Exhibit 10.2 - Convertible Debenture Form
SUBSCRIPTION AGREEMENT
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THIS SUBSCRIPTION AGREEMENT (this "Agreement"), is dated as of March
___, 2009, by and between AirtimeDSL, a Nevada corporation (the
"Company"), and the subscribers identified on the signature page hereto
(each a "Subscriber" and collectively, the "Subscribers").
WHEREAS, the Company and each Subscriber are executing and delivering
this Agreement in reliance upon an exemption from securities
registration afforded by the provisions of Section 4(2), Section 4(6)
and/or Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "1933 Act").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and such Subscriber shall purchase (i)
for up to $400,000 (the "Purchase Price") of up to $480,000 principal
amount ("Principal Amount") of promissory notes of the Company ("Note"
or "Notes"), a form of which is annexed hereto as Exhibit A,
convertible into shares of the Company's Common Stock, $0.001 par value
(the "Common Stock") at a per share conversion price set forth in the
Note ("Conversion Price"); and (ii) two series of share purchase
warrants (the "Warrants") in the form attached hereto as Exhibit B and
Exhibit C, to purchase shares of the Company's Common Stock (the
"Warrant Shares") (collectively the "Offering"). The Notes, shares of
Common Stock issuable upon conversion of the Notes (the "Shares" or
"Conversion Shares"), the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities."); and
WHEREAS, the aggregate proceeds of the Offering shall be held in escrow
pursuant to the terms of a Funds Escrow Agreement to be executed by the
parties substantially in the form attached hereto as Exhibit D (the
"Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscriber
hereby agree as follows:
1. Closing Date. The "Closing Date" shall be the date that the
Purchase Price is transmitted by wire transfer or otherwise credited to
or for the benefit of the Company. The consummation of the transactions
contemplated herein shall take place at the offices of Xxxxxx & Xxxxxx
LLP, 000 Xxxxx 0 Xxxxx, Xxxxx 000, Xxxxxxxxx XX 00000, upon the
satisfaction or waiver of all conditions to closing set forth in this
Agreement. Subject to the satisfaction or waiver of the terms and
conditions of this Agreement, on the Closing Date, Subscribers shall
purchase and the Company shall sell to Subscribers Notes in the
aggregate Principal Amount of up to $480,000 and Warrants as described
in Section 2 of this Agreement.
2. Notes and Warrants.
(a) Notes. Subject to the satisfaction or waiver of the terms and conditions
of this Agreement, on the Closing Date, each Subscriber shall purchase and the
Company shall sell to each Subscriber a Note in the Principal Amount designated
on the signature page hereto for such Subscriber's Purchase Price indicated
thereon.
(b) Warrants. On the Closing Date, the Company will issue and deliver
Class A Warrants and Class B Warrants to each Subscriber. One Class A
Warrant and one Class B Warrant will be issued for each Share which
would be issued on the Closing Date assuming the complete conversion of
the Note on the Closing Date at the Conversion Price. The exercise
price to acquire a Warrant Share upon exercise of (i) a Class A Warrant
shall be $0.30 and (ii) a Class B Warrant shall be $0.60. The Class A
Warrants and Class B Warrants shall be exercisable until five years
after the issue date of such Warrants.
3. Allocation of Purchase Price. The Purchase Price will be allocated
among the components of the Securities so that each component of the
Securities will be fully paid and non-assessable.
4. Subscriber Representations and Warranties. Each Subscriber hereby
represents and warrants to and agrees with the Company that:
(a) Organization and Standing of the Subscriber. If such Subscriber
is an entity, such Subscriber is a corporation, partnership or other
entity duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Such Subscriber has the requisite power
and authority to enter into and perform this Agreement and the other
Transaction Documents (as defined herein) and to purchase the Notes
being sold to it hereunder. The execution, delivery and performance of
this Agreement and the other Transaction Documents by such Subscriber
and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate or
partnership action, and no further consent or authorization of such
Subscriber or its Board of Directors, stockholders, partners, members,
as the case may be, is required. This Agreement and the other
Transaction Documents have been duly authorized, executed and delivered
by such Subscriber and constitutes, or shall constitute when executed
and delivered, a valid and binding obligation of such Subscriber
enforceable against such Subscriber in accordance with the terms
thereof.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation by
such Subscriber of the transactions contemplated hereby and thereby or
relating hereto do not and will not (i) result in a violation of such
Subscriber's charter documents or bylaws or other organizational
documents or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument
or obligation to which such Subscriber is a party or by which its
properties or assets are bound, or result in a violation of any law,
rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to such Subscriber or its properties
(except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a material adverse effect on
such Subscriber). Such Subscriber is not required to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement and the
other Transaction Documents or to purchase the Securities in accordance
with the terms hereof, provided that for purposes of the representation
made in this sentence, such Subscriber is assuming and relying upon the
accuracy of the relevant representations and agreements of the Company
herein.
(d) Information on Company. Such Subscriber has been furnished with
or has had access to the XXXXX Website of the Commission to the
Company's Form 10-K filed on October 28, 2008 for the fiscal year ended
July 31, 2008 and the financial statements included therein, Form 10-Q
filed on March 13, 2009 for the quarter ended January 31, 2009,
together with all other filings made with the Commission available at
the XXXXX website until five days before the Closing Date (hereinafter
referred to collectively as the "Reports"). In addition, such
Subscriber may have received in writing from the Company such other
information concerning its operations, financial condition and other
matters as such Subscriber has requested in writing, identified thereon
as OTHER WRITTEN INFORMATION (such other information is collectively,
the "Other Written Information"), and considered all factors such
Subscriber deems material in deciding on the advisability of investing
in the Securities. Such Subscriber has relied on the Reports and Other
Written Information in making its investment decision.
(e) Information on Subscriber. Subscriber is, and will be at the time
of the conversion of the Notes and exercise of the Warrants, an
"accredited investor", as such term is defined in Regulation D
promulgated by the Commission under the 1933 Act, is experienced in
investments and business matters, has made investments of a speculative
nature and has purchased securities of United States publicly-owned
companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax
and other business matters as to enable such 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. Such
Subscriber has the authority and is duly and legally qualified to
purchase and own the Securities. Such Subscriber is able to bear the
risk of such investment for an indefinite period and to afford a
complete loss thereof. The information set forth on the signature page
hereto regarding such Subscriber is accurate.
(f) Purchase of Notes and Warrants. On the Closing Date, such
Subscriber will purchase the Note and Warrants as principal for its own
account for investment only and not with a view toward, or for resale
in connection with, the public sale or any distribution thereof.
(g) Compliance with Securities Act. Such Subscriber understands and
agrees that the Securities have not been registered under the 1933 Act
or any applicable state securities laws, by reason of their issuance in
a transaction that does not require registration under the 1933 Act
(based in part on the accuracy of the representations and warranties of
the Subscriber contained herein), and that such Securities must be held
indefinitely unless a subsequent disposition is registered under the
1933 Act or any applicable state securities laws or is exempt from such
registration. In any event, and subject to compliance with applicable
securities laws, the Subscriber may enter into lawful hedging
transactions in the course of hedging the position they assume and the
Subscriber may also enter into lawful short positions or other
derivative transactions relating to the Securities, or interests in the
Securities, and deliver the Securities, or interests in the Securities,
to close out their short or other positions or otherwise settle other
transactions, or loan or pledge the Securities, or interests in the
Securities, to third parties who in turn may dispose of these
Securities.
(h) Conversion Shares and Warrant Shares Legend. The Conversion
Shares, and Warrant Shares shall bear the following or similar legend:
"THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, NOR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."
(i) Note and Warrant Legend. The Note and Warrants shall bear the
following legend:
"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE -OR-EXERCISABLE] HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES."
(j) Communication of Offer. The offer to sell the Securities was
directly communicated to such Subscriber by the Company. At no time
was such Subscriber presented with or solicited by any leaflet,
newspaper or magazine article, radio or television advertisement, or
any other form of general advertising or solicited or invited to attend
a promotional meeting otherwise than in connection and concurrently
with such communicated offer.
(k) Restricted Securities. Such Subscriber understands that the
Securities have not been registered under the 1933 Act and such
Subscriber will not sell, offer to sell, assign, pledge, hypothecate or
otherwise transfer any of the Securities unless pursuant to an
effective registration statement under the 1933 Act, or unless an
exemption from registration is available. Notwithstanding anything to
the contrary contained in this Agreement, such Subscriber may transfer
(without restriction and without the need for an opinion of counsel)
the Securities to its Affiliates (as defined below) provided that each
such Affiliate is an "accredited investor" under Regulation D and such
Affiliate agrees to be bound by the terms and conditions of this
Agreement. For the purposes of this Agreement, an "Affiliate" of any
person or entity means any other person or entity directly or
indirectly controlling, controlled by or under direct or indirect
common control with such person or entity. Affiliate includes each
Subsidiary of the Company. For purposes of this definition, "control"
means the power to direct the management and policies of such person or
firm, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
(l) No Governmental Review. Such Subscriber understands that no
United States federal or state agency or any other governmental or
state agency has passed on or made recommendations or endorsement of
the Securities or the suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the
offering of the Securities.
(m) Correctness of Representations. Such Subscriber represents as to
such Subscriber that the foregoing representations and warranties are
true and correct as of the date hereof and, unless such Subscriber
otherwise notifies the Company prior to the Closing Date shall be true
and correct as of the Closing Date.
(n) Acknowledgement of Going Concern. Such Subscriber recognizes and
acknowledges that the Company is a "going concern" as disclosed in its
Reports and Other Written Information and as reported by its auditor
and may be unable to meet its financial obligations over the next
twelve months.
(o) Survival. The foregoing representations and warranties shall
survive one (1) year from the Closing Date.
5. Company Representations and Warranties. The Company represents and
warrants to and agrees with each Subscriber that:
(a) Due Incorporation. The Company is a corporation or other entity
duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization
and has the requisite corporate power to own its properties and to
carry on its business as presently conducted. The Company is duly
qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would
not have a Material Adverse Effect. For purposes of this Agreement, a
"Material Adverse Effect" shall mean a material adverse effect on the
financial condition, results of operations, prospects, properties or
business of the Company and its Subsidiaries taken as a whole. For
purposes of this Agreement, "Subsidiary" means, with respect to any
entity at any date, any corporation, limited or general partnership,
limited liability company, trust, estate, association, joint venture or
other business entity of which more than 30% of (i) the outstanding
capital stock having (in the absence of contingencies) ordinary voting
power to elect a majority of the board of directors or other managing
body of such entity, (ii) in the case of a partnership or limited
liability company, the interest in the capital or profits of such
partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the
beneficial interest in such trust, estate, association or other entity
business is, at the time of determination, owned or controlled directly
or indirectly through one or more intermediaries, by such entity. As
of the Closing Date, all of the Company's Subsidiaries and the
Company's ownership interest therein is set forth on Schedule 5(a).
