Exhibit 10.3
SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Antra Holdings
Group, Inc., a Delaware corporation (the "Company") hereby agrees to issue and
to sell to the Subscriber, 10% Secured Convertible Notes (the "Notes")
convertible in accordance with the terms thereof into shares of the Company's
$.001 par value common stock (the "Company Shares") as set forth on the
signature page hereof for the aggregate consideration as set forth on the
signature page hereof ["Purchase Price"]. The form of Convertible Note is
annexed hereto as Exhibit A. (The Company Shares are sometimes referred to
herein as the "Shares" or "Common Stock"). (The Notes, the Company Shares, and
Common Stock Purchase Warrants issuable to the Placement Agents ("Placement
Warrants"), identified on Schedule B hereto, and the Common Stock issuable upon
exercise of the Placement Warrants are collectively referred to herein as, the
"Securities"). Upon acceptance of this Agreement by the Subscriber, the Company
shall issue and deliver to the Subscriber the Note against payment, by federal
funds (U.S.) wire transfer of the Purchase Price.
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber hereby
represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been furnished with
and has read the Company's audited financial statements for the year ended
December 31, 1998, and unaudited financial statements for the period ended March
31, 1999, and a pro-forma compilation for the period ended June 30, 1999
(hereinafter referred to as the "Reports"). In addition, the Subscriber has
received from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested, and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities (such information in writing is
collectively, the "Other Written Information").
(b) Information on Subscriber. The Subscriber is an "accredited
investor", as such term is defined in Regulation D promulgated by the Commission
under the Securities Act of 1933, as amended, is experienced in investments and
business matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such
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knowledge and experience in financial, tax and other business matters as to
enable the Subscriber to utilize the information made available by the Company
to evaluate the merits and risks of and to make an informed investment decision
with respect to the proposed purchase, which represents a speculative
investment. The Subscriber has the authority and is duly and legally qualified
to purchase and own the Securities. The Subscriber is able to bear the risk of
such investment for an indefinite period and to afford a complete loss thereof.
(c) Purchase of Company Shares. On the Closing Date, the Subscriber
will purchase the Note for its own account and not with a view to any
distribution thereof.
(d) Compliance with Securities Act. The Subscriber understands and
agrees that the Securities have not been registered under the Securities Act of
1933, as amended (the "1933 Act") by reason of their issuance in a transaction
that does not require registration under the 1933 Act, and that such Securities
must be held unless a subsequent disposition is registered under the 1933 Act or
is exempt from such registration.
(e) Company Shares Legend. The Company Shares and the shares of
Common Stock issuable upon the exercise of the Placement Warrants shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO ANTRA HOLDINGS GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(f) Warrants Legend. The Placement Warrants shall bear the following
legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND
THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO ANTRA HOLDINGS GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
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(g) Note Legend. The Note shall bear the following legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ANTRA HOLDINGS GROUP, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED."
(h) Communication of Offer. The offer to sell the Securities was
directly communicated to the Subscriber. At no time was the Subscriber presented
with or solicited by any leaflet, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising or solicited
or invited to attend a promotional meeting otherwise than in connection and
concurrently with such communicated offer.
(i) Correctness of Representations. The Subscriber represents that
the foregoing representations and warranties are true and correct as of the date
hereof and, unless the Subscriber otherwise notifies the Company prior to the
Closing Date (as hereinafter defined), shall be true and correct as of the
Closing Date. The foregoing representations and warranties shall survive the
Closing Date.
2. Company Representations and Warranties. The Company represents and
warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the respective jurisdictionss of their incorporation and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the
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business, operations or prospects or condition (financial or otherwise) of the
Company.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of the Company and each of its subsidiaries has been duly authorized and
validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
authorized, executed and delivered by the Company and is a valid and binding
agreement enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and the Company has full corporate power and
authority necessary to enter into this Agreement and to perform its obligations
hereunder and all other agreements entered into by the Company relating hereto.
(d) Additional Issuances. There are no outstanding agreements or
preemptive or similar rights affecting the Company's common stock or equity and
no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of any shares of common stock or equity of the
Company or other equity interest in any of the subsidiaries of the Company,
except as described in the Reports or Other Written Information.
(e) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company, or any of its affiliates, the NASD, NASDAQ or the Company's
Shareholders is required for execution of this Agreement, and all other
agreements entered into by the Company relating thereto, including, without
limitation issuance and sale of the Securities, and the performance of the
Company's obligations hereunder.
(f) No Violation or Conflict. Assuming the representations and
warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, neither the
issuance and sale of the Securities nor the performance of its obligations under
this Agreement and all other agreements entered into by the Company relating
thereto by the Company will:
(i) violate, conflict with, result in a breach of, or constitute
a default (or an event which with the giving of notice or the lapse of time or
both would be reasonably likely to constitute a default) under (A) the articles
of incorporation, charter or bylaws of the Company, or any of its affiliates,
(B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company, or any
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of its affiliates of any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its affiliates or over the
properties or assets of the Company, or any of its affiliates, (C) the terms of
any bond, debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage, deed
of trust or other instrument to which the Company, or any of its affiliates is a
party, by which the Company, or any of its affiliates is bound, or to which any
of the properties of the Company, or any of its affiliates is subject, or (D)
the terms of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its affiliates is a party; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company, or any of
its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests,
liens, claims or other encumbrances, subject to restrictions upon transfer under
the 1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and on
the date of issuance and on the Closing Date, as hereinafter defined, and the
date the Note is converted, and the Placement Warrants are exercised, the
Securities will be duly and validly issued, fully paid and nonassessable (and if
registered pursuant to the 1933 Act, and resold pursuant to an effective
registration statement will be free trading and unrestricted);
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company;
(iv) will not subject the holders thereof to personal liability
by reason of being such holders; and
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under this Agreement, and all
other agreements entered into by the Company relating hereto.
