made in accordance with the rules and
regulations of Regulation S.
4. Exemption; Reliance on Representations. Buyer understands that the
offer and sale of the Securities are not being registered under the 1933 Act.
Seller and Buyer are relying
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on the rules governing offers and sales made outside the United States pursuant
to Regulation S.
5. Transfer Agent Instructions.
(a) Debentures. Upon the conversion of the Debentures, the
holder thereof shall submit such Debenture with a notice of conversion to the
Seller and the Seller shall instruct Seller's transfer agent to issue one or
more Certificates representing that number of shares of Common Stock into which
the Debenture or Debentures are convertible in accordance with the provisions
regarding conversion set forth in the Debenture. The Seller or its designees
shall act as Debenture Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture.
(b) Common Stock to be Issued Without Restrictive Legend. Upon
the conversion of any Debenture by a person who is a non-U.S. Person, Seller
shall instruct Seller's transfer agent to issue Stock Certificates without
restrictive legend in the name of Buyer (being a non-U.S. Person) and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion, as applicable. Seller warrants that
no instructions other than these instructions and instructions to impose a "stop
transfer" instruction with respect to the certificates until the end of the
Restricted Period have been given or will be given to the transfer agent and
that the Common Stock issuable upon conversion of the Debentures in accordance
with the terms thereof shall otherwise be freely transferable on the books and
records of Seller subject to compliance with requirements of Regulation S.
Nothing in this Section 5, however, shall affect in any way Buyer's or such
nominee's obligations and agreements to comply with all applicable securities
laws upon resale of the Securities.
6. Registration. If upon conversion of Debentures effected by the Buyer
pursuant to the terms of this Agreement the Company fails to issue certificates
for shares of Common Stock issuable upon such conversion (the "Underlying
Shares") to the Buyer bearing no restrictive legend for any reason other than
(i) the Company's reasonable good faith belief that the representations and
warranties made by the Buyer in this Agreement or the Notice of Conversion were
untrue when made, or are untrue at the time of question, (ii) failure by the
Buyer to comply with the rules of Regulation S, or (iii) if the restricted
period under Regulation S is extended, then the Company shall be required, at
the request of the Buyer and at the Company's expense, to effect the
registration of the Underlying Shares issuable upon conversion of the Debentures
under the Act and relevant Blue Sky laws as promptly as is practicable on Form
S-3. The Company and the Buyer shall cooperate in good faith in connection with
the furnishing of information required for such registration and the taking of
such other actions as may be legally or commercially necessary in order to
effect such registration. The Company shall file a registration statement within
60 days of Buyer's demand therefor and shall use its reasonable best efforts to
cause such registration statement to become effective as soon as practicable
thereafter. Such best efforts shall include, but not be limited to, promptly
responding to all comments received from the staff of the Securities and
Exchange Commission, providing Buyer's counsel with a contemporaneous copy of
all written communications from and to the
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staff of the Securities and Exchange Commission with respect to such
registration statement and promptly preparing and filing amendments to such
registration statement which are responsive to the comments received from the
staff of the Securities and Exchange Commission. Once declared effective by the
Securities and Exchange Commission, the Company shall cause such registration
statement to remain effective until the earlier of (i) the sale by the Buyer of
all Underlying Shares registered or (ii) 120 days after the effective date of
such registration statement. The foregoing shall not in any way limit Buyer's
rights in connection with the Common Stock pursuant to Regulation S.
7. Delivery Instructions. The Debentures being purchased hereunder
shall be delivered to the Buyer at such time and place as shall be mutually
agreed by Seller and Buyer.
8. Conditions To Seller's Obligation To Sell. Seller's obligation to
sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Buyer of this Agreement as
evidenced by execution of this Agreement by Buyer.
(b) Delivery into the Seller's account of good funds by Buyer
as payment in full of the purchase price of the Debentures.
9. Conditions To Buyer's Obligation To Purchase. Buyer's obligation to
purchase the Debentures is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement as
evidenced by execution of this Agreement by the duly authorized officer of
Seller.
(b) Delivery of the Debentures as described herein.
10. Offering Materials. All offering materials and documents used in
connection with offers and sales of the Securities prior to the expiration of
the Restricted Period referred to in Section 2(v) hereof shall include
statements to the effect that the Securities have not been registered under the
1933 Act or applicable state securities laws, and that neither Buyer, nor any
direct or indirect purchaser of the Securities from Buyer, may directly or
indirectly offer or sell the Securities in the United States or to U.S. Persons
(other than distributors) unless the Securities are registered under the 1933
Act and any applicable state securities laws, or any exemption from the
registration requirements of the 1933 Act or such state securities laws is
available. Such statements shall appear (1) on the cover of any prospectus or
offering circular used in connection with the offer or sale of the Securities,
(2) in the underwriting section of any prospectus or offering circular used in
connection with the offer or sale of the Securities, and (3) in any
advertisement made or issued by Seller, Buyer, any other distributor, any of
their respective affiliates, or any person acting on behalf of any of the
foregoing and in accordance with 902(h)(2) of Regulation S.
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11. No Shareholder Approval. Seller hereby agrees that from the Closing
Date until the issuance of Common Stock upon the conversion of the Debentures,
Seller will not take any action in respect of the Securities which would require
Seller to seek shareholder approval of the issuance of the Securities unless
such shareholder approval is required by law or regulatory body (including but
not limited to the NASDAQ Stock Market, Inc.) as a result of the issuance of the
Securities hereunder.
12. Miscellaneous.
(a) Except as specifically referenced herein, this Agreement
constitutes the entire contract between the parties, and neither party shall be
liable or bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein. Any previous agreement among
the parties related to the transactions described herein is superseded hereby.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
(b) Buyer is an independent contractor, and is not the agent
of Seller. Buyer is not authorized to bind Seller, or to make any
representations or warranties on behalf of Seller.
(c) Seller makes no representations or warranties with respect
to Seller, its finances, assets, business prospects or otherwise. Buyer will
advise each purchaser, if any, and potential purchaser of the Securities, of the
foregoing sentence, and that such purchaser is relying on its own investigation
with respect to all such matters.
(d) All representations and warranties contained in this
Agreement by Seller and Buyer shall survive the closing of the transactions
contemplated by this Agreement.
(e) This Agreement shall be construed in accordance with the
laws of New York (without regard to conflicts of law principles) and shall be
binding upon the successors and permitted assigns of each party hereto. This
Agreement may be executed in counterparts, and the facsimile transmission of an
executed counterpart to this Agreement shall be effective as an original.
(f) Buyer agrees to indemnify and hold Seller harmless from
any and all claims, damages and liabilities arising from Buyer's breach of its
representations and/or covenants set forth herein.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.
Official Signatory of Seller:
Xxxxx Xxxxxx Multimedia Company, Inc.
By:___________________________________
Title:________________________________
Official Signatory of Buyer:
______________________________________
By:___________________________________
Title:________________________________
Address of Buyer:
______________________________________
______________________________________
______________________________________
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