SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of November ___,
2005,
by
and among Comprehensive Healthcare Solutions, Inc., a Delaware corporation
(the
"Company"),
and the subscribers identified
on
the
signature page hereto (each a "Subscriber" and
collectively "Subscribers").
WHEREAS,
the Company and the Subscribers are executing and delivering this Agreement
in
reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2), Section 4(6) and/or Regulation D ("Regulation D")
as
promulgated by the United States Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933
Act").
WHEREAS,
the parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscribers, as provided herein,
and the Subscribers, in the aggregate, shall purchase $500,000 (the "Purchase
Price") of principal amount of promissory notes of the Company ("Note" or
"Notes") convertible into shares of the Company's common stock, $.10 par value
(the "Common Stock") at a per share conversion price of $0.25 per share, and
share purchase warrants (the "Warrants") in the form attached hereto as Exhibits
A and B respectively, to purchase shares of Common Stock (the "Warrant Shares")
(the "Offering"). The Notes, shares of Common Stock issuable upon conversion
of
the Notes (the "Shares"), the Warrants and the Warrant Shares are collectively
referred to herein as the "Securities"; and
WHEREAS,
the Company has entered into a Placement Agency Agreement with Westor Capital
Group, Inc. (the "Placement Agency Agreement") dated November __,
2005.
NOW,
THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Subscribers hereby agree as
follows:
1. Conditions
to Closing. Subject to the satisfaction or waiver of the terms and conditions
of this Agreement, on the "Closing Date" (as defined
in
Section 2 below), each Subscriber shall purchase and the Company
shall
sell to each Subscriber a Note in the principal
amount designated on the signature page hereto and the
amount of Warrants determined pursuant
to
Section 3 below. The aggregate principal
amount of the Notes to be purchased by the Subscribers on the Closing Date
shall, in the aggregate, be equal to the Purchase Price.
2. Closing.
The consummation of the transactions contemplated herein shall take place at
the
offices
of
Westor
Capital Group, Inc. 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxx, Xxx Xxxx 00000, upon
the satisfaction of all conditions to Closing set forth in this Agreement
("Closing Date"). At the Closing, the Company shall deliver to each Subscriber
this Agreement, a Note in a principal amount equal to such Subscriber's
investment amount and a Warrant, all duly executed by the Company, as well
as a
legal opinion form counsel to the Company, in a form acceptable to the
Subscribers. At the Closing, each Subscriber shall deliver to the Company its
investment amount in immediately available funds.
1
3. Warrants.
On the Closing Date, the Company will issue and deliver to each Subscriber
three
warrants as follows: (i) one “A” Warrant entitling the Subscriber to purchase
one share of Common Stock for every 3 shares of Common Stock into which the
Notes would be converted into on the Closing Date. The exercise price to acquire
a Warrant Share upon exercise of the “A” Warrant shall be $.40 per share; (ii)
one “B” Warrant entitling the Subscriber to purchase one share of Common Stock
for every 3 shares of Common Stock into which the Notes would be converted
into
on the Closing Date. The exercise price to acquire a Warrant Share upon exercise
of the “B” Warrant shall be $.80 per share; and, (iii) one “C” Warrant entitling
the Subscriber to purchase one share of Common Stock for every 3 shares of
Common Stock into which the Notes would be converted into on the Closing Date.
The exercise price to acquire a Warrant Share upon exercise of the “C” Warrant
shall be $1.20 per share.
4. Subscriber's
Representations and Warranties. Each Subscriber hereby represents and warrants
to and agrees with the Company only as to such Subscriber that:
(a) Organization
and Standing of the Subscribers. If the Subscriber is an entity, such Subscriber
is a corporation, partnership or other entity duly incorporated or organized,
validly existing and in good standing under the laws of the jurisdiction of
its
incorporation or organization.
(b) Authorization
and Power. Each Subscriber has the requisite power and authority to enter into
and perform this Agreement and to purchase the Securities being sold to it
hereunder. The execution, delivery and performance of this Agreement by such
Subscriber and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate or partnership
action, and no further consent or authorization of such Subscriber or its Board
of Directors, stockholders, partners, members, as the case may be, is
required.
(c) No
Conflicts. The execution, delivery and performance of this Agreement and the
consummation by such Subscriber of the transactions contemplated hereby do
not
(i) conflict with such Subscriber's charter documents or bylaws or other
organizational documents or (ii) violate law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to such
Subscriber or its properties, except for such conflicts and violations would
not, individually or in the aggregate, have a material adverse effect on such
Subscriber. Such Subscriber is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or to purchase the Notes or acquire the Warrants in
accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, such Subscriber is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
(d) Information
on Company. Such Subscriber has reviewed the Reports and has been afforded
(i)
the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information about the Company and
the Subsidiaries and their respective financial condition,
2
(e) Information
on Subscriber. The Subscriber is, and will be at the time of the exercise of
the
Warrants,
an
"accredited investor", as such term is defined
in
Regulation D promulgated by the Commission under the 1933 Act, is
experienced
in
investments and business
matters,
has
made investments of a speculative nature and has
purchased securities of United States publicly-owned companies
in
private placements in the past and,
with
its representatives, has such knowledge and experience
in financial,
tax
and other
business matters
as to
enable the Subscriber
to
utilize the information made available by the Company
to
evaluate the merits and risks
of
and to
make
an
informed
investment decision with respect to the proposed purchase, which represents
a
speculative investment. The information set forth on the signature page hereto
regarding the Subscriber is accurate. Such Subscriber is not a registered
broker-dealer under Section 15 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"). Such Subscriber does not have any agreement
or understanding, directly or indirectly, with any Person
to
distribute
any of
the
Securities
(f) Investment
Intent: Such Subscriber is acquiring the Securities as principal for its
own
account for investment purposes only and not
with
a view to or for distributing or reselling
such
Securities or any part
thereof,
without prejudice, however, to such Subscriber's right at all times to sell
or
otherwise dispose of all or any part
of such
Securities in compliance
with
applicable federal and state securities laws. Subject to the immediately
preceding sentence, nothing contained herein shall be deemed a representation
or
warranty by such Subscriber to hold the Securities for any period
of
time. Such Subscriber is acquiring the Securities
hereunder in the ordinary
course
of its business.
(g) Shares
Legend. The Shares and the Warrant Shares shall bear the following or similar
legend for as long as is required pursuant to this Agreement:
"THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW
OR
3
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO COMPREHENSIVE HEALTHCARE
SOLUTIONS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(h) Warrants
Legend. The Warrants shall bear the following or similar legend:
"THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND
THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT
BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE
STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COMPREHENSIVE
HEALTHCARE SOLUTIONS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(i) Note
Legend. The Note shall bear the following legend:
"THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO COMPREHENSIVE HEALTHCARE SOLUTIONS, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED.
(j) Communication
of Offer. The offer
to
sell
the Securities was directly communicated to such Subscriber by the Company
and/or its agents. At no time was such Subscriber presented with or solicited
by
any leaflet,
newspaper
or magazine article, radio or television advertisement, or any other form of
general advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such
communicated
offer.
(k) Enforceability.
This Agreement has been duly authorized and executed
by such Subscriber
and,
when
delivered by the Subscriber, will become Subscriber's valid and binding
agreement enforceable against Subscriber in accordance
with
their terms, subject to bankruptcy,
(h)
4
insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(l) Restricted
Securities. Such Subscriber understands that the Securities have not been
registered under the 1933 Act and such Subscriber will not sell, offer to sell,
assign, pledge, hypothecate or otherwise transfer any of the Securities unless
pursuant to an effective registration statement under the 1933 Act or under
an
exemption from such registration requirements. Accordingly, Securities must
be
held indefinitely unless a subsequent disposition is registered under the 1933
Act or any applicable state securities laws or is exempt from such registration.
Notwithstanding anything to the contrary contained in this Agreement, such
Subscriber may transfer (without restriction and without the need for an opinion
of counsel) the Securities to its Affiliates (as defined below) provided that
each such Affiliate is an "accredited Subscriber" under Regulation D and such
Affiliate agrees to be bound by the terms and conditions of this Agreement.
