Exhibit 4.19
SUBSCRIPTION AGREEMENT
Stonepath Group, Inc.
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Attention: ▇▇▇▇ ▇▇▇▇▇, CFO
Ladies and Gentlemen:
The undersigned subscriber ("Subscriber") hereby tenders this
Subscription Agreement (this "Agreement") in accordance with and subject to the
terms and conditions set forth herein:
1. Subscription.
1.1 Subscriber hereby subscribes for and agrees to purchase the number
of shares (the "Shares") of common shares, $.001 par value per share (the
"Common Shares"), of Stonepath Group, Inc., a Delaware corporation (the
"Company"), indicated on the signature page attached hereto at the purchase
price set forth on such signature page (the "Purchase Price"). Subscriber has
made or will make payment by wire transfer of funds in accordance with
instructions from the Company in the full amount of the Purchase Price of the
Common Shares for which Subscriber is subscribing (the "Payment").
1.2 Subject to the terms and conditions hereof and in reliance on the
representations and warranties contained herein, or made pursuant hereto, the
Company will issue to Subscriber, and Subscriber will acquire from the Company,
on the Closing Date (as hereinafter defined), the number of Common Shares
indicated on the signature page attached hereto at the Purchase Price.
1.3 This Agreement is part of an offering of Common Shares being
conducted by Stonegate Securities, Inc. (the "Placement Agent") on behalf of the
Company (the "Offering"). The Company agrees that it shall not undertake any
other financings involving its Equity Common Shares (as defined below) on terms
more favorable than those in the Offering until the later of ninety (90) days
after the Initial Closing Date or 30 days after the effective date of the
Registration Statement (as that term is defined in Appendix I hereto) covering
all of the Common Shares, without the prior written approval of the holders of
66 2/3% interest of the Registrable Securities (as defined in Appendix I). The
term "Equity Common Shares" as used herein shall mean all capital stock of the
Company, plus all rights, warrants, options, convertible Common Shares or
indebtedness, exchangeable Common Shares or indebtedness, or other rights,
exercisable for or convertible into, directly or indirectly, capital stock of
the Company. Notwithstanding the above, "Equity Common Shares" shall not include
any Common Shares of the Company issued pursuant to any incentive or stock
option plan of the Company approved by the shareholders or the board of
directors of the Company.
1.4 Subscriber understands that it will not earn interest on any funds
held by the Company prior to the date of closing of the Offering. The Placement
Agent and the Company may hold an initial closing of the Offering (the "Initial
Closing") at any mutually agreeable time. The date of the Initial Closing is
hereinafter referred to as the "Initial Closing Date." The Company may hold
additional interim closings after the Initial Closing provided that the terms of
the Offering are the same for each closing. Any such interim closings are each
hereinafter referred to as an "Additional Closing" and shall occur on one or
more dates each hereinafter referred to as an "Additional Closing Date." The
Initial Closing Date and the Additional Closing Dates are each hereinafter
sometimes referred to as a "Closing Date." The last Closing is sometimes
referred to herein as the "Final Closing." The Final Closing shall occur no
later than five (5) business days after the Initial Closing. Upon receipt by the
Company of the requisite payment for all Common Shares to be purchased by the
subscribers whose subscriptions are accepted at the Initial Closing or any
Additional Closing, as applicable, and subject to the satisfaction of certain
conditions, the Common Shares so purchased will be issued in the name of each
such subscriber, and the name of such subscriber will be registered on the stock
transfer books of the Company as the record owner of such Common Shares. The
Company will promptly thereafter issue to each subscriber participating in such
closing a stock certificate for the Common Shares so purchased.
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1.5 Subscriber hereby agrees to be bound hereby upon (i) execution and
delivery to the Company, in care of the Placement Agent, of the signature page
to this Agreement and (ii) written acceptance on the Initial Closing Date or an
Additional Closing Date, as the case may be, by the Company and the Placement
Agent of Subscriber's subscription, which shall be confirmed by faxing to the
Subscriber the signature page to this Agreement that has been executed by the
Company (the "Subscription").
1.6 Prior to acceptance of this Agreement by the Company and the
Placement Agent, Subscriber agrees that the Company and Placement Agent may, as
they mutually agree in their sole and absolute discretion, reduce the
Subscription to any number of Common Shares that in the aggregate do not exceed
the number of Common Shares hereby applied for without any prior notice to or
further consent by Subscriber; provided, however, if any of Subscriber's
Subscription is so reduced, Subscriber may withdraw his entire Subscription.
Subscriber hereby irrevocably constitutes and appoints the Placement Agent and
each officer of the Placement Agent, each of the foregoing acting singularly, in
each case with full power of substitution, the true and lawful agent and
attorney-in-fact of Subscriber, with full power and authority in Subscriber's
name, place and stead to amend this Agreement, including, in each case,
Subscriber's signature page thereto, to effect any of the foregoing provisions
of this Section 1.6.
1.7 Subscriber agrees and understands that the principals of the
Placement Agent may purchase Common Shares in this offering for their own
account on the same terms and conditions as Subscriber.
2. Offering Material.
2.1 Subscriber represents and warrants that it is in receipt of and
that it has carefully read the following items:
(a) The Company's Form 10-K for the period ended December 31, 2001
(the "Form 10-K");
(b) The Company's Form 10-Q's for the periods ended March 31, 2002,
June 30, 2002 and September 30, 2002; and
(c) All other documents filed by the Company with the Commission
subsequent to the Company's Form 10-K and prior to the date of this Agreement.
The documents listed in this Section 2.1 shall be referred to herein as
the "Disclosure Documents."
3. Conditions to Subscriber's Obligations.
3.1 The obligation of Subscriber to close the transaction contemplated
by this Agreement (the "Transaction") is subject to the satisfaction on or prior
to the Closing Date of the following conditions set forth in Sections 3.2
through 3.5 hereof.
3.2 The Company shall have executed this Agreement and delivered the
same to the Placement Agent.
3.3 The Board of Directors of the Company shall have adopted
resolutions consistent with Section 4.1(d) below in a form reasonably acceptable
to the Placement Agent.
3.4 Subscriber shall have received copies of all documents and
information which it may have reasonably requested in connection with the
Offering.
3.5 The Company shall have caused its legal counsel to deliver to
Subscriber a legal opinion in substantially the form attached hereto as Appendix
II.
3.6 No stop order or suspension of trading shall have been imposed by
the American Stock Exchange, the Securities and Exchange Commission (the "SEC"),
or any other governmental regulatory body with respect to public trading in
Common Shares of the Company.
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3.7 The representations and warranties of the Company shall be true and
correct on and as of the Closing Date as though made on and as of such date; and
Subscriber shall have received on the Closing Date a certificate to this effect
executed by the Chief Executive Officer or the Chief Financial Officer of the
Company.
3.8 If so requested by Subscriber, the Company shall have delivered to
the custodian for the Subscriber duly executed certificates, registered in the
name of Subscriber's nominee, representing the Common Shares.
