EXHIBIT 10(I)
SUBSCRIPTION AGREEMENT
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THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of December ___, 2003,
by and among Imaging Technologies Corporation, a Delaware corporation (the
"Company"), and the subscribers identified on the signature page hereto (each a
"Subscriber" and collectively "Subscribers").
WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the provisions of Section 4(2), Section 4(6) and/or Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act").
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Subscribers, as
provided herein, and the Subscribers, in the aggregate, shall purchase
$2,000,000 (the "Purchase Price") of principal amount of 8% secured promissory
notes of the Company ("Note" or "Notes") convertible into shares of the
Company's common stock, $.005 par value (the "Common Stock") at a per share
conversion price equal to the lesser of $.02, or seventy percent (70%) of the
average of the three lowest closing bid prices of the Common Stock as reported
by Bloomberg L.P. for the OTC Bulletin Board ("Bulletin Board") for the sixty
(60) trading days preceding, but not including the Conversion Date, as defined
in Section 7.1(b) of this Agreement ("Conversion Price"); and share purchase
warrants (the "Warrants"), in the form attached hereto as EXHIBIT A, to purchase
shares of Common Stock (the "Warrant Shares"). Eight Hundred Thousand Dollars
($800,000) of the Purchase Price shall be payable on the Initial Closing Date,
as defined in Section 1 hereof ("Initial Closing Purchase Price"). Up to One
Million Two Hundred Thousand Dollars ($1,200,000) of the Purchase Price will be
payable within five (5) business days after the actual effectiveness ("Actual
Effective Date") of the Registration Statement as defined in Section 11.1(iv) of
this Agreement ("Second Closing Purchase Price"). The Notes, shares of Common
Stock issuable upon conversion of the Notes (the "Shares"), the Warrants and the
Warrant Shares are collectively referred to herein as the "Securities"; and
WHEREAS, the aggregate proceeds of the sale of the Notes and the Warrants
contemplated hereby shall be held in escrow pursuant to the terms of a Funds
Escrow Agreement to be executed by the parties substantially in the form
attached hereto as EXHIBIT B (the "Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Subscribers hereby agree as
follows:
1. Initial Closing. Subject to the satisfaction or waiver of the terms and
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conditions of this Agreement, on the Initial Closing Date, each Subscriber shall
purchase and the Company shall sell to each Subscriber a Note in the principal
amount designated on the signature page hereto ("Initial Closing Notes"). The
aggregate amount of the Notes to be purchased by the Subscribers on the Initial
Closing Date shall, in the aggregate, be equal to the Initial Closing Purchase
Price. The Initial Closing Date shall be the date that subscriber funds
representing the net amount due the Company from the Initial Closing Purchase
Price of the Offering is transmitted by wire transfer or otherwise to or for the
benefit of the Company.
2. Second Closing.
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(a) Second Closing. The closing date in relation to the Second
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Closing Purchase Price shall be the fifth (5th) business day after the Actual
Effective Date (the "Second Closing Date"). Subject to the satisfaction or
waiver of the terms and conditions of this Agreement on the Second Closing Date,
each Subscriber shall purchase and the Company shall sell to each Subscriber a
Note in the principal amount designated on the signature page hereto ("Second
Closing Notes"). The aggregate Purchase Price of the Second Closing Notes for
all Subscribers shall be equal to the Second Closing Purchase Price. The Second
Closing Note shall be identical to the Note issuable on the Initial Closing Date
except that the maturity date of such Notes shall be three (3) years after the
Second Closing Date. The Maximum Base Price (defined in Section 2.1 (6) of the
Note) shall be equitably adjusted to offset the effect of stock splits, stock
dividends, pro rata distributions of property or equity interests to the
Company's shareholders after the Initial Closing Date.
(b) Conditions to Second Closing. The occurrence of the Second
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Closing is expressly contingent on (i) the truth and accuracy, on the Effective
Date, Actual Effective Date and the Second Closing Date of the representations
and warranties of the Company and Subscriber contained in this Agreement, (ii)
continued compliance with the covenants of the Company set forth in this
Agreement, (iii) the non-occurrence of any Event of Default (as defined in the
Note) or other default by the Company of its obligations and undertakings
contained in this Agreement, (iv) the delivery on the Second Closing Date of
Second Closing Notes for which the Company Shares issuable upon conversion have
been included in the Registration Statement, which must be effective as of the
Second Closing Date, and (v) the delivery of the Second Closing Warrants for
which the Warrant Shares issuable upon exercise have been included in the
Registration Statement which must be effective as of the Second Closing Date
(c) Second Closing Deliveries. On the Second Closing Date, the
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Company will deliver the Second Closing Notes and Second Closing Warrants to the
Escrow Agent and each Subscriber will deliver his portion of the respective
Purchase Price to the Escrow Agent. On the Second Closing Date, the Company
will deliver a certificate ("Second Closing Certificate") signed by its chief
operating officer or chief financial officer (i) representing the truth and
accuracy of all the representations and warranties made by the Company contained
in this Agreement, as of the Initial Closing Date, the Actual Effective Date,
and the Second Closing Date, as if such representations and warranties were made
and given on all such dates, (ii) adopting the covenants and conditions set
forth in Sections 9, 10, 11, and 12 of this Agreement in relation to the Second
Closing Notes and Second Closing Warrants, (iii) representing the timely
compliance by the Company with the Company's registration requirements set forth
in Section 11 of this Agreement, and (iv) certifying that an Event of Default
has not occurred. A legal opinion nearly identical to the legal opinion
referred to in Section 6 of this Agreement shall be delivered to the Subscriber
at the Second Closing in relation to the Company and Second Closing Notes
("Second Closing Legal Opinion"). The Second Closing Legal Opinion must also
state that all of the Registerable Securities have been included for
registration in an effective registration statement effective as of the Actual
Effective Date and Second Closing Date.
(d) Second Closing Limitation. A Second Closing may not take place in
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connection with that amount of Second Closing Notes which would be in excess of
the sum of (y) the number of shares of Common Stock beneficially owned by a
Subscriber on the Second Closing Date, and (z) the number of Company Shares
issuable upon the conversion of the Second Closing Note with respect to which
the determination of this proviso is being made on a Second Closing Date, which
would result in beneficial ownership by the Subscriber of more than 9.99% of the
outstanding shares of Common Stock of the Company on the Second Closing Date.
For the purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
The Subscriber may revoke the restriction described in this paragraph upon and
effective after sixty-one (61) days prior notice to the Company. The Subscriber
shall have the right to determine which of the equity of the Company deemed
beneficially owned by the Subscriber shall be included in the 9.99% described
above and which shall be allocated to the excess above 9.99%.
