Exhibit 10.1
SUBSCRIPTION AGREEMENT
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THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of
February 2, 2006, by and among VoIP, Inc., a Texas corporation
(the "Company"), and the subscribers identified on the signature
page hereto (each a "Subscriber" and collectively "Subscribers").
WHEREAS, the Company and the Subscribers are executing and
delivering this Agreement in reliance upon an exemption from
securities registration afforded by the provisions of Section
4(2), Section 4(6) and/or Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933,
as amended (the "1933 Act").
WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue and
sell to the Subscribers, as provided herein, and the Subscribers,
in the aggregate, shall subscribe to Two Million Nine Hundred and
Eighty-Seven Thousand and Seventy-Two Dollars ($2,987,072) (the
"Purchase Price") of promissory notes of the Company with an
original discount of 12.121% ("Note" or "Notes") convertible into
shares of the Company's common stock, $.001 par value (the
"Common Stock") at a per share conversion price set forth in the
Note ("Conversion Price"); and share purchase warrants (the
"Warrants"), in the forms attached hereto as Exhibits A1 and A2,
to purchase shares of Common Stock (the "Warrant Shares"). The
Notes, shares of Common Stock issuable upon conversion of the
Notes (the "Shares"), the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities"; and
WHEREAS, the aggregate proceeds of the sale of the Notes and
the Warrants contemplated hereby shall be held in escrow pursuant
to the terms of a Funds Escrow Agreement to be executed by the
parties substantially in the form attached hereto as Exhibit B
(the "Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and
other agreements contained in this Agreement the Company and the
Subscribers hereby agree as follows:
1. CLOSING. Subject to the satisfaction or waiver of
the terms and conditions of this Agreement, on the "Closing Date"
(as defined in Section 13(b) hereof), each Subscriber shall
purchase and the Company shall sell to each Subscriber a Note in
the principal amount designated on the signature page hereto and
the amount of Warrants determined pursuant to Section 3 below.
The aggregate principal amount of the Notes to be purchased by
the Subscribers on the Closing Date shall, in the aggregate, be
equal to the Purchase Price.
2. SECURITY INTEREST. The Subscribers will be
granted a security interest in all the assets of the Company,
including ownership of Subsidiaries as defined in Section 5(a) of
this Agreement, and the assets of the Subsidiaries to be
memorialized in "Security Agreements", forms of which are annexed
hereto as Exhibit C1 and C2. The Company will execute such other
agreements, documents and financing statements to be filed at the
Company's expense with such jurisdictions, states and counties
designated by the Subscribers. The Company will also execute all
such documents reasonably necessary in the opinion of Subscriber
to memorialize and further protect the security interest
described herein. The Subscribers will appoint a Collateral
Agent to represent them collectively in connection with the
security interest to be granted in the assets of the Company and
Subsidiaries. The appointment will be pursuant to a "Collateral
Agent Agreement", a form of which is annexed hereto as Exhibit D.
3. WARRANTS.
(a) CLASS A WARRANTS. On the Closing Date, the
Company will issue and deliver Class A Warrants to the
Subscribers. Fifty (50) Class A Warrants will be issued for each
one hundred (100) Shares which would be issued on the Closing
Date assuming the complete conversion of the Note on the Closing
Date at the Conversion Price then in effect. The exercise price
to acquire a Warrant Share upon exercise of a Class A Warrant
shall be $1.45889. The Class A Warrants shall be exercisable
until five years after the Closing Date.
(b) CLASS B WARRANTS. On the Closing Date, the
Company will issue and deliver Class B Warrants to the
Subscribers. Fifty (50) Class B Warrants will be issued for
each one hundred (100) Shares which would be issued on the
Closing Date assuming the complete conversion of the Note on the
Closing Date at the Conversion Price then in effect. The
exercise price to acquire a Warrant Share upon exercise of a
Class B Warrant shall be $1.5915. The Class B Warrants shall be
exercisable until the Registration Statement [defined in Section
11.1(iv)] has been effective for the public unrestricted resale
of the Shares and Warrants for 365 days.
4. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. Each
Subscriber hereby represents and warrants to and agrees with the
Company only as to such Subscriber that:
(a) ORGANIZATION AND STANDING OF THE SUBSCRIBERS.
If the Subscriber is an entity, such Subscriber is a corporation,
partnership or other entity duly incorporated or organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
(b) AUTHORIZATION AND POWER. Each Subscriber has
the requisite power and authority to enter into and perform this
Agreement and to purchase the Notes and Warrants being sold to it
hereunder. The execution, delivery and performance of this
Agreement by such Subscriber and the consummation by it of the
transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate or partnership action, and
no further consent or authorization of such Subscriber or its
Board of Directors, stockholders, partners, members, as the case
may be, is required. This Agreement has been duly authorized,
executed and delivered by Subscriber and constitutes, or shall
constitute when executed and delivered, a valid and binding
obligation of the Subscriber enforceable against the Subscriber
in accordance with the terms thereof.
(c) NO CONFLICTS. The execution, delivery and
performance of this Agreement and the consummation by Subscriber
of the transactions contemplated hereby or relating hereto do not
and will not (i) result in a violation of such Subscriber's
charter documents or bylaws or other organizational documents or
(ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Subscriber is a party or
by which its properties or assets are bound, or result in a
violation of any law, rule, or regulation, or any order, judgment
or decree of any court or governmental agency applicable to such
Subscriber or its properties (except for such conflicts, defaults
and violations as would not, individually or in the aggregate,
have a material adverse effect on such Subscriber). Such
Subscriber is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or
perform any of its obligations under this Agreement or to
purchase the Notes or acquire the Warrants in accordance with the
terms hereof, provided that for purposes of the representation
made in this sentence, such Subscriber is assuming and relying
upon the accuracy of the relevant representations and agreements
of the Company herein.
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(d) INFORMATION ON COMPANY. The Subscriber has
been furnished with or has had access at the ▇▇▇▇▇ Website of the
Commission to the Company's Form 10-KSB for the year ended
December 31, 2004 as filed with the Commission, together with all
subsequently filed Forms 10-QSB, 8-K, and filings made with the
Commission available at the ▇▇▇▇▇ website (hereinafter referred
to collectively as the "Reports"). The Subscriber has had an
opportunity to ask questions and receive answers from
representatives of the Company. In addition, the Subscriber has
received in writing from the Company such other information
concerning its operations, financial condition and other matters
as the Subscriber has requested in writing (such other
information is collectively, the "Other Written Information"),
and considered all factors the Subscriber deems material in
deciding on the advisability of investing in the Securities.
(e) INFORMATION ON SUBSCRIBER. The Subscriber
is, and will be at the time of the conversion of the Notes and
exercise of the Warrants, an "accredited investor", as such term
is defined in Regulation D promulgated by the Commission under
the 1933 Act, is experienced in investments and business matters,
has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private
placements in the past and, with its representatives, has such
knowledge and experience in financial, tax and other business
matters as to enable 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.
(f) PURCHASE OF NOTES AND WARRANTS. On the
Closing Date, the Subscriber will purchase the Notes, and
Warrants as principal for its own account for investment only and
not with a view toward, or for resale in connection with, the
public sale or any distribution thereof.
(g) COMPLIANCE WITH SECURITIES ACT. The
Subscriber understands and agrees that the Securities have not
been registered under the 1933 Act or any applicable state
securities laws, by reason of their issuance in a transaction
that does not require registration under the 1933 Act (based in
part on the accuracy of the representations and warranties of
Subscriber contained herein), and that such Securities must be
held indefinitely unless a subsequent disposition is registered
under the 1933 Act or any applicable state securities laws or is
exempt from such registration.
(h) SHARES LEGEND. The 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 VOIP, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
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(i) WARRANTS LEGEND. 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 VOIP, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED."