(i) Publicly Held Company. The Company is a publicly-held company.
The Company's Common Stock is trading on the NASD OTC Bulletin Board. Pursuant
to the provisions of the Securities Exchange Act of 1934 (the "1934 Act"), the
Company has timely filed all reports and other materials required to be filed
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thereunder with the Securities and Exchange Commission during the preceding
twelve months.
(j) No Market Manipulation. The Company has not taken, and will not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the common stock of the Company to facilitate the sale or resale of the
Securities or affect the price at which the Securities may be issued.
(k) Information Concerning Company. The Reports and Other Written
Information contain all material information relating to the Company and its
operations and financial condition as of their respective dates which
information is required to be disclosed therein. Since the date of the financial
statements included in the Reports, and except as modified in the Other Written
Information, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the Reports. The
Reports and Other Written Information do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(l) Dilution. The number of Shares issuable upon conversion (as
hereinafter defined) may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines prior to conversion of the Note. The
Company's executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon conversion of the Note and exercise of the Placement
Warrants is binding upon the Company and enforceable, except as otherwise
described in this Subscription Agreement, regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.
(m) Stop Transfer. The Securities are restricted securities as of
the date of this Agreement. The Company will not issue or continue any stop
transfer order or other order impeding the sale and delivery of the Securities
at such time as the Securities are registered for public sale or an exemption
from registration is available.
(n) Defaults. Neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or ByLaws. Neither the Company nor
any of its subsidiaries is (i) in default under or in violation of any other
material agreement or
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instrument to which it is a party or by which it or any of its properties are
bound or affected, which default or violation would have a material adverse
effect on the Company, (ii) in default with respect to any order of any court,
arbitrator or governmental body or subject to or party to any order of any court
or governmental authority arising out of any action, suit or proceeding under
any statute or other law respecting antitrust, monopoly, restraint of trade,
unfair competition or similar matters, or (iii) to its knowledge in violation of
any statute, rule or regulation of any governmental authority material to its
business.
(o) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act which would prevent the Company from
selling the Securities under Section 4(2) of the 1933 Act, or any applicable
stockholder approval provisions. Nor will the Company or any of its affiliates
or subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.
(p) Use of Proceeds. The proceeds of the Subscriber funds to be
released to the Company will be used for, approximately $500,000 for joint
development, design and commercialization by the Company and Teltran
International, Inc. of "Records-To-Go" website; approximately $1,750,000 for
distribution and production of three albums anticipated to be released in fourth
quarter; and working capital and for expenses of this offering.
(q) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Act) in connection with the offer or sale of
the Securities.
(r) Listing. The Company's common stock is listed for trading on
NASD OTC Bulletin Board. The Company has not received any notice that its common
stock will be delisted from the OTC Bulletin Board or that the common stock does
not meet all requirements for the continuation of such listing.
(s) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects and, unless the Company otherwise notifies the
Subscriber prior to the Closing Date, shall be true and correct in all material
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respects as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date.
3. Regulation D Offering. This Offering is being made pursuant to the
exemption from the registration provisions of the Securities Act of 1933, as
amended, afforded by Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion acceptable to Subscriber from
the Company's legal counsel opining on the availability of the Regulation D
exemption as it relates to the offer and issuance of the Securities. A form of
the legal opinion is annexed hereto as Exhibit C. The Company will provide, at
the Company's expense, such other legal opinions in the future as are reasonably
necessary for the conversion of the Note and exercise of the Placement Warrants.
4. Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Sections 1(e) and
1(f) above at such time as (a) the holder thereof is permitted to dispose of
such Securities pursuant to Rule 144(k) under the Act, or (b) upon resale
subject to an effective registration statement after the Securities are
registered under the Act. The Company agrees to cooperate with the Subscriber in
connection with all resales pursuant to Rule 144(d) and Rule 144(k) and furnish
legal opinions necessary to allow such resales provided the Company and its
counsel receive reasonably requested certifications from the Subscriber and
selling broker, if any.
5. Redemption. Except as described herein, the Company may not redeem
the Securities without the consent of the holder of the Securities.
6. Legal Fees/Commissions. The Company shall pay to counsel to the
Subscriber its fee of $45,000 for services rendered to the Subscriber in
reviewing this Agreement and other subscription agreements for the aggregate
subscription amounts of up to $2,866,666 and acting as escrow agent. The Company
will pay a cash commission and unaccountable expense allowance, in the
aggregate, of twelve percent (12%) of the Purchase Price designated on the
signature page hereto to certain Placement Agents identified on Schedule B
hereto. The cash commissions and legal fees will be payable out of funds held
pursuant to a Funds Escrow Agreement to be entered into by the Company,
Subscriber and an Escrow Agent. The Company will also issue and deliver to the
Placement Agents as additional compensation Placement Warrants designated on
Schedule B hereto. The cash commissions and Placement Warrants will be issued to
the Placement Agents only when, as, and if the corresponding subscription amount
is released from escrow to the Company. All the representations, covenants,
warranties, undertakings, and indemnification including but not limited to
registration rights made or granted to or for the benefit of the
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Subscriber are hereby also made and granted to the Placement Agents in respect
of the Placement Warrants and common stock issuable upon exercise of the
Placement Warrants.