3. Warrants. . On each Closing Date, the Company will issue Warrants to the
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Subscribers. Twenty (20) Warrants will be issued for each One Dollar ($1.00)
Initial Purchase Price and Second Closing Purchase Price paid on the Initial
Closing Date and Second Closing Date, respectively. The Warrants issuable on
the Initial Closing Date are referred to as Initial Closing Warrants. The
Warrants issuable on the Second Closing Date are referred to as Second Closing
Warrants. The per Warrant Share exercise price to acquire a Warrant Share upon
exercise of a Warrant shall be One Hundred and Ten Percent (110%) of the closing
price of the Common Stock as reported by Bloomberg L.P. for the OTC Bulletin
Board ("Bulletin Board") for the trading day immediately preceding but not
including the Initial Closing Date. Collectively, the Initial Closing Warrants
and Second Closing Warrants are referred to herein as Warrants. The Common
Stock issuable upon exercise of the Initial Closing Warrants and Second Closing
Warrants is referred to herein as "Warrant Shares". The Warrants shall be
exercisable for five (5) years after the Initial Closing Date and Second Closing
Date, respectively. The exercise price of the Second Closing Warrants issuable
shall be equitably adjusted to offset the effect of stock splits, stock
dividends, pro rata distributions of property or equity interests to the
Company's shareholders, occurring after the Initial Closing Date. The entire
Purchase Price shall be deemed allocated to the Common Stock.
4. Subscriber's Representations and Warranties. Each Subscriber hereby
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represents and warrants to and agrees with the Company as to such Subscriber
that:
(a) Information on Company. The Subscriber has been furnished with or has
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obtained from the XXXXX Website of the Securities and Exchange Commission (the
"Commission") the Company's Form 10-K for the year ended June 30, 2003 as filed
with the Commission, together with all subsequently filed Forms 10-Q, 8-K, and
filings made with the Commission available at the XXXXX website (hereinafter
referred to collectively 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.
(b) Information on Subscriber. The Subscriber is, and will be at the time
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of the conversion of the Notes and exercise of any of the Warrants, an
"accredited investor", as such term is defined in Regulation D promulgated by
the Commission under the Securities Act of 1933, as amended (the "1933 Act"), is
experienced in investments and business matters, has made investments of a
speculative nature and has purchased securities of United States publicly-owned
companies in private placements in the past and, with its representatives, has
such knowledge and experience in financial, tax and other business matters as to
enable the Subscriber to utilize the information made available by the Company
to evaluate the merits and risks of and to make an informed investment decision
with respect to the proposed purchase, which represents a speculative
investment. The Subscriber has the authority and is duly and legally qualified
to purchase and own the Securities. The Subscriber is able to bear the risk of
such investment for an indefinite period and to afford a complete loss thereof.
The information set forth on the signature page hereto regarding the Subscriber
is accurate.
(c) Purchase of Notes and Warrants. On each closing date, the Subscriber
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will purchase the Notes and/or Warrants as principal for its own account and not
with a view to any distribution thereof.
(d) Compliance with Securities Act. The Subscriber understands and agrees
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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. In any event, and subject to
compliance with applicable securities laws, the Subscriber may enter into
hedging transactions with third parties, which may in turn engage in short sales
of the Securities in the course of hedging the position they assume and the
Subscriber may also enter into short positions or other derivative transactions
relating to the Securities, or interests in the Securities, and deliver the
Securities, or interests in the Securities, to close out their short or other
positions or otherwise settle short sales or other transactions, or loan or
pledge the Securities, or interests in the Securities, to third parties that in
turn may dispose of these Securities.
(b) Shares Legend. The Shares and the Warrant Shares shall bear the
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following or similar legend:
(c)
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IMAGING TECHNOLOGIES CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED."
(f) Warrants Legend. The Warrants shall bear the following or similar
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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 OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IMAGING
TECHNOLOGIES CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
(g) Note Legend. The Note shall bear the following legend:
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"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IMAGING TECHNOLOGIES CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
(h) Communication of Offer. The offer to sell the Securities was directly
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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.
(i) Authority; Enforceability. This Agreement and other agreements
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delivered together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by the Subscriber and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and Subscriber has full corporate power and
authority necessary to enter into this Agreement and such other agreements and
to perform its obligations hereunder and under all other agreements entered into
by the Subscriber relating hereto.
(j) Correctness of Representations. Each Subscriber represents as to such
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Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and will be true and correct as of each closing
date and unless a Subscriber otherwise notifies the Company prior to any closing
date, shall be true and correct as of such closing dates. The foregoing
representations and warranties shall survive the Second Closing Date for a
period of three (3) years.
5. Company Representations and Warranties. The Company represents and
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warrants to and agrees with each Subscriber that:
(a) Due Incorporation. The Company and each of its subsidiaries is a
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corporation duly organized, validly existing and in good standing under the laws
of the respective jurisdictions of their incorporation and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. The Company and each of its subsidiaries is duly qualified as
a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property owned by it
makes such qualification necessary, other than those jurisdictions in which the
failure to so qualify would not have a material adverse effect on the business,
operations or financial condition of the Company.
(b) Outstanding Stock. All issued and outstanding shares of capital stock
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of the Company and each of its subsidiaries has been duly authorized and validly
issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement, the Notes, the Warrants, the
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Escrow Agreement and any other agreements delivered together with this Agreement
or in connection herewith have been duly authorized, executed and delivered by
the Company and are valid and binding agreements enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity;
and the Company has full corporate power and authority necessary to enter into
this Agreement, the Notes, the Warrants, the Escrow Agreement and such other
agreements delivered together with this Agreement or in connection herewith and
to perform its obligations hereunder and under all other agreements entered into
by the Company relating hereto.
(d) Additional Issuances. There are no outstanding agreements or
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preemptive or similar rights affecting the Company's common stock or equity and
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no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of any shares of common stock or equity of the
Company or other equity interest in any of the subsidiaries of the Company
except as described on Schedule 5(d), or the Reports.
(e) Consents. No consent, approval, authorization or order of any court,
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governmental agency or body or arbitrator having jurisdiction over the Company,
or any of its affiliates, the Amex, the National Association of Securities
Dealers, Inc., NASDAQ, SmallCap Market, the OTC Bulletin Board nor the Company's
Shareholders is required for the execution and compliance by the Company of its
obligations under this Agreement, and all other agreements entered into or to be
entered into by the Company relating hereto, including, without limitation, the
issuance and sale of the Securities, and the performance of the Company's
obligations hereunder and under all such other agreements.
(f) No Violation or Conflict. Assuming the representations and warranties
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of the Subscribers in Section 4 are true and correct, neither the issuance nor
sale of the Securities nor the performance of the Company's obligations under
this Agreement and all other agreements entered into by the Company relating
thereto by the Company will:
(i) violate, conflict with, result in a breach of, or constitute a default
(or an event which with the giving of notice or the lapse of time or both would
be reasonably likely to constitute a default) under (A) the articles of
incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of its subsidiaries or
over the properties or assets of the Company or any of its affiliates, (C) the
terms of any bond, debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage, deed
of trust or other instrument to which the Company or any of its affiliates or
subsidiaries is a party, by which the Company or any of its affiliates or
subsidiaries is bound, or to which any of the properties of the Company or any
of its affiliates or subsidiaries 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 or subsidiaries is a party except the
violation, conflict, breach, or default of which would not have a material
adverse effect on the Company; 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, its subsidiaries or any
of its affiliates.
