EXHIBIT 4.3 FORM OF SUBSCRIPTION AGREEMENT
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
FOR CONVERTIBLE PREFERRED SHARES
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER OR ANY STATE SECURITIES LAWS, AND
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S
OF THE 1933 ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS
DEFINED IN REGULATION S OF THE 1933 ACT) EXCEPT PURSUANT TO REGISTRATION UNDER
OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT OR ANY STATE
SECURITIES LAWS.
THIS OFFERING IS BEING MADE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE 1933 ACT FOR AN OFFER AND SALE OF SECURITIES THAT DO NOT INVOLVE A
PUBLIC OFFERING. THE SECURITIES OFFERED HEREBY MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF, EXCEPT AS PERMITTED UNDER THE 1933 ACT AND APPLICABLE
STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THERE IS
CURRENTLY NO PUBLIC OR OTHER MARKET FOR THE SECURITIES OFFERED HEREBY AND THERE
CAN BE NO ASSURANCE THAT A PUBLIC OR OTHER MARKET WILL DEVELOP. EACH
PROSPECTIVE INVESTOR SHOULD PROCEED ONLY ON THE ASSUMPTION THAT SUCH PROSPECTIVE
INVESTOR MAY HAVE TO BEAR THE ECONOMIC RISK OF ANY INVESTMENT IN THE SECURITIES
OFFERED HEREBY FOR AN INDEFINITE PERIOD OF TIME.
NO GENERAL SOLICITATION WILL BE CONDUCTED AND NO OFFERING LITERATURE OR
ADVERTISING IN ANY FORM WILL OR MAY BE EMPLOYED IN THE OFFERING OF THE UNITS.
EXCEPT FOR THE DOCUMENTS SUMMARIZED HEREIN OR ENCLOSED HEREWITH. NO PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED
IN THE DOCUMENTS SUMMARIZED HEREIN OR ENCLOSED HEREWITH AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON.
THE PURCHASE OF THESE SECURITIES ENTAILS A HIGH DEGREE OF RISK. NO
INVESTMENT IN THE SHARES SHOULD BE MADE BY ANY PERSON WHO IS NOT IN A POSITION
TO LOSE THE ENTIRE AMOUNT OF SUCH INVESTMENT. THIS IS NOT AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES DESCRIBED HEREIN IN ANY
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SALE.
This Offshore Securities Subscription Agreement ("Agreement") is executed in
reliance upon the transaction exemption afforded by Regulation S ("Regulation
S") as promulgated by
the Securities and Exchange Commission ("SEC") under the Securities Act of 1933,
as amended ("1933 ACT").
This Agreement has been executed by the undersigned in connection with the
offshore offering of an amount not exceeding $1,100,000 of the Series A
Convertible Preferred Stock (the "Shares") of
MIDISOFT CORPORATION
0000 XX Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
National Association of Securities Dealers Automated Quotation System Symbol
(MIDI), a corporation organized under the laws of Washington, United States of
America (the "ISSUER" or "Company").
The Undersigned Purchaser:
NAME:
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ADDRESS:
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--------------------------------
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, a non "U.S. person" as that term Is defined In Regulation S of the 1933 Act
(the "PURCHASER") hereby represents and warrants to, and agrees with, ISSUER as
follows:
1. THE OFFERING.
a. The undersigned hereby subscribes for ____________ Series A Convertible
Preferred Shares (the "Shares") of the Issuer, at the aggregate subscription
price of U.S.$1,000 per share, payable in United States Dollars, for a total
consideration of $___________ Dollars (the "Subscription Proceeds"). The Shares
shall pay an 8% cumulative dividend payable in common stock at the time of each
conversion. The Shares are subject to a mandatory, 24 month conversion feature
at the end of which all Shares outstanding will be automatically converted based
upon the conversion formula set forth in this Section 1.a.
The PURCHASER is entitled, at its option to convert one-third of the Shares
into shares of Common Stock, $0.001 par value per share, of the Issuer (the
"Common Stock"), 60 days after the Closing Date (as defined in Paragraph 8),
one-third of the Shares 90 days after the Closing Date and one-third of the
Shares 120 days after the Closing Date. The conversion price for each share of
Common Stock shall equal the lesser of (a) eighty-five percent (85%) of the
closing bid price on the day of conversion, or (b) 100% of the closing bid price
for the Common Stock on the "Closing Date" as defined in paragraph 8 (the
"Conversion Rate"). PURCHASER shall exercise the conversion option pursuant to
the Notice of Conversion attached hereto as Exhibit "A".
At the time of conversion the company will issue one warrant (the "Warrant")
with each share of Common stock that is issued. The Warrant holders will have
the right FOR TWO YEARS
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to purchase one share of common stock at 200% OF THE CLOSING BID PRICE ON THE
DAY OF CLOSING of this transaction.
b. Form of Payment. PURCHASER shall pay the total Subscription Proceeds
hereunder by delivering good funds by wire transfer in United States Dollars on
or before October 4, 1996 into the escrow account as follows:
Bank
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ABA NO.