(j) NOTE LEGEND. The Note shall bear the
following legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THIS NOTE AND THE COMMON SHARES
ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER
SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO VOIP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(k) 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.
(l) AUTHORITY; ENFORCEABILITY. This Agreement
and other agreements delivered together with this Agreement or in
connection herewith have been duly authorized, executed and
delivered by the Subscriber 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 Subscriber has full corporate power and
authority necessary to enter into this Agreement and such other
agreements and to perform its obligations hereunder and under all
other agreements entered into by the Subscriber relating hereto.
(m) RESTRICTED SECURITIES. Subscriber
understands that the Securities have not been registered under
the 1933 Act and such Subscriber will not sell, offer to sell,
assign, pledge, hypothecate or otherwise transfer any of the
Securities unless pursuant to an effective registration statement
under the 1933 Act, or unless an exemption from registration is
available. Notwithstanding anything to the contrary contained in
this Agreement, such Subscriber may transfer (without restriction
and without the need for an opinion of counsel) the Securities to
its Affiliates (as defined below) provided that each such
Affiliate is an "accredited investor" under Regulation D and such
Affiliate agrees to be bound by the terms and conditions of this
Agreement. For the purposes of this Agreement, an "Affiliate" of
any person or entity means any other person or entity directly or
indirectly controlling, controlled by or under direct or indirect
common control with such person or entity. Affiliate includes
each subsidiary of the
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Company. For purposes of this definition, "control" means the
power to direct the management and policies of such person or
firm, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise.
(n) NO GOVERNMENTAL REVIEW. Each Subscriber
understands that no United States federal or state agency or any
other governmental or state agency has passed on or made
recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of
the Securities.
(o) CORRECTNESS OF REPRESENTATIONS. Each
Subscriber represents as to such Subscriber that the foregoing
representations and warranties are true and correct as of the
date hereof and, unless a Subscriber otherwise notifies the
Company prior to the Closing Date shall be true and correct as of
the Closing Date.
(p) RESTRICTION ON SALES. From the time the
Subscriber was made aware of the Offering (as defined in Section
8(c) hereof) until such time as the Offering is publicly
announced, the Subscriber will not offer to sell, solicit offers
to buy, dispose of, loan, pledge or grant any right with respect
to the Common Stock.
(q) SURVIVAL. The foregoing representations and
warranties shall survive the Closing Date for a period of three
years.
5. COMPANY REPRESENTATIONS AND WARRANTIES. The
Company represents and warrants to and agrees with each
Subscriber that:
(a) DUE INCORPORATION. The Company and each of
its Subsidiaries is a corporation or other entity duly
incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or
organization and has the requisite corporate power to own its
properties and to carry on its business as presently conducted.
The Company 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. For purposes of this
Agreement, a "Material Adverse Effect" shall mean a material
adverse effect on the financial condition, results of operations,
properties or business of the Company and its Subsidiaries taken
as a whole. For purposes of this Agreement, "Subsidiary" means,
with respect to any entity at any date, any corporation, limited
or general partnership, limited liability company, trust, estate,
association, joint venture or other business entity of which more
than 50% of (i) the outstanding capital stock having (in the
absence of contingencies) ordinary voting power to elect a
majority of the board of directors or other managing body of such
entity, (ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such
partnership or limited liability company or (iii) in the case of
a trust, estate, association, joint venture or other entity, the
beneficial interest in such trust, estate, association or other
entity business is, at the time of determination, owned or
controlled directly or indirectly through one or more
intermediaries, by such entity. All the Company's Subsidiaries
as of the Closing Date are set forth on Schedule 5(a) hereto.
(b) OUTSTANDING STOCK. All issued and
outstanding shares of capital stock of the Company has been duly
authorized and validly issued and are fully paid and
nonassessable.
(c) AUTHORITY; ENFORCEABILITY. This Agreement,
the Note, the Warrants, the Escrow Agreement, Security Agreement
and Collateral Agent Agreement, and any other agreements
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delivered together with this Agreement or in connection herewith
(collectively "Transaction Documents") 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. The Company has full corporate power and
authority necessary to enter into and deliver the Transaction
Documents and to perform its obligations thereunder.
(d) ADDITIONAL ISSUANCES. There are no
outstanding agreements or preemptive or similar rights affecting
the Company's common stock or equity and no outstanding rights,
warrants or options to acquire, or instruments convertible into
or exchangeable for, or agreements or understandings with respect
to the sale or issuance of any shares of common stock or equity
of the Company or other equity interest in any of the
Subsidiaries of the Company except as described on Schedule 5(d).
(e) CONSENTS. No consent, approval,
authorization or order of any court, governmental agency or body
or arbitrator having jurisdiction over the Company, or any of its
Affiliates, the Bulletin Board nor the Company's shareholders is
required for the execution by the Company of the Transaction
Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without
limitation, the issuance and sale of the Securities.
(f) NO VIOLATION OR CONFLICT. Assuming the
representations and warranties of the Subscribers in Section 4
are true and correct, 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 or
certificate of incorporation, charter or bylaws of the Company,
(B) to the Company's knowledge, any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to the
Company of any court, governmental agency or body, or arbitrator
having jurisdiction over the Company or over the properties or
assets of the Company or any of its Affiliates, (C) the terms of
any bond, debenture, note or any other evidence of indebtedness,
or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the
Company or any of its Affiliates is a party, by which the Company
or any of its Affiliates is bound, or to which any of the
properties of the Company or any of its Affiliates is subject, or
(D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company, or any of
its Affiliates is a party except the violation, conflict, breach,
or default of which would not have a Material Adverse Effect; or
(ii) result in the creation or imposition of
any lien, charge or encumbrance upon the Securities or any of the
assets of the Company or any of its Affiliates except as
described herein; or
(iii) result in the activation of any
anti-dilution rights or a reset or repricing of any debt or
security instrument of any other creditor or equity holder of the
Company, nor result in the acceleration of the due date of any
obligation of the Company; or
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(iv) result in the activation of any piggy-
back registration rights of any person or entity holding
securities of the Company or having the right to receive
securities of the Company.
(g) THE SECURITIES. The Securities upon
issuance:
(i) are, or will be, free and clear of any
security interests, liens, claims or other encumbrances, subject
to restrictions upon transfer under the 1933 Act and any
applicable state securities laws;
(ii) have been, or will be, duly and validly
authorized and on the date of issuance of the Shares and upon
exercise of the Warrants, the Shares and Warrant Shares will be
duly and validly issued, fully paid and nonassessable or if
registered pursuant to the 1933 Act, and resold pursuant to an
effective registration statement will be free trading and
unrestricted);
(iii) will not have been issued or sold
in violation of any preemptive or other similar rights of the
holders of any securities of the Company;
(iv) will not subject the holders thereof to
personal liability by reason of being such holders; and
(v) assuming the representations warranties
of the Subscribers as set forth in Section 4 hereof are true and
correct, will not result in a violation of Section 5 under the
1933 Act.
(h) LITIGATION. There is no pending or, to the
best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency
or body, or arbitrator having jurisdiction over the Company, or
any of its Affiliates that would affect the execution by the
Company or the performance by the Company of its obligations
under the Transaction Documents. Except as disclosed in the
Reports or in Schedule 5(h) hereto, there is no pending or, to
the best knowledge of the Company, basis for or threatened
action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its Affiliates which litigation if
adversely determined would have a Material Adverse Effect.
(i) REPORTING COMPANY. The Company is a publicly-
held company subject to reporting obligations pursuant to Section
13 of the 1934 Act and has a class of common shares registered
pursuant to Section 12(g) of the 1934 Act. Pursuant to the
provisions of the 1934 Act, the Company has filed all reports and
other materials required to be filed thereunder with the
Commission during the preceding twelve months.
(j) NO MARKET MANIPULATION. The Company and its
Affiliates have not taken, and will not take, directly or
indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of
the Securities or affect the price at which the Securities may be
issued or resold.
