Exhibit 10.1
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of
___________, 2007, by and among SENSE HOLDINGS, INC., a Florida corporation (the
"Company"), and the subscribers identified on the signature page hereto (each a
"Subscriber" and collectively "Subscribers") (each agreement with a Subscriber
being deemed a separate and independent agreement between the Company and such
Subscriber, except that each Subscriber acknowledges and consents to the rights
granted to each other Subscriber [each, an "Other Subscriber"] under such
agreement and the Transaction Documents, as defined in Section 5(c) of this
Agreement, referred to therein).
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 shall purchase of not less
than $1,800,000.00 nor more than $2,160,000.00 (the "Aggregate Purchase Price")
of the Company's common stock, $.001 par value ("Common Stock"), at a per share
purchase price of Six Cents ($0.06; the "Share Purchase Price"; subject to
adjustment as described in this Agreement), and share purchase warrants in the
form attached hereto as Exhibit A (the "Warrants"), to purchase shares of Common
Stock (the "Warrant Shares"). The per share Exercise Price of the Warrants shall
be Twelve Cents ($0.12; the "Exercise Price"; subject to adjustment as described
in the Warrant and in this Agreement). The purchase price to be paid by each
Subscriber, as identified on the signature page to this Agreement, is referred
to as the "Purchase Price" and the shares being purchased by and issued to such
Subscriber, as identified on the signature page to this Agreement, are referred
to as the "Purchased Shares." The Purchased 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 Purchased Shares 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 an
Escrow Agreement in the form attached hereto as Exhibit B (the "Escrow
Agreement").(1)
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 Date. The "Closing Date" shall be the date that the sum of
$1,800,000 is transmitted by wire transfer or otherwise to or for the benefit of
the Company. The consummation of the transactions contemplated herein (the
"Closing") shall take place at the offices of Xxxxxxx & Xxxxxx, LLP, 00
Xxxxxxxx, Xxxxx 000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of all
conditions to Closing set forth in this Agreement.
2. Closing.
(a) Subject to the satisfaction or waiver of the terms and conditions
of this Agreement, on the Closing Date each Subscriber, in the amounts set forth
on the signature page hereto, shall purchase and the Company shall sell to each
such Subscriber in the amount set forth on the signature page hereto, the
Purchased Shares and the Warrants as described in Section 3 of this Agreement.
(b) The occurrence of the Closing is expressly contingent on (i)
payment by the Subscriber of the Subscriber's Purchase Price, which payment
shall made to an escrow account maintained by the Escrow Agent named in the
Escrow Agreement pursuant to instructions separately provided to the Subscriber,
to be held in escrow pending the Closing, (ii) delivery by the Company to the
Escrow Agent, to be held in escrow pending the Closing, of one or more original
signed stock certificates representing the Purchased Shares, issued in the name
of the Subscriber and original ink-signed Warrants issued by the Company to the
Subscriber (such stock certificates and Warrants, the "Delivered Certificates"),
(iii) the truth and accuracy, on the Closing Date of the representations and
warranties of the Company and Subscriber contained in this Agreement, (iv) the
continued compliance with the covenants of the Company set forth in this
Agreement through such date, (v) the non-occurrence prior to that date of any
event that with the passage of time or the giving of notice could become an
Event of Default, as defined in Section 7 hereof or other default by the Company
of its obligations and undertakings contained in this Agreement, (vi) the
delivery by the Company on the Closing Date of a certificate substantially in
the form of Exhibit E (the "Closing Certificate") signed by its chief executive
officer or chief financial officer (1) representing the truth and accuracy of
all the representations and warranties made by the Company contained in this
Agreement, as of the Closing Date, as if such representations and warranties
were made and given on such date, except for changes that will not have alone,
or in any combination in the aggregate, a Material Adverse Effect (as defined in
Section 5(a) of this Agreement), (2) certifying that the information contained
in the schedules and exhibits hereto is substantially accurate as of the Closing
Date, except for changes that do not constitute a Material Adverse Effect, (3)
adopting and renewing the covenants and representations set forth in Sections 5,
7, 8, 9, 10, 11, and 12 of this Agreement in relation to the Closing Date, the
Purchased Shares and the Warrants, and (4) certifying that no Event of Default
has occurred, and (vii) a legal opinion of Company Counsel nearly identical to
the legal opinion referred to in Section 6 of this Agreement shall be delivered
to each Subscriber on the Closing Date in relation to the Company, the Purchased
Shares and the Warrants ("Closing Legal Opinion ").
3. Warrants. On the Closing Date, the Company will issue and deliver
Warrants to the Subscribers. Each Warrant shall (i) be for the purchase of a
number of shares of Common Stock equal to the number of Purchased Shares of the
relevant Subscriber; (ii) have a per share exercise price (the "Exercise Price")
of $0.12; the Exercise Price will be subject to adjustment as provided herein
and in the Warrant; (iii) be exercisable from the Closing Date through the close
of business on the date which is the last day of the calendar month in which the
fifth annual anniversary of the Closing Date occurs (the "Warrant Expiration
Date"); (iv) have cashless exercise rights and call rights as provided in the
Warrant; and (v) provide for automatic conversion immediately prior to the
Warrant Expiration Date on the terms provided in the Warrant. Except as
specified above, each Warrant shall generally be in the form annexed hereto as
Exhibit A. The Warrant Shares shall be subject to the provisions of the
Registration Rights Agreement.