(g) The Securities. The Securities upon issuance:
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(i) are, or will be, free and clear of any security interests, liens, claims
or other encumbrances, subject to restrictions upon transfer under the 1933 Act
and any applicable state securities laws;
(ii) have been, or will be, duly and validly authorized and on the date of
conversion of the Notes, and upon exercise of the Warrants, the Shares and
Warrant Shares respectively, will be duly and validly issued, fully paid and
nonassessable (and if registered pursuant to the 1933 Act, and resold pursuant
to an effective registration statement will be free trading and unrestricted,
provided that each Subscriber complies with the prospectus delivery requirements
of the 1933 Act);
(iii) will not have been issued or sold in violation of any preemptive or
other similar rights of the holders of any securities of the Company; and
(iv) will not subject the holders thereof to personal liability by reason of
being such holders.
(v) will not result in the activation of any anti-dilution rights or a reset
or repricing of any debt or security instrument of any other debt or equity
holder of the Company.
(h) Litigation. There is no pending or, to the best knowledge of the
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Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under this Agreement, and all
other agreements entered into by the Company relating hereto. Except as
disclosed in the Reports, there is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates which litigation if adversely determined could have a
material adverse effect on the Company.
(i) Reporting Company. The Company is a publicly-held company subject to
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reporting obligations pursuant to Sections 15(d) and 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and has a class of common
shares registered pursuant to Section 12(g) of the 1934 Act. Pursuant to the
provisions of the 1934 Act, the Company has timely filed all reports and other
materials required to be filed thereunder with the Commission during the
preceding twelve months.
(j) No Market Manipulation. The Company has not taken, and will not take,
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directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
the Common Stock of the Company to facilitate the sale or resale of the
Securities or affect the price at which the Securities may be issued or resold.
(k) Information Concerning Company. The Reports contain all material
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information relating to the Company and its operations and financial condition
as of their respective dates which information is required to be disclosed
therein. Since the date of the financial statements included in the Reports,
and except as modified in the Other Written Information or in the Schedules
hereto, there has been no material adverse change in the Company's business,
financial condition or affairs not disclosed in the Reports. The Reports do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made.
(l) Stop Transfer. The Securities, when issued, will be restricted
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securities. The Company will not issue any stop transfer order or other order
impeding the sale, resale or delivery of any of the Securities, except as may be
required by any applicable federal or state securities laws and unless
contemporaneous notice of such instruction is given to the Subscriber.
(m) Defaults. The Company is not in violation of its Articles of
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Incorporation or Bylaws. The Company is (i) not in default under or in
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violation of any other material agreement or instrument to which it is a party
or by which it or any of its properties are bound or affected, which default or
violation would have a material adverse effect on the Company, (ii) 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 its knowledge in violation of any statute, rule or
regulation of any governmental authority which violation would have a material
adverse effect on the Company.
(n) No Integrated Offering. Neither the Company, nor any of its affiliates,
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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 and/or sale of the Securities
pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of the Bulletin
Board. Nor will the Company or any of its affiliates or subsidiaries take any
action or steps that would cause the offer and/or sale of the Securities to be
integrated with other offerings. 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.
(o) No General Solicitation. Neither the Company, nor any of its
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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 Company's common stock is quoted on the Bulletin Board.
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The Company has not received any oral or written notice that its common stock
will be delisted from the Bulletin Board nor that its common stock does not meet
all requirements for the continuation of such quotation and the Company
satisfies the requirements for the continued listing of its common stock on the
Bulletin Board.
(q) No Undisclosed Liabilities. The Company has no liabilities or
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obligations which are material, individually or in the aggregate, which are not
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disclosed in the Reports and Other Written Information, other than those
incurred in the ordinary course of the Company's businesses since June 30, 2003
and which, individually or in the aggregate, would reasonably be expected to
have a material adverse effect on the Company's financial condition, other than
as set forth in Schedule 5(q).
(r) No Undisclosed Events or Circumstances. Since June 30, 2003, no event
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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
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Company as of the date of this Agreement and the Closing Date are set forth on
Schedule 5(s). Except as set forth in the Reports and Other Written Information
and 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 have studied
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and fully understand the nature of the Securities being sold hereby and
recognize that they 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 such issuance is in the best interests of the Company.
The Company specifically acknowledges that its obligation to issue the Shares
upon conversion of the Note and exercise of the Warrants is binding upon the
Company and enforceable, except as otherwise described in this Subscription
Agreement or the Note, regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company or parties entitled to
receive equity of the Company.
(u) No Disagreements with Accountants and Lawyers. There are no
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disagreements of any kind presently existing, or reasonably anticipated by the
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Company to arise, between the accountants and lawyers formerly or presently
employed by the Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers.
(v) Investment Company. The Company is not, and is not an Affiliate (as
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defined in Rule 405 under the 0000 Xxx) of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(w) Correctness of Representations. The Company represents that the
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foregoing representations and warranties are true and correct as of the date
hereof and will be true and correct as of each closing date, and unless the
Company otherwise notifies the Subscribers prior to any closing date, shall be
true and correct as of such closing dates. The foregoing representations and
warranties shall survive the Second Closing Date for a period of three (3)
years.
6. Regulation D Offering. The offer and issuance of the Securities to the
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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 each 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. A form of the legal opinion is annexed hereto as EXHIBIT C. The
Company will provide, at the Company's expense, such other legal opinions in the
future as are reasonably necessary for the conversion of the Notes and exercise
of the Warrants and resale of the Shares and Warrant Shares.
7.1. Conversion of Note.
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(a) Upon the conversion of the Note or part thereof, the Company shall, at
its own cost and expense, take all necessary action, including obtaining and
delivering, an opinion of counsel to assure that the Company's transfer agent
shall issue stock certificates in the name of Subscriber (or its nominee) or
such other persons as designated by Subscriber and in such denominations to be
specified at conversion representing the number of shares of common stock
issuable upon such conversion. The Company warrants that no instructions other
than these instructions have been or will be given to the transfer agent of the
Company's Common Stock and that, unless waived by the Subscriber, the Shares
will be free-trading, and freely transferable, and will not contain a legend
restricting the resale or transferability of the Shares provided the Shares are
being sold pursuant to an effective registration statement covering the Shares
or are otherwise exempt from registration.
(b) Subscriber will give notice of its decision to exercise its right to
convert the Note or part thereof by telecopying an executed and completed Notice
of Conversion (a form of which is annexed to EXHIBIT A to the Note) to the
Company via confirmed telecopier transmission or otherwise pursuant to Section
13(a) of this Agreement. The Subscriber will not be required to surrender the
Note until the Note has been fully converted or satisfied. Each date on which a
Notice of Conversion is telecopied to the Company in accordance with the
provisions hereof shall be deemed a Conversion Date. The Company will itself or
cause the Company's transfer agent to transmit the Company's Common Stock
certificates representing the Shares issuable upon conversion of the Note to the
Subscriber via express courier for receipt by such Subscriber within three (3)
business days after receipt by the Company of the Notice of Conversion (the
"Delivery Date"). In the event the Shares are electronically transferable, then
delivery of the Shares must be made by electronic transfer provided request for
----
such electronic transfer has been made by the Subscriber. A Note representing
the balance of the Note not so converted will be provided by the Company to the
Subscriber if requested by Subscriber, provided the Subscriber delivers an
original Note to the Company. To the extent that a Subscriber elects not to
surrender a Note for reissuance upon partial payment or conversion, the
Subscriber hereby indemnifies the Company against any and all loss or damage
attributable to a third-party claim in an amount in excess of the actual amount
then due under the Note.