7.1. Covenants of the Company. The Company covenants and agrees with
the Subscriber as follows:
(a) The Company will advise the Subscriber, promptly after it
receives notice of issuance by the Securities and Exchange Commission, any state
securities commission or any other regulatory authority of any stop order or of
any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the common stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b) The Company shall promptly secure the listing of the Company
Shares, and common stock issuable upon the exercise of the Placement Warrants
upon each national securities exchange, or automated quotation system, if any,
upon which shares of common Stock are then listed (subject to official notice of
issuance) and shall maintain such listing so long as any other shares of common
stock shall be so listed. The Company will use its best efforts to maintain the
listing and trading of its common stock on the NASD OTC Bulletin Board, and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company will provide the
Subscriber copies of all notices it receives notifying the Company of the
threatened and actual delisting of the common stock on any exchange or quotation
system on which the common stock is listed.
(c) The Company shall notify the SEC, NASD and applicable state
authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the Subscriber
and Placement Agents and promptly provide copies thereof to Subscriber.
(d) Until at least two (2) years after the effectiveness of the
Registration Statement on Form SB-2 or such other Registration Statement
described in Section 10.1(iv) hereof, the Company will (i) cause its Common
Stock to be registered under Sections 12(b) or 12(g) of the Exchange Act, (ii)
comply in all respects with its reporting and filing obligations under the
Exchange Act, and (iii) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will not take any action
or file any document (whether or not permitted by the Act or the Exchange Act or
the rules thereunder) to terminate or suspend such registration or to
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terminate or suspend its reporting and filing obligations under said Acts until
the later of (i) two (2) years after the effective date of the Registration
Statement on Form SB-2 or such other Registration Statement described in Section
10.1(iv) hereof, or (ii) the sale by the Subscribers and Placement Agents of all
the Company Shares issuable by the Company pursuant to this Agreement. Until at
least two (2) years after the Placement Warrants have been exercised, the
Company will use its commercial best efforts to continue the listing or trading
of its Common Stock on NASD OTC Bulletin Board and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the NASD and NASDAQ, as appropriate.
(e) The Company undertakes to use the proceeds of the Subscriber's
funds for, approximately $500,000 for joint development, design and
commercialization by the Company and Teltran International, Inc. of
"Records-To-Go" website; approximately $1,750,000 for distribution and
production of three albums anticipated to be released in fourth quarter; and
working capital and for expenses of this offering. The Company represents and
warrants that the Purchase Price of the Notes and the Put Purchase Price will
not be used directly or indirectly to pay any outstanding debts or monetary
obligations of the Company.
8. Covenants of the Company and Subscriber Regarding Idemnifications.
(a) The Company agrees to indemnify, hold harmless, reimburse and
defend Subscriber, Subscriber's officers, directors, agents, affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon Subscriber which results, arises out of or
is based upon (i) any misrepresentation by Company or breach of any warranty by
Company in this Agreement or in any Exhibits or Schedules attached hereto, or
Reports or other Written Information; or (ii) any breach or default in
performance by Company of any covenant or undertaking to be performed by Company
hereunder, or any other agreement entered into by the Company and Subscribers
relating hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company at all times against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which results, arises out of or is based
upon (a) any misrepresentation by Subscriber in this Agreement or in any
Exhibits or Schedules attached hereto; or (b) any breach or default in
performance by Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder, or any other agreement entered into by the Company and
Subscribers relating hereto.
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9.1. Conversion of Note.
(a) Upon the conversion of the Note or part thereof, the Company
shall, at its expense, take all necessary action (including the issuance of an
opinion of counsel) to assure that the Company's transfer agent shall issue
stock certificates in the name of Subscriber (or its nominee) or such other
persons as designated by Subscriber and in such denominations to be specified at
conversion representing the number of shares of common stock issuable upon such
conversion, as applicable. The Company warrants that no instructions other than
these instructions have been or will be given to the transfer agent of the
Company's common stock and that the Company Shares will be unlegended,
free-trading, and freely transferable, and will not contain a legend restricting
the resale or transferability of the Company Shares provided the Company Shares
are included in an effective registration statement or are otherwise exempt from
registration.
(b) Subscriber will give notice of its decision to exercise its
right to convert the Note or part thereof by telecopying an executed and
completed notice of Conversion to the Company. The Subscriber will not be
required to surrender the Note until the Note has been fully converted or
satisfied. Each date on which a Notice of Conversion is telecopied to the
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Company will or cause the transfer agent to transmit the Company's
common stock certificates representing the Company Shares issuable upon
conversion of the Note (and a Note representing the balance of the Note not so
converted, if requested by Subscriber) to the Subscriber via express courier for
receipt by such Subscriber within five business days after receipt by the
Company of the Notice of Conversion (the "Delivery Date"). To the extent that a
Subscriber elects not to surrender a Note for reissuance upon partial payment or
conversion, the Subscriber hereby indemnifies the Company against any and all
loss or damage attributable to a third-party claim in an amount in excess of the
actual amount then due under the Note.
9.2. Liquidated Damages.
(a) The Company understands that a delay in the delivery of the
Shares in the form required pursuant to Section 9 hereof, or the Mandatory
Redemption Amount described in Section 9.3 hereof, beyond the Delivery Date or
Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber. As compensation to the Subscriber for such
loss, the Company agrees to pay late payments to the Subscriber for late
issuance of Shares in the form required pursuant to Section 9 hereof upon
Conversion of the Note or late payment of the Mandatory Redemption Amount, in
the amount of $100 per business day after the Delivery Date or Mandatory
Redemption Payment Date, as the case may be, for each $10,000 of Note principal
amount being converted or
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redeemed. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Furthermore, in addition to any other
remedies which may be available to the Subscriber, in the event that the Company
fails for any reason to effect delivery of the Shares by the Delivery Date or
make payment by the Mandatory Redemption Payment Date, the Subscriber will be
entitled to revoke all or part of the relevant Notice of Conversion or rescind
all or part of the notice of Mandatory Redemption by delivery of a notice to
such effect to the Company whereupon the Company and the Subscriber shall each
be restored to their respective positions immediately prior to the delivery of
such notice, except that late payment charges described above shall be payable
through the date notice of revocation or rescission is given to the Company.
(b) Nothing contained herein or in any document referred to herein
or delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or dividends
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Subscriber and thus refunded to the Company.
9.3. Mandatory Redemption. In the event the Company may not issue
Shares on a Delivery Date or at any time when the Note is convertible, for any
reason then at the Subscriber's election, the Company must pay to the Subscriber
five (5) business days after request or on the Delivery Date a sum of money
determined by multiplying the principal of the Note not convertible by 150%,
together with accrued but unpaid interest thereon ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by the Subscriber
on the same date as the Company Shares otherwise deliverable or within five (5)
business days after request, whichever is sooner ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the corresponding Note
principal and interest will be deemed paid and no longer outstanding.
9.4. Optional Redemption. The Company will have the option of redeeming
the Note and Put Note (as hereinafter defined) ("Optional Redemption") by paying
to the Subscriber a sum of money determined by multiplying the principal amount
of the Note or Put Note by 130% together with accrued but unpaid interest
thereon ("Redemption Amount") outstanding on the day the date notice of
redemption ("Notice of Redemption) is given to a Subscriber ("Redemption Date").
A Notice of Redemption may not be given in connection with any portion of Note
or Put Note for which notice of conversion has been given by the Subscriber at
any time before receipt of a Notice of Redemption. The Subscriber may elect
within three (3) business days after receipt of a Notice of Redemption to
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give the Company Notice of Conversion in connection with some or all of the Note
and Put Note principal which was the subject of the Notice of Redemption. A
Notice of Redemption must be accompanied by a certificate signed by the chief
executive officer or chief financial officer of the Company stating that the
Company has on deposit and segregated ready funds equal to the Redemption
Amount. The Redemption Amount must be paid in good funds to the Subscriber no
later than the fifth business day after the Redemption Date. In the event the
Company fails to pay the Redemption Amount by such date, then the Redemption
Notice will be null and void and the Company will thereafter have no further
right to effect an Optional Redemption. Such failure will also be deemed an
Event of Default under the Note and Put Note. Any Notice of Redemption must be
given to all holders of Notes and Put Notes issued in the Company's offering of
up to $2,866,666 of Notes and up to $1,433,334 of Put Notes to which this
Subscription Agreement relates, in proportion to their holdings of Note and Put
Note principal on a Redemption Date. A Notice of Redemption may be given by the
Company only during the seven (7) business day period commencing on the 181st
day after the Effective Date (defined in Section 10.1(iv) hereof, provided (i)
no Event of Default, as described in the Note shall have occurred or be
continuing; (ii) the average closing bid price of the Company's common stock on
the NASD OTC Bulletin Board shall have been not less than $3.00 for each of the
twenty trading days prior to the Redemption Date; and (iii) the average daily
trading volume of the Company's common stock on the NASD OTC Bulletin Board
shall have been not less than 100,000 common shares for each of the twenty
trading days prior to the Redemption Date. Only one Notice of Redemption may be
given to the Subscriber.
9.5. Maximum Conversion. The Subscriber shall not be entitled to
convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Subscriber and its
affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this proviso is being made on a Conversion Date, which would result in
beneficial ownership by the Subscriber and its affiliates of more than 9.99% of
the outstanding shares of Common Stock of the Company on such Conversion Date.
For the purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 9.99%. The Subscriber may revoke the restriction described
in this paragraph upon 75 days prior notice to the Company.
9.6. Injunction - Posting of Bond. In the event a Subscriber shall
elect to convert a Note or part thereof, the Company may not refuse conversion
based on any claim that such
13
Subscriber or any one associated or affiliated with such Subscriber has been
engaged in any violation of law, or any other reason unless, an injunction from
a court, on notice, restraining and or enjoining conversion of all or part of
said Note shall have been sought and obtained and the Company posts a surety
bond for the benefit of such Subscriber in the amount of 150% of the amount of
the Note, which is subject to the injunction, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Subscriber to the extent it obtains judgment.
9.7. Buy-In. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if after the
Delivery Date the Subscriber purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Subscriber of the Common Stock which the Subscriber anticipated receiving upon
such conversion (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored, together with interest thereon
at a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if the Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of $10,000 of note principal and/or interest, the
Company shall be required to pay the Subscriber $1,000, plus interest. The
Subscriber shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In.
10.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 91 days after the
Closing Date, but not later than three years after the Closing Date, the
Company, upon a written request therefor from any record holder or holders of
more than 50% of the aggregate of the Company's Shares issued and issuable upon
Conversion of the Note and Put Notes defined in Section 11.1(a) hereof, if
actually issued, being offered in the Company's aggregate offering of $2,866,666
of Notes principal and $1,433,334 of Put Note principal on identical terms (the
Securities and securities issued or issuable by virtue of ownership of the
Securities, and the Put Securities, defined in Section 11.1(a) hereof, if
actually issued, being, the "Registrable Securities"), shall prepare and file
with the SEC a registration statement under the Act covering the
14
Registrable Securities which are the subject of such request, unless such
Registrable Securities are the subject of an effective registration statement.
In addition, upon the receipt of such request, the Company shall promptly give
written notice to all other record holders of the Registrable Securities that
such registration statement is to be filed and shall include in such
registration statement Registrable Securities for which it has received written
requests within 10 days after the Company gives such written notice. Such other
requesting record holders shall be deemed to have exercised their demand
registration right under this Section 10.1(i). As a condition precedent to the
inclusion of Registrable Securities, the holder thereof shall provide the
Company with such information as the Company reasonably requests. The obligation
of the Company under this Section 10.1(i) shall be limited to one registration
statement.