For
the purposes of this Agreement, an "Affiliate" of any person or entity means
any
other person or entity directly or indirectly controlling, controlled by or
under direct or indirect common control with such person or entity. Affiliate
includes each subsidiary of the Company. For purposes of this definition,
"control" means the power to direct the management and policies of such person
or firm, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
(m) Limited
Ownership. The purchase by such Subscriber of the Note and Warrant issuable
to
it at the Closing will not result in such Subscriber (individually or together
with other Person with whom such Subscriber has identified, or will have
identified, itself as part of a "group" in a public filing made with the
Commission involving the Company's securities) acquiring, or obtaining the
right
to acquire, in excess of 19.999% of the outstanding shares of Common Stock
or
the voting power of the Company on a post transaction basis that assumes that
the Closing shall have occurred. Such Subscriber does not presently intend
to,
alone or together with others, make a public filing with the Commission to
disclose that it has (or that it together with such other persons have)
acquired, or obtained the right to acquire, as a result of the Closing (when
added to any other securities of the Company that it or they then own or have
the right to acquire), in excess of 19.999% of the outstanding shares of Common
Stock or the voting power of the Company on a post transaction basis that
assumes that the Closing shall have occurred.
(n) No
Governmental Review. Each Subscriber understands that no United States federal
or state agency or any other governmental or state agency has passed on or
made
recommendations or endorsement of the Securities or the suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Securities.
(o) Correctness
of Representations. The foregoing representations and warranties of such
Subscriber are true and correct as of the date hereof and, unless such
Subscriber otherwise
notifies
the Company prior to the Closing Date shall be true and correct as of the
Closing Date.
(p) Survival.
The foregoing representations and warranties shall survive the Closing
Date.
5
The
Company acknowledges and agrees that no Subscriber has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 4.
5.
Company Representations and Warranties. Except as set forth in the Disclosure
Schedule (attached hereto as Attachment 1) (the parties understand and agree
that an item disclosed under a particular schedule shall only qualify the
Section referenced in the heading to such particular schedule, and shall not
modify or qualify any other schedule not referenced in such schedule heading),
the Company represents and warrants to and agrees with each Subscriber
that:
(a) Due
Incorporation. The Company is a corporation duly organized, validly existing
and
in good standing under the laws of the jurisdiction of its incorporation and
has
the requisite corporate power to own its properties and to carry on its business
is disclosed in the Reports. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure
to
so qualify would not have a Material Adverse Effect. For purpose of this
Agreement, a "Material Adverse Effect" shall mean any of (i) a material and
adverse effect on the legality, validity or enforceability of any of this
Agreement, any Note, Warrant, Share or Warrant Share (collectively, the
"Transaction Documents"), (ii) a material and adverse effect on the results
of
operations, assets, prospects, business or condition (financial or otherwise)
of
the Company and the Subsidiaries, taken as a whole, or (iii) an adverse
impairment to the Company's ability to perform on a timely basis its obligations
under any Transaction Document.
(b) Outstanding
Stock. All issued and outstanding
shares of capital stock of the Company
has
been duly authorized and validly
issued and are fully paid and nonassessable.
(c) Authority;
Enforceability. This Agreement, the Note, the Warrants, and the Escrow
Agreement, and any other agreements delivered together with this Agreement
or in
connection herewith (collectively "Transaction Documents") have been duly
authorized, executed and delivered by the Company and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of
general applicability relating to or affecting creditors' rights generally
and
to general principles of equity. The Company has full corporate power and
authority necessary to enter into and deliver the Transaction Documents and
to
perform its obligations thereunder.
(d) Additional
Issuances. There are no outstanding agreements or preemptive or similar rights
affecting the Company's common stock or equity and no outstanding rights,
warrants or options to acquire, or instruments convertible into or exchangeable
for, or agreements or understandings with respect to the sale or issuance of
any
shares of common stock or equity of the Company or other equity interest in
the
Company except as described on Schedule 5(d).
6
(e) Consents.
No consent, approval, authorization or order of any court, governmental agency
or body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, the Over The Counter Bulletin Board ("The OTCBB") nor the Company's
shareholders is required for the execution by the Company of the Transaction
Documents and compliance and performance by the Company of its obligations
under
the Transaction Documents, including, without limitation, the issuance and
sale
of the Securities.
(f) No
Violation or Conflict. Assuming the representations and warranties of the
Subscribers in Section 4 are true and correct, neither the issuance and sale
of
the Securities nor the performance of the Company's obligations under this
Agreement and all other agreements entered into by the Company relating thereto
by the Company will:
(i) violate,
conflict with, result in a breach of, or constitute a default (or an event
which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the articles or certificate of
incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the properties or assets
of the Company or any of its Affiliates, (C) the terms of any bond, debenture,
note or any other evidence of indebtedness, or any agreement, stock option
or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its Affiliates is a party, by which
the Company or any of its Affiliates is bound, or to which any of the properties
of the Company or any of its Affiliates is subject, or (D) the terms of any
"lock-up" or similar provision of any underwriting or similar agreement to
which
the Company, or any of its Affiliates is a party except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect;
or
(ii) result
in
the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates;
or
(iii) result
in
the activation of any anti-dilution rights or a reset or repricing of any debt
or security instrument of any other creditor or equity holder of the Company,
nor result in the acceleration of the due date of any obligation of the Company;
or
(iv) result
in
the activation of any piggy-back registration rights of any person or entity
holding securities of the Company or having the right to receive securities
of
the Company.
(i)
7
(i) are,
or
will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and
any
applicable state securities laws;
(ii) have
been, or will be, duly and validly authorized and on the date of issuance of
the
Shares and upon exercise of the Warrants, the Shares and Warrant Shares will
be
duly and validly issued, fully paid and nonassessable or if registered pursuant
to the 1933 Act, and resold pursuant to an effective registration statement
will
be free trading and unrestricted);
(iii) will
not
have been issued or sold in violation of any preemptive or other similar rights
of the holders of any securities of the Company; and
(iv) will
not
subject the holders thereof to personal liability by reason of being such
holders.
(h)
Litigation. There is no pending or, to the best knowledge of the Company,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates
that
would affect the execution by the Company or the performance by the Company
of
its obligations under the Transaction Documents. Except as disclosed on the
Disclosure Schedule or in the Reports, there is no pending or, to the best
knowledge of the Company, basis for or threatened action, suit, proceeding
or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its Affiliates
which
litigation if adversely determined would have a Material Adverse
Effect.
(i)
Reporting Company. The Company is eligible to register the resale of its Common
Stock for resale by the Subscribers under Form SB-2 promulgated under the 1933
Act. The Company is a publicly-held company subject to reporting obligations
pursuant to Section 13 of the 1934 Act and has a class of common shares
registered pursuant to Section 12(g) of the 1934 Act. Pursuant to the provisions
of the 1934 Act, the Company has timely filed
with
the
Commission all reports and other materials required to be filed
thereunder
during the preceding twelve months (collectively, the "Reports").
(j)
No
Market
Manipulation. The Company has not taken, and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected to,
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Securities or affect the price
at
which the Securities may be issued or resold.
(k)
Information Concerning Company. The Subscribers have not been provided with
any
material non-public information concerning the Company, except as the terms
and
8
conditions
of the transactions contemplated hereby may constitute such information. The
Company understands and confirms that the Subscribers will rely on the
representations and covenants herein effecting transactions in securities of
the
Company. All disclosure provided to the Subscribers regarding the Company,
its
business and the transactions contemplated hereby, furnished by or on behalf
of
the Company (including the Company's representations and warranties set forth
in
this Agreement) are true and correct and do not contain any untrue statement
of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were
made, not misleading. The Reports contain all material information relating
to
the Company and its operations and financial condition as of their respective
dates which information is required to be disclosed therein. Since the date
of
the financial statements included in the Reports, and except as modified in
other Reports filed prior to the date of this Agreement, there has been no
event
or occurrence that may have or result in a Material Adverse Event relating
to
the Company's business, financial condition or affairs. The Reports do not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made.
(l) Stop
Transfer. The Securities, when issued, will be restricted securities. The
Company will not issue any stop transfer order or other order impeding the
sale,
resale or delivery of any of the Securities, except as may be required by any
applicable federal or state securities laws and unless contemporaneous notice
of
such instruction is given to the Subscriber.
(m) Defaults.