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FOR THE ACCOUNT OF:
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ACCOUNT NO.
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IN FAVOR OF ____________________________________ ATTORNEY TRUST ACCOUNT
ACCOUNT NO.
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2. SUBSCRIBER REPRESENTATIONS; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
a. OFFSHORE TRANSACTION. PURCHASER represents and warrants to ISSUER as
follows:
i) Neither the PURCHASER nor any person or entity for whom the
PURCHASER is acting as fiduciary is a U.S. person. A U.S. person means any
one of the following:
(1) any natural person resident in the United States of America;
(2) any partnership or corporation organized or incorporated
under the laws of the United States;
(3) any estate of which any executor or administrator is a U.S.
person;
(4) any trust of which any trustee is a U.S. person;
(5) any agency or branch of a foreign entity located in the
United States;
(6) any non-discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary for the benefit
or account of a U.S. person;
(7) any discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States; and
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(8) any partnership or corporation if:
(A) organized or incorporated under the laws of any foreign
jurisdiction; and
(B) formed by a U.S. person, principally for the purpose of
investing in securities not registered under the Securities Act,
unless it is organized or incorporated, and owned, by accredited
investors (as defined in Rule 501(a) under the Securities Act)
who are not natural persons, estates or trusts.
ii) At the time the buy order was originated, PURCHASER was outside
the United States and is outside the United States as of the date of the
execution and delivery of this Agreement. No offer to purchase the Shares
was made to a person In the United States.
iii) PURCHASER is purchasing the Shares for its own account or for the
account of beneficiaries for whom the PURCHASER has full investment
discretion with respect to the Shares and whom the PURCHASER has full
authority to bind so that each such beneficiary Is bound hereby as if such
beneficiary were a direct purchaser hereunder and all representations,
warranties and agreements herein were made directly by such beneficiary.
Purchaser is not purchasing the Shares on behalf of any U.S. person and the
sale has not been prearranged with a purchaser In the United States.
iv) Each distributor participating in the offering of the Shares, if
any, has agreed In writing, a copy of which has been delivered to ISSUER
with this Agreement, that all offers and sales of the Shares prior to the
expiration of a period commencing on the date of the Closing of the last
purchase and sale of the Shares offered by the ISSUER and ending 40 days
thereafter or such other time period as required by Regulation S as it is
then in effect (the "Restricted Period") shall only be made (a) In
compliance with the safe harbor contained in Regulation S; (b) pursuant to
registration of Shares under the Securities Act; or (c) pursuant to an
exemption from registration.
v) PURCHASER represents and warrants and hereby agrees that all
offers and sales of the Shares, the Common Stock or the Warrants shall only
be made (a) in compliance with the safe harbor contained in Regulation S;
(b) pursuant to registration of Shares under the 1933 Act; or (c) pursuant
to an exemption from registration.
vi) PURCHASER understands and acknowledges that the Shares, the
Common Stock or the Warrants have not been registered under the 1933 Act and
any State securities laws and may not be offered or sold In the United
States or to U.S. persons or for the account or benefit of a U.S. person
(other than distributors as defined in Regulation S) unless the Shares, the
Common Stock or the Warrants are registered under the 1933 Act, the Common
Stock or the Warrants or an exemption from the registration requirements is
available.
vii) PURCHASER acknowledges that the purchase of the Shares involves a
high degree of risk and further acknowledges that it can bear the economic
risk of the
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purchase of the Shares, including the total loss of its investment.
PURCHASER acknowledges that it has obtained the advice of competent legal
counsel in its domicile jurisdiction that Purchaser is qualified under the
laws of its domicile to purchase the securities offered hereunder and that
the offer and sale of said securities will not violate the laws of its
domicile jurisdiction.
viii) PURCHASER understands that the Shares are being offered and sold
to it and that the Common Stock and Warrants will be issued to it in
reliance on the rules promulgated under Regulation S and that the ISSUER Is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of PURCHASER set forth herein
in order to determine the applicability of such rules and the suitability of
PURCHASER to acquire the Shares, the Common Stock and the Warrants.
ix) PURCHASER is sufficiently experienced in financial and business
matters to be capable of evaluating the merits and risks of its investments,
and to make an informed decision relating thereto.
x) In evaluating its investment, PURCHASER has consulted with its
own investment and/or legal and/or tax advisors who are unaffiliated with
and not compensated by the Issuer and who have such knowledge and experience
in financial, tax and business matters so as to enable the PURCHASER to
utilize the information made available to the PURCHASER in connection with
this agreement to evaluate the risks and merits of an investment in the
shares and to make an informed decision with respect thereof.