4. Subscriber's Representations and Warranties. Each Subscriber, for
himself, herself or itself (but not with respect to any other Subscriber),
hereby represents and warrants to and agrees with the Company that:
(a) Organization and Standing of the Subscriber. 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. The Subscriber has the requisite power and
authority to enter into and perform this Agreement and to purchase the
Securities. The execution, delivery and performance of this Agreement by the
Subscriber and, if the Subscriber is an entity, the consummation by the
Subscriber 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 the 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 the Subscriber of the transactions
contemplated hereby or relating hereto do not and will not (i) result in a
violation of the Subscriber's charter documents or bylaws or other
organizational documents, each as currently in effect, 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 the 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 the Subscriber). The 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 Securities in accordance with the terms hereof, provided that for purposes
of the representation made in this sentence, the 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 XXXXX Website of the Commission to the Company's Form
10-KSB (and any amendments thereto) for the year ended December 31, 2006 and all
periodic and current reports filed with the Commission thereafter, but not later
than five business days before the Closing Date (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.Subscriber acknowledges that on August 3,, 2007 , the Company filed a
Form 8-K/A which disclosed, inter alia, as follows:
Effective June 27, 2007 we entered into a membership interest exchange
agreement with Shanghai Aohong Industry Co., Ltd. ("Aohong), a Chinese
limited liability company, and its sole members Xx. Xxxxx Xx and his
wife, Xxx. Xxxx Xx. Under the terms of the agreement, we acquired 54.9%
of the membership interests of Aohong from that company in exchange for
$2,800,000 to be paid to Aohong between September 30, 2007 and July 27,
2009 which will be additional registered capital in that company,
together with 12,500,000 shares of our common stock valued at
$1,187,500 which were issued to Xx. Xx. The transfer of the membership
interests to us is subject to receipt by Aohong the necessary
government approvals as required by the laws of the People's Republic
of China. Subsequent to June 27, 2007, Aohong has submitted the
requisite documentation and the approval process is pending.
(e) Information on Subscriber. The Subscriber (i) is, and will be on
the Closing Date and upon each exercise of the Warrants, an "accredited
investor", as such term is defined in Regulation D promulgated by the Commission
under the 1933 Act, (ii) is experienced in investments and business matters,
(iii) has made investments of a speculative nature and has purchased securities
of United States publicly-owned companies in private placements in the past and,
(iv) alone or with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber 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 Purchased Shares and Warrants. On the Closing Date, the
Subscriber will purchase the Purchased Shares 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 Purchased Shares and Warrants 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 this Agreement)
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) Legends on Purchased Shares and Warrant Shares. The Purchased
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 SENSE HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(i) Legend on Warrants. 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 SENSE HOLDINGS, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED."
(j) 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.
(k) 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 the 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.
(l) No Governmental Review. The 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.
(m) Correctness of Representations. The Subscriber represents that the
foregoing representations and warranties are true and correct as of the
date hereof and, unless the Subscriber otherwise notifies the Company
prior to the Closing Date, shall be true and correct as of the Closing
Date.
(n) Survival. The foregoing representations and warranties shall
survive 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 in Schedule 5 hereto, 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 is 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 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. The Company's capitalization and
outstanding shares are substantially as reported in the most recently
filed Reports reflecting such information.
(c) Authority; Enforceability. This Agreement, the Purchased Shares,
the Warrants, the Escrow Agreement and any other agreements delivered
together with this Agreement or in connection herewith (collectively,
the "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
other equity securities and, other than (i) pursuant to this Agreement
with other Subscribers and (ii) as described on Schedule 5(d), 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
other equity securities of the Company or other equity interest in any
of the Subsidiaries of the Company. The Common Stock of the Company on
a fully diluted basis outstanding as of immediately following the
Closing 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 each of the Subscribers in Section 4 are true and
correct, neither the issuance and sale of the Securities nor the
performance of the Company's obligations under this Agreement and all
other Transaction Documents entered into by the Company relating
thereto or contemplated thereby 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) of a material nature under (A) the articles or
certificate of incorporation, charter or bylaws of the Company, each as
currently in effect, (B) 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, 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, except as contemplated herein; or
(iii) result in the activation of any anti-dilution rights or a reset
or repricing of any debt or security instrument of any other 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. Upon their issuance, the Securities (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 issuance of the
Purchased Shares, and upon exercise of the Warrants, the Purchased
Shares and Warrant Shares, will be duly and validly issued, fully paid
and nonassessable or 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 the
Subscriber's representations herein are true and accurate; and (v)
provided the Subscriber's representations herein are true and accurate,
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. There is no pending 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 that would affect the execution by the Company or the
performance by the Company of its obligations under the Transaction
Documents. There is no pending, or, to the knowledge of the Company,
basis for any, 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 15 of the 1934 Act. Pursuant to the
provisions of the 1934 Act, the Company has filed all reports and other
materials required to be filed thereunder with the Commission during
the preceding twelve (12) 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 Effect relating to the Company's business, financial condition
or affairs not disclosed in the Reports. The Reports including the
financial statements therein, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances when made.
(l) 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, if so required, 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 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") or any Principal Market 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 0000 Xxx) in
connection with the offer or sale of the Securities.