3.9 Bank of Oklahoma NA, as escrow agent, will hold investment funds in
escrow until such time as the Company has received and accepted subscriptions
for at least $3.5 million (the "Minimum Offering"). If subscriptions for at
least the Minimum Offering have not been received and accepted prior to February
28, 2002, no subscriptions will be accepted and all subscription funds will be
returned to prospective investors without interest or deduction.
4. Representations and Warranties; Covenants; Survival.
4.1 The Company represents and warrants to Subscriber that, at the date
of this Agreement and at each Closing Date on which Subscriber purchases Common
Shares:
(a) The Company has the full power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Company, enforceable
in accordance with its terms. The Company need not give any notice to, make any
filings with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(b) The Company and each of its subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of their states
of incorporation, with all requisite corporate power and authority to carry on
the business in which they are engaged and to own the properties they own, and
the Company has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The Company
and each of its subsidiaries are duly qualified and licensed to do business and
are in good standing in all jurisdictions where the nature of their business
makes such qualification necessary, except where the failure to be qualified or
licensed would not have a material adverse effect on the business of the Company
and its subsidiaries, taken as a whole.
(c) Except as set forth in the Company's filings with the SEC,
there are no legal actions or administrative proceedings or investigations
instituted, or to the best knowledge of the Company threatened, against the
Company, that could reasonably be expected to have a material adverse effect on
the Company or any subsidiary, any of the Common Shares, or the business of the
Company and its subsidiaries, or which concerns the transactions contemplated by
this Agreement.
(d) The Company's audited consolidated financial statements as of
December 31, 2001, contained in the Form 10-K and the unaudited financial
statements for the three months and nine months ended September 30, 2002,
contained in the Form 10-Q, including the notes contained therein, fairly
present the consolidated financial position of the Company at the respective
dates thereof and the results of its consolidated operations for the periods
purported to be covered thereby. Such financial statements have been prepared in
conformity with generally accepted accounting principles consistently applied
with prior periods subject to any comments and notes contained therein. All
liabilities, contingent and other, of the Company and its subsidiaries, are set
forth in the financial statements as of September 30, 2002 contained in the Form
10-Q, excepting only liabilities incurred in the ordinary course of business
subsequent to September 30, 2002, and liabilities of the type not required under
generally accepted accounting principles to be reflected in such financial
statements. Since September 30, 2002, there has been no material adverse change
in the financial condition of the Company from the financial condition stated in
such financial statements. As of December 31, 2002, the Company had 23,442,164
Common Shares outstanding. The capitalization of the Company, including the
authorized capital stock, the number of shares issued and outstanding, the
number of shares issuable and reserved for issuance pursuant to the Company's
stock option plans, the number of shares issuable and reserved for issuance
pursuant to securities exercisable for, or convertible into or exchangeable for
any shares of capital stock as of the Closing Date is as described in Schedule
4.1(d) attached to this Agreement.
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(e) The Company, by appropriate and required corporate action, has,
or will have prior to the Initial Closing, duly authorized the execution of this
Agreement and the issuance and delivery of the Common Shares. The Common Shares
are not subject to preemptive or other rights of any stockholders of the Company
and when issued in accordance with the terms of this Agreement and the Amended
and Restated Certificate of Incorporation of the Company, as amended and
currently in effect, the Common Shares will be validly issued, fully paid and
nonassessable and free and clear of all pledges, liens and encumbrances. The
issuance of the Common Shares hereunder will not trigger any outstanding
antidilution rights.
(f) Performance of this Agreement and compliance with the
provisions hereof will not violate any provision of any applicable law or of the
Certificate of Incorporation or Bylaws of the Company, or of any of its
subsidiaries, and, will not conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon, any of the
properties or assets of the Company, or of any of its subsidiaries, pursuant to
the terms of any indenture, mortgage, deed of trust or other agreement or
instrument binding upon the Company, or any of its subsidiaries, other than such
breaches, defaults or liens which would not have a material adverse effect on
the Company and its subsidiaries taken as a whole. The Company is not in default
under any provision of its charter or by-laws or other organizational documents
or under any provision of any agreement or other instrument to which it is a
party or by which it is bound or of any law, governmental order, rule or
regulation so as to affect adversely in any material manner its business or
assets or its condition, financial or otherwise.
(g) The Disclosure Documents, taken together, do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein to make the statements contained therein not misleading.
(h) The Company has provided Subscriber with all material public
information in connection with the business of the Company and the transactions
contemplated by this Agreement, and no representation or warranty made, nor any
document, statement, or financial statement prepared or furnished by the Company
in connection herewith contains any untrue statement of material fact, or omits
to state a material fact necessary to make the statements or facts contained
herein or therein not misleading.
(i) This Agreement, including Appendix I, has been duly executed
and delivered by the Company and constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
(j) Other than the listing of the Registrable Securities on the
American Stock Exchange, no registration, authorization, approval, qualification
or consent of any court or governmental authority or agency is necessary in
connection with the execution and delivery of this Agreement or the offering,
issuance or sale of the Common Shares under this Agreement.
(k) The Company has timely filed with the SEC all documents
required to be filed by the Company under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (collectively, the "SEC Filings"). On their
respective dates of filing, the SEC Filings complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
SEC.
(l) The Company is not now, and after the sale of the Common Shares
under this Agreement and under all other agreements and the application of the
net proceeds from the sale of the Common Shares will not be, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(m) The Company has filed all material tax returns required to be
filed, which returns are true and correct in all material respects, and the
Company is not in default in the payment of any taxes, including penalties and
interest, assessments, fees and other charges, shown thereon due or otherwise
assessed, other than those being contested in good faith and for which adequate
reserves have been provided or those currently payable without interest which
were payable pursuant to said returns or any assessments with respect thereto.
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(n) The Company has not taken any action outside the ordinary
course of business designed to or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Common Shares to
facilitate the sale or resale of the Common Shares in any manner in
contravention of applicable securities laws.
(o) Subject to the accuracy of the Subscriber's representations and
warranties in Section 7 of this Agreement, the offer, sale, and issuance of the
Common Shares in conformity with the terms of this Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act") and from the
registration or qualification requirements of the laws of any applicable state
or United States jurisdiction.
(p) Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or
sales in any security or solicited any offers to buy any security under
circumstances that would require registration under the Securities Act of the
issuance of the Shares to the Subscriber. The issuance of the Shares to the
Subscriber will not be integrated with any other issuance of the Company's
securities (past, current or future) for purposes of the Securities Act or any
applicable rules of the American Stock Exchange. The Company will not make any
offers or sales of any security (other than the Common Shares) that would cause
the offering of the Common Shares to be integrated with any other offering of
securities by the Company for purposes of any registration requirement under the
Securities Act or any applicable rules of Nasdaq.
(q) The Company is eligible to register securities for resale with
the SEC under Form S-3 promulgated under the Securities Act.