xi) PURCHASER understands that in the view of the SEC the statutory
basis for the exemption claimed for this transaction would not be present if
the offering of Shares, although in technical compliance with Regulation S,
is part of a plan or scheme to evade the registration provision of the
Securities Act. PURCHASER is acquiring the Shares and will be acquiring for
investment purposes and has no present intention to sell the Shares, the
Warrants or the Common Stock in the United States, to a U.S. person or for
the account or benefit of a U.S. person. PURCHASER hereby confirms that the
purpose of including the PURCHASER Representation Letter (see Exhibit B
attached hereto) to facilitate the transfer of the certificates representing
the Shares into street name, is to enable PURCHASER to comply with the
requirements of certain offshore portfolio management regulations and the
security requirements of offshore lenders for margin loans.
xii) PURCHASER is neither an underwriter of, nor a dealer in, the
Shares. PURCHASER is not participating, pursuant to a contractual
agreement, in the distribution of the Shares.
xiii) PURCHASER represents and warrants that neither it nor any of its
affiliates will directly or indirectly maintain any short position in
Shares, Common Stock or any other securities of the ISSUER during the
Restricted Period.
xiv) If PURCHASER is a natural person, PURCHASER has reached the age
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of twenty-one.
If PURCHASER is purchasing the Shares subscribed for hereby in
representative or fiduciary capacity, the representations and warranties
in this Offshore Securities Subscription Agreement shall be deemed to
have been made on behalf of the person or persons for whom PURCHASER is
so purchasing.
The foregoing representations and warranties are true and accurate as of
the date hereof, shall be true and accurate as of the date of the
acceptance by the ISSUER of PURCHASER's subscription, and shall survive
thereafter. If PURCHASER has knowledge, prior to the acceptance of its
Offshore Securities Subscription Agreement by the ISSUER, that any such
representations and warranties shall not be true and accurate in any
respect, the PURCHASER, prior to such acceptance, will give written
notice of such fact to the ISSUER specifying which representations and
warranties are not true and accurate and the reasons therefor.
b. CURRENT PUBLIC INFORMATION. PURCHASER acknowledges that PURCHASER has
acquired and carefully reviewed the ISSUER'S annual report on Form 10-K for its
fiscal year ended December 31, 1995, and its quarterly report on Form 10-Q filed
for the quarter ended June 30, 1996, proxy statements and Form 8-Ks (together,
the "SEC Reports"). Except as set forth in this Agreement and the SEC Reports,
no representations or warranties have been made to PURCHASER by the ISSUER or
any agent, employee or affiliate of the ISSUER, and in entering into this
transaction PURCHASER is not relying upon any information, other than that
provided pursuant to this Agreement and the SEC Reports and the results of
independent investigation by PURCHASER.
c. INDEPENDENT INVESTIGATION; ACCESS. PURCHASER acknowledges that
PURCHASER, in making the decision to purchase the Shares subscribed for, has
relied upon independent investigations made by it and its PURCHASER
representative, if any, and PURCHASER and such representative, if any, have,
prior to any sale to PURCHASER, had an opportunity to ask questions of, and to
receive answers from ISSUER or any person acting on its behalf concerning the
terms and conditions of this offering. PURCHASER and its advisor's, if any,
have been furnished with access to all publicly available materials relating to
the business, finances and operations of the ISSUER and materials relating to
the offer and sale of the Shares which have been requested. PURCHASER and its
advisors, if any, have received complete and satisfactory answers to any such
inquiries.
d. NO GOVERNMENT RECOMMENDATIONS OR APPROVAL. PURCHASER understands that
no federal or state agency has made or will make any finding or determination
relating to the fairness for public investment in the Shares, or has passed or
made, or will pass on or make, any recommendation or endorsement of the Shares.
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e. ENTITY PURCHASES. If PURCHASER is a partnership, corporation or trust,
the person executing this Agreement on its behalf represents and warrants that:
i) He or she has made due inquiry to determine the truthfulness of
the representations and warranties made pursuant to this Agreement with
respect to each partner, shareholder, trustee, or beneficiary as the case
may be;
ii) He or she is duly authorized (if the undersigned is a trust, by
the trust agreement) to make this investment and to enter into and execute
this Agreement on behalf of such entity, partner, shareholder, trustee or
beneficiary as the case may be.
3. ISSUER REPRESENTATIONS.
ISSUER represents and warrants to the PURCHASER as follows:
a. ORGANIZATION AND AUTHORIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington and has all requisite corporate power and authority to own and
operate its properties and assets and to carry on its business as currently
conducted. The Company is not in default or violation of any material term or
provision of its Articles of Incorporation, as amended, or By-laws nor will the
consummation of the transactions contemplated by this Agreement cause any such
default or violation. The Company has all requisite corporate power and
authority to enter into this Agreement, to sell the Securities hereunder and to
carry out and perform its obligations under the terms of this Agreement. This
Agreement is a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
effecting the rights of creditors generally and available equitable remedies.
b. SEC FILINGS. None of the Company's filings with the Securities and
Exchange Commission since January 1, 1996, when such filings were made,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading.