(ii) If the Company at any time proposes to register any of its
securities under the Act for sale to the public, whether for its own account or
for the account of other security holders or both, except with respect to
registration statements on Forms X-0, X-0 or another form not available for
registering the Registrable Securities for sale to the public, provided the
Registrable Securities are not otherwise registered for resale by the Subscriber
or Holder pursuant to an effective registration statement, each such time it
will give at least 30 days' prior written notice to the record holder of the
Registrable Securities of its intention so to do. Upon the written request of
the holder, received by the Company within 30 days after the giving of any such
notice by the Company, to register any of the Registrable Securities, the
Company will cause such Registrable Securities as to which registration shall
have been so requested to be included with the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition of the Registrable Securities
so registered by the holder of such Registrable Securities (the "Seller"). In
the event that any registration pursuant to this Section 10.1(ii) shall be, in
whole or in part, an underwritten public offering of common stock of the
Company, the number of shares of Registrable Securities to be included in such
an underwriting may be reduced by the managing underwriter if and to the extent
that the Company and the underwriter shall reasonably be of the opinion that
such inclusion would adversely affect the marketing of the securities to be sold
by the Company therein; provided, however, that the Company shall notify the
Seller in writing of any such reduction. Notwithstanding the forgoing
provisions, the Company may withdraw any registration statement referred to in
this Section 10.1(ii) without thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration is
received by the Company pursuant to Section 10.1(i), the Company has determined
to proceed with the actual
15
preparation and filing of a registration statement under the 1933 Act in
connection with the proposed offer and sale for cash of any of its securities
for the Company's own account, such written request shall be deemed to have been
given pursuant to Section 10.1(ii) rather than Section 10.1(i), and the rights
of the holders of Registrable Securities covered by such written request shall
be governed by Section 10.1(ii) except that the Company or underwriter, if any,
may not withdraw such registration or limit the amount of Registrable Securities
included in such registration.
(iv) The Company shall file with the Commission within 30 days of
the Closing Date (the "Filing Date"), and use its reasonable commercial efforts
to cause to be declared effective Form SB-2 registration statement to be filed
with the Commission, (or such other form that it is eligible to use) within 60
days of the Closing Date in order to register the Registrable Securities for
resale and distribution under the Act. The registration statement described in
this paragraph must be declared effective by the Commission within 150 days of
the Closing Date (as defined herein) ("Effective Date"). The Company will
register not less than 25,000 shares of Common Stock in the aforedescribed
registration statement for each $25,000 of Note principal subscribed for and Put
Note principal and one share of Common Stock for each common share issuable upon
exercise of the Placement Warrants and Put Commission Warrants. The Registrable
Securities shall be reserved and set aside exclusively for the benefit of the
Subscriber and Placement Agents, as the case may be, and not issued, employed or
reserved for anyone other than the Subscriber and Placement Agents. Such
registration statement will be promptly amended or additional registration
statements will be promptly filed by the Company as necessary to register
additional Company Shares to allow the public resale of all Common Stock
included in and issuable by virtue of the Registrable Securities. No securities
other than the Registrable Securities will be included for registration in the
registration statement described in this Section 10.1(iv).
10.2. Registration Procedures. If and whenever the Company is required
by the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and promptly
provide to the holders of Registrable Securities copies of all filings and
Commission letters of comment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the
16
prospectus used in connection therewith (including post-effective amendments) as
may be necessary to keep such registration statement effective until the earlier
of the (A) public sale of all the Registrable Securities or (B) the Registrable
Securities becoming capable of full and complete public sale without
registration under the Act, and comply with the provisions of the Act with
respect to the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Seller's intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if any, such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller and in the
case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Company
is then listed;
(f) immediately notify the Seller and each underwriter under such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event of which
the Company has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
17
10.3. Provision of Documents.
(a) At the request of the Seller, provided a demand for
registration has been made pursuant to Section 10.1(i) or a request for
registration has been made pursuant to Section 10.1(ii), the Registrable
Securities will be included in a registration statement filed pursuant to this
Section 10. In the event of a firm commitment underwritten public offering in
which the Registrable Securities are so included, the lockup, if any, requested
by the managing underwriter may not exceed ninety (90) days after the effective
date thereof.
(b) In connection with each registration hereunder, the Seller
will furnish to the Company in writing such information and representation
letters with respect to itself and the proposed distribution by it as reasonably
shall be necessary in order to assure compliance with federal and applicable
state securities laws. In connection with each registration pursuant to Section
10.1(i) or 10.1(ii) covering an underwritten public offering, the Company and
the Seller agree to enter into a written agreement with the managing underwriter
in such form and containing such provisions as are customary in the securities
business for such an arrangement between such underwriter and companies of the
Company's size and investment stature.
