SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of September 30,
2004, by and among Emergency Filtration Products, Inc., a Nevada corporation
(the "Company"), and the subscribers identified on the signature page hereto
(each a "Subscriber" and collectively "Subscribers").
WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the provisions of Section 4(2), Section 4(6) and/or Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers shall purchase, in the
aggregate, $750,000.00 (the "Purchase Price") of the Company's common stock,
$.001 par value (the "Common Stock" or "Shares"), and share purchase warrants in
the form attached hereto as Exhibits A1 and A2 (the "Warrants"), to purchase
shares of Common Stock (the "Warrant Shares"). The per Share Purchase Price
shall be $0.25, subject to adjustment as described in this Agreement. The
Purchase Price shall be payable to the Company on the Closing Date. The Common
Stock, the Warrants and the Warrant Shares are collectively referred to herein
as the "Securities"; and
WHEREAS, the aggregate proceeds of the sale of the Common Stock and the
Warrants contemplated hereby may be held in escrow pursuant to the terms of a
Funds Escrow Agreement which may 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. Purchase and Sale of Shares and Warrants. Subject to the satisfaction
(or waiver) of the conditions to Closing set forth in this Agreement and the
Escrow Agreement, each Subscriber shall purchase the Shares and Warrants for the
portion of the Purchase Price indicated on the signature page hereto, and the
Company shall sell such Shares and Warrants to the Subscriber. The Purchase
Price for the Shares and Warrants shall be paid in cash. The entire Purchase
Price shall be allocated to the Shares.
2. Escrow Arrangements; Form of Payment. Upon execution hereof by the
parties and pursuant to the terms of the Escrow Agreement, each Subscriber
agrees to make the deliveries required of such Subscriber as set forth in the
Escrow Agreement and the Company agrees to make the deliveries required of the
Company as set forth in the Escrow Agreement.
3. Warrants. On the Closing Date the Company will issue Warrants to the
Subscribers. Three (3) Class A Warrants and two (2) Class B Warrants will be
issued for each three (3) Shares issued on the Closing Date. The per Warrant
Share exercise price to acquire a Warrant Share upon exercise of a Class A
Warrant shall be $0.30. The per Warrant Share exercise price to acquire a
Warrant Share upon exercise of a Class B Warrant shall be $0.001. Collectively,
the Class A Warrants and Class B Warrants are referred to herein as Warrants.
The Class A Warrants shall be exercisable until two (2) years after the Closing
Date. The Class B Warrants shall be exercisable until five (5) years after the
Closing Date; provided, however, the Class B Warrants may be terminated pursuant
to the provisions of Section 1.9 of the Class B Warrants.
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4. Subscriber's Representations and Warranties. Each Subscriber hereby
represents and warrants to and agrees with the Company only as to such
Subscriber that:
(a) Information on Company. The Subscriber has been furnished with or
has had access at the ▇▇▇▇▇ Website of the Commission to the Company's Form
10-KSB for the year ended December 31, 2003 as filed with the Commission,
together with all subsequently filed Forms 10-QSB, 8-K, and filings made with
the Commission available at the ▇▇▇▇▇ 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. The Subscriber has had full
opportunity to conduct, and has conducted, a complete and thorough due diligence
investigation of the Company, and such opportunity has been made available to
the Subscriber's professional representative(s) to ask questions of and receive
answers from representatives of the Company concerning the Company and its
financial condition and prospects, as well as request additional information
necessary to verify the accuracy of the Reports and Other Written Information
provided to Subscriber.
(b) Information on Subscriber. The Subscriber is organized and validly
existing under the laws of its formation. The Subscriber is, and will be at the
time of the issuance of the Common Stock and exercise of any of the Warrants, an
"accredited investor", as such term is defined in Regulation D promulgated by
the Commission under the 1933 Act, is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, 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 Common Stock and Warrants. On the Closing Date, the
Subscriber will purchase the Common Stock and 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 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. (e) Shares Legend. The Shares and the
Warrant Shares shall bear the following or similar legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
APPLICABLE STATE SECURITIES LAWS. 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 EMERGENCY FILTRATION
PRODUCTS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
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(f) Warrants Legend. The Warrants shall bear the following
or similar legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS. 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 EMERGENCY FILTRATION PRODUCTS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(g) Stop Transfer Order. The Securities, when issued prior to the
effectiveness of the "Registration Statement" (as defined in Section 10 of this
Agreement), will be restricted securities. Subscriber agrees that, in order to
ensure compliance with the restrictions referenced at Section 4(e) & (f) herein,
the Company may issue "stop transfer" instructions to its transfer agent
consistent with the legends.
(h) Communication of Offer. The offer to sell the Securities was
directly communicated to the Subscriber by the Company. At no time was the
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
(i) Authority; Enforceability. This Agreement and other agreements
delivered together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by the Subscriber and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and Subscriber has full corporate power and
authority necessary to enter into this Agreement and such other agreements and
to perform its obligations hereunder and under all other agreements entered into
by the Subscriber relating hereto.