c. FULL DISCLOSURE. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not been
disclosed to the Subscriber that (i) could reasonably be expected to have a
material adverse effect on the condition (financial or otherwise) or on the
earnings, business affairs, business prospects, properties or assets of the
Company, or (ii) could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement.
d. OPINION(S) OF COUNSEL. Subscriber shall, upon purchase of the Stock,
receive an opinion letter or opinion letters from counsel to the Company, and
the Company represents that it will immediately obtain such opinions from
counsel to the satisfaction of the transfer agent, to the effect that, except as
otherwise and qualified in the opinion:
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i) The Company has been incorporated and is existing in the
jurisdiction of its incorporation.
ii) Except as otherwise disclosed in such opinion, to such counsel's
knowledge, there is no action, proceeding or investigation pending
against the Company which might result, either individually or in the
aggregate, in any material adverse change in the business or operations
of the Company.
iii) Except as otherwise disclosed in such opinion, to such counsel's
knowledge, the Company is not a party to or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
iv) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable.
v) The Agreement, the issuance of the Stock and the issuance of
Common Stock, upon conversion of the Stock, have been duly approved by
all required corporate action and that all such securities, upon
delivery in accordance with this Agreement, shall be validly issued and
outstanding, fully paid and nonassessable.
The Company shall have furnished to such counsel such documents and shall
have exhibited to them such papers and records as they may reasonably request
for the purpose of enabling them to pass upon such matters. In connection with
such opinions, such counsel may rely on representations or certificates of
officers of the Company and governmental officials.
e. REPORTING COMPANY STATUS. ISSUER is a reporting issuer as defined by
Rule 902 of Regulation S. ISSUER has filed the information required by the
reporting obligations under Sections 13 or 15(d) of the Securities Exchange Act
of 1934, as amended.
f. OFFSHORE TRANSACTION. ISSUER has not offered Shares to any person in
the United States or to any U.S. person or for the account or benefit of any
U.S. person. At the time the buy order was originated, ISSUER and/or its agent
reasonably believed that PURCHASER was outside of the United States and was not
a U.S. Person. ISSUER and/or its agent reasonably believe that the transaction
has not been prearranged with a Purchaser in the United States.
g. NO DIRECTED SELLING EFFORTS. In regard to this transaction, ISSUER, has
not conducted any "directed selling efforts" as that term is defined in Rule 902
of Regulation S nor has ISSUER conducted any general solicitation relating to
the offer and sale of Shares to U.S. persons residing within the United States
or elsewhere.
h. SHARES. The Shares and shares of Common Stock Issuable upon conversion
of the Shares, when issued and delivered will be duly and validly authorized and
issued, fully paid and non-assessable and will not subject the holders thereof
to any liability by reason of being such holders. If at the time of conversion
all representations and warranties are true and
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correct, including those contained in the Purchaser Representation Letter, then
in such event the stock certificates representing Common Stock issued upon
conversion of the Shares shall be unlegended and there shall be no stop transfer
instructions issued in relation to such common stock.
i. SUBSCRIPTION AGREEMENT. This Agreement, when acknowledged by the
signature of an officer of the ISSUER, has been duly authorized, validly
executed and delivered on behalf of the ISSUER and is a valid and binding
agreement of the ISSUER in accordance with its terms.
j. NON-CONTRAVENTION. The execution and delivery of this Agreement, the
consummation of the issuance of the Shares and the transactions contemplated
hereunder do not and will not conflict with or result in a breach by the ISSUER
of any of the terms or provisions of, or constitute a default under, the
certificate of incorporation or by-laws of the ISSUER (or any equivalent
documents thereto) or any indenture, mortgage, deed of trust, or other material
agreement or instrument to which the ISSUER is a party or by which it or any of
its properties or assets are bound, or any existing applicable law, rule, or
regulation or any applicable decrees, judgment, or order of any court, federal
or state regulatory body, administrative agency or other governmental body
having jurisdictions over the ISSUER or any of its properties or assets.
k. PRIOR SHARES ISSUED UNDER REGULATION S. ISSUER has not issued any
shares of stock under Regulation S subsequent to its most recent SEC Report.
l. SECURITIES LAW COMPLIANCE. Based upon the representations and
warranties of the PURCHASER in Section 2 and of all other PURCHASERS executing
similar agreements in connection with this offering, with respect to the
Company's actions, (i) the offer and the sale of Shares has been made so as to
conform in all respects with the requirements of Regulation S and with the
requirements of all other published rules and regulations of the SEC currently
in effect relating to "private offerings" to non-residents of the United States
of the type contemplated herein; and (ii) Neither the offer, sale or delivery of
the Shares under the terms of this Agreement will violate Section 5 of the
Securities Act, as presently in effect.
m. FILINGS. ISSUER undertakes and agrees pursuant to the sale of its
securities under Regulation S to make all necessary filings in connection with
the sale of its securities as required by the laws and regulations of the United
States.