(c) The Company understands that a delay in the delivery of the Shares in
the form required pursuant to Section 7 hereof, or the Mandatory Redemption
Amount described in Section 7.2 hereof, beyond the Delivery Date or Mandatory
Redemption Payment Date (as hereinafter defined) could result in economic loss
to the Subscriber. As compensation to the Subscriber for such loss, the Company
agrees to pay to the Subscriber for late issuance of Shares in the form required
pursuant to Section 7 hereof upon Conversion of the Note in the amount of $100
per business day after the Delivery Date for each $10,000 of Note principal
amount being converted, of the corresponding Shares which are not timely
delivered. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Furthermore, in addition to any other
remedies which may be available to the Subscriber, in the event that the Company
fails for any reason to effect delivery of the Shares by the Delivery Date or
make payment by the Mandatory Redemption Payment Date, the Subscriber will be
entitled to revoke all or part of the relevant Notice of Conversion or rescind
all or part of the notice of Mandatory Redemption by delivery of a notice to
such effect to the Company whereupon the Company and the Subscriber shall each
be restored to their respective positions immediately prior to the delivery of
such notice, except that late payment charges described above shall be payable
through the date notice of revocation or rescission is given to the Company.
(d) Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Subscriber and thus refunded to the
Company.
7.2. Mandatory Redemption at Subscriber's Election. In the event the
-------------------------------------------------
Company is prohibited from issuing Shares, or fails to timely deliver Shares on
a Delivery Date, or upon the occurrence of any other Event of Default (as
defined in the Note or in this Agreement) or for any reason other than pursuant
to the limitations set forth in Section 7.3 hereof, then at the Subscriber's
election, the Company must pay to the Subscriber ten (10) business days after
request by the Subscriber or on the Delivery Date (if requested by the
Subscriber) at the Subscriber's election, a sum of money determined by (i)
multiplying up to the outstanding principal amount of the Note designated by the
Subscriber by 130%, or (ii) multiplying the number of Shares otherwise
deliverable upon conversion of an amount of Note principal and/or interest
designated by the Subscriber (with the date of giving of such designation being
a Deemed Conversion Date) at the then Conversion Price that would be in effect
on the Deemed Conversion Date by the highest closing price of the Common Stock
on the principal market for the period commencing on the Deemed Conversion Date
until the day prior to the receipt of the Mandatory Redemption Payment,
whichever is greater, together with accrued but unpaid interest thereon
("Mandatory Redemption Payment"). The Mandatory Redemption Payment must be
received by the Subscriber on the same date as the Company Shares otherwise
deliverable or within ten (10) business days after request, whichever is sooner
("Mandatory Redemption Payment Date"). Upon receipt of the Mandatory Redemption
Payment, the corresponding Note principal and interest will be deemed paid and
no longer outstanding.
7.3. Maximum Conversion. The Subscriber shall not be entitled to convert on
------------------
a Conversion Date that amount of the Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of common stock beneficially owned by the Subscriber and its affiliates
on a Conversion Date, and (ii) the number of shares of Common Stock issuable
upon the conversion of the Note with respect to which the determination of this
provision is being made on a Conversion Date, which would result in beneficial
ownership by the Subscriber and its affiliates of more than 9.99% of the
outstanding shares of common stock of the Company on such Conversion Date. For
the purposes of the provision to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Subscriber shall not be limited to aggregate conversions of
only 9.99% and aggregate conversion by the Subscriber may exceed 9.99%. The
Subscriber may void the conversion limitation described in this Section 7.3 upon
and effective after (sixty-one) 61 days prior written notice to the Company.
The Subscriber may allocate which of the equity of the Company deemed
beneficially owned by the Subscriber shall be included in the 9.99% amount
described above and which shall be allocated to the excess above 9.99%.
7.4. Injunction - Posting of Bond. In the event a Subscriber shall elect to
----------------------------
convert a Note or part thereof or exercise the Warrant in whole or in part, the
Company may not refuse conversion or exercise based on any claim that such
Subscriber or any one associated or affiliated with such Subscriber has been
engaged in any violation of law, or for any other reason, unless, an injunction
from a court, on notice, restraining and or enjoining conversion of all or part
of said Note 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 130% of the amount of the Note, or aggregate
purchase price of the Warrant Shares which are subject to the injunction, which
bond shall remain in effect until the completion of arbitration/litigation of
the dispute and the proceeds of which shall be payable to such Subscriber to the
extent Subscriber obtains judgment.
7.5. Buy-In. In addition to any other rights available to the
------
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if ten (10) days
after the Delivery Date the Subscriber purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
such Subscriber of the Common Stock which the Subscriber anticipated receiving
upon such conversion (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored, together with interest thereon
at a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if the Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of $10,000 of note principal and/or interest, the
Company shall be required to pay the Subscriber $1,000, plus interest. The
Subscriber shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In. The delivery date by which
Common Stock must be delivered pursuant to this Section 7.5 shall be tolled for
the amount of days that the Subscriber does not deliver information reasonably
requested by the Company's transfer agent.
7.6 Adjustments. The Conversion Price and amount of Shares issuable upon
------------
conversion of the Notes shall be adjusted to offset the effect of stock splits,
stock dividends, pro rata distributions of property or equity interests to the
Company's shareholders.
7.7. Redemption. The Company may not redeem or call the Note without the
----------
consent of the holder of the Note.
8. Legal Fee/Escrow Agent and Finder's Fee.
---------------------------------------------
(a) Legal Fee. The Company shall pay to Grushko & Xxxxxxx, P.C., a
----------
fee of $15,000 ("Legal Fees") as reimbursement for services rendered to Alpha
Capital Aktiengesellschaft in connection with this Agreement and the purchase
and sale of the Notes and Warrants (the "Offering") and acting as Escrow Agent
for the Offering. Thirteen Thousand Dollars ($13,000) of the Legal Fees shall
be payable on or before the Initial Closing Date and $2,000 shall be payable on
the Second Closing Date. The Legal Fees will be payable out of funds held
pursuant to the Escrow Agreement.
(b) Finder's Fee. The Company on the one hand, and each Subscriber
--------------
(for himself 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 other than the entities identified on
Schedule 8(b) to this Agreement. (each a "Finder") on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby and
arising out of such party's actions. Anything to the contrary in this Agreement
notwithstanding, each Subscriber is providing indemnification only for such
Subscriber's own actions and not for any action of any other Subscriber. Each
Subscriber's liability hereunder is several and not joint. The Company agrees
that it will pay the Finders a cash fee equal to ten percent (10%) of the
Initial Closing Purchase Price on the Initial Closing Date and ten percent (10%)
of the Second Closing Purchase Price on the Second Closing Date directly out of
the funds held pursuant to the Escrow Agreement ("Finder's Fees"). The Finder's
Fees will be disbursed as described in Schedule 8(b) hereto. The Company
represents that there are no other parties entitled to receive fees,
commissions, or similar payments in connection with the Offering except the
Finders.