(b) Outstanding Stock. All issued and outstanding shares of capital
stock and equity interests in the Company have been duly authorized and
validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement, the Note, Shares,
Warrants, the Escrow Agreement, and any other agreements delivered
together with this Agreement or in connection herewith (collectively
"Transaction Documents") have been duly authorized, executed and
delivered by the Company and/or Subsidiaries and are valid and binding
agreements of the Company enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights generally and to general principles of
equity. The Company has full corporate power and authority necessary
to enter into and deliver the Transaction Documents and to perform its
obligations thereunder.
(d) Capitalization and Additional Issuances. The authorized and
outstanding capital stock of the Company and Subsidiaries on a fully
diluted basis as of the date of this Agreement and the Closing Date
(not including the Securities) are set forth on Schedule 5(d). Except
as set forth on Schedule 5(d), there are no options, warrants, or
rights to subscribe to, securities, rights, understandings or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock or other equity interest of
the Company or any of the Subsidiaries. The only officer, director,
employee and consultant stock option or stock incentive plan or similar
plan currently in effect or contemplated by the Company is described on
Schedule 5(d). There are no outstanding agreements or preemptive or
similar rights affecting the Company's Common Stock.
(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 OTC Bulletin Board (the
"Bulletin Board") or the Company's shareholders is required for the
execution by the Company of the Transaction Documents and compliance
and performance by the Company of its obligations under the Transaction
Documents, including, without limitation, the issuance and sale of the
Securities. The Transaction Documents and the Company's performance of
its obligations thereunder has been unanimously approved by the
Company's Board of Directors. No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any governmental authority in the world,
including without limitation, the United States, or elsewhere is
required by the Company or any Affiliate of the Company in connection
with the consummation of the transactions contemplated by this
Agreement, except as would not otherwise have a Material Adverse Effect
or the consummation of any of the other agreements, covenants or
commitments of the Company or any Subsidiary contemplated by the other
Transaction Documents. Any such qualifications and filings will, in the
case of qualifications, be effective on the Closing and will, in the
case of filings, be made within the time prescribed by law.
(f) No Violation or Conflict. Assuming the representations and
warranties of the Subscriber in Section 4 are true and correct, neither
the issuance nor sale of the Securities nor the performance of the
Company's obligations under this Agreement and all other agreements
entered into by the Company relating thereto by the Company will:
(i) violate, conflict with, result in a breach of, or constitute a
default (or an event which with the giving of notice or the lapse of
time or both would be reasonably likely to constitute a default) under
(A) the articles or certificate of incorporation, charter or bylaws of
the Company, (B) to the Company's knowledge, any decree, judgment,
order, law, treaty, rule, regulation or determination applicable to the
Company of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company or over the properties or assets of the
Company or any of its Affiliates, (C) the terms of any bond, debenture,
note or any other evidence of indebtedness, or any agreement, stock
option or other similar plan, indenture, lease, mortgage, deed of trust
or other instrument to which the Company or any of its Affiliates is a
party, by which the Company or any of its Affiliates is bound, or to
which any of the properties of the Company or any of its Affiliates is
subject, or (D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company, or any of its
Affiliates is a party except the violation, conflict, breach, or
default of which would not have a Material Adverse Effect; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company or
any of its Affiliates except in favor of Subscriber as described
herein; or
(iii) result in the activation of any anti-dilution rights or a reset
or repricing of any debt, equity or security instrument of any creditor
or equity holder of the Company, or the holder of the right to receive
any debt, equity or security instrument of the Company nor result in
the acceleration of the due date of any obligation of the Company; or
(iv) result in the triggering of any piggy-back or other registration
rights of any person or entity holding securities of the Company or
having the right to receive securities of the Company.
(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 only to restrictions upon
transfer under the 1933 Act and any applicable state securities laws;
(ii) have been, or will be, duly and validly authorized and on the
dates of issuance of the Conversion Shares upon conversion of the Note,
and the Warrant Shares upon exercise of the Warrants, such Shares and
Warrant Shares will be duly and validly issued, fully paid and non-
assessable, and if registered pursuant to the 1933 Act and resold
pursuant to an effective registration statement or exempt from
registration will be free trading, unrestricted and unlegended;
(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
or rights to acquire securities of the Company; and
(iv) will not subject the holders thereof to personal liability by
reason of being such holders.
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before
any court, governmental agency or body, or arbitrator having
jurisdiction over the Company, or any of its Affiliates that would
affect the execution by the Company or the complete and timely
performance by the Company of its obligations under the Transaction
Documents. Except as disclosed in the Reports, there is no pending or,
to the best knowledge of the Company, basis for or threatened action,
suit, proceeding or investigation before any court, governmental agency
or body, or arbitrator having jurisdiction over the Company, or any of
its Affiliates which litigation if adversely determined would have a
Material Adverse Effect.
(i) No Market Manipulation. The Company and its Affiliates have not
taken, and will not take, directly or indirectly, any action designed
to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Securities or affect the price at
which the Securities may be issued or resold.
(j) 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 July 31,
2008 and except as modified in the Reports and Other Written
Information or in the Schedules hereto, there has been no Material
Adverse Effect relating to the Company's business, financial condition
or affairs. The Reports and Other Written Information, including the
financial statements included therein 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, taken
as a whole, not misleading in light of the circumstances and when made.
(k) Defaults. The Company is not in material violation of its articles
of incorporation or bylaws. The Company is (i) not in default under
or in violation of any other material agreement or instrument to which
it is a party or by which it or any of its properties are bound or
affected, which default or violation would have a Material Adverse
Effect, (ii) not in default with respect to any order of any court,
arbitrator or governmental body or subject to or party to any order of
any court or governmental authority arising out of any action, suit or
proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters
which default would have a Material Adverse Effect, or (iii) not in
violation of any statute, rule or regulation of any governmental
authority which violation would have a Material Adverse Effect.
(l) 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 of the Company
nor solicited any offers to buy any security of the Company under
circumstances that would cause the offer of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and
regulations of the Bulletin Board. No prior offering will impair the
exemptions relied upon in this Offering or the Company's ability to
timely comply with its obligations hereunder. Neither the Company nor
any of its Affiliates will take any action or steps that would cause
the offer or issuance of the Securities to be integrated with other
offerings which would impair the exemptions relied upon in this
Offering or the Company's ability to timely comply with its obligations
hereunder. The Company will not conduct any offering other than the
transactions contemplated hereby that may be integrated with the offer
or issuance of the Securities that would impair the exemptions relied
upon in this Offering or the Company's ability to timely comply with
its obligations hereunder.
(m) 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 0000 Xxx) in
connection with the offer or sale of the Securities.
(n) No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material, individually or in the aggregate, other
than those incurred in the ordinary course of the Company businesses
since July 31, 2008 and which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, except as
disclosed in the Reports or on Schedule 5(n).
(o) No Undisclosed Events or Circumstances. Since July 31, 2008,
except as disclosed in the Reports, no event or circumstance has
occurred or exists with respect to the Company or its businesses,
properties, operations or financial condition, that, under applicable
law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.
(p) Dilution. The Company's executive officers and directors
understand the nature of the Securities being sold hereby and recognize
that the issuance of the Securities will have a potential dilutive
effect on the equity holdings of other holders of the Company's equity
or rights to receive equity of the Company. The board of directors of
the Company has concluded, in its good faith business judgment that the
issuance of the Securities is in the best interests of the Company.
The Company specifically acknowledges that its obligation to issue the
Conversion Shares upon conversion of the Note and the Warrant Shares
upon exercise of the Warrants is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company or parties
entitled to receive equity of the Company.
(q) No Disagreements with Accountants and Lawyers. Other than the
opinion regarding the Company's ability to continue as a "going
concern," as disclosed in the Company's Reports, there are no material
disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise between the Company and the accountants and
lawyers previously and presently employed by the Company, including but
not limited to disputes or conflicts over payment owed to such
accountants and lawyers, nor have there been any such disagreements
during the two years prior to the Closing Date.
(r) Investment Company. Neither the Company nor any Affiliate of the
Company is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(s) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or campaigns
from corporate funds, (iii) failed to disclose fully any contribution
made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
(t) Reporting Company/Shell Company. The Company is a publicly-held
company subject to reporting obligations pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and has a
class of Common Stock registered pursuant to Section 12(g) of the 1934
Act. Pursuant to the provisions of the 1934 Act, the Company has
timely filed all reports and other materials required to be filed
thereunder with the Commission during the preceding twelve months. As
of the Closing Date, the Company is a "start-up" company as referred to
in Footnote 172 to Rule 144 and, therefore, not considered a "shell
company" as those terms are employed in Rule 144(i) under the 1933 Act.
(u) Listing. The Company's Common Stock is quoted on the Bulletin
Board under the symbol ATIM. The Company has not received any oral or
written notice that its Common Stock is not eligible nor will become
ineligible for quotation on the Bulletin Board nor that its Common
Stock does not meet all requirements for the continuation of such
quotation. The Company satisfies all the requirements for the
continued quotation of its Common Stock on the Bulletin Board.
(v) Transfer Agent. The Company's transfer agent is a participant in
the Depository Trust Company Automated Securities Transfer Program. The
name, address, telephone number, fax number, contact person and email
address of the Company transfer agent is set forth on Schedule 5(w)
hereto.
(w) Company Predecessor and Subsidiaries. The Company makes each of
the representations contained in Sections 5(a), (b), (c), (d), (e),
(f), (h), (j), (k), (n), (o), (p), (q), (r) and (s) of this Agreement,
as same relate or could be applicable to each Subsidiary. All
representations made by or relating to the Company of a historical or
prospective nature and all undertakings described in Sections 9(g)
through 9(l) shall relate, apply and refer to the Company and its
predecessors and successors. The Company represents that it owns all
of the equity of the Subsidiaries and rights to receive equity of the
Subsidiaries identified on Schedule 5(a), free and clear of all liens,
encumbrances and claims, except as set forth on Schedule 5(a). No
person or entity other than the Company has the right to receive any
equity interest in the Subsidiaries. The Company further represents
that the Subsidiaries have not been known by any other name for the
prior five years.
(x) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the
date hereof in all material respects, and, unless the Company otherwise
notifies the Subscribers prior to the Closing Date, shall be true and
correct in all material respects as of the Closing Date; provided,
that, if such representation or warranty is made as of a different
date, in which case such representation or warranty shall be true as of
such date.