10.4. Non-Registration Events. The Company and the Subscriber agree
that the Seller will suffer damages if any registration statement required under
Section 10.1(i) or 10.1(ii) above is not filed within 60 days after request by
the Holder and not declared effective by the Commission within 120 days after
such request [or the Filing Date and Effective Date, respectively, in reference
to the Registration Statement on Form SB-2 or such other form described in
Section 10.1(iv)], and maintained in the manner and within the time periods
contemplated by Section 10 hereof, and it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if (i) the Registration
Statement described in Sections 10.1(i) or 10.1(ii) is not filed within 60 days
of such request, or is not declared effective by the Commission on or prior to
the date that is 120 days after such request, or (ii) the registration statement
on Form SB-2 or such other form described in Section 10.1(iv) is not filed on or
before the Filing Date or not declared effective on or before the sooner of the
Effective Date, or within five days of receipt by the Company of a communication
from the Commission that the registration statement described in Section
10.1(iv) will not be reviewed, or (iii) any registration statement described in
Sections 10.1(i), 10.1(ii) or 10.1(iv) is filed and declared effective but shall
thereafter cease to be effective (without being succeeded immediately by an
additional registration statement filed and declared effective) for a period of
time which shall exceed 30 days in the aggregate per year but not more than 20
consecutive calendar days (defined as a period of 365 days commencing on the
date the
18
Registration Statement is declared effective) (each such event referred to in
clauses (i), (ii) and (iii) of this Section 10.4 is referred to herein as a
"Non-Registration Event"), then, for so long as such Non-Registration Event
shall continue, the Company shall pay in cash as Liquidated Damages to each
holder of any Registrable Securities an amount equal to three (3%) percent for
each thirty (30) days or part thereof, of the Purchase Price of the Note,
whether or not converted, and the aggregate amount of the exercise prices of the
Placement Warrants, whether or not exercised, then owned of record by such
holder as of the occurrence of such Non-Registration Event. Payments to be made
pursuant to this Section 10.4 shall be due and payable immediately upon demand
in immediately available funds. In the event a Mandatory Redemption payment is
demanded from the Company by the Holder of a Note, pursuant to Section 9.2 of
this Subscription Agreement, then the Liquidated Damages described in this
Section 10.4 shall no longer accrue from and after the date the Holder receives
the Mandatory Redemption Payment. It shall be deemed a Non-Registration Event
to the extent the Shares into which a Note is convertible assuming complete
conversion of all sums due under the Note are not included in an effective
registration statement as of and after the Effective Date at the Conversion
Price in effect from and after the Effective Date.
10.5. Expenses. All expenses incurred by the Company in complying with
Section 10, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, fee of one counsel, if any, to
represent all the Sellers, and costs of insurance are called "Registration
Expenses". All underwriting discounts and selling commissions applicable to the
sale of Registrable Securities, including any fees and disbursements of any
special counsel to the Seller, are called "Selling Expenses". The Seller shall
pay the fees of its own additional counsel, if any.
The Company will pay all Registration Expenses in connection with
the registration statement under Section 10. All Selling Expenses in connection
with each registration statement under Section 10 shall be borne by the Seller
and may be apportioned among the Sellers in proportion to the number of shares
sold by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities
under the Act pursuant to Section 10, the
19
Company will indemnify and hold harmless the Seller, each officer of the Seller,
each director of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Registrable Securities was registered under the Act pursuant to
Section 10, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
if and to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished by any such
Seller, the underwriter or any such controlling person in writing specifically
for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Section 10, the Seller will indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Act pursuant to Section 10, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any
20
such loss, claim, damage, liability or action, provided, however, that the
Seller will be liable hereunder in any such case if and only to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
Seller, as such, furnished in writing to the Company by such Seller specifically
for use in such registration statement or prospectus, and provided, further,
however, that the liability of the Seller hereunder shall be limited to the
proportion of any such loss, claim, damage, liability or expense which is equal
to the proportion that the public offering price of the Registrable Securities
sold by the Seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the gross proceeds received by the Seller from the sale of Registrable
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.6(c) if and to the extent the indemnifying party is prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 10.6(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate
21
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in
the event of joint liability under the Act in any case in which either (i) the
Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 10.6 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 10.6 provides for indemnification in such case, or (ii)
contribution under the Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
provided under this Section 10.6; then, and in each such case, the Company and
the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (A) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
11.1. Obligation To Purchase.
(a) The Subscriber agrees to purchase from the Company
convertible notes in up to the principal amount ("Put Note") set forth on the
signature page hereof for up to the aggregate consideration designated on the
signature page hereof (the "Put"). Collectively the Put Notes, Put Warrants (as
hereinafter defined) and the common stock issuable upon exercise of the Put
Warrants are referred to as the "Put Securities". Except for the issue date, the
Put Notes will be identical to the Notes and have the same Maturity Date. The
Holders of the Put Securities are granted all the rights, remedies, liquidated
damages and indemnification granted to the Subscriber in connection with the
Note, including but not limited to, the rights and procedures set forth in
Sections 9.1, 9.2, 9.3, 9.5, 9.6 the registration rights described in Section 10
hereof and security interest described in Section 13(g) hereof.
22
(b) The agreement to purchase the Put Notes is contingent on the
following (any, some or all of which may be waived by the Subscriber):
(i) The timely filing and timely effectiveness of the
registration statement described in Section 10.1(iv) hereof relating to all the
Registrable Securities.
(ii) As of the Put Date (defined in Section 11.2(b) hereof),
and Put Closing Date, the Company will be a full reporting company with the
class of Shares registered pursuant to Section 12(g) of the Securities Exchange
Act of 1934.
(iii) The closing bid price of the Company's common stock on
the OTC Bulletin Board ("Closing Bid Price") for each of the ten trading days
prior to the giving of a Put Notice and prior to the Put Closing Date will not
be less than $2.00, nor will the aggregate trading volume in the Company's
Common Stock be fewer than 75,000 shares per day for each of the ten trading
days prior to the giving of a Put Notice and prior to the Put Closing Date.
(iv) No material adverse change in the Company's business or
business prospects shall have occurred after the date of the most recent
financial statements included in the Reports. Material adverse change is defined
as any effect on the business, operations, properties, prospects, or financial
condition of the Company that is material and adverse to the Company and its
subsidiaries and affiliates, taken as a whole, and/or any condition,
circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement, or any other agreement entered into or to be entered into in
connection herewith, in any material respect.
(v) The non-occurrence (whether or not continuing) of an Event
of Default under the Note.
