Exhibit 4.27
SUBSCRIPTION AGREEMENT
Stonepath Group, Inc.
Xxx Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx Xxxxx, CFO
Ladies and Gentlemen:
The undersigned subscriber ("Subscriber") hereby tenders this
Subscription Agreement (this "Agreement") in accordance with and subject to the
terms and conditions set forth herein:
1. Subscription.
1.1 Subscriber hereby subscribes for and agrees to purchase the number of
shares (the "Shares") of common stock, $.001 par value per share (the "Common
Shares"), of Stonepath Group, Inc., a Delaware corporation (the "Company"),
indicated on the signature page attached hereto at the purchase price set forth
on such signature page (the "Purchase Price"). Subscriber has made or will make
payment by wire transfer of funds in accordance with instructions from the
Company in the full amount of the Purchase Price of the Common Shares for which
Subscriber is subscribing (the "Payment").
1.2 Subject to the terms and conditions hereof and in reliance on the
representations and warranties contained herein, or made pursuant hereto, the
Company will issue to Subscriber, and Subscriber will acquire from the Company,
on the Closing Date (as hereinafter defined), the number of Common Shares
indicated on the signature page attached hereto at the Purchase Price.
1.3 This Agreement is part of an offering of Common Shares being conducted
by Stonegate Securities, Inc. (the "Placement Agent") on behalf of the Company
(the "Offering"). The Company agrees that it shall not undertake any other
financings involving its Equity Common Shares (as defined below) on terms more
favorable than those in the Offering until the later of ninety (90) days after
the Initial Closing Date or 30 days after the effective date of the Registration
Statement (as that term is defined in Appendix I hereto) covering all of the
Common Shares, without the prior written approval of the holders of 66 2/3%
interest of the Registrable Securities (as defined in Appendix I). The term
"Equity Common Shares" as used herein shall mean all capital stock of the
Company, plus all rights, warrants, options, convertible Common Shares or
indebtedness, exchangeable Common Shares or indebtedness, or other rights,
exercisable for or convertible into, directly or indirectly, capital stock of
the Company. Notwithstanding the above, "Equity Common Shares" shall not include
any Common Shares of the Company issued pursuant to any incentive or stock
option plan of the Company approved by the shareholders or the board of
directors of the Company. For the purposes hereof, preferred shares that carry
an above-market issue price and conversion rate (at the time of subscription),
subject to dividends of between 5%-8%, would not be viewed as "on terms more
favorable than those in the Offering."
1.4 (a) The Placement Agent and the Company may hold an initial closing of
the Offering (the "Initial Closing") at any mutually agreeable time, once all of
the closing conditions referred to at Section 3 hereafter have been satisfied.
The date of the Initial Closing is hereinafter referred to as the "Initial
Closing Date."
(b) All subscriptions received prior to the Initial Closing Date will
be deposited by the Placement Agent in an interest bearing escrow account at the
Bank of Texas, N.A. (the "Escrow Agent"). If prior to October 31, 2003,
subscriptions for at least $10 million (the "Minimum Offering") have not been
received and accepted, and all closing conditions have not been satisfied, no
subscriptions will be accepted and all subscription funds, plus interest to the
extent obtained, will be returned to prospective investors. Upon any closings,
interest generated from escrow, if any, will be distributed to the Company.
(c) The Company may hold additional interim closings after the Initial
Closing provided that the terms of the Offering are the same for each closing.
Any such interim closings are each hereinafter referred to as an "Additional
Closing" and shall occur on one or more dates each hereinafter referred to as an
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"Additional Closing Date." The Initial Closing Date and the Additional Closing
Dates are each hereinafter sometimes referred to as a "Closing Date." The last
Closing is sometimes referred to herein as the "Final Closing." The Final
Closing shall occur no later than five (5) business days after the Initial
Closing.
(d) Upon receipt by the Company of the requisite payment for all
Common Shares to be purchased by the subscribers whose subscriptions are
accepted at the Initial Closing or any Additional Closing, as applicable, and
subject to the satisfaction of certain conditions, the Common Shares so
purchased will be issued in the name of each such subscriber, and the name of
such subscriber will be registered on the stock transfer books of the Company as
the record owner of such Common Shares. The Company will promptly thereafter
issue to each subscriber participating in such closing a stock certificate for
the Common Shares so purchased.
1.5 Subscriber hereby agrees to be bound hereby upon (i) execution and
delivery to the Company, in care of the Placement Agent, of the signature page
to this Agreement and (ii) written acceptance on the Initial Closing Date or an
Additional Closing Date, as the case may be, by the Company and the Placement
Agent of Subscriber's subscription, which shall be confirmed by faxing to the
Subscriber the signature page to this Agreement that has been executed by the
Company (the "Subscription").
1.6 Prior to acceptance of this Agreement by the Company and the Placement
Agent, Subscriber agrees that the Company and Placement Agent may, as they
mutually agree in their sole and absolute discretion, reduce the Subscription to
any number of Common Shares that in the aggregate do not exceed the number of
Common Shares hereby applied for without any prior notice to or further consent
by Subscriber; provided, however, if any of Subscriber's Subscription is so
reduced the Company shall provide written notice to Subscriber and Subscriber
may withdraw its entire Subscription. Subscriber hereby irrevocably constitutes
and appoints the Placement Agent and each officer of the Placement Agent, each
of the foregoing acting singularly, in each case with full power of
substitution, the true and lawful agent and attorney-in-fact of Subscriber, with
full power and authority in Subscriber's name, place and stead to amend this
Agreement, including, in each case, Subscriber's signature page thereto, for the
sole purpose of effecting the foregoing provisions of this Section 1.6.
1.7 Subscriber agrees and understands that the principals of the Placement
Agent may purchase Common Shares in this offering for their own account on the
same terms and conditions as Subscriber.
2. Offering Material.
2.1 Subscriber represents and warrants that it is in receipt of and that it
has carefully read the following items:
(a) The Company's Proxy Statement on Schedule 14A, as filed with the
SEC on April 15, 2003 (the "2003 Proxy Statement");
(b) The Company's Form 10-K/A for the period ended December 31, 2002,
as filed with the SEC on August 28, 2003 (the "Form 10-K/A");
(c) The Company's Form 10-Q/A for the period ended March 31, 2003, as
filed with the SEC on August 28, 2003;
(d) The Company's Form 10-Q/A for the period ended June 30, 2003, as
filed with the SEC on August 28, 2003;
(e) The Company's Registration Statement on Form S-3, Registration No.
333-104228, as filed with the SEC on August 28, 2003; and
(f) All other documents filed by the Company with the Commission
subsequent to the Company's Form 10-K/A and prior to the date this Agreement is
executed by the Subscriber.
The documents listed in this Section 2.1 shall be referred to herein as the
"Disclosure Documents."
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3. Conditions to Subscriber's Obligations.
3.1 The obligation of Subscriber to close the transaction contemplated by
this Agreement (the "Transaction") is subject to the satisfaction on or prior to
the Closing Date of the following conditions set forth in this Section 3:
(a) The Company shall have executed this Agreement and delivered the
same to the Placement Agent.
(b) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 4.1(d) below in a form reasonably acceptable
to the Placement Agent.