(p) Listing. The Common Stock is quoted on the Bulletin Board under the
symbol: SEHO. The Company has not received any oral or written notice
that the Common Stock is not eligible nor will become ineligible for
quotation on the Bulletin Board nor that the Common Stock does not meet
all requirements for the continuation of such quotation.
(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.
(s) Capitalization. The authorized and outstanding capital stock of the
Company 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. 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.
(t) 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 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.
(u) 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, nor have there been any such disagreements
during the two years prior to the Closing Date.
(v) Transfer Agent. The name, address, telephone number, fax number,
contact person and email address of the Company current transfer agent
is set forth on Schedule 5(v) hereto. The Company's transfer agent at
any time is referred to as the "Transfer Agent."
(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) Absence of Certain Company Control Person Actions or Events. The
term "Company Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Section 20 of the
1934 Act. To the Company's knowledge, none of the following has
occurred during the past five (5) years with respect to a Company
Control Person:
(i) A petition under the federal bankruptcy laws or any state insolvency law was
filed by or against, or a receiver, fiscal agent or similar officer was
appointed by a court for the business or property of such Company Control
Person, or any partnership in which he was a general partner at or within two
years before the time of such filing, or any corporation or business association
of which he was an executive officer at or within two years before the time of
such filing;
(ii) Such Company Control Person was convicted in a criminal proceeding or is a
named subject of a pending criminal proceeding (excluding traffic violations and
other minor offenses);
(iii) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:
(A) acting, as an investment advisor, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance
company, as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, any
other Person regulated by the Commodity Futures Trading Commission
("CFTC") or engaging in or continuing any conduct or practice in
connection with such activity;
(B) engaging in any type of business practice; or
(C) engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws;
(iv) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than 60 days the
right of such Company Control Person to engage in any activity described in
paragraph (iii) of this item, or to be associated with Persons engaged in any
such activity; or
(v) Such Company Control Person was found by a court of competent jurisdiction
in a civil action or by the CFTC or Commission to have violated any federal or
state securities law, and the judgment in such civil action or finding by the
CFTC or Commission has not been subsequently reversed, suspended, or vacated.
(y) Subsidiary Representations. The Company makes each of the
representations contained in Sections 5(a), (b), (d), (e), (f), (h), (k), (m),
(q), (r), (u), and (w) of this Agreement, as same relate to each Subsidiary of
the Company.
(z) Company Predecessor. All representations made by or relating to the
Company of a historical or prospective nature and all undertakings described in
Sections 9(g) through 9(l) shall relate, apply and refer to the Company and its
predecessors.
(aa) 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.
(bb) 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 C. The Company will provide, at the
Company's expense, such other legal opinions in the future as are reasonably
necessary for (i) the issuance of the Warrant Shares and (ii) the resale of the
Shares and the Warrant Shares pursuant to an effective registration statement,
pursuant to Rule 144 under the 1933 Act ("Rule 144"), or pursuant to another
available exemption from registration.
7. Events of Default. The occurrence of any of the following events is
an event of default under this Agreement (each, an "Event of Default"):
(a) Breach of Covenant. The Company breaches any material covenant or
other term or condition of any Transaction Document in any material respect;
provided, however, that if such breach is capable of being cured, such breach
continues for a period of ten business days after written notice to the Company
from the Subscriber.
(b) Breach of Representations and Warranties. Any material
representation or warranty of the Company made herein in any Transaction
Document or in connection therewith shall be false or misleading in any material
respect as of the date made or as of the Closing Date.
(c) Receiver or Trustee. The Company or any Subsidiary shall make an
assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed.
(d) Judgments. Any money judgment, writ or similar final process shall
be entered or filed against Company or any Subsidiary or any of their property
or other assets for more than $100,000.00, and shall remain unvacated, unbonded
or unstayed for a period of forty-five (45) days.
(e) Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law,
or the issuance of any notice in relation to such event, for the relief of
debtors shall be instituted by or against the Company or any Subsidiary and if
instituted against is not dismissed within 45 days of initiation.
(f) Delisting. Delisting of the Common Stock from any Principal Market;
failure to comply with the requirements for continued listing on a Principal
Market; or notification from a Principal Market that the Company is not in
compliance with the conditions for such continued listing on such Principal
Market.
(g) Non-Payment. A default by the Company or any Subsidiary under any
one or more obligations in an aggregate monetary amount in excess of $500,000
for more than ten days after the due date.
(h) Stop Trade. A Commission or judicial stop trade order or Principal
Market trading suspension that lasts for five or more consecutive trading days.
(i) Reservation Default. Failure by the Company to comply with its
obligation to reserve shares from its authorized Common Stock to be issued upon
exercise of the Warrants.
(j) Cross Default. A default by the Company of a material term,
covenant, warranty or undertaking of any other agreement to which the Company or
any Subsidiary are parties, or the occurrence of a material event of default
under any such other agreement which is not cured after any required notice
and/or cure period.
(k) Default to Other Subscriber. An Event of Default shall have been
declared by any other Subscriber in accordance with the preceding provisions of
this Section 7.
8. Finder/Legal Fees.
(a) Finder. Each of the Company on the one hand, and each Subscriber
(for such Subscriber 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 finder's 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. Except as provided in the following sentence, the Company
represents that there are no parties entitled to receive fees,
commissions, or similar payments in connection with the Offering.