(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
Schedules hereto, there has been no Material Adverse Event
relating to 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
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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. The Company will not issue
any stop transfer order or other order impeding the sale, resale
or delivery of any of the Securities, except as may be required
by any applicable federal or state securities laws and unless
contemporaneous notice of such instruction is given to the
Subscriber.
(m) DEFAULTS. The Company is not in violation
of its articles of incorporation or bylaws. Except as described
on Schedule 5(m), the Company is (i) not in default under or in
violation of any other material agreement or instrument to which
it is a party or by which it or any of its properties are bound
or affected, which default or violation would have a Material
Adverse Effect, (ii) not in default with respect to any order of
any court, arbitrator or governmental body or subject to or party
to any order of any court or governmental authority arising out
of any action, suit or proceeding under any statute or other law
respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) to the Company's
knowledge not in violation of any statute, rule or regulation of
any governmental authority which violation would have a Material
Adverse Effect.
(n) NO INTEGRATED OFFERING. Neither the Company,
nor any of its Affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of
any security or solicited any offers to buy any security under
circumstances that would cause the 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 take any action or steps
that would cause the offer or issuance 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,
or which would impair the exemption relied upon in this Offering.
(o) NO GENERAL SOLICITATION. Neither the
Company, nor any of its Affiliates, nor to its knowledge, any
person acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning
of Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer
or sale of the Securities.
(p) LISTING. The Common Stock is quoted on the
Bulletin Board. The Company has not received any oral or written
notice that the Common Stock is not eligible nor will become
ineligible for quotation on the Bulletin Board nor that the
Common Stock does not meet all requirements for the continuation
of such quotation and the Company satisfies all the requirements
for the continued quotation 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 December 31,
2004 and which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, except
as disclosed on Schedule 5(q).
(r) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES.
Since December 31, 2004, 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
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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. The authorized and
outstanding capital stock of the Company as of the date of this
Agreement and the Closing Date (not including the Securities) are
set forth on Schedule 5(d). Except as set forth on Schedule
5(d), there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares
of capital stock of the Company or any of its Subsidiaries. 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. The Company's executive officers
and directors understand the nature of the Securities being sold
hereby and recognize that the issuance of the Securities will
have a potential dilutive effect on the equity holdings of other
holders of the Company's equity or rights to receive equity of
the Company. The board of directors of the Company has
concluded, in its good faith business judgment that the issuance
of the Securities is in the best interests of the Company. The
Company specifically acknowledges that its obligation to issue
the Shares upon conversion of the Notes, and the Warrant Shares
upon exercise of the Warrants is binding upon the Company and
enforceable regardless of the dilution such issuance may have on
the ownership interests of other shareholders of the Company or
parties entitled to receive equity of the Company.
(u) NO DISAGREEMENTS WITH ACCOUNTANTS AND
LAWYERS. There are no disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or
presently employed by the Company, including but not limited to
disputes or conflicts over payment owed to such accountants and
lawyers.
(v) DTC STATUS. The Company's transfer agent is
a participant in and the Common Stock is eligible for transfer
pursuant to the Depository Trust Company Automated Securities
Transfer Program.
(w) INVESTMENT COMPANY. Neither the Company nor
any Affiliate is an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(x) VOLO COMMUNICATIONS INC. REPRESENTATIONS.
The Company represents that it has acquired and owns 100% of Volo
Communications, Inc., a Delaware corporation ("Volo") and neither
the Company nor Volo is in default of any of the terms and
conditions in connection with the Company's acquisition,
ownership and operation of Volo, including but not limited to any
agreements with Volo. For purposes of this Agreement, Volo is a
Subsidiary, as defined herein. The Company further represents
that there are no modifications or amendments to the terms and
conditions of the Acquisition Agreements and all agreements in
relation to the Company's acquisitions of Volo as filed with the
SEC on Form 8-K on June 6, 2005.
(y) SUBSIDIARY REPRESENTATIONS. The Company
makes each of the representations contained in Sections 5(a),
(b), (d), (f), (h), (k), (m), (q) through (s), (u) and (w) of
this Agreement, as same relate to each Subsidiary of the Company.
(z) COMPANY PREDECESSOR. All representations
made by or relating to the Company of a historical or prospective
nature and all undertaking described in Sections 9(g) through
9(l) shall relate and refer to the Company, its predecessors, and
the Subsidiaries.
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(AA) CORRECTNESS OF REPRESENTATIONS. The Company
represents that the foregoing representations and warranties are
true and correct as of the date hereof in all material respects,
and, unless the Company otherwise notifies the Subscribers prior
to the Closing Date, shall be true and correct in all material
respects as of the Closing Date.
(BB) EMPLOYEE REPRESENTATIONS. The Company
represents that there is currently in effect a valid employment
agreement with ▇▇▇▇▇ ▇▇▇▇▇, a copy of which is annexed hereto as
Exhibit H, and that there are no disagreements nor defaults of
any of the terms or provisions of the employment agreement.
Furthermore, the Company undertakes to notify the Subscribers
within three trading days of the Company becoming aware of any
change to the employment agreement with ▇▇. ▇▇▇▇▇, or any of the
occurrence of any default by the Company or ▇▇. ▇▇▇▇▇ in
connection with his employment by the Company.
(CC) SURVIVAL. The foregoing representations and
warranties shall survive the Closing Date for a period of three
years.
6. REGULATION D OFFERING. The offer and issuance of
the Securities to the Subscribers is being made pursuant to the
exemption from the registration provisions of the 1933 Act
afforded by Section 4(2) or Section 4(6) of the 1933 Act and/or
Rule 506 of Regulation D promulgated thereunder. On the Closing
Date, the Company will provide an opinion reasonably acceptable
to Subscriber from the Company's legal counsel opining on the
availability of an exemption from registration under the 1933 Act
as it relates to the offer and issuance of the Securities and
other matters reasonably requested by Subscribers. A form of the
legal opinion is annexed hereto as Exhibit E. The Company will
provide, at the Company's expense, such other legal opinions in
the future as are reasonably necessary for the issuance and/or
resale of the Common Stock issuable upon conversion of the Notes
and exercise of the Warrants pursuant to an effective
registration statement.
7.1. CONVERSION OF NOTE.
(a) Upon the conversion of a Note or part
thereof, the Company shall, at its own cost and expense, take all
necessary action, including obtaining and delivering, an opinion
of counsel to assure that the Company's transfer agent shall
issue stock certificates in the name of Subscriber (or its
nominee) or such other persons as designated by Subscriber and in
such denominations to be specified at conversion representing the
number of shares of Common Stock issuable upon such conversion.
The Company warrants that no instructions other than these
instructions have been or will be given to the transfer agent of
the Company's Common Stock and that, unless waived by the
Subscriber, the Shares will be free-trading, and freely
transferable, and will not contain a legend restricting the
resale or transferability of the Shares provided the Shares are
being sold pursuant to an effective registration statement
covering the Shares or are otherwise exempt from registration.
(b) Subscriber will give notice of its decision
to exercise its right to convert the Note, interest, any sum due
to the Subscriber under the Transaction Documents including
Liquidated Damages, or part thereof by telecopying an executed
and completed Notice of Conversion (a form of which is annexed as
Exhibit A to the Note) to the Company via confirmed telecopier
transmission or otherwise pursuant to Section 13(a) of this
Agreement. The Subscriber will not be required to surrender the
Note until the Note has been fully converted or satisfied. Each
date on which a Notice of Conversion is telecopied to the Company
in accordance with the provisions hereof shall be deemed a
Conversion Date. The Company will itself or cause the Company's
transfer agent to transmit the Company's Common Stock
certificates representing the Shares issuable upon conversion of
the Note to the Subscriber via express courier for receipt by
such Subscriber within three (3) business days after receipt by
the Company of the
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Notice of Conversion (such third day being the "Delivery Date").
In the event the Shares are electronically transferable, then
delivery of the Shares must be made by electronic transfer
provided request for such electronic transfer has been made by
the Subscriber and the Subscriber has complied with all
applicable securities laws in connection with the sale of the
Common Stock, including, without limitation, the prospectus
delivery requirements. A Note representing the balance of the
Note not so converted will be provided by the Company to the
Subscriber if requested by Subscriber, provided the Subscriber
delivers the original Note to the Company. In the event that a
Subscriber elects not to surrender a Note for reissuance upon
partial payment or conversion, the Subscriber hereby indemnifies
the Company against any and all loss or damage attributable to a
third-party claim in an amount in excess of the actual amount
then due under the Note.
(c) The Company understands that a delay in the
delivery of the Shares in the form required pursuant to Section
7.1 hereof, or the Mandatory Redemption Amount described in
Section 7.2 hereof, respectively after the Delivery Date or the
Mandatory Redemption Payment Date (as hereinafter defined) could
result in economic loss to the Subscriber. As compensation to
the Subscriber for such loss, the Company agrees to pay (as
liquidated damages and not as a penalty) to the Subscriber for
late issuance of Shares in the form required pursuant to Section
7.1 hereof upon Conversion of the Note in the amount of $100 per
business day after the Delivery Date for each $10,000 of Note
principal amount being converted of the corresponding Shares
which are not timely delivered. The Company shall pay any
payments incurred under this Section in immediately available
funds upon demand. Furthermore, in addition to any other
remedies which may be available to the Subscriber, in the event
that the Company fails for any reason to effect delivery of the
Shares by the Delivery Date or make payment by the Mandatory
Redemption Payment Date, the Subscriber will be entitled to
revoke all or part of the relevant Notice of Conversion or
rescind all or part of the notice of Mandatory Redemption by
delivery of a notice to such effect to the Company whereupon the
Company and the Subscriber shall each be restored to their
respective positions immediately prior to the delivery of such
notice, except that the liquidated damages described above shall
be payable through the date notice of revocation or rescission is
given to the Company.
(d) Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be
deemed to establish or require the payment of a rate of interest
or other charges in excess of the maximum permitted by applicable
law. In the event that the rate of interest or dividends
required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Company to the
Subscriber and thus refunded to the Company.
7.2. MANDATORY REDEMPTION AT SUBSCRIBER'S ELECTION. In
the event the Company is prohibited from issuing Shares, or fails
to timely deliver Shares on a Delivery Date, or upon the
occurrence of any other Event of Default (as defined in the Note
or in this Agreement) that is not cured during any applicable
cure period and an additional ten days thereafter, then at the
Subscriber's election, the Company must pay to the Subscriber ten
(10) business days after request by the Subscriber, at the
Subscriber's election, a sum of money determined by (i)
multiplying up to the outstanding principal amount of the Note
designated by the Subscriber by 115%, or (ii) multiplying the
number of Shares otherwise deliverable upon conversion of an
amount of Note principal and/or interest designated by the
Subscriber (with the date of giving of such designation being a
"Deemed Conversion Date") at the then Conversion Price that would
be in effect on the Deemed Conversion Date by the highest closing
price of the Common Stock on the Principal Market for the period
commencing on the Deemed Conversion Date until the day prior to
the receipt of the Mandatory Redemption Payment, whichever is
greater, together with accrued but unpaid interest thereon and
any other sums arising and outstanding under the Transaction
Documents ("Mandatory Redemption Payment"). The Mandatory
Redemption Payment must be received by the
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Subscriber on the same date as the Company Shares otherwise
deliverable or within ten (10) business days after request,
whichever is sooner ("Mandatory Redemption Payment Date"). Upon
receipt of the Mandatory Redemption Payment, the corresponding
Note principal and interest will be deemed paid and no longer
outstanding. Liquidated damages calculated pursuant to Section
7.1(c) hereof, that have been paid or accrued for the twenty day
period prior to the actual receipt of the Mandatory Redemption
Payment by the Subscriber shall be credited against the Mandatory
Redemption Payment calculated pursuant to subsections (i) and
(ii) above of this Section 7.2. In the event of a "Change in
Control" (as defined below), the Subscriber may demand, and the
Company shall pay, a Mandatory Redemption Payment equal to 115%
of the outstanding principal amount of the Note designated by the
Subscriber together with accrued but unpaid interest thereon and
any other sums arising and outstanding under the Transaction
Documents. For purposes of this Section 7.2, "Change in Control"
shall mean (i) the Company no longer having a class of shares
publicly tradable and listed on a Principal Market, (ii) the
Company becoming a Subsidiary of another entity or merging into
or with another entity, (iii) a majority of the board of
directors of the Company as of the Closing Date no longer serving
as directors of the Company except for the addition or
replacement of up to six directors, other than due to natural
causes, (iv) if the holders of the Company's Common Stock as of
the Closing Date beneficially owning at any time after the
Closing Date less than thirty-five percent of the Common stock
owned by them on the Closing Date, or (v) the sale, lease,
license or transfer of substantially all the assets of the
Company or Subsidiaries.
7.3. MAXIMUM CONVERSION. The Subscriber shall not be
entitled to convert on a Conversion Date that amount of the Note
in connection with that number of shares of Common Stock which
would be in excess of the sum of (i) the number of shares of
common stock beneficially owned by the Subscriber and its
Affiliates on a Conversion Date, and (ii) the number of shares of
Common Stock issuable upon the conversion of the Note with
respect to which the determination of this provision is being
made on a Conversion Date, which would result in beneficial
ownership by the Subscriber and its Affiliates of more than 4.99%
of the outstanding shares of common stock of the Company on such
Conversion Date. For the purposes of the provision to the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Subscriber shall not
be limited to aggregate conversions of only 4.99% and aggregate
conversions by the Subscriber may exceed 4.99%. The Subscriber
may waive the conversion limitation described in this Section
7.3, in whole or in part, or increase the permitted beneficial
ownership amount upon and effective after 61 days prior written
notice to the Company. The Subscriber may allocate which of the
equity of the Company deemed beneficially owned by the Subscriber
shall be included in the 4.99% amount described above and which
shall be allocated to the excess above 4.99%.
7.4. INJUNCTION POSTING OF BOND. In the event a
Subscriber shall elect to convert a Note or part thereof or
exercise the Warrant in whole or in part, the Company may not
refuse conversion or exercise based on any claim that such
Subscriber or any one associated or affiliated with such
Subscriber has been engaged in any violation of law, or for any
other reason, unless, an injunction from a court, on notice,
restraining and or enjoining conversion of all or part of such
Note or exercise of all or part of such Warrant shall have been
sought and obtained by the Company and the Company has posted a
surety bond for the benefit of such Subscriber in the amount of
120% of the amount of the Note, or aggregate purchase price of
the Warrant Shares which are sought to be subject to the
injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Subscriber to the
extent Subscriber obtains judgment.
7.5. BUY-IN. In addition to any other rights available
to the Subscriber, if the Company fails to deliver to the
Subscriber such shares issuable upon conversion of a Note by the
Delivery Date and if after seven (7) business days after the
Delivery Date the Subscriber purchases (in an open market
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transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Subscriber of the Common Stock
which the Subscriber was entitled to receive upon such conversion
(a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected
by the Subscriber) the amount by which (A) the Subscriber's total
purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (B) the aggregate
principal and/or interest amount of the Note for which such
conversion was not timely honored, together with interest thereon
at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). For example,
if the Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of $10,000 of note principal and/or
interest, the Company shall be required to pay the Subscriber
$1,000, plus interest. The Subscriber shall provide the Company
written notice indicating the amounts payable to the Subscriber
in respect of the Buy-In.