(y) Survival. The foregoing representations and warranties shall
survive for a period of one (1) year after the Closing Date.
6. Regulation D Offering/Legal Opinion. The offer and issuance of the
Securities to the Subscribers is being made pursuant to the exemption
from the registration provisions of the 1933 Act afforded by Section
4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation D
promulgated thereunder. On the Closing Date, the Company will provide
an opinion reasonably acceptable to the Subscribers from the Company's
legal counsel opining on the availability of an exemption from
registration under the 1933 Act as it relates to the offer and issuance
of the Securities and other matters reasonably requested by
Subscribers. A form of the legal opinion is annexed hereto as Exhibit
E. The Company will provide, at the Company's expense, such other
legal opinions, if any, as are reasonably necessary in each
Subscriber's opinion for the issuance and resale of the Common Stock
issuable upon conversion of the Notes and exercise of the Warrants
pursuant to an effective registration statement, Rule 144 under the
1933 Act or an exemption from registration.
7.1. Conversion of Note.
(a) Upon the conversion of a Note or part thereof, the Company shall,
at its own cost and expense, take all necessary action, including
obtaining and delivering, an opinion of counsel to assure that the
Company's transfer agent shall issue stock certificates in the name of
Subscriber (or its permitted 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. 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 certificates
representing such shares shall contain no legend other than the legend
set forth in Section 4(h). If and when Subscriber sells the Shares,
assuming (i) a registration statement including such Shares for
registration, filed with the Commission is effective and the
prospectus, as supplemented or amended, contained therein is current
and (ii) Subscriber or its agent confirms in writing to the transfer
agent that Subscriber has complied with the prospectus delivery
requirements, the Company will reissue the Shares without restrictive
legend and the Shares will be free-trading, and freely transferable.
In the event that the Shares are sold in a manner that complies with an
exemption from registration, the Company will promptly instruct its
counsel to issue to the transfer agent an opinion permitting removal of
the legend indefinitely, if pursuant to Rule 144(b)(1)(i) of the 1933
Act, or for 90 days if pursuant to the other provisions of Rule 144 of
the 1933 Act, provided that Subscriber delivers all reasonably
requested representations in support of such opinion.
(b) Subscriber will give notice of its decision to exercise its right
to convert the Note, interest, or part thereof by telecopying, or
otherwise delivering a completed Notice of Conversion (a form of which
is annexed as Exhibit A to the Note) to the Company via confirmed
telecopier transmission or otherwise pursuant to Section 13(a) of this
Agreement. 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 by 6 PM Eastern Time ("ET") (or if received by
the Company after 6 PM ET, then the next business day) shall be deemed
a "Conversion Date." The Company will itself or cause the Company's
transfer agent to transmit the Company's Common Stock certificates
representing the Conversion Shares issuable upon conversion of the Note
to Subscriber via express courier for receipt by Subscriber within four
(4) business days after the Conversion Date (such fourth day being the
"Delivery Date"). In the event the Conversion Shares are
electronically transferable, then delivery of the Shares must be made
by electronic transfer provided request for such electronic transfer
has been made by the Subscriber. A Note representing the balance of
the Note not so converted will be provided by the Company to Subscriber
if requested by Subscriber, provided Subscriber delivers the original
Note to the Company.
(c) The Company understands that a delay in the delivery of the
Conversion Shares in the form required pursuant to Section 7.1 hereof,
or the Mandatory Redemption Amount described in Section 7.2 hereof,
respectively, later than the Delivery Date or the Mandatory Redemption
Payment Date (as hereinafter defined) could result in economic loss to
the Subscriber. As compensation to Subscriber for such loss, the
Company agrees to pay (as liquidated damages and not as a penalty) to
Subscriber for late issuance of Conversion Shares in the form required
pursuant to Section 7.1 hereof upon Conversion of the Note, the amount
of $100 per business day after the Delivery Date for each $10,000 of
Note principal amount and interest (and proportionately for other
amounts) being converted of the corresponding Conversion Shares which
are not timely delivered not to exceed a maximum of 15% of the
principal amount outstanding on the Note. The Company shall pay any
payments incurred under this Section 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 Conversion Shares within seven (7) business days
after the Delivery Date or make payment within seven (7) business days
after the Mandatory Redemption Payment Date (as defined in Section 7.2
below), 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 Subscriber shall each be restored to
their respective positions immediately prior to the delivery of such
notice, except that the damages payable in connection with the
Company's default shall be payable through the date notice of
revocation or rescission is given to the Company.
7.2. Mandatory Redemption at Subscriber's Election. In the event (i)
the Company is prohibited from issuing Conversion Shares or Warrant
Shares, (ii) the Company redeems any securities junior to the Notes,
(iii) upon the occurrence of any other Event of Default (as defined in
the Note or in this Agreement), that continues for more than ten (10)
business days, (iv) a Change in Control (as defined below), or (v) of
the liquidation, dissolution or winding up of the Company, then at the
Subscriber's election, the Company must pay to the Subscriber ten (10)
business days after request by Subscriber ("Calculation Period"), a sum
of money determined by multiplying up to the outstanding principal
amount of the Note designated by Subscriber by 120%, plus accrued but
unpaid interest and any other amounts due under the Transaction
Documents ("Mandatory Redemption Payment"). The Mandatory Redemption
Payment must be received by Subscriber not later than ten (10) business
days after request ("Mandatory Redemption Payment Date"). Upon receipt
of the Mandatory Redemption Payment, the corresponding Note principal,
interest and other amounts will be deemed paid and no longer
outstanding. The Subscriber may rescind the election to receive a
Mandatory Redemption Payment at any time until such payment is actually
received. Liquidated damages calculated pursuant to Section 7.1(c)
hereof, that have been paid or accrued for the ten day period prior to
the actual receipt of the Mandatory Redemption Payment by Subscriber
shall be credited against the Mandatory Redemption Payment. For
purposes of this Section 7.2, "Change in Control" shall mean (i) the
Company no longer having a class of shares publicly traded or listed on
a Principal Market (as defined in Section 9(b) hereto), (ii) the
Company becoming a Subsidiary of another entity (other than a
corporation formed by the Company for purposes of reincorporation in
another U.S. jurisdiction), (iii) a majority of the board of directors
of the Company as of the Closing Date no longer serving as directors of
the Company except due to natural causes, and (iv) the sale, lease or
transfer of substantially all the assets of the Company or its
Subsidiaries.
7.3. Maximum Conversion. Subscriber shall not be entitled to convert
on a Conversion Date that amount of the Note nor may the Company make
any payment including principal, interest, or liquidated or other
damages by delivery of Conversion Shares in connection with that number
of Conversion Shares which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by Subscriber and
its Affiliates on a Conversion Date or payment date, and (ii) the
number of Conversion Shares issuable upon the conversion of the Note
with respect to which the determination of this provision is being made
on a calculation date, which would result in beneficial ownership by
Subscriber and its Affiliates of more than 4.99% of the outstanding
shares of Common Stock of the Company on such Conversion Date. For the
purposes of 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 Rule 13d-3 thereunder. Subject
to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 4.99% and aggregate conversions by the Subscriber
may exceed 4.99%. The Subscriber may increase the permitted beneficial
ownership amount up to 9.99% upon and effective after 61 days prior
written notice to the Company. Subscriber may allocate which of the
equity of the Company deemed beneficially owned by Subscriber shall be
included in the 4.99% amount described above and which shall be
allocated to the excess above 4.99%.
7.4. Injunction Posting of Bond. In the event Subscriber shall elect
to convert a Note or part thereof, the Company may not refuse
conversion based on any claim that Subscriber or any one associated or
affiliated with Subscriber has been engaged in any violation of law, or
for any other reason, unless, a court order, an injunction or temporary
restraining order from a court made on notice to Subscriber,
restraining and or enjoining conversion of all or part of such Note
shall have been sought and obtained by the Company or the Company has
posted a surety bond for the benefit of Subscriber in the amount of
120% of the outstanding principal and accrued but unpaid interest of
the Note, or aggregate purchase price of the Shares which are sought to
be which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall
be payable to Subscriber to the extent the judgment or decision is in
Subscriber's favor.
7.5. Buy-In. In addition to any other rights available to Subscriber,
if the Company fails to deliver to Subscriber Conversion Shares by the
Delivery Date and if after the Delivery Date Subscriber or a broker on
Subscriber's behalf purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale
by Subscriber of the Common Stock which Subscriber was entitled to
receive upon such conversion (a "Buy-In"), then the Company shall pay
to Subscriber (in addition to any remedies available to or elected by
the Subscriber) the amount by which (A) 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 request 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 a 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 Subscriber $1,000 plus
interest. Subscriber shall provide the Company written notice and
evidence indicating the amounts payable to Subscriber in respect of the
Buy-In.
7.6 Adjustments. The Conversion Price, Warrant exercise prices and
amount of Shares issuable upon conversion of the Notes and Warrant
Shares issuable upon exercise of the Warrants shall be equitably
adjusted and as otherwise described in this Agreement, the Notes and
Warrants.
7.7. Redemption. The Note shall not be redeemable or callable by
the Company, except as described in the Note.
8. Legal Fees. The Company shall pay to Grushko & Xxxxxxx, P.C., a
fee of $12,500 as reimbursement for services rendered to the
Subscribers in connection with this Agreement and the purchase and sale
of the Offering. The Subscriber's Legal Fees and expenses (to the
extent known as of the Closing) will be payable out of funds held
pursuant to the Escrow Agreement. Grushko & Xxxxxxx, P.C. will be
reimbursed at Closing for all filing fees, and printing and shipping
costs for the closing statements to be delivered to Subscribers.
9. Covenants of the Company. The Company covenants and agrees with the
Subscribers as follows:
(a) Stop Orders. Subject to the prior notice requirement described in
Section 9(n), the Company will advise the Subscribers, within twenty-
four hours after it receives notice of issuance by the 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.
The Company will not issue any stop transfer order or other order
impeding the sale, resale or delivery of any of the Securities, except
as may be required by any applicable federal or state securities laws
and unless contemporaneous notice of such instruction is given to the
Subscribers.