Notwithstanding the foregoing, (i) the Company reserves the right to
engage registered broker-dealers in connection with this offering to
participate in the offering to certain Subscribers, and (ii) the
Company will be responsible for all fees and other compensation due to
such broker-dealers, which compensation may include a cash fee of up
to10 % of the Purchase Price paid by those Subscribers identified by
such broker- dealers and warrants ("Placement Agent Warrants") having
terms substantially similar to the Warrants for the purchase of up to
10% of the number of shares subject to the Warrants of those
Subscribers.
(b) Legal Fees. The Company shall pay to Xxxxxxx & Xxxxxx, LLP
("Counsel"), a fee of $20,000.00 ("Legal Fees") as reimbursement for
services rendered to the Subscribers in connection with this Agreement
and the purchase and sale of the Purchased Shares and the Warrants (the
"Offering"). The Legal Fees will be paid on the Closing Date and will
be paid out of funds held pursuant to the Escrow Agreement.
(c) Due Diligence Fee. The Company will pay a due diligence fee ("Due
Diligence Fee") described on Schedule 8 hereto to the parties
identified on Schedule 8 hereto (each, a "Due Diligence Fee
Recipient").
9. Covenants of the Company. The Company covenants and agrees with each
Subscriber as follows:
(a) Stop Orders. The Company will advise each Subscriber, 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. The Company shall promptly secure the listing of the
Purchased Shares 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 use commercially
reasonable efforts to maintain such listing so long as any Purchased
Shares, Warrants or Warrant Shares are outstanding. The Company will
maintain the listing 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 each Subscriber with 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. 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 each Subscriber.
(d) Filing Requirements. From the date of this Agreement and until the
earliest of
(i) the date which is two years after the date (the "Last Exercise
Date") on which the Warrants have been exercised in full other than by
way of a cashless exercise (which Last Exercise Date shall be deemed to
occur no later than the Warrant Expiration Date),
(ii) the date on which all of the Purchased Shares and the Warrant
Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement provided, however, that if any
outstanding Warrant may still be exercised, such date shall not be
determined until the earlier of the date such Warrants have been
exercised in full or the Warrant Expiration Date, or
(iii) the date on which all of the Purchased Shares and the Warrant
Shares which were issued upon exercise of the Warrants other than by
way of cashless exercise may be resold or transferred pursuant to Rule
144, without regard to volume limitations; provided, however, that if
any outstanding Warrant may still be exercised, such date shall not be
determined until the earlier of the date such Warrants have been
exercised in full or the Warrant Expiration Date,
the Company will (A) cause its Common Stock to continue to be registered under
Xxxxxxx 00 xx xxx 0000 Xxx, (X) 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 commercially reasonable 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 years after the
Closing Date. Until the earlier of the resale of the Purchased Shares and the
Warrant Shares by each Subscriber or two years after the Warrants have been
exercised, the Company will use its commercially reasonable 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 Aggregate 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 or equity
instruments of the Company, litigation related expenses or settlements,
brokerage fees, nor non-trade obligations outstanding on the Closing
Date.
(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 common shares equal to the shares
and 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.
(g) Taxes. From the date of this Agreement and until the sooner of (i)
the date which is two (2) years after the Closing Date, or (ii) the
date as of which all of the Purchased Shares and Warrants 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) [Intentionally omitted].
(i) Books and Records. From the date of this Agreement and until the
sooner of (i) (i) the date which is two (2) years after the Closing
Date, or (ii) the date as of which all of the Purchased Shares and
Warrants 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) the date which is two (2) years after the Closing
Date, or (ii) the date as of which all of the Purchased Shares and
Warrants 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) the date which is two (2) years after the Closing
Date, or (ii) the date as of which all of the Purchased Shares and
Warrants 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) the date which is two (2) years after the Closing Date, or (ii) the
date as of which all of the Purchased Shares and Warrants 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 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) the date which is two (2) years
after the Closing Date, or (ii) the date as of which all of the
Purchased Shares and Warrants 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 or in a filing
required by any other government or agency having jurisdiction over the
Company, 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 fourth 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 D.
(n) Further Registration Statements. Except for a registration
statement filed on behalf of the Subscribers pursuant to Section 11 of
this Agreement, and as set forth on Schedule 11(a) hereto, the Company
will not file any registration statements or amend any already filed
registration statement to increase the amount of Common Stock
registered therein, or reduce the price of which such Common Stock is
registered therein, including but not limited to Forms S-8 [except with
regard to Form S-8 as described on Schedule 9(n)],. with the Commission
or with state regulatory authorities without the consent of the
Subscriber until the expiration of the "Exclusion Period", which shall
be defined as the sooner of (i) the Registration Statement having been
current and available for use in connection with the resale of all of
the Registrable Securities (as defined in Section 11(a)(i) of this
Agreement) for a period of 240 days, or (ii) the date on which all of
the Purchased Shares and Warrant Shares have been resold or transferred
by the Subscribers pursuant to the Registration Statement or Rule 144,
without regard to volume limitations. The Exclusion Period will be
tolled during the pendency of an Event of Default. The foregoing will
not apply to any Registration Statement in respect of any acquisition,
merger, exchange or sale or other transaction.