(j) Restricted Securities. Subscriber understands that the Securities
have not been registered under the 1933 Act and such Subscriber will not sell,
offer to sell, assign, pledge, hypothecate or otherwise transfer any of the
Securities unless (i) pursuant to an effective registration statement under the
1933 Act or (ii) such Subscriber provides the Company with an opinion of
counsel, in a form reasonably acceptable to the Company, to the effect that a
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sale, assignment or transfer of the Securities may be made without registration
under the 1933 Act and the Subscriber provides the Company with reasonable
assurances, if applicable (in the form of seller and broker representation
letters), that the Shares or the Warrant Shares, as the case may be, can be sold
pursuant to (A) Rule 144 promulgated under the 1933 Act, or (B) Rule 144(k)
promulgated under the 1933 Act, in each case following the applicable holding
period set forth therein. Notwithstanding anything to the contrary contained in
this Agreement, such Subscriber may transfer (without restriction and without
the need for an opinion of counsel) the Securities to its Affiliates (as defined
below) provided that each such Affiliate is an "accredited investor" under
Regulation D and such Affiliate agrees to be bound by the terms and conditions
of this Agreement.
For the purposes of this Agreement, an "Affiliate" of any specified
Subscriber means any other person or entity directly or indirectly controlling,
controlled by or under direct or indirect common control with such specified
Subscriber. For purposes of this definition, "control" means the power to direct
the management and policies of such person or firm, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
(k) No Governmental Review. Each Subscriber understands that no United
States federal or state agency or any other governmental or state agency has
passed on or made recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
(l) Correctness of Representations. Each Subscriber represents as to
such Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and, unless a Subscriber otherwise notifies the
Company prior to the Closing Date (as hereinafter defined), shall be true and
correct as of the Closing Date.
(m) Survival. The foregoing representations and warranties shall
survive the Closing Date for a period of two years.
5. Company Representations and Warranties. The Company represents and
warrants to and agrees with each Subscriber that:
(a) Due Incorporation. The Company and each of its subsidiaries is a
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. For purposes of this
Agreement, a "material adverse effect" shall mean a material adverse effect on
the financial condition, results of operations, properties or business of the
Company taken as a whole.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of the Company and each of its subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable.
(c) Authority; Enforceability. This Agreement, the Common Stock, the
Warrants, the Escrow Agreement and any other agreements delivered together with
this Agreement or in connection herewith (collectively "Transaction Documents")
have been duly authorized, executed and delivered by the Company and are valid
and binding agreements enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity. The Company has full corporate
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power and authority necessary to enter into and deliver the Transaction
Documents and to perform its obligations thereunder.
(d) Additional Issuances. There are no outstanding agreements or
preemptive or similar rights affecting the Company's common stock or equity and
no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of any shares of common stock or equity of the
Company or other equity interest in any of the subsidiaries of the Company
except as described on Schedule 5(d) hereto.
(e) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company, or any of its affiliates, the American Stock Exchange, the National
Association of Securities Dealers, Inc., Nasdaq, SmallCap Market, the OTC
Bulletin Board ("Bulletin Board") nor the Company's shareholders is required for
the execution by the Company of the Transaction Documents and compliance and
performance by the Company of its obligations under the Transaction Documents,
including, without limitation, the issuance and sale of the Securities.
(f) No Violation or Conflict. Assuming the representations and
warranties of the Subscribers in Section 4 are true and correct, neither the
issuance and sale of the Securities nor the performance of the Company's
obligations under the Transaction Documents 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
or certificate of incorporation, charter or bylaws of the Company, (B) to the
Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation
or determination applicable to the Company of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or 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; or
(iii) except as disclosed on Schedule 5(d), result in the activation
of any anti-dilution rights or a reset or repricing of any debt or security
instrument of any other creditor or equity holder of the Company, nor result in
the acceleration of the due date of any obligation of the Company; or
(iv) except as disclosed on Schedule 10.1, result in the activation of
any piggy-back registration rights of any person or entity holding securities of
the Company or having the right to receive securities of the Company.
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(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer under the
1933 Act and any applicable state securities laws;
(ii) have been, or will be, duly and validly authorized and on the
date of issuance of the Shares and upon exercise of the Warrants, the Shares and
Warrant Shares will be duly and validly issued, fully paid and nonassessable
(and if registered pursuant to the 1933 Act, and resold pursuant to an effective
registration statement will be free trading and unrestricted, 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.
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under the Transaction Documents.
Except as disclosed in the Reports, there is no pending or, to the best
knowledge of the Company, basis for or threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its affiliates which litigation
if adversely determined would have a material adverse effect on the Company.
(i) Reporting Company. The Company is a publicly-held company subject
to reporting obligations pursuant to Section 13 of the Securities Exchange Act
of 1934, 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, 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
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) Defaults. The Company is not in violation of its articles of
incorporation or bylaws. The Company is (i) not in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its properties are bound or affected, which default or violation
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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 not in violation of any statute, rule or regulation of any
governmental authority which violation would have a material adverse effect on
the Company.
(m) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board which if so integrated would eliminate the exemption as
described in Section 6 of this Agreement for the Offering (as defined in Section
7(c) of this Agreement). The Company will not conduct any offering other than
the transactions contemplated hereby that will be integrated with the offer or
issuance of the Securities which if so integrated would impair the exemption for
the Offering.
(n) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale
of the Securities.
(o) Listing. The Company's common stock is quoted on the Bulletin
Board. The Company has not received any oral or written notice that its common
stock is not eligible nor will become ineligible for quotation on the Bulletin
Board nor that its common stock does not meet all requirements for the
continuation of such quotation and the Company satisfies and as of the Closing
Date, the Company will satisfy all the requirements for the continued quotation
of its common stock on the Bulletin Board.