n. USE OF PROCEEDS. ISSUER represents that the proceeds of this offering
shall be used for advertising and promotion of its products.
o. COMPANY LISTING. ISSUER shall use its best efforts to maintain its
listing on the Nasdaq Stock Market.
p. CONCERNING THE SECURITIES. The issuance, sale and delivery of the
Shares have been duly authorized by all required corporate action on the part of
ISSUER, and when issued, sold and delivered in accordance with the terms hereof
and thereof for the consideration expressed herein and therein, will be duly and
validly issued, fully paid and non-assessable. A sufficient
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number of shares of Common Stork issuable upon conversion of the Shares have
been duly and validly reserved for issuance and upon issuance in accordance with
the terms of the Shares, shall be duly and validly issued, fully paid, and
nonassessable and will not subject the holders thereof, if such persons are non-
U.S. persons, to personal liability by reason of being such holders. There are
no pre-emptive rights of any shareholder of ISSUER.
q. INTELLECTUAL PROPERTY. The Company has valid and unrestricted and know-
how, technology and other intellectual property necessary to the conduct of its
business. The Company also has trade secrets necessary to the conduct of its
business which are necessarily secret and cannot be disclosed to Purchasers.
The Company has granted licenses or has assigned or otherwise transferred a
portion of (or all of) such valid, unrestricted and exclusive patents,
trademarks, trademark registrations, trade names, copyrights, know-how,
technology and other intellectual property necessary to the conduct of its
business. The Company has granted licenses or has been assigned or has
otherwise had transferred to it from other persons or entities the use of
patents, trademarks, trademarks registrations, trade names, copyrights,
know-how, technology and/or other intellectual property necessary to the conduct
of its business.
To the best of the Company's knowledge, the Company is not infringing on the
intellectual property rights of any third party, nor is any third party
infringing on the Company's intellectual property rights. There are no
restrictions in any agreements, licenses, franchises, or other instruments that
are necessary for the conduct of the Company's business as presently conducted
or as planned to be conducted in the future.
4. RESTRICTED PERIOD; CONVERSION.
Rule 903 (c) under Regulation S restricts PURCHASER from offering and
selling the Shares or the shares of Common Stock into which the Shares may be
converted to U.S. persons or for the account or benefit of a U.S. person during
the Restricted Period.
5. RELIANCE ON REPRESENTATIONS.
PURCHASER understands that the offer and sale of the Shares is not being
registered under the Securities Act. ISSUER is relying on the rules governing
offers and sales made outside the United States pursuant to Regulation S. Rules
901 through 903 of Regulation S govern this transaction.
6. TRANSFER AGENT INSTRUCTIONS.
a. LEGENDS ON CERTIFICATE. PURCHASER may transfer the Shares to persons
other than U.S. persons in accordance with Regulation S prior to the expiration
of the Restricted Period. Accordingly, PURCHASER acknowledges that the Company
will instruct its transfer agent to place a stop transfer order with respect to
certificates representing the Shares and that such certificates will bear the
following legend:
"The shares represented by this certificate have been acquired for
investment purposes only, issued pursuant to Regulation S promulgated
under the Securities
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Act of 1933, as amended ("Act"), and have not been registered under the
Act. These shares may not be offered or sold within the United States
or to or for the account of a "U.S. Person" (as that term is defined in
Regulation S) until after __________________, 1996, [the 40th day
following completion of the offering]. The terms of conversion are
subject to a Subscription Agreement that was entered into with Midisoft
Corporation."
b. PURCHASER REPRESENTATION LETTER. ISSUER agrees to accept a PURCHASER's
Representation Letter from the PURCHASER in the form of Exhibit "B" attached, as
evidence that the PURCHASER has complied with applicable securities laws and
upon receipt of such a letter shall promptly transfer, or instruct the transfer
agent, for the Convertible Preferred Shares, if any, to transfer the Shares into
"Street Name", if so requested by PURCHASER, as expeditiously as practical after
receipt of the certificates and the PURCHASER Representation Letter.
c. TRANSFER AGENT INSTRUCTIONS. ISSUER shall issue, or instruct the
transfer agent for the Convertible Preferred Shares, if any, to issue one or
more share certificates representing Shares, in the names of qualified
purchasers to be specified prior to Closing. All of the Shares so issued will
be issued pursuant to Regulation S. ISSUER warrants further that the Shares
shall be freely transferable on the books and records of ISSUER subject to
compliance with Regulation S and other applicable securities laws and the terms
of this Agreement.