(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 in each instance 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.
The Company will offer to a single firm of counsel designated by the
Subscribers (which, until further notice, shall be deemed to be Xxxxxxx
& Prager LLP, Attn: Xxxxxx Xxxxxxxx, Esq., which firm has requested to
receive such notification; each, an "Investor's Counsel") an
opportunity to review and comment on the Registration Statement and all
amendments and supplements thereto between three and five business days
prior to the proposed filing date thereof, and not file any document in
a form to which such counsel reasonably objects.
(p) Offering Restrictions. Until the expiration of the Exclusion Period
or except as indicated on Schedule 5 hereto, and during the pendency of
an Event of Default, except for the Excepted Issuances (as defined in
Section 12 of this Agreement), 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. From the date of this Agreement and until the sooner of (i)
the date which is two (2) years after the Closing Date, or (ii) the
date as of which all of the Purchased Shares and Warrants 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, except for the Excepted Issuances, 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.
The only officer, director, employee and consultant stock option or
stock incentive plan currently in effect or contemplated by the Company
has been submitted to the Subscribers. No other plan will be adopted
nor may any options or equity not included in such plan be issued until
the end of the Exclusion Period.
(q) Additional Negative Covenants. From the date of this Agreement and
until the sooner of (i) the date which is two (2) years after the
Closing Date, or (ii) the date as of which all of the Purchased Shares
and Warrants 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, without the written Consent
of the Subscribers, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly:
(i) amend its certificate of incorporation, bylaws or its charter
documents so as to adversely affect any rights of the Subscriber;
(ii) 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 as
set forth in Schedule 9 (q) (ii).
(iii) prepay any financing related or other outstanding debt
obligations.
10. Covenants of the Company and Subscriber Regarding Indemnification.
(a) Company Indemnification. 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 breach of any warranty by Company in
this Agreement or in any Exhibits or Schedules attached hereto, or
other agreement delivered pursuant hereto; or (ii) after any applicable
notice and/or cure periods, any breach or default in performance by the
Company of any material covenant or undertaking to be performed by the
Company hereunder, or any other agreement entered into by the Company
and Subscriber relating hereto. Any or all of the foregoing are deemed
Events of Default.
(b) Subscriber Indemnification. 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 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) Limitation on Subscriber Indemnification. 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.
(d) Procedures. The procedures set forth in Section 11(f) shall apply
to the indemnification set forth in Sections 10(a) and 10(b) above.
11. Registration Rights; Rule 144 Provisions.
(a) Registration Statement Requirements. The Company shall file with
the Commission a Form SB-2 registration statement (the "Registration
Statement") (or such other form that it is eligible to use) in order to
register all of the Registrable Securities for resale and distribution
under the 1933 Act on or before the date (the "Required Filing Date")
which is sixty (60) calendar days after the Closing Date (the actual
date of such filing, the "Filing Date"), and use its best efforts to
cause the Registration Statement to be declared effective by the date
(the "Required Effective Date") which is not later than the earlier of
(x) one hundred eighty (180) calendar days after the Closing Date or
(y) seven (7) business days after oral or written notice to the Company
or its counsel from the Commission that it may be declared effective.
The Company will register not less than a number of shares of common
stock in the aforedescribed registration statement that is equal to the
sum of the Purchased Shares and Warrant Shares issuable pursuant to
this Agreement upon exercise of the Warrants (assuming, for such
purposes, that the holders of all outstanding Warrants have exercised
such Warrants in full) (collectively, the "Registrable Securities");
provided, however, the number of such shares being registered for each
Subscriber may, with the written consent of the Subscriber (which
consent may be conditioned upon, among other things, the Company's
agreement to include certain shares in a subsequent registration
statement), be less than such number. The Registration Statement shall
also state that, in accordance with Rule 416 and 457 under the 1933
Act, it also covers such indeterminate number of additional shares of
Common Stock as may become issuable with respect to the Registrable
Securities to prevent dilution resulting from stock splits, stock
dividends or similar transactions. The Registrable Securities shall be
reserved and set aside exclusively for the benefit of the Subscribers
and Warrant holders and not issued, employed or reserved for anyone
other than such Subscribers and Warrant holders. The Registration
Statement will immediately be amended or additional registration
statements will be immediately filed by the Company as necessary to
register additional shares of Common Stock to allow the public resale
of all Common Stock included in and issuable by virtue of the
Registrable Securities or any other provisions of this Agreement.
Except with the written Consent of the Subscribers, no securities of
the Company other than the Registrable Securities will be included in
the Registration Statement except that the Registration Statement may
include (i) Payment Shares (as defined in Section 11(d) of this
Agreement), (ii) the shares issuable upon exercise of Placement Agent
Warrants, if any, and (iii) the shares, if any, described on Schedule
11(a) hereto. It shall be deemed a Non-Registration Event if at any
time after the date the Registration Statement is declared effective by
the Commission ("Actual Effective Date") the Company has registered for
unrestricted resale on behalf of the Subscribers less than 100% of the
outstanding Purchased Shares and of the outstanding Warrant Shares
(assuming, for such purposes at any time prior to the Warrant
Expiration Date, that the holders of all outstanding Warrants have
exercised such Warrants in full). Any holder of Purchased Shares or
Warrant Shares named as a selling stockholder in the Registration
Statement is sometimes referred to herein as a "Seller".
