EXHIBIT 4.21
SUBSCRIPTION AGREEMENT
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The Subscriber hereby agrees to purchase, and USA Technologies, Inc.,
a Pennsylvania corporation (the "Company") hereby agrees to issue and to
sell to the Subscriber, shares of the Company's no par value common stock
(the "Company Shares") and common stock purchase warrants representing the
right to purchase one share per warrant of the Company's no par value
common stock ("Warrants") for the aggregate consideration of $150,000
("Purchase Price"). The amount of Company Shares to be sold by the Company
and purchased by the Subscriber shall be 1,500,000 Company Shares. The form
of Warrant is annexed hereto as Exhibit A. The Company Shares included in
the Securities (as hereinafter defined) are sometimes referred to herein as
the "Shares", "Common Shares" or "Common Stock". The Company Shares,
Warrants, and the Common Stock issuable upon exercise of the Warrants
("Warrant Shares") are collectively referred to herein as, the
"Securities". Subject to the terms and conditions hereof and upon
acceptance of this agreement by the Subscriber, at the Closing Date, as
defined in Section 10(b), the Company shall issue, sell and deliver the
Company Shares and Warrants against payment, by Subscriber of the Purchase
Price, by a federal funds wire transfer of immediately available funds.
The Company will also issue and deliver to the Subscriber on the
Closing Date 750,000 Warrants. The per share "Purchase Price" of the Common
Stock (as defined in the Warrant) shall be equal to the closing price of
the Company's common stock for the trading day immediately preceding the
Closing Date. The Warrants shall be exercisable for five years after the
Issue Date (as defined in the Warrant).
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber hereby
represents and warrants to and agrees with the Company that:
(a) Information on Company.
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The Subscriber has been furnished or has obtained from the ▇▇▇▇▇
Website of the Securities and Exchange Commission (the "Commission") the
Company's Form 10-KSB for the year ended June 30, 2002 as filed with the
Commission on October 15, 2002, together with all subsequently filed Forms
10-Q, 8-K, and filings made with the Commission available at the ▇▇▇▇▇
website (hereinafter referred to collectively as the "Reports"). In
addition, the Subscriber has received from the Company such other
information concerning its operations, financial condition and other
matters as the Subscriber has requested in writing (such information in
writing is collectively, the "Other Written Information"), and considered
all factors the Subscriber deems material in deciding on the advisability
of investing in the Securities.
(b) Information on Subscriber.
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The Subscriber is an "accredited investor", as such term is defined in
Regulation D promulgated by the Commission under the Securities Act of
1933, as amended (the "1933 Act"), because Subscriber is a corporation with
total assets in excess of $5,000,000 and not formed for the specific
purpose of acquiring the Securities, is experienced in investments and
business matters, has made investments of a speculative nature and has
purchased securities of United States publicly-owned companies in private
placements in the past and, with its representatives, has such knowledge
and experience in financial, tax and other business matters as to enable
the Subscriber to utilize the information made available by the Company to
evaluate the merits and risks of and to make an informed investment
decision with respect to the proposed purchase, which represents a
speculative investment. The Subscriber has the authority and is duly and
legally qualified to purchase and own the Securities. The Subscriber is
able to bear the risk of such investment for an indefinite period and to
afford a complete loss thereof. The information set forth on the signature
page hereto regarding the Subscriber is accurate. Subscriber is a
corporation duly organized, validly existing and in good standing under the
laws of ▇▇▇▇▇▇▇▇▇▇▇▇.
4
(c) Purchase of Company Shares and Warrants.
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On the Closing Date, the Subscriber will purchase the Company Shares
and Warrants for its own account and not with a view to any distribution
thereof.
(d) Compliance with Securities Act.
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The Subscriber understands and agrees that the Securities have not
been registered under the 1933 Act, 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 Subscriber
contained herein), and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or is
exempt from such registration. In any event and subject to compliance with
applicable securities laws, at any time following the earlier of the actual
effective date of a registration statement described in Section 8 of this
Agreement or one hundred and twenty days after the Closing Date, the
Subscriber may enter into hedging transactions with third parties, which
may in turn engage in short sales of the Securities in the course of
hedging the position they assume and the Subscriber may also enter into
short positions or other derivative transactions relating to the
Securities, or interests in the Securities, and deliver the Securities, or
interests in the Securities, to close out their short or other positions or
otherwise settle short sales or other transactions, or loan or pledge the
Securities, or interests in the Securities, to third parties that in turn
may dispose of these Securities.
(e) Company Shares Legend.
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The Company Shares, and the Warrant Shares, shall bear the following
or similar legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO USA TECHNOLOGIES, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED."
(f) Warrants Legend.
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The Warrants shall bear the following or similar legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO USA
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(g) Communication of Offer. The offer to sell the Securities was
directly communicated to the Subscriber by the Company. At no time was the
Subscriber presented with or solicited by any leaflet, newspaper or
magazine article, radio or television advertisement, or any other form of
general advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such communicated offer.
(h) Correctness of Representations. The Subscriber represents that the
foregoing representations and warranties are true and correct as of the
date hereof and, unless the Subscriber otherwise notifies the Company prior
to the Closing Date (as hereinafter defined), shall be true and correct as
of the Closing Date. The foregoing representations and warranties shall
survive the Closing Date for a period of three years.
2. Company Representations and Warranties.
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The Company represents and warrants to and agrees with the Subscriber that:
(a) Due Incorporation.
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The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
respective jurisdictions of their incorporation and have the requisite
corporate power to own their properties and to carry on their business as
now being conducted. The Company and each of its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing
in each jurisdiction where the nature of the business conducted or property
owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or financial condition of the
Company.
(b) Outstanding Stock.
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All issued and outstanding shares of capital stock of the Company and
each of its subsidiaries has been duly authorized and validly issued and
are fully paid and non-assessable.
(c) Authority; Enforceability.
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This Agreement, the Warrant and other agreements delivered together
with this Agreement or in connection herewith have been duly authorized,
executed and delivered by the Company and are valid and binding agreements
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity; and the Company has full
corporate power and authority necessary to enter into this Agreement,
Warrant and such other agreements and to perform its obligations hereunder
and under all other agreements entered into by the Company relating hereto.
(d) Additional Issuances.
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There are no outstanding agreements or preemptive or similar rights
affecting the Company's common stock or equity and no outstanding rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for, or agreements or understandings with respect to the sale
or issuance of any shares of common stock or equity of the Company or other
equity interest in any of the subsidiaries of the Company except as
described in Schedule 2(d).
(e) Consents.
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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 American Stock Exchange ("Amex"),
the National Association of Securities Dealers, Inc. ("NASD"), Nasdaq, the
OTC Bulletin Board ("Bulletin Board") or the Company's Shareholders is
required for execution of this Agreement, and all other agreements entered
into by the Company relating thereto, including, without limitation, the
issuance and sale of the Securities, and the performance of the Company's
obligations hereunder and under all such other agreements.
(f) No Violation or Conflict.
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Assuming the representations and warranties of the Subscriber in
Section 1 are true and correct and the Subscriber complies with its
obligations under this Agreement, neither the issuance and sale of the
Securities nor the performance of 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 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 any of its affiliates or over the properties or assets of the
Company or any of its affiliates, (C) the terms of any bond, debenture,
note or any other evidence of indebtedness, or any agreement, stock option
or other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its affiliates is a party, by
which the Company or any of its affiliates is bound, or to which any of the
properties of the Company or any of its affiliates is subject, or (D) the
terms of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its affiliates is a party except
the violation, conflict, breach, or default of which would not have a
material adverse effect on the Company; 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, its
subsidiaries or any of its affiliates.
(g) The Securities. The Securities upon issuance:
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(i) are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer under
the 1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and on the
date of issuance and on the Closing Date, and the Warrants are exercised,
the Securities will be duly and validly issued, fully paid and
nonassessable (and if registered pursuant to the 1933 Act, and resold
pursuant to an effective registration statement will be free trading and
unrestricted, provided that the Subscriber complies with the Prospectus
delivery requirements);
(iii) will not have been issued or sold in violation of any preemptive
or other similar rights of the holders of any securities of the Company;
and
(iv) will not subject the holders thereof to personal liability by
reason of being such holders.
(h) Litigation.
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There is no pending or, to the best knowledge of the Company,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the
Company, or any of its affiliates that would affect the execution by the
Company or the performance by the Company of its obligations under this
Agreement, and all other agreements entered into by the Company relating
hereto. Except as disclosed in the Reports or Other Written Information,
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 which litigation if adversely determined could have a
material adverse effect on the Company.
(i) Reporting Company.
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The Company is a publicly-held company subject to reporting
obligations pursuant to Sections 15(d) and 13 of the Securities Exchange
Act of 1934, as amended (the "1934 Act") and has a class of common shares
registered pursuant to Section 12(g) of the 1934 Act. The Company's common
stock is listed for trading on the Bulletin Board. Pursuant to the
provisions of the 1934 Act, the Company has filed all reports and other
materials required to be filed thereunder with the Securities and Exchange
Commission during the preceding twelve months.
(j) No Market Manipulation.
----------------------
The Company has not taken, and will not take, directly or indirectly,
any action designed to, or that might reasonably be expected to, cause or
result in stabilization or manipulation of the price of the common stock of
the Company to facilitate the sale or resale of the Securities or affect
the price at which the Securities may be issued or resold.
(k) Information Concerning Company.
--------------------------------
The Reports contain all material information relating to the Company
and its operations and financial condition as of their respective dates
which information is required to be disclosed therein. Since the date of
the financial statements included in the Reports, and except as modified in
the Other Written Information or in the Schedule hereto, there has been no
material adverse change in the Company's business, financial condition or
affairs not disclosed in the Reports. The Reports do not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made.
(l) Stop Transfer.
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The Securities are restricted securities as of the date of this
Agreement. The Company will not issue any stop transfer order or other
order impeding the sale, resale or delivery of the Securities, except as
may be required by federal securities laws.
(m) Defaults.
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The Company is not in violation of its Articles of Incorporation or
ByLaws. The Company is (i) not in default under or in violation of any
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 on the Company, (ii) not in
default with respect to any order of any court, arbitrator or governmental
body or subject to or party to any order of any court or governmental
authority arising out of any action, suit or proceeding under any statute
or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) to its knowledge in violation of
any statute, rule or regulation of any governmental authority which
violation would have a material adverse effect on the Company.
(n) No Integrated Offering.
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Neither the Company, nor any of its affiliates, nor any person acting
on its or their behalf, has directly or indirectly made any offers or sales
of any security or solicited any offers to buy any security under
circumstances that would cause the offer of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of the
Bulletin Board, nor will the Company or any of its affiliates or
subsidiaries take any action or steps that would cause the offer of the
Securities to be integrated with other offerings. The Company will not
conduct any offering other than the transactions contemplated hereby that
will be integrated with the offer or issuance of the Securities.
(o) No General Solicitation.
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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 ▇▇▇▇ ▇▇▇) in connection with the offer or sale of
the Securities.
(p) Listing.
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The Company's common stock is quoted on, and listed for trading on the
Bulletin Board. The Company has not received any oral or written notice
that its Common Stock will be delisted from the Bulletin Board nor that its
common stock does not meet all requirements for the continuation of such
listing. The Company satisfies the requirements for the continued listing
of the Common Stock on the Bulletin Board.
(q) No Undisclosed Liabilities.
---------------------------
The Company has no liabilities or obligations which are material,
individually or in the aggregate, which are not disclosed in the Reports
and Other Written Information, other than those incurred in the ordinary
course of the Company's businesses since June 30, 2002 and which,
individually or in the aggregate, would reasonably be expected to have a
material adverse effect on the Company's financial condition, other than as
set forth in Schedule 2(q).
(r) No Undisclosed Events or Circumstances.
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Since June 30, 2002, no event or circumstance has occurred or exists
with respect to the Company or its businesses, properties, operations or
financial condition, that, under applicable law, rule or regulation,
requires public disclosure or announcement prior to the date hereof by the
Company but which has not been so publicly announced or disclosed in the
Reports.
(s) Capitalization.
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The authorized and outstanding capital stock of the Company as of the
date of this Agreement and the Closing Date are set forth on Schedule 2(s).
Except as set forth in the Reports and Other Written Information and
Schedule 2(s), there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or
giving any right to subscribe for any shares of capital stock of the
Company. All of the outstanding shares of Common Stock of the Company have
been duly and validly authorized and issued and are fully paid and
nonassessable.
(t) Dilution.
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The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize
that they have a potential dilutive effect on the interests of other
holders of the Company's securities. The board of directors of the Company
has concluded, in its good faith business judgment, that such issuance is
in the best interests of the Company.
(u) 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, will be true and correct as of the Closing Date in all material
respects, and, unless the Company otherwise notifies the Subscriber prior
to the Closing Date, shall be true and correct in all material respects as
of the Closing Date. The foregoing representations and warranties shall
survive the Closing Date for a period of three years.
3. Regulation D Offering. This Offering is being made pursuant to the
exemption from the registration provisions of the Securities Act of 1933,
as amended, afforded by Rule 506 of Regulation D promulgated thereunder. On
the Closing Date, the Company will provide an opinion reasonably acceptable
to Subscriber from the Company's legal counsel opining on the availability
of the Regulation D exemption as it relates to the offer and issuance of
the Securities. A form of the legal opinion is annexed hereto as Exhibit B.
The Company will provide, at the Company's expense, such other legal
opinions in the future as are reasonably necessary for the exercise of the
Warrants.
4. Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Sections 1(e) and 1(f) above at such time as (a) the holder thereof is
permitted to and disposes of such Securities pursuant to Rule 144(d) and/or
Rule 144(k) under the 1933 Act in the opinion of counsel reasonably
satisfactory to the Company, or (b) upon resale subject to an effective
registration statement after the Securities are registered under the ▇▇▇▇
▇▇▇. The Company agrees to cooperate with the Subscriber in connection with
all resales pursuant to Rule 144(d) and Rule 144(k) and provide legal
opinions at the Company's expense necessary to allow such resales provided
the Company and its counsel receive reasonably requested written
representations from the Subscriber and selling broker, if any. Provided
the Subscriber provides required certifications and representation letters,
if any, if the Company fails to remove any legend as required by this
Section 4 (a "Legend Removal Failure"), then beginning on the tenth (10th)
day following the date that the Subscriber has requested the removal of the
legend and delivered all items reasonably required by the Company to be
delivered by the Subscriber, that the Company continues to fail to remove
such legend, the Company shall pay to each Subscriber or assignee holding
shares, subject to a Legend Removal Failure, as liquidated damages and not
a penalty an amount equal to ten percent (10%) of the Purchase Price of the
shares subject to a Legend Removal Failure for each 15-day period or part
thereof that such failure continues. If during any twelve (12) month
period, the Company fails to remove any legend as required by this Section
4 for an aggregate of thirty (30) days, each Subscriber or assignee holding
Securities subject to a Legend Removal Failure may, at its option, require
the Company to purchase all or any portion of the Securities subject to a
Legend Removal Failure held by such Subscriber or assignee at a price per
share equal to 130% of the applicable Purchase Price.
5. Finder's Fee/Legal Fee.
(a) Legal Fee.
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The Company shall pay to Grushko & ▇▇▇▇▇▇▇, P.C., counsel to the
Subscriber a fee of $15,000 ("Legal Fees") (of which $3,000 has previously
been paid) as reimbursement for services rendered to Subscriber in
connection with this Agreement and the purchase and sale of the Company
Shares and Warrants for the aggregate Purchase Price of $150,000 (the
"Offering") and acting as escrow agent for the Offering. The Legal Fees
will be payable out of funds held pursuant to a funds escrow agreement
("Escrow Agreement") to be entered into by the Company, Subscriber and
Escrow Agent in connection with the Offering.
(b) Finder.
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The Company on the one hand, and the Subscriber on the other hand,
agree to indemnify the other against and hold the other harmless from any
and all liabilities to any persons claiming brokerage commissions or
finder's fees other than Libra Finance, S.A. ("Finder") on account of
services purported to have been rendered on behalf of the indemnifying
party in connection with this Agreement or the transactions contemplated
hereby and arising out of such party's actions. The Company agrees that it
will pay the Finder a cash fee equal to 10% of the Purchase Price and
Second Closing Purchase Price (as defined in Section 9.1 of this Agreement)
on the Closing Date and Second Closing Date (as defined in Section 9.1 of
this Agreement) directly out of the funds held pursuant to the Escrow
Agreement or other escrow agreement to be entered into in connection with
the Second Closing. The Company represents that there are no other parties
entitled to receive fees, commissions, or similar payments in connection
with the offering described in this Agreement except the Finder.
6. Covenants of the Company.
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The Company covenants and agrees with the Subscriber as follows:
(a) Stop Orders.
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The Company will advise the Subscriber, promptly after it receives
notice of issuance by the Securities and Exchange Commission, any state
securities commission or any other regulatory authority of any stop order
or of any order preventing or suspending any offering of any securities of
the Company, or of the suspension of the qualification of the Common Stock
of the Company for offering or sale in any jurisdiction, or the initiation
of any proceeding for any such purpose.
(b) Listing.
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The Company shall promptly secure the listing of the Company Shares,
and Common Stock issuable upon the exercise of the Warrants upon each
national securities exchange, or automated quotation system, if any, upon
which shares of common stock are then listed (subject to official notice of
issuance) and shall maintain such listing so long as any Securities are
outstanding. The Company will maintain the listing of its Common Stock on
the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market
System, NASD OTC Bulletin Board (or any successor entity or the proposed
"Bulletin Board Exchange"), 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 Bulletin Board and such exchanges, as applicable. The
Company will provide the Subscriber copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common
Stock from any Principal Market.
(c) Market Regulations.
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The Company shall notify the Commission, the Bulletin Board, the
Principal Market and applicable state authorities, in accordance with their
requirements, if any, of the transactions contemplated by this Agreement,
and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Securities to the Subscriber and promptly
provide copies thereof to Subscriber.
(d) Reporting Requirements.
-----------------------
From the Closing Date and until at least two (2) years after the
actual effective date of the Registration Statement on Form SB-2 or such
other Registration Statement described in Section 8.1(iv) hereof, the
Company will (i) cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, (ii) comply in all respects
with its reporting and filing obligations under the Exchange Act, (iii)
comply with all reporting requirements that are applicable to an issuer
with a class of Shares registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, as applicable, and (iv) 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 Act or the Exchange 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
later of two (2) years after the actual effective date of the Registration
Statement on Form SB-2 or such other Registration Statement described in
Section 8.1(iv) hereof. Until the earlier of the resale of the Company
Shares by the Subscriber or at least two (2) years after the Warrants have
been exercised, the Company will use its best efforts to continue the
listing of the Common Stock on the Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations under
the bylaws or rules of Principal Market.
(e) Use of Proceeds.
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The Purchase Price will be used by the Company for general working
capital, and may not and will not be used for accrued and unpaid officer
and director salaries, future officer and director salaries, payment of
financing related debt, redemption of outstanding redeemable notes or
equity instruments of the Company nor non-trade obligations outstanding on
the Closing Date.
(f) Reservation of Common Stock.
----------------------------
The Company undertakes to reserve from its authorized but unissued
common stock, at all times that Warrants remain outstanding, a number of
common shares equal to the amount of common shares issuable upon exercise
of the Warrants.
(g) Taxes.
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For a period of two years after the date hereof, the Company will
promptly pay and discharge, or cause to be paid and discharged, when due
and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the
Company; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in
good faith by appropriate proceedings and if the Company shall have set
aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.
(h) Insurance.
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For a period of two years after the date hereof, the Company will keep
its assets which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other
risks customarily insured against by companies in the Company's line of
business, in amounts sufficient to prevent the Company from becoming a
co-insurer and not in any event less than 100% of the insurable value of
the property insured; and the Company will maintain, with financially sound
and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary
for companies in similar businesses similarly situated and to the extent
available on commercially reasonable terms.
(i) Books and Records.
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For a period of two years after the date hereof, the Company will keep
true records and books of account in which full, true and correct entries
will be made of all dealings or transactions in relation to its business
and affairs in accordance with generally accepted accounting principles
applied on a consistent basis.
j) Governmental Authorities.
-------------------------
For a period of two years after the date hereof, the Company shall
duly observe and conform in all material respects to all valid requirements
of governmental authorities relating to the conduct of its business or to
its properties or assets.
(k) Intellectual Property.
----------------------
For a period of two years after the date hereof, the Company shall
maintain in full force and effect its corporate existence, rights and
franchises and all licenses and other rights to use intellectual property
owned or possessed by it and reasonably deemed to be necessary to the
conduct of its business.
(l) Properties.
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For a period of two years after the date hereof, 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 needful and proper
repairs, renewals, replacements, additions and improvements thereto; and
the Company will at all times comply with each provision of all leases to
which it is a party or under which it occupies property if the breach of
such provision could reasonably be expected to have a material adverse
effect.
(m) Blackout.
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The Company undertakes and covenants that until the first to occur of
(i) the registration statement described in Section 8.1(iv) being effective
for one hundred and eighty (180) business days, (ii) until all the Company
Shares have been resold pursuant to said registration statement, or (iii)
two years after the Closing Date, the Company will not enter into any
acquisition, merger, exchange or sale or other transaction that could have
the effect of delaying the effectiveness of any pending registration
statement, causing an already effective registration statement to no longer
be effective or current, or require the filing of an amendment to an
already effective registration statement.
(n) Confidentiality.
----------------
For a period of two years after the date hereof, the Company agrees
that it will not disclose publicly or privately the identity of the
Subscriber unless expressly agreed to in writing by the Subscriber or only
to the extent required by law.
7. Covenants of the Company and Subscriber Regarding Indemnification.
------------------------------------------------------------------
(a) The Company agrees to indemnify, hold harmless, reimburse and
defend Subscriber, Subscriber's officers, directors, agents, affiliates,
control persons, and principal shareholders, against any claim, cost,
expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon Subscriber or any such
person which results, arises out of or is based upon (i) any material
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice
and/or cure periods, any breach or default in performance by the Company of
any covenant or undertaking to be performed by the Company hereunder, or
any other agreement entered into by the Company and Subscriber relating
hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company and each of the Company's officers, directors, agents,
affiliates, control persons against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company or any such person which results,
arises out of or is based upon (i) any material misrepresentation by
Subscriber in this Agreement or in any Exhibits or Schedules attached
hereto, or other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance
by Subscriber of any covenant or undertaking to be performed by Subscriber
hereunder, or any other agreement entered into by the Company and
Subscribes relating hereto.
(c) The procedures set forth in Section 8.6 shall apply to the
indemnifications set forth in Sections 7(a) and 7(b) above.
8.1. Registration Rights.
--------------------
The Company hereby grants the following registration rights to holders
of the Securities.
(i) On one occasion, for a period commencing 121 days after the
Closing Date, but not later than three years after the Closing Date
("Request Date"), the Company, upon a written request therefor from any
record holder or holders of more than 50% of the Company Shares actually
issued hereunder (the Company Shares issued hereunder on the Closing Date,
the Second Closing Shares, and one share of common stock issued or issuable
upon exercise of the Warrants and Second Closing Warrants as if same were
issued on the Closing Date, collectively the "Registrable Securities"),
shall prepare and file with the Commission a registration statement under
the 1933 Act covering the Registrable Securities which are the subject of
such request, unless such Registrable Securities are the subject of an
effective registration statement or included for registration in a pending
registration statement. In addition, upon the receipt of such request, the
Company shall promptly give written notice to all other record holders of
the Registrable Securities that such registration statement is to be filed
and shall include in such registration statement Registrable Securities for
which it has received written requests within 10 days after the Company
gives such written notice. Such other requesting record holders shall be
deemed to have exercised their demand registration right under this Section
8.1(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 ▇-▇, ▇-▇ or another form not
available for registering the Registrable Securities for sale to the
public, provided the Registrable Securities are not otherwise registered
for resale by the Subscriber or Holder pursuant to an effective
registration statement, each such time it will give at least 15 days' prior
written notice to the record holder of the Registrable Securities of its
intention so to do. Upon the written request of the holder, received by the
Company within 10 days after the giving of any such notice by the Company,
to register any of the Registrable Securities, the Company will cause such
Registrable Securities as to which registration shall have been so
requested to be included with the securities to be covered by the
registration statement proposed to be filed by the Company, all to the
extent required to permit the sale or other disposition of the Registrable
Securities so registered by the holder of such Registrable Securities (the
"Seller"). In the event that any registration pursuant to this Section
8.1(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 8.4 hereof,
the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 8.1(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 8.1(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 8.1(ii) rather than
Section 8.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section 8.1(ii).
(iv) The Company shall file with the Commission prior to the Closing
Date (the "Filing Date"), and use its reasonable commercial efforts to
cause to be declared effective within ninety (90) days after the Closing
Date (the "Effective Date"), a Form SB-2 registration statement (the
"Registration Statement") (or such other form that it is eligible to use)
in order to register the Registrable Securities for resale and distribution
under the 1933 Act. The Company will register not less than a number of
shares of common stock in the aforedescribed registration statement that is
equal to the number of Company Shares issued on the Closing Date and Second
Closing Shares issuable on the Second Closing Date and one share of common
stock for each of the common shares issuable upon exercise of the Warrants
and Second Closing Warrants as if same were issued on the Closing Date. The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of the Subscriber, and not issued, employed or reserved for anyone
other than the Subscriber. Such registration statement will immediately be
amended or additional registration statements will be immediately filed by
the Company as necessary to register additional Company Shares to allow the
public resale of all Common Stock included in and issuable by virtue of the
Registrable Securities. No securities of the Company other than the
Registrable Securities will be included in the registration statement
described in this Section 8.1(iv) except as disclosed on Schedule 8.1,
without the written consent of the Subscriber.
8.2. Registration Procedures.
------------------------
If and whenever the Company is required by the provisions hereof to
effect the registration of any shares of Registrable Securities under the
1933 Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
required by Section 8.1, with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective
for the period of the distribution contemplated thereby (determined as
herein provided), and promptly provide to the holders of Registrable
Securities ("Sellers") copies of all filings and Commission letters of
comment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective until the later of: (i) until twelve months after all
the Company Shares are eligible for resale pursuant to Rule 144(k) of the
1933 Act; or (ii) until such registration statement has been effective for
a period of not less than 365 days, 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
Seller's intended method of disposition set forth in such registration
statement for such period;
(c) furnish to the Seller, at the Company's expense, such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller,
provided, however, that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation
in any jurisdiction where it is not so qualified or to consent to general
service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the
Company is then listed;
(f) immediately notify the Seller when a prospectus relating thereto
is required to be delivered under the 1933 Act, of the happening of any
event of which the Company has knowledge as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(g) provided same would not be in violation of the provision of
Regulation FD under the 1934 Act, make available for inspection by the
Seller, and any attorney, accountant or other agent retained by the Seller
or underwriter, all publicly available, non-confidential financial and
other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
publicly available, non-confidential information reasonably requested by
the seller, attorney, accountant or agent in connection with such
registration statement.
8.3. Provision of Documents. In connection with each registration
described in this Section 8, the Seller will furnish to the Company in
writing such information and representation letters with respect to itself
and the proposed distribution by it as reasonably shall be necessary in
order to assure compliance with federal and applicable state securities
laws. In connection with each registration pursuant to Section 8.1(i) or
8.1(ii) covering an underwritten public offering, the Company and the
Seller agree to enter into a written agreement with the managing
underwriter in such form and containing such provisions as are customary in
the securities business for such an arrangement between such underwriter
and companies of the Company's size and investment stature.
8.4. Non-Registration Events. The Company and the Subscriber agree
that the Seller will suffer damages if any registration statement required
under Section 8.1(i) or 8.1(ii) above is not filed within 60 days after
written request by the Holder and not declared effective by the Commission
within 120 days after such request or within 120 days after the Closing
Date in reference to the Registration Statement on Form SB-2 or such other
form described in Section 8.1(iv), and maintained in the manner and within
the time periods contemplated by Section 8 hereof, and it would not be
feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement described in Sections 8.1(i)
or 8.1(ii) is not filed within 60 days of such written request, or is not
declared effective by the Commission on or prior to the date that is 120
days after such request, or (ii) the registration statement on Form SB-2 or
such other form described in Section 8.1(iv) is not declared effective on
or before the sooner of 120 days after the Closing Date, or within ten (10)
business days of receipt by the Company of a written or oral communication
from the Commission that the registration statement described in Section
8.1(iv) will not be reviewed, or (iii) any registration statement described
in Sections 8.1(i), 8.1(ii) or 8.1(iv) is filed and declared effective but
shall thereafter cease to be effective (without being succeeded immediately
by an additional registration statement filed and declared effective) for a
period of time which shall exceed 45 days in the aggregate per year or more
than 20 consecutive calendar days (defined as a period of 365 days
commencing on the date the Registration Statement is declared effective)
(each such event referred to in clauses (i), (ii) and (iii) of this Section
8.4 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 of additional Company Shares ("Additional Company
Shares") equal to four Additional Company Shares for each ten Company
Shares held by the Subscriber which are subject to a Non-Registration
Event. Such Additional Company Shares must be delivered to the Subscriber
within three business days of the occurrence of the Non-Registration Event.
In respect to the Additional Company Shares, the Subscriber is granted the
registration rights described in Section 8.1(i) hereof immediately upon the
occurrence of a Non-Registration Event and may exercise those rights in
relation to the issued or issuable Additional Company Shares without regard
to the proportion of outstanding Company Shares such Additional Company
Shares represent. Additionally, for so long as such Non-Registration Event
shall continue for more than 60 days (in the aggregate), the Company shall
pay in cash as Liquidated Damages to each holder of any Registrable
Securities an amount equal to one (1%) percent for each 30 days or part
thereof beyond the initial 60 days of the pendency of the Non-Registration
Event of the Purchase Price of the Company Shares and actually paid
Purchase Price (as defined in the Warrant) of the Common Stock issued or
issuable upon exercise of the Warrant, during the pendency of such
Non-Registration Event for the Registrable Securities owned of record by
such holder as of or subsequent to the occurrence of such Non-Registration
Event. Payments to be made pursuant to this Section 8.4 shall be due and
payable within ten (10) business days after demand in immediately available
funds. The Additional Company Shares shall be deemed Registrable Securities
for all purposes from and after the occurrence of a Non-Registration Event.
8.5. Expenses. All expenses incurred by the Company in complying with
Section 8, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable
counsel fees) incurred in connection with complying with state securities
or "blue sky" laws, fees of the National Association of Securities Dealers,
Inc., transfer taxes, fees of transfer agents and registrars, and costs of
insurance are called "Registration Expenses". All underwriting discounts
and selling commissions applicable to the sale of Registrable Securities,
including any fees and disbursements of any special counsel to the Seller,
are called "Selling Expenses". The Seller shall pay the fees of its own
additional counsel, if any. The Company will pay all Registration Expenses
in connection with the registration statement under Section 8. Selling
Expenses in connection with each registration statement under Section 8
shall be borne by the Seller and may be apportioned among the Sellers in
proportion to the number of shares sold by the Seller relative to the
number of shares sold under such registration statement or as all Sellers
thereunder may agree.
8.6. Indemnification and Contribution.
--------------------------------
(a) In the event of a registration of any Registrable Securities under
the 1933 Act pursuant to Section 8, the Company will, to the extent
permitted by law, indemnify and hold harmless the Seller, each officer of
the Seller, each director of the Seller, each underwriter of such
Registrable Securities thereunder and each other person, if any, who
controls such Seller or underwriter within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to
which the Seller, or such underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such Registrable
Securities was registered under the 1933 Act pursuant to Section 8, 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 8.6(c) reimburse the Seller, each such underwriter
and each such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable to the Seller to the extent that any such
damages arise out of or are based upon an untrue statement or omission made
in any preliminary prospectus if (i) the Seller failed to send or deliver a
copy of the final prospectus delivered by the Company to the Seller with or
prior to the delivery of written confirmation of the sale by the Seller to
the person asserting the claim from which such damages arise, (ii) the
final prospectus would have corrected such untrue statement or alleged
untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by any
such Seller, or any such controlling person in writing specifically for use
in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the 1933 Act pursuant to Section 8, the Seller 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 8, 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 gross proceeds received by the
Seller from the sale of Registrable Securities covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to
notify the indemnifying party shall not relieve it from any liability which
it may have to such indemnified party other than under this Section 8.6(c)
and shall only relieve it from any liability which it may have to such
indemnified party under this Section 8.6(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 8.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of liaison
with counsel so selected, provided, however, that, if the defendants in any
such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional
to those available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified parties, as a group, shall have
the right to select one separate counsel and to assume such legal defenses
and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the 1933 Act in any case in which either (i)
the Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 8.6 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 8.6 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 8.6; 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 offered by it
pursuant to such registration statement; and (z) no person or entity guilty
of fraudulent misrepresentation (within the meaning of Section 10(f) of the
▇▇▇▇ ▇▇▇) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
8.7. Delivery of Unlegended Shares.
-----------------------------
(a) Within three (3) business days (such third business day, the
"Delivery Date") after the business day on which the Company has received a
notice that (i) Registrable Securities have been sold, (ii) a
representation that the prospectus delivery requirements, if applicable,
have been satisfied, and (iii) and the original Company Share certificate,
the Company at its expense, (i) 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, for the delivery of unlegended Company Shares issuable pursuant to
any effective and current registration statement described in Section 8 of
this Agreement (the "Unlegended Shares"); and (ii) transmit the
certificates representing the Unlegended Shares, with a legended
certificate representing the balance of the unsold Company Shares to the
Subscriber at the address specified in the notice of sale, via express
courier, by electronic transfer or otherwise on or before the Delivery
Date.
(b) In lieu of delivering physical certificates representing the
Unlegended Shares, if the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer
program, upon request of the Subscriber and its compliance with the
provisions contained in this paragraph, so long as the certificates
therefore 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 use its best efforts to cause its transfer agent to electronically
transmit the Unlegended Shares by crediting the account of Subscriber's
prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.
(c) The Company understands that a delay in the delivery of the
Unlegended Shares pursuant to Section 8 hereof beyond the Delivery Date
could result in economic loss to the Subscriber. As compensation to the
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 Company Shares
delivered to the Company for reissuance as Unlegended Shares. The Company
shall pay any payments incurred under this Section in immediately available
funds upon demand.
(d) In addition to any other rights available to the Subscriber, if
the Company fails to deliver to the Subscriber Unlegended Shares within ten
(10) calendar days after the Delivery Date and the Subscriber purchases (in
an open market transaction or otherwise) shares of common stock to deliver
in satisfaction of a sale by such Subscriber of the Company Shares which
the Subscriber anticipated receiving 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 Company Shares 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 the 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 Company Shares 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.
9. Second Closing.
--------------
9.1. Second Closing Securities. The Subscriber agrees to purchase from
the Company and the Company agrees to sell to the Subscriber additional
Company Shares ("Second Closing Shares") and one Warrant for each two
Second Closing Shares ("Second Closing Warrants" and collectively with the
Second Closing Shares and Common Stock issuable upon exercise of the Second
Closing Warrants - "Second Closing Securities"). The closing date for the
purchase of the Second Closing Shares and Second Closing Warrants shall be
the seventh business day after the actual effective date of the
Registration Statement described in Section 8.1(iv) ("Second Closing
Date"). The purchase price of the Second Closing Shares and Second Closing
Warrants shall be $150,000 ("Second Closing Purchase Price"). The amount of
Second Closing Shares to be sold by the Company and purchased by Subscriber
shall be 1,500,000. The Company will also issue and deliver to the
Subscriber on the Second Closing Date 750,000 Second Closing Warrants. The
per share "Purchase Price" of the Common Stock (as defined in the Warrant)
issuable upon exercise of the Second Closing Warrants shall be the closing
price of the Company's Common Stock for the trading day immediately
preceding the Second Closing Date. The Second Closing Warrants shall be
exercisable for five years after the Second Closing Date.
9.2. Conditions to Second Closing. The requirement of Subscriber to
proceed with the Second Closing is expressly contingent on the truth and
accuracy, on the Closing Date and Second Closing Date, of the
representations and warranties of the Company contained in Section 2 of
this Agreement. The Second Closing is further expressly contingent on the
non-occurrence of any Registration Default or other default by the Company
of its obligation and undertakings contained in this Agreement, and the
delivery of Second Closing Shares that have been included in the
registration statement described in Section 8.1(iv), which must be
effective as of the Second Closing Date.
9.3. Second Closing Deliveries. On the Second Closing Date, the
Company will deliver the Second Closing Shares and Second Closing Warrants,
and the Subscriber will deliver the Second Closing Purchase Price (the
"Second Closing"). The Company will deliver a certificate ("Second Closing
Certificate") signed by its chief operating officer and chief financial
officer (i) representing the truth and accuracy of all the representations
and warranties made by the Company contained in this Agreement, as of the
Closing Date, the actual effective date of the Registration Statement and
the Second Closing Date as if such representations and warranties were made
and given on each of such dates, (ii) adopting the covenants of the Company
set forth in Section 6 of this Agreement in relation to the Second Closing
Securities, and (iii) representing the timely compliance by the Company
with the Company's registration requirements set forth in Section 8 of this
Agreement. A legal opinion nearly identical to the legal opinion referred
to in Section 3 of this Agreement shall be delivered to the Subscriber at
the Second Closing in relation to the Company and Second Closing
Securities. The legal opinion must state that all of the Registrable
Securities have been included for registration in an effective
registration statement.
9.4. Second Closing Finder's Fee. The Finders shall receive from the
Company a Finder's Fee in connection with the Second Closing in the same
proportion as received in connection with the Closing, and on the same
terms and conditions as set forth in Section 6(b) of this Agreement.
9.5. Second Closing Limitation. A Second Closing may not take place in
connection with that amount of Second Closing Securities which would be in
excess of the sum of (y) the number of shares of Common Stock beneficially
owned by a Subscriber on the Effective Date, and (z) the number of shares
of Second Closing Securities with respect to which the determination of
this proviso is being made on the Effective Date, which would result in
beneficial ownership by the Subscriber of more than 9.99% of the
outstanding shares of Common Stock of the Company on the Effective Date.
For the purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. The Subscriber may revoke the restriction described in this
paragraph upon 75 days prior notice to the Company. The Subscriber shall
have the right to determine which of the equity of the Company deemed
beneficially owned by the Subscriber shall be included in the 9.99%
described above and which shall be allocated to the excess above 9.99%.
10. Miscellaneous.
-------------
(a) Notices.
--------
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with
charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such
party shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at
the address or number designated below (if delivered on a business day
during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or
upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be: (i) if to the Company, to USA
Technologies, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇., telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy by telecopier only to:
Lurio & Associates, One Commerce Square, Suite 2340, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., telecopier: (215)
665-8582, and (ii) if to the Subscriber, to the name, address and telecopy
number set forth on the signature page hereto, with a copy by telecopier
only to Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopier number: (212)
697-3575.
(b) Closing.
--------
The consummation of the transactions contemplated herein shall take
place at the offices of Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, upon the satisfaction of all conditions to
Closing set forth in this Agreement. The closing date shall be the date
that subscriber funds representing the net amount due the Company from the
Purchase Price of the Offering is transmitted by wire transfer or otherwise
to the Company (the "Closing Date"). The Subscriber agrees that the Closing
must take place not later than one business day after the Subscriber has
been notified by the Company of the Filing Date.
(c) 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 either party shall
be assigned by that party without prior notice to and the written consent
of the other party.
(d) Execution.
----------
This Agreement may be executed by facsimile transmission, and in
counterparts, each of which will be deemed an original.
(e) Law Governing this Agreement.
----------------------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts
of laws. Any action brought by either party against the other concerning
the transactions contemplated by this Agreement shall be brought only in
the state courts of New York or in the federal courts located in the state
of New York. Both parties and the individuals executing this Agreement and
other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorney's
fees and costs. In the event that any provision of this Agreement or any
other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule
of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other
provision of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction.
-------------------------------------------------
The Company and Subscriber acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity. Subject to Section
10(e) hereof, each of the Company and Subscriber hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of such court, that the 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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.
USA TECHNOLOGIES, INC.
A Pennsylvania Corporation
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
By:_______________________
Name:
Title:
Dated: November 4, 2002
------------------------------------ ------------- -------------- -------------
SUBSCRIBER PURCHASE WARRANTS SECOND
PRICE CLOSING
PURCHASE
PRICE
------------------------------------ ------------- -------------- -------------
------------------------------------ ------------- -------------- -------------
$150,000.00 Warrants to $150,000.00
Purchase
750,000
Common Shares
/s/
------------------------------------
(Signature)
ALPHA CAPITAL AKTIENGESELLSCHAFT
▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Lichtenstein
Fax: ▇▇▇-▇▇-▇▇▇▇▇▇▇▇
------------------------------------ ------------- -------------- -------------
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Warrant
Exhibit B Form of Legal Opinion
Schedule 2(d) Additional Issuances
Schedule 2(q) Undisclosed Liabilities
Schedule 2(s) Capitalization
Schedule 8.1 Other Securities to be Registered