(vi) The execution and delivery to the Subscriber of a
certificate signed by its chief executive officer representing the truth and
accuracy of all the Company's representations and warranties contained in this
Subscription Agreement as of the Put Date and Put Closing Date, confirming the
undertakings contained herein, and representing the satisfaction of all
contingencies and conditions required for the exercise of the Put.
(vii) The Company's compliance after the date hereof with the
listing requirements of the NASD OTC Bulletin
23
Board, and the Company's not having received notice from the NASD OTC Bulletin
Board (or any principal market on which the Company's Common Stock is listed for
trading) that the Company is not in compliance with the requirements for
continued listing.
(viii) The execution by the Company and delivery to the
Subscriber of all documents reasonably necessary to memorialize the rights and
obligations of each of the parties in relation to the Put.
(c) The exercise of the Put is expressly contingent on the
declaration of effectiveness by the Securities and Exchange Commission and the
continued effectiveness of the Registration Statement on Form SB-2 or such other
form as described in Section 10.1(iv) hereof relating to the Registrable
Securities and the Company's ability to issue common stock upon conversion
and/or exercise of the Put Securities, pursuant to an effective registration
statement, with such common stock, upon resale, being unlegended freely
transferable common stock.
11.2. Exercise of Put.
(a) The Company's right to exercise the Put expires two weeks
after the declaration of effectiveness of the registration statement described
in Section 10.1(iv) of this Subscription Agreement relating to all the
Registrable Securities ("Put Exercise Period").
(b) The Put may be exercised by the Company by the giving to the
Subscriber of a written notice of exercise ("Put Notice") during the Put
Exercise Period in relation to all the subject Put Securities. The date a Put
Notice is given is a "Put Date." Each Put Notice must be accompanied by the (i)
officer's certificate described in Section 11.1(b)(vi) above; (ii) a copy of the
filed registration statement; (iii) notice of declaration of effectiveness; (iv)
five copies of the final prospectus; and (v) a legal opinion relating to the Put
Securities in form reasonably acceptable to Subscriber.
(c) Unless otherwise agreed to by the Subscribers, Put Notices
must be given to all Subscribers in proportion to the amounts agreed to be
purchased by all Subscribers undertaking to purchase Put Shares in the
$2,866,666 offering to which this Subscription Agreement relates. The aggregate
amount of all such Put Notices may not exceed $1,433,334. In the event the
Company does not exercise the Put during the Put Exercise Period, then the
Subscriber may exercise the Put on behalf of the Company, by giving notice to
the Company of such exercise during the fourteen (14) business days following
the Put Exercise Period.
24
(d) Payment by the Subscriber in relation to a Put Notice
relating to the First Put must be made within thirty (30) days of receipt of a
Put Notice and items set forth in Section 11.2(b) above. Payment will be made
against delivery to the Subscriber or an escrow agent to be agreed upon by the
Company and Subscriber, of the Put Securities, and delivery to the Placement
Agents of the Put Commissions relating to the Put being exercised.
11.3. Put Placement Warrants. Except for the issue date, the Put
Commission Warrants (as defined herein) payable in connection with the Put will
be identical to the Placement Warrants.
11.4. Put Commissions. The Placement Agents identified on Schedule B
hereto shall receive aggregate commissions in connection with the closing of the
Put as follows: (i) cash equal to twelve (12%) percent of the Put Consideration
paid for the Put Notes, as set forth on the signature page hereto; and (ii) one
Put Warrant for each $2.50 of Put purchase price paid by a Subscriber in
connection with the Put. Collectively, the foregoing are referred to as Put
Commissions. The Put Commissions are set forth on Schedule B hereto. Put
Commissions shall be payable only in connection with the Put Purchase Price
actually paid by a Subscriber. The attorney for the Subscriber shall receive a
payment at the Closing of each Put equal to one and six-tenths (1.6%) percent of
the Put purchase price for each Put.
12. (a) Right of First Refusal. Until 120 days after the effective date
of the Registration Statement described in Section 10.1(iv) hereof, the
Subscriber shall be given not less than ten (10) business days prior written
notice of any proposed sale by the Company of its common stock or other
securities or debt obligations except as disclosed in the Reports or Other
Written Information. The Subscriber shall have the right during the ten (10)
business days following the notice to agree to purchase an amount of such
offered securities or debt obligations in the same proportion as Put Notes being
purchased in the aggregate offering to which this Subscription Agreement relates
(i.e. $2,866,666 in the aggregate), in accordance with the terms and conditions
set forth in the notice of sale. In the event such terms and conditions are
modified during the notice period, the Subscriber shall be given prompt notice
of such modification and shall have the right during the original notice period
or for a period of ten (10) business days following the notice of modification,
whichever is longer, to exercise such right. In the event the right of first
refusal described in this Section is exercised by the Subscriber and the Company
thereby receives net proceeds from such exercise, then commissions and fees will
be paid by the Company to the
25
Placement Agents in the same amounts as specified in the notice of sale.
(b) Offering Restrictions. The Company agrees not to issue any
equity, convertible debt or other securities which are or could be (by
conversion, registration, or exemption) free-trading securities prior to the
complete conversion and payment of all sums due or payable under the Note and
Put Note, unless the per common shares equivalent price of such issued
instruments is greater than $3.25.