(r) The Company is in material compliance with all applicable
securities (or "Blue Sky") laws of the states of the United States in connection
with the issuance and sale of the Common Shares to Subscriber and the issuance
of the other Common Shares.
(s) The Company shall use all commercially reasonable efforts to
obtain, prior to the effective date of the Registration Statement, approval for
listing of the Registrable Securities on the American Stock Exchange.
4.2 The Company will take all action required to continue to be
eligible to register securities for resale with the SEC under Form S-3
promulgated under the Securities Act.
4.3 The Company shall issue a press release and file a Current Report
on Form 8-K with the SEC regarding the closing of the Offering within three (3)
business days after the Final Closing.
4.4 The Company shall indemnify and hold harmless the Subscriber from
and against all fees, commissions or other payments owing by the Company to the
Placement Agent or any other person or firm acting on behalf of the Company
hereunder.
5. Transfer and Registration Rights.
5.1 Subscriber acknowledges that it is acquiring the Common Shares for
its own account and for the purpose of investment and not with a view to any
distribution or resale thereof within the meaning of the Securities Act and any
applicable state or other securities laws ("State Acts"). Subscriber further
agrees that it will not sell, assign, transfer or otherwise dispose of any of
the Common Shares in violation of the Securities Act or State Acts and
acknowledges that, in taking unregistered Common Shares, it must continue to
bear economic risk in regard to its investment for an indefinite period of time
because of the fact that such Common Shares have not been registered under the
Securities Act or State Acts and further realizes that such Common Shares cannot
be sold unless subsequently registered under the Securities Act and State Acts
or an exemption from such registration is available. Subscriber further
recognizes that the Company is not assuming any obligation to register such
Common Shares except as expressly set forth herein. Subscriber also acknowledges
that appropriate legends reflecting the status of the Common Shares under the
Securities Act and State Acts may be placed on the face of the certificates for
such Common Shares at the time of their transfer and delivery to the holder
thereof. This Agreement is made with Subscriber in reliance upon Subscriber's
above representations.
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5.2 The Common Shares issued pursuant to this Agreement may not be
transferred except in a transaction which is in compliance with the Securities
Act and State Acts. Except as provided hereafter with respect to registration of
the Common Shares or sale under Rule 144 contemplated in Appendix I, it shall be
a condition to any such transfer that the Company shall be furnished with an
opinion of counsel, which counsel and opinion shall be reasonably satisfactory
to the Company, to the effect that the proposed transfer would be in compliance
with the Securities Act and State Acts. Notwithstanding the foregoing,
furnishing such opinion of counsel shall not be a condition to any transfer of
Common Shares to an affiliate of Subscriber, including for this purpose if
Subscriber is an investment company, any fund or account advised by Subscriber's
investment adviser or any affiliate thereof.
5.3 The Company hereby grants to Subscriber the registration rights set
forth in Appendix I attached hereto. Appendix I is incorporated into, and made a
part of, this Agreement.
6. Closing.
6.1 The closing of the sale of the Common Shares to Subscriber shall take place
at the offices of the Placement Agent at such time as the Company and Placement
Agent shall mutually agree, provided that the Final Closing shall occur no later
than five (5) business days after the Initial Closing and no later than ten days
after the date that this Agreement is tendered to the Company by Subscriber.
Subscriber may terminate this Agreement by giving written notice to the Company
if the Final Closing has not occurred within such timeframe.
7. Subscriber Representations. Subscriber hereby represents, warrants and
acknowledges and agrees with the Company and Placement Agent as follows:
7.1 Subscriber has been furnished with and has carefully read the
Disclosure Documents as set forth in Section 2.1 hereto and is familiar with the
terms of the Offering. With respect to individual or partnership tax and other
economic considerations involved in this investment, Subscriber is not relying
on the Company or the Placement Agent (or any agent or representative of any of
them). Subscriber has carefully considered and has, to the extent Subscriber
believes such discussion necessary, discussed with Subscriber's legal, tax,
accounting and financial advisers the suitability of an investment in the Common
Shares for Subscriber's particular tax and financial situation.
7.2 Subscriber has had an opportunity to inspect relevant documents
relating to the organization and operations of the Company. Subscriber
acknowledges that all documents, records and books pertaining to this investment
which Subscriber has requested have been made available for inspection by
Subscriber and Subscriber's attorney, accountant or other adviser(s).
7.3 Subscriber and/or Subscriber's advisor(s) has/have had a reasonable
opportunity to ask questions of and receive answers and to request additional
relevant information from a person or persons acting on behalf of the Company
concerning the Offering.
7.4 Subscriber is not subscribing for the Common Shares as a result of
or subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar.
7.5 Subscriber is an "accredited investor," within the meaning of Rule
501(a) of Regulation D under the Securities Act ("Regulation D"). Subscriber, by
reason of Subscriber's business or financial experience or the business or
financial experience of Subscriber's professional advisers who are unaffiliated
with and who are not compensated by the Company or the Placement Agent or any
affiliate of either of them, directly or indirectly, can be reasonably assumed
to have the capacity to protect Subscriber's own interests in connection with
the transaction. Subscriber further acknowledges that he has read the written
materials provided by the Company.
7.6 Subscriber has adequate means of providing for Subscriber's current
financial needs and contingencies, is able to bear the substantial economic
risks of an investment in the Common Shares for an indefinite period of time,
has no need for liquidity in such investment and, at the present time, could
afford a complete loss of such investment.
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7.7 Subscriber has such knowledge and experience in financial, tax and
business matters so as to enable Subscriber to use the information made
available to Subscriber in connection with the Offering to evaluate the merits
and risks of an investment in the Common Shares and to make an informed
investment decision with respect thereto.
7.8 Subscriber acknowledges that the Common Shares herein subscribed
for has not been registered under the Securities Act or under any State Act.
Subscriber understands further that in absence of an effective Registration
Statement, the Common Shares can only be sold pursuant to some exemption from
registration, such as Rule 144 of the Act, which requires, among other
conditions, that the Common Shares must be held for a minimum of one (1) year.
7.9 Subscriber recognizes that investment in the Common Shares involves
substantial risks. Subscriber acknowledges that he has reviewed the risk factors
identified within the Disclosure Documents. Subscriber further recognizes that
no Federal or state agencies have passed upon this offering of the Common Shares
or made any finding or determination as to the fairness of this investment.
7.10 Subscriber acknowledges that each certificate representing the
Common Shares shall contain a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AVAILABLE
EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT THE SELLER
DELIVERS TO THE COMPANY AN OPINION OF COUNSEL (WHICH OPINION
AND COUNSEL ARE REASONABLY SATISFACTORY TO THE COMPANY)
CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME.