(p) No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material, individually or in the aggregate, which are not
disclosed in the Reports and Other Written Information, other than those
incurred in the ordinary course of the Company's businesses since December 31,
2003 and which, individually or in the aggregate, would reasonably be expected
to have a material adverse effect on the Company's financial condition.
(q) No Undisclosed Events or Circumstances. Since December 31, 2003,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(s) Capitalization. The authorized and outstanding capital stock of
the Company as of the date of this Agreement and the Closing Date is set forth
on Schedule 5(s) hereto. 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
except as set forth on Schedule 5(s). 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.
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(t) Dilution. The Company's executive officers and directors
understand the nature of the Securities being sold hereby and recognize that the
issuance of the Securities may have a dilutive effect on the equity holdings of
other holders of the Company's equity or rights to receive equity of the
Company. The board of directors of the Company has concluded, in its good faith
business judgment, that the issuance of the Securities is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Warrant Shares upon exercise of the Warrants is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company or parties entitled to
receive equity of the Company. (u) No Disagreements with Accountants and
Lawyers. There are no disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the Company, including
but not limited to disputes or conflicts over payment owed to such accountants
and lawyers.
(v) Investment Company. The Company is not an Affiliate 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 foregoing representations and
warranties are true and correct as of the date hereof in all material respects,
and, unless the Company otherwise notifies the Subscribers prior to the Closing
Date, shall be true and correct in all material respects as of the Closing Date.
(x) Survival. The foregoing representations and warranties shall
survive the Closing Date for a period of two years.
6. Regulation D Offering. The offer and issuance of the Securities to the
Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder. On the Closing Date,
the Company will provide an opinion reasonably acceptable to Subscriber from the
Company's legal counsel opining on the availability of an exemption from
registration under the 1933 Act as it relates to the offer and issuance of the
Securities and other matters reasonably requested by Subscribers. A form of the
legal opinion is annexed hereto as Exhibit C. The Company will provide, at the
Company's expense, such other legal opinions in the future as are reasonably
necessary for the resale of the Common Stock and exercise of the Warrants and
resale of the Warrant Shares.
7. Broker/Legal Fees.
(a) Legal Fees. The Company shall pay to Grushko & ▇▇▇▇▇▇▇, P.C., a
fee of $16,250 ("Legal Fees") asreimbursement for services rendered to the
Subscribers in connection with this Agreement and the purchase and sale of the
Shares and Warrants (the "Offering") and acting as Escrow Agent for the
Offering. The Legal Fees will be payable on the Closing Date out of funds held
pursuant to the Escrow Agreement.
(b) Broker. The Company on the one hand, and each Subscriber (for
himself only) on the other hand, agree to indemnify the other against and hold
the other harmless from any and all liabilities to any persons claiming
brokerage commissions or Broker's Commission other than First Montauk Securities
Corp. ("Broker") on account of services purported to have been rendered on
behalf of the indemnifying party in connection with this Agreement or the
transactions contemplated hereby and arising out of such party's actions.
Anything in this Agreement to the contrary notwithstanding, each Subscriber is
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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 Broker a cash fee equal to
eight percent (8%) and a cash non-accountable expense allowance equal to two
percent (2%) of the Purchase Price on the Closing Date (as defined herein)
directly out of the funds held pursuant to the Escrow Agreement (collectively,
the aforementioned fees are referred to as "Broker's Fee") as payment to Broker
in connection with the sale of the Securities hereunder. The Company represents
that there are no other parties entitled to receive fees, commissions, or
similar payments in connection with the offering described in this Agreement
except the Broker.
(c) Broker's Warrants. On the Closing Date, the Company will issue to
the Broker, or at the Broker's written instructions to officers or employees of
the Broker, Warrants similar to and carrying the same rights as the Class A
Warrants issuable to the Subscribers ("Broker's Warrants"). The Broker will
receive, in the aggregate, one Broker's Warrant for each ten (10) Shares and
Class A Warrants issued on the Closing Date to the Subscribers. All the
representations, covenants, warranties, undertakings, remedies, liquidated
damages, indemnification, and other rights including but not limited to
reservation and registration rights made or granted to or for the benefit of the
Subscribers are hereby also made by the Company and granted to the holders of
the Broker's Warrants.
8. 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 of Common Stock and the Warrant Shares upon each national securities
exchange, or automated quotation system upon which they are or become eligible
for listing (subject to official notice of issuance) and shall maintain such
listing so long as any Shares or Warrants are outstanding. The Company will
maintain the listing of its Common Stock on the American Stock Exchange, Nasdaq
SmallCap Market, Nasdaq National Market System, Bulletin Board, or New York
Stock Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock (the "Principal Market")) or other
market with the reasonable consent of Subscribers holding a majority of the
Shares and Warrant Shares, 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 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
the sooner of (i) two (2) years after the Closing Date, or (ii) until all the
Shares and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
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to volume limitation, the Company will (v) cause its Common Stock to continue to
be registered under Section 12(b) or 12(g) of the 1934 Act, (x) comply in all
respects with its reporting and filing obligations under the 1934 Act, (y)
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 (z) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will not take any action
or file any document (whether or not permitted by the 1933 Act or the 1934 Act
or the rules thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under said acts until
two (2) years after the Closing Date. Until the earlier of the resale of the
Common Stock 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 or
other market or exchange identified in Section 5(e) above, and will comply in
all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Principal Market. The Company agrees to timely file a
Form D with respect to the Securities if required under Regulation D and to
provide a copy thereof to each Subscriber promptly after such filing.