The Company is not in violation of its articles of incorporation or bylaws.
The
Company is (i) not in default under or in violation of any agreement or
instrument to which it is a party or by which it or any of its properties are
bound or affected, which default or violation would have a Material Adverse
Effect, (ii) not in default with respect to any order of any court, arbitrator
or governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under
any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) not in violation of any statute, rule
or regulation of any governmental authority which violation would have a
Material Adverse Effect.
(n) No
Integrated Offering. Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf, has directly or indirectly made any offers
or sales of any security or solicited any offers to buy any security under
circumstances that would cause the offer of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes
of
the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of the Bulletin Board.
Nor
will the Company or any of its Affiliates take any action or steps that would
cause the offer or issuance of the Securities to be integrated with other
offerings. The Company will not conduct any offering other than the transactions
contemplated hereby that will be integrated with the offer or issuance of the
Securities.
(o) No
General Solicitation; Private Placement. Neither the Company, nor any of its
Affiliates, nor to its knowledge, any person acting on its or their behalf,
has
engaged in any form of general solicitation or general advertising (within
the
meaning of Regulation D under the 1933
9
Act)
in
connection with the offer or sale of the Securities. Assuming the accuracy
of
the Subscribers' representations and warranties set forth in Sections 4(d)-(f),
no registration under the 1933 Act is required for the offer and sale of the
Shares and Warrant Shares by the Company to the Subscribers under the
Transaction Documents.
(p) Listing.
The Company's common stock is listed on the Over The Counter Bulletin Board.
The
Company has not received any oral or written notice that its common stock is
not
eligible nor will become ineligible for quotation on the OTCBB nor that its
common stock does not meet all requirements for the continuation of such
quotation and the Company satisfies all the requirements for the continued
listing of its common stock on the OTCBB.
(q) No
Undisclosed Liabilities. The Company
has no
liabilities or obligations which are material,
individually or in the aggregate, which are not disclosed in the
Reports
and Other
Written
Information, other than
those
incurred in the ordinary course of the Company's
businesses since December 31, 2004 and which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(r) No
Undisclosed Events or Circumstances. Since December 31, 2004, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure
or announcement prior to the date hereof by the Company but which has not been
so
publicly
announced or disclosed in the Reports.
(s) Capitalization.
The authorized and outstanding capital stock of the Company as of the date
of
this Agreement and the Closing Date (not including the Securities) are set
forth
on Schedule 5(s). Except as set forth on Schedule 5(s), there are no options,
warrants, or rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right to subscribe for any
shares of capital stock of the Company or any of its Subsidiaries. All of the
outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable.
(t) Dilution;
Hedging. The Company acknowledges and agrees that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders
of
the Company's equity or rights to receive equity of the Company. The board
of
directors of the Company
has concluded, in its good faith business judgment that the issuance of the
Securities is
in the
best interests of the Company. The Company specifically acknowledges that its
obligation to issue the Shares upon conversion of the Notes, and the Warrant
Shares upon exercise of the Warrants
is absolute regardless of the dilution such issuance may have on the ownership
interests
of other
shareholders of the Company or parties entitled to receive equity of the
Company. Subject to compliance with applicable securities laws, the Subscribers
may enter into lawful hedging transactions with third parties, which may in
turn
engage in short sales of the Securities in the course of hedging the position
they assume and the Subscribers may also enter into short positions or other
derivative transactions relating to the Securities, or interests in the
Securities, and deliver the Securities, or interests in the Securities, to
close
out their short or other positions or otherwise settle short sales or other
transactions, or loan or pledge the Securities, or interests in the Securities,
to third parties that in turn may dispose of these Securities.
10
(u) No
Disagreements with Accountants and Lawyers. There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company, including but not limited to disputes or conflicts
over
payment owed to such accountants and lawyers.
(v) Investment
Company. The Company is not an Affiliate of an "investment company" within
the
meaning of the Investment Company Act of 1940, as amended.
(w) Subsidiary
Represents. The Company makes each of the representations contained in Sections
5(a), (b), (d), (f), (h), (k), (m), (q) through (s), (u) and (w) of this
Agreement, as same relate to each Subsidiary of the Company. For purposes of
this Agreement, "Subsidiary" means, with respect to any entity at any date,
any
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity) of which more
than
50% of (i) the outstanding capital stock having (in the absence of
contingencies) ordinary voting power to elect a majority of the board of
directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at
the
time of determination, owned or controlled directly or indirectly through one
or
more intermediaries, by such entity.
(x) Correctness
of Representations. The Company represents that the foregoing representations
and warranties are true and correct as of the date hereof in all material
respects, and,
unless the Company otherwise notifies the Subscribers prior to each Closing
Date, shall be
true and
correct in all material respects as of each Closing Date.
(y) Title
to
Assets. The Company and its subsidiaries have good and marketable title in
fee
simple to all real property owned by them that is material to their respective
businesses and good and marketable title in all personal property owned by
them
that is material to their respective businesses, in each case free and clear
of
all liens, except for liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to
be
made of such property by the Company and its subsidiaries. Any real property
and
facilities held under lease by the Company and its subsidiaries are held by
them
under valid, subsisting and enforceable leases of which the Company and its
subsidiaries are in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(z) Patents
and Trademarks. The Company and its subsidiaries have, or have rights to use,
all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and other similar rights that are
necessary or material for use in connection with their respective businesses
as
described in the Reports and which the failure to so have could, individually
or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect (collectively, the "Intellectual Property Rights"). Neither the Company
nor any subsidiary has received a written notice that the Intellectual Property
Rights used by the
11
Company
or any subsidiary violates or infringes upon the rights of any person. Except
as
set forth
in
the Reports, to the knowledge of the Company, all such Intellectual Property
Rights are
enforceable and there is no existing infringement by another person of any
of
the Intellectual Property Rights.
(aa)
Insurance. The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company
and
its subsidiaries are engaged. The Company has no reason to believe that it
will
not be able to renew its and its subsidiaries' existing insurance coverage
as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business on terms consistent with
market for the Company's and such subsidiaries' respective lines of
business.
(bb)
Internal Accounting Controls. The Company and its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance
that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with United States generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general
or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e))
for the Company and designed such disclosure controls and procedures to ensure
that material information relating to the Company, including its subsidiaries,
is made known to the certifying officers by others within those entities,
particularly during the period in which the Company's Form 10-K, 10-KSB, 10-Q,
or 10-QSB, as the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures in accordance with Item 307 of Regulation S-K under the 1934 Act
for
the Company's most recently ended fiscal quarter or fiscal year-end (such date,
the "Evaluation Date"). The Company presented in its most recently filed Form
10-KSB or Form 10-QSB the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company's internal controls (as such term
is
defined in Item 308(c) of Regulation S-K under the 0000 Xxx) or, to the
Company's knowledge, in other factors that could significantly affect the
Company's internal controls.
(cc)
Solvency. Based on the financial condition of the Company as of the Closing
Date
(and assuming that the Closing shall have occurred), (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to be
paid
on or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature, (ii) the Company's
assets do not constitute unreasonably small capital to carry on its business
for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were
it to
liquidate all of its assets, after taking into account all anticipated uses
of
the cash, would be
12
sufficient
to pay all amounts on or in respect of its debt when such amounts are required
to be paid. The Company
does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts
of cash to be payable on or in respect of its debt).
(dd)
Survival. The foregoing representations and warranties shall survive the
Closing.
6. Regulation
D Offering. The offer and issuance of the Securities to the Subscribers is
being
made pursuant to the exemption from the registration provisions of the 1933
Act
afforded by Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of
Regulation D promulgated thereunder.
On the Closing Date, the Company will provide an opinion reasonably acceptable
to
Subscriber from the Company's legal counsel opining on the availability of
an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers. A form of the legal opinion is annexed hereto as Exhibit C. The
Company will provide, at the Company's expense, such other legal opinions in
the
future as are reasonably necessary for the issuance and resale of the Common
Stock issuable upon conversion of the Notes and exercise of the Warrants
pursuant to an effective registration statement.
7. Adjustments
ad Redemption. The Conversion Price, Warrant exercise price and amount of Shares
issuable upon conversion of the Notes and exercise of the Warrants shall be
adjusted as described in this Agreement, the Notes and Warrants. The Note and
Warrants shall not be redeemable or callable except as described in the
Note.