9. Covenants of the Company. The Company covenants and agrees with the
---------------------------
Subscribers as follows:
(a) Stop Orders. The Company will advise the Subscribers, promptly after it
-----------
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 Shares
-------
and Warrant Shares upon each national securities exchange, or quotation system,
if any, upon which shares of common stock are then listed (subject to official
notice of issuance) and shall maintain such listing so long as any Securities
are outstanding. The Company will maintain the listing of its Common Stock on
the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market
System, OTC Bulletin Board, or New York Stock Exchange (whichever of the
foregoing is at the time the principal trading exchange or market for the Common
Stock [the "Principal Market"]), and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the Principal Market, as applicable. The Company will provide the Subscribers
copies of all notices it receives notifying the Company of the threatened and
actual delisting of the Common Stock from any Principal Market. As of the date
of this Agreement and the Initial Closing Date, the Bulletin Board is and will
be 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 Subscriber.
(d) Reporting Requirements. From the date of this Agreement and until at
-----------------------
least two (2) years after the Actual Effective Date, the Company will (i) cause
its Common Stock to continue to be registered under Section 12(b) or 12(g) of
the 1934 Act, (ii) comply in all respects with its reporting and filing
obligations under the 1934 Act, (iii) comply with all reporting requirements
that are applicable to an issuer with a class of shares registered pursuant to
Section 12(b) or 12(g) of the 1934 Act, as applicable, and (iv) comply with all
requirements related to any registration statement filed pursuant to this
Agreement. The Company will use its best efforts not to take any action or file
any document (whether or not permitted by the 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 the later of
two (2) years after the Actual Effective Date. Until the earlier of the resale
of the Shares and the Warrant Shares by each Subscriber or at least two (2)
years after the Warrants have been exercised, the Company will use its best
efforts to continue the listing or quotation of the Common Stock on 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.
The Company agrees to file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to each Subscriber promptly
after such filing.
(e) Use of Proceeds. The Company undertakes to use the proceeds of the
-----------------
Subscribers' funds for the purposes set forth on SCHEDULE 9(E) hereto. A
deviation from the use of proceeds set forth on SCHEDULE 9(E) of more than 10%
per item or more than 20% in the aggregate shall be deemed a material breach of
the Company's obligations hereunder. Except as set forth on SCHEDULE 9(E), the
Purchase Price may not and will not be used for accrued and unpaid officer and
director salaries, payment of financing related debt, redemption of outstanding
redeemable notes or equity instruments of the Company nor non-trade obligations
outstanding on the Initial Closing Date.
(f) Reservation. The Company undertakes to reserve, pro rata on behalf of
-----------
each holder of a Note or Warrant, from its authorized but unissued common stock,
at all times that Notes or Warrants remain outstanding, a number of common
shares equal to not less than 200% of the amount of common shares necessary to
allow each such holder at all times to be able to convert all such outstanding
Notes, and one common share for each Warrant Share. Failure to have sufficient
shares reserved pursuant to this Section 9(f) for three (3) consecutive business
days or ten (10) days in the aggregate shall be an Event of Default under the
Note.
(g) Taxes. From the date of this Agreement until two (2) years after the
-----
Closing Date (or Second Closing Date if the Second Closing Notes are issued),
the Company will promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Company;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefore.
(h) Insurance. From the date of this Agreement until two (2) years after
---------
the Closing Date (or Second Closing Date if the Second Closing Notes are
issued), the Company will keep its assets which are of an insurable character
insured by financially sound and reputable insurers against loss or damage by
fire, explosion and other risks customarily insured against by companies in the
Company's line of business, in amounts sufficient to prevent the Company from
becoming a co-insurer and not in any event less than 100% of the insurable value
of the property insured; and the Company will maintain, with financially sound
and reputable insurers, insurance against other hazards and risks and liability
to persons and property to the extent and in the manner customary for companies
in similar businesses similarly situated and to the extent available on
commercially reasonable terms.
(i) Books and Records. From the date of this Agreement until two (2) years
-------------------
after the Closing Date (or Second Closing Date if the Second Closing Notes are
issued), 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 until two (2)
--------------------------
years after the Closing Date (or Second Closing Date if the Second Closing Notes
are issued), 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 until two (2)
----------------------
years after the Closing Date (or Second Closing Date if the Second Closing Notes
are issued), 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.
(l) Properties. From the date of this Agreement until two (2) years after
-----------
the Closing Date (or Second Closing Date if the Second Closing Notes are
issued), 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
needful 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. From the date of this Agreement until two (2) years
----------------
after the Closing Date (or Second Closing Date if the Second Closing Notes are
issued), the Company agrees that it will not disclose publicly or privately the
identity of the Subscribers unless expressly agreed to in writing by a
Subscriber or only to the extent required by law and then only upon ten (10)
days prior notice to Subscriber.
(n) Blackout. The Company undertakes and covenants that until the first
---------
to occur of (i) the registration statement described in Section 11.1(iv) having
been effective for one hundred and eighty (180) business days, or (ii) until all
the Shares and Warrant Shares have been resold pursuant to said registration
statement, the Company will not enter into any acquisition, merger, exchange or
sale or other transaction that could have the effect of delaying the
effectiveness of any pending registration statement, causing an already
effective registration statement to no longer be effective or current, or
require the filing of an amendment to an already effective registration
statement.
(o) S-8. The Company will not file a Form S-8 with the Commission during
----
the Exclusion Period (as defined in Section 12(a) of the Agreement) without the
consent of the Subscriber.
10. Covenants of the Company and Subscriber Regarding Indemnification.
------------------------------------------------------------------------
(a) The Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers' officers, directors, agents, affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
Company or breach of any warranty by Company in this Agreement or in any
Exhibits or Schedules attached hereto, or other agreement delivered pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any breach or
default in performance by the Company of any covenant or undertaking to be
performed by the Company hereunder, or any other agreement entered into by the
Company and Subscriber relating hereto.
(b) Each Subscriber agrees to indemnify, hold harmless, reimburse and defend
the Company and each of the Company's officers, directors, agents, affiliates,
control persons against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company or any such person which results, arises out of or is based
upon (i) any material misrepresentation by such Subscriber in this Agreement or
in any Exhibits or Schedules attached hereto, or other agreement delivered
pursuant hereto; or (ii) after any applicable notice and/or cure periods, any
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 Subscribes relating hereto.
(c) In no event shall the liability of any Subscriber or permitted successor
hereunder or under any other agreement delivered in connection herewith be
greater in amount than the dollar amount of the net proceeds received by such
Subscriber upon the sale of Registrable Securities (as defined herein) giving
rise to such indemnification obligation.
(d) The procedures set forth in Section 11.6 shall apply to the
indemnifications set forth in Sections 10(a) and 10(b) above.