(c) Subscriber shall have received copies of all documents and
information which it may have reasonably requested in connection with the
Offering.
(d) The Company shall have caused its legal counsel to deliver to
Subscriber a legal opinion in substantially the form attached hereto as Appendix
II.
(e) No stop order or suspension of trading shall have been imposed by
the American Stock Exchange, the Securities and Exchange Commission (the "SEC"),
or any other governmental regulatory body with respect to public trading in
Common Shares of the Company.
(f) The issuance of the Common Shares in this Offering have been
approved for listing on the American Stock Exchange.
(g) The representations and warranties of the Company shall be true
and correct on and as of the Closing Date as though made on and as of such date;
and Subscriber shall have received on the Closing Date a certificate to this
effect executed by the Chief Executive Officer or the Chief Financial Officer of
the Company.
(h) If so requested by Subscriber, the Company shall have
delivered to the custodian for the Subscriber duly executed certificates,
registered in the name of Subscriber's nominee, representing the Common Shares.
4. Representations and Warranties; Covenants; Survival.
4.1 The Company represents and warrants to Subscriber that, at the date of
this Agreement and at each Closing Date on which Subscriber purchases Common
Shares:
(a) The Company has the full power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Company, enforceable
in accordance with its terms. The Company need not give any notice to, make any
filings with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(b) The Company and each of its subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of their states
of incorporation, with all requisite corporate power and authority to carry on
the business in which they are engaged and to own the properties they own, and
the Company has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The Company
and each of its subsidiaries are duly qualified and licensed to do business and
are in good standing in all jurisdictions where the nature of their business
makes such qualification necessary, except where the failure to be qualified or
licensed would not have a material adverse effect on the business of the Company
and its subsidiaries, taken as a whole.
(c) Except as set forth in the Company's filings with the SEC, there
are no legal actions or administrative proceedings or investigations instituted,
or to the best knowledge of the Company threatened, against the Company, that
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could reasonably be expected to have a material adverse effect on the Company or
any subsidiary, any of the Common Shares, or the business of the Company and its
subsidiaries, or which concerns the transactions contemplated by this Agreement.
(d) The Company's audited consolidated financial statements as of
December 31, 2002, contained in the Form 10-K/A and the unaudited financial
statements for the three months and six months ended June 30, 2003, contained in
the Form 10-Q/A, including the notes contained therein, fairly present the
consolidated financial position of the Company at the respective dates thereof
and the results of its consolidated operations for the periods purported to be
covered thereby. Such financial statements have been prepared in conformity with
generally accepted accounting principles consistently applied with prior periods
subject to any comments and notes contained therein. All liabilities, contingent
and other, of the Company and its subsidiaries, are set forth in the financial
statements as of June 30, 2003 contained in the Form 10-Q/A, excepting only
liabilities incurred in the ordinary course of business subsequent to June 30,
2003, and liabilities of the type not required under generally accepted
accounting principles to be reflected in such financial statements. Since June
30, 2003, there has been no material adverse change in the financial condition
of the Company from the financial condition stated in such financial statements.
As of September 2, 2003, the Company had 29,719,837 Common Shares outstanding
(29,917,753 as of September 24, 2003). The capitalization of the Company,
including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities exercisable for, or convertible into or
exchangeable for any shares of capital stock as of the Closing Date is as
described in Schedule 4.1(d) attached to this Agreement.
(e) The Company, by appropriate and required corporate action, has, or
will have prior to the Initial Closing, duly authorized the execution of this
Agreement and the issuance and delivery of the Common Shares. The Common Shares
are not subject to preemptive or other rights of any stockholders of the Company
and when issued in accordance with the terms of this Agreement and the Amended
and Restated Certificate of Incorporation of the Company, as amended and
currently in effect, the Common Shares will be validly issued, fully paid and
nonassessable and free and clear of all pledges, liens and encumbrances. The
issuance of the Common Shares hereunder will not trigger any outstanding
antidilution rights.
(f) Performance of this Agreement and compliance with the provisions
hereof will not violate any provision of any applicable law or of the
Certificate of Incorporation or Bylaws of the Company, or of any of its
subsidiaries, and, will not conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon, any of the
properties or assets of the Company, or of any of its subsidiaries, pursuant to
the terms of any indenture, mortgage, deed of trust or other agreement or
instrument binding upon the Company, or any of its subsidiaries, other than such
breaches, defaults or liens which would not have a material adverse effect on
the Company and its subsidiaries taken as a whole. The Company is not in default
under any provision of its charter or by-laws or other organizational documents
or under any provision of any agreement or other instrument to which it is a
party or by which it is bound or of any law, governmental order, rule or
regulation so as to affect adversely in any material manner its business or
assets or its condition, financial or otherwise.
(g) The Disclosure Documents, taken together, do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein to make the statements contained therein not misleading.
(h) The Company has provided Subscriber with all material public
information in connection with the business of the Company and the transactions
contemplated by this Agreement, and no representation or warranty made, nor any
document, statement, or financial statement prepared or furnished by the Company
in connection herewith contains any untrue statement of material fact, or omits
to state a material fact necessary to make the statements or facts contained
herein or therein not misleading.
(i) This Agreement, including Appendix I, has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
(j) Other than the listing of the Registrable Securities on the
American Stock Exchange, no registration, authorization, approval, qualification
or consent of any court or governmental authority or agency is necessary in
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connection with the execution and delivery of this Agreement or the offering,
issuance or sale of the Common Shares under this Agreement.
(k) The Company has timely filed with the SEC all documents required
to be filed by the Company under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (collectively, the "SEC Filings"). On their respective
dates of filing, the SEC Filings complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC.
(l) The Company is not now, and after the sale of the Common Shares
under this Agreement and under all other agreements and the application of the
net proceeds from the sale of the Common Shares will not be, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(m) The Company has filed all material tax returns required to be
filed, which returns are true and correct in all material respects, and the
Company is not in default in the payment of any taxes, including penalties and
interest, assessments, fees and other charges, shown thereon due or otherwise
assessed, other than those being contested in good faith and for which adequate
reserves have been provided or those currently payable without interest which
were payable pursuant to said returns or any assessments with respect thereto.
(n) The Company has not taken any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Shares to facilitate the sale or resale of the Common
Shares in any manner in contravention of applicable securities laws.
(o) Subject to the accuracy of the Subscriber's representations and
warranties in Section 7 of this Agreement, the offer, sale, and issuance of the
Common Shares in conformity with the terms of this Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act") and from the
registration or qualification requirements of the laws of any applicable state
or United States jurisdiction.
(p) 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 in any security or solicited any offers to buy any security under
circumstances that would require registration under the Securities Act of the
issuance of the Shares to the Subscriber. The issuance of the Shares to the
Subscriber will not be integrated with any other issuance of the Company's
securities (past, current or future) for purposes of the Securities Act or any
applicable rules of the American Stock Exchange. The Company will not make any
offers or sales of any security (other than the Common Shares) that would cause
the offering of the Common Shares to be integrated with any other offering of
securities by the Company for purposes of any registration requirement under the
Securities Act or any applicable rules of the American Stock Exchange.
(q) The Company is eligible to register securities for resale with the
SEC under Form S-3 promulgated under the Securities Act.