7.11 If this Agreement is executed and delivered on behalf of a
partnership, corporation, trust or estate: (i) such partnership, corporation,
trust or estate has the full legal right and power and all authority and
approval required (a) to execute and deliver, or authorize execution and
delivery of, this Agreement and all other instruments executed and delivered by
or on behalf of such partnership, corporation, trust or estate in connection
with the purchase of the Common Shares, (b) to delegate authority pursuant to a
power of attorney and (c) to purchase and hold such Common Shares; (ii) the
signature of the party signing on behalf of such partnership, corporation, trust
or estate is binding upon such partnership, corporation, trust or estate; and
(iii) such partnership, corporation or trust has not been formed for the
specific purpose of acquiring the Common Shares, unless each beneficial owner of
such entity is qualified as an "accredited investor" within the meaning of
Regulation D and has submitted information substantiating such individual
qualification.
7.12 If Subscriber is a retirement plan or is investing on behalf of a
retirement plan, Subscriber acknowledges that investment in the Common Shares
poses risks in addition to those associated with other investments, including
the inability to use losses generated by an investment in the Common Shares to
offset taxable income.
7.13 The information furnished by Subscriber in the Subscriber
Questionnaire signed by Subscriber is true and accurate as of the date thereof.
8. Understandings.
Subscriber understands, acknowledges and agrees with the Company and
the Placement Agent as follows:
8.1 The parties hereby acknowledge and agree that, except as otherwise
noted herein, upon acceptance from the Company and Placement Agent, and in the
case of Subscriber, upon notice of acceptance from the Company and Placement
Agent pursuant to Section 1.4, the Subscription hereunder is irrevocable by the
parties, that, except as required by law the parties are not entitled to cancel,
terminate or revoke this Agreement or any agreements of the parties hereunder
and that this Subscription Agreement and such other agreements shall survive the
death or disability of the parties and shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns. If
Subscriber is more than one person, the obligations of Subscriber hereunder
shall be joint and several and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and his or her heirs, executors, administrators,
successors, legal representatives and permitted assigns.
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8.2 No federal or state agency has made any findings or determination
as to the fairness of the terms of this Offering for investment nor any
recommendations or endorsement of the Common Shares.
8.3 The Offering is intended to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act and the
provisions of Rule 506 of Regulation D thereunder, which is in part dependent
upon the truth, completeness and accuracy of the statements made by Subscriber
herein and in the Subscriber Questionnaire.
8.4 It is understood that in order not to jeopardize the Offering's
exempt status under Section 4(2) of the Securities Act and Regulation D, any
transferee may, at a minimum, be required to fulfill the investor suitability
requirements thereunder.
8.5 The Placement Agent will receive compensation from the Company in
connection with the Offering but is not guaranteeing or assuming responsibility
for the operation or possible liability of the Company, including, without
limitation, compliance by the Company with the agreements entered into in
connection with the Offering, and the Placement Agent will not supervise or
participate in the operation or management of the Company.
8.6 No person or entity acting on behalf, or under the authority, of
Subscriber is or will be entitled to any broker's, finder's or similar fee or
commission in connection with this Subscription.
8.7 Subscriber acknowledges that the information furnished in this
Agreement by the Company or the Placement Agent to Subscriber or its advisers in
connection with the Offering, is confidential and nonpublic and agrees that all
such written information which is material and not yet publicly disseminated by
the Company shall be kept in confidence by Subscriber and neither used by
Subscriber for Subscriber's personal benefit (other than in connection with this
Subscription), nor disclosed to any third party, except Subscriber's legal and
other advisers who shall be advised of the confidential nature of such
information, for any reason; provided, however, that this obligation shall not
apply to any such information that (i) is part of the public knowledge or
literature and readily accessible at the date hereof, (ii) becomes a part of the
public knowledge or literature and readily accessible by publication (except as
a result of a breach of this provision) or (iii) is received from third parties
(except third parties who disclose such information in violation of any
confidentiality agreements or obligations, including, without limitation, any
subscription agreement entered into with the Company). The representations,
warranties and agreements of Subscriber and the Company contained herein and in
any other writing delivered in connection with the Offering shall be true and
correct in all material respects on and as of the Closing Date of such
Subscription as if made on and as of the date the Company executes this
Agreement and shall survive the execution and delivery of this Agreement and the
purchase of the Common Shares.
8.8 IN MAKING AN INVESTMENT DECISION, SUBSCRIBER MUST RELY ON ITS OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THE COMMON SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
8.9 Subscriber hereby acknowledges and agrees that Placement Agent has
been retained by the Company to act as the Company's placement agent in the
Offering, and that for its services, Placement Agent will be compensated by the
Company as follows: (i) a fee equal to: (a) six percent of the gross proceeds
from the sale of Common Shares for the first $10 million of Common Shares sold
in the Offering; and (b) five percent of the gross proceeds from the sale of
Common Shares in the Offering over the initial $10 million; (ii) an up-front due
diligence fee of $25,000 plus reimbursement of Placement Agent's reasonable
out-of-pocket expenses in connection with the Offering, (iii) an initial warrant
to purchase up to 150,000 Common Shares at an exercise price of $1.23 per share
(the "Initial Warrants"); and (iv) upon completion of the Offering, a warrant to
purchase Common Shares equal to: (a) 10% of the total Common Shares sold in the
Offering for the first $10 million of Common Shares sold; plus (b) 6% of the
total Common Shares sold in the Offering over $10 million (the "Placement Agent
Warrants"); less (c) the 150,000 Common Shares underlying the Initial Warrants
described above.
9
9. Miscellaneous.
9.1 Except as set forth elsewhere herein, any notice or demand to be
given or served in connection herewith shall be deemed to be sufficiently given
or served for all purposes by being sent as registered or certified mail, return
receipt requested, postage prepaid, in the case of the Company, addressed to it
at the address set forth below:
Stonepath Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, CFO
and in the case of Subscriber to the address for correspondence set forth on the
Subscriber Questionnaire.
9.2 This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Delaware, and shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed to be modified to conform with such statute or rule of law. Any
provision hereof that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
9.3 In any action, proceeding or counterclaim brought to enforce any of
the provisions of this Agreement or to recover damages, costs and expenses in
connection with any breach of the Agreement, the prevailing party shall be
entitled to be reimbursed by the opposing party for all of the prevailing
party's reasonable outside attorneys' fees, costs and other out-of-pocket
expenses incurred in connection with such action, proceeding or counterclaim.
9.4 This Agreement (including Appendix I) and the Subscriber
Questionnaire constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth herein. The Company
acknowledges that all material facts upon which it has relied in forming its
decision to enter into this Agreement are expressly set forth herein and further
acknowledges that the Subscriber has not made any representations, express or
implied, which are not set expressly set forth herein. This Agreement supercedes
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof.
9.5 The Company shall indemnify, defend and hold harmless Subscriber
and each of its agents, partners, members, officers, directors, representatives,
or affiliates (collectively, the "Subscriber Indemnities") against any and all
losses, liabilities, claims and expenses, including reasonable attorneys' fees
("Losses"), sustained by Subscriber Indemnities resulting from, arising out of,
or connected with any material inaccuracy in, breach of, or nonfulfillment of
any representation, warranty, covenant or agreement made by or other obligation
of the Company contained in this Agreement (including the Exhibits hereto) or in
any document delivered in connection herewith.