8. Broker/Legal
Fees.
(a) Broker's
Fee. The Company on the one hand, and each Subscriber (for itself only) on
the
other hand, agree to indemnify the other against and hold the other harmless
from any and all liabilities to any persons claiming brokerage commissions
or
finder's fees on account of services purported to have been rendered on behalf
of the indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party's actions. The Company
represents that there are no parties entitled to receive fees, commissions,
or
similar payments from the Company in connection with the transactions described
in this Agreement except Westor Capital Group, Inc. ("Broker"), which the
Company is obligated to compensate pursuant to a separate
agreement.
(b) Legal
Fees. In addition to the Commission, Fees and Warrants
payable to the Placement Agent, the Company
shall
pay to Westor Capital Group a sum not to exceed $20,000 as reimbursement for
accountable legal and due diligence expenses incurred in connection with the
Offering.
9.1.
Covenants of the Company. The Company covenants and agrees with the Subscribers
as follows:
(a)
Stop
Orders. The Company will advise the Subscribers, promptly after it receives
notice of issuance by the Commission, any state securities commission or any
other regulatory
13
authority
of any stop order or of any order preventing or suspending any offering of
any
securities
of the Company, or of the suspension of the qualification of the Common Stock
of
the Company
for offering or sale in any jurisdiction, or the initiation of any proceeding
for any such
purpose.
(b) Listing.
The Company shall promptly secure the listing of the shares of Common Stock
and
the Warrant Shares upon each national securities exchange, or automated
quotation system upon which they are or become eligible for listing (subject
to
official notice of issuance) and shall maintain such listing so long as any
Warrants are outstanding. The Company will maintain the listing of its Common
Stock on the Over The Counter Bulletin Board, Nasdaq SmallCap Market, Nasdaq
National Market System, Bulletin Board, or New York Stock Exchange whichever
of
the foregoing is at the time the principal trading exchange or market for
the
Common Stock (the "Principal Market"), and will comply in all respects with
the
Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market, as applicable. The Company will provide the Subscribers copies
of all notices it receives notifying the Company of the threatened and actual
delisting of the Common Stock from any Principal Market,
but not any information that is material, non-public information unless such
information
is also
promptly publicly disclosed. As of the date of this Agreement and the Closing
Date, the Bulletin Board is and will be the Principal Market.
(c) Market
Regulations. The Company shall notify the Commission, the Principal Market
and
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law,
rule
and regulation, for the legal and valid issuance of the Securities to the
Subscribers and promptly provide copies thereof to Subscriber.
(d) Reporting
Requirements. From the date of this Agreement and until the sooner of (i) two
(2) years after the Closing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to volume
limitation, the Company will (A) cause its Common Stock to continue to be
registered under Section 12(b) or 12(g) of the 1934 Act, (B) comply in all
respects with its reporting and filing obligations under the 1934 Act, (C)
comply with all reporting requirements that are applicable to an issuer with
a
class of shares registered pursuant to Section 12(b) or 12(g) of the 1934 Act,
as applicable, and (D) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will not take any action
or file any document (whether or not permitted by the 1933 Act or the 1934
Act
or the rules thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under said acts until
two (2) years after the Closing Date. Until the earlier of the resale of the
Common Stock and the Warrant Shares by each Subscriber or two (2) years after
the Warrants have been exercised, the Company will continue the listing or
quotation of the Common Stock on a Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market. The Company agrees to timely file
a
Form D with respect to the Securities if required under Regulation D and to
provide a copy thereof to each Subscriber promptly after such
filing.
14
(e) Use
of
Proceeds. The proceeds of the Offering will be employed by the Company for
the
purposes set forth on Schedule 9.1(e) hereto. A deviation of more than 10%
of
any single stated use of proceeds or a deviation in the aggregate of more than
25% will be an Event of Default under the Note. Except as set forth on Schedule
9.1(e), the Purchase Price may not and will not be used for accrued and unpaid
officer and director salaries, payment of financing related debt, redemption
of
outstanding notes or equity instruments of the Company nor non-trade obligations
outstanding on a Closing Date.
(f) Reservation.
Prior to the Closing Date, the Company undertakes to reserve, pro rata, on
behalf of each holder of a Note or Warrant, from its authorized but unissued
common stock,
a
number of common shares equal to 175% of the amount of Common Stock necessary
to
allow
each holder of a Note to be able to convert all such outstanding Notes and
interest and reserve the amount of Warrant Shares issuable upon exercise of
the
Warrants. Failure to have sufficient shares reserved pursuant to this Section
9.1(f) for three (3) consecutive business days or ten (10) days in the aggregate
shall be a material default of the Company's obligations under this
Agreement.
(g) Taxes.
From the date of this Agreement and until the sooner of (i) two (2) years after
the Closing Date, or (ii) until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume limitations, the
Company will promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges
or
levies imposed upon the income, profits, property or business of the Company;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefore.
(h) Insurance.
From the date of this Agreement and until the sooner of (i) two (2) years after
the Closing Date, or (ii) until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume limitations, the
Company will keep its assets which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire,
explosion and other risks customarily insured against by companies in the
Company's line of business, in amounts sufficient to prevent the Company from
becoming a co-insurer and not in any event less than one hundred percent (100%)
of the insurable value of the property insured; and the Company will maintain,
with financially sound and reputable insurers, insurance against other hazards
and risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated and to the
extent available on commercially reasonable terms.
(i) Books
and
Records. From the date of this Agreement and until the sooner of (i) two (2)
years after the Closing Date, or (ii) until all the Shares and Warrant Shares
have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to
15
Rule
144,
without regard to volume limitations, the Company will keep true records and
books of
account in which full, true and correct entries will be made of all dealings
or
transactions in relation
to its business and affairs in accordance with generally accepted accounting
principles
applied
on a consistent basis.
(j) Governmental
Authorities. From the date of this Agreement and until the sooner of (i) two
(2)
years after the Closing Date, or (ii) until all the Shares and Warrant Shares
have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company shall duly observe and conform in all material respects
to all valid requirements of governmental authorities relating to the conduct
of
its business or to its properties or assets.
(k) Intellectual
Property. From the date of this Agreement and until the sooner of (i) two (2)
years after the Closing Date, or (ii) until all the Shares and Warrant Shares
have been resold
or
transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to
Rule
144, without regard to volume limitations, the Company shall maintain in full
force and effect its corporate existence, rights and franchises and all licenses
and other rights to use intellectual property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.
(l) Properties.
From the date of this Agreement and until the sooner of (i) two (2) years after
the Closing Date, or (ii) until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration
Statement (as defined in Section 11.1(iv) hereof) or pursuant to Rule 144,
without regard to volume limitations, the Company will keep its properties
in
good repair, working order and condition, reasonable wear and tear excepted,
and
from time to time make all necessary and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company will at all times comply
with each provision of all leases to which it is a party or under which it
occupies property if the breach of such provision could reasonably be expected
to have a Material Adverse Effect.
(m) Confidentiality/Public
Announcement. From the date of this Agreement and until the sooner of (i) two
(2) years after the Closing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to volume
limitations, the Company agrees that except in connection with a Form 8-K or
the
Registration Statement, it will not disclose publicly or privately the identity
of the Subscribers unless expressly agreed to in writing by a Subscriber or
only
to the extent required by law and then only upon five days prior notice to
Subscriber. In any event and subject to the foregoing, the Company shall file
a
Form 8-K (and attach thereto the Transaction Documents) and issue a press
release describing the Offering no later than the Closing Date. In the Form
8-K
or press release, the Company will specifically disclose the amount of common
stock outstanding immediately after the Closing. A form of the proposed Form
8-K
or press release to be employed in connection with the Offering is annexed
hereto as Exhibit D.
(n) Further
Registration Statements. Except for a registration statement filed on behalf
of
the Subscribers pursuant to Section 11 of this Agreement and the entity
identified on Schedule
16
9.1(n)
hereto, the Company will not file any registration statements or amend any
already filed registration statement, including but not limited to Form S-8,
with the Commission or with state regulatory
authorities without the consent of the Subscriber until the Registration
Statement shall
have
been current and available for use in connection with the public resale of
the
Shares and Warrant Shares for 60 days ("Exclusion Period"). The Exclusion Period
will be tolled during the pendency of an Event of Default as defined in the
Note
and for any period of time as the Registration Statement is not available to
the
Subscribers for the resale of Shares and Warrant Shares.