(r) The Company is in material compliance with all applicable
securities (or "Blue Sky") laws of the states of the United States in connection
with the issuance and sale of the Common Shares to Subscriber and the issuance
of the other Common Shares.
(s) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are executed
in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets;
(c) access to assets is permitted only in accordance with management's general
or specific authorization; and (d) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
4.2 The Company will take all action required to continue to be eligible to
register securities for resale with the SEC under Form S-3 promulgated under the
Securities Act.
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4.3 The Company shall issue a press release and file a Current Report on
Form 8-K with the SEC regarding the closing of the Offering within three (3)
business days after the Final Closing.
4.4 The Company shall indemnify and hold harmless the Subscriber from and
against all fees, commissions or other payments owing by the Company to the
Placement Agent or any other person or firm acting on behalf of the Company
hereunder.
5. Transfer and Registration Rights.
5.1 Subscriber acknowledges that it is acquiring the Common Shares for its
own account and for the purpose of investment and not with a view to any
distribution or resale thereof within the meaning of the Securities Act and any
applicable state or other securities laws ("State Acts"). Subscriber further
agrees that it will not sell, assign, transfer or otherwise dispose of any of
the Common Shares in violation of the Securities Act or State Acts and
acknowledges that, in taking unregistered Common Shares, it must continue to
bear economic risk in regard to its investment for an indefinite period of time
because of the fact that such Common Shares have not been registered under the
Securities Act or State Acts and further realizes that such Common Shares cannot
be sold unless subsequently registered under the Securities Act and State Acts
or an exemption from such registration is available. Subscriber also
acknowledges that appropriate legends reflecting the status of the Common Shares
under the Securities Act and State Acts may be placed on the face of the
certificates for such Common Shares at the time of their transfer and delivery
to the holder thereof. This Agreement is made with Subscriber in reliance upon
Subscriber's above representations.
5.2 The Common Shares issued pursuant to this Agreement may not be
transferred except in a transaction which is in compliance with the Securities
Act and State Acts. Except as provided hereafter with respect to registration of
the Common Shares or sale under Rule 144 contemplated in Appendix I, it shall be
a condition to any such transfer that the Company shall be furnished with an
opinion of counsel, which counsel and opinion shall be reasonably satisfactory
to the Company, to the effect that the proposed transfer would be in compliance
with the Securities Act and State Acts. Notwithstanding the foregoing,
furnishing such opinion of counsel shall not be a condition to any transfer of
Common Shares to an affiliate of Subscriber, including for this purpose if
Subscriber is an investment company, any fund or account advised by Subscriber's
investment adviser or any affiliate thereof.
5.3 The Company hereby grants to Subscriber the registration rights set
forth in Appendix I attached hereto. Appendix I is incorporated into, and made a
part of, this Agreement.
6. Closing.
6.1 The closing of the sale of the Common Shares to Subscriber shall take
place at the offices of the Placement Agent at such time as the Company and
Placement Agent shall mutually agree, provided that the Final Closing shall
occur no later than five (5) business days after the Initial Closing. Subscriber
may terminate this Agreement by giving written notice to the Company if the
Final Closing has not occurred within such timeframe.
7. Subscriber Representations. Subscriber hereby represents, warrants and
acknowledges and agrees with the Company and Placement Agent as follows:
7.1 Subscriber has been furnished with and has carefully read the
Disclosure Documents as set forth in Section 2.1 hereto and is familiar with the
terms of the Offering. With respect to individual or partnership tax and other
economic considerations involved in this investment, Subscriber is not relying
on the Company or the Placement Agent (or any agent or representative of any of
them). Subscriber has carefully considered and has, to the extent Subscriber
believes such discussion necessary, discussed with Subscriber's legal, tax,
accounting and financial advisers the suitability of an investment in the Common
Shares for Subscriber's particular tax and financial situation.
7.2 Subscriber has had an opportunity to inspect relevant documents
relating to the organization and operations of the Company. Subscriber
acknowledges that all documents, records and books pertaining to this investment
which Subscriber has requested have been made available for inspection by
Subscriber and Subscriber's attorney, accountant or other adviser(s).
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7.3 Subscriber and/or Subscriber's advisor(s) has/have had a reasonable
opportunity to ask questions of and receive answers and to request additional
relevant information from a person or persons acting on behalf of the Company
concerning the Offering.
7.4 Subscriber is not subscribing for the Common Shares as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar.
7.5 Subscriber is an "accredited investor," within the meaning of Rule
501(a) of Regulation D under the Securities Act ("Regulation D"). Subscriber, by
reason of Subscriber's business or financial experience or the business or
financial experience of Subscriber's professional advisers who are unaffiliated
with and who are not compensated by the Company or the Placement Agent or any
affiliate of either of them, directly or indirectly, can be reasonably assumed
to have the capacity to protect Subscriber's own interests in connection with
the transaction. Subscriber further acknowledges that he has read the written
materials provided by the Company.
7.6 Subscriber has adequate means of providing for Subscriber's current
financial needs and contingencies, is able to bear the substantial economic
risks of an investment in the Common Shares for an indefinite period of time,
has no need for liquidity in such investment and, at the present time, could
afford a complete loss of such investment.
7.7 Subscriber has such knowledge and experience in financial, tax and
business matters so as to enable Subscriber to use the information made
available to Subscriber in connection with the Offering to evaluate the merits
and risks of an investment in the Common Shares and to make an informed
investment decision with respect thereto.
7.8 Subscriber acknowledges that the Common Shares herein subscribed for
has not been registered under the Securities Act or under any State Act.
Subscriber understands further that in absence of an effective Registration
Statement, the Common Shares can only be sold pursuant to some exemption from
registration, such as Rule 144 of the Act, which requires, among other
conditions, that the Common Shares must be held for a minimum of one (1) year.
7.9 Subscriber recognizes that investment in the Common Shares involves
substantial risks. Subscriber acknowledges that he has reviewed the risk factors
identified within the Disclosure Documents. Subscriber further recognizes that
no Federal or state agencies have passed upon this offering of the Common Shares
or made any finding or determination as to the fairness of this investment.
7.10 Subscriber acknowledges that each certificate representing the Common
Shares shall contain a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AVAILABLE
EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT THE SELLER
DELIVERS TO THE COMPANY AN OPINION OF COUNSEL (WHICH OPINION
AND COUNSEL ARE REASONABLY SATISFACTORY TO THE COMPANY)
CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION.
7.11 If this Agreement is executed and delivered on behalf of a
partnership, corporation, trust or estate: (i) such partnership, corporation,
trust or estate has the full legal right and power and all authority and
approval required (a) to execute and deliver, or authorize execution and
delivery of, this Agreement and all other instruments executed and delivered by
or on behalf of such partnership, corporation, trust or estate in connection
with the purchase of the Common Shares, (b) to delegate authority pursuant to a
power of attorney and (c) to purchase and hold such Common Shares; (ii) the
signature of the party signing on behalf of such partnership, corporation, trust
or estate is binding upon such partnership, corporation, trust or estate; and
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(iii) such partnership, corporation or trust has not been formed for the
specific purpose of acquiring the Common Shares, unless each beneficial owner of
such entity is qualified as an "accredited investor" within the meaning of
Regulation D and has submitted information substantiating such individual
qualification.