(e) Use of Proceeds. The Company undertakes to use the proceeds of the
Subscribers' funds for the purposes set forth on Schedule 8(e) hereto. Except as
set forth on Schedule 8(e), the Purchase Price may not and will not be used for
accrued and unpaid officer and director salaries, payment of financing related
debt, redemption of outstanding notes or equity instruments of the Company nor
non-trade obligations outstanding on the Closing Date.
(f) Reservation. Prior to the Closing Date, the Company undertakes to
reserve, pro rata, on behalf of each Subscriber and holder of a Warrant, from
its authorized but unissued common stock, a number of common shares equal to the
amount of Warrant Shares issuable upon exercise of the Warrants.
(g) Taxes. From the date of this Agreement and until the sooner of (i)
two (2) years after the Closing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.
(h) Insurance. From the date of this Agreement and until the sooner of
(i) two (2) years after the Closing Date, or (ii) until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than one
hundred percent (100%) of the insurable value of the property insured; 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.
10
(i) Books and Records. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company will keep true records and books of account
in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
(j) Governmental Authorities. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company shall duly observe and conform
in all material respects to all valid requirements of governmental authorities
relating to the conduct of its business or to its properties or assets.
(k) Intellectual Property. From the date of this Agreement and until
the sooner of (i) two (2) years after the Closing Date, or (ii) until all the
Shares and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company shall maintain in full force and effect its
corporate existence, rights and franchises and all licenses and other rights to
use intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business.
(l) Properties. From the date of this Agreement and until the sooner
of (i) two (2) years after the Closing Date, or (ii) until all the Shares and
Warrant Shares have been resold or transferred by all the Subscribers pursuant
to the Registration Statement (as defined in Section 10.1(iv) hereof) or
pursuant to Rule 144, without regard to volume limitations, the Company will
keep its properties in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all necessary and proper repairs,
renewals, replacements, additions and improvements thereto; and the Company will
at all times comply with each provision of all leases to which it is a party or
under which it occupies property if the breach of such provision could
reasonably be expected to have a Material Adverse Effect.
(m) Confidentiality/Public Announcement. From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until all the Shares and Warrant Shares have been resold or transferred by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company agrees that except in
connection with a Form 8-K or the Registration Statement, 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. In any event
and subject to the foregoing, the Company undertakes to file a Form 8-K or make
a public announcement describing the Offering not later than the first business
day after receipt of funds by the Company. In the Form 8-K or public
announcement, the Company will specifically disclose the amount of common stock
outstanding immediately after each Closing. A form of the proposed Form 8-K or
public announcement to be employed in connection with the Closing is annexed
hereto as Exhibit D.
(n) Further Registration Statements. Except for a registration
statement filed on behalf of the Subscribers pursuant to Section 10 of this
Agreement or in connection with the securities identified on Schedule 10.1
hereto, the Company will not file any registration statements, including but not
limited to Form S-8, with the Commission or with state regulatory authorities,
without the consent of the Subscribers holding 85% of the outstanding Shares and
Warrant Shares, until ninety (90) days after the actual effective date of the
Registration Statement described in Section 10.1(iv) of this Agreement ("Actual
Effective Date") during which such Registration Statement shall have been
11
current and available for use in connection with the public resale of the Shares
and Warrant Shares ("Exclusion Period"). Nor will the Company allow any
registration statement except for the Registration Statement to be declared
effective by the Commission prior to the end of the Exclusion Period.
(o) Blackout. The Company undertakes and covenants that until the
first to occur of (i) the end of the Exclusion Period, or (ii) until all the
Shares and Warrant Shares have been resold pursuant to a registration statement
or Rule 144, 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 or causing an already
effective registration statement to no longer be effective or current for a
period of fifteen (15) or more days.
(p) Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Subscriber
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such
Subscriber shall have agreed in writing to receive such information. The Company
understands and confirms that each Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
(q) Limited Standstill. The Company will deliver to the Subscribers on
or before the Closing Date and enforce the provisions of irrevocable lockup
agreements ("Limited Standstill Agreements") in the forms annexed hereto as
Exhibit E, with the parties identified on Schedule 8(q) hereto.
9. 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 any of the
Transaction Documents; 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 under any Transaction Documents other
than its obligations under Section 10 of this Agreement.
(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 Subscribers, 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 Purchase Price.
(d) The procedures set forth in Section 10.6 shall apply to the
indemnifications set forth in Sections 9(a) and 9(b) above.
12
10.1. 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 fifty-one
(151) days after the Closing Date, but not later than two (2) years after the
Closing Date ("Request Date"), upon a written request therefor from any record
holder or holders of more than 50% of the Shares issued and Warrant Shares
actually issued upon exercise of the Warrants, the Company shall prepare and
file with the Commission a registration statement under the 1933 Act registering
the Shares and Warrant Shares issuable upon exercise of the Class A Warrants,
Class B Warrants and Broker's Warrants (collectively "Registrable Securities")
which are the subject of such request for unrestricted public resale by the
holder thereof. Registrable Securities shall not include (i) Securities which
are already registered for resale in an effective registration statement, (ii)
included for registration in a pending registration statement, or (iii) which
have been issued without further transfer restrictions after a sale or transfer
pursuant to Rule 144 under the 1933 Act. 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 10.1(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 ▇-▇, ▇-▇ 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, subject to
the terms of this Agreement, cause such Registrable Securities as to which
registration shall have been so requested to be included with the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent required to permit the sale or other disposition of the
Registrable Securities so registered by the holder of such Registrable
Securities (the "Seller" or "Sellers"). In the event that any registration
pursuant to this Section 10.1(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 10.4
hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 10.1(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 10.1(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 10.1(ii) rather than Section 10.1(i), and the
rights of the holders of Registrable Securities covered by such written request
shall be governed by Section 10.1(ii).