(o) Blackout.
The Company undertakes and covenants that until the end of the Exclusion Period,
the Company will not enter into any acquisition, merger, exchange or sale or
other transaction that could have the effect of delaying the effectiveness
of
any pending registration statement or causing an already effective registration
statement to no longer be effective or current for a period twenty (20) or
more
days.
(p) Non-Public
Information. The Company covenants and agrees that neither it nor any other
person acting on its behalf will provide any Subscriber or its agents or counsel
with any
information that the Company believes constitutes material non-public
information, unless
prior
thereto such Subscriber shall have agreed in writing to receive such
information. The Company understands and confirms that each Subscriber shall
be
relying on the foregoing representations in effecting transactions in securities
of the Company.
10.
Covenants of the Company and Subscriber Regarding Indemnification.
(a) The
Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers' officers, directors, agents, Affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of
any
nature, incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material misrepresentation
by
Company or breach of any warranty by Company in this Agreement or in any
Exhibits or Schedules attached hereto, or other agreement delivered pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any breach
or
default in performance by the Company of any covenant or undertaking to be
performed by the Company hereunder, or any other agreement entered into by
the
Company and Subscriber relating hereto.
(b) Each
Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company
and each of the Company's officers, directors, agents, Affiliates, control
persons against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees)
of
any nature, incurred by or imposed upon the Company or any such person which
results,
arises
out of or is based upon (i) any material misrepresentation by such Subscriber
in
this Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
cure periods, any breach or default in performance by such Subscriber of any
covenant or undertaking to be performed by such Subscriber hereunder, or any
other agreement entered into by the Company and Subscribers relating
hereto.
17
(c) In
no
event shall the liability of any Subscriber
or permitted
successor hereunder or under any Transaction Document or other agreement
delivered in connection herewith be greater in amount than
the
dollar amount of the net proceeds actually received by such Subscriber upon
the
sale of Registrable Securities (as defined herein).
(d) The
procedures set forth in Section 11.6 shall apply to the indemnification set
forth in Sections 10(a) and 10(b) above.
11.
Registration Rights
11.1.
Registration Rights. The Company hereby grants the following registration rights
to holders of the Securities.
(i) The
Company shall file with the Commission a Form SB-2 registration statement (the
"Registration Statement") (or such other form that it is eligible to use) in
order to register the Registrable Securities for resale and distribution under
the 1933 Act not later than thirty (30) days after the Closing Date (the "Filing
Date"), and cause to be declared effective not later than ninety (90) days
after
the Filing Date (the "Effective Date"). The Company will register not less
than
a number of shares of common stock in the aforedescribed registration statement
that is equal to 175% of the Shares issuable upon conversion of the Notes and
all of the Warrant Shares issuable pursuant to this Agreement upon exercise
of
the Warrants. The Registrable Securities shall be reserved and set aside
exclusively for the benefit of each Subscriber and Warrant holder, pro rata,
and
not issued, employed or reserved for anyone other than each such Subscriber
and
Warrant holder. The Registration Statement will immediately be amended or
additional registration statements will be immediately filed by the Company
as
necessary to register additional shares of Common Stock to allow the public
resale of all Common Stock included in and issuable by virtue of the Registrable
Securities. Without the written consent of the Subscriber, no securities of
the
Company other than the Registrable Securities will be included in the
Registration Statement except as described on Schedule 11.1 hereto. It shall
be
deemed a Non-Registration Event if at any time after the date the Registration
Statement is declared effective by the Commission ("Actual Effective Date")
the
Company has registered for unrestricted resale on behalf of the Subscriber
less
than 125% of the amount of Common Shares issuable upon full conversion of all
sums due under the Notes and 100% of the Warrant Shares issuable upon exercise
of the Warrants.
(ii) If
the
Company at any time proposes to register any of its securities under the 1933
Act for sale to the public, whether for its own account or for the account
of
other security holders
or both, except with respect to registration statements on Forms X-0, X-0 or
another form
not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale
by
the Subscribers or Holder pursuant to an effective registration statement,
each
such time it will give at least fifteen (15) days' prior written notice to
the
record holder of the Registrable Securities of its intention so to do. Upon
the
written request of the holder, received by the Company within ten (10) days
after the giving of any such notice by the Company, to register any of the
Registrable Securities not previously registered, the Company will cause such
Registrable Securities as to which
18
registration
shall have been so requested to be included with the securities to be covered
by
the registration statement proposed to be filed by the Company, all to the
extent required to permit the sale or other disposition of the Registrable
Securities so registered by the holder of such Registrable Securities (the
"Seller" or "Sellers"). In the event that any registration pursuant to this
Section 11.1(ii) shall be, in whole or in part, an underwritten public offering
of common stock of the Company, the number of shares of Registrable Securities
to be included in such an underwriting
may be reduced by the managing underwriter if and to the extent that the
Company and
the
underwriter shall reasonably be of the opinion that such inclusion would
adversely affect
the
marketing of the securities to be sold by the Company therein; provided,
however, that the Company shall notify the Seller in writing of any such
reduction. Notwithstanding the foregoing provisions, or Section 11.4 hereof,
the
Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 11.1(ii) without thereby incurring any
liability to
the
Seller.
(iii)
If,
at the time any written request for registration is received by the
Company
pursuant
to Section 11.1(i), the Company has determined to proceed with the actual
preparation and filing of a registration statement under the 1933 Act in
connection with the proposed offer and sale for cash of any of its securities
for the Company's own account and the Company actually does file such other
registration statement, such written request shall be deemed to have been given
pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of
the
holders of Registrable Securities covered by such written request shall be
governed by Section 11.1(ii).
11.2.
Registration Procedures. If and whenever the Company is required by the
provisions
of Section 11.1(i) or 11.1(ii)to effect the registration of any Registrable
Securities
under
the 1933 Act, the Company will, as expeditiously as possible:
(a) subject
to the timelines provided in this Agreement, prepare and file with the
Commission a registration statement required by Section 11, with respect to
such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as herein provided), promptly provide to the holders of
the
Registrable Securities copies of all filings and Commission letters of comment
(but not any information that is material, non-public information unless such
information is also promptly publicly disclosed) and notify Subscribers (by
telecopier and by e-mail
addresses provided by Subscribers) on or before 6 pm ET on the same business
day
that the
Company
receives notice that (i) the Commission has no comments or no further comments
on the
Registration Statement, and (ii) the registration statement has been declared
effective (failure
to
timely provide notice as required by this Section 11.2(a) shall be a material
breach of the Company's obligation and an Event of Default as defined in the
Notes and a Non-Registration Event as defined in Section 10.4 of this
Agreement);
(b) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be
necessary to keep such registration statement effective until such registration
statement has been effective for a period of two (2) years, and comply with
the
provisions of the 1933 Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in
19
accordance
with the Sellers' intended method of disposition set forth in such registration
statement for such period;
(c) furnish
to the Sellers, at the Company's expense, such number of copies of the
registration statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement;
(d) use
its
commercially reasonable best efforts
to
register or qualify the Registrable Securities
covered by such registration statement under the securities
or
"blue sky" laws of such jurisdictions as the Sellers shall request in writing,
provided, however, that the Company
shall
not for any such
purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in
any such
jurisdiction;
(e) if
applicable, list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Company
is then listed;
(f) immediately
notify the Sellers when a prospectus relating thereto is required to be
delivered under the 1933 Act, of the happening of any event of which the Company
has knowledge as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material fact
or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing; and
(g) provided
same would not be in violation of the provision of Regulation FD under the
1934
Act, make available for inspection by the Sellers, and any attorney, accountant
or other agent retained by the Seller or underwriter, all publicly available,
non-confidential financial and other records, pertinent corporate documents
and
properties of the Company, and cause the Company's officers, directors and
employees to supply all publicly available, non-confidential information
reasonably requested by the seller, attorney, accountant or agent in connection
with such registration statement.
11.3.