7.12 If Subscriber is a retirement plan or is investing on behalf of a
retirement plan, Subscriber acknowledges that investment in the Common Shares
poses risks in addition to those associated with other investments, including
the inability to use losses generated by an investment in the Common Shares to
offset taxable income.
7.13 The information furnished by Subscriber in the Subscriber
Questionnaire signed by Subscriber is true and accurate as of the date thereof.
7.14 Subscriber acknowledges that the principals or employees of the
Placement Agent own warrants to purchase Common Shares of the Company, and may
exercise these warrants from time to time, either in the form of a cash exercise
or by using the mechanism of a cashless exercise. Subscriber also acknowledges
that the principals or employees of the Placement Agent may hold or from time to
time may sell, in the open market or in negotiated transactions, any such Common
Shares obtained pursuant to the warrants.
8. Understandings.
Subscriber understands, acknowledges and agrees with the Company and the
Placement Agent as follows:
8.1 The parties hereby acknowledge and agree that, except as otherwise
noted herein, upon acceptance from the Company and Placement Agent, and in the
case of Subscriber, upon notice of acceptance from the Company and Placement
Agent pursuant to Section 1.4, the Subscription hereunder is irrevocable by the
parties, that, except as required by law the parties are not entitled to cancel,
terminate or revoke this Agreement or any agreements of the parties hereunder
and that this Subscription Agreement and such other agreements shall survive the
death or disability of the parties and shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns. If
Subscriber is more than one person, the obligations of Subscriber hereunder
shall be joint and several and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and his or her heirs, executors, administrators,
successors, legal representatives and permitted assigns.
8.2 No federal or state agency has made any findings or determination as to
the fairness of the terms of this Offering for investment nor any
recommendations or endorsement of the Common Shares.
8.3 The Offering is intended to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act and the
provisions of Rule 506 of Regulation D thereunder, which is in part dependent
upon the truth, completeness and accuracy of the statements made by Subscriber
herein and in the Subscriber Questionnaire.
8.4 It is understood that in order not to jeopardize the Offering's exempt
status under Section 4(2) of the Securities Act and Regulation D, any transferee
may, at a minimum, be required to fulfill the investor suitability requirements
thereunder.
8.5 The Placement Agent will receive compensation from the Company in
connection with the Offering but is not guaranteeing or assuming responsibility
for the operation or possible liability of the Company, including, without
limitation, compliance by the Company with the agreements entered into in
connection with the Offering, and the Placement Agent will not supervise or
participate in the operation or management of the Company.
8.6 No person or entity acting on behalf, or under the authority, of
Subscriber is or will be entitled to any broker's, finder's or similar fee or
commission in connection with this Subscription.
8.7 Subscriber acknowledges that the information furnished in this
Agreement by the Company or the Placement Agent to Subscriber or its advisers in
connection with the Offering, is confidential and nonpublic and agrees that all
such written information which is material and not yet publicly disseminated by
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the Company shall be kept in confidence by Subscriber and neither used by
Subscriber for Subscriber's personal benefit (other than in connection with this
Subscription), nor disclosed to any third party, except Subscriber's legal and
other advisers who shall be advised of the confidential nature of such
information, for any reason; provided, however, that this obligation shall not
apply to any such information that (i) is part of the public knowledge or
literature and readily accessible at the date hereof, (ii) becomes a part of the
public knowledge or literature and readily accessible by publication (except as
a result of a breach of this provision) or (iii) is received from third parties
(except third parties who disclose such information in violation of any
confidentiality agreements or obligations, including, without limitation, any
subscription agreement entered into with the Company). The representations,
warranties and agreements of Subscriber and the Company contained herein and in
any other writing delivered in connection with the Offering shall be true and
correct in all material respects on and as of the Closing Date of such
Subscription as if made on and as of the date the Company executes this
Agreement and shall survive the execution and delivery of this Agreement and the
purchase of the Common Shares.
8.8 IN MAKING AN INVESTMENT DECISION, SUBSCRIBER MUST RELY ON ITS OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THE COMMON SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
8.9 Subscriber hereby acknowledges and agrees that Placement Agent has been
retained by the Company to act as the Company's placement agent in the Offering,
and that for its services, Placement Agent will be compensated by the Company
through payment of a fee equal to: (a) four percent of the gross proceeds from
the sale of Common Shares, plus reimbursement of Placement Agent's reasonable
out-of-pocket expenses in connection with the Offering.
9. Miscellaneous.
9.1 Except as set forth elsewhere herein, any notice or demand to be given
or served in connection herewith shall be deemed to be sufficiently given or
served for all purposes by being sent as registered or certified mail, return
receipt requested, postage prepaid, in the case of the Company, addressed to it
at the address set forth below:
Stonepath Group, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx, CFO
and in the case of Subscriber to the address for correspondence set forth
on the Subscriber Questionnaire.
9.2 This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Delaware, and shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. If any provision of this Agreement 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 to be modified to conform with such statute or rule of law. Any
provision hereof that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
9.3 In any action, proceeding or counterclaim brought to enforce any of the
provisions of this Agreement or to recover damages, costs and expenses in
connection with any breach of the Agreement, the prevailing party shall be
entitled to be reimbursed by the opposing party for all of the prevailing
party's reasonable outside attorneys' fees, costs and other out-of-pocket
expenses incurred in connection with such action, proceeding or counterclaim.
9.4 This Agreement (including Appendix I) and the Subscriber Questionnaire
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth herein. The Company acknowledges that
all material facts upon which it has relied in forming its decision to enter
into this Agreement are expressly set forth herein and further acknowledges that
the Subscriber has not made any representations, express or implied, which are
not set expressly set forth herein. This Agreement supercedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
9
9.5 The Company shall indemnify, defend and hold harmless Subscriber and
each of its agents, partners, members, officers, directors, representatives, or
affiliates (collectively, the "Subscriber Indemnities") against any and all
losses, liabilities, claims and expenses, including reasonable attorneys' fees
("Losses"), sustained by Subscriber Indemnities resulting from, arising out of,
or connected with any material inaccuracy in, breach of, or nonfulfillment of
any representation, warranty, covenant or agreement made by or other obligation
of the Company contained in this Agreement (including the Exhibits hereto) or in
any document delivered in connection herewith; provided, however, that with
respect to any representations, warranty, covenant or agreement made by or other
obligation of the Company contained in the Agreement qualified as to
materiality, the Company shall indemnify, defend and hold harmless the
Subscriber Indemnities against any and all Losses sustained by the Subscriber
Indemnities resulting from, arising out of, or connected with any inaccuracy in,
breach of, or nonfulfillment of any such representations, warranty, covenant,
agreement or other obligation.
9.6 The Company shall not issue any public statement or press release, or
otherwise disclose in any manner the identity of the Subscriber or that
Subscriber has purchased the Common Shares, without the prior written consent of
the Subscriber, except as may be required by applicable law; provided, however,
that the Company may disclose such information in any registration statement
filed with the SEC pursuant to the registration rights provisions set forth in
Appendix I hereto.
10. Signature. The signature page of this Agreement is contained as part of
the applicable Subscription Package, entitled "Signature Page."
10
SUBSCRIPTION AGREEMENT GENERAL INSTRUCTIONS
General Instructions
These Subscription Documents contain all documents necessary to subscribe
for Common Shares, $.001 par value ("Common Shares"), of Stonepath Group, Inc.,
a Delaware corporation (the "Company").
You may subscribe for Common Shares by completing the Subscription
Agreement in the following manner:
1. On line (a) of the signature page state the number of Common Shares you
wish to purchase.
2. On line (b) of the signature page state the total cost of the Common
Shares you wish to purchase. To obtain the cost, multiply the number of Common
Shares you desire to purchase by the purchase price per Common Share set forth
therein.
3. Please complete the detailed investment and other representations in the
Subscriber Questionnaire to evidence your suitability for an investment in the
Company. All purchasers must complete and sign the Subscription Agreement and
the Subscriber Questionnaire.
4. Sign and state your address, telephone number and social security or
other taxpayer identification number on the lines provided on the signature page
to the Subscription Agreement and deliver the completed Subscription Agreement
and Subscriber Questionnaire with payment of the entire purchase price of the
Common Shares subscribed for as set forth below. Payment should be made in
United States Dollars by wire transfer to:
Bank of Oklahoma NA
ABA # 103 900 036
Acct # 600024642
Acct Name: Bank of Texas Trust Funds
FFC Acct # 754448017
FFC Acct Name: Stonepath Group Escrow
Attn: Xxxxxx Xxxxxx
The Subscription Agreement Signature Page must be completed and signed by each
investor. Send all documents to:
Stonegate Securities, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxxx
Telephone No.: 214/000-0000
Facsimile No.: 214/987-1981
THE COMPLETED SUBSCRIPTION AGREEMENT AND SUBSCRIBER QUESTIONNAIRE SHOULD BE
RETURNED IN ITS ENTIRETY TO THE PLACEMENT AGENT DESIGNATED ABOVE.
Acceptance of Delivery
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of the completed Subscription Agreement will be
reasonably determined by the Company. The Company reserves the absolute right to
reject any completed Subscription Agreement, in its sole and absolute
discretion. The Company also reserves the right to waive any immaterial or
administrative defects in completing the signature page to the Subscription
Agreements; provided, however, that such waiver shall not impact any other
subscriber, and provided further the Company shall not waive any such
irregularity that would result in the offering not being eligible for the
exemption from registration provided by Regulation D. The Company shall be under
no duty to give any notification of irregularities in connection with any
attempted subscription for Common Shares or incur any liability for failure to
give such notification. Until such irregularities have been cured or waived, no
subscription for Common Shares shall be deemed to have been made. Any
Subscription Agreement that is not properly completed and as to which defects
have not been cured or waived will be returned by the Company to the subscriber
as soon as practicable.
11
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned investor hereby certifies that he or she (i) has
received and relied solely upon information provided by the Company, (ii) agrees
to all the terms and conditions of this Subscription Agreement, (iii) meets the
suitability standards set forth in this Subscription Agreement and (iv) is a
resident of the state or foreign jurisdiction indicated below.
(a) The undersigned subscribes for __________ Common Shares.
(b) The total cost of the Common Shares subscribed for, at $2.20 per Common
Share, is $__________ (the "Purchase Price").
(c) This Agreement is executed by the undersigned on _________, 2003.
_______________________________________________________
Name of Subscriber (Print) If other than Individual check one and indicate
capacity of signatory under the signature:
_______________________________________________________ [ ] Trust
Name of Joint Subscriber (if any) (Print) [ ] Estate
[ ] Uniform Gifts to Minors Act of State of __________________
[ ] Attorney-in-fact
_______________________________________________________ [ ] Corporation
Signature of Subscriber [ ] Other ____________________________________________________
_______________________________________________________ If Joint Ownership, check one:
Signature of Joint Subscriber (if any)
[ ] Joint Tenants with Right of Survivorship
_______________________________________________________ [ ] Tenants in Common
Capacity of Signatory (if applicable) [ ] Tenants by Entirety
[ ] Community Property
_______________________________________________________ Backup Withholding Statement:
Social Security or Taxpayer Identification Number Please check this box only if the investor is subject to:
[ ] backup withholding.
_______________________________________________________
Residence Address Foreign Person:
Please check this box only if the investor is a:
_______________________________________________________
City State Zip Code [ ] nonresident alien, foreign corporation, foreign partnership,
foreign trust or foreign estate.
Telephone ( )_______________________________________
Telecopy No. _______________________________________
The investor agrees to the terms of this Subscription Agreement and, as required
by the Regulations pursuant to the Internal Revenue Code, certifies under
penalty of perjury that (1) the Social Security Number or Taxpayer
Identification Number and address provided above is correct, (2) the investor is
not subject to backup withholding (unless the Backup Withholding Statement box
is checked) either because he has not been notified that he is subject to backup
withholding as a result of a failure to report all interest or dividends or
because the Internal Revenue Service has notified him that he is no longer
subject to backup withholding and (3) the investor (unless the Foreign Person
box above is checked) is not a nonresident alien, foreign partnership, foreign
trust or foreign estate.
THE SUBSCRIPTION FOR _____________ COMMON SHARES OF STONEPATH GROUP, INC.
BY THE ABOVE NAMED SUBSCRIBER(S) IS ACCEPTED AS OF ________________, 2003.
_________________________________
By: _____________________________________________
Title:___________________________________________
12
Schedule 4.1(c)
Capitalization Table as of 9/2/03
Authorized Capital Stock: 100,000,000 shares of common stock, par value $.001
per share
10,000,000 shares of preferred stock, par value $.001 per share
Number of shares issued and outstanding: 29,719,837 shares of common stock
Number of shares issuable and reserved for issuance pursuant to Company's
Amended and Restated 2000 Stock Incentive Plan (the "Plan"): 13,000,000
Number of shares issuable and reserved for issuance pursuant to securities
exercisable for, or convertible into or exchangeable for any shares of the
Company's capital stock is 16,295,296, consisting of the following:
1. 8,510,600 shares issuable upon exercise of options outstanding under the
company's Plan (*);
2. 1,985,100 shares issuable upon exercise of outstanding non-Plan options
(i.e., those options that were granted before the Plan was approved during June
2000);
3. 2,373,346 shares issuable upon exercise of outstanding common stock
purchase warrants; and
4. 3,401,250 shares issuable upon the conversion of outstanding Series D
Convertible Preferred stock.
TOTAL CAPITALIZATION 46,015,133
(*) The number of outstanding options does not give effect to the contemplated
grant of up to approximately 800,000 options that may be awarded to the
Company's CEO after evaluation of 2003 individual and company performance
objectives in accordance with the Report of the Company's Compensation Committee
contained within the Company's 2003 Proxy Statement.
13
Appendix I
Registration Rights
1. Definitions.
(a) As used in this Appendix I, the following terms shall have the
meanings:
(i) "Affiliate," of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in control of, is
controlled by, or is under common control with, such specified Person. For
purposes of this definition, control of a Person means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person whether by contract, securities ownership or otherwise; and the
terms "controlling" and "controlled" have the respective meanings correlative to
the foregoing.
(ii) "Commission" means the Securities and Exchange Commission.