13
(iv) The Company shall file with the Commission not later than thirty
(30) days after the Closing Date (the "Filing Date"), and cause to be declared
effective within one hundred and fifty (150) days after the Closing Date (the
"Effective Date"), a registration statement on Form SB-2 (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 "Registration Statement"). The
Company will register not less than a number of shares of common stock in the
aforedescribed registration statement that is equal to the Shares and all of the
Warrant Shares issuable upon exercise of the Warrants and Broker's Warrants. The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber and Warrant holder, pro rata, and not issued,
employed or reserved for anyone other than each such Subscriber and Warrant
holder. The Registration Statement will immediately be amended or additional
registration statements will be immediately filed by the Company as necessary to
register additional shares of Common Stock to allow the public resale of all
Common Stock included in and issuable by virtue of the Registrable Securities.
Without the written consent of the Subscriber, no securities of the Company
other than the Registrable Securities will be included in the Registration
Statement except as disclosed on Schedule 10.1. It shall be deemed a
Non-Registration Event (as defined in Section 10.4 of this Agreement) if at any
time after the actual effective date of the Registration Statement ("Actual
Effective Date"), the Company has registered for unrestricted resale on behalf
of each Subscriber fewer than all the Shares and Warrant Shares issuable upon
exercise of the Warrants and Broker's Warrants.
10.2. Registration Procedures. If and whenever the Company is required
by the provisions of Section 10.1 to effect the registration of any Registrable
Securities under the 1933 Act, the Company will, as expeditiously as possible:
(a) subject to the timelines provided in this Agreement, prepare and
file with the Commission a registration statement required by Section 10, 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 the Registrable Securities copies of all filings and Commission
letters of comment and notify Subscribers and Grushko & ▇▇▇▇▇▇▇, P.C. (by
telecopier and by email to ▇▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇) within four (4) hours of (i)
notice that the Commission has no comments or no further comments on the
Registration Statement, and (ii) the declaration of effectiveness of the
registration statement, (failure to timely provide notice as required by this
Section 10.2(a) shall be a material breach of the Company's obligation hereunder
and a Non-Registration Event as defined in Section 10.4 of this Agreement;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until such registration statement has been effective for a period of two (2)
years, and comply with the provisions of the 1933 Act with respect to the
disposition of all of the Registrable Securities covered by such registration
statement in accordance with the Sellers' intended method of disposition set
forth in such registration statement for such period;
(c) furnish to the Sellers, at the Company's expense, such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the Sellers shall request in writing,
provided, however, that the Company shall not for any such purpose be required
14
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 Sellers 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 Sellers,
and any attorney, accountant or other agent retained by the Seller or
underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration statement.
10.3. Provision of Documents. In connection with each registration
described in this Section 10, each Seller will furnish to the Company in writing
such information and representation letters with respect to itself and the
proposed distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.
10.4. Non-Registration Events. The Company and the Subscribers agree that
the Sellers will suffer damages if the Registration Statement 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 10.1(i) or 10.1(ii)
is not filed within 60 days after written request and declared effective by the
Commission within 150 days after such request, and maintained in the manner and
within the time periods contemplated by Section 10 hereof, and it would not be
feasible to ascertain the extent of such damages with precision. Accordingly, if
(i) the Registration Statement is not filed on or before the Filing Date, (ii)
is not declared effective on or before the sooner of the Effective Date, or
within three (3) business days of receipt by the Company of a written or oral
communication from the Commission that the Registration Statement will not be
reviewed or that the Commission has no further comments, (iii) if the
registration statement described in Sections 10.1(i) or 10.1(ii) is not filed
within 60 days after such written request, or is not declared effective within
150 days after such written request, or (iv) any registration statement
described in Sections 10.1(i), 10.1(ii) or 10.1(iv) is filed and declared
effective but shall thereafter cease to be effective (without being succeeded
within fifteen (15) business days by an effective replacement or amended
registration statement) for a period of time which shall exceed 30 days in the
aggregate per year (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) or more than 20 consecutive days
(each such event referred to in clauses (i) , (ii), (iii) and (iv) of this
Section 10.4 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%) pro rated on a daily basis for each
thirty days or part thereof of the pendency of such Non-Registration Event of
the Purchase Price of the Shares owned of record by such holder which are
subject to such Non-Registration Event. The Company must pay the Liquidated
Damages in cash within ten (10) days after the end of each thirty (30) day
period or shorter part thereof for which Liquidated Damages are payable. In the
event a Registration Statement is filed by the Filing Date but is withdrawn
prior to being declared effective by the Commission, then such Registration
Statement will be deemed to have not been filed. All oral or written comments
received from the Commission relating to the Registration Statement must be
responded to within fifteen (15) business days. Failure to timely respond is a
15
Non-Registration Event for which Liquidated Damages shall accrue and be payable
by the Company to the holders of Registrable Securities at the same rate set
forth above. Notwithstanding the foregoing, the Company shall not be liable to
the Subscriber under this Section 10.4 for any events or delays occurring as a
consequence of the acts or omissions of the Subscribers contrary to the
obligations undertaken by Subscribers in this Agreement.