9.6 The Company shall not issue any public statement or press release,
or otherwise disclose in any manner the identity of the Subscriber or that
Subscriber has purchased the Common Shares, without the prior written consent of
the Subscriber, except as may be required by applicable law; provided, however,
that the Company may disclose such information in any registration statement
filed with the SEC pursuant to the registration rights provisions set forth in
Appendix I hereto.
10. Signature. The signature page of this Agreement is contained as
part of the applicable Subscription Package, entitled "Signature Page."
10
SUBSCRIPTION AGREEMENT GENERAL INSTRUCTIONS
-------------------------------------------
General Instructions
These Subscription Documents contain all documents necessary to
subscribe for Common Shares, $.001 par value ("Common Shares"), of Stonepath
Group, Inc., a Delaware corporation (the "Company").
You may subscribe for Common Shares by completing the Subscription
Agreement in the following manner:
1. On line (a) of the signature page state the number of Common Shares
you wish to purchase.
2. On line (b) of the signature page state the total cost of the Common
Shares you wish to purchase. To obtain the cost, multiply the number of Common
Shares you desire to purchase by the purchase price per Common Share set forth
therein.
3. Please complete the detailed investment and other representations in
the Subscriber Questionnaire to evidence your suitability for an investment in
the Company. All purchasers must complete and sign the Subscription Agreement
and the Subscriber Questionnaire.
4. Sign and state your address, telephone number and social security or
other taxpayer identification number on the lines provided on the signature page
to the Subscription Agreement and deliver the completed Subscription Agreement
and Subscriber Questionnaire with payment of the entire purchase price of the
Common Shares subscribed for as set forth below. Payment should be made in
United States Dollars by wire transfer to:
Bank of Oklahoma NA
ABA # 103 900 036
Acct # 600024642
Acct Name: Trust Funds
FFC Acct # 754390011
FFC Acct Name: Stonepath Group Escrow
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
The Subscription Agreement Signature Page must be completed and signed by each
investor. Send all documents to:
Stonegate Securities, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No.: 214/▇▇▇-▇▇▇▇
Facsimile No.: 214/987-1981
THE COMPLETED SUBSCRIPTION AGREEMENT AND SUBSCRIBER QUESTIONNAIRE
SHOULD BE RETURNED IN ITS ENTIRETY TO THE PLACEMENT AGENT DESIGNATED ABOVE.
Acceptance of Delivery
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of the completed Subscription Agreement will be
reasonably determined by the Company. The Company reserves the absolute right to
reject any completed Subscription Agreement, in its sole and absolute
discretion. The Company also reserves the right to waive any irregularities in,
or conditions of, the submission of completed Subscription Agreements. The
Company shall be under no duty to give any notification of irregularities in
connection with any attempted subscription for Common Shares or incur any
liability for failure to give such notification. Until such irregularities have
been cured or waived, no subscription for Common Shares shall be deemed to have
been made. Any Subscription Agreement that is not properly completed and as to
which defects have not been cured or waived will be returned by the Company to
the subscriber as soon as practicable.
11
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned investor hereby certifies that he or she (i) has
received and relied solely upon information provided by the Company, (ii) agrees
to all the terms and conditions of this Subscription Agreement, (iii) meets the
suitability standards set forth in this Subscription Agreement and (iv) is a
resident of the state or foreign jurisdiction indicated below.
(a) The undersigned subscribes for __________ Common Shares.
(b) The total cost of the Common Shares subscribed for, at $____ per Common Share, is $__________ (the "Purchase Price").
_______________________________________________________
Name of Subscriber (Print) If other than Individual check one and indicate capacity of
signatory under the signature:
_______________________________________________________ [ ] Trust
Name of Joint Subscriber (if any) (Print) [ ] Estate
[ ] Uniform Gifts to Minors Act of State of ________________
[ ] Attorney-in-fact
_______________________________________________________ [ ] Corporation
Signature of Subscriber [ ] Other __________________________________________________
_______________________________________________________
Signature of Joint Subscriber (if any) If Joint Ownership, check one:
_______________________________________________________ [ ] Joint Tenants with Right of Survivorship
Capacity of Signatory (if applicable) [ ] Tenants in Common
[ ] Tenants by Entirety
_______________________________________________________ [ ] Community Property
Social Security or Taxpayer Identification Number
Backup Withholding Statement:
Please check this box only if the investor is subject to:
_______________________________________________________
Residence Address [ ] backup withholding.
_______________________________________________________ Foreign Person:
City State Zip Code Please check this box only if the investor is a:
[ ] nonresident alien, foreign corporation, foreign
Telephone ( )_______________________________________ partnership, foreign trust or foreign estate.
Telecopy No. __________________________________________
The investor agrees to the terms of this Subscription Agreement and, as required
by the Regulations pursuant to the Internal Revenue Code, certifies under
penalty of perjury that (1) the Social Security Number or Taxpayer
Identification Number and address provided above is correct, (2) the investor is
not subject to backup withholding (unless the Backup Withholding Statement box
is checked) either because he has not been notified that he is subject to backup
withholding as a result of a failure to report all interest or dividends or
because the Internal Revenue Service has notified him that he is no longer
subject to backup withholding and (3) the investor (unless the Foreign Person
box above is checked) is not a nonresident alien, foreign partnership, foreign
trust or foreign estate.
THE SUBSCRIPTION FOR _____________ COMMON SHARES OF STONEPATH GROUP,
INC. BY THE ABOVE NAMED SUBSCRIBER(S) IS ACCEPTED AS OF ________________, 2003.
__________________________
By: _______________________________
Title:_____________________________
12
Schedule 4.1(c)
Capitalization Table as of 12/31/02
Authorized Capital Stock: 100,000,000 shares of common stock, par value $.001
per share
10,000,000 shares of preferred stock, par value $.001 per share
Number of shares issued and outstanding: 23,442,164 shares of common stock
(23,475,914 as of 2/5/03)
Number of shares issuable and reserved for issuance pursuant to Company's
Amended and Restated 2000 Stock Incentive Plan (the "Plan"): 10,000,000
Number of shares issuable and reserved for issuance pursuant to securities
exercisable for, or convertible into or exchangeable for any shares of the
Company's capital stock:
1. 7,164,000 shares issuable upon exercise of options outstanding under
the company's Plan (*);
2. 2,283,300 shares issuable upon exercise of outstanding non-Plan
options (i.e., those options that were granted before the Plan was approved
during June 2000);
3. 2,939,514 shares issuable upon exercise of outstanding common stock
purchase warrants; and
4. 3,607,448 shares issuable upon the conversion of outstanding Series
D Convertible Preferred stock.
TOTAL CAPITALIZATION 39,436,426(*)
(*) The number of outstanding options has been determined as of 12/31/02, and
does not give effect to the contemplated grant of executive performance options
during the first quarter of 2003, estimated not to exceed 15% of outstanding
Plan options.