(iii) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(iv) "Investors" means the Subscribers and any permitted transferee or
assignee of Registrable Securities who agrees to become bound by all of the
terms and provisions of this Appendix I and the subscription agreements executed
as part of the Offering.
(v) "Person" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust, unincorporated
organization, or a government agency or political subdivision thereof.
(vi) "Prospectus" means the prospectus (including any preliminary
prospectus and/or any final prospectus filed pursuant to Rule 424(b) under the
Securities Act and any prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by the Registration Statement and by all other amendments and
supplements to such prospectus, including all material incorporated by reference
in such prospectus and all documents filed after the date of such prospectus by
the Company under the Exchange Act and incorporated by reference therein.
(vii) "Public Offering" means an offer registered with the Commission
and the appropriate state securities commissions by the Company of its Common
Stock and made pursuant to the Securities Act.
(viii) "Registrable Securities" means the Common Shares purchased
pursuant to the subscription agreements executed as part of the Offering;
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provided, however, a Common Share shall cease to be a Registrable Security for
purposes of this Appendix I when it no longer is a Restricted Security.
(ix) "Registration Statement" means a registration statement of the
Company filed on Form S-3 under the Securities Act providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Registrable Securities pursuant to Rule 415 under the Securities
Act, including the Prospectus contained therein and forming a part thereof, any
amendments to such registration statement and supplements to such Prospectus,
and all exhibits and other material incorporated by reference in such
registration statement and Prospectus. In the event that Form S-3 is unavailable
for such a registration, the Company shall use such other form as is available
for such a registration.
(x) "Restricted Security" means any Common Share except any that (i)
have been registered pursuant to an effective registration statement under the
Securities Act and sold in a manner contemplated by the prospectus included in
such registration statement, (ii) have been transferred in compliance with the
resale provisions of Rule 144 under the Securities Act (or any successor
provision thereto) or is transferable pursuant to paragraph (k) of Rule 144
under the Securities Act (or any successor provision thereto), or (iii)
otherwise has been transferred and are not subject to transfer restrictions
under the Securities Act.
(xi) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, or any similar
successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Agreement.
2. Registration.
(a) Filing and Effectiveness of Registration Statement. The Company shall
prepare and file with the Commission not later than twenty business days
following the Final Closing (as that term is defined in the accompanying
Subscription Agreement) (the "Filing Deadline") a Registration Statement
relating to the offer and sale of the Registrable Securities by the Investors
and shall use its best efforts to cause the Commission to declare such
Registration Statement effective under the Securities Act as promptly as
practicable, but not later than 120 days after the Final Closing (the
"Effectiveness Deadline"). The Common Shares issued in the Offering, and the
Common Shares referenced in Section 10(g), shall be included in such
Registration Statement. The Company shall notify the Investors in writing by
telecopy notice that such Registration Statement has been declared effective by
the Commission on the date of such declaration by the Commission. The Company
agrees to keep such Registration Statement effective until the earlier of: (i)
the passage of two years from the effective date of such Registration Statement;
or (ii) the date on which all Registrable Securities may be resold by the
Investors by reason of Rule 144(k) under the Securities Act or any other rule of
similar effect.
(b) Registration Default. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) is not (i) filed with the Commission by the Filing Deadline, provided that
the Company has used its commercially reasonable best efforts to do so, or (ii)
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declared effective by the Commission by the Effectiveness Deadline (each of the
Filing Deadline and Effectiveness Deadline, an "Initial Date"), then the Company
shall make the payments to the Investors as provided in the next sentence as
liquidated damages and not as a penalty. The amount to be paid by the Company to
the Investors shall be determined as of each Computation Date (as defined below)
and, as applicable, the actual filing and effectiveness dates of the
Registration Statement, and such amount shall be equal to 2.5% (the "Liquidated
Damage Rate") of the Purchase Price (as defined in the Subscription Agreement)
for the period from the Initial Date to the first Computation Date, and for each
30-day period of any subsequent Computation Dates thereafter, calculated on a
pro rata basis to the date on which the Registration Statement is filed with (in
the event of an Initial Date pursuant to clause (i) above) or declared effective
by (in the event of an Initial Date pursuant to clause (ii) above) the
Commission (the "Periodic Amount") provided, however, that in no event shall the
liquidated damages be less than $70,000. The full Periodic Amount shall be paid
by the Company to the Investors, pro rata, by wire transfer of immediately
available funds within three days after each Computation Date and, as
applicable, the actual filing and effectiveness dates of the Registration
Statement.
As used in this Section 2(b), "Computation Date" means the date which is 30
days after the Initial Date and, if the Registration Statement to be filed by
the Company pursuant to Section 2(a) has not theretofore been filed with the
Commission or declared effective by the Commission, as the case may be, each
date which is 30 days after the previous Computation Date until such
Registration Statement is so filed or declared effective, as the case may be.
Notwithstanding the above, if the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not filed with the Commission by the Filing Deadline, the Company
shall be in default of the terms of this Appendix I, and the Investors shall be
entitled to damages as set forth above.
(c) Piggyback Registration Rights.
(i) Until such date as the Registration Statement to be filed in
accordance with Section 2(a) is declared effective by the Commission, if the
Company proposes to register any of its Common Shares or any other common shares
of the Company under the Securities Act (other than a registration (A) on Form
S-8 or S-4 or any successor or similar forms, (B) relating to Common Shares or
any other common shares of the Company issuable upon exercise of employee or
consultant share options or in connection with any employee benefit or similar
plan of the Company or (C) in connection with a direct or indirect acquisition
by the Company of another Person or any transaction with respect to which Rule
145 (or any successor provision) under the Securities Act applies), whether or
not for sale for its own account, it will each such time, give prompt written
notice at least 20 days prior to the anticipated filing date of the registration
statement relating to such registration to the Investors, which notice shall set
forth such Investors' rights under this Section 2(c) and shall offer the
Investors the opportunity to include in such registration statement such number
of Registrable Securities as the Investors may request. Upon the written request
of an Investor made within 10 days after the receipt of notice from the Company
(which request shall specify the number of Registrable Securities intended to be
disposed of by such Investors), the Company will use its best efforts to effect
the registration under the Securities Act of all Registrable Securities that the
Company has been so requested to register by the Investors, to the extent
requisite to permit the disposition of the Registrable Securities to be so
registered; provided, however, that (A) if such registration involves a Public
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Offering, the Investors must sell their Registrable Securities to the
underwriters on the same terms and conditions as apply to the Company and (B)
if, at any time after giving written notice of its intention to register any
Registrable Securities pursuant to this Section 2(c) and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such Registrable
Securities, the Company shall give written notice to the Investors and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. The Company's obligations under
this Section 2(c) shall remain in effect for the period required by Section 3
(a) below; however, in no event shall this Section 2 (c) require the inclusion
of the Registrable Securities in more than one effective registration statement.