7. CONVERSION PROCEDURES.
(a) The PURCHASER is entitled, at its option to convert one-third of the
Shares into shares of Common Stock, $0.001 par value per share, of the Issuer
(the "Common Stock") 60 days after the Closing Date (as defined in paragraph 8),
one-third of the Shares 90 days after the Closing Date and one-third of the
Shares 120 days after the Closing Date. The conversion price for each share of
Common Stock shall be equal to the lesser of (a) eighty-five percent (85%) of
the closing bid price on the day of conversion, or (b) 100% of the closing bid
price for the Common Stock on the Closing Date as defined in paragraph 8. Such
conversion shall be effectuated by sending to the Company, the Share or Shares
to be converted, a facsimile or original of the signed Notice of Conversion and
a facsimile or original of the signed Purchaser Representation Letter, see
Exhibits A and B attached hereto, which evidences Purchaser's intention to
convert the Shares or a specified portion thereof, and accompanied by proper
assignment, if applicable. The Conversion Price shall be set on the day the
Notice of Conversion and the signed Purchaser Representation Letter is sent by
Purchaser. No fractional shares or scrip representing fractions of shares will
be issued on conversion, but the number of shares issuable shall be rounded down
or up, as the case may be, to the nearest whole share. The date on which notice
of conversion Is effective ("Conversion Date") shall be deemed to be the date on
which the Purchaser has delivered to the Company the original Shares, a
facsimile or original of the signed Notice of Conversion and a facsimile or
original of the signed Purchaser Representation Letter. If after 10 business
days the Company has failed to honor a Conversion Notice for any reason, then in
such event, Purchaser shall have the right to demand and receive from the
Company the full amount of Subscription Proceeds paid by PURCHASER plus interest
based on the 8% cumulative dividend.
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(b) If at the time of conversion all representations and warranties are true
and correct including those contained in the Purchaser Representation Letter,
then in such event, within seven (7) business days after receipt of the
documentation referred to above in this Section 7(a), the Company shall deliver
a certificate, without restrictive legend or stop transfer instructions, for the
number of Common Stock issuable upon the conversion, it shall be the Company's
responsibility to take all necessary actions and to bear all such costs to issue
the Common Stock as provided herein, including the delivery of an opinion letter
to the transfer agent, if so required. The person in whose name the certificate
of Common Stock is to be registered shall be treated as a shareholder of record
on and after the conversion date. No payment or adjustment shall be made for
accrued and unpaid interest until the earlier of the Conversion Date or the
mandatory conversion date. Upon surrender of any Shares that are to be
converted in part, the Company shall issue to the Purchaser new Shares equal to
the number of unconverted Shares, if so requested by Purchaser. In the event
the Company does not make delivery of the Common Stock, as instructed by
Purchaser, within 4 business days after the Conversion Date, then in such event
the Company shall pay to Purchaser an amount, in cash in accordance with the
following schedule, wherein "No. Business Days Late" is defined as the number
of business days beyond the 4 business days delivery period.
Late Payment for Each
$10,000 of Preferred Principal
No. Business Days Late Amount Being Converted
---------------------- ------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Days Late Beyond
10 Days
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 7(b) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 7(b) shall not
apply but instead the provisions of Section 7(c) shall apply.
12
The Company shall pay any payments incurred under this Section 7(b) in
immediately available funds within three (3) business days from the date of
issuance of the applicable Common Stock. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's failure to issue
and deliver Common Stock to the Holder within 4 business days after the
Conversion Date.
The Company recognizes the right of Purchaser to assign any portion of
the Shares to another non-U.S. Person during the 40 day restricted period and to
assign any portion of the Shares to another non-U.S. Person or U.S. person or
entity after the 40 day restricted period.
(c) If, at any time Purchaser submits a Notice of Conversion and the Company
does not have sufficient authorized but unissued shares of Common Stock
available to effect, in full, a conversion of the Shares (a "Conversion
Default", the date of such default being referred to herein as the "Conversion
Default Date"), the Company shall issue to the Purchaser all of the shares of
Common Stock which are available, and the Notice of Conversion as to any Shares
requested to be converted but not converted (the "Unconverted Shares") shall
become null and void. The Company shall provide notice of such Conversion
Default ("Notice of Conversion Default") to all existing Purchasers of
outstanding Shares, by facsimile, within one (1) business day of such default
(with the original delivered by overnight or two day courier). No Holder may
submit a Notice of Conversion after receipt of a Notice of Conversion Default
until the date additional shares of Common Stock are authorized by the Company.
The Company agrees to pay to all Purchasers of outstanding Shares payments
for a Conversion Default ("Conversion Default Payments") in the amount of
(N/365) x (.24) x the initial issuance price of the outstanding Shares held by
each Purchaser where N = the number of days from the Conversion Default Date to
the date (the "Authorization Date") that the Company authorizes a sufficient
number of shares of Common Stock to effect conversion of all remaining Shares.
The Company shall send notice ("Authorization Notice") to each Purchaser of
outstanding Shares that additional shares of Common Stock have been authorized,
the Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default shall be paid in cash or shall be
convertible into Common Stock at the Conversion Rate, at the Purchaser's option,
payable as follows: (i) in the event Purchaser elects to take such payment in
cash, cash payments shall be made to such Purchaser of outstanding Shares by the
fifth day of the following calendar month, or (ii) in the event Purchaser elects
to take such payment in stock, the Purchaser may convert such payment amount
into Common Stock at the Conversion Rate at anytime after the 5th day of the
calendar month following the month in which the Authorization Notice was
received, until the expiration of the mandatory 24 month conversion period.
Nothing herein shall limit the Purchaser's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock.
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8. CLOSING DATE AND ESCROW AGENT.
The date of the issuance of the Shares in the name of the PURCHASER (the
"Closing Date") shall be October 7, 1996. Closing shall be effected through
delivery of funds and certificates to the Escrow Agent as per a separate Escrow
Agreement. PURCHASER shall forthwith deliver the necessary funds as indicated
in Paragraph 1 to the Escrow Agent. Share Certificates will be delivered at the
instructions of the ISSUER to the Escrow Agent: ______________________________.
PURCHASER herein instructs the Escrow Agent, and gives the Escrow Agent its good
and sufficient authority to release funds to the ISSUER and placement agent in
connection with the purchase of the Shares, upon receipt by the Escrow Agent of
said Shares subscribed for, subject to the terms and conditions of any Escrow
Agreement in effect between the Issuer and the Escrow Agent. PURCHASER and
ISSUER agree that the Escrow Agent, In his capacity as Escrow Agent, has no
liability as a result of any fraudulent or unlawful conduct of any party other
than the Escrow Agent and agree to hold the Escrow Agent harmless in such event.
In the event the Share Certificates are not received by the Escrow Agent from
the ISSUER within Five (5) Business Days of the date of receipt of the Escrowed
Funds, the Escrow Agent shall return the Escrowed funds without interest to the
PURCHASER by wire transfer pursuant to written instructions.
9. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
ISSUER reserves the right to reject this Agreement for any reason
whatsoever, prior to signing by ISSUER. PURCHASER understands that ISSUER'S
obligation to sell the Shares subscribed for hereunder is conditioned upon:
a. The receipt and acceptance by ISSUER of this Agreement for all the
Shares as evidenced by execution of this subscription agreement by the Chief
Executive Officer or Chief Financial Officer of the ISSUER. The acceptance of
funds by the ISSUER shall be deemed to be constructive acceptance of this
Agreement. PURCHASER understands this Agreement is irrevocable; and
b. Delivery into the Escrow Agent by PURCHASER of good U.S. funds as
payment in full for the purchase of the Shares and all fees.
10. CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE.
ISSUER understands that PURCHASER's obligation to purchase the Shares
subscribed for hereunder is conditioned upon the following:
a. execution and delivery of this Agreement;
b. delivery of Shares; and
c. delivery of a filed Certificate of Designation
14
11. GOVERNING LAW.
This agreement shall be governed by and construed under the laws of the
State of New York without regard to its choice of law principles.
12. RIGHT OF FIRST REFUSAL.
The PURCHASER Is hereby given a pro-rata right of first refusal on any
Regulation S offering involving the Issuer during the next 12 months. Purchaser
shall have 5 business days from the date the Company sends a facsimile copy of
the Subscription Agreement to the PURCHASER in which to accept by signing the
Subscription Agreement and faxing it to the Company.
13. ENTIRE AGREEMENT/FACSIMILE.
This Agreement constitutes the entire agreement among the parties hereof
with respect to the subject matter hereof and supersedes any and all prior or
contemporaneous representations, warranties, agreements and understandings in
connection therewith. This Offshore Securities Subscription Agreement may be
amended only in writing executed by all parties hereto. In lieu of the
original, a facsimile transmission or copy of the original shall be as effective
and enforceable as the original. This Agreement may be executed in
counterparts, which shall be considered an original document and which together
shall be considered a complete document.
14. INDEMNIFICATION.
Each of the Company and the Subscriber agrees to indemnify the other and to
hold the other harmless from and against any and all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) which the
other may sustain or incur in connection with a material breach by the
indemnifying party of any representation, warranty or covenant made by it in
this Agreement.
15. FINANCING; RESTRICTIONS.
The Company cannot, without the prior approval in writing from Subscriber,
obtain convertible debt or equity financing for a period of sixty (60) days
following the Closing Date.
16. RESTRICTIONS ON CONVERSION OF SHARES.
The Subscriber or any subsequent holder of the Shares (the "Holder") shall
be prohibited from converting any portion of the Debentures which would result
in the Subscriber or the Holder being deemed the beneficial owner, in accordance
with the provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended, of 4.99% or more of the then issued and outstanding Common Stock of the
Company.
15
17. INDEPENDENT COUNSEL.
The undersigned acknowledge that they have been advised to consult with
their own attorneys and financial advisors regarding this Agreement.
18. ARBITRATION.
The parties shall resolve any dispute arising hereunder before a panel of
three arbitrators selected pursuant to and run in accordance with the rules of
the American Arbitration Association. The arbitration shall be held in New
York, New York. The successful party shall be entitled to an award of
reasonable attorneys fees and costs to be awarded in the sole discretion of the
arbitrators. Disputes under this Agreement as well as all of the terms and
conditions of this Agreement shall be governed in accordance with and by the
laws of the State of New York.