(b) Listing/Quotation. The Company shall promptly secure the quotation
or listing of the Conversion Shares and Warrant Shares upon each
national securities exchange, or automated quotation system upon the
Company's Common Stock is quoted or listed and upon which such
Conversion Shares and Warrant Shares are or become eligible for
quotation or listing (subject to official notice of issuance) and shall
maintain same so long as any Notes and Warrants are outstanding. The
Company will maintain the quotation or listing of its Common Stock on
the American Stock Exchange, Nasdaq Capital Market, Nasdaq Global
Market, Nasdaq Global Select Market, Bulletin Board, or New York Stock
Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock (the "Principal
Market"), and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal
Market, as applicable. The Company will provide Subscribers with copies
of all notices it receives notifying the Company of the threatened and
actual delisting of the Common Stock from any Principal Market. As of
the date of this Agreement and the Closing Date, the Bulletin Board is
and will be the Principal Market.
(c) Market Regulations. If required, the Company shall notify the
Commission, the Principal Market and applicable state authorities, in
accordance with their requirements, of the transactions contemplated by
this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to
the Subscribers and promptly provide copies thereof to the Subscribers.
(d) Filing Requirements. From the date of this Agreement and until the
last to occur of (i) two (2) years after the Closing Date, (ii) until
all the Shares have been resold or transferred by the Subscriber
pursuant to a registration statement or pursuant to Rule 144(b)(1)(i),
or (iii) the Note and Warrants are no longer outstanding (the date of
such latest occurrence being the "End Date"), the Company will (A)
cause its Common Stock to continue to be registered under Section 12(b)
or 12(g) of the 1934 Act, (B) comply in all respects with its reporting
and filing obligations under the 1934 Act, (C) voluntarily comply with
all reporting requirements that are applicable to an issuer with a
class of shares registered pursuant to Section 12(g) of the 1934 Act,
if the Company is not subject to such reporting requirements, and (D)
comply with all requirements related to any registration statement
filed pursuant to this Agreement. The Company will use its best
efforts not to take any action or file any document (whether or not
permitted by the 1933 Act or the 1934 Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said acts until the End Date.
Until the End Date, the Company will continue the listing or quotation
of the Common Stock on a Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Principal Market. The Company agrees
to timely file a Form D with respect to the Securities if required
under Regulation D and to provide a copy thereof to each Subscriber
promptly after such filing.
(e) Use of Proceeds. The proceeds of the Offering will be employed by
the Company for expenses of the Offering, and general working capital.
Except as described on Schedule 9(e), the Purchase Price may not and
will not be used for accrued and unpaid officer and director salaries,
payment of financing related debt, redemption of outstanding notes or
equity instruments of the Company nor non-trade obligations outstanding
on a Closing Date. For so long as any Note is outstanding, the Company
will not prepay any financing related debt obligations, except
equipment payments or in the event such payments are made in the
ordinary course of business, nor redeem any equity instruments of the
Company without the prior consent of the Subscribers.
(f) Reservation. Prior to the Closing, the Company undertakes to
reserve on behalf of Subscribers from its authorized but unissued
Common Stock, a number of shares of Common Stock equal to 150% of the
amount of Common Stock necessary to allow Subscribers to be able to
convert the entire Note and 100% of the amount of Warrant Shares
issuable upon exercise of the Warrants ("Required Reservation").
Failure to have sufficient shares reserved pursuant to this Section
9(f) at any time shall be a material default of the Company's
obligations under this Agreement and an Event of Default under the
Note. If at any time Notes and Warrants are outstanding the Company
has insufficient Common Stock reserved on behalf of the Subscribers in
an amount less than 140% of the amount necessary for full conversion of
the outstanding Note principal and interest at the conversion price
that would be in effect on every such date and 100% of the Warrant
Shares ("Minimum Required Reservation"), the Company will promptly
reserve the Minimum Required Reservation, or if there are insufficient
authorized and available shares of Common Stock to do so, the Company
will take all action necessary to increase its authorized capital to be
able to fully satisfy its reservation requirements hereunder, including
the filing of a preliminary proxy with the Commission not later than
fifteen days after the first day the Company has less than the Minimum
Required Reservation. The Company agrees to provide notice to the
Subscribers not later than five days after the date the Company has
less than the Minimum Required Reservation reserved on behalf of the
Subscribers.
(g) DTC Program. At all times that Notes or Warrants are outstanding,
the Company will employ as the transfer agent for the Common Stock,
Shares and Warrant Shares a participant in the Depository Trust Company
Automated Securities Transfer Program.
(h) Taxes. From the date of this Agreement and until the End Date, the
Company will promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits,
property or business of the Company; provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the
Company will pay all such taxes, assessments, charges or levies
forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.
(i) Insurance. As reasonably necessary as determined by the Company,
from the date of this Agreement and until the End Date, the Company
will keep its assets which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by
fire, explosion and other risks customarily insured against by
companies in the Company's line of business and location, in amounts
and to the extent and in the manner customary for companies in similar
businesses similarly situated and located and to the extent available
on commercially reasonable terms.
(j) Books and Records. From the date of this Agreement and until the
End Date, the Company will keep true records and books of account in
which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
(k) Governmental Authorities. From the date of this Agreement and
until the End Date, the Company shall duly observe and conform in all
material respects to all valid requirements of governmental authorities
relating to the conduct of its business or to its properties or assets.
(l) Intellectual Property. From the date of this Agreement and until
the End Date, the Company shall maintain in full force and effect its
corporate existence, rights and franchises and all licenses and other
rights to use intellectual property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business,
unless it is sold for value. Schedule 9(l) hereto identifies all of
the intellectual property owned by the Company and Subsidiaries.
(m) Properties. From the date of this Agreement and until the End
Date, the Company will keep its properties in good repair, working
order and condition, reasonable wear and tear excepted, and from time
to time make all necessary and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company will at all times
comply with each provision of all leases and claims to which it is a
party or under which it occupies or has rights to property if the
breach of such provision could reasonably be expected to have a
Material Adverse Effect. The Company will not abandon any of its
assets except for those assets which have negligible or marginal value
or for which it is prudent to do so under the circumstances.
(n) Confidentiality/Public Announcement. From the date of this
Agreement and until the End Date, the Company agrees that except in
connection with a Form 8-K and the registration statement or statements
regarding the Subscriber's Securities or in correspondence with the SEC
regarding same, it will not disclose publicly or privately the identity
of the Subscriber unless expressly agreed to in writing by a Subscriber
or only to the extent required by law and then only upon not less than
three days prior notice to Subscriber. In any event and subject to the
foregoing, the Company undertakes to file a Form 8-K describing the
Offering not later than the fourth (4th) business day after the Closing
Date. Prior to the Closing Date, such Form 8-K will be provided to
Subscribers for their review and approval. In the Form 8-K, the
Company will specifically disclose the nature of the Offering and
amount of Common Stock outstanding immediately after the Closing, not
including any Conversions. Upon delivery by the Company to the
Subscribers after the Closing Date of any notice or information, in
writing, electronically or otherwise, and while a Note, Conversion
Shares or Warrants are held by Subscribers, unless the Company has in
good faith determined that the matters relating to such notice do not
constitute material, nonpublic information relating to the Company or
Subsidiaries, the Company shall within one business day after any such
delivery publicly disclose such material, nonpublic information on a
Report on Form 8-K. In the event that the Company believes that a
notice or communication to Subscribers contains material, nonpublic
information relating to the Company or Subsidiaries, the Company shall
so indicate to Subscribers prior to delivery of such notice or
information. Subscribers will be granted sufficient time to notify the
Company that such Subscriber elects not to receive such information.
In such case, the Company will not deliver such information to
Subscribers. In the absence of any such indication, Subscribers shall
be allowed to presume that all matters relating to such notice and
information do not constitute material, nonpublic information relating
to the Company or Subsidiaries.
(o) Non-Public Information. The Company covenants and agrees that
except for the Reports, Other Written Information and schedules and
exhibits to this Agreement and the Transaction Documents, which
information the Company undertakes to publicly disclose on the Form 8-K
described in Section 9(n) above, neither it nor any other person acting
on its behalf will at any time provide any Subscriber or its agents or
counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Subscriber
shall have agreed in writing to accept such information. The Company
understands and confirms that each Subscriber shall be relying on the
foregoing representations in effecting transactions in securities of
the Company.
(p) Negative Covenants. So long as a Note is outstanding, without
the consent of the Subscribers, the Company will not and will not
permit any of its Subsidiaries to directly or indirectly:
(i) create, incur, assume or suffer to exist any pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security
interest, security title, mortgage, security deed or deed of trust,
easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement
perfecting a security interest under the Uniform Commercial Code or
comparable law of any jurisdiction) (each, a "Lien") upon any of its
property, whether now owned or hereafter acquired except for: (A) the
Excepted Issuances (as defined in Section 12 hereof), and (B) (a) Liens
imposed by law for taxes that are not yet due or are being contested in
good faith and for which adequate reserves have been established in
accordance with generally accepted accounting principles; (b)
carriers', warehousemen's, mechanics', material men's, repairmen's and
other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30
days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations; (d) deposits
to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of
business; (e) Liens created with respect to the financing of the
purchase of new property in the ordinary course of the Company's
business up to the amount of the purchase price of such property; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property (each of
(a) through (f), a "Permitted Lien").
(ii) amend its certificate of incorporation, bylaws or its charter
documents so as to materially and adversely affect any rights of the
Subscriber (an increase in the amount of authorized shares and an
increase in the number of directors will not be deemed adverse to the
rights of the Subscribers);
(iii) repay, repurchase or offer to repay, repurchase or otherwise
acquire or make any dividend or distribution in respect of any of its
Common Stock, preferred stock, or other equity securities other than to
the extent permitted or required under the Transaction Documents.
(iv) engage in any transactions with any officer, director, employee or
any Affiliate of the Company, including any contract, agreement or
other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any
officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
$100,000 other than (i) for payment of salary, or fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the
Company, and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company; or
(v) prepay or redeem any financing related debt or past due obligations
or securities outstanding as of the Closing Date, or past due
obligations (except with respect to vendor obligations, any such
obligations which in management's good faith, reasonable judgment must
be repaid to avoid disruption of the Company's businesses.
The Company agrees to provide Subscribers not less than ten (10) days
notice prior to becoming obligated to or effectuating a Permitted Lien
or Excepted Issuance.
(q) Further Registration Statements. Except for a registration
statement filed exclusively on behalf of the Subscribers, the Company
will not, without the consent of the Subscribers, file with the
Commission or with state regulatory authorities any registration
statements or amend any already filed registration statement to
increase the amount of Common Stock registered therein, or reduce the
price of which such company securities are registered therein,
(including but not limited to Forms S-8), until the expiration of the
"Exclusion Period," which shall be defined as the sooner of (i) the
date that all of the registrable securities have been registered in an
effective registration statement, or (ii) until all the Conversion
Shares and Warrant Shares are have been resold by the Subscriber
pursuant to a registration statement or Rule 144b(1)(i), without regard
to volume limitations. The Exclusion Period will be tolled or
reinstated, as the case may be, during the pendency of an Event of
Default as defined in the Note.