(ii) If a registration pursuant to this Section 2(c) involves a Public
Offering and the managing underwriter thereof advises the Company that, in its
view, the number of Common Shares, if any, or other Common Shares that the
Company and the Investors intend to include in such registration exceeds the
largest number of Common Shares (including any other Common Shares or warrants
of the Company) that can be sold without having an adverse effect on such Public
Offering (the "Maximum Offering Size"), the Company will include in such
registration only that number of Common Shares which does not exceed the Maximum
Offering Size, in the following order of priorities: (1) first, all securities
the Company proposes to sell for its own account, (2) second, up to the full
number of securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the Registration
Statement by reason of demand registration rights, and (3) third, the securities
requested to be registered by other holders of securities entitled to
participate in the registration, drawn from them pro-rata based on the number of
shares each has requested to be included in such registration and the Investors
pursuant to this Appendix I.
If as a result of the proration provisions of this Section 2(c)(ii), the
Investors are not entitled to include all such Registrable Securities in such
registration, such Investors may elect to withdraw their request to include any
Registrable Securities in such registration.
Notwithstanding the foregoing, the Company shall have no obligations under
this Section 2(c) hereof at any time that such Registrable Securities are the
subject of an effective registration statement.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall:
(a) Subject to the provisions of Section 3(r) hereof, promptly (i) prepare
and file with the Commission such amendments (including post-effective
amendments) to the Registration Statement and supplements to the Prospectus as
may be necessary to keep the Registration Statement continuously effective and
in compliance with the provisions of the Securities Act applicable thereto so as
to permit the Prospectus forming part thereof to be current and useable by
Investors for resales of the Registrable Securities for a period of two years
from the date the Registration Statement is first declared effective by the
Commission (the "Effective Time") or such shorter period that will terminate
when all the Registrable Securities covered by the Registration Statement have
been sold pursuant thereto in accordance with the plan of distribution provided
in the Prospectus, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in the delivery of new securities
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not subject to transfer restrictions under the Securities Act (the "Registration
Period") and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an 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
and (B) the Prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the Registration
Period include an 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, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the Company's obligations hereunder
shall terminate as to any investor at such time as that Investor's Registrable
Securities can be sold under Rule 144(k);
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
(including a copy of the accountant's consent letter to be included in the
filing) to Stonegate Securities, Inc. ("Stonegate") and reflect in such
documents all such comments as Stonegate reasonably may propose; and (ii)
furnish to each Investor whose Registrable Securities are included in the
Registration Statement, (A) promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by the Company, one copy of
the Registration Statement, each Prospectus, and each amendment or supplement
thereto, and (B) such number of copies of the Prospectus and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "Blue Sky" laws of all
jurisdictions requiring Blue Sky registration or qualification, (ii) prepare and
file in such jurisdictions such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such event, notify
each Investor of the occurrence of any event, as a result of which the
Prospectus included in the 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, in
light of the circumstances under which they were made, not misleading, and
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promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) Notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement on the date of receipt of any such
stop order or other suspension, and take all lawful action to effect the
withdrawal, recession or removal of such stop order or other suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed not later than the date that the Registration Statement
is declared effective by the Commission on the principal national securities
exchange, or included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same class or
series issued by the Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions that are consistent with the
provisions of this Agreement and the transactions that are contemplated hereby
that are reasonably necessary to expedite and facilitate the disposition by the
Investors of their Registrable Securities in accordance with the intended
methods therefor provided in the Prospectus which are customary under the
circumstances; provided, however, the Company shall have no obligation to assure
the terms and conditions of distribution, to obtain a commitment from an
underwriter relative to the sale of the Registrable Securities or to otherwise
assume any responsibility for the manner, price or terms of the distribution of
the Registrable Securities;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
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(l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) In connection with any underwritten offering, make such representations
and warranties to the Investors participating in such underwritten offering and
to the managers, in form, substance and scope as are customarily made by the
Company to underwriters in secondary underwritten offerings;
(n) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the date the Registration Statement is first declared
effective or most recent post- effective amendment thereto, as the case may be,
the absence from the Registration Statement and the Prospectus, including any
documents incorporated by reference therein, of an untrue statement of a
material fact or the omission of a material fact required to be stated therein
or necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, subject
to customary limitations);
(o) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(p) In connection with any underwritten offering, deliver such documents
and certificates as may be reasonably required by the managers, if any; and
(q) In connection with any underwritten offering, in the event that any
broker-dealer registered under the Exchange Act shall be an "Affiliate" (as
defined in Rule 2729(b)(1) of the rules and regulations of the National
Association of Securities Dealers, Inc. (the "NASD Rules") (or any successor
provision thereto)) of the Company or has a "conflict of interest" (as defined
in Rule 2720(b)(7) of the NASD Rules (or any successor provision thereto)) and
such broker-dealer shall underwrite, participate as a member of an underwriting
syndicate or selling group or assist in the distribution of any Registrable
Securities covered by the Registration Statement, whether as a holder of such
Registrable Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, the Company shall assist such
AI-7
broker-dealer in complying with the requirements of the NASD Rules, including,
without limitation, by (A) engaging a "qualified independent underwriter" (as
defined in Rule 2720(b)(15) of the NASD Rules (or any successor provision
thereto)) to participate in the preparation of the Registration Statement
relating to such Registrable Securities, to exercise usual standards of due
diligence in respect thereof and to recommend the public offering price of such
Registrable Securities, (B) indemnifying such qualified independent underwriter
to the extent of the indemnification of underwriters provided in Section 6
hereof, and (C) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the requirements of the
NASD Rules.
(r) Notwithstanding anything to the contrary in Section 3, at any time
after the Registration Statement has been declared effective, the Company may
delay the disclosure of material non-public information concerning the Company,
the disclosure of which at the time is not, in the good faith opinion of the
Company and its counsel, in the best interest of the Company (a "Grace Period");
provided, that the Company shall promptly (i) notify the Investors in writing of
the existence of material non-public information giving rise to a Grace Period
and the date on which the Grace Period will begin, and (ii) notify the Investors
in writing in advance of, or on the same date on which, the Grace Period ends;
and, provided further, that during any consecutive 365 day period, there shall
be only two Grace Periods, such Grace Periods in total not to exceed 45 days.
For purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the holders receive the notice referred to
in clause (i) and shall end on and include the date specified as the Grace
Period ending date in the notice referred to in clause (ii). If at any time
after the Registration Statement has been declared effective, the Company delays
disclosure of material non-public information concerning the Company, other than
during a permitted Grace Period as described above, the Company shall make
payments to the Investors as provided in the next sentence as liquidated damages
intended by the parties to compensate the Investors in part for the incremental
costs and investment risks associated with holding the Registrable Securities as
restricted securities and not as a penalty. The amount of payments shall be
calculated at the Liquidated Damage Rate of the Purchase Price in accordance
with the provisions of Section 2(b) (including its provision of a minimum amount
of $70,000), and the timing of payments shall also be determined in accordance
with Section 2(b). For the purposes of such calculations and determinations of
the amount and timing of payments: (i) the Initial Date shall mean the first
date that the Company delays disclosure of material non-public information
concerning the Company other than during a permitted Grace Period and (ii) the
Computation Date shall mean the date that is 30 days after the Initial Date and
each date that is 30 days after the previous Computation Date until such period
of delay has ceased and the Company has provided notice to the Investors of the
end of such period in accordance with the provisions of this section above.
Nothing herein shall limit the rights of any Investor to pursue actual damages
for the Investor's inability to sell any of the Registrable Securities into the
public market for any reason described in this section.