13
Appendix I
Registration Rights
11. Definitions.
11.1 As used in this Appendix I, the following terms shall have the
meanings:
(a) "Affiliate," of any specified Person means any other Person
who directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified Person.
For purposes of this definition, control of a Person means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person whether by contract, securities ownership or otherwise; and the
terms "controlling" and "controlled" have the respective meanings correlative to
the foregoing.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(d) "Investors" means the Subscribers and any permitted transferee
or assignee of Registrable Securities who agrees to become bound by all of the
terms and provisions of this Appendix I and the Subscription Agreements.
(e) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government agency or political subdivision
thereof.
(f) "Prospectus" means the prospectus (including any preliminary
prospectus and/or any final prospectus filed pursuant to Rule 424(b) under the
Securities Act and any prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by the Registration Statement and by all other amendments and
supplements to such prospectus, including all material incorporated by reference
in such prospectus and all documents filed after the date of such prospectus by
the Company under the Exchange Act and incorporated by reference therein.
(g) "Public Offering" means an offer registered with the
Commission and the appropriate state securities commissions by the Company of
its Common Stock and made pursuant to the Securities Act.
(h) "Registrable Securities" means the Common Shares purchased
pursuant to the Subscription Agreements; provided, however, a Common Share shall
cease to be a Registrable Security for purposes of this Appendix I when it no
longer is a Restricted Security.
(i) "Registration Statement" means a registration statement of the
Company filed on Form S-3 under the Securities Act providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Registrable Securities pursuant to Rule 415 under the Securities
Act, including the Prospectus contained therein and forming a part thereof, any
amendments to such registration statement and supplements to such Prospectus,
and all exhibits and other material incorporated by reference in such
registration statement and Prospectus. In the event that Form S-3 is unavailable
for such a registration, the Company shall use such other form as is available
for such a registration.
(j) "Restricted Security" means any Common Share except any that
(i) have been registered pursuant to an effective registration statement under
the Securities Act and sold in a manner contemplated by the prospectus included
in such registration statement, (ii) have been transferred in compliance with
the resale provisions of Rule 144 under the Securities Act (or any successor
provision thereto) or is transferable pursuant to paragraph (k) of Rule 144
under the Securities Act (or any successor provision thereto), or (iii)
otherwise has been transferred and are not subject to transfer restrictions
under the Securities Act.
14
(k) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, or any similar
successor statute.
11.2 All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Subscription Agreement.
12. Registration.
12.1 Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the Commission not later than twenty business days
following the Final Closing (as that term is defined in the accompanying
Subscription Agreement) (the "Filing Deadline") a Registration Statement
relating to the offer and sale of the Registrable Securities by the Investors
and shall use its best efforts to cause the Commission to declare such
Registration Statement effective under the Securities Act as promptly as
practicable, but not later than 120 days after the Final Closing (the
"Effectiveness Deadline"). The Common Shares issued in the Offering, and the
Common Shares underlying warrants issued to Stonegate Securities, Inc., shall be
included in such Registration Statement. The Company shall notify the Investors
in writing by telecopy notice that such Registration Statement has been declared
effective by the Commission on the date of such declaration by the Commission.
The Company agrees to keep such Registration Statement effective until the
earlier of: (i) the passage of two years from the effective date of such
Registration Statement; or (ii) the date on which all Registrable Securities may
be resold by the Investors by reason of Rule 144(k) under the Securities Act or
any other rule of similar effect.
12.2 Registration Default. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) is not (i) filed with the Commission by the Filing Deadline, or (ii)
declared effective by the Commission by the Effectiveness Deadline (each of the
Filing Deadline and Effectiveness Deadline, an "Initial Date"), then the Company
shall make the payments to the Investors as provided in the next sentence as
liquidated damages and not as a penalty. The amount to be paid by the Company to
the Investors shall be determined as of each Computation Date (as defined below)
and, as applicable, the actual filing and effectiveness dates of the
Registration Statement, and such amount shall be equal to 2.5% (the "Liquidated
Damage Rate") of the Purchase Price (as defined in the Subscription Agreement)
for the period from the Initial Date to the first Computation Date, and for each
30-day period of any subsequent Computation Dates thereafter, calculated on a
pro rata basis to the date on which the Registration Statement is filed with (in
the event of an Initial Date pursuant to clause (i) above) or declared effective
by (in the event of an Initial Date pursuant to clause (ii) above) the
Commission (the "Periodic Amount") provided, however, that in no event shall the
liquidated damages be less than $34,000. The full Periodic Amount shall be paid
by the Company to the Investors, pro rata, by wire transfer of immediately
available funds within three days after each Computation Date and, as
applicable, the actual filing and effectiveness dates of the Registration
Statement.
As used in this Section 2(b), "Computation Date" means the date which
is 30 days after the Initial Date and, if the Registration Statement to be filed
by the Company pursuant to Section 2(a) has not theretofore been filed with the
Commission or declared effective by the Commission, as the case may be, each
date which is 30 days after the previous Computation Date until such
Registration Statement is so filed or declared effective, as the case may be.
Notwithstanding the above, if the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not filed with the Commission by the Filing Deadline, the Company
shall be in default of the terms of this Appendix I, and the Investors shall be
entitled to damages as set forth above.
12.3 Piggyback Registration Rights.
(i) Until such date as the Registration Statement to be filed
in accordance with Section 2(a) is declared effective by the Commission, if the
Company proposes to register any of its Common Shares or any other common shares
of the Company under the Securities Act (other than a registration (A) on Form
S-8 or S-4 or any successor or similar forms, (B) relating to Common Shares or
any other common shares of the Company issuable upon exercise of employee or
consultant share options or in connection with any employee benefit or similar
plan of the Company or (C) in connection with a direct or indirect acquisition
by the Company of another Person or any transaction with respect to which Rule
145 (or any successor provision) under the Securities Act applies), whether or
not for sale for its own account, it will each such time, give prompt written
notice at least 20 days prior to the anticipated filing date of the registration
statement relating to such registration to the Investors, which notice shall set
forth such Investors' rights under this Section 2(c) and shall offer the
Investors the opportunity to include in such registration statement such number
of Registrable Securities as the Investors may request. Upon the written request
of an Investor made within 10 days after the receipt of notice from the Company
(which request shall specify the number of Registrable Securities intended to be
disposed of by such Investors), the Company will use its best efforts to effect
the registration under the Securities Act of all Registrable Securities that the
Company has been so requested to register by the Investors, to the extent
requisite to permit the disposition of the Registrable Securities to be so
registered; provided, however, that (A) if such registration involves a Public
Offering, the Investors must sell their Registrable Securities to the
underwriters on the same terms and conditions as apply to the Company and (B)
if, at any time after giving written notice of its intention to register any
Registrable Securities pursuant to this Section 2(c) and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such Registrable
Securities, the Company shall give written notice to the Investors and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. The Company's obligations under
this Section 2(c) shall terminate on the date that the registration statement to
be filed in accordance with Section 2(a) is declared effective by the
Commission.