(r) Offering Restrictions. For so long as the Notes are outstanding,
the Company will not without the consent of the Subscriber enter into
any Equity Line of Credit or similar agreement, nor issue nor agree to
issue any floating or Variable Priced Equity Linked Instruments nor any
of the foregoing or equity with price reset rights (collectively, the
"Variable Rate Restrictions"). For purposes hereof, "Equity Line of
Credit" shall include any transaction involving a written agreement
between the Company and an investor or underwriter whereby the Company
has the right to "put" its securities to the investor or underwriter
over an agreed period of time and at an agreed price or price formula,
and "Variable Priced Equity Linked Instruments" shall include: (A) any
debt or equity securities which are convertible into, exercisable or
exchangeable for, or carry the right to receive additional shares of
Common Stock either (1) at any conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of
or quotations for Common Stock at any time after the initial issuance
of such debt or equity security, or (2) with a fixed conversion,
exercise or exchange price that is subject to being reset at some
future date at any time after the initial issuance of such debt or
equity security due to a change in the market price of the Company's
Common Stock since date of initial issuance, and (B) any amortizing
convertible security which amortizes prior to its maturity date, where
the Company is required or has the option to (or any investor in such
transaction has the option to require the Company to) make such
amortization payments in shares of Common Stock which are valued at a
price that is based upon and/or varies with the trading prices of or
quotations for Common Stock at any time after the initial issuance of
such debt or equity security (whether or not such payments in stock are
subject to certain equity conditions).
(s) Seniority. Except for Permitted Liens, until the Note is fully
satisfied or converted, without the consent of the Subscriber, the
Company shall not grant nor allow any security interest to be taken in
the assets of the Company or any Subsidiary or any Subsidiary's assets;
nor issue any debt, equity or other instrument which would give the
holder thereof directly or indirectly, a right in any assets of the
Company or any Subsidiary or any right to payment equal to or superior
to any right of the Subscriber as a holder of the Note in or to such
assets or payment, nor issue or incur any debt not in the ordinary
course of business.
(t) Notices. For so long as the Subscribers hold any Securities, the
Company will maintain a United States address and United States fax
number for notice purposes under the Transaction Documents.
(u) Transactions With Insiders. So long as the Note is
outstanding without the consent of the Subscriber, the Company shall
not, and shall cause each of its subsidiaries not to, enter into,
amend, modify or supplement, or permit any subsidiary to enter into,
amend, modify or supplement any agreement, transaction, commitment, or
arrangement relating to the sale, transfer or assignment of any of the
Company's tangible or intangible assets with any of its Insiders (as
defined below), or any Affiliates (as defined below) thereof, or with
any individual related by blood, marriage, or adoption to any such
individual. Affiliate for purposes of this Section 9(t) means, with
respect to any person or entity, another person or entity that,
directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more
common ownership with that person or entity, (iii) controls that person
or entity, or (iv) shares common control with that person or entity.
"Control" or "Controls" for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity. For purposes hereof, "Insiders"
shall mean any officer, director or manager of the Company, including
but not limited to the Company's president, chief executive officer,
chief financial officer and chief operations officer, and any of their
affiliates or family members.
(v) Blackout. The Company undertakes and covenants that without the
consent of the Subscriber, until the end of the Exclusion Period, the
Company will not enter into any acquisition, merger, exchange or sale
or other transaction or fail to take any action that could have the
effect of delaying the effectiveness of any pending registration
statement beyond the effective date, or causing an already effective
registration statement to no longer be effective or current for a
period of forty-five or more days in the aggregate during any three
hundred and sixty-five day period.
(w) Lockup Agreement. The Company will deliver to the Subscribers on
or before the Closing Date and enforce the provisions of irrevocable
lockup agreements ("Lockup Agreement") in the form annexed hereto as
Exhibit F, with the persons identified on Schedule 9(w).
10. Covenants of the Company Regarding Indemnification.
(a) The Company agrees to indemnify, hold harmless, reimburse and
defend the Subscriber, the Subscriber's officers, directors, agents,
Affiliates, members, managers, control persons, and principal
shareholders, against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material
misrepresentation by Company or breach of any representation or
warranty by Company in this Agreement or in any Exhibits or Schedules
attached hereto in any Transaction Document, or (ii) after any
applicable notice and/or cure periods, any breach or default in
performance by the Company of any material covenant or undertaking to
be performed by the Company hereunder, or any other material agreement
entered into by the Company and Subscriber relating hereto.
(b) In no event shall the liability of the Subscriber or permitted
successor hereunder or under any Transaction Document or other
agreement delivered in connection herewith be greater in amount than
the dollar amount of the net proceeds actually received by such
Subscriber or successor upon the sale of Registrable Securities (as
defined herein).
(c) The procedures set forth in Section 11.6 shall apply to the
indemnification set forth in Section 10(a).
11.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing one hundred and eighty
days after the Closing Date, but not later than two years after the
Closing Date, upon a written request therefor from any record holder or
holders of more than 50% of the Conversion Shares issued and issuable
upon conversion of the outstanding Notes and outstanding Warrant
Shares, the Company shall prepare and file with the Commission a
registration statement under the 1933 Act registering the Registrable
Securities, as defined in Section 11.1(iv) hereof, which are the
subject of such request for unrestricted public resale by the holder
thereof. For purposes of Sections 11.1(i) and 11.1(ii), Registrable
Securities shall not include Securities which are (A) registered for
resale in an effective registration statement, (B) included for
registration in a pending registration statement, (C) which have been
issued without further transfer restrictions after a sale or transfer
pursuant to Rule 144 under the 1933 Act or (D) which may be resold
under Rule 144 without volume limitations. 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 ten 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 11.1(i).
(ii) If the Company at any time proposes to register any of its
securities under the 1933 Act for sale to the public, whether for its
own account or for the account of other security holders or both,
except with respect to registration statements on Forms S 4, S 8 or
another form not available for registering the Registrable Securities
for sale to the public, provided the Registrable Securities are not
otherwise registered for resale by the Subscribers or Holder pursuant
to an effective registration statement, each such time it will give at
least ten (10) days' prior written notice to the record holder of the
Registrable Securities of its intention so to do. Upon the written
request of the holder, received by the Company within ten (10) days
after the giving of any such notice by the Company, to register any of
the Registrable Securities not previously registered, the Company will
cause such Registrable Securities as to which registration shall have
been so requested to be included with the securities to be covered by
the registration statement proposed to be filed by the Company, all to
the extent required to permit the sale or other disposition of the
Registrable Securities so registered by the holder of such Registrable
Securities (the "Seller" or "Sellers"). In the event that any
registration pursuant to this Section 11.1(ii) shall be, in whole or in
part, an underwritten public offering of common stock of the Company,
the number of shares of Registrable Securities to be included in such
an underwriting may be reduced by the managing underwriter if and to
the extent that the Company and the underwriter shall reasonably be of
the opinion that such inclusion would adversely affect the marketing of
the securities to be sold by the Company therein; provided, however,
that the Company shall notify the Seller in writing of any such
reduction. Notwithstanding the foregoing provisions, or Section 11.4
hereof, the Company may withdraw or delay or suffer a delay of any
registration statement referred to in this Section 11.1(ii) without
thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration is received
by the Company pursuant to Section 11.1(i), the Company has determined
to proceed with the actual preparation and filing of a registration
statement under the 1933 Act in connection with the proposed offer and
sale for cash of any of its securities for the Company's own account
and the Company actually does file such other registration statement,
such written request shall be deemed to have been given pursuant to
Section 11.1(ii) rather than Section 11.1(i), and the rights of the
holders of Registrable Securities covered by such written request shall
be governed by Section 11.1(ii).
(iv) The Company shall file with the Commission a Form S-1 registration
statement (the "Registration Statement") (or such other form that it is
eligible to use) in order to register the Registrable Securities for
resale and distribution under the 1933 Act within ninety (90) calendar
days after the Closing Date (the "Filing Date"), and cause the
Registration Statement to be declared effective not later than one
hundred and eighty (180) days after the Closing Date (the "Effective
Date"). The Company will register not less than a number of shares of
common stock in the aforedescribed registration statement that is equal
to 175% of the Shares issued and issuable upon conversion of all of the
Notes and 100% of the Warrant Shares issuable upon exercise of the
Warrants (collectively the "Registrable Securities"). The Registrable
Securities shall be reserved and set aside exclusively for the benefit
of each Subscriber and Warrant holder, pro rata, and not issued,
employed or reserved for anyone other than each Subscriber and Warrant
holder. The Registration Statement will immediately be amended or
additional registration statements will be immediately filed by the
Company as necessary to register additional shares of Common Stock to
allow the public resale of all Common Stock included in and issuable by
virtue of the Registrable Securities. Except with the written consent
of the Subscriber, no securities of the Company other than the
Registrable Securities will be included in the Registration Statement.
It shall be deemed a Non-Registration Event if at any time after the
date the Registration Statement is declared effective by the Commission
("Actual Effective Date") the Company has registered for unrestricted
resale on behalf of the Subscribers fewer than 140% of the amount of
Common Shares issuable upon full conversion of all sums due under the
Notes and all of the Warrant Shares (the difference between such 120%
and the actual amount of shares registered being the "Shortfall"). In
such event, the Company shall take all actions necessary to cause at
least 120% of the amount of shares of Common Stock issuable upon full
conversion of all sums due under the Notes and 100% of the Warrant
Shares to be registered within sixty (60) days after the first day such
Shortfall exists. Failure to file the Registration Statement within
thirty (30) days after the first day such Shortfall first exists or
failure to cause such registration to become effective within sixty
(60) days after such Shortfall first exists shall be a Non-Registration
Event.