7.6 ADJUSTMENTS. The Conversion Price, Warrant
exercise price and amount of Shares issuable upon conversion of
the Notes and exercise of the Warrants shall be equitably
adjusted and as otherwise described in the Transaction Documents.
7.7. REDEMPTION. The Note shall not be redeemable or
callable except as described in the Note. The Warrants shall not
be callable or redeemable.
8. FINDER/LEGAL FEES.
(a) FINDER'S FEE. The Company on the one hand,
and each Subscriber (for himself only) 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 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
represents that there are no other parties entitled to receive
fees, commissions, or similar payments in connection with the
Offering except as described on Schedule 8(a) hereto.
(b) LEGAL FEES. The Company shall pay to
Grushko & ▇▇▇▇▇▇▇, P.C., a fee of $15,000 ("Legal Fees") as
reimbursement for services rendered to the Subscribers in
connection with this Agreement and the purchase and sale of the
Notes, and Warrants (the "Offering") and acting as Escrow Agent
for the Offering. The Legal Fees will be payable on the Closing
Date out of funds held pursuant to the Escrow Agreement. Grushko
& ▇▇▇▇▇▇▇, P.C. will be reimbursed at the Closing Date for all
UCC search and filing fees.
9. COVENANTS OF THE COMPANY. The Company covenants
and agrees with the Subscribers as follows:
(a) STOP ORDERS. The Company will advise the
Subscribers within two hours after it receives notice of issuance
by the Commission, any state securities commission or any other
regulatory authority of any stop order or of any order preventing
or suspending any offering of any securities of the Company, or
of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
(b) LISTING. The Company shall promptly secure
the listing of the Shares and the Warrant Shares upon each
national securities exchange, or electronic or automated
quotation system upon which they are or become eligible for
listing and shall maintain such listing so long as any Notes or
Warrants are outstanding. The Company will maintain the listing
of its Common Stock on the American
-▇▇-
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Nasdaq SmallCap Market, Nasdaq National Market
System, Bulletin Board, or New York Stock Exchange (whichever of
the foregoing is at the time the principal trading exchange or
market for the Common Stock (the "Principal Market")), and will
comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Principal
Market, as applicable. The Company will provide the Subscribers
copies of all notices it receives notifying the Company of the
threatened and actual delisting of the Common Stock from any
Principal Market. As of the date of this Agreement and the
Closing Date, the Bulletin Board is and will be the Principal
Market.
(c) MARKET REGULATIONS. The Company shall notify
the Commission, the Principal Market and applicable state
authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all
other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Securities to the Subscribers and
promptly provide copies thereof to Subscriber.
(d) FILING REQUIREMENTS. From the date of this
Agreement and until the sooner of (i) three (3) years after the
Closing Date, or (ii) until all the Shares and Warrant Shares
have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without
regard to volume limitation, the Company will (A) cause its
Common Stock to continue to be registered under Section 12(b) or
12(g) of the 1934 Act, (B) comply in all respects with its
reporting and filing obligations under the 1934 Act, (C) 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 1934 Act, as applicable, and (D) comply with all
filing requirements related to any registration statement filed
pursuant to this Agreement. The Company will use its best
efforts not to take any action or file any document (whether or
not permitted by the 1933 Act or the 1934 Act or the rules
thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under
said acts until three (3) years after the Closing Date. Until
the earlier of the resale of the Shares, and Warrant Shares by
each Subscriber or until three (3) years after the Warrants have
been exercised, the Company will use its best efforts to continue
the listing or quotation of the Common Stock on a Principal
Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules
of the Principal Market. The Company agrees to timely file a
Form D with respect to the Securities if required under
Regulation D and to provide a copy thereof to each Subscriber
promptly after such filing.
(e) USE OF PROCEEDS. The proceeds of the
Offering must be employed by the Company for the purposes set
forth on Schedule 9(e) hereto. Except as set forth on Schedule
9(e), the Purchase Price may not and will not be used for accrued
and unpaid officer and director salaries, payment of financing
related debt, redemption of outstanding notes or equity
instruments of the Company nor non-trade obligations outstanding
on the Closing Date.
(f) RESERVATION. Prior to the Closing Date, the
Company undertakes to reserve, pro rata, on behalf of each holder
of a Note or Warrant, from its authorized but unissued common
stock, a number of common shares equal to 120% of the amount of
Common Stock necessary to allow each holder of a Note to be able
to convert all such outstanding Notes and interest and reserve
the amount of Warrant Shares issuable upon exercise of the
Warrants. After the Reservation Approval (as described in
Section 9(r) of this Agreement), the Company will reserve pro-
rata on behalf of the Subscribers from its authorized but
unissued Common Stock a number of common shares equal to 200% of
the amount of Common Stock necessary to allow each holder of a
Note to be able to convert all such outstanding Notes and
interest and reserve the amount of Warrant Shares issuable upon
exercise of the Warrants. Failure to have sufficient shares
reserved pursuant to this Section 9(f) for three (3) consecutive
business days or ten (10) days in the aggregate shall be a
material default of the Company's obligations under this
Agreement and an Event of Default under the Note.
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(g) TAXES. From the date of this Agreement and
until the sooner of (i) three (3) years after the Closing Date,
or (ii) until all the Shares, and Warrant Shares have been resold
or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to
volume limitations, 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. From the date of this Agreement
and until the sooner of (i) three (3) years after the Closing
Date, or (ii) until all the Shares, and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to
volume limitations, 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 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. From the date of this
Agreement and until the sooner of (i) three (3) years after the
Closing Date, or (ii) until all the Shares, and Warrant Shares
have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without
regard to volume limitations, 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. From the date of
this Agreement and until the sooner of (i) three (3) years after
the Closing Date, or (ii) until all the Shares, and Warrant
Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, 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. From the date of this
Agreement and until the sooner of (i) three (3) years after the
Closing Date, or (ii) until all the Shares, and Warrant Shares
have been resold or transferred by all the Subscribers pursuant
to the Registration Statement or pursuant to Rule 144, without
regard to volume limitations, 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. From the date of this Agreement
and until the sooner of (i) three (3) years after the Closing
Date, or (ii) until all the Shares, and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the
Registration Statement (as defined in Section 11.1(iv) hereof) or
pursuant to Rule 144, without regard to volume limitations, the
Company will keep its properties in good repair, working order
and condition, reasonable wear and tear excepted, and from time
to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and
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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) CONFIDENTIALITY/PUBLIC ANNOUNCEMENT. From
the date of this Agreement and until the sooner of (i) three (3)
years after the Closing Date, or (ii) until all the Shares, and
Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to
Rule 144, without regard to volume limitations, the Company
agrees that except in connection with a Form 8-K or the
Registration Statement, it will not disclose publicly or
privately the identity of the Subscribers unless expressly agreed
to in writing by a Subscriber or only to the extent required by
law and then only upon five days prior notice to Subscriber. In
any event and subject to the foregoing, the Company shall file a
Form 8-K or make a public announcement describing the Offering
not later than the first business day after the Closing Date. In
the Form 8-K or public announcement, the Company will
specifically disclose the amount of common stock outstanding
immediately after the Closing. A form of the proposed Form 8-K
or public announcement to be employed in connection with the
Offering is annexed hereto as Exhibit F.
(n) FURTHER REGISTRATION STATEMENTS. Except for
a registration statement filed on behalf of the Subscribers
pursuant to Section 11 of this Agreement or in connection with
the registration of the Common Stock described in Section
12(a)(vi), the Company will not file any registration statements
or amend any already filed registration statement, including but
not limited to Form S-8, with the Commission or with state
regulatory authorities without the consent of the Subscriber
until the sooner of (i) the Registration Statement shall have
been current and available for use in connection with the resale
of the Registrable Securities (as defined in Section 11.1(i) for
a period of 60 days, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by the Subscribers
pursuant to the Registration Statement or Rule 144, without
regard to volume limitations. The Exclusion Period will be tolled
during the pendency of an Event of Default as defined in the
Note.