11.1. Registration Rights. The Company hereby grants the following
--------------------
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing one hundred and twenty-one
(120) days after the Initial Closing Date, but not later than three (3) years
after the Second Closing Date ("Request Date"), the Company, upon a written
request therefor from any record holder or holders of more than 50% of the
Shares issued and issuable upon conversion of the issued Initial Closing Notes,
Second Closing Notes, and Warrant Shares actually issued upon exercise of the
Warrants shall prepare and file with the Commission a registration statement
under the 1933 Act covering the Shares and Warrant Shares (collectively
"Registrable Securities") which are the subject of such request. For purposes
of Sections 11.1(i) and 11.1(ii), Registrable Securities shall not include
Securities which are registered for resale in an effective registration
statement or included for registration in a pending registration statement, or
which have been issued without further transfer restrictions after a sale or
transfer pursuant to Rule 144 under the 1933 Act. In addition, upon the receipt
of such request, the Company shall promptly give written notice to all other
record holders of the Registrable Securities that such registration statement is
to be filed and shall include in such registration statement Registrable
Securities for which it has received written requests within ten (10) days after
the Company gives such written notice. Such other requesting record holders
shall be deemed to have exercised their demand registration right under this
Section 11.1(i).
(ii) If the Company at any time proposes to register any of its securities
under the 1933 Act for sale to the public, whether for its own account or for
the account of other security holders or both, except with respect to
registration statements on Forms X-0, X-0 or another form not available for
registering the Registrable Securities for sale to the public, provided the
Registrable Securities are not otherwise registered for resale by the
Subscribers or Holder pursuant to an effective registration statement, each such
time it will give at least fifteen (15) days' prior written notice to the record
holder of the Registrable Securities of its intention so to do. Upon the written
request of the holder, received by the Company within ten (10) days after the
giving of any such notice by the Company, to register any of the Registrable
Securities not previously registered, the Company will cause such Registrable
Securities as to which registration shall have been so requested to be included
with the securities to be covered by the registration statement proposed to be
filed by the Company, all to the extent required to permit the sale or other
disposition of the Registrable Securities so registered by the holder of such
Registrable Securities (the "Seller"). In the event that any registration
pursuant to this Section 11.1(ii) shall be, in whole or in part, an underwritten
public offering of common stock of the Company, the number of shares of
Registrable Securities to be included in such an underwriting may be reduced by
the managing underwriter if and to the extent that the Company and the
underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the foregoing provisions, or Section 11.4
hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 11.1(ii) without thereby incurring any
liability to the Seller.
(iii) If, at the time any written request for registration is received by
the Company pursuant to Section 11.1(i), the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
1933 Act in connection with the proposed offer and sale for cash of any of its
securities for the Company's own account and the Company actually does file such
other registration statement, such written request shall be deemed to have been
given pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights
of the holders of Registrable Securities covered by such written request shall
be governed by Section 11.1(ii).
(iv) The Company shall file with the Commission not later than thirty (30)
days after the Initial Closing Date (the "Filing Date"), and cause to be
declared effective within one hundred and twenty (120) days after the Initial
Closing Date (the "Effective Date"), a Form SB-2 registration statement (the
"Registration Statement") (or such other form that it is eligible to use) in
order to register the Registrable Securities for resale and distribution under
the 1933 Act. The Company will register not less than a number of shares of
common stock in the aforedescribed registration statement that is equal to one
hundred and seventy-one percent (171%) of the Shares issuable upon conversion of
the Notes (using the Conversion Price on the Initial Closing Date or the trading
day immediately preceding the filing date of the Registration Statement, or any
amendment thereto, whichever results in the greatest number of registrable
Shares, such amount of Shares being included in the definition of Registrable
Securities) and one hundred percent (100%) of the Warrant Shares issuable upon
exercise of the Warrants. The Registrable Securities shall be reserved and set
aside exclusively for the benefit of each Subscriber, and not issued, employed
or reserved for anyone other than each Subscriber. Such 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. No securities of the Company
other than the Registrable Securities will be included in the registration
statement described in this Section 11.1(iv) except as disclosed on Schedule
11.1, without the written consent of Subscriber. A registration that is filed
but withdrawn prior to being declared effective shall be deemed not to have been
filed for purposes of this Section 11.1.
11.2. Registration Procedures. If and whenever the Company is required by
------------------------
the provisions of Section 11.1(i), 11.1(ii), or (iv) to affect the registration
of any shares of Registrable Securities under the 1933 Act, the Company will, as
expeditiously as possible:
(a) subject to the timelines provided in this Agreement, prepare and file
with the Commission a registration statement required by Section 11, with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as herein provided), and promptly provide to
the holders of Registrable Securities (the "Sellers") copies of all filings and
Commission letters of comment;
(b) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective until 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 Seller's intended method of disposition set forth in such
registration statement for such period;
(c) furnish to the 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 persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement;
(d) use its best efforts to register or qualify the Seller's Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the Seller, provided, however, that the
Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;
(e) if applicable, list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify the Seller when 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; and
(g) provided same would not be in violation of the provision of Regulation
FD under the 1934 Act, make available for inspection by the Seller, and any
attorney, accountant or other agent retained by the Seller or underwriter, all
publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, attorney,
accountant or agent in connection with such registration statement.
11.3. Provision of Documents. In connection with each registration
------------------------
described in this Section 11, the Seller will furnish to the Company in writing
such information and representation letters with respect to itself and the
proposed distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.
11.4. Non-Registration Events. The Company and the Subscribers agree that
------------------------
the Seller will suffer damages if any registration statement required under
Section 11.1(iv) above is not filed by the Filing Date and not declared
effective by the Commission by the Effective Date, and any registration
statement required under Section 11.1(i) or 11.1(ii) is not filed within sixty
(60) days after written request and declared effective by the Commission within
one hundred and twenty (120) days after such request, and 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 (i) the registration statement on Form SB-2 or such other form
described in Section 11.1(iv) is not filed on or before the Filing Date or is
not declared effective on or before the sooner of the Effective Date, or within
ten (10) business days of receipt by the Company of a written or oral
communication from the Commission that the registration statement described in
Section 11.1(iv) will not be reviewed, (ii) if the registration statement
described in Sections 11.1(i) or 11.1(ii) is not filed within sixty (60) days
after such written request, or is not declared effective within one hundred and
twenty (120) days after such written request, or (iii) any registration
statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and
declared effective but shall thereafter cease to be effective (without being
succeeded immediately by an additional registration statement filed and declared
effective) for a period of time which shall exceed thirty (30) days in the
aggregate per year or more than twenty (20) consecutive days (defined as a
period of three hundred and sixty-five (365) days commencing on the date the
Registration Statement is declared effective) (each such event referred to in
clauses (i), (ii) and (iii) of this Section 11.4 is referred to herein as a
"Non-Registration Event"), then the Company shall deliver to the holder of
Registrable Securities, as Liquidated Damages, an amount equal to two percent
(2%) for each thirty (30) days or part thereof, of the Purchase Price of the
Notes remaining unconverted and purchase price of Shares issued upon conversion
of the Notes and actually paid "Purchase Price" (as defined in the Warrants) of
Warrant Shares issued or issuable upon actual exercise of the Warrants, for the
Registrable Securities owned of record by such holder as of and during the
pendency of such Non-Registration Event which are subject to such
Non-Registration Event. Payments to be made pursuant to this Section 11.4
shall be due and payable within ten (10) business days after the end of each
thirty (30) day period or part thereof, in the form of additional Notes
identical to and carrying the same rights, including but not limited to
registration rights and indemnification, as the Notes. It shall be deemed a
Non-Registration Event if at any time after the Effective Date the Company has
registered for unrestricted resale on behalf of each Subscriber fewer than one
hundred and twenty-five percent (125%) of the amount of Common Stock issuable
upon full conversion of all sums due under such Subscriber's Note.