11.2. Registration Procedures. If and whenever the Company is required
by the provisions of Sections 11.1(i), 11.1(ii) or 11.1(iv) to effect
the registration of any Registrable Securities under the 1933 Act, the
Company will, as expeditiously as possible:
(a) subject to the timelines provided in this Agreement, prepare and
file with the Commission a registration statement required by Section
11, with respect to such securities and use its best commercially
reasonable efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated
thereby (determined as herein provided), promptly provide to the
holders of the Registrable Securities copies of all filings and
Commission letters of comment and notify the Sellers (by telecopier and
by e-mail addresses provided by the Subscribers) and Grushko & Xxxxxxx,
P.C. (by telecopier and by email to Xxxxxxxxx@xxx.xxx) on or before the
second business day thereafter that the Company receives notice that
(i) the Commission has no comments or no further comments on the
registration statement, and (ii) the registration statement has been
declared effective [failure to timely provide notice as required by
this Section 11.2(a) shall be a material breach of the Company's
obligation and an Event of Default as defined in the Notes and a Non-
Registration Event as defined in Section 11.4 of this Agreement];;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective until such registration statement has been
effective for a period of two (2) years, and comply with the provisions
of the 1933 Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in
accordance with the Sellers' intended method of disposition set forth
in such registration statement for such period;
(c) furnish to the Sellers, at the Company's expense, such number of
copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons
reasonably may request in order to facilitate the public sale or their
disposition of the securities covered by such registration statement or
make them electronically available;
(d) use its reasonable best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of New York and such jurisdictions as the
Sellers shall request in writing, provided, however, that the Company
shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it
is not so qualified or to consent to general service of process in any
such jurisdiction;
(e) 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) notify the Sellers within twenty-four hours of the Company's
becoming aware that a prospectus relating thereto is required to be
delivered under the 1933 Act, of the happening of any event of which
the Company has knowledge as a result of which the prospectus contained
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing or which becomes
subject to a Commission, state or other governmental order suspending
the effectiveness of the registration statement covering any of the
Registrable Securities;
(g) provided same would not be in violation of the provision of
Regulation FD under the 1934 Act, make available for inspection by the
Sellers during reasonable business hours, and any attorney, accountant
or other agent retained by the Sellers 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
Sellers, attorney, accountant or agent in connection with such
registration statement at such requesting Seller's expense; and
(h) provide to the Sellers copies of the Registration Statement and
amendments thereto five business days prior to the filing thereof with
the Commission. Any Seller's failure to comment on any registration
statement or other document provided to a Subscriber or its counsel
shall not be construed to constitute approval thereof nor the accuracy
thereof.
11.3. Provision of Documents. In connection with each registration
described in this Section 11, each Seller will furnish to the Company
in writing such information and representation letters with respect to
itself and the proposed distribution by it as reasonably shall be
necessary in order to assure compliance with federal and applicable
state securities laws.
11.4. Non-Registration Events. The Company agrees that the Sellers
will suffer damages if the Registration Statement is not filed by the
Filing Date and not declared effective by the Commission by the
Effective Date, and any registration statement required under Section
11.1(i) or 11.1(ii) is not filed within 60 days after written request
and declared effective by the Commission within 150 days after such
request, and maintained in the manner and within the time periods
contemplated by Section 11 hereof, and it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if
(A) the Registration Statement is not filed on or before the Filing
Date, (B) the Registration Statement is not declared effective on or
before the required Effective Date, (C) due to the action or inaction
of the Company the Registration Statement is not declared effective
within three (3) business days after receipt by the Company or its
attorneys of a written or oral communication from the Commission that
the Registration Statement will not be reviewed or that the Commission
has no further comments, (D) if the registration statement described in
Sections 11.1(i) or 11.1(ii) is not filed within 60 days after such
written request, or is not declared effective within 120 days after
such written request, or (E) any registration statement described in
Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective
but shall thereafter cease to be effective without being succeeded
within twenty-five (25) business days by an effective replacement or
amended registration statement or for a period of time which shall
exceed forty (45) days in the aggregate per year (defined as every
rolling period of 365 consecutive days commencing on the Actual
Effective Date) (each such event referred to in clauses A through E of
this Section 11.4 is referred to herein as a "Non-Registration Event"),
then the Company shall deliver to the holder of Registrable Securities,
as Liquidated Damages, an amount equal to two percent (2%) for each
thirty (30) days (or such lesser pro-rata amount for any period of less
than thirty (30) days) of the principal amount of the outstanding Notes
and purchase price of Shares and Warrant Shares issued upon conversion
of Notes and exercise (but excluding cashless exercise) of Warrants
held by Subscriber which are subject to such Non-Registration Event ,
not to exceed a maximum amount of liquidated damages of 15% of the
purchase price of Shares and Warrant Shares. The Company must pay the
Liquidated Damages in cash. The Liquidated Damages must be paid within
ten (10) days after the end of each thirty (30) day period or shorter
part thereof for which Liquidated Damages are payable. In the event a
Registration Statement is filed by the Filing Date but is withdrawn
prior to being declared effective by the Commission, then such
Registration Statement will be deemed to have not been filed and
Liquidated Damages will be calculated accordingly. All oral or written
comments received from the Commission relating to a registration
statement must be satisfactorily responded to within ten (10) business
days after receipt of comments from the Commission. Failure to timely
respond to Commission comments is a Non-Registration Event for which
Liquidated Damages shall accrue and be payable by the Company to the
holders of Registrable Securities at the same rate and amounts set
forth above calculated from the date the response was required to have
been made. Liquidated Damages shall not be payable pursuant to this
Section 11.4 in connection with Registrable Securities for such times
as such Registrable Securities may be sold by the holder thereof
without restriction pursuant to Section 144(b)(1)(i) of the 1933 Act.
Notwithstanding the registration obligations set forth in this Section
11.4, in the event the Commission informs the Company that all of the
Registrable Securities cannot, as a result of the application of Rule
415, be registered for resale on a single registration statement, the
Company agrees to promptly (i) inform the Subscriber thereof and will
promptly file amendments to the initial Registration Statement as
required by the Commission and/or (ii) withdraw the initial
Registration Statement and file a new registration statement (a "New
Registration Statement"), in either case covering the maximum number of
Registrable Securities permitted to be registered by the Commission, on
Form S-1 or such other form available to register for resale the
Registrable Securities; provided, however, that prior to filing such
amendment or New Registration Statement, the Company shall be obligated
to use its commercially reasonable efforts to advocate with the
Commission for the registration of all of the Registrable Securities in
accordance with the SEC Guidance, including without limitation, the
Manual of Publicly Available Telephone Interpretations D.29. Further,
unless Subscriber notifies the Company otherwise, with respect to any
Registrable Securities that are required to be reduced, the Registrable
Securities shall be reduced first by the Warrant Shares and second by
the Shares. In the event the Company is required to amend the
Registration Statement or files a New Registration Statement pursuant
to SEC Guidance, as the case may be, under clauses (i) or (ii) above,
the Company will file with the Commission, as promptly as allowed by
Commission or SEC Guidance provided to the Company or to registrants of
securities in general, one or more registration statements on Form S-1
or such other form available to register for resale those Registrable
Securities that were not registered for resale on the initial
Registration Statement, as amended, or the New Registration Statement
(the "Remainder Registration Statements").
The Company shall not be liable for Liquidated Damages under this
Agreement as to any Registrable Securities which are not permitted by
the Commission to be included in a Registration Statement due solely to
SEC Guidance from the time that it is determined that such Registrable
Securities are not permitted to be registered until such time as the
provisions of this Agreement as to the Remainder Registration
Statements required to be filed hereunder are triggered which in no
event shall be later than ___days after such notice is received from
the Commission, in which case the provisions of this Section 11.4 shall
once again apply. In such case, the Liquidated Damages shall be
calculated to only apply to the percentage of Registrable Securities
which are permitted in accordance with SEC Guidance to be included in
such Registration Statement. The Company may require, from time to
time, information from the Subscriber that is necessary to complete the
Registration Statement in accordance with the requirements of the
Securities Act. In the event of the failure by such Subscriber to
comply with the Company's request within fifteen (15) days from the
date of such request, the Company shall be permitted to withhold filing
the Registration Statement, without being subject to the payment of
Liquidated Damages to the Subscriber. At such time that the Subscriber
complies with the Company's request the Company shall immediately file
the Registration Statement.
11.5. Expenses. All expenses incurred by the Company in complying with
Section 11, including, without limitation, all registration and filing
fees, printing expenses (if required), 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
NASD, transfer taxes, and fees of transfer agents and registrars, are
called "Registration Expenses." All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities are called
"Selling Expenses." The Company will pay all Registration Expenses in
connection with any registration statement described in Section 11.
Selling Expenses in connection with each such registration statement
shall be borne by the Seller and may be apportioned among the Sellers
in proportion to the number of shares included on behalf of the Seller
relative to the aggregate number of shares included under such
registration statement for all Sellers, or as all Sellers thereunder
may agree.
11.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under
the 1933 Act pursuant to Section 11, the Company will, to the extent
permitted by law, indemnify and hold harmless the Seller, each of the
officers, directors, agents, Affiliates, members, managers, control
persons, and principal shareholders of the Seller, each underwriter of
such Registrable Securities thereunder and each other person, if any,
who controls such Seller or underwriter within the meaning of the 1933
Act, against any losses, claims, damages or liabilities, joint or
several, to which the Seller, or such underwriter or controlling person
may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933
Act pursuant to Section 11, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances when made, and will subject to the provisions of Section
11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company
shall not be liable to the Seller to the extent that any such damages
arise out of or are based upon an untrue statement or omission made in
any preliminary prospectus if (i) the Seller failed to send or deliver
a copy of the final prospectus delivered by the Company to the Seller
with or prior to the delivery of written confirmation of the sale by
the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue
statement or alleged untrue statement or such omission or alleged
omission, or (iii) to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity
with information furnished by any such Seller in writing specifically
for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable Securities
under the 1933 Act pursuant to Section 11, each Seller severally but
not jointly will, to the extent permitted by law, indemnify and hold
harmless the Company, and each person, if any, who controls the Company
within the meaning of the 1933 Act, each officer of the Company who
signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the
meaning of the 1933 Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such
Registrable Securities were registered under the 1933 Act pursuant to
Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the Seller will be liable hereunder in
any such case if and only to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such
Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of the Seller hereunder
shall be limited to the net proceeds actually received by the Seller
from the sale of Registrable Securities pursuant to such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to such indemnified party other than
under this Section 11.6(c) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 11.6(c),
except and only if and to the extent the indemnifying party is
prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume
and undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to
such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 11.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected, provided, however, that, if the
defendants in any such action include both the indemnified party and
the indemnifying party and the indemnifying party shall have reasonably
concluded that there may be reasonable defenses available to
indemnified party which are different from or additional to those
available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the
interests of the indemnifying party, the indemnified parties, as a
group, shall have the right to select one separate counsel, reasonably
satisfactory to the indemnified and indemnifying party, and to assume
such legal defenses and otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such separate counsel
and other expenses related to such participation to be reimbursed by
the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the 1933 Act in any case in which either
(i) a Seller, or any controlling person of a Seller, makes a claim for
indemnification pursuant to this Section 11.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section
11.6 provides for indemnification in such case, or (ii) contribution
under the 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which
indemnification is not provided under this Section 11.6; then, and in
each such case, the Company and the Seller will contribute to the
aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that the
Seller is responsible only for the portion represented by the
percentage that the public offering price of its securities offered by
the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however,
that, in any such case, (y) the Seller will not be required to
contribute any amount in excess of the public offering price of all
such securities sold by it pursuant to such registration statement; and
(z) no person or entity guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 0000 Xxx) will be entitled to
contribution from any person or entity who was not guilty of such
fraudulent misrepresentation and provided, further, however, that the
liability of the Seller hereunder shall be limited to the net proceeds
actually received by the Seller from the sale of Registrable Securities
pursuant to such registration statement..