10.5. Expenses. All expenses incurred by the Company in complying with
Section 10, 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, and costs of insurance 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 10. Selling Expenses in connection
with each registration statement under Section 10 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.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under
the 1933 Act pursuant to Section 10, 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 10, 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 10.6(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 10, 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
16
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 10, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the net proceeds actually received by the Seller from the sale of Registrable
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 10.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.6(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 10.6(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 10.6 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 10.6 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 10.6; then, and in each such case, the Company
17
and the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities sold by it pursuant
to such registration statement; and (z) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
10.7. Delivery of Unlegended Shares.
(a) Within three (3) business days (such third (3rd) business day
being the "Unlegended Shares Delivery Date") after the business day on which the
Company has received (i) a written 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, and (iv) in the case of sales under Rule 144, customary
representation letters of the Subscriber and/or Subscriber's broker regarding
compliance with the requirements of Rule 144, the Company at its expense, (y)
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to its transfer agent (with copies to Subscriber) an appropriate instruction and
opinion of such counsel, directing the delivery of shares of Common Stock
without any legends including the legend set forth in Section 4 above, issuable
pursuant to any effective and current Registration Statement described in
Section 10 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. Transfer fees shall be the responsibility of the Seller.
(b) In lieu of delivering physical certificates representing the
Unlegended Shares, if the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of a Subscriber, so long as the certificates therefor do not bear a
legend and the Subscriber is not obligated to return such certificate for the
placement of a legend thereon, the Company 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 10 hereof later than two business days
after 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 10.7
for an aggregate of thirty (30) days, then each Subscriber or assignee holding
Securities subject to such default may, at its option, require the Company to
redeem all or any portion of the Shares and Warrant Shares subject to such
default at a price per share equal to 120% of the Purchase Price of such Common
Stock and Warrant Shares ("Unlegended Redemption Amount"). The amount of the
18
aforedescribed liquidated damages that have accrued or been paid for the twenty
day period prior to the receipt by the Subscriber of the Unlegended Redemption
Amount shall be credited against the Unlegended Redemption Amount. 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 as required pursuant
to this Agreement, within seven (7) business days after the Unlegended Shares
Delivery Date and the Subscriber purchases (in an open market transaction or
otherwise) shares of common stock to deliver in satisfaction of a sale by such
Subscriber of the shares of Common Stock which the Subscriber was entitled to
receive from the Company (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of common stock so
purchased exceeds (B) the aggregate purchase price of the shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, together with
interest thereon at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if a Subscriber purchases
shares of Common Stock having a total purchase price of $10,000 to cover a
Buy-In with respect to $10,000 of purchase price of shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, the Company shall
be required to pay the Subscriber $1,000, plus interest. The Subscriber shall
provide the Company written notice indicating the amounts payable to the
Subscriber in respect of the Buy-In.
(e) In the event a Subscriber shall request in writing delivery of
Unlegended Shares as described in Section 10.7(e) and the Company is required to
deliver such Unlegended Shares pursuant to Section 10.7(e), the Company may not
refuse to deliver Unlegended Shares based on any claim that such Subscriber or
any one associated or affiliated with such Subscriber has been engaged in any
violation of law, or for any other reason, unless, the Company files for an
injunction or temporary restraining order from a court, on notice, restraining
and or enjoining delivery of such Unlegended Shares or exercise of all or part
of said Warrant shall have been sought and obtained and the Company has posted a
surety bond for the benefit of such Subscriber in the amount of 110% of the
amount of the aggregate purchase price of the Common Stock and Warrant Shares
which are subject to the injunction or temporary restraining order, which bond
shall remain in effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to such Subscriber to the
extent Subscriber obtains judgment in Subscriber's favor.
11. (a) Right of First Refusal. Until the end of the Exclusion Period, the
Subscribers shall be given not less than five (5) 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, (iii) the shares to
be issued in lieu of outstanding debt described on Schedule 5(d), or (iv) as has
been described in the Reports or Other Written Information filed with the
Commission or delivered to the Subscribers prior to the Closing Date
(collectively the foregoing are "Excepted Issuances"). The Subscribers who
exercise their rights pursuant to this Section 11(a) shall have the right during
the five (5) business days following receipt of the notice to purchase such
offered common stock, debt or other securities in accordance with the terms and
conditions set forth in the notice of sale in the same proportion to each other
as their purchase of Shares 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 five (5)
business days following the notice of modification, whichever is longer, to
exercise such right.