(o) BLACKOUT. The Company undertakes and
covenants that until (i) the sooner of the Registration Statement
shall have been current and available for use in connection with
the resale of the Registrable Securities (as defined in Section
11.1(i) for a period of 180 days, or (ii) all the Shares and
Warrant Shares have been resold or transferred by the Subscribers
pursuant to the Registration Statement or Rule 144 without regard
to volume limitation (the "Exclusion Period"), 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 or causing an
already effective registration statement to no longer be
effective or current for a period twenty (20) or more days.
(p) NON-PUBLIC INFORMATION. The Company
covenants and agrees that neither it nor any other person acting
on its behalf will provide any Subscriber or its agents or
counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto
such Subscriber shall have agreed in writing to receive such
information. The Company understands and confirms that each
Subscriber shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
(q) LIMITED STANDSTILL. The Company will
deliver to the Subscribers on or before the Closing Date and
enforce the provisions of irrevocable standstill agreements
("Limited Standstill Agreements") in the form annexed hereto as
Exhibit G, with the parties identified on Schedule 9(q) hereto.
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(r) SHAREHOLDER APPROVAL. The Company and
Subscribers agree that until the Company obtains shareholder
approval of an increase in the authorized Common Stock of the
Company to not less than 250,000,000 Shares of Common Stock,
files an amendment to the Company's Articles of Incorporation and
reserve 200% of the amount of shares of Common Stock necessary to
allow the conversion of the entire Note principal and interest
that may accrue thereon and 100% of the Common Stock issuable
upon exercise of all of the Warrants issued in connection with
this Agreement (collectively such shares of Common Stock being
the "Reserve Amount" and the shareholder approval, amendment and
reservation being the "Reservation"), each Subscriber may not
convert the Note nor exercise any Warrants in excess of each
Subscriber's pro rata portion of 12,000,000 shares of Common
Stock. Each Subscriber's pro rata portion is equal to the Note
principal purchased by such Subscriber divided by the aggregate
Note principal sold in the Offering. The Company undertakes to
file a preliminary proxy statement for a meeting of the Company's
shareholders relating to the Reservation with the Commission not
later than January 31, 2006 ("Proxy Filing Date"). The Company
covenants to use its best efforts to obtain the Reservation.
Failure to file the preliminary proxy on or before the Proxy
Filing Date or to obtain the Reservation (each a "Reservation
Default") is an Event of Default under the Note for which
liquidated damages will accrue at the rate of two percent (2%)
for each thirty (30) days, or pro rata portion thereof during the
pendency of such Reservation Default. Liquidated damages for a
Reservation Default that accrues at the same time as a Non-
Registration Event (as defined in Section 11.4 hereof) shall be
limited to the greater of the amount of such damages which may
accrue.
10. COVENANTS OF THE COMPANY AND SUBSCRIBER REGARDING
INDEMNIFICATION.
(a) The Company agrees to indemnify, hold
harmless, reimburse and defend the Subscribers, the Subscribers'
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 the Subscriber
or any such person which results, arises out of or is based upon
(i) any material misrepresentation by Company or breach of any
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) Each 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 such 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 such
Subscriber of any covenant or undertaking to be performed by such
Subscriber hereunder, or any other agreement entered into by the
Company and Subscribers, relating hereto.
(c) In no event shall the liability of any
Subscriber or permitted successor hereunder or under any
Transaction Document or other agreement delivered in connection
herewith be greater in amount than the dollar amount of the net
proceeds actually received by such Subscriber upon the sale of
Registrable Securities (as defined herein).
(d) The procedures set forth in Section 11.6
shall apply to the indemnification set forth in Sections 10(a)
and 10(b) above.
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11.1. REGISTRATION RIGHTS. The Company hereby
grants the following registration rights to holders of the
Securities.
(i) On one occasion, for a period commencing one
hundred and six (106) days after the Closing Date, but not later
than two (2) years after the Closing Date ("Request Date"), upon
a written request therefor from any record holder or holders of
more than 50% of the Shares issued and issuable upon conversion
of the Notes and Warrant Shares actually issued upon exercise of
the Warrants, the Company shall prepare and file with the
Commission a registration statement under the 1933 Act
registering the Shares issuable upon conversion of all sums due
under the Notes and Warrant Shares issuable upon exercise of the
Warrants and Finder's Warrants (collectively "Registrable
Securities") which are the subject of such request for
unrestricted public resale by the holder thereof. From the
Closing Date until the Reservation (as defined in this
Agreement), Registrable Securities shall mean 120% of the Shares
issuable upon conversion of the Notes and exercise of the
Warrants. Following the Reservation, Registrable Securities
shall mean 200% of all Shares issuable upon conversion of the
Notes and 100% of all Shares issuable upon exercise of the
Warrants. For purposes of Sections 11.1(i) and 11.1(ii),
Registrable Securities shall not include Securities (A) which are
registered for resale in an effective registration statement, (B)
included for registration in a pending registration statement, or
(C) which have been issued without further transfer restrictions
after a sale or transfer pursuant to Rule 144 under the 1933 Act.
Upon the receipt of such request, the Company shall promptly give
written notice to all other record holders of the Registrable
Securities that such registration statement is to be filed and
shall include in such registration statement Registrable
Securities for which it has received written requests within ten
(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 11.1(i).
(ii) If the Company at any time proposes to
register any of its securities under the 1933 Act for sale to the
public, whether for its own account or for the account of other
security holders or both, except with respect to registration
statements on Forms ▇-▇, ▇-▇ or another form not available for
registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered
for resale by the Subscribers or Holder pursuant to an effective
registration statement, each such time it will give at least
fifteen (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 ten
(10) days after the giving of any such notice by the Company, to
register any of the Registrable Securities not previously
registered, the Company will cause such Registrable Securities as
to which registration shall have been so requested to be included
with the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent required
to permit the sale or other disposition of the Registrable
Securities so registered by the holder of such Registrable
Securities (the "Seller" or "Sellers"). In the event that any
registration pursuant to this Section 11.1(ii) shall be, in whole
or in part, an underwritten public offering of common stock of
the Company, the number of shares of Registrable Securities to be
included in such an underwriting may be reduced by the managing
underwriter if and to the extent that the Company and the
underwriter shall reasonably be of the opinion that such
inclusion would adversely affect the marketing of the securities
to be sold by the Company therein; provided, however, that the
Company shall notify the Seller in writing of any such reduction.
Notwithstanding the foregoing provisions, or Section 11.4 hereof,
the Company may withdraw or delay or suffer a delay of any
registration statement referred to in this Section 11.1(ii)
without thereby incurring any liability to the Seller.
(iii) If, at the time any written request for
registration is received by the Company pursuant to Section
11.1(i), the Company has determined to proceed with the actual
preparation and filing of a registration statement under the 1933
Act in connection with the proposed offer and sale for cash of
any of its securities for the Company's own account and the
Company actually does file such other
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registration statement, such written request shall be deemed to
have been given pursuant to Section 11.1(ii) rather than Section
11.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section
11.1(ii).
(iv) The Company shall file with the Commission a
Form SB-2 or Form S-3 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 ▇▇▇▇ ▇▇▇) not later than February 13, 2006
(the "Filing Date"), and cause it to be declared effective not
later than April 21, 2006 (the "Effective Date"). The Company
will register not less than a number of shares of Common Stock in
the aforedescribed registration statement that is equal to 200%
of the Shares issuable upon conversion of the Notes and all of
the Warrant Shares issuable upon exercise of the Warrants. The
Registrable Securities shall be reserved and set aside
exclusively for the benefit of each Subscriber and Warrant
holder, pro rata, and not issued, employed or reserved for anyone
other than each such Subscriber and Warrant holder. The
Registration Statement will immediately be amended or additional
registration statements will be immediately filed by the Company
as necessary to register additional shares of Common Stock to
allow the public resale of all Common Stock included in and
issuable by virtue of the Registrable Securities. Without the
written consent of the Subscriber, no securities of the Company
other than the Registrable Securities will be included in the
Registration Statement except as described on Schedule 11.1,
hereto. It shall be deemed a Non-Registration Event if at any
time after the date the Registration Statement is declared
effective by the Commission the Company has registered for
unrestricted resale on behalf of a Subscriber fewer than 125% of
the amount of Common Shares issuable upon full conversion of all
sums due under the Notes and 100% of the Warrant Shares issuable
upon exercise of the Warrants.