11.7. Delivery of Unlegended Shares.
(a) Within four (4) business days (such third business day being the
"Unlegended Shares Delivery Date") after the business day on which the
Company has received (i) a notice that Conversion Shares, Warrant
Shares or any other Common Stock held by a Subscriber have been sold
pursuant to the Registration Statement or Rule 144 under the 1933 Act,
(ii) a representation that the prospectus delivery requirements, or the
requirements of Rule 144, as applicable and if required, have been
satisfied, and (iii) the original share certificates representing the
shares of Common Stock that have been sold, and (iv) in the case of
sales under Rule 144, customary representation letters of the
Subscriber and, if required, Subscriber's broker regarding compliance
with the requirements of Rule 144, the Company at its expense, (y)
shall deliver, and shall cause legal counsel selected by the Company to
deliver to its transfer agent (with copies to Subscriber) an
appropriate instruction and opinion of such counsel, directing the
delivery of shares of Common Stock without any legends including the
legend set forth in Section 3(a) above (the "Unlegended Shares"); and
(z) cause the transmission of the certificates representing the
Unlegended Shares together with a legended certificate representing the
balance of the submitted Shares certificate, if any, to the Subscriber
at the address specified in the notice of sale, via express courier, by
electronic transfer or otherwise on or before the Unlegended Shares
Delivery Date.
(b) In lieu of delivering physical certificates representing the
Unlegended Shares, upon request of Subscriber, so long as the
certificates therefor do not bear a legend and the Subscriber is not
obligated to return such certificate for the placement of a legend
thereon, the Company shall cause its transfer agent to electronically
transmit the Unlegended Shares by crediting the account of Subscriber's
prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission system, if such transfer agent participates
in such DWAC system. Such delivery must be made on or before the
Unlegended Shares Delivery Date.
(c) The Company understands that a delay in the delivery of the
Unlegended Shares pursuant to Section 11 hereof later than the
Unlegended Shares Delivery Date could result in economic loss to a
Subscriber. As compensation to a Subscriber for such loss, the Company
agrees to pay late payment fees (as liquidated damages and not as a
penalty) to the Subscriber for late delivery of Unlegended Shares in
the amount of $100 per business day after the Delivery Date for each
$10,000 of purchase price of the Unlegended Shares subject to the
delivery default. If during any 360 day period, the Company fails to
deliver Unlegended Shares as required by this Section 11.2 for an
aggregate of thirty days, then each Subscriber or assignee holding
Securities subject to such default may, at its option, require the
Company to redeem all or any portion of the Shares subject to such
default at a price per share equal to the greater of (i) 120%, or (ii)
a fraction in which the numerator is the highest closing price of the
Common Stock during the aforedescribed thirty day period and the
denominator of which is the lowest conversion price during such thirty
day period, multiplied by the price paid by Subscriber for such Common
Stock ("Unlegended Redemption Amount"). The Company shall pay any
payments incurred under this Section in immediately available funds
upon demand.
(d) In the event a Subscriber shall request delivery of Unlegended
Shares as described in Section 11.7 and the Company is required to
deliver such Unlegended Shares pursuant to Section 11.7, the Company
may not refuse to deliver Unlegended Shares based on any claim that
such Subscriber or any one associated or affiliated with such
Subscriber has been engaged in any violation of law, or for any other
reason, unless, an injunction or temporary restraining order from a
court, on notice, restraining and or enjoining delivery of such
Unlegended Shares shall have been sought and obtained by the Company
and the Company has posted a surety bond for the benefit of such
Subscriber in the amount of 120% of the amount of the aggregate
purchase price of the Common Stock which are subject to the injunction
or temporary restraining order, which bond shall remain in effect until
the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Subscriber to the extent
Subscriber obtains judgment in Subscriber's favor.
(e) In addition to any other rights available to Subscriber, if the
Company fails to deliver to a Subscriber Unlegended Shares as required
pursuant to this Agreement and after the Unlegended Shares Delivery
Date, the Subscriber or a broker on the Subscriber's behalf, purchases
(in an open market transaction or otherwise) shares of common stock to
deliver in satisfaction of a sale by such Subscriber of the shares of
Common Stock which the Subscriber was entitled to receive from the
Company (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase
price (including brokerage commissions, if any) for the shares of
common stock so purchased exceeds (B) the aggregate purchase price of
the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together with interest thereon at a rate of 15% per
annum accruing until such amount and any accrued interest thereon is
paid in full (which amount shall be paid as liquidated damages and not
as a penalty). For example, if a Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to $10,000 of purchase price of shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, the
Company shall be required to pay the Subscriber $1,000, plus interest.
The Subscriber shall provide the Company written notice indicating the
amounts payable to the Subscriber in respect of the Buy-In.
11.8. Commencing six months after the Closing Date and ending thirty-
six months thereafter, in the event the Subscriber is not permitted to
resell any of the Conversion Shares or Warrant Shares without any
restrictive legend or if such sales are permitted but subject to volume
limitations or further restrictions on resale as a result of the
unavailability to non-affiliate Subscribers of Rule 144(b)(1)(i) under
the 1933 Act or any successor rule (a "144 Default"), for any reason
including but not limited to failure by the Company to file quarterly,
annual or any other filings by the required filing dates, except for
Subscriber's status as an Affiliate or "control person" of the Company,
or as a result of a change in current applicable securities laws, then
the Company shall pay such Subscriber as liquidated damages and not as
a penalty an amount equal to two percent (2%) for each thirty days (or
such lesser pro-rata amount for any period less than thirty days),
thereafter of the purchase price of the Conversion Shares and Shares by
the Subscriber during the pendency of the 144 Default. Liquidated
Damages shall not be payable pursuant to this Section 11.8 in
connection with Conversion Shares and Warrant Shares for such times as
such Conversion Shares and Warrant Shares may be sold by the holder
thereof without volume or other restrictions pursuant to Section
144(b)(1)(i) of the 1933 Act or pursuant to an effective registration
statement.
12. (a) Right of First Refusal. Until the Notes are no longer
outstanding, the Subscribers shall be given not less than ten business
days prior written notice of any proposed sale by the Company of its
common stock or other securities or equity linked debt obligations,
except in connection with (i) full or partial consideration in
connection with a strategic merger, acquisition, consolidation or
purchase of substantially all of the securities or assets of
corporation or other entity which holders of such securities or debt
are not at any time granted registration rights, (ii) the Company's
issuance of securities in connection with strategic license agreements
and other partnering arrangements so long as such issuances are not for
the purpose of raising capital and which holders of such securities or
debt are not at any time granted registration rights, (iii) the
Company's issuance of Common Stock or the issuances or grants of
options to purchase Common Stock to employees, directors, and
consultants, pursuant to plans described on Schedule 5(d) as such plans
are constituted on the Closing Date, (iv) securities upon the exercise
or exchange of or conversion of any securities exercisable or
exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement and described on Schedule
5(d), and (v) as a result of the exercise of Warrants or conversion of
Notes which are granted or issued pursuant to this Agreement
(collectively the foregoing are "Excepted Issuances"). The Subscribers
who exercise their rights pursuant to this Section 12(a) shall have the
right during the ten business days following receipt of the notice to
purchase in the aggregate such offered common stock, debt or other
securities in accordance with the terms and conditions set forth in the
notice of sale in the same proportion to each other as their purchase
of Notes in the Offering. In the event such terms and conditions are
modified during the notice period, the Subscribers shall be given
prompt notice of such modification and shall have the right during the
ten business days following the notice of modification to exercise such
right.
(b) Favored Nations Provision. Other than in connection with Excepted
Issuances, if at any time the Subscriber owns any Common Stock from the
conversion of the Notes or exercise of the Warrants, the Company shall
agree to or issue (the "Lower Price Issuance") any Common Stock or
securities convertible into or exercisable for shares of Common Stock
(or modify any of the foregoing which may be outstanding) to any person
or entity at a price per share or conversion or exercise price per
share which shall be less than the Conversion Price in effect at such
time, or if less than any Warrant exercise price in effect at such
time, without the consent of the Subscriber, then the Company shall
issue, for each such occasion, additional shares of Common Stock to the
Subscriber respecting those Conversion Shares and Warrants Shares that
are then still owned by the Subscriber at the time of the Lower Price
Issuance so that the average per share purchase price of the Shares or
Warrant Shares purchased and owned by the Subscriber on the date of the
Lower Price Issuance is equal to such other lower price per share.
Other than in connection with Excepted Issuances, if at any time the
Notes or Warrants are outstanding, if the Company shall agree to a
Lower Price Issuance, then the Conversion Price and any Warrant
exercise price shall automatically be reduced to such other lower
price. The average Purchase Price of the Conversion Shares and average
exercise price in relation to the Warrant Shares shall be calculated
separately for the Shares and Warrant Shares. The delivery to
Subscriber of the additional shares of Common Stock shall be not later
than the closing date of the transaction giving rise to the requirement
to issue additional shares of Common Stock. Subscriber is granted the
registration rights described in Section 11 hereof in connection with
such additional shares of Common Stock. For purposes of the issuance
and adjustment described in this paragraph, the issuance of any
security of the Company carrying the right to convert such security
into shares of Common Stock or of any warrant, right or option to
purchase Common Stock shall result in the issuance of the additional
shares of Common Stock upon the sooner of the agreement to or actual
issuance of such convertible security, warrant, right or option and
again at any time upon any subsequent issuances of shares of Common
Stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the Conversion Price or any Warrant
exercise price in effect upon such issuance. Common Stock issued or
issuable by the Company for no consideration or for consideration that
cannot be determined at the time of issue will be deemed issuable or to
have been issued for $0.001 per share of Common Stock. The rights of
Subscriber set forth in this Section 12 are in addition to any other
rights the Subscriber has pursuant to this Agreement, the Note, any
Transaction Document, and any other agreement referred to or entered
into in connection herewith or to which Subscriber and Company are
parties.