19
(b) Favored Nations Provision. Other than the Excepted Issuances, if
at any during the Exclusion Period and the Shares are still held by a
Subscriber, the Company shall offer, issue or agree to issue any common stock or
securities convertible into or exercisable for shares of common stock (or modify
any of the foregoing which may be outstanding at any time prior to the Closing
Date) to any person or entity at a price per common share or conversion or
exercise price per share which shall be less than the per Share Purchase Price,
without the consent of each Subscriber holding such Shares, then the Company
shall issue, for each such occasion, additional shares of Common Stock to each
Subscriber so that the average per Share Purchase Price of the shares of Common
Stock issued to the Subscriber (of only the Common Stock still owned by the
Subscriber) is equal to such other lower price per share. The delivery to the
Subscriber of the additional shares of Common Stock shall be not later than the
closing date of the transaction giving rise to the requirement to issue such
additional shares of Common Stock. The Subscriber is granted the registration
rights described in Section 10 hereof in relation to such additional shares of
Common Stock except that the Filing Date and Effective Date vis-a-vis such
additional common shares shall be, respectively, the sixtieth (60th) and one
hundred and twentieth (120th) date after the closing date giving rise to the
requirement to issue the additional shares of Common Stock. For purposes of the
issuance and adjustment described in this paragraph, the issuance of any
security of the Company carrying the right to convert such security into shares
of Common Stock or of any warrant, right or option to purchase Common Stock
shall result in the issuance of the additional shares of Common Stock upon the
issuance of such convertible security, warrant, right or option and again upon
any subsequent issuances of shares of Common Stock upon exercise of such
conversion or purchase rights at any time if such issuance is at a price lower
than the per Share Purchase Price. The rights of the Subscriber set forth in
this Section 12 are in addition to any other rights the Subscriber has pursuant
to this Agreement and any other agreement referred to or entered into in
connection herewith.
(c) Maximum Exercise of Rights. In the event the exercise of the
rights described in Sections 11(a) and 11(b) would result in the issuance of an
amount of common stock of the Company that would exceed the maximum amount that
may be issued to a Subscriber calculated in the manner described in Section 10
of the Warrant, then the issuance of such additional shares of common stock of
the Company to such Subscriber will be deferred in whole or in part until such
time as such Subscriber is able to beneficially own such common stock without
exceeding the maximum amount set forth calculated in the manner described in
Section 10 of the Class A Warrant. The determination of when such common stock
may be issued shall be made by each Subscriber as to only such Subscriber.
12. 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: Emergency Filtration
Products, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President, telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy
20
by telecopier to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., 22 East ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.,
Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, 1065 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the
Subscribers, to: the one or more addresses and telecopier numbers indicated on
the signature pages hereto, with an additional copy by telecopier only to:
Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, and (iii) if to the Broker, to: First Montauk
Securities Corp., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, Director of Corporate Finance, telecopier: (▇▇▇) ▇▇▇-▇▇▇▇.
(b) Closing. The consummation of the transactions contemplated herein
shall take place at the offices of Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, upon the satisfaction of all conditions to
Closing set forth in this Agreement. The closing date ("Closing Date") will be
deemed to be the date the Escrow Agent has received all of the documents
required to be delivered pursuant to the Escrow 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. Except as set forth in this
Agreement, no right or obligation of any party hereto 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 with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
Subject to Section 12(e) hereof, each of the Company, Subscriber and any
21
signator hereto in his personal capacity hereby waives, and agrees not to assert
in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction in New York of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.
(g) Independent Nature of Subscribers. The Company acknowledges that
the obligations of each Subscriber under the Transaction Documents are several
and not joint with the obligations of any other Subscriber, and no Subscriber
shall be responsible in any way for the performance of the obligations of any
other Subscriber under the Transaction Documents. The Company acknowledges that
the decision of each Subscriber to purchase Securities has been made by such
Subscriber independently of any other Subscriber and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or
given by any other Subscriber or by any agent or employee of any other
Subscriber, and no Subscriber or any of its agents or employees shall have any
liability to any Subscriber (or any other person) relating to or arising from
any such information, materials, statements or opinions. The Company
acknowledges that nothing contained in any Transaction Document, and no action
taken by any Subscriber pursuant hereto or thereto (including, but not limited
to, the (i) inclusion of a Subscriber in the Registration Statement and (ii)
review by, and consent to, such Registration Statement by a Subscriber) shall be
deemed to constitute the Subscribers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Subscribers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. The
Company acknowledges that each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of the Transaction Documents, and it shall not be necessary for any other
Subscriber to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all Subscribers
with the same terms and Transaction Documents for the convenience of the Company
and not because Company was required or requested to do so by the Subscribers.
The Company acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Subscribers are in any way
acting in concert or as a group with respect to the Transaction Documents or the
transactions contemplated thereby.
22
(h) Equitable Adjustment. The Securities and the purchase prices of
Securities shall be equitably adjusted to offset the effect of stock splits,
stock dividends, pro rata distributions of property or equity interests of the
Company to its shareholders.
[THIS SPACE INTENTIONALLY LEFT BLANK]
23
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.
EMERGENCY FILTRATION PRODUCTS, INC.
a Nevada corporation
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Dated: as of September ____, 2004
------------------------------------------------- ------------------------- ------------------- ------------------- ----------------
SUBSCRIBER PURCHASE PRICE SHARES CLASS A WARRANTS CLASS B WARRANTS
------------------------------------------------- ------------------------- ------------------- ------------------- ----------------
▇▇▇▇▇▇▇▇▇▇▇ LIMITED PARTNERSHIP $400,000.00 1,600,000 1,600,000 1,066,667
C/o Canaccord Capital Corporation
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------
(Signature)
--------------------------------
Print Name and Title
------------------------------------------------- ------------------------- ------------------- ------------------- ----------------
24
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.