11.2. REGISTRATION PROCEDURES. If and whenever the
Company is required by the provisions of Section 11.1(i),
11.1(ii), or (iv) to effect the registration of any Registrable
Securities under the 1933 Act, the Company will, as expeditiously
as possible:
(a) subject to the timelines provided in this
Agreement, prepare and file with the Commission a registration
statement required by Section 11, with respect to such securities
and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution
contemplated thereby (determined as herein provided), promptly
provide to the holders of the Registrable Securities copies of
all filings and Commission letters of comment and notify
Subscribers (by telecopier and by e-mail addresses provided by
Subscribers) and Grushko & ▇▇▇▇▇▇▇, P.C. (by telecopier and by
email to ▇▇▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇) on or before 3:00 PM EST on the next
business day that the Company receives notice that (i) the
Commission has no comments or no further comments on the
Registration Statement, and (ii) the registration statement has
been declared effective (failure to timely provide notice as
required by this Section 11.2(a) shall be a material breach of
the Company's obligation and an Event of Default as defined in
the Notes and a Non-Registration Event as defined in Section 11.4
of this Agreement);
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective until such
registration statement has been effective for a period of three
(3) years, and comply with the provisions of the 1933 Act with
respect to the disposition of all of the Registrable Securities
covered by such registration statement in accordance with the
Sellers' intended method of disposition set forth in such
registration statement for such period;
(c) furnish to the Sellers, at the Company's
expense, such number of copies of the registration statement and
the prospectus included therein (including each preliminary
prospectus) as
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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 commercially reasonable best efforts
to register or qualify the Registrable Securities covered by such
registration statement under the securities or "blue sky" laws of
New York and such jurisdictions as the Sellers shall request in
writing, provided, however, that the Company shall not for any
such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is
not so qualified or to consent to general service of process in
any such jurisdiction;
(e) if applicable, list the Registrable
Securities covered by such registration statement with any
securities exchange on which the Common Stock of the Company is
then listed;
(f) notify the Subscribers within two hours of
the Company's becoming aware that a prospectus relating thereto
is required to be delivered under the 1933 Act, of the happening
of any event of which the Company has knowledge as a result of
which the prospectus contained in such registration statement, as
then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in
light of the circumstances then existing or which becomes subject
to a Commission, state or other governmental order suspending the
effectiveness of the registration statement covering any of the
Shares; and
(g) provided same would not be in violation of
the provision of Regulation FD under the 1934 Act, make available
for inspection by the Sellers, 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.
11.3. PROVISION OF DOCUMENTS. In connection with
each registration described in this Section 11, each Seller will
furnish to the Company in writing such information and
representation letters with respect to itself and the proposed
distribution by it as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities
laws.
11.4. NON-REGISTRATION EVENTS. The Company and the
Subscribers agree that the Sellers will suffer damages if the
Registration Statement is not filed by the Filing Date and not
declared effective by the Commission by the Effective Date, and
any registration statement required under Section 11.1(i) or
11.1(ii) is not filed within 60 days after written request and
declared effective by the Commission within 120 days after such
request, and maintained in the manner and within the time periods
contemplated by Section 11 hereof, and it would not be feasible
to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or
before the Filing Date, (B) is not declared effective on or
before the Effective Date, (C) the Registration Statement is not
declared effective within three (3) business days after receipt
by the Company or its attorneys of a written or oral
communication from the Commission that the Registration Statement
will not be reviewed or that the Commission has no further
comments, (D) if the registration statement described in Sections
11.1(i) or 11.1(ii) is not filed within 60 days after such
written request, or is not declared effective within 120 days
after such written request, or (E) any registration statement
described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and
declared effective but shall thereafter cease to be effective
(without being succeeded within fifteen (15) business days by an
effective replacement or amended registration statement) for a
period of time which shall exceed 20 days in the aggregate per
year (defined as a period of 365 days commencing on the date the
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Registration Statement is declared effective) (each such event
referred to in clauses (A) through (E) of this Section 11.4 is
referred to herein as a "Non-Registration Event"), then the
Company shall deliver to the holder of Registrable Securities, as
Liquidated Damages, an amount equal to one and one-half percent
(1.5%) for each thirty (30) days or part thereof, thereafter of
the Purchase Price of the Notes remaining unconverted and
purchase price of Shares issued upon conversion of the Notes
owned of record by such holder which are subject to such Non-
Registration Event. The Company must pay the Liquidated Damages
in cash. The Liquidated Damages must be paid within ten (10)
days after the end of each thirty (30) day period or shorter part
thereof for which Liquidated Damages are payable. In the event a
Registration Statement is filed by the Filing Date but is
withdrawn prior to being declared effective by the Commission,
then such Registration Statement will be deemed to have not been
filed. All oral or written comments received from the Commission
relating to the Registration Statement must be satisfactorily
responded to within ten (10) business days after receipt of
comments from the Commission. Failure to timely respond to
Commission comments is a Non-Registration Event for which
Liquidated Damages shall accrue and be payable by the Company to
the holders of Registrable Securities at the same rate set forth
above. Notwithstanding the foregoing, the Company shall not be
liable to the Subscriber under this Section 11.4 for any events
or delays occurring as a consequence of the acts or omissions of
the Subscribers contrary to the obligations undertaken by
Subscribers in this Agreement.
11.5. EXPENSES. All expenses incurred by the
Company in complying with Section 11, 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, costs of insurance and fee of one
counsel for all Sellers are called "Registration Expenses." All
underwriting discounts and selling commissions applicable to the
sale of Registrable Securities, including any fees and
disbursements of one counsel to the Seller, are called "Selling
Expenses." The Company will pay all Registration Expenses in
connection with the registration statement under Section 11.
Selling Expenses in connection with each registration statement
under Section 11 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.
11.6. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any
Registrable Securities under the 1933 Act pursuant to Section 11,
the Company will, to the extent permitted by law, indemnify and
hold harmless the Seller, each 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 11, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light
of the circumstances when made, and will subject to the
provisions of Section 11.6(c) reimburse the Seller, each such
underwriter and each such controlling person for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall
not be liable to the Seller to the extent that any such damages
arise out of or are based upon an untrue statement or omission
made in any preliminary prospectus if (i) the
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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 11,
each Seller severally but not jointly will, to the extent
permitted by law, indemnify and hold harmless the Company, and
each person, if any, who controls the Company within the meaning
of the 1933 Act, each officer of the Company who signs the
registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within
the meaning of the 1933 Act, against all losses, claims, damages
or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement under which such Registrable Securities
were registered under the 1933 Act pursuant to Section 11, any
preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company
and each such officer, director, underwriter and controlling
person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the
Seller will be liable hereunder in any such case if and only to
the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such Seller, as
such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or
prospectus, and provided, further, however, that the liability of
the Seller hereunder shall be limited to the net proceeds
actually received by the Seller from the sale of Registrable
Securities 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 11.6(c) and shall only relieve it from any
liability which it may have to such indemnified party under this
Section 11.6(c), except and only if and to the extent the
indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and,
to the extent it shall wish, to assume and undertake the defense
thereof with counsel satisfactory to such indemnified party, and,
after notice from the indemnifying party to such indemnified
party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 11.6(c) for any legal
expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs
of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and
the 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
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legal defenses and otherwise to participate in the defense of