(c) Maximum Exercise of Rights. In the event the exercise of the
rights described in Sections 12(a) and 12(b) would or could result in
the issuance of an amount of Common Stock of the Company that would
exceed the maximum amount that may be issued to Subscribers calculated
in the manner described in Section 7.3 of this Agreement, then the
issuance of such additional shares of Common Stock of the Company to
Subscriber will be deferred in whole or in part until such time as such
Subscriber is able to beneficially own such Common Stock without
exceeding the applicable maximum amount set forth calculated in the
manner described in Section 7.3 of this Agreement and notifies the
Company accordingly.
13. Miscellaneous.
(a) Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air
courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram, or facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently by
written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand
delivery or delivery by facsimile, with accurate confirmation generated
by the transmitting facsimile machine, at the address or number
designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or
(b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company, to:
AirtimeDSL
Attn: Xxxxxx X. Xxxxxx, CEO
0000 X. Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
facsimile: (000)000-0000
With a copy by fax only to (which copy shall not constitute notice):
Tag Industries, Inc.
000 XX 0xx Xxxxxx #000
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, CEO
Facsimile: (000) 000-0000
With a copy by fax only to (which copy shall not constitute notice):
Xxxxxx & Xxxxxx LLP
Attn: Xxxxxx X. Xxxxxxx, Esq.
000 Xxxxx 0 Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
facsimile: (000) 000-0000
If to the Subscribers:
To each of the addresses and facsimile numbers listed on the signature
pages of this Agreement
With a copy by fax only to (which copy shall not constitute notice):
Grushko & Xxxxxxx, P.C.
Attn: Xx Xxxxxxx, Esq.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
facsimile: (000) 000-0000
(b) Entire Agreement; Assignment. This Agreement and other documents
delivered in connection herewith represent the entire agreement between
the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties. Neither the
Company nor the Subscriber has relied on any representations not
contained or referred to in this Agreement and the documents delivered
herewith. No right or obligation of the Company shall be assigned
without prior notice to and the written consent of the Subscribers.
(c) Counterparts/Execution. This Agreement may be executed in any
number of counterparts and by the different signatories hereto on
separate counterparts, each of which, when so executed, shall be deemed
an original, but all such counterparts shall constitute but one and the
same instrument. This Agreement may be executed by facsimile
transmission, PDF, electronic signature or other similar electronic
means with the same force and effect as if such signature page were an
original therof.
(d) 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 and
county of New York. The parties to this Agreement hereby irrevocably
waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. The parties
executing this Agreement and other agreements referred to herein or
delivered in connection herewith on behalf of the Company agree to
submit to the in personam jurisdiction of such courts and hereby
irrevocably 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. Each party
hereby irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding in connection
with this Agreement or any other Transaction Document by mailing a copy
thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by law.
(e) Specific Enforcement, Consent to Jurisdiction. The Company and
Subscribers 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 seek an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity. Subject to Section 13(d)
hereof, the Company hereby irrevocably waives, and agrees not to assert
in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction in New York of such court, that
the suit, action or proceeding is brought in an inconvenient forum or
that the venue of the suit, action or proceeding is improper. Nothing
in this Section shall affect or limit any right to serve process in any
other manner permitted by law.
(f) Damages. In the event the Subscriber is entitled to receive any
liquidated damages pursuant to the Transactions Documents, the
Subscriber may elect to receive the greater of actual damages or such
liquidated damages.
(g) Maximum Payments. 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.
(h) Calendar Days. All references to "days" in the Transaction
Documents shall mean calendar days unless otherwise stated. The terms
"business days" and "trading days" shall mean days that the New York
Stock Exchange is open for trading for three or more hours. Time
periods shall be determined as if the relevant action, calculation or
time period were occurring in New York City. Any deadline that falls
on a non-business day in any of the Transaction Documents shall be
automatically extended to the next business day and interest, if any,
shall be calculated and payable through such extended period.
(i) Captions: Certain Definitions. The captions of the various
sections and paragraphs of this Agreement have been inserted only for
the purposes of convenience; such captions are not a part of this
Agreement and shall not be deemed in any manner to modify, explain,
enlarge or restrict any of the provisions of this Agreement. As used
in this Agreement the term "person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.
(j) Severability. In the event that any term or provision of this
Agreement shall be finally determined to be superseded, invalid,
illegal or otherwise unenforceable pursuant to applicable law by an
authority having jurisdiction and venue, that determination shall not
impair or otherwise affect the validity, legality or enforceability:
(i) by or before that authority of the remaining terms and provisions
of this Agreement, which shall be enforced as if the unenforceable term
or provision were deleted, or (ii) by or before any other authority of
any of the terms and provisions of this Agreement.
(k) Successor Laws. References in the Transaction Documents to laws,
rules, regulations and forms shall also include successors to and
functionally equivalent replacements of such laws, rules, regulations
and forms. A successor rule to Rule 144(b)(1)(i) shall include any
rule that would be available to a non-Affiliate of the Company for the
sale of Common Stock not subject to volume restrictions and after a six
month holding period.
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
----------------------------------------
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon
it shall become a binding agreement between us.
AIRTIMEDSL
a Nevada corporation
By:_________________________________
Name:
Title:
Dated: March ___, 2008
SUBSCRIBER PURCHASE PRICE NOTE PRINCIPAL
------------------------------------ ----------------- --------------
WHALEHAVEN CAPITAL FUND LIMITED $400,000 $480,000
000 Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx, X.X. 00000
Fax: (000) 000-0000
___________________________________________
By:
Title:
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibit A Form of Note
Exhibit B Form of Class A Warrant
Exhibit C Form of Class B Warrant
Exhibit D Form of Legal Opinion
Exhibit E Escrow Agreement
Exhibit F Form of Lockup Agreement
Schedule 5(a) Subsidiaries
Schedule 5(d) Additional Issuances / Capitalization
Schedule 5(n) Undisclosed Liabilities
Schedule 5(p) Financial Institutions
Schedule 5(w) Transfer Agent
Schedule 9(e) Use of Proceeds
Schedule 9(l) Intellectual Property
Schedule 9(w) Lockup Agreement Providers
EXHIBIT F
LOCKUP AGREEMENT
This AGREEMENT (the "Agreement") is made as of the ____ day of March,
2009, by ____________ ("Holder"), maintaining an address at c/o Airtime
DSL, 0000 X. Xxxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000,
facsimile: ____ ________, in connection with his ownership of shares of
Airtime DSL, a Nevada corporation (the "Company").
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which consideration are hereby acknowledged, Holder
agrees as follows:
1. Background.
a. Holder is the beneficial owner of the amount of shares of the Common
Stock, $.001 par value, of the Company ("Common Stock") designated on
the signature page hereto.
x. Xxxxxx acknowledges that the Company has entered into or will enter
into at or about the date hereof agreements with subscribers to the
Company's Note, convertible into Common Stock and Warrants (the
"Subscriber"). Holder understands that, as a condition to proceeding
with the Offering, the Subscriber have required, and the Company has
agreed to obtain on behalf of the Subscriber an agreement from the
Holder to refrain from selling any securities of the Company from the
date of the Subscription Agreement until eighteen months after the
Closing Date (as defined in the Subscription Agreement).
2. Sale Restriction.
a. Holder hereby agrees that during the Restriction Period, the Holder
will not sell, transfer or otherwise dispose of any shares of Common
Stock or any options, warrants or other rights to purchase shares of
Common Stock or any other security of the Company which Holder owns or
has a right to acquire as of the date hereof, other than in connection
with an offer made to all shareholders of the Company in connection
with merger, consolidation or similar transaction involving the
Company. Holder further agrees that the Company is authorized to and
the Company agrees to place "stop orders" on its books to prevent any
transfer of shares of Common Stock or other securities of the Company
held by Holder in violation of this Agreement. The Company agrees not
to allow to occur any transaction inconsistent with this Agreement.
b. Any subsequent issuance to and/or acquisition by Holder of Common
Stock or options or instruments convertible into Common Stock will be
subject to the provisions of this Agreement.
c. Notwithstanding the foregoing restrictions on transfer, the Holder
may, at any time and from time to time during the Restriction Period,
transfer the Common Stock (i) as bona fide gifts or transfers by will
or intestacy, (ii) to any trust for the direct or indirect benefit of
the undersigned or the immediate family of the Holder, provided that
any such transfer shall not involve a disposition for value, (iii) to a
partnership which is the general partner of a partnership of which the
Holder is a general partner, provided, that, in the case of any gift or
transfer described in clauses (i), (ii) or (iii), each donee or
transferee agrees in writing to be bound by the terms and conditions
contained herein in the same manner as such terms and conditions apply
to the undersigned. For purposes hereof, "immediate family" means any
relationship by blood, marriage or adoption, not more remote than first
cousin.
3. Miscellaneous.
a. At any time, and from time to time, after the signing of this
Agreement Holder will execute such additional instruments and take such
action as may be reasonably requested by the Subscriber to carry out
the intent and purposes of this Agreement.
b. 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. The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of any
action instituted hereunder and shall not assert any defense based on
lack of jurisdiction or venue or based upon forum non conveniens. The
parties executing this Agreement and other agreements referred to
herein or delivered in connection herewith agree to submit to the in
personam jurisdiction of such courts and hereby irrevocably 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. Notices hereunder shall be given in the same manner as set
forth in the Subscription Agreement. Each party hereby irrevocably
waives personal service of process and consents to process being served
in any suit, action or proceeding in connection with this Agreement or
any other Transaction Document by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law. Holder irrevocably appoints the
Company its true and lawful agent for service of process upon whom all
processes of law and notices may be served and given in the manner
described above; and such service and notice shall be deemed valid
personal service and notice upon Holder with the same force and
validity as if served upon Holder.
c. The restrictions on transfer described in this Agreement are in
addition to and cumulative with any other restrictions on transfer
otherwise agreed to by the Holder or to which the Holder is subject to
by applicable law.
d. This Agreement shall be binding upon Holder, its legal
representatives, successors and assigns.
e. This Agreement may be signed and delivered by facsimile signature
and delivered electronically.
f. The Company agrees not to take any action or allow any act to be
taken which would be inconsistent with this Agreement.
g. The Holder acknowledges that this Lockup Agreement is being entered
into for the benefit of the Subscriber identified in the Subscription
Agreement dated March ____, 2009 among the Company and the Subscriber,
may be enforced by the Subscriber and may not be amended without the
consent of the Subscriber, which may be withheld for any reason.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Holder
has executed this Agreement as of the day and year first above written.
HOLDER:
________________________________
(Signature of Holder)
________________________________
(Print Name of Holder)
________________________________
Number of Shares of Common Stock
Beneficially Owned
COMPANY:
AIRTIME DSL
By:______________________________