Provision of Documents. In connection with each registration described
in
this Section 11, each Seller will furnish
to
the Company
in
writing such information and representation
letters
with
respect to itself and the
proposed distribution by it as reasonably shall be necessary in order to assure
compliance
with
federal and applicable
state securities laws.
11.4.
Non-Registration Events. The Company and the Subscribers agree that the Sellers
will suffer damages if the Registration Statement is not filed by the Filing
Date and not declared effective by the Commission by the Effective Date, and
any
registration statement required under Section 11.1(ii) is not filed within
30
days after written request and declared effective by the Commission within
90
days after such request, and maintained in the manner and within the time
periods contemplated by Section 11 hereof, and it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if (A) the
Registration
20
Statement
is not filed on or before the Filing Date, (B) is not declared effective on
or
before the Effective Date, (C) the Registration Statement is not declared
effective within three (3) business days after receipt by the Company or its
attorneys of a written or oral communication from the Commission that the
Registration Statement will not be reviewed or that the Commission has no
further comments, (D) if the registration statement described in Sections or
11.1(ii) is not filed within 30 days after such written request, or is not
declared effective within 90 days after such written request, or (E) any
registration statement described in Sections 11.1(i) or 11.1(ii) or is filed
and
declared effective but shall thereafter cease to be effective (without being
succeeded within fifteen (15) business days by an effective replacement or
amended registration statement) for a period of time which shall exceed 30
days
in the aggregate per year (defined as a period of 365 days commencing on the
date the Registration Statement is declared effective) or more than 20
consecutive days (each such event referred to in clauses A through E of this
Section 11.4 is referred to herein as a "Non-Registration Event"), then the
Company shall deliver to the holder of Registrable Securities, as Liquidated
Damages, an amount equal to one percent (1%) for each thirty (30) days or part
thereof, thereafter of the Purchase Price of the Notes acquired by such holder
hereunder. The Company must pay the Liquidated Damages in cash or an amount
equal to one hundred and fifty percent (150%) of such cash Liquidated Damages
if
paid in additional shares of registered unlegended free-trading shares of Common
Stock. Such Common Stock shall be valued at a per share value equal to the
average of the five (5) lowest closing bid prices of the Common Stock as
reported by Bloomberg L.P. for the twenty (20) trading days preceding the first
day of each thirty (30) day or shorter period for which Liquidated Damages
are
payable. The Liquidated Damages must be paid within ten (10) days after the
end
of each thirty (30) day period or shorter part thereof for which Liquidated
Damages are payable. In the event a Registration Statement is filed by the
Filing Date but is withdrawn prior to being declared effective by the
Commission, then such Registration Statement will be deemed to have not been
filed. All oral or written and accounting comments received from the Commission
relating to the Registration Statement must be responded to within ten (10)
business days. Failure to timely respond to Commission comments is a
Non-Registration Event for which Liquidated Damages shall accrue and be payable
by the Company to the holders of Registrable Securities at the same rate set
forth above. The Company and Subscribers agree that they will extend the date
on
which liquidated damages begin for up to 45 days if the delay in the Effective
Date is due to any review undertaken by the SEC and the Company has demonstrated
that it has used its best efforts in filing the registration statement and
responding to the SEC. Notwithstanding the foregoing, the Company shall not
be
liable to the Subscriber under this Section 11.4 for any events or delays
occurring as a consequence of the acts or omissions of the Subscribers contrary
to the obligations undertaken by Subscribers in this Agreement. Liquidated
Damages will not accrue nor be payable pursuant to this Section 11.4 nor will
a
Non-Registration Event be deemed to have occurred for times during which
Registrable Securities are transferable by the holder of Registrable Securities
pursuant to Rule 144(k) under the 1933 Act.
11.5.
Expenses. All expenses incurred by the Company in complying with Section 11,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including reasonable counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees
of
the National Association of Securities Dealers, Inc., transfer taxes, fees
of
transfer agents and registrars, costs of insurance and fee of one counsel for
all
21
Sellers
are called "Registration Expenses." All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, including any
fees
and disbursements of one counsel to the Seller, are called "Selling Expenses."
The Company will pay all Registration Expenses in connection with the
registration statement under Section 11. Selling Expenses in connection with
each registration statement under Section 11 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares
sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
11.6.
Indemnification and Contribution.
(a) In
the
event of a registration of any Registrable Securities under the 1933 Act
pursuant to Section 11, the Company will, to the extent permitted by law,
indemnify and hold harmless the Seller, each officer of the Seller, each
director of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions
of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable
to
the Seller to the extent that any such damages arise out of or are based upon
an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by
the
Company to the Seller with or prior to the delivery of written confirmation
of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement
or
alleged untrue statement or such omission or alleged omission, or (iii) to
the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller,
or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In
the
event of a registration of any of the Registrable Securities under the 1933
Act
pursuant to Section 11, each Seller severally but not jointly will, to the
extent permitted by law, indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of the 1933 Act,
each officer of the Company who signs the registration statement, each director
of the Company, each underwriter and each person who controls any underwriter
within the meaning of the 1933 Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
underwriter or
22
controlling
person may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which such
Registrable Securities were registered under the 1933 Act pursuant to Section
11, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage
or
liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and
in
conformity with information pertaining to such Seller, as such, furnished in
writing to the Company by such Seller specifically for use in such registration
statement or prospectus, and provided, further, however, that the liability
of
the Seller hereunder shall be limited to the net proceeds actually received
by
the Seller from the sale of Registrable Securities covered by such registration
statement.
(c) Promptly
after receipt by an indemnified party hereunder of notice of the commencement
of
any action, such indemnified party shall, if a claim in respect thereof is
to be
made against the indemnifying party hereunder, notify the indemnifying party
in
writing thereof, but the omission so to notify the indemnifying party shall
not
relieve it from any liability which it may have to such indemnified party other
than under this Section 11.6(c) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 11.6(c), except
and only if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified
party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake
the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 11.6(c) for any legal expenses subsequently incurred
by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both
the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to
it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed
to
conflict with the interests of the indemnifying party, the indemnified parties,
as a group, shall have the right to select one separate counsel and to assume
such legal defenses and otherwise to participate in the defense of such action,
with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
(d) In
order
to provide for just and equitable
contribution
in
the event of joint liability under the 1933 Act in any case
in
which either (i) a Seller, or any controlling
person of a
23
Seller,
makes a claim for indemnification pursuant to this Section 11.6 but it is
judicially determined (by the entry of a final judgment or decree by a court
of
competent jurisdiction and the expiration of time to appeal or the denial of
the
last right of appeal) that such indemnification may not be enforced in such
case
notwithstanding the fact that this Section 11.6 provides for indemnification
in
such case, or (ii) contribution under the 1933 Act may be required on the part
of the Seller or controlling person of the Seller in circumstances for which
indemnification is not provided under this Section 11.6; then, and in each
such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Seller is responsible only for
the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (y) the Seller will not be required to
contribute any amount in excess of the public offering price of all such
securities sold by it pursuant to such registration statement; and (z) no person
or entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 0000 Xxx) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
11.7.
Delivery of Unlegended Shares.
(a) Neither
the Shares nor the Warrant Shares shall contain any legend, including the legend
set forth in Section 4(g), provided (i) a registration statement (including
the
Registration Statement) covering the resale of such security is effective under
the Securities Act, or (ii) following any sale of such Shares or Warrant Shares
pursuant to Rule 144, or (iii) if such Shares or Warrant Shares are eligible
for
sale under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). A holder of Shares or
Warrant Shares may, by notice to the Company, require the Company to reissue
any
Shares or Warrant Shares previously issued, so that new Shares or Warrant Shares
do not contain any legends. Within five (5) business days (such third (3rd)
business day being the "Unlegended Shares Delivery Date") after the business
day
on which the Company has received such holder's request to remove legends,
the
Company shall deliver, and shall cause legal counsel selected by the Company
to
deliver to its transfer agent (with copies to Subscriber) an appropriate
instruction and opinion of such counsel, directing the delivery of shares of
Common Stock without any legends, including the legend set forth in Section
4(g)
above, reissuable pursuant to any effective and current Registration Statement
described in Section 11 of this Agreement or pursuant to Rule 144 under the
1933
Act (the "Unlegended Shares"); and the Company shall cause the transmission
of
the certificates representing the Unlegended Shares together with a legended
certificate representing the balance of the submitted Shares certificate, if
any, to the Subscriber at the address specified in the notice of sale, via
express courier, by electronic transfer or otherwise on or before the Unlegended
Shares Delivery Date. Transfer fees shall be the responsibility of the
Seller.