19. FULL NAME AND ADDRESS OF PURCHASER FOR REGISTRATION PURPOSES:
If not filled in completely by Purchaser the Company will not accept.)
NAME:
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ADDRESS:
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TELE. NO.:
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FAX NO.:
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CONTACT NAME:
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20. DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME):
NAME:
--------------------------------------------------------------------------
ADDRESS:
-----------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
TELE. NO.:
---------------------------------------------------------------------
FAX NO.:
-----------------------------------------------------------------------
CONTACT NAME:
------------------------------------------------------------------
SPECIAL
INSTRUCTIONS:
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21. ISSUER'S ACCEPTANCE BASED UPON PURCHASER REPRESENTATIONS.
ISSUER is accepting this subscription based upon and in reliance upon the
representations and warranties of PURCHASER contained herein, including without
limitation, those contained in section 2 and this Agreement would not be
accepted by ISSUER in the absence of such representations and warranties.
16
IN WITNESS WHEREOF, this Offshore Securities Subscription Agreement was duly
executed as of the _______ day of __________, 1996.
Company
Name:
--------------------------------------------------------------------------
Purchaser
By:
----------------------------------------
Official Signatory of Purchaser
Name:
(Printed):
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Title:
-------------------------------------------------------------------------
County of
Execution:
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Accepted this _____ day of the month of ____________________, 1996.
MIDISOFT CORPORATION
By:
-------------------------------
its:
------------------------------
18
EXHIBIT "A"
NOTICE OF CONVERSION
_______________, 199___
MIDISOFT CORPORATION
0000 XX Xxxxxxxxx Xxxx
Xxxxx 000
xxxxxxxx, XX 00000
The undersigned, _________________________ (the "Holder"), does hereby give
notice that it wishes to convert __________ shares of Series A Convertible
Preferred Stock (the "Shares") of MIDISOFT CORPORATION (the "Issuer") held by it
into shares of Common Stock of the Issuer, which have been reserved for issuance
upon such conversion. The Holder represents and warrants that (i) all of the
requirements of Regulation S promulgated under the Securities Act of 1933, as
amended (the "Act") applicable to the Holder have been complied with by the
Holder and (ii) the Holder has not engaged in any transaction or series of
transactions that, although in technical compliance with all of the requirements
of Regulation S, is part of a plan or scheme to evade the registration
requirements of the Act. The number of shares of the Corporation's common
stock, par value $.001 per share ("Common Stock") issuable upon conversion of
the Shares held by an Investor under the terms of this Agreement shall equal the
Subscription Proceeds plus the amount of the accrued dividends through the
Conversion Date, divided by the lesser of (a) eight-five percent (85%) of the
closing bid price on the day of conversion, or (b) 100% the closing bid price
for the Common on the "Closing Date" as defined in paragraph 8 of the
Subscription Agreement. The undersigned has not taken any short position, in
violation of Regulations nor has the undersigned made any promissory notes
and/or pledges to that effect on the Company's Common Stock.
[Holder]
By:
------------------------------------
19
EXHIBIT "B"
PURCHASER REPRESENTATION LETTER
Dear Sirs:
The undersigned ______________________ has purchased on ______, 1996,
__________ Convertible Preferred Shares of MIDISOFT CORPORATION (the Company")
at a per share subscription price of $1,000 per share, (the Convertible
Preferred Shares referred to herein as the "Shares") together with warrants as
set forth in the Subscription Agreement. In connection with such purchase, the
undersigned, has executed and delivered a subscription agreement ("Subscription
Agreement") of your design. As the applicable transaction restriction period
has expired, the undersigned hereby requests that the Shares be transferred into
[ ] the Purchaser's name or [ ] "Street Name" of _______________ (check
whichever is applicable).
The undersigned represents and warrants as follows:
(1) The offer to purchase the Shares was made to it outside of the United
States and the undersigned was, at the time the Subscription Agreement was
executed and delivered, and is now, outside the United States;
(2) It is not a U.S. Person (as such term is defined In Section 902(a) of
Regulation S promulgated under the United States Securities Act of 1933 (the
"Securities Act"); and it has purchased the Shares Shams for its own account and
not for the account or benefit of any U.S. person;
(3) All offers and sales by the undersigned of the Shares shall be made
pursuant to an effective registration statement under the Securities Act or
pursuant to an exemption from, or in a transaction not subject to the
registration requirements of, the Securities Act;
(4) It Is familiar with and understands the terms, conditions and
requirements contained in Regulation S and definitions of U.S. persons contained
in Regulation S;
(5) The undersigned has not engaged in any "directed selling efforts" (as
such term is defined in Regulation S) with respect to the Shares; and
Dated this _____ day of the month of _______________, 1996.
By:
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Official Signature of Purchaser
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Title
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