15
(ii) If a registration pursuant to this Section 2(c) involves
a Public Offering and the managing underwriter thereof advises the Company that,
in its view, the number of Common Shares, if any, or other Common Shares that
the Company and the Investors intend to include in such registration exceeds the
largest number of Common Shares (including any other Common Shares or warrants
of the Company) that can be sold without having an adverse effect on such Public
Offering (the "Maximum Offering Size"), the Company will include in such
registration only that number of Common Shares which does not exceed the Maximum
Offering Size, in the following order of priorities: (1) first, all securities
the Company proposes to sell for its own account, (2) second, up to the full
number of securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the Registration
Statement by reason of demand registration rights, and (3) third, the securities
requested to be registered by other holders of securities entitled to
participate in the registration, drawn from them pro-rata based on the number of
shares each has requested to be included in such registration and the Investors
pursuant to this Appendix I.
If as a result of the proration provisions of this Section 2(c)(ii),
the Investors are not entitled to include all such Registrable Securities in
such registration, such Investors may elect to withdraw their request to include
any Registrable Securities in such registration.
Notwithstanding the foregoing, the Company shall have no obligations
under this Section 2(c) hereof at any time that such Registrable Securities are
the subject of an effective registration statement.
13. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall use its reasonable best efforts to:
13.1 Subject to the provisions of Section 3(r) hereof, promptly (i)
prepare and file with the Commission such amendments (including post-effective
amendments) to the Registration Statement and supplements to the Prospectus as
may be necessary to keep the Registration Statement continuously effective and
in compliance with the provisions of the Securities Act applicable thereto so as
to permit the Prospectus forming part thereof to be current and useable by
Investors for resales of the Registrable Securities for a period of two years
from the date the Registration Statement is first declared effective by the
Commission (the "Effective Time") or such shorter period that will terminate
when all the Registrable Securities covered by the Registration Statement have
been sold pursuant thereto in accordance with the plan of distribution provided
in the Prospectus, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act (the "Registration
Period") and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, not misleading
and (B) the Prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the Registration
Period include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the Company's obligations hereunder
shall terminate as to any investor at such time as that Investor's Registrable
Securities can be sold under Rule 144(k);
16
13.2 During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
13.3 (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
(including a copy of the accountant's consent letter to be included in the
filing) to Stonegate Securities, Inc. ("Stonegate") and reflect in such
documents all such comments as Stonegate reasonably may propose; and (ii)
furnish to each Investor whose Registrable Securities are included in the
Registration Statement, (A) promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by the Company, one copy of
the Registration Statement, each Prospectus, and each amendment or supplement
thereto, and (B) such number of copies of the Prospectus and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
13.4 (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "Blue Sky" laws of all
jurisdictions requiring Blue Sky registration or qualification, (ii) prepare and
file in such jurisdictions such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
13.5 As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
13.6 Notify each Investor who holds Registrable Securities being sold
(or, in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement on the date of receipt of any such
stop order or other suspension, and take all lawful action to effect the
withdrawal, recession or removal of such stop order or other suspension;
13.7 Cause all the Registrable Securities covered by the Registration
Statement to be listed not later than the date that the Registration Statement
is declared effective by the Commission on the principal national securities
exchange, or included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same class or
series issued by the Company are then listed or included;
13.8 Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
13.9 Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
17
13.10 Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
13.11 Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
13.12 In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
13.13 In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
13.14 In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the date the Registration Statement is first declared
effective or most recent post- effective amendment thereto, as the case may be,
the absence from the Registration Statement and the Prospectus, including any
documents incorporated by reference therein, of an untrue statement of a
material fact or the omission of a material fact required to be stated therein
or necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, subject
to customary limitations);
13.15 In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
13.16 In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
13.17 In connection with any underwritten offering, in the event that
any broker-dealer registered under the Exchange Act shall be an "Affiliate" (as
defined in Rule 2729(b)(1) of the rules and regulations of the National
Association of Securities Dealers, Inc. (the "NASD Rules") (or any successor
provision thereto)) of the Company or has a "conflict of interest" (as defined
in Rule 2720(b)(7) of the NASD Rules (or any successor provision thereto)) and
such broker-dealer shall underwrite, participate as a member of an underwriting
syndicate or selling group or assist in the distribution of any Registrable
Securities covered by the Registration Statement, whether as a holder of such
Registrable Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, the Company shall assist such
broker-dealer in complying with the requirements of the NASD Rules, including,
without limitation, by (A) engaging a "qualified independent underwriter" (as
defined in Rule 2720(b)(15) of the NASD Rules (or any successor provision
thereto)) to participate in the preparation of the Registration Statement
relating to such Registrable Securities, to exercise usual standards of due
diligence in respect thereof and to recommend the public offering price of such
Registrable Securities, (B) indemnifying such qualified independent underwriter
to the extent of the indemnification of underwriters provided in Section 6
hereof, and (C) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the requirements of the
NASD Rules.
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13.18 Notwithstanding anything to the contrary in Section 3, at any
time after the Registration Statement has been declared effective, the Company
may delay the disclosure of material non-public information concerning the
Company, the disclosure of which at the time is not, in the good faith opinion
of the Company and its counsel, in the best interest of the Company (a "Grace
Period"); provided, that the Company shall promptly (i) notify the Investors in
writing of the existence of material non-public information giving rise to a
Grace Period and the date on which the Grace Period will begin, and (ii) notify
the Investors in writing in advance of, or on the same date on which, the Grace
Period ends; and, provided further, that during any consecutive 365 day period,
there shall be only two Grace Periods, such Grace Periods in total not to exceed
45 days. For purposes of determining the length of a Grace Period above, the
Grace Period shall begin on and include the date the holders receive the notice
referred to in clause (i) and shall end on and include the date specified as the
Grace Period ending date in the notice referred to in clause (ii). If at any
time after the Registration Statement has been declared effective, the Company
delays disclosure of material non-public information concerning the Company,
other than during a permitted Grace Period as described above, the Company shall
make payments to the Investors as provided in the next sentence as liquidated
damages intended by the parties to compensate the Investors in part for the
incremental costs and investment risks associated with holding the Registrable
Securities as restricted securities and not as a penalty. The amount of payments
shall be calculated at the Liquidated Damage Rate of the Purchase Price in
accordance with the provisions of Section 2(b) (including its provision of a
minimum amount of $34,000), and the timing of payments shall also be determined
in accordance with Section 2(b). For the purposes of such calculations and
determinations of the amount and timing of payments: (i) the Initial Date shall
mean the first date that the Company delays disclosure of material non-public
information concerning the Company other than during a permitted Grace Period
and (ii) the Computation Date shall mean the date that is 30 days after the
Initial Date and each date that is 30 days after the previous Computation Date
until such period of delay has ceased and the Company has provided notice to the
Investors of the end of such period in accordance with the provisions of this
section above. Nothing herein shall limit the rights of any Investor to pursue
actual damages for the Investor's inability to sell any of the Registrable
Securities into the public market for any reason described in this section.