EMERGENCY FILTRATION PRODUCTS, INC.
a Nevada corporation
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Dated: as of September ____, 2004
------------------------------------------------- ------------------------- ------------------- ------------------- ----------------
SUBSCRIBER PURCHASE PRICE SHARES CLASS A WARRANTS CLASS B WARRANTS
------------------------------------------------- ------------------------- ------------------- ------------------- ----------------
WHALEHAVEN CAPITAL FUND LIMITED $200,000.00 800,000 800,000 533,333
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------
(Signature)
--------------------------------
Print Name and Title
------------------------------------------------- ------------------------- ------------------- ------------------- ----------------
25
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.
EMERGENCY FILTRATION PRODUCTS, INC.
a Nevada corporation
By:_________________________________
Name:
Title:
Dated: as of September ____, 2004
------------------------------------------------- ------------------------- ------------------- ------------------- ----------------
SUBSCRIBER PURCHASE PRICE SHARES CLASS A WARRANTS CLASS B WARRANTS
------------------------------------------------- ------------------------- ------------------- ------------------- ----------------
GREENWICH GROWTH FUND LIMITED $150,000.00 600,000 600,000 400,000
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------
(Signature)
--------------------------------
Print Name and Title
------------------------------------------------- ------------------------- ------------------- ------------------- ----------------
26
LIST OF EXHIBITS AND SCHEDULES
Exhibit A1 Form of Class A Warrant
Exhibit A2 Form of Class B Warrant
Exhibit B Escrow Agreement
Exhibit C Form of Legal Opinion
Exhibit D Public Disclosure
Exhibit E Form of Limited Standstill Agreement
Schedule 5(d) Disclosure Schedule
Schedule 5(s) Capitalization
Schedule 8(e) Use of Proceeds
Schedule 8(q) Parties to Limited Standstill Agreements
Schedule 10.1 Other Securities to be Registered
27
EXHIBIT E
LIMITED STANDSTILL AGREEMENT
This AGREEMENT (the "Agreement") is made as of the ____ day of September,
2004, by the signators hereto (each a "Holder"), in connection with his
ownership of shares of Emergency Filtration Products, Inc., a Nevada corporation
(the "Company").
NOW, THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which consideration are hereby acknowledged, Holder agrees as
follows:
1. Background.
a. Holder is the beneficial owner of the amount of shares of the
Common Stock, $.001 par value, of the Company ("Common Stock") designated on the
signature page hereto.
▇. ▇▇▇▇▇▇ acknowledges that the Company has entered into or will enter
into agreements with subscribers to the Company's Common Stock and Warrants (the
"Subscribers"), for the sale of an aggregate of up to $750,000 of Common Stock
and Warrants to the Subscribers (the "Offering"). Holder understands that, as a
condition to proceeding with the Offering, the Subscribers have required, and
the Company has agreed to assist the Subscribers in obtaining, an agreement from
the Holder to refrain from selling any securities of the Company from the date
of the Subscription Agreement until the end of the Exclusion Period as defined
in the Subscription Agreement (the "Restriction Period").
2. Share Restriction.
a. Holder hereby agrees that during the Restriction Period, except for
125,000 shares of Common Stock which may be sold for not less than $0.40 per
share, the Holder will not sell or otherwise dispose of any shares of Common
Stock or any options, warrants or other rights to purchase shares of Common
Stock or any other security of the Company which Holder owns or has a right to
acquire as of the date hereof, other than in connection with an offer made to
all shareholders of the Company or any merger, consolidation or similar
transaction involving the Company. Holder further agrees that the Company is
authorized to and the Company agrees to place "stop orders" on its books to
prevent any transfer of shares of Common Stock or other securities of the
Company held by Holder in violation of this Agreement.
b. Any subsequent issuance to and/or acquisition of shares by Holder
will be subject to the provisions of this Agreement.
c. Notwithstanding the foregoing restrictions on transfer, the Holder
may, at any time and from time to time during the Restriction Period, transfer
the Common Stock (i) as bona fide gifts or transfers by will or intestacy, (ii)
to any trust for the direct or indirect benefit of the undersigned or the
immediate family of the Holder, provided that any such transfer shall not
involve a disposition for value, (iii) to a partnership which is the general
partner of a partnership of which the Holder is a general partner, provided,
that, in the case of any gift or transfer described in clauses (i), (ii) or
(iii), each donee or transferee agrees in writing to be bound by the terms and
conditions contained herein in the same manner as such terms and conditions
apply to the undersigned. For purposes hereof, "immediate family" means any
relationship by blood, marriage or adoption, not more remote than first cousin.
3. Miscellaneous.
a. At any time, and from time to time, after the signing of this
Agreement Holder will execute such additional instruments and take such action
as may be reasonably requested by the Subscribers to carry out the intent and
purposes of this Agreement.
b. This Agreement shall be governed, construed and enforced in
accordance with the laws of the State of New York, except to the extent that the
securities laws of the state in which Holder resides and federal securities laws
may apply.
c. This Agreement contains the entire agreement of the Holder with
respect to the subject matter hereof.
d. This Agreement shall be binding upon Holder, its legal
representatives, successors and assigns.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Holder
has executed this Agreement as of the day and year first above written.
HOLDER:
--------------------------------
(Signature of Holder)
--------------------------------
(Print Name of Holder)
--------------------------------
Number of Shares of Common Stock
Beneficially Owned
COMPANY:
EMERGENCY FILTRATION PRODUCTS, INC.
By:______________________________