(b) Registration Procedures. If and whenever the Company is required by
the provisions of this Section 11 to effect the registration of any
Registrable Securities under the 1933 Act, the Company will, as
expeditiously as possible:
(i) subject to the time lines 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 each Seller (by telecopier and by e-mail addresses provided by
Subscribers) and Counsel (by telecopier and by email to
xxxxxxxx@xxxxxxxxx.xxx) on or before 3:00 PM EST on the first business
day following the day 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(b) shall be a material breach of the Company's obligation and a
Non-Registration Event as defined in Section 11(d) of this Agreement);
(ii) 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 methods of disposition set forth
in such registration statement for such period;
(iii) furnish to each Seller, at the Company's expense, such number of
copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such Seller
reasonably may request in order to facilitate the public sale or their
disposition of the securities covered by such registration statement;
(iv) 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 a Seller 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;
(v) 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;
(vi) notify each Seller 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
Shares; and
(vii) provided same would not be in violation of the provision of
Regulation FD under the 1934 Act, make available for inspection by any
Seller, and any attorney, accountant or other agent retained by such
Seller, 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.
(c) 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.
(d) Non-Registration Events. The Company and the Subscribers agree that
the Sellers will suffer damages if the Registration Statement is not
filed by the Required Filing Date and not declared effective by the
Commission by the Required Effective Date or if, after it is declared
effective, its effectiveness is not maintained in the manner and within
the time periods contemplated by Section 11 hereof, and it would not be
feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or
before the Required Filing Date, (B) the Registration Statement is not
declared effective on or before the Effective Date, (C) the
Registration Statement is not declared effective within seven (7)
business days after receipt by the Company or its attorneys of a
written or oral communication from the Commission that the Registration
Statement will not be reviewed or that the Commission has no further
comments, (D) any registration statement described in Section 11
declared effective but shall thereafter cease to be effective for a
period of time which shall exceed 30 days in the aggregate per year
(defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) or more than 20
consecutive days at any one time (each such event referred to in
clauses A through D of this Section 11(d) is referred to herein as a
"Non-Registration Event"), then the Company shall deliver to the holder
of Registrable Securities, as liquidated damages ("Liquidated
Damages"), an amount equal to two percent (2%) of the Purchase Price of
the Shares owned of record by such holder for each thirty (30) days
(pro rata for any period less than thirty days) which are subject to
such Non-Registration Event, but in no event shall Liquidated Damages
exceed 180 days of Liquidated Damages. The Company must pay the
Liquidated Damages in cash, except that, subject to the conditions
described below, the Company may pay the Liquidated Damages in shares
of Common Stock (with each share valued at the then effective Share
Purchase Price); such shares are referred to as "Payment Shares." The
Company may issue Payment Shares if, but only if the Effective Date is
on or before the date which is 300 days after the Closing Date and the
Registration Statement covering the Payment Shares to be issued to the
Seller is then effective. The Liquidated Damages must be paid within
ten (10) days after the end of each thirty (30) day period or shorter
part thereof for which Liquidated Damages are payable. In the event a
Registration Statement is filed by the Filing Date but is withdrawn
prior to being declared effective by the Commission, then such
Registration Statement will be deemed to have not been filed. All oral
or written comments received from the Commission relating to the
Registration Statement must be satisfactorily responded to within ten
(10) business days after receipt of comments from the Commission.
Failure to timely respond to Commission comments is a Non-Registration
Event for which Liquidated Damages shall accrue and be payable by the
Company to the holders of Registrable Securities at the same rate set
forth above. Notwithstanding the foregoing, the Company shall not be
liable to the Seller under this Section 11(d) for any events or delays
occurring as a consequence of the acts or omissions of the Seller
contrary to the obligations undertaken by Sellers in this Agreement.
Liquidated Damages will not accrue nor be payable pursuant to this
Section 11d) nor will a Non-Registration Event be deemed to have
occurred for times during which Registrable Securities are transferable
by the holder of Registrable Securities pursuant to Rule 144(k) under
the 1933 Act.
(e) 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 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.
(f) Indemnification and Contribution.
(i) 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 was 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(f)(iii) 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.
(ii) 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.
(iii) 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(f)(iii) and shall
only relieve it from any liability which it may have to such indemnified party
under this Section 11(f)(iii), except and only if and to the extent the
indemnifying party is prejudiced by such omission. In case any such action shall
be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party of its election so
to assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 11(f)(iii) 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.
(iv) 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(f) 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(f) 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(f); 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 0000 Xxx) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(g) Delivery of Unlegended Shares.
(i) Within five (5) business days (such fifth business day
being the "Unlegended Shares Delivery Date") after the business day on which the
Company has received (i) a notice that Shares or Warrant Shares have been sold
pursuant to the 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(h) 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 certificates, 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. Transfer fees shall be the responsibility of the Seller.
(ii) In lieu of delivering physical certificates representing
the Unlegended Shares, if the Company's Transfer Agent is then 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 shall 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.