Notwithstanding the foregoing, the Company shall have no obligations under
Section 3(l) through (q) unless it is effecting an underwritten offering
pursuant to Section 2(c).
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations,
which obligations shall be several and not joint:
(a) Prior to the first anticipated filing date of the Registration
Statement under Section 2(a) hereof, the Company shall provide the Investors
with a draft of the Registration Statement, including such information about the
Investor as has been provided in the Questionnaire completed by the Investor,
AI-8
together with whatever confirmations, certificates or consents as may be
reasonably requested by the Company. In connection with any other Registration
Statement including the Investors, it shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Appendix I with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request in writing and as are customary. At least ten business days
prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Investor and its counsel, whether in-house or
otherwise ("Counsel") of the information the Company requires from each such
Investor (the "Requested Information") if such Investor elects to have any of
its Registrable Securities included in the Registration Statement. If at least
four business days prior to the anticipated filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor") or its Counsel, then the Company shall send such Non-Responsive
Investor and its Counsel a reminder of such information request. If at least two
business days prior to the anticipated filing date the Company still has not
received the Requested Information from such Non-Responsive Investor or its
Counsel, then the Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Investor. However, promptly upon
receipt of the Requested Information, and at the expense of the Non-Responsive
Investor, the Company shall file such amendment(s) to the Registration Statement
as may be necessary to include therein the Registrable Securities of the
Non-Responsive Investor.
(b) Each Investor by its acceptance of the Registrable Securities agrees to
cooperate with the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of its election to exclude all of its Registrable Securities from the
Registration Statement; the Company shall, on its part, ensure that Item 507 of
Regulation S-K of the Securities Act (regarding information on the selling
security holders) be complied with in connection with its preparation and filing
of the Registration Statement hereunder;
(c) As promptly as practicable after becoming aware of such event, notify
the Company of the occurrence of any event, as a result of which the Prospectus
included in the 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, in light of the
circumstances under which they were made, not misleading; and
(d) Each Investor agrees that, upon receipt of any notice from the Company
of the occurrence of any event of the kind described in Section 3(e) or 3(f), it
shall immediately discontinue its disposition of Registrable Securities pursuant
to the Registration Statement covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(e) and, if so directed by the Company, such Investor
shall deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
AI-9
5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company, and
the reasonable fees, not to exceed $5,000.00, of one firm of counsel to the
holders of a majority in interest of the Registrable Securities shall be borne
by the Company.
6. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Investor and each
underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective officers and directors and each person
who controls such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Person") from and against
any losses, claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person written notice that such Prospectus is
outdated or defective.
(b) Indemnification by the Investors. Each Investor agrees, as a
consequence of the inclusion of any of its Registrable Securities in a
Registration Statement, severally and not jointly, to (i) indemnify and hold
harmless the Company, its directors (including any person who, with his or her
consent, is named in the Registration Statement as a director nominee of the
Company), its officers and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus 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 (in light of the circumstances under which they were
AI-10
made, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made by such Investor in reliance
upon and in conformity with written information furnished to the Company by such
holder expressly for use therein; provided, however, that no Investor shall be
liable under this Section 6(b) for any amount in excess of the gross proceeds
paid to such Investor in respect of shares sold by it, and (ii) reimburse the
Company for any legal or other expenses incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(c) Indemnification by the Underwriters. Each underwriter, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors (including any person who, with his or her consent, is named in the
Registration Statement as a director nominee of the Company), its officers and
each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities to which the Company or such other
persons may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such Registration Statement or Prospectus 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 (in light of the circumstances under which they were made, in
the case of the Prospectus), not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such holder or underwriter
expressly for use therein; provided, however, that no underwriter shall be
liable under this Section 6(b) for any amount in excess of the gross proceeds
paid to such underwriter in respect of shares sold by it, and (ii) reimburse the
Company for any legal or other expenses incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(d) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
AI-11
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.
(e) Contribution. If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(e) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(e).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(e) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.
(f) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the gross
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act.
AI-12
(g) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. Rule 144. With a view to making available to the Investors the benefits of
Rule 144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Investor, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
8. Assignment. Subject to the last sentence of this paragraph, in the event
there is not an effective Registration Statement covering the Registrable
Securities, the rights to have the Company register Registrable Securities
pursuant to this Appendix I may be assigned or transferred without the prior
written consent of the Company. Additionally, subject to the last sentence of
this paragraph, consent of the Company shall not be required with respect to any
assignment or transfer of Registrable Securities to an affiliate of Investor,
including for this purpose if Investor is an investment company, any fund or
account advised by Investor's investment adviser or any affiliate thereof and if
the Investor is a partnership, any partner thereof. In the event of any such
assignment or transfer by the Investors to any permitted transferee of all or
any portion of such Registrable Securities such transfer will be allowed only
if: (a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.
9. Amendment and Waiver. Any provision of this Appendix I may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and Investors who hold a majority interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon each Investor and the Company.
AI-13
10. Miscellaneous.
(a) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) If after the date hereof and prior to the Commission declaring the
Registration Statement to be filed pursuant to Section 2(a) effective under the
Securities Act, the Company grants to any Person any registration rights with
respect to any Company securities which are more favorable to such other Person
than those provided in this Appendix I, then the Company forthwith shall grant
(by means of an amendment to this Appendix I or otherwise) identical
registration rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service as follows, and shall be
deemed given when actually received.
if to the Company, to: Stonepath Group, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx, CFO
With a copy to: Xxxxxxx Xxxxx
Stonepath Group, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
if to the Investors, to: To the address set forth in the subscriber
questionnaire filled out by each Investor in
connection with the Subscription Agreement
The Company or any Investor may change the foregoing address by notice
given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under this
Appendix I or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(e) This Appendix I shall be governed by and interpreted in accordance with
the laws of the State of Delaware.
AI-14
(f) The remedies provided in this Appendix I are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Appendix I is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(g) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Appendix I or otherwise conflicts with the
provisions hereof. Except for approximately 50,000 shares issued in lieu of
liquidated damages paid to investors in a prior private placement, the Company
is not currently a party to any agreement granting any registration rights with
respect to any of its securities to any person which conflicts with the
Company's obligations hereunder or gives any other party the right to include
any securities in any Registration Statement filed pursuant hereto. Without
limiting the generality of the foregoing, without the written consent of the
holders of a 66 2/3% interest of the Registrable Securities, the Company shall
not file a registration statement to register any of its securities under the
Securities Act (other than a registration (A) on Form S-8 or S-4 or any
successor or similar forms, (B) relating to Common Shares or any other common
shares of the Company issuable upon exercise of employee or consultant share
options or in connection with any employee benefit or similar plan of the
Company or (C) in connection with a direct or indirect acquisition by the
Company of another Person or any transaction with respect to which Rule 145 (or
any successor provision) under the Securities Act applies) until all Registrable
Securities have been registered pursuant to a Registration Statement that has
been declared effective by the Commission. The restrictions on the Company's
rights to grant registration rights under this paragraph shall terminate on the
date all Registrable Securities have been registered pursuant to a Registration
Statement that has been declared effective by the Commission.
(h) This Appendix I and the Subscription Agreements constitute the entire
agreement among the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Appendix I and the Subscription
Agreements supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Appendix I shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Appendix I are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