Notwithstanding the foregoing, the Company shall have no obligations
under Section 3(l) through (q) unless it is effecting an underwritten offering
pursuant to Section 2(c).
14. Obligations of the Investors. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations,
which obligations shall be several and not joint:
14.1 Prior to the first anticipated filing date of the Registration
Statement under Section 2(a) hereof, the Company shall provide the Investors
with a draft of the Registration Statement, including such information about the
Investor as has been provided in the Questionnaire completed by the Investor,
together with whatever confirmations, certificates or consents as may be
reasonably requested by the Company. In connection with any other Registration
Statement including the Investors, it shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Appendix I with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least ten business days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor and its counsel, whether in-house or otherwise ("Counsel") of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of its Registrable Securities
included in the Registration Statement. If at least four business days prior to
the anticipated filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor") or its Counsel, then
the Company shall send such Non-Responsive Investor and its Counsel a reminder
of such information request. If at least two business days prior to the
anticipated filing date the Company still has not received the Requested
Information from such Non-Responsive Investor or its Counsel, then the Company
may file the Registration Statement without including Registrable Securities of
such Non-Responsive Investor. However, promptly upon receipt of the Requested
Information, and at the expense of the Non-Responsive Investor, the Company
shall file such amendment(s) to the Registration Statement as may be necessary
to include therein the Registrable Securities of the Non-Responsive Investor.
14.2 Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; the Company shall, on
its part, ensure that Item 507 of Regulation S-K of the Securities Act
(regarding information on the selling security holders) be complied with in
connection with its preparation and filing of the Registration Statement
hereunder;
19
14.3 As promptly as practicable after becoming aware of such event,
notify the Company of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; and
14.4 Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
15. Expenses of Registration. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company, and
the reasonable fees, not to exceed $5,000.00, of one firm of counsel to the
holders of a majority in interest of the Registrable Securities shall be borne
by the Company.
16. Indemnification and Contribution.
16.1 The Company shall indemnify and hold harmless each Investor and
each underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective officers and directors and each person
who controls such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Person") from and against
any losses, claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person written notice that such Prospectus is
outdated or defective.
16.2 Indemnification by the Investors. Each Investor agrees, as a
consequence of the inclusion of any of its Registrable Securities in a
Registration Statement, severally and not jointly, to (i) indemnify and hold
harmless the Company, its directors (including any person who, with his or her
consent, is named in the Registration Statement as a director nominee of the
Company), its officers and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in light of the circumstances under which they were
made, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made by such Investor in reliance
upon and in conformity with written information furnished to the Company by such
holder expressly for use therein; provided, however, that no Investor shall be
liable under this Section 6(b) for any amount in excess of the gross proceeds
paid to such Investor in respect of shares sold by it, and (ii) reimburse the
Company for any legal or other expenses incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.
20
16.3 Indemnification by the Underwriters. Each underwriter, if any,
which facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors (including any person who, with his or her consent, is named in the
Registration Statement as a director nominee of the Company), its officers and
each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities to which the Company or such other
persons may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such Registration Statement or Prospectus or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein (in light of the circumstances under which they were made, in
the case of the Prospectus), not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such holder or underwriter
expressly for use therein; provided, however, that no underwriter shall be
liable under this Section 6(b) for any amount in excess of the gross proceeds
paid to such underwriter in respect of shares sold by it, and (ii) reimburse the
Company for any legal or other expenses incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.
16.4 Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.
16.5 Contribution. If the indemnification provided for in this Section
6 is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(d) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.
21
16.6 Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the gross
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act.
16.7 The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
17. Rule 144. With a view to making available to the Investors the
benefits of Rule 144 under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
17.1 comply with the provisions of paragraph (c) (1) of Rule 144; and
17.2 file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Investor, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
18. Assignment. Subject to the last sentence of this paragraph, in the
event there is not an effective Registration Statement covering the Registrable
Securities, the rights to have the Company register Registrable Securities
pursuant to this Appendix I may be assigned or transferred without the prior
written consent of the Company. Additionally, subject to the last sentence of
this paragraph, consent of the Company shall not be required with respect to any
assignment or transfer of Registrable Securities to an affiliate of Investor,
including for this purpose if Investor is an investment company, any fund or
account advised by Investor's investment adviser or any affiliate thereof and if
the Investor is a partnership, any partner thereof. In the event of any such
assignment or transfer by the Investors to any permitted transferee of all or
any portion of such Registrable Securities such transfer will be allowed only
if: (a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.
22
19. Amendment and Waiver. Any provision of this Appendix I may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
20. Miscellaneous.
20.1 A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
20.2 If after the date hereof and prior to the Commission declaring the
Registration Statement to be filed pursuant to Section 2(a) effective under the
Securities Act, the Company grants to any Person any registration rights with
respect to any Company securities which are more favorable to such other Person
than those provided in this Appendix I, then the Company forthwith shall grant
(by means of an amendment to this Appendix I or otherwise) identical
registration rights to all Investors hereunder.
20.3 Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service as follows, and shall be
deemed given when actually received.
if to the Company, to: Stonepath Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, CFO
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇
Stonepath Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Investors, to: To the address set forth in the
subscriber questionnaire filled
out by each Investor in connection
with the Subscription Agreement
The Company or any Investor may change the foregoing address by notice
given pursuant to this Section 10(c).
20.4 Failure of any party to exercise any right or remedy under this
Appendix I or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
20.5 This Appendix I shall be governed by and interpreted in accordance
with the laws of the State of Texas.
20.6 The remedies provided in this Appendix I are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Appendix I is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
23
20.7 The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Appendix I or otherwise conflicts with the
provisions hereof. Except for approximately 100,000 shares underlying warrants,
the Initial Warrants and the Placement Agent's Warrants, the Company is not
currently a party to any agreement granting any registration rights with respect
to any of its securities to any person which conflicts with the Company's
obligations hereunder or gives any other party the right to include any
securities in any Registration Statement filed pursuant hereto, except for such
rights and conflicts as have been irrevocably waived. Without limiting the
generality of the foregoing, without the written consent of the holders of a 66
2/3% interest of the Registrable Securities, the Company shall not grant to any
person the right to request it to register any of its securities under the
Securities Act unless the prior rights of the holders of Registrable Securities
set forth herein are superior to the registration rights so granted, and are not
otherwise in conflict or inconsistent with the provisions of this Appendix I.
The restrictions on the Company's rights to grant registration rights under this
paragraph shall terminate on the date all Registrable Securities have been
registered pursuant to a Registration Statement that has been declared effective
by the Commission.
20.8 This Appendix I and the Subscription Agreements constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein. This Appendix I and the Subscription
Agreements supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.
20.9 Subject to the requirements of Section 8 hereof, this Appendix I
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
20.10 All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
The headings in this Appendix I are for convenience of reference only and shall
not limit or otherwise affect the meaning thereof.