(iii) The Company understands that a delay in the delivery of
the Unlegended Shares pursuant to the foregoing provisions of this Section 11
hereof later than the Unlegended Shares Delivery Date could result in economic
loss to a Subscriber. As compensation to a 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 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(g)
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 Purchased Shares and Warrant Shares subject to
such default at a price per share equal to the Redemption Percentage (as defined
below) multiplied by the Purchase Price of such Common Stock and exercise price
of such Warrant Shares ("Unlegended Redemption Amount"). The term "Redemption
Percentage" means the greater of (i) 120%, or (ii) a fraction (expressed as a
percentage) in which the numerator is the highest closing price of the Common
Stock during the aforedescribed thirty (30) day period and the denominator of
which is the lowest conversion price during such thirty (30) day period. The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand.
(iv) 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 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.
(v) In the event a Subscriber shall request delivery of
Unlegended Shares as described in Section 11(g) or the Subscriber has exercised
the Warrant and the Company is required to deliver such Warrant Shares, the
Company may not refuse to deliver Unlegended Shares or Warrant 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 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.
(h) Reports under 1933 Act and 1934 Act. With a view to making
available to each Subscriber the benefits of Rule 144 or any other similar rule
or regulation of the Commission that may at any time permit the Subscriber to
sell securities of the Company to the public without Registration ("Rule 144"),
the Company agrees to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act;
and
(iii) furnish to the Subscriber so long as the Subscriber owns
Registrable Securities, promptly upon request, (x) a written statement
by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (y) if not available on the
Commission's XXXXX system, a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so
filed by the Company and (z) such other information as may be
reasonably requested to permit the Subscriber to sell such securities
pursuant to Rule 144 without registration; and
(iv) at the request of any Subscriber holding Registrable Securities (a
"Holder"), give its Transfer Agent instructions (supported by an
opinion of Company Counsel or other counsel to the Company, if required
or requested by the Transfer Agent) to the effect that, upon the
Transfer Agent's receipt from such Holder of
(1) a certificate (a "Rule 144 Certificate") certifying (A)
that the Holder's holding period (as determined in accordance
with the provisions of Rule 144) for the shares of Registrable
Securities which the Holder proposes to sell (the "Securities
Being Sold") is not less than (1) year and (B) as to such
other matters as may be appropriate in accordance with Rule
144 under the 1933 Act, and
(2) an opinion of counsel acceptable to the Company (for which
purposes it is agreed that the opinion of Xxxxxxx & Prager LLP
shall be deemed acceptable if not given by Company counsel)
that, based on the Rule 144 Certificate, Securities Being Sold
may be sold pursuant to the provisions of Rule 144, even in
the absence of an effective Registration Statement,
the Transfer Agent is to effect the transfer of the Securities Being
Sold and issue to the buyer(s) or transferee(s) thereof one or more
stock certificates representing the transferred Securities Being Sold
without any restrictive legend and without recording any restrictions
on the transferability of such shares on the Transfer Agent's books and
records (except to the extent any such legend or restriction results
from facts other than the identity of the Holder, as the seller or
transferor thereof, or the status, including any relevant legends or
restrictions, of the shares of the Securities Being Sold while held by
the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or
cause to be delivered all such reasonable additional documentation as
may be necessary to effectuate the issuance of an unlegended
certificate.
(i) Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement and the
rights of the Subscriber under this Section 11 shall be automatically assigned
by the Subscriber to any transferee of the Registrable Securities (excluding any
transfer of such Registrable Securities by a sale pursuant to an effective
Registration Statement or pursuant to Rule 144) or of all or any portion of any
unexercised Warrants, but , only if the Company is, within a reasonable time
after such transfer or assignment, furnished with written notice of (a) the name
and address of such transferee or assignee, (b) the securities with respect to
which such registration rights are being transferred or assigned, and (c)
written evidence of the transferee's assumption of the Subscriber's obligations
under this Agreement.
12. Right of First Refusal; Most Favored Nation Provision; Other
Provisions.
(a) Right of First Refusal. During the period from the Closing Date
through and including the first anniversary of 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 to any party of its common stock or other
securities or debt obligations of the Company, 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 and 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, if any, 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, and (iv) as a result of the exercise
of Warrants or conversion of which are granted or issued pursuant to this
Agreement or that have been issued prior to the Closing Date all on the original
terms thereof, the issuance of which has been disclosed in a Report filed not
less than five (5) days prior to the Closing Date (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 in the
Offering. Each Subscriber may exercise such right independent of the exercise
thereof by the other Subscribers. 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) Most Favored Nation Provision. Other than the Excepted Issuances,
if, at any time while the Subscriber holds any Purchased Shares, Warrants or
Warrant Shares, the Company shall offer, issue or agree to issue any common
stock or securities (including preferred stock, debentures, warrants, options or
other rights, howsoever denominated) convertible into or exercisable for shares
of common stock (or modify any of the foregoing which may be outstanding)
(collectively, "New Securities") to any person or entity ("Third Party
Purchaser") at a purchase or conversion price per share and/or an exercise price
per share, respectively, which shall be less than the Share Purchase Price
(adjusted for capital adjustments such as stock splits or dividends paid in
shares of common stock) or the then effective Exercise Price of the Warrants,
without the consent of the Subscriber holding such Purchased Shares, Warrants or
Warrant Shares, then such Subscriber shall have the right to apply the lowest
such purchase price, conversion price or exercise price of the offering or sale
of such New Securities to the purchase price of the Purchased Shares then held
by the Subscriber (and, if necessary, the Company will issue additional shares
to Subscriber to take into account the amount paid by the Subscriber as of the
Closing Date and the adjustment made to the per share purchase price
contemplated by this paragraph), to the warrant exercise price of Warrant Shares
then held by the Subscriber (and, if necessary, the Company will issue
additional shares to Subscriber to take into account the amount paid whether in
cash or by cashless exercise paid by the Subscriber for the Warrant Shares then
held and the adjustment made to the per share exercise price) and to the
exercise price for all unexercised Warrants, each as of the date of the offering
or sale of such New Securities, and the appropriate adjustments to each relevant
Transaction Document will be deemed made accordingly. The rights of the
Subscriber set forth in this Section 12(b) 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) Option Plan Restrictions. The only officer, director, employee and
consultant stock option or stock incentive plan currently in effect or
contemplated by the Company has been submitted to the Subscribers or filed with
the Reports. No other plan will be adopted nor may any options or equity not
included in such plan be issued until the end of the Exclusion Period.