11.5. Expenses. All expenses incurred by the Company in complying with
--------
Section 11, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, costs of insurance and fee of one
counsel for all Sellers are called "Registration Expenses". All underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities, including any fees and disbursements of any additional counsel to
the Seller, are called "Selling Expenses". The Company will pay all
Registration Expenses in connection with the registration statement under
Section 11. Selling Expenses in connection with each registration statement
under Section 11 shall be borne by the Seller and may be apportioned among the
Sellers in proportion to the number of shares sold by the Seller relative to the
number of shares sold under such registration statement or as all Sellers
thereunder may agree.
11.6. Indemnification and Contribution.
----------------------------------
(a) In the event of a registration of any Registrable Securities under the
1933 Act pursuant to Section 11, the Company will, to the extent permitted by
law, indemnify and hold harmless the Seller, each officer of the Seller, each
director of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities 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 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the Registrable Securities
under the 1933 Act pursuant to Section 11, each Seller severally but not jointly
will, to the extent permitted by law, indemnify and hold harmless the Company,
and each person, if any, who controls the Company within the meaning of the 1933
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the 1933 Act, against all losses, claims,
damages or liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Registrable Securities were registered under the 1933
Act pursuant to Section 11, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the Seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such Seller, as such, furnished
in writing to the Company by such Seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
liability of the Seller hereunder shall be limited to the gross proceeds
received by the Seller from the sale of Registrable Securities covered by such
registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 11.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 11.6(c), except and only if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 11.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties, as a group, shall have the right to select one
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the event of
joint liability under the 1933 Act in any case in which either (i) a Seller, or
any controlling person of a Seller, makes a claim for indemnification pursuant
to this Section 11.6 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 11.6 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not provided under this Section 11.6; then, and in each such case, the Company
and the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (z) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the 0000
Xxx) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
11.7. Delivery of Unlegended Shares.
--------------------------------
(a) Within three (3) business days (such third business day, the "Unlegended
Shares Delivery Date") after the business day on which the Company has received
(i) a notice that Registrable Securities have been sold either 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, have been satisfied, and (iii) the original share certificates
representing the shares of Common Stock that have been sold, 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, for the delivery of shares
of Common Stock without any legends including the legends set forth in Sections
4(e) and 4(g) above, issuable 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 unsold shares of Common Stock, if
any, to the Subscriber at the address specified in the notice of sale, via
express courier, by electronic transfer or otherwise on or before the Unlegended
Shares Delivery Date.
(b) In lieu of delivering physical certificates representing the Unlegended
Shares, if the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, upon request of a
Subscriber, so long as the certificates therefore 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.
(c) The Company understands that a delay in the delivery of the Unlegended
Shares pursuant to Section 11 hereof beyond 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 11.7 for an aggregate of thirty (30) days,
then each Subscriber or assignee holding Securities subject to such default may,
at its option, require the Company to purchase all or any portion of the Shares
and Warrant Shares subject to such default at a price per share equal to 130% of
the Purchase Price of such Shares and Warrant Shares. The Company shall pay any
payments incurred under this Section in immediately available funds upon demand.
(d) In addition to any other rights available to a Subscriber, if the
Company fails to deliver to a Subscriber Unlegended Shares within ten (10)
calendar 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 anticipated receiving 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.
12. (a) Right of First Refusal. Until one hundred and eighty (180) days
----------------------
after the Actual Effective Date of the Registration Statement (the "Exclusion
Period"), the Subscribers shall be given not less than fourteen (14) business
days prior written notice of any proposed sale by the Company of its common
stock or other securities or debt obligations, except in connection with (i)
employee stock options or compensation plans, (ii) as full or partial
consideration in connection with any merger, consolidation or purchase of
substantially all of the securities or assets of any corporation or other
entity, or (iii) as has been described in the Reports or Other Written
Information filed or delivered prior to the Initial Closing Date (collectively
"Excepted Issuances"). The Subscribers shall have the right during the
fourteen (14) business days following the notice to purchase such offered common
stock, debt or other securities in accordance with the terms and conditions set
forth in the notice of sale in the same proportion to each other as their
purchase of Notes in the Offering. In the event such terms and conditions are
modified during the notice period, the Subscribers shall be given prompt notice
of such modification and shall have the right during the original notice period
or for a period of fourteen (14) business days following the notice of
modification, whichever is longer, to exercise such right.
(b) Offering Restrictions. Except as disclosed in the Reports or Other
----------------------
Written Information filed with the Commission or made available to the
Subscriber prior to the Initial Closing Date, or in connection with Excepted
Issuances, the Company will not issue any equity, convertible debt or other
securities convertible into common stock on any terms more favorable to such
other investor than any of the terms of the Offering, until after the Exclusion
Period without the prior written consent of Subscribers, holding the majority of
the unconverted principal of the Notes and Purchase Price of issued Shares,
which consent may be withheld for any reason.
(c) Favored Nations Provision. If, at any time a Note or Warrant is
---------------------------
outstanding or Registrable Securities are not then registered in an effective
Registration Statement for unrestricted resale as required by Section 11 hereof
("Outstanding Period"), except for the Excepted Issuances, the Company shall
offer, issue or agree to issue any Common Stock or securities convertible into
or exercisable for shares of Common Stock to any person, firm or corporation at
a price per share or conversion or exercise price per share which shall be less
than the per share purchase price of the Shares, or upon any other term more
favorable to such other investor, without the consent of a Subscriber still
holding Securities, then the Subscriber is granted the right to modify any term
or condition of the Offering including but not limited to the Conversion Price
or other price at which Common Stock may be purchased upon conversion of the
Notes and exercise of the Warrants. The rights of the Subscriber set forth in
this Section 12(c) are in addition to any other rights the Subscriber has
pursuant to this Agreement and any other agreement referred to or entered into
in connection herewith.
(d) Maximum Exercise of Rights. In the event the exercise of the rights
-----------------------------
described in Sections 12(a) or 12(c) 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 as described in Section 7.3 of this Agreement, then the
purchase and/or issuance of such other Common Stock or Common Stock equivalents
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 or
Common Stock equivalents without exceeding the maximum amount set forth in
Section 7.3. The determination of when such Common Stock or Common Stock
equivalents may be issued shall be made by each Subscriber as to only such
Subscriber.
13. Security Interest. The Subscribers will be granted a security interest
------------------
in all the assets of the Company to be memorialized in a Security Agreement.