(b) In
lieu
of delivering physical certificates representing the Unlegended Shares, if
the
Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated
Securities Transfer program, upon request of a Subscriber, so long as the
certificates
therefor
do not bear a legend and the Subscriber is not obligated to return such
certificate for the
24
placement
of a legend thereon, the Company shall cause its transfer agent to
electronically transmit
the Unlegended Shares by crediting the account of Subscriber's prime Broker
with
DTC
through
its Deposit Withdrawal Agent Commission system. Such delivery must be made
on or
before the Unlegended Shares Delivery Date.
(c) The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof later than two business days after
the
Unlegended Shares Delivery Date could result in economic loss to a Subscriber.
As compensation to a Subscriber for such loss, the Company agrees to pay late
payment fees (as liquidated damages and not as a penalty) to the Subscriber
for
late delivery of Unlegended Shares in the amount of $20 per business day
after
the
Delivery Date for each $10,000 of purchase price of the Unlegended Shares
subject to the delivery default. If during any 365 day period, the Company
fails
to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
of thirty (30) days, then each Subscriber or assignee holding Securities subject
to such default may, at its option, require the Company to redeem all or any
portion of the Shares and Warrant Shares subject to such default at a price
per
share equal to 120% of the Purchase Price of such Common Stock and Warrant
Shares ("Unlegended Redemption Amount"). The amount of the liquidated damages
described above that have accrued or paid for the twenty day period prior to
the
receipt by the Subscriber of the Unlegended Redemption Amount shall be credited
against the Unlegended Redemption Amount. The Company shall pay any payments
incurred under this Section in immediately available funds upon
demand.
(d) In
addition to any other rights available to a Subscriber, if the Company fails
to
deliver to a Subscriber Unlegended Shares as required pursuant to this
Agreement, and after
the
Unlegended Shares Delivery Date the Subscriber purchases (in an open market
transaction or
otherwise) shares of common stock to deliver in satisfaction of a sale by such
Subscriber of the shares of Common Stock which the Subscriber was entitled
to
receive from the Company (a "Buy-In"), then the Company shall pay in cash to
the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of common stock so
purchased exceeds (B) the aggregate purchase price of the shares of Common
Stock
delivered to the
Company for reissuance as Unlegended Shares together with interest thereon
at a
rate of 15%
per
annum, accruing until such amount and any accrued interest thereon is paid
in
full (which amount shall be paid as liquidated damages and not as a penalty).
For example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the
Buy-In.
(e) In
the
event a Subscriber shall request delivery of Unlegended Shares as described
in
Section 11.7 and the Company is required to deliver such Unlegended Shares
pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
Shares based on any claim that such Subscriber or any one associated or
affiliated
with
such
Subscriber has been engaged in any violation of law, or for any other reason,
unless, an injunction or temporary restraining order from a court, on notice,
restraining and or enjoining delivery of such
25
Unlegended
Shares or exercise of all or part
of said
Warrant
shall
have been sought and obtained
and the
Company
has
posted a surety bond for the benefit of such Subscriber
in
the amount of 120% of the amount of the aggregate purchase price of the Common
Stock and Warrant
Shares
which are subject to the injunction or temporary restraining order, which bond
shall remain in effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to such Subscriber
to
the extent Subscriber
obtains judgment in Subscriber's
favor.
12.
(a)
Right of First Refusal. Until the later of 365 days after the date that the
Registration Statement has been effective for the resale of all the Registrable
Securities the Subscribers shall be given not less than seven (7) business
days
prior written notice of any proposed sale by the Company of its common stock
or
other securities or debt obligations, except in connection with (i) full or
partial consideration in connection with a strategic merger, consolidation
or
purchase of substantially all of the securities or assets of corporation or
other entity, and (ii) the Company's issuance of securities in connection with
strategic license agreements and other partnering arrangements so long as such
issuances are not for the purpose of raising capital, (iii) the Company's
issuance of Common Stock or the issuance or grants of options to purchase Common
Stock pursuant to the Company's stock option plans and employee stock purchase
plans as they now exist, which copies of such plans have been delivered to
the
Subscribers (iv) as a result of the exercise of options or warrants or
conversion of convertible notes or preferred stock which are granted or issued
pursuant to this Agreement, (v) the payment of any interest on the Notes and
(vi) as has been described in the Reports or Other Written Information filed
with the Commission or delivered to the Subscribers prior to the Closing Date
(collectively the foregoing are "Excepted Issuances"). The Subscribers who
exercise their rights pursuant to this Section 12(a) shall have the right during
the seven (7) business days following receipt of the notice to purchase such
offered common stock, debt or other securities in accordance with the terms
and
conditions set forth in the notice of sale in the same proportion to each other
as their purchase of Notes in the Offering. In the event such terms and
conditions are modified during the notice period, the Subscribers shall be
given
prompt notice of such modification and shall have the right during the seven
(7)
business days following the notice of modification, whichever is longer, to
exercise such right. After the expiration of such seven (7) business day period,
should the Subscriber choose not to exercise its right pursuant to this Section
12(a), the Company shall, within twenty-one (21) days, publicly announce either
the entering into of definitive agreements (and attach such agreements along
with such public filing) with respect to such proposed sale of Common Stock
(or
equivalents thereof or securities convertible into Common Stock) by the Company
or the termination of such transaction.
(b)
Favored Nation Provision. Except for the Excepted Issuances, if at any time
Notes are outstanding the Company shall offer, issue or agree to issue any
common stock or securities convertible into or exercisable for shares of common
stock (or modify any of the foregoing which may be outstanding) to any person
or
entity at a price per share or conversion or exercise price per share which
shall be less than the Conversion Price in respect of the Shares, or if less
than the Warrant exercise price in respect of the Warrant Shares, without the
consent of each Subscriber holding Notes, Shares, and/or Warrants, then the
Company shall issue, for each such occasion, additional shares of Common Stock
to each Subscriber so that the average per share purchase price of the shares
of
Common Stock issued to the Subscriber (of only the Common Stock or Warrant
Shares still owned by the Subscriber) is equal to such other lower price
per
26
share
and
the Conversion Price and Warrant Exercise Price shall automatically be reduced
to such other lower price per share. The average Purchase Price of the Shares
and average exercise price in relation to the Warrant Shares shall be calculated
separately for the Shares and Warrant Shares. The foregoing calculation and
issuance shall be made separately for Shares received upon conversion and
separately for Warrant Shares. The delivery to the Subscriber of the additional
shares of Common Stock shall be not later than the closing date of the
transaction giving rise to the requirement to issue additional shares of Common
Stock. The Subscriber is granted the registration rights described in Section
11
hereof in relation to such additional shares of Common Stock except that the
Filing Date and Effective Date vis-a-vis such additional common shares shall
be,
respectively, the sixtieth (60) and one hundred and twentieth (120) date
after
the
closing date giving rise to the requirement to issue the additional shares
of
Common Stock. For purposes of the issuance and adjustment described in this
paragraph, the issuance of any security of the Company carrying the right to
convert such security into shares of Common Stock or of any warrant, right
or
option to purchase Common Stock shall result in the issuance of the additional
shares of Common Stock upon the issuance of such convertible security, warrant,
right or option and again at any time upon any subsequent issuances of shares
of
Common Stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the Conversion Price in effect upon such
issuance. The rights of the Subscriber set forth in this Section 12 are in
addition to any other rights the Subscriber has pursuant to this Agreement,
the
Note, any Transaction Document, and any other agreement referred to or entered
into in connection herewith.
(c)
Offering Restrictions. With the exception of an investment in an amount of
up to
$1,500,000 from Xxxxxx Equities upon the completion of the Company’s
pending
acquisition, the Company will not enter into an agreement to nor issue any
equity, convertible debt or other securities convertible into common stock
or
equity of the Company nor modify any of the foregoing which may be outstanding
at anytime for up to 180 days after
the
Registration Statement has been declared effective, for so long as any Notes
are
outstanding, without written consent of the Investors.