(d) Maximum Exercise of Rights. In the event the exercise of the rights
described in Sections 12(a) and 12(b) would 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 2.2 of the
Warrants, 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 maximum amount set forth contemplated by Section 2.2 of the
Warrants. The determination of when such common stock may be issued shall be
made by each Subscriber as to only such Subscriber.
(e) Other Financing Transactions. Anything in any other provision of
the Transaction Documents, including the preceding provisions of this Section
12, to the contrary notwithstanding, during the period from the Closing Date
through and including the first anniversary of the Effective Date, the Company
shall not enter into any other financing transaction which provides for the
Company to issue any shares of Common Stock or any security convertible into or
exercisable for Common Stock.
13. 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: Sense Holdings, Inc.,
00000 X.X. 00xx Xxxxxx, Xxxxxxx, Xxxxxxx 00000, Attn: Dore Perler, CEO, with a
copy by telecopier only to: Xxxxxxxxx Xxxxxxxxxx, Attn: Xxxxx Xxxxxxxxx, Esq.,
0000 XX Xxxxxxxxx Xxxx #000, Xxxx Xxxxx, XX 00000, telecopier: (000) 000-0000 ,
and (ii) if to the Subscribers, to: the one or more addresses and telecopier
numbers indicated on the signature pages hereto, with an additional copy by
telecopier only to: Xxxxxxx & Xxxxxx, LLP, Attn: Xxxxxx X. Xxxxxxx, Esq., 00
Xxxxxxxx, Xxxxx 000, Xxx Xxxx, Xxx Xxxx 00000, telecopier number: (212)
363-2999.
(b) Maximum Interest Rate. Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest or dividends required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Subscriber and thus refunded
to the Company.
(c) Entire Agreement; Assignment. This Agreement and other documents
delivered in connection herewith 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.
(d) 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.
(e) Law Governing this Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to 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 state courts of New York sitting in the City of New
York or in the federal courts located in the state of New York sitting in the
City Counties of New York. 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.
(f) Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to 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 13(e) hereof, each of the Company, Subscriber
and any signatory 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.
(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.
(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) Consent. As used in the Agreement, "Consent of the Subscribers" or
similar language means the written consent of holders of not less than 75% of
the total of the Shares issued which are owned by Subscribers on the date such
consent is requested.
(h) 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 Subscribers and their permitted successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
IN WITNESS WHEREOF, with respect to the Purchase Price specified below,
each the undersigned represents that the foregoing statements made by it above
are true and correct and that it has caused this Agreement to be duly executed
on its behalf (if an entity, by one of its officers thereunto duly authorized)
as of the date first above written.
PURCHASE PRICE: $________________________
PURCHASED SHARES [= PURCHASE PRICE/$0.06] _________________________
SUBSCRIBER:
-------------------------------- ------------------------------------
Address Printed Name of Subscriber
Telephone No. ___________________ By: _________________________________
Telecopier No. ___________________ (Signature of Authorized Person)
______________________________ Printed Name and Title
Jurisdiction of Incorporation
or Organization
Tax ID No. _______________
If the above Notice Address is not the Residence (for individual Subscriber) or
Principal Place of Business (for Subscriber which is not an individual), such
Residence or Principal Place of Business is:
COMPANY:
SENSE HOLDINGS, INC.
a Florida Corporation
By: _________________________________
(Signature of Authorized Person)
-------------------------------------
Printed Name and Title
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Warrants
Exhibit B Escrow Agreement
Exhibit C Form of Legal Opinion
Exhibit D Form of Public Announcement or Form 8-K
Exhibit E Closing Certificate
Schedule 5(a) Subsidiaries
Schedule 5(d) Additional Issuances / Capitalization
Schedule 5(q) Undisclosed Liabilities
Schedule 5(v) Transfer Agent
Schedule 8 Due Diligence Fees
Schedule 9(e) Use of Proceeds
Schedule 9(n) Permitted Form S-8 Filings
Schedule 9(q)(ii) Permitted Repurchases
Schedule 11(a) Other Securities to be Registered
(1)By signing this Agreement, each of the Subscriber and the Company, subject to
acceptance by the Escrow Agent, agrees to all of the terms and conditions of,
and becomes a party to, the Escrow Agreement, all of the provisions of which are
incorporated herein by this reference as if set forth in full.