13. Miscellaneous.
(a) Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being telecopied (provided that a copy is
delivered by first class mail) to the party to receive the same at its address
set forth below or to such other address as either party shall hereafter give to
the other by notice duly made under this Section: (i) if to the Company, to
Antra Holdings Group, Inc., 0000 Xxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxxxxxx, XX
00000, telecopier number: (000) 000-0000, with a copy by telecopier only to
Xxxxxx Xxxxxx Xxxxxx & Xxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000,
Attn: Xxxxxxx XxXxxxxxxx, Esq., telecopier number: (000) 000-0000, and (ii) if
to the Subscriber, to the name, address and telecopy number set forth on the
signature page hereto, with a copy by telecopier only to Grushko & Xxxxxxx, 000
Xxxxxxxx, Xxxxx 000, Xxx Xxxx, Xxx Xxxx 00000, telecopier number: (212)
227-5865. Any notice that may be given pursuant to this Agreement, or any
document delivered in connection with the foregoing may be given by the
Subscriber on the first business day after the observance dates in the United
States of America by Orthodox Jewry of Rosh Hashanah, Yom Kippur, the first two
days of the Feast of Tabernacles, Shemini Atzeret Simchat Torah, the first two
and final two days of Passover and Pentecost, with such notice to be deemed
given and effective, at the election of the Subscriber on a holiday date that
precedes such notice. Any notice received by the Subscriber on any of the
aforedescribed holidays may be deemed by the Subscriber to be received and
effective as if such notice had been received on the first business day after
the holiday.
(b) Closing. The consummation of the transactions contemplated
herein shall take place at the offices of Grushko & Xxxxxxx, 000 Xxxxxxxx, Xxxxx
000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of all conditions to
Closing set forth in this Agreement. The closing date shall be the date that
subscriber funds representing the net amount due the Company from the Purchase
Price are transmitted by wire transfer to the Company (the "Closing
26
Date"). The closing date for the Put shall be the date on which Subscriber funds
representing the net amount due the Company from the Put Purchase Price is
transmitted to or on behalf of the Company ("Put Closing Date").
(c) Entire Agreement; Assignment. This Agreement represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. No right
or obligation of either party shall be assigned by that party without prior
notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by facsimile
transmission, and in counterparts, each of which will be deemed an original.
(e) Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The Company
and Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 13(e) hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the
27
suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(g) Security Interest. As a condition of Closing, the Company
will deliver 1,000,000 common shares ($.001 par value) of Teltran International
Group, Ltd., a Delaware corporation ("Security Shares") to a Collateral Agent to
be held by the Collateral Agent on behalf of the Subscriber pursuant to a
Collateral Agent Agreement and Security Agreement. The Security Shares will be
held on behalf of all Subscribers in the Company's offering of $2,866,666
principal Note amount and $1,433,334 Put Note amount on terms nearly identical
to the terms in this Subscription Agreement and related documents. The
Subscriber will be granted a security interest in the Security Shares to be
memorialized in a Security Agreement. The Company will execute Forms UCC-1 to be
filed with such states and counties designated by the Subscriber. The Company
will also execute all such documents reasonably necessary to memorialize and
further protect the security interest described above.
(h) Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing shall
not have occurred by the tenth (10th) business day following the date this
Agreement is accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
28
SCHEDULE B TO SUBSCRIPTION AGREEMENT
================================================================================
PLACEMENT
PLACEMENT AGENT CASH COMMISSION WARRANTS
--------------------------------------------------------------------------------
LIBRA FINANCE S.A. $ 67,000.00 920,000
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxx
Fax: 000-000-000-0000
--------------------------------------------------------------------------------
XXXXX CAPITAL LTD. 36,666.66 80,000
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Fax: 000-000-0000
--------------------------------------------------------------------------------
INTERNATIONAL GLOBAL 143,333.30 -0-
COMMUNICATIONS, INC.
000 Xxxxxxx Xxxxxx, Xxxxx 0X
Xxxxxx Xxxxxxx, Xxx Xxxx
Fax: 000-000-0000
--------------------------------------------------------------------------------
X. XXXXX 82,333.32 -0-
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Fax: 000-000-0000
--------------------------------------------------------------------------------
XXXXX ENTERPRISES, LTD. 1,333.32 13,333
00X Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxx
XX0, 0XX
Fax: 000-000-000000000
--------------------------------------------------------------------------------
TALBIYA B. INVESTMENTS, INC. 13,333.32 133,333
Ragnall House
00 Xxxx Xxxx
Xxxxxxx, Xxxx xx Xxx
0X0, 0X0, Xxxxxx Xxxxxxx
Fax: 000-000-00000000
--------------------------------------------------------------------------------
TOTALS $343,999.92 1,146,666
================================================================================
29
PUT COMMISSION SCHEDULE
================================================================================
PLACEMENT
PLACEMENT AGENT CASH COMMISSION WARRANTS
--------------------------------------------------------------------------------
LIBRA FINANCE S.A. $ 71,000.00 460,000
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxx
Fax: 000-000-000-0000
--------------------------------------------------------------------------------
XXXXX CAPITAL LTD. 18,333.34 40,000
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Fax: 000-000-0000
--------------------------------------------------------------------------------
INTERNATIONAL GLOBAL 71,666.70 -0-
COMMUNICATIONS, INC.
000 Xxxxxxx Xxxxxx, Xxxxx 0X
Xxxxxx Xxxxxxx, Xxx Xxxx
Fax: 000-000-0000
--------------------------------------------------------------------------------
X. XXXXX 3,666.68 -0-
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Fax: 000-000-0000
--------------------------------------------------------------------------------
XXXXX ENTERPRISES, LTD. 666.68 6,667
00X Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxx
XX0, 0XX
Fax: 000-000-000000000
--------------------------------------------------------------------------------
TALBIYA B. INVESTMENTS, INC. 6,666.68 66,667
Ragnall House
00 Xxxx Xxxx
Xxxxxxx, Xxxx xx Xxx
0X0, 0X0, Xxxxxx Xxxxxxx
Fax: 000-000-00000000
--------------------------------------------------------------------------------
TOTALS $172,000.08 573,334
================================================================================
30