(d) Additional
Registration Statements. In the event, whether due to anti-dilution provisions
or otherwise, Common Stock becomes issuable pursuant to a Note, which is not
then registered pursuant to a Registration Statement, the Company shall then
file
an
additional Registration Statement registering such Common Stock for resale
by
the Subscribers. The liquidated damages referenced in Section 11.4 herein shall
apply with respect to the Company's obligations to register such Common
Stock.
(e) Option
Plan Restrictions. The only officer,
director,
employee and consultant stock option or stock incentive plan currently in effect
or contemplated by the Company has been submitted to the Subscribers. No other
plan will be adopted nor may any options or equity not included in such plan
be
issued for so long as any sum is outstanding under the Note.
(f) Maximum
Exercise of Rights. In the event the exercise of the right described in Section
12(a) would result in the issuance of an amount of common stock of the Company
that would exceed the maximum amount that may be issued to a Subscriber
calculated in the manner
27
described
in Section 2.3 of the Note, then the issuance
of
such additional shares of common stock of the Company
to such
Subscriber
will
be deferred in whole or in part
until
such time as such Subscriber
is
able to beneficially own such common stock without exceeding the maximum amount
set forth
calculated in the manner described
in
Section 2.3 of the Note. The determination of when such common stock may be
issued shall be made by each Subscriber as to only such Subscriber.
13.
Miscellaneous.
(a) Notices.
All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Company, to: Comprehensive Healthcare
Solutions, Inc., 00 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, XX 00000, Attn: Xxxx
Xxxxxxx, CEO, telecopier number: (000) 000-0000, with a copy by telecopier
only
to: Xxxxxx & Jaclin, LLP, 000 Xxxxx 0 Xxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000,
telecopier number: (000) 000-0000, (ii) if to the Subscribers, to: the one
or
more addresses and telecopier numbers indicated on the signature pages hereto,
with an additional copy by telecopier only to:,
and
(iii) if to the Broker, to: Westor Capital, Inc., 000 Xxxxxxx Xxxxxx, Xxxxx
000,
Xxxxx, XX 00000, Attn: Xxxxxxx X. Xxxx, President, telecopier number: (000)
000-0000, with an additional copy to Xxxxx & Associates, LLC, 00 Xxxxxxxx,
Xxxxx 0000, XX,XX 00000, telecopier number (000) 000-0000.
(b) Entire
Agreement; Assignment. This Agreement and other documents delivered in
connection herewith represent the entire agreement between the parties hereto
with respect to the subject matter hereof. No right or obligation of the Company
shall be assigned without prior notice to and the written consent of the
Subscribers.
(c) Amendments;
Waivers; No Additional Consideration. No provision of this Agreement may be
waived or amended except in a written
instrument signed by the Company and the
Subscribers holding a majority of the Shares. No waiver of any default with
respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent
default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission
of
either party
to
exercise any right hereunder in any manner
impair the exercise of any such
right.
No
consideration shall be
28
offered
or paid to any Investor
to amend or consent to a waiver or modification of any provision
of any Transaction
Document unless the same consideration is also offered to all Subscribers
who
then hold Shares.
(d) Counterparts/Execution.
This Agreement may be executed in any number of counterparts and by the
different signatories hereto on separate counterparts, each of which,
when
so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and
the
same instrument. This Agreement may be executed by facsimile signature and
delivered
by
facsimile transmission.
(e) Law
Governing this Agreement. This Agreement shall be governed by and construed
in
accordance with the laws of the State of New York without regard to conflicts
of
laws principles that would result in the application of the substantive laws
of
another jurisdiction. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought
only
in the state courts of New York or in the federal courts located in the state
of
New York. The parties and the individuals executing this Agreement and other
agreements referred to herein or delivered in connection herewith on behalf
of
the Company agree to submit to the jurisdiction of such courts and waive trial
by jury. The prevailing party shall be entitled to recover from the other party
its reasonable attorney's fees and costs. In the event that any provision of
this Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then
such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule
of
law. Any such provision which may prove invalid or unenforceable under any
law
shall not affect the validity or enforceability of any other provision of any
agreement.
(f) Specific
Enforcement, Consent to Jurisdiction. The Company and Subscriber acknowledge
and
agree that irreparable damage would occur in the event that any of the
provisions
of this Agreement were not performed in accordance with their specific terms
or
were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to one or more preliminary and final injunctions to prevent or cure breaches
of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any
of
them may be entitled by law or equity. Subject to Section 13(d) hereof,
each
of
the Company, Subscriber and any signator hereto in his personal capacity hereby
waives,
and
agrees not to assert in any such suit, action or proceeding, any claim that
it
is not personally subject to the jurisdiction in New York of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that
the
venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(g) Independent
Nature of Subscribers. The Company acknowledges that the obligations of each
Subscriber under the Transaction Documents are several and not joint with the
obligations of any other Subscriber, and no Subscriber shall be responsible
in
any way for the performance of the obligations of any other Subscriber under
the
Transaction Documents. The Company acknowledges that each Subscriber has
represented that the decision of each
29
Subscriber
to purchase Securities has been made by such Subscriber independently of any
other Subscriber and independently of any information, materials, statements
or
opinions as to the business, affairs,
operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company which may have been made or given by
any
other Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company acknowledges that
nothing contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Subscriber in the Registration Statement and (ii) review by,
and
consent to, such Registration Statement by a Subscriber) shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture
or
any other kind of entity, or create a presumption that the Subscribers are
in
any way acting in concert or as a group with respect to such obligations or
the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Subscriber shall be entitled to independently protect and enforce
its
rights, including without limitation, the rights arising out of the Transaction
Documents, and it shall not be necessary for any other Subscriber to be joined
as an additional party in any proceeding for such purpose. The Company
acknowledges that it has elected to provide all Subscribers with the same terms
and Transaction Documents for the convenience of the Company and not because
Company was required or requested to do so by the Subscribers. The Company
acknowledges that such procedure with respect to the Transaction Documents
in no
way creates a presumption that the Subscribers are in any way acting in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated thereby.
(h) Business/Calendar
Days. Unless otherwise indicated, references to days in the Transaction
Documents will refer to calendar days.
(i) Liquidated
Damages. Wherever liquidated damages are due and payable pursuant to this
Agreement, the parties agree that such liquidated damages are: (i) not a penalty
and (ii) not the sole remedy of such Subscriber, and that such Subscriber is
entitled to pursue such damages as it may be entitled to at law, including
specific
performance,
provided the amount of any such liquidated damages that have been paid shall
be
offset against any such other damages that may be awarded. The Company and
each
Subscriber agree that monetary damages would not provide adequate compensation
for any losses incurred by reason of a breach by it of any of the provisions
of
this Agreement and hereby further agrees that, in the event of any action for
specific
performance
in respect of such breach, it shall waive the defense that a remedy at law
would
be adequate.
30
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
COMPREHENSIVE
HEALTHCARE SOLUTIONS, INC., a Delaware corporation
By:
/s/ Xxxx X. Xxxxxxx
XXXX
XXXXXXX
CEO
Dated:
11/4/05, 2005
SUBSCRIBER:
NITE
CAPITAL LP
By:
/s/
Xxxxx X Xxxxxxx
Name:
Xxxxx X. Xxxxxxx
Title:
Manager of the General Partner
Address:
NITE
CAPITAL, LP
000
XXXX
XXXX XXXXXX, XXX 000
XXXXXXXXXXXX,
XX 00000
Telephone:
000-000-0000
Facsimile: 000-000-0000
Email:
Xxxxx@xxxxxxxxxxx.xxx
Note
Principal: $100,000.00
Warrants
31
LIST
OF
EXHIBITS AND SCHEDULES
Attachment
1 Disclosure Schedule
Exhibit
A Form
of
Convertible Note
Exhibit
B1 Form of Warrant A
Exhibit
B2 Form of Warrant B
Exhibit
B3 Form of Warrant C
Exhibit
C Form
of
Public Announcement and Form 8-K
Exhibit
D Form
of
Legal Opinion
Schedule
5(d) Additional Issuances
Schedule
5(s) Capitalization/Additional Issuances
Schedule
9.1(e) Use of Proceeds
Schedule
9.1(n) Further Registration Statements
Schedule
11.1 Additional
Securities to be Registered