The Company will execute such other agreements, documents and financing
statements to be filed at the Company's expense with such jurisdictions, states
and counties designated by the Subscribers. The Company will also execute all
such documents reasonably necessary in the opinion of Subscriber to memorialize
and further protect the security interest described herein. A form of Security
Agreement is annexed hereto as EXHIBIT D. The Subscribers will appoint a
Collateral Agent to represent them collectively in connection with the security
interest to be granted in the Company's assets. The appointment will be
pursuant to a Collateral Agent Agreement, a form of which is annexed hereto as
EXHIBIT E.
14. Miscellaneous.
-------------
(a) Notices. All notices, demands, requests, consents, approvals, and other
-------
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to
be given hereunder shall be deemed effective (a) upon hand delivery or delivery
by facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Company, to: Imaging Technologies
Corporation, 00000 Xxx Xxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, telecopier (858)
613-1311, with a copy by telecopier only to: Xxxxxxxxx & Associates, 00000
Xxxxxxxxx, Xxxxx 000, Xxxxxx, XX 00000, Attn: Xxxx Xxxxxxxxx, Esq., telecopier:
(000) 000-0000, (ii) if to the Subscribers, to: the address and telecopier
number indicated on the signature page hereto, with a copy by telecopier only
to: Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000, telecopier number: (000) 000-0000, and (iii) if to the Finders, to: the
addresses and telecopier numbers set forth on Schedule 8(b).
(b) Closing. The consummation of the transactions contemplated herein shall
-------
take place at the offices of Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of all conditions to
Closing set forth in this Agreement.
(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
either party shall be assigned by that party without prior notice to and the
written consent of the other party.
(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
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state 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 to such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The Company and
-------------------------------------------------
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 14(e) hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
(g) Independent Nature of Subscribers' Obligations and Rights. The
----------------------------------------------------------------
obligations of each Subscriber hereunder are several and not joint with the
obligations of any other Subscriber hereunder, and no such Subscriber shall be
responsible in any way for the performance of the obligations of any other
hereunder.
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
--------------------------------------------
Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
IMAGING TECHNOLOGIES CORPORATION
A Delaware Corporation
By:_________________________________
Name:
Title:
Dated: December _____, 2003
SUBSCRIBER
ALPHA CAPITAL AKTIENGESELLSCHAFT
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
INITIAL CLOSING NOTE (INITIAL CLOSING PURCHASE PRICE)
$225,000.00
WARRANTS ISSUABLE ON INITIAL CLOSING DATE
4,500,000
SECOND CLOSING NOTE (SECOND CLOSING PURCHASE PRICE):
$337,500.00
WARRANTS ISSUABLE ON SECOND CLOSING DATE
6,750,000
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
--------------------------------------------
Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
IMAGING TECHNOLOGIES CORPORATION
A Delaware Corporation
By:_________________________________
Name:
Title:
Dated: December _____, 2003
SUBSCRIBER
GAMMA OPPORTUNITY CAPITAL PARTNERS, LP
British Colonial Centre of Commerce
One Bay Street, Suite 401
Nassau (NP), The Bahamas
Vaduz, Lichtenstein
INITIAL CLOSING NOTE (INITIAL CLOSING PURCHASE PRICE)
$225,000.00
WARRANTS ISSUABLE ON INITIAL CLOSING DATE
4,500,000
SECOND CLOSING NOTE (SECOND CLOSING PURCHASE PRICE):
$337,500.00
WARRANTS ISSUABLE ON SECOND CLOSING DATE
6,750,000
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)
--------------------------------------------
Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
IMAGING TECHNOLOGIES CORPORATION
A Delaware Corporation
By:_________________________________
Name:
Title:
Dated: December _____, 2003
SUBSCRIBER
LONGVIEW FUND, L.P.
0000 Xxxxxx Xxxxxx #000
Xxxxxxxxxx, XX 00000
INITIAL CLOSING NOTE (INITIAL CLOSING PURCHASE PRICE)
$150,000.00
WARRANTS ISSUABLE ON INITIAL CLOSING DATE
3,000,000
SECOND CLOSING NOTE (SECOND CLOSING PURCHASE PRICE):
$300,000.00
WARRANTS ISSUABLE ON SECOND CLOSING DATE
6,000,000
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)
--------------------------------------------
Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
IMAGING TECHNOLOGIES CORPORATION
A Delaware Corporation
By:_________________________________
Name:
Title:
Dated: December _____, 2003
SUBSCRIBER
LONGVIEW FUND, L.P.
0000 Xxxxxx Xxxxxx #000
Xxxxxxxxxx, XX 00000
INITIAL CLOSING NOTE (INITIAL CLOSING PURCHASE PRICE)
$150,000.00
WARRANTS ISSUABLE ON INITIAL CLOSING DATE
3,000,000
SECOND CLOSING NOTE (SECOND CLOSING PURCHASE PRICE):
$225,000.00
WARRANTS ISSUABLE ON SECOND CLOSING DATE
4,500,000
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibit A Form of Warrant
Exhibit B Escrow Agreement
Exhibit C Form of Legal Opinion
Exhibit D Form of Security Agreement
Exhibit E Form of Collateral Agent Agreement
Schedule 5(d) Additional Issuances
Schedule 5(q) Undisclosed Liabilities
Schedule 5(s) Capitalization
Schedule 8(b) Finders
Schedule 9(e) Use of Proceeds
Schedule 11.1 Other Securities to be Registered
SCHEDULE 8(B) - FINDERS
-----------------------
FINDER. . . . . . . . . . . . . . 10% FINDER'S FEE PAYABLE IN CONNECTION WITH INVESTMENT BY
LIBRA FINANCE, S.A. . . . . . . . ALPHA CAPITAL AKTIENGESELLSCHAFT
P.O. Box 4603 . . . . . . . . . . Xxxxxxxxx 0
Xxxxxx, Xxxxxxxxxxx . . . . . . . 9490 Furstentums
Fax: 000-000-0000 . . . . . . . . Vaduz, Lichtenstein
Fax: 000-00-00000000
LIBRA FINANCE, S.A. . . . . . . . GAMMA OPPORTUNITY CAPITAL PARTNERS, LP
P.O. Box 4603 . . . . . . . . . . British Colonial Centre of Commerce
Zurich, Switzerland . . . . . . . Xxx Xxx Xxxxxx, Xxxxx 000
Fax: 000-000-0000 . . . . . . . . Nassau (NP), The Bahamas
Fax: (000) 000-0000
BI-COASTAL CONSULTING CORP.
25 Longview Court . . . . . . . . LONGVIEW FUND, L.P.
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Fax: (000) 000-0000 . . . . . . . Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
XXXXXXXXXXX CORPORATION . . . . . XXXXXXXXXXX LIMITED PARTNERSHIP
C/o Canaccord Capital Corporation X/x Xxxxxxxxx Xxxxxxx Xxxxxxxxxxx
000 Xxx Xxxxxx, Xxxxx 0000. . . . 000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0, Xxxxxx. Xxxxxxx, Xxxxxxx X0X 0X0, Xxxxxx
Fax: (000) 000-0000 . . . . . . . Fax: (000) 000-0000
