AMENDING AGREEMENT - SUBSCRIPTION AGREEMENT
THIS AMENDING AGREEMENT (the "Agreement") is dated as of July 23, 2004 by
and between AdZone Research, Inc., a Delaware corporation (the "Company") and
The Nutmeg Group, L.L.C. (the "Purchaser")
WHEREAS, the Company and the Purchaser have entered into a Subscription
Agreement (the "Subscription Agreement") dated as of May 20, 2004; and
WHEREAS, the parties now wish to amend the Subscription Agreement on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants contained herein, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, intending to be legally bound,
hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined shall have
the respective meanings given to them in the Subscription Agreement.
2. The Subscription Agreement is hereby amended as follows:
(a) Section 1, paragraphs 1-3 are hereby deleted and replaced in its
entirety by the following:
"1. Subscription. Subject to the terms and conditions contained herein,
the Purchaser hereby agrees to purchase from the Company, and the Company hereby
agrees to issue and sell to the Purchaser, (i) a certain number of shares of the
Company's Common Stock (the "Common Stock"), and warrants to purchase additional
shares of Common Stock; and (ii) an option to purchase shares of common stock
(the Common Stock, Warrants and Options are referred to as the "Securities"),
for an aggregate purchase price of up to $1,850,000 (the "Purchase Price").
The $1,850,000 Purchase Price will be payable by Purchaser, in four
traunches. The first traunche will be a minimum of $400,000 and occur no later
than May 20, 2004. The second traunche will be an amount equal to $600,000 and
shall occur no later than June 4, 2004. The third $100,000 shall occur no later
than August 1, 2004. The fourth traunche will be in the form of a $750,000
Option and shall occur within 5 days of the date on which the registration
statement registering the Securities is declared effective.
The number of shares issuable to Nutmeg (the "Applicable Number") for
Traunches 1, 2 and 3 will equal $1,000,000 divided by the lesser of:
(a) $.20, or
(b) fifty-seven percent (57%) of the average closing bid price for Common
Stock on the two trading days immediately prior to Closing of such traunche, or
(c) fifty-seven percent (57%) of the average closing bid price for Common
Stock on the two trading days immediately prior to the date on which the
registration statement (as described in the Registration Rights Agreement) is
declared effective.
(the lesser of (a), (b) and (c) being hereinafter referred to as the
"Fixed Price").
The number of shares issuable to Nutmeg for Traunche 4 will equal $750,000
divided by the lesser of:
(a) $.20, or
(b) fifty-seven percent (57%) of the average closing bid price for Common
Stock on the two trading days immediately prior to the filing with the
Securities and Exchange Commission of the registration statement (as described
in the Registration Rights Agreement),
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(c) fifty-seven percent (57%) of the average closing bid price for Common
Stock on the two trading days immediately prior to the date on which the
registration statement (as described in the Registration Rights Agreement) is
declared effective.
Purchaser will be issued Warrants (hereinafter "Warrants") exercisable
into such number of shares of Common Stock as is equal to 50% of the shares
issued pursuant to this agreement. The Common Stock into which the Warrants are
exercisable will have piggyback registration rights, and the Warrants will be
transferable. Unexercised Warrants will expire December 31, 2008 ("Warrant
Expiration Date"). Warrants will be exercisable into Common Stock at the lesser
of: (a) $0.25, or a price equal to (b) 125% of fifty-seven percent (57%) of the
average closing bid price for Common Stock on the two trading days immediately
prior tothe filing with the Securities and Exchange Commission of the
registration statement (as described in the Registration Rights Agreement), or,
in the case of traunches one, two and three, (c) 125% of fifty-seven percent
(57%) of the average closing bid price for Common Stock on the two trading days
immediately prior to Closing of such traunche.
(b) The following limitation is to be added at the end of Section 1
Maximum Exercise. At any point in time, the Purchaser shall not be
entitled to receive shares of common stock if such issuance would result in
beneficial ownership by the Purchaser and its affiliates of more than 9.99% of
the outstanding shares of common stock of the Company on such issue date,
including:
(i) the number of shares of common stock beneficially owned by the
Purchaser and its affiliates, and
(ii) the number of shares of common stock issuable upon the
exercise or conversion of securities owned.
For the purposes of this provision as set forth in the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
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thereunder. Subject to the foregoing, the Purchaser shall not be limited to
aggregate common stock issuances of only 9.99% and aggregate commn stock
issuances may exceed 9.99%. The Purchaser may void the issuance limitation
described in this Section upon 61 days prior written notice to the Company. The
Purchaser may allocate which of the equity of the Company deemed beneficially
owned by the Purchaser shall be included in the 9.99% amount described above and
which shall be allocated to the excess above 9.99%.
3. Except as amended hereby, the Subscription Agreement shall bind the parties
thereto in accordance with its terms.
4. If a provision of this Agreement is wholly or partially invalid, this
Agreement shall be interpreted as if the invalid provision had not been a part.
5. No condoning, excusing or waiver by any party of any default, breach or
non-observance by any other party will operate as a waiver of that party's
rights in respect of any continuing or subsequent default, breach or
non-observance or so as to defeat or affect in any way the rights of that party
in respect of any continuing or subsequent default, breach or non-observance,
and no waiver will be inferred from or implied by anything done or omitted to be
done by the party having those rights.
6. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, New York for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto (including its affiliates,
agents, officers, directors and employees) hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Agreement, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
7. Delivery of an executed copy of this Agreement by electronic facsimile
transmission or other means of electronic communication capable of producing a
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printed copy will be deemed to be execution and delivery of this Agreement as of
the date first set forth above.
8. This Agreement may be executed in facsimile counterparts, each of which when
executed and delivered shall be deemed to be an original and all of which
counterparts together shall constitute the same Agreement.
[SIGNATURE PAGE FOLLOWS]
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[SIGNATURE PAGE TO AMENDING AGREEMENT IN RESPECT OF
SUBSCRIPTION AGREEMENT]
IN WITNESS WHEREOF the parties have executed this Agreement on the day and
year first above written.
ADZONE RESEARCH, INC.
By:
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Name: Xxxxxxx Xxxxxxx
Title: President and Chief Executive Officer
[SIGNATURE PAGE OF PURCHASER FOLLOWS]
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[PURCHASER SIGNATURE PAGE TO AMENDING AGREEMENT
IN RESPECT OF SUBSCRIPTION AGREEMENT]
Address: THE NUTMEG GROUP
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By:
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Name:
Title:
