Exhibit 4.1
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT made as of this ____ day of June 2005, between
Relationserve Media, Inc., a Nevada corporation with offices at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Company") and the undersigned (the
"Subscriber").
WHEREAS, pursuant to a Confidential Memorandum dated June 22, 2005,
(the "PPM"), the Company is offering in a private placement (the "Offering") to
accredited investors up to $4,000,000 of Units for a purchase price of $100,000
per Unit. Each Unit consists of 50,000 shares of the Company's common stock, par
value $0.001 per share (the "Common Stock") and a three-year warrant to purchase
25,000 shares of Common Stock at $3.50 per share; and
WHEREAS, the Subscriber desires to subscribe for the number of Units
set forth on the signature page hereof, on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS AND COVENANTS OF SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company such
number of Units as is set forth upon the signature page hereof, at a price equal
to $100,000 per Unit, and the Company agrees to sell such Units to the
Subscriber for said purchase price, subject to the Company's right to sell to
the Subscriber such lesser number of Units (or no Units) as the Company may, in
its sole discretion, deem necessary or desirable. The purchase price is payable
by cash or wire transfer of immediately available funds to the account of the
Company, pursuant to the wire instructions attached hereto as EXHIBIT A.
1.2 The Subscriber recognizes that the purchase of Units involves a high
degree of risk in that (i) an investment in the Company is highly speculative
and only investors who can afford the loss of their entire investment should
consider investing in the Company and the Units; (ii) the Units are not
registered under the Securities Act of 1933, as amended (the "Act"), or any
state securities law; (iii) there is no trading market for the Units, none is
likely ever to develop, and the Subscriber may not be able to liquidate his
investment; (iv) transferability of the Units is extremely limited; and (v) an
investor could suffer the loss of his, her or its entire investment.
1.3 The Subscriber represents and warrants that the Subscriber is an
"accredited investor" as such term in defined in Rule 501 of Regulation D
promulgated under the Act and that the Subscriber is able to bear the economic
risk of an investment in the Units.
1.4 The Subscriber acknowledges that the Subscriber has prior investment
experience (including investment in non listed and non registered securities),
and has read and evaluated, or has employed the services of an investment
advisor, attorney or accountant to read and evaluate, all of the documents
furnished or made available by the Company to the Subscriber and to all other
prospective investors in the Units, including without limitation the PPM and the
Company's Current Report on Form 8-K filed with the Securities and Exchange
Commission ("SEC") on June 16, 2005 ("Current Report") and subsequent SEC
filings and reports, as well as the merits and risks of such an investment by
the Subscriber. The Subscriber represents that his, her or its overall
commitment to investments which are not readily marketable is not
disproportionate to the Subscriber's net worth, and that the Subscriber's
investment in the Units will not cause such overall commitment to become
excessive. The Subscriber represents that, if an individual, he or she has
adequate means of providing for his or her current needs and personal and family
contingencies and has no need for liquidity in his or her investment in the
Units. The Subscriber is financially able to bear the economic risk of this
investment, including the ability to afford holding the Units for an indefinite
period or to afford a complete loss of this investment.
1.5 The Subscriber acknowledges receipt and careful review of the PPM and
the Current Report (including all exhibits attached thereto) and all other
documents furnished in connection with this transaction (collectively, the
"Offering Documents") and hereby represents that the Subscriber has been
furnished by the Company during the course of this transaction with all
information regarding the Company which the Subscriber has requested or desires
to know; and that the Subscriber has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of the
Offering, and any additional information which the Subscriber has requested.
1.6 The Subscriber acknowledges that the purchase of Units may involve tax
consequences to the Subscriber and that the contents of the Offering Documents
do not contain tax advice. The Subscriber acknowledges that the Subscriber must
retain his own professional advisors to evaluate the tax and other consequences
to the Subscriber of an investment in the Units. The Subscriber acknowledges
that it is the responsibility of the Subscriber to determine the appropriateness
and the merits of a corporate entity to own the Subscriber's Units and the
corporate structure of such entity.
1.7 The Subscriber acknowledges that this Offering has not been reviewed by
the SEC or any state securities commission, and that no federal or state agency
has made any finding or determination regarding the fairness or merits of the
Offering. The Subscriber represents that the Units are being purchased for his,
her or its own account, for investment only, and not with a view toward
distribution or resale to others. The Subscriber agrees that he will not sell or
otherwise transfer the Units unless they are registered under the Act or unless
an exemption from such registration is available, as the same may be amended
from time to time.
1.8 The Subscriber understands that the provisions of Rule 144 under the
Act are not available for at least one (1) year to permit resales of the Units,
and there can be no assurance that the conditions necessary to permit such sales
under Rule 144 will ever be satisfied. The Subscriber understands that the
Company is under no obligation to the Subscriber to comply with the conditions
of Rule 144 or take any other action necessary in order to make any exemption
for the sale of the Units without registration available.
1.9 The Subscriber agrees to hold the Company and its directors, officers
and controlling persons and their respective heirs, representatives, successors
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and assigns harmless and to indemnify them against all liabilities, costs and
expenses incurred by them as a result of any misrepresentation made by the
Subscriber contained herein or any sale or distribution by the Subscriber in
violation of the Act (including without limitation the rules promulgated
thereunder), any state securities laws, or the Company's certificate of
incorporation or by-laws, as amended from time to time.
1.10 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Units stating that they have not
been registered under the Act and setting forth or referring to the restrictions
on transferability and sale thereof.
1.11 The Subscriber understands that the Company will review and rely on
this Subscription Agreement without making any independent investigation; and it
is agreed that the Company reserves the unrestricted right to reject or limit
any subscription and to withdraw the Offering at any time.
1.12 The Subscriber hereby represents that the address of the Subscriber
furnished at the end of this Subscription Agreement is the undersigned's
principal residence if the Subscriber is an individual or its principal business
address if it is a corporation or other entity.
1.13 The Subscriber acknowledges that if the Subscriber is a Registered
Representative of an NASD member firm, the Subscriber must give such firm the
notice required by the NASD's Conduct Rules, receipt of which must be
acknowledged by such firm on the signature page hereof.
1.14 The Subscriber hereby represents that, except as expressly set forth
in the Offering Documents, no representations or warranties have been made to
the Subscriber by the Company or any agent, employee or affiliate of the Company
and in entering into this transaction, the Subscriber is not relying on any
information, other than that contained in the Offering Documents and the results
of independent investigation by the Subscriber.
1.15 The Subscriber recognizes that this is an offering in which the
Company will accept subscriptions regardless of the attainment of any minimum
amount of subscriptions, and may accept subscriptions even if the proceeds
received in the Offering are less than $4,000,000. The Company will require
additional financing in order to accomplish its short-term goals and its
business objectives. There can be no assurance that any such additional funds
will be available on reasonable terms, or at all, and any such additional funds
raised in any equity offering will dilute the interests of the Subscriber.
Subscriber further recognizes that Company reserves the right to pay a
commission or finders fee of up to 5% of the gross proceeds of the Offering.
1.16 All information provided by the Subscriber in the Investor
Questionnaire attached hereto as EXHIBIT B is true and accurate in all respects,
and the Subscriber acknowledges that the Company will be relying on such
information to its possible detriment in deciding whether the Company can sell
these securities to the Subscriber without giving rise to the loss of an
exemption from registration under the applicable securities laws.
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1.17 The Subscriber is aware that the Company has not entered into any
agreement or understanding providing for the purchase of any business or assets
other than those referred to in the PPM and no such agreements have been agreed,
or are being negotiated, and that by execution of this Subscription Agreement,
the Subscriber consents to any and all resulting terms of such purchases which
will be in the sole discretion of the Company over which the Subscriber will
have no effective influence.
II. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the Subscriber that as of the
date of the closing of this Offering (the "Closing Date"):
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada and has the
corporate power to conduct the business which it conducts and proposes to
conduct.
(b) The execution, delivery and performance of this Subscription
Agreement by the Company will have been duly authorized by the Company and all
other corporate action required to authorize and consummate the offer and sale
of the Units will have been duly taken and approved.
(c) The Units have been duly and validly authorized and issued.
(d) The Company has obtained, or is in the process of obtaining,
all licenses, permits and other governmental authorizations necessary to the
conduct of its business, except where the failure to so obtain such licenses,
permits and authorizations would not have a material adverse effect on the
Company. Such licenses, permits and other governmental authorizations obtained
are in full force and effect, except where the failure to be so would not have a
material adverse effect on the Company, and the Company is in all material
respects complying therewith.
(e) The Company knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which would materially
adversely affect the business, financial condition or operations of the Company,
except that the Company has advised the subscribers of certain facts described
under Certain Legal Proceedings in the Current Report.
(f) The Company is not in violation of or default under, nor will
the execution and delivery of this Subscription Agreement or the issuance of the
Units, or the consummation of the transactions herein contemplated, result in a
violation of, or constitute a default under, the Company's certificate of
incorporation or by-laws, any material obligations, agreements, covenants or
conditions contained in any bond, debenture, note or other evidence of
indebtedness or in any material contract, indenture, mortgage, loan agreement,
lease, joint venture or other agreement or instrument to which the Company is a
party or by which it or any of its properties may be bound or any material
order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality or court, domestic or foreign.
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III. COVENANTS BY THE COMPANY
The Company agrees Subscribers shall have the certain registration
rights with respect to the shares of Common Stock underlying the Units, and the
Warrants, issued to Subscribers pursuant to the terms of the Registration Rights
Agreement annexed hereto as Exhibit C. Certain additional holders of Common
Stock will have a right to have their shares of Common Stock registered pursuant
to any registration statement tat is filed for Subscribers.
IV. TERMS OF SUBSCRIPTION
4.1 Subject to Section 4.2 hereof, the subscription period will begin
as of June 22, 2005 and will terminate at 11:59 PM Eastern time, on June 30,
2005, unless sooner terminated by the Company, or extended by the Company.
4.2 The Subscriber has effected a wire transfer in the full amount of
the purchase price for the Units to the Company's account in accordance with the
wire instructions set forth on Exhibit A hereto.
4.3 The Subscriber hereby authorizes and directs the Company to
deliver any certificates or other written instruments representing the Units to
be issued to such Subscriber pursuant to this Subscription Agreement to the
address indicated on the signature page hereof.
4.4 The Subscriber hereby authorizes and directs the Company to return
any funds, without interest, for unaccepted subscriptions to the same account
from which the funds were drawn.
4.5 If the Subscriber is not a United States person, such Subscriber
shall immediately notify the Company and the Subscriber hereby represents that
the Subscriber is satisfied as to the full observance of the laws of its
jurisdiction in connection with any invitation to subscribe for the Units or any
use of this Subscription Agreement, including (i) the legal requirements within
its jurisdiction for the purchase of the Units, (ii) any foreign exchange
restrictions applicable to such purchase, (iii) any governmental or other
consents that may need to be obtained, and (iv) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale or transfer of the Units or the securities comprising the Units. Such
Subscriber's subscription and payment for, and continued beneficial ownership
of, the Units and the securities comprising the Units will not violate any
applicable securities or other laws of the Subscriber's jurisdiction.
V. MISCELLANEOUS
5.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by reputable overnight courier, facsimile
(with receipt of confirmation) or registered or certified mail, return receipt
requested, addressed to the Company, at the address set forth in the first
paragraph hereof, Attention ▇▇▇▇▇▇▇▇ ▇▇▇▇, President, facsimile ((▇▇▇)▇▇▇-▇▇▇▇)
and to the Subscriber at the address indicated on the signature page hereof.
Notices shall be deemed to have been given on the date of mailing or fax, except
notices of change of address, which shall be deemed to have been given when
received.
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5.2 This Subscription Agreement shall not be changed, modified or
amended except by a writing signed by the parties to be charged, and this
Subscription Agreement may not be discharged except by performance in accordance
with its terms or by a writing signed by the party to be charged.
5.3 This Subscription Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter thereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
5.4 Notwithstanding the place where this Subscription Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed in accordance with and governed
by the laws of the State of Florida. The parties hereby agree that any dispute
which may arise between them arising out of or in connection with this
Subscription Agreement shall be adjudicated before a court located in Broward
County, Florida and they hereby submit to the exclusive jurisdiction of the
federal and state courts of the State of Florida located in Broward County with
respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising out of
this Subscription Agreement or any acts or omissions relating to the sale of the
securities hereunder, and consent to the service of process in any such action
or legal proceeding by means of registered or certified mail, return receipt
requested, in care of the address set forth below or such other address as the
undersigned shall furnish in writing to the other.
5.5 This Subscription Agreement may be executed in counterparts. Upon
the execution and delivery of this Subscription Agreement by the Subscriber,
this Subscription Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Units as herein provided; subject, however, to
the right hereby reserved to the Company to (i) enter into the same agreements
with other subscribers, (ii) to add and/or to delete other persons as
subscribers and (iii) to cut back or reject any subscription.
5.6 The holding of any provision of this Subscription Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Subscription Agreement, which shall remain in full
force and effect.
5.7 It is agreed that a waiver by either party of a breach of any
provision of this Subscription Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.
5.8 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Subscription Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
______________________________ X $100,000 for each Unit = $__________________.
Number of Units subscribed for Aggregate Purchase Price
MANNER IN WHICH TITLE IS TO BE HELD (PLEASE CHECK ONE):
1. ___ Individual 7. ___ Trust/Estate/Pension or Profit
sharing Plan
Date Opened:______________
2. ___ Joint Tenants with Right of 8. ___ As a Custodian for
Survivorship ______________________________
Under the Uniform Gift to
Minors Act of the State of
______________________________
3. ___ Community Property 9. ___ Married with Separate Property
4. ___ Tenants in Common 10. ___ ▇▇▇▇▇
5. ___ Corporation/Partnership/ 11. ___ Tenants by the Entirety
Limited Liability Company
6. ___ ▇▇▇
IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL SUBSCRIBERS MUST COMPLETE PAGE 8
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 9.
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EXECUTION BY NATURAL PERSONS
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Exact Name in Which Title is to be Held
-------------------------------- -----------------------------------
Name (Please Print) Name of Additional Subscriber
-------------------------------- -----------------------------------
Residence: Number and Street Address of Additional Subscriber
-------------------------------- -----------------------------------
City, State and Zip Code City, State and Zip Code
-------------------------------- -----------------------------------
Social Security Number Social Security Number
-------------------------------- -----------------------------------
Telephone Number Telephone Number
-------------------------------- -----------------------------------
Fax Number (if available) Fax Number (if available)
-------------------------------- -----------------------------------
E-Mail (if available) E-Mail (if available)
-------------------------------- -----------------------------------
(Signature) (Signature of Additional Subscriber)
ACCEPTED this ___ day of _________ 2005, on behalf Relationserve
Media, Inc.
By: _______________________________
Name:
Title:
8
EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, Trust, Etc.)
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Name of Entity (Please Print)
Date of Incorporation or Organization:__________________________________________
State of Principal Office:______________________________________________________
Federal Taxpayer Identification Number:_________________________________________
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Office Address
--------------------------------------------
City, State and Zip Code
--------------------------------------------
Telephone Number
--------------------------------------------
Fax Number (if available)
--------------------------------------------
E-Mail (if available)
[seal]
By:_____________________________
Name:
Attest:_____________________________________ Title:
(If Entity is a Corporation)
*IF SUBSCRIBER IS A REGISTERED
REPRESENTATIVE WITH AN NASD MEMBER FIRM,
HAVE THE FOLLOWING ACKNOWLEDGEMENT
SIGNED BY THE APPROPRIATE PARTY:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Rule 3050 of the NASD
Conduct Rules
ACCEPTED this ____ day of __________ 2005, on behalf of Relationserve
Media, Inc.
By: _____________________________
Name:
Title:
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EXHIBIT A
WIRE INSTRUCTIONS
WIRE INSTRUCTIONS:
BANK NAME: BANK OF AMERICA
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
ACCOUNT NAME: RELATIONSERVE MEDIA, INC.
ACCOUNT NUMBER: ▇▇▇▇-▇▇-▇▇▇▇
FOR THE BENEFIT OF:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ FROME ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
ABA ROUTING #: ▇▇▇▇▇▇▇▇▇
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EXHIBIT B
INVESTOR QUESTIONNAIRE
INSTRUCTIONS
This Questionnaire is being given to each person or entity expressing an
interest in participating in the offering. The purpose of this Questionnaire is
to obtain certain information regarding your status, so the Company can comply
with various laws and regulations governing this investment.
Your answers will be kept confidential. However, you hereby agree that the
Company may present this Questionnaire to such parties as it deems appropriate
in order to ascertain that the offer and the sale of the securities to you will
not result in violations of federal or state securities laws which are being
relied upon by the Company in connection with the offer and sale thereof.
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INVESTOR QUESTIONNAIRE
INSTRUCTIONS: CHECK ALL BOXES BELOW WHICH CORRECTLY DESCRIBE YOU.
|_| You are (i) a bank, as defined in Section 3(a)(2) of the Securities
Act of 1933, as amended (the "Securities Act"), (ii) a savings and
loan association or other institution, as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in an individual or
fiduciary capacity, (iii) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (iv) an insurance company as defined in Section 2(13)
of the Securities Act, (v) an investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company
Act"), (vi) a business development company as defined in Section
2(a)(48) of the Investment Company Act, (vii) a Small Business
Investment Company licensed by the U.S. Small Business Administration
under Section 301 (c) or (d) of the Small Business Investment Act of
1958, as amended, (viii) a plan established and maintained by a state,
its political subdivisions, or an agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees and
you have total assets in excess of $5,000,000, or (ix) an employee
benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and (1) the decision that
you shall subscribe for and purchase Units offered by Relationserve
Media, Inc. (the "Units"), is made by a plan fiduciary, as defined in
Section 3(21) of ERISA, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, (2)
you have total assets in excess of $5,000,000 and the decision that
you shall subscribe for and purchase the Units is made solely by
persons or entities that are accredited investors, as defined in Rule
501 of Regulation D promulgated under the Securities Act ("Regulation
D") or (3) you are a self-directed plan and the decision that you
shall subscribe for and purchase the Units is made solely by persons
or entities that are accredited investors.
|_| You are a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, as amended.
|_| You are an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), a corporation,
Massachusetts or similar business trust or a partnership, in each case
not formed for the specific purpose of making an investment in the
Units and with total assets in excess of $5,000,000.
|_| You are a director or executive officer of Relationserve Media, Inc.
|_| You are a natural person whose individual net worth, or joint net
worth with your spouse, exceeds $1,000,000 at the time of your
subscription for and purchase of the Units.
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|_| You are a natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with
your spouse in excess of $300,000 in each of the two most recent
years, and who has a reasonable expectation of reaching the same
income level in the current year.
|_| You are a trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Units, whose subscription
for and purchase of the Units is directed by a sophisticated person as
described in Rule 506(b)(2)(ii) of Regulation D.
|_| You are an entity in which all of the equity owners are persons or
entities described in one of the preceding paragraphs.
The undersigned hereby represents and warrants that all of its answers to
this Investor Questionnaire are true as of the date of its execution of the
Subscription Agreement pursuant to which it purchased Units, each Unit
consisting of (i) 50,000 shares of common stock, and (ii) a three-year warrant
to purchase 25,000 shares of the common stock of Relationserve Media, Inc.
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Name of Purchaser [please print] Name of Co-Purchaser [please print]
------------------------------------- ------------------------------------
Signature of Purchaser (Entities Signature of Co-Purchaser
please provide signature of
Purchaser's duly authorized
signatory.)
------------------------------------
Name of Signatory (Entities only)
------------------------------------
Title of Signatory (Entities only)
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SPECIAL NOTICE TO FLORIDA RESIDENTS
THE UNITS REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER
IN A TRANSACTION EXEMPT UNDER ss. 517.061 OF THE FLORIDA SECURITIES ACT.
THE UNITS HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA.
IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE
PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS
MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW
AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS
COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made and entered
into as of the __ day of June, 2005 between RELATIONSERVE MEDIA, INC., a
corporation organized and existing under the laws of the State of Nevada
("Relationserve" or the "Company") and _____________________, a
___________________, (the "INVESTOR"). Unless defined otherwise, capitalized
terms herein shall have the identical meaning as in the Common Stock
Subscription Agreement.
PRELIMINARY STATEMENT
WHEREAS, pursuant to the Common Stock Subscription Agreement, of even date
herewith, by and among Relationserve and the Investor, as part of the
consideration, Investor shall receive Common Stock and Warrants, which upon
conversion and exercise, in accordance with the terms of the Common Stock
Subscription Agreement and Warrant Agreement, entitle the Investor to receive
shares of the Common Stock, par value $0.001 per share (the "Shares"), of the
Company; and
WHEREAS, the ability of the Investor to sell their Shares of Common Stock
is subject to certain restrictions under the 1933 Act; and
WHEREAS, as a condition to the Common Stock Subscription Agreement, the
Company has agreed to provide the Investor with a mechanism that will permit
such Investor, subject to a market stand-off agreement, to sell its Shares of
Common Stock in the future.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
INCORPORATION BY REFERENCE, SUPERSEDER
1.1. INCORPORATION BY REFERENCE. The foregoing recitals and the Exhibits
attached hereto and referred to herein, are hereby acknowledged to be true and
accurate, and are incorporated herein by this reference.
1.2. SUPERSEDER. This Agreement, to the extent that it is inconsistent with any
other instrument or understanding among the parties governing the affairs of the
Company, shall supersede such instrument or understanding to the fullest extent
permitted by law. A copy of this Agreement shall be filed at the Company's
principal office.
ARTICLE II
DEMAND REGISTRATION RIGHTS
2.1. "REGISTRABLE SECURITIES" means and includes the Shares of the Company
underlying the Common Stock and Warrants issued pursuant to the Common Stock
Subscription Agreement and Warrant Agreement. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities when (a)
they have been effectively registered under the 1933 Act and disposed of in
accordance with the registration statement covering them, (b) they are or may be
freely traded without registration pursuant to Rule 144 under the 1933 Act (or
any similar provisions that are then in effect), or (c) they have been otherwise
transferred and new certificates for them not bearing a restrictive legend have
been issued by the Company and the Company shall not have "stop transfer"
instructions against them. "SHARES" shall mean, collectively, the shares of
Common Stock of the Company issuable upon conversion of the Common Stock and
those shares of Common Stock of the Company issuable to the Investor upon
exercise of the Warrants.
2.2. REGISTRATION OF REGISTRABLE SECURITIES. The Company shall prepare and file
within forty-five (45) days following the date of final closing of the sale of
Units under the PPM (the "FILING DATE") a registration statement (the
"REGISTRATION STATEMENT") covering the resale of such number of shares of the
Registrable Securities as the Investor shall elect by written notice to the
Company, and absent such election, covering the resale of all of the shares of
the Registrable Securities. The Company shall use its best efforts to cause the
Registration Statement to be declared effective by the SEC on the earlier of (i)
120 days following the Closing Date with respect to the Registration Statement,
(ii) ten (10) days following the receipt of a "No Review" or similar letter from
the SEC or (iii) the first business day following the day the SEC determines the
Registration Statement eligible to be declared effective (the "REQUIRED
EFFECTIVENESS DATE"). Nothing contained herein shall be deemed to limit the
number of Registrable Securities to be registered by the Company hereunder. As a
result, should the Registration Statement not relate to the maximum number of
Registrable Securities acquired by (or potentially acquirable by) the holders of
the Shares of the Company issued to the Investor pursuant to the Common Stock
Subscription Agreement, the Company shall be required to promptly file a
separate registration statement (utilizing Rule 462 promulgated under the 1933
Act, where applicable) relating to such Registrable Securities which then remain
unregistered. The provisions of this Agreement shall relate to any such separate
registration statement as if it were an amendment to the Registration Statement.
2.3. DEMAND REGISTRATION. Subject to the limitations of Section 2.2, at any time
and from time to time, the Investor may request the registration under the 1933
Act of all or part of the Registrable Shares then outstanding (a "DEMAND
REGISTRATION"). Subject to the conditions of Section 3, the Company shall use
its best efforts to file such registration statement under the 1933 Act as
promptly as practicable after the date any such request is received by the
Company and to cause such registration statement to be declared effective. The
Company shall notify the Investor promptly when any such registration statement
has been declared effective. If more than eighty percent (80%) of the Shares
issuable under the Common Stock Subscription Agreement have been registered or
sold, this provision shall expire.
2.4. REGISTRATION STATEMENT FORM. Registrations under Section 2.2 and Section
2.3 shall be on the appropriate registration form of the SEC as shall permit the
disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in the Registration Statement;
provided, however, such intended method of disposition shall not include an
underwritten offering of the Registrable Securities.
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2.5. EXPENSES. The Company will pay all Registration expenses in connection with
any registration required by under Sections 2.2 and Section 2.3 herein.
2.6. EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to
Sections 2.2 and Section 2.3 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective within
the time period specified herein, provided that a registration which does not
become effective after the Company filed a registration statement with respect
thereto solely by reason of the refusal to proceed of any holder of Registrable
Securities (other than a refusal to proceed based upon the advice of counsel in
the form of a letter signed by such counsel and provided to the Company relating
to a disclosure matter unrelated to such holder) shall be deemed to have been
effected by the Company unless the holders of the Registrable Securities shall
have elected to pay all Registration Expenses in connection with such
registration, (ii) if, after it has become effective, such registration becomes
subject to any stop order, injunction or other order or extraordinary
requirement of the SEC or other governmental agency or court for any reason or
(iii) if, after it has become effective, such registration ceases to be
effective for more than the allowable Black-Out Periods (as defined herein).
2.7. PLAN OF DISTRIBUTION. The Company hereby agrees that the Registration
Statement shall include a plan of distribution section reasonably acceptable to
the Investor; provided, however, such plan of distribution section shall be
modified by the Company so as to not provide for the disposition of the
Registrable Securities on the basis of an underwritten offering.
2.8. LIQUIDATED DAMAGES. Subject to the right of the Company to allow for any
Black Out periods if, after four (4) months from the date on which the
Registration Statement is filed pursuant to the requirements of Section 2.2
herein, or if the Registration Statement filed pursuant to Section 2.2 herein is
not declared effective, the Company shall, for each such full month for which a
Registration Statement is not so effective, pay the Investor, as liquidated
damages and not as a penalty, an amount equal to one percent (1%) percent of the
Purchase Price per full month for which such Registration Statement is not so
effective following the four (4) months period; such payment shall be made no
later than the first business day of the calendar month next succeeding the
month in which such day occurs. The maximum amount of liquidated damages shall
be twelve (12%) percent. All payments shall be made in shares of Common Stock at
the Initial Purchase Price (i.e. $2.00 per share).
The parties agree that the only damages payable for a violation of the terms of
this Agreement with respect to which liquidated damages are expressly provided
shall be such liquidated damages. Nothing shall preclude the Investor from
pursuing or obtaining specific performance or other equitable relief with
respect to this Agreement.
The parties hereto agree that the liquidated damages provided for in this
Section 2.8 constitute a reasonable estimate of the damages that may be incurred
by the Investor by reason of the failure of the Registration Statement(s) to be
filed or declared effective in accordance with the provisions hereof.
The obligation of the Company terminates when the holder of shares of
Registrable Securities no longer holds more than twenty percent (20%) of its
shares of Registrable Securities.
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ARTICLE III
INCIDENTAL REGISTRATION RIGHTS
3.1. RIGHT TO INCLUDE ("PIGGY-BACK") REGISTRABLE SECURITIES. Provided that the
Registrable Securities have not been registered, if at any time after the date
hereof but before the second anniversary of the date hereof, the Company
proposes to register any of its securities under the 1933 Act (other than by a
registration in connection with an acquisition in a manner which would not
permit registration of Registrable Securities for sale to the public, on Form
S-8, or any successor form thereto, on Form S-4, or any successor form thereto
and other than pursuant to Section 2), on an underwritten basis (either
best-efforts or firm-commitment), then, the Company will each such time give
prompt written notice to all holders of Registrable Securities of its intention
to do so and of such holders of Registrable Securities' rights under this
Section 3.1. Upon the written request of any such holders of Registrable
Securities made within ten (10) days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such holders of Registrable Securities and the intended method of disposition
thereof), the Company will, subject to the terms of this Agreement, use its
commercially reasonable best efforts to effect the registration under the 1933
Act of the Registrable Securities, to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
such Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the securities
which the Company proposes to register, provided that if, at any time after
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to register
or to delay registration of such securities, the Company may, at its election,
give written notice of such determination to each holders of Registrable
Securities and, thereupon, (i) in the case of a determination not to register,
shall be relieved of this obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice, however, to
the rights of any holder or holders of Registrable Securities entitled to do so
to request that such registration be effected as a registration under Section 2,
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities, for the same period as the
delay in registering such other securities. No registration effected under this
Section 3.1 shall relieve the Company of its obligation to effect any
registration upon request under Section 2. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this Section 3.1. The right provided the Holders of the
Registrable Securities pursuant to this Section shall be exercisable at their
sole discretion and will in no way limit any of the Company's obligations to pay
the Securities according to their terms.
3.2. PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing underwriter of the
underwritten offering contemplated by this Section 3 shall inform the Company
and holders of the Registrable Securities requesting such registration by letter
of its belief that the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, then the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (i) first securities
proposed by the Company to be sold for its own account, and (ii) second
4
Registrable Securities and (iii) securities of other selling security holders
requested to be included in such registration.
ARTICLE IV
REGISTRATION PROCEDURES
4.1. REGISTRATION PROCEDURES. If and whenever the Company is required to effect
the registration of any Registrable Securities under the 1933 Act as provided in
Section 2.2 and, as applicable, 2.3, the Company shall, as expeditiously as
possible:
(i) prepare and file with the SEC the Registration Statement, or amendments
thereto, to effect such registration (including such audited financial
statements as may be required by the 1933 Act or the rules and regulations
promulgated thereunder) and thereafter use its commercially reasonable best
efforts to cause such registration statement to be declared effective by the
SEC, as soon as practicable, but in any event no later than the Required
Effectiveness Date (with respect to a registration pursuant to Section 2.2);
provided, however, that before filing such registration statement or any
amendments thereto, the Company will furnish to the counsel selected by the
holders of Registrable Securities which are to be included in such registration,
copies of all such documents proposed to be filed;
(ii) with respect to any registration statement pursuant to Section 2.2 or
Section 2.3, prepare and file with the SEC 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 and to comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities covered by such registration statement until the earlier
to occur of twenty-four (24) months after the date of this Agreement (subject to
the right of the Company to suspend the effectiveness thereof for not more than
twenty-five (25) consecutive Trading Days or an aggregate of sixty (60) Trading
Days during each year (each a "BLACK-OUT PERIOD")) or such time as all of the
securities which are the subject of such registration statement cease to be
Registrable Securities (such period, in each case, the "REGISTRATION MAINTENANCE
PERIOD");
(iii) furnish to each holder of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the 1933
Act, in conformity with the requirements of the 1933 Act, and such other
documents, as such holder of Registrable Securities and underwriter, if any, may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such holder of Registrable Securities;
(iv) use its commercially reasonable best efforts to register or qualify
all Registrable Securities and other securities covered by such registration
statement under such other U.S. federal or state securities laws or U.S. state
blue sky laws as any U.S. holder of Registrable Securities thereof shall
reasonably request, to keep such registrations or qualifications in effect for
5
so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary to enable such holder of Registrable
Securities to consummate the disposition in such jurisdictions of the securities
owned by such holder of Registrable Securities, except that the Company shall
not for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (iv) be obligated to be so qualified or to
consent to general service of process in any such jurisdiction;
(v) use its commercially reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the U.S. holder of Registrable Securities thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish to each holder of Registrable Securities a signed counterpart,
addressed to such holder of Registrable Securities, and the underwriters, if
any, of an opinion of counsel for the Company, dated the effective date of such
registration statement (or, if such registration includes an underwritten public
offering, an opinion dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to such holder of
Registrable Securities) including that the prospectus and any prospectus
supplement forming a part of the Registration Statement does not contain an
untrue statement of a material fact or omits a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and
(vii) notify the Investor and its counsel promptly and confirm such advice
in writing promptly after the Company has knowledge thereof:
(A) when the Registration Statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the Registration
Statement has been filed, and, with respect to the Registration Statement or any
post-effective amendment thereto, when the same has become effective;
(B) of any request by the SEC for amendments or supplements to the
Registration Statement or the prospectus or for additional information;
(C) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
by any Person for that purpose; and
(D) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale under
the securities or blue sky laws of any jurisdiction or the initiation or threat
of any proceeding for such purpose;
(viii) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material facts required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such holder of
6
Registrable Securities promptly prepare and furnish to such holder of
Registrable Securities a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(ix) use its best efforts to obtain the withdrawal of any order suspending
the effectiveness of the Registration Statement at the earliest possible moment;
(x) otherwise use its commercially reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
(xi) enter into such agreements and take such other actions as the Investor
shall reasonably request in writing (at the expense of the requesting or
benefiting Investor) in order to expedite or facilitate the disposition of such
Registrable Securities; and
(xii) use its commercially reasonable best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange on
which any of the Registrable Securities are then listed.
The Company may require each holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such holder of Registrable Securities and the distribution of such
securities as the Company may from time to time reasonably request in writing.
4.2. The Company will not file any registration statement pursuant to Section
2.2 or Section 2.3, or amendment thereto or any prospectus or any supplement
thereto to which the Investor shall reasonably object, provided that the Company
may file such documents in a form required by law or upon the advice of its
counsel.
4.3. The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Common Stock Subscription
Agreement.
4.4. Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the occurrence of any event of the kind described in
subdivision (viii) of Section 4.1, such Holder will forthwith discontinue such
holder of Registrable Securities' disposition of Registrable Securities pursuant
to the Registration Statement relating to such Registrable Securities until such
holder of Registrable Securities' receipt of the copies of the supplemented or
amended prospectus contemplated by subdivision (viii) of Section 4.1 and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such Holder's possession
7
of the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
ARTICLE V
UNDERWRITTEN OFFERINGS
5.1. INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time proposes to
register any of its securities under the 1933 Act as contemplated by Section 3.1
and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by any holder of Registrable
Securities as provided in Section 3.1 and subject to the provisions of Section
3.2, use its commercially reasonable best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and sold by
such holder among the securities to be distributed by such underwriters. In no
event shall any Investor be deemed an underwriter for purposes of this
Agreement.
5.2. PARTICIPATION IN UNDERWRITTEN OFFERINGS. No holder of Registrable
Securities may participate in any underwritten offering under Section 3.1 unless
such holder of Registrable Securities (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the holders of a majority of
Registrable Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting agreements
and other documents (other than powers of attorney) required under the terms of
such underwriting arrangements. Notwithstanding the foregoing, no underwriting
agreement (or other agreement in connection with such offering) shall require
any holder of Registrable Securities to make a representation or warranty to or
agreements with the Company or the underwriters other than representations and
warranties contained in a writing furnished by such holder of Registrable
Securities expressly for use in the related registration statement or
representations, warranties or agreements regarding such holder of Registrable
Securities, such holder's Registrable Securities and such holder's intended
method of distribution and any other representation required by law.
5.3. PREPARATION; REASONABLE INVESTIGATION. In connection with the preparation
and filing of each registration statement under the 1933 Act pursuant to this
Agreement, the Company will give the holders of Registrable Securities
registered under such registration statement, and their respective counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the SEC,
and each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
reasonable opinion of such holders' and such underwriters' respective counsel,
to conduct a reasonable investigation within the meaning of the 1933 Act.
8
ARTICLE VI
INDEMNIFICATION
6.1. INDEMNIFICATION BY THE COMPANY. In the event of any registration of any
securities of the Company under the 1933 Act, the Company will, and hereby does
agree to indemnify and hold harmless the holder of any Registrable Securities
covered by such registration statement, its directors and officers, each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such holder or any such
underwriter within the meaning of the 1933 Act against any losses, claims,
damages or liabilities, joint or several, to which such holder or any such
director or officer or underwriter or controlling person may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, 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 securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any 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 the Company will reimburse such holder
and each such director, officer, underwriter and controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, provided that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability, (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such holder or
underwriter stating that it is for use in the preparation thereof and, provided
further that the Company shall not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities or to any other
Person, if any, who controls such underwriter within the meaning of the 1933
Act, in any such case to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of such
Person's failure to send or give a copy of the final prospectus, as the same may
be then supplemented or amended, within the time required by the 1933 Act to the
Person asserting the existence of an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus or an amendment or
supplement thereto. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder or any such
director, officer, underwriter or controlling person and shall survive the
transfer of such securities by such holder.
6.2. INDEMNIFICATION BY THE INVESTOR. The Company may require, as a condition to
including any Registrable Securities in any registration statement filed
pursuant to this Agreement, that the Company shall have received an undertaking
satisfactory to it from the prospective holder of such Registrable Securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 6.1) the Company, each director of the Company, each officer of
the Company and each other Person, if any, who controls the Company within the
9
meaning of the 1933 Act, with respect to any statement or alleged statement in
or omission or alleged omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such holder of Registrable Securities specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Any such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such Investor.
6.3. NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party of
notice of the commencement of any action or proceeding involving a claim
referred to in Sections 6.1 and Section 6.2, such indemnified party will, if
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under Sections 6.1 and Section
6.2, except to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that the indemnifying party
may wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability, or a covenant not to ▇▇▇, in respect to such
claim or litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying party.
6.4. OTHER INDEMNIFICATION. Indemnification similar to that specified in
Sections 6.1 and Section 6.2 (with appropriate modifications) shall be given by
the Company and each holder of Registrable Securities (but only if and to the
extent required pursuant to the terms herein) with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of any governmental authority, other than the 1933 Act.
6.5. INDEMNIFICATION PAYMENTS. The indemnification required by Sections 6.1 and
Section 6.2 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
10
6.6. CONTRIBUTION. If the indemnification provided for in Sections 6.1 and
Section 6.2 is unavailable to an indemnified party in respect of any expense,
loss, claim, damage or liability referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such expense,
loss, claim, damage or liability (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
holder of Registrable Securities or underwriter, as the case may be, on the
other from the distribution of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the holder of Registrable Securities or underwriter, as the
case may be, on the other in connection with the statements or omissions which
resulted in such expense, loss, damage or liability, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the holder of Registrable Securities or underwriter, as the
case may be, on the other in connection with the distribution of the Registrable
Securities shall be deemed to be in the same proportion as the total net
proceeds received by the Company from the initial sale of the Registrable
Securities by the Company to the purchasers bear to the gain, if any, realized
by all selling holders participating in such offering or the underwriting
discounts and commissions received by the underwriter, as the case may be. The
relative fault of the Company on the one hand and of the holder of Registrable
Securities or underwriter, as the case may be, on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates to
information supplied by the Company, by the holder of Registrable Securities or
by the underwriter and the parties' relative intent, knowledge, access to
information supplied by the Company, by the holder of Registrable Securities or
by the underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
provided that the foregoing contribution agreement shall not inure to the
benefit of any indemnified party if indemnification would be unavailable to such
indemnified party by reason of the provisions contained herein, and in no event
shall the obligation of any indemnifying party to contribute under this Section
6.6 exceed the amount that such indemnifying party would have been obligated to
pay by way of indemnification if the indemnification provided for hereunder had
been available under the circumstances.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 6.6
were determined by pro rata allocation (even if the holders of Registrable
Securities and any underwriters were treated as one entity for such purpose) or
by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth herein, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6.6, no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities in the
applicable Registration Statement or (ii) in the case of an underwriter, the
11
total price at which the Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any such case, the amount
of any damages that such holder or underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
ARTICLE VII
RULE 144
7.1. RULE 144. The Company shall timely file the reports required to be filed by
it under the 1933 Act and the 1934 Act (including but not limited to the reports
under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)
of Rule 144 adopted by the SEC under the ▇▇▇▇ ▇▇▇) and the rules and regulations
adopted by the SEC thereunder (or, if the Company is not required to file such
reports, will, upon the request of any holder of Registrable Securities, make
publicly available other information) and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the 1933 Act within the limitation of the exemptions
provided by (a) Rule 144 under the 1933 Act, as such Rule may be amended from
time to time, or (b) any similar rule or regulation hereafter adopted by the
SEC. Upon the request of any holder of Registrable Securities, the Company will
deliver to such holder a written statement as to whether it has complied with
the requirements of this Section 7.1.
ARTICLE VIII
MISCELLANEOUS
8.1. AMENDMENTS AND WAIVERS. This Agreement may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Company shall have obtained the written consent
to such amendment, action or omission to act, of the holder or holders of the
sum of the fifty-one percent (51%) or more of the shares of (i) Registrable
Securities issued at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent if sought). Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 8.1, whether or not such Registrable Securities shall have been marked
to indicate such consent.
8.2. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by a holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
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Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership or such Registrable Securities.
8.3. NOTICES. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of a party hereto
other than the Company, addressed to such party in the manner set forth in the
Common Stock Subscription Agreement or at such other address as such party shall
have furnished to the Company in writing, or (b) in the case of any other holder
of Registrable Securities, at the address that such holder shall have furnished
to the Company in writing, or, until any such other holder so furnishes to the
Company an address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the Company, or (c) in
the case of the Company, at the address set forth on the signature page hereto,
to the attention of its President, or at such other address, or to the attention
of such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice, request or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including, without
limitation, by fax or air courier), when delivered at the address specified
above, provided that any such notice, request or communication shall not be
effective until received.
8.4. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto. In addition, and whether or not any
express assignment shall have been made, the provisions of this Agreement which
are for the benefit of the parties hereto other than the Company shall also be
for the benefit of and enforceable by any subsequent holder of any Registrable
Securities. Each of the Holders of the Registrable Securities agrees, by
accepting any portion of the Registrable Securities after the date hereof, to
the provisions of this Agreement including, without limitation, appointment of
the Investor' Representative to act on behalf of such Holder pursuant to the
terms hereof which such actions shall be made in the good faith discretion of
the Investor' Representative and be binding on all persons for all purposes.
8.5. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections and
paragraphs of this Agreement are inserted for reference only and shall not limit
or otherwise affect the meaning hereof.
8.6. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Florida, without giving
effect to principles of conflicts of law.
8.7. JURISDICTION. If any action is brought among the parties with respect to
this Agreement or otherwise, by way of a claim or counterclaim, the parties
agree that in any such action, and on all issues, the parties irrevocably waive
their right to a trial by jury. Exclusive jurisdiction and venue for any such
action shall be the State or Federal Courts serving the State of Florida located
in Broward County. In the event suit or action is brought by any party under
this Agreement to enforce any of its terms, or in any appeal therefrom, it is
agreed that the prevailing party shall be entitled to reasonable attorneys fees
to be fixed by the arbitrator, trial court, and/or appellate court.
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8.8. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the Company and each other party hereto relating to the
subject matter hereof and supercedes all prior agreements and understandings
relating to such subject matter.
8.9. SEVERABILITY. If any provision of this Agreement, or the application of
such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
8.10. BINDING EFFECT. All the terms and provisions of this Agreement whether so
expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective administrators, executors, legal
representatives, heirs, successors and assignees.
8.11. PREPARATION OF AGREEMENT. This Agreement shall not be construed more
strongly against any party regardless of who is responsible for its preparation.
The parties acknowledge each contributed and is equally responsible for its
preparation.
8.12. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay
on the part of any party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty, covenant or agreement herein, nor shall
nay single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
8.13. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Investor and the Company have as of the date first
written above executed this Agreement.
RELATIONSERVE MEDIA, INC.
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By:
Title:
INVESTOR
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