such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable
contribution in the event of joint liability under the 1933 Act
in any case in which either (i) a Seller, or any controlling
person of a Seller, makes a claim for indemnification pursuant to
this Section 11.6 but it is judicially determined (by the entry
of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial
of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section
11.6 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of
the Seller or controlling person of the Seller in circumstances
for which indemnification is not provided under this Section
11.6; then, and in each such case, the Company and the Seller
will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from
others) in such proportion so that the Seller is responsible only
for the portion represented by the percentage that the public
offering price of its securities offered by the registration
statement bears to the public offering price of all securities
offered by such registration statement, provided, however, that,
in any such case, (y) the Seller will not be required to
contribute any amount in excess of the public offering price of
all such securities sold by it pursuant to such registration
statement; and (z) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
▇▇▇▇ ▇▇▇) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
11.7. DELIVERY OF UNLEGENDED SHARES.
(a) Within three (3) business days (such third
business day being the "Unlegended Shares Delivery Date") after
the business day on which the Company has received (i) a notice
that Shares, or Warrant Shares have been sold pursuant to the
Registration Statement or Rule 144 under the 1933 Act, (ii) a
representation that the prospectus delivery requirements, or the
requirements of Rule 144, as applicable and if required, have
been satisfied, and (iii) the original share certificates
representing the shares of Common Stock that have been sold, and
(iv) in the case of sales under Rule 144, customary
representation letters of the Subscriber and/or Subscriber's
broker regarding compliance with the requirements of Rule 144,
the Company at its expense, (y) shall deliver, and shall cause
legal counsel selected by the Company to deliver to its transfer
agent (with copies to Subscriber) an appropriate instruction and
opinion of such counsel, directing the delivery of shares of
Common Stock without any legends including the legend set forth
in Section 4(h) above, reissuable pursuant to any effective and
current Registration Statement described in Section 11 of this
Agreement or pursuant to Rule 144 under the 1933 Act (the
"Unlegended Shares"); and (z) cause the transmission of the
certificates representing the Unlegended Shares together with a
legended certificate representing the balance of the submitted
certificates, if any, to the Subscriber at the address specified
in the notice of sale, via express courier, by electronic
transfer or otherwise on or before the Unlegended Shares Delivery
Date. Transfer fees shall be the responsibility of the Seller.
(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 a
Subscriber, so long as the certificates therefor do not bear a
legend and the Subscriber is not obligated to return such
certificate for the placement of a legend thereon, the Company
shall cause its transfer agent to electronically transmit the
Unlegended Shares by crediting the account of Subscriber's prime
Broker with DTC through its Deposit Withdrawal Agent Commission
system. Such delivery must be made on or before the Unlegended
Shares Delivery Date.
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(c) The Company understands that a delay in the
delivery of the Unlegended Shares pursuant to Section 11 hereof
later than the Unlegended Shares Delivery Date could result in
economic loss to a Subscriber. As compensation to a Subscriber
for such loss, the Company agrees to pay late payment fees (as
liquidated damages and not as a penalty) to the Subscriber for
late delivery of Unlegended Shares in the amount of $100 per
business day after the Delivery Date for each $10,000 of purchase
price of the Unlegended Shares subject to the delivery default.
If during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Section 11.7 for an
aggregate of thirty (30) days, then each Subscriber or assignee
holding Securities subject to such default may, at its option,
require the Company to redeem all or any portion of the Shares,
and Warrant Shares subject to such default at a price per share
equal to 115% of the purchase price or value described in Section
12(e) hereof, of such Shares, and Warrant Shares ("Unlegended
Redemption Amount"). The amount of the aforedescribed liquidated
damages that have accrued or been paid for the twenty day period
prior to the receipt by the Subscriber of the Unlegended
Redemption Amount shall be credited against the Unlegended
Redemption Amount. 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
a Subscriber, if the Company fails to deliver to a Subscriber
Unlegended Shares as required pursuant to this Agreement, within
seven (7) business days after the Unlegended Shares 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 shares of Common Stock which the
Subscriber was entitled to receive from the Company (a "Buy-In"),
then the Company shall pay in cash to the Subscriber (in addition
to any remedies available to or elected by the Subscriber) the
amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of
common stock so purchased exceeds (B) the aggregate purchase
price of the shares of Common Stock delivered to the Company for
reissuance as Unlegended Shares together with interest thereon at
a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). For example,
if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to
$10,000 of purchase price of shares of Common Stock delivered to
the Company for reissuance as Unlegended Shares, the Company
shall be required to pay the Subscriber $1,000, plus interest.
The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of
the Buy-In.
(e) In the event a Subscriber shall request
delivery of Unlegended Shares as described in Section 11.7 and
the Company is required to deliver such Unlegended Shares
pursuant to Section 11.7, the Company may not refuse to deliver
Unlegended Shares based on any claim that such Subscriber or any
one associated or affiliated with such Subscriber has been
engaged in any violation of law, or for any other reason, unless,
an injunction or temporary restraining order from a court, on
notice, restraining and or enjoining delivery of such Unlegended
Shares or exercise of all or part of said Warrant shall have been
sought and obtained and the Company has posted a surety bond for
the benefit of such Subscriber in the amount of 120% of the
amount of the aggregate purchase price of the Common Stock and
Warrant Shares which are subject to the injunction or temporary
restraining order, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Subscriber to the
extent Subscriber obtains judgment in Subscriber's favor.
12. (a) RIGHT OF FIRST REFUSAL. Until the
Registration Statement has been effective for the public
unrestricted resale of the Registrable Securities for 365 days,
the Subscribers shall be given not less than seven (7) business
days prior written notice of any proposed sale by the Company of
its common stock or other securities or debt obligations, except
in connection with (i) as a result of the exercise of options or
warrants or conversion of convertible Notes or amounts which are
granted, issued or
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accrue pursuant to this Agreement, (ii) as has been described in
the Reports or Other Written Information filed with the
Commission not later than three business days prior to the
Closing Date, or delivered to the Subscribers prior to the
Closing Date, (iii) full or partial consideration in connection
with a strategic merger, consolidation or purchase of
substantially all of the securities or assets of corporation or
other entity, (iv) the Company's issuance of securities in
connection with strategic license agreements and other partnering
arrangements so long as such issuances are not for the purpose of
raising capital, (v) the Company's issuance of Common Stock or
the issuance or grants of options to purchase Common Stock
pursuant to the Company's stock option plans and employee stock
purchase plans as they now exist, provided such options are
granted with exercise prices at least equal to the closing price
of the Common Stock on the grant dates, which copies of such
plans have been delivered to the Subscribers, and (vi) Common
Stock or instruments convertible or exchangeable for Common
Stock, provided the issue price (or conversions, exchanges, or
exercise prices, whichever is applicable) of such Common stock or
other instrument is not less than 150% of the Conversion Price in
effect at all times (collectively the foregoing are "Excepted
Issuances"). The Subscribers who exercise their rights pursuant
to this Section 12(a) shall have the right during the seven (7)
business days following receipt of the notice to purchase in the
aggregate all such offered common stock, debt or other securities
in accordance with the terms and conditions set forth in the
notice of sale in the same proportion to each other as their
purchase of Notes in the Offering. In the event such terms and
conditions are modified during the notice period, the Subscribers
shall be given prompt notice of such modification and shall have
the right during the seven (7) business days following the notice
of modification, whichever is longer, to exercise such right.
(b) OFFERING RESTRICTIONS. Other than the
Excepted Issuances, until the Actual Effective Date and during
the pendency of an Event of Default, or when any compensatory or
liquidated damages are accruing or are outstanding, the Company
will not enter into an agreement to nor issue any equity,
convertible debt or other securities convertible into common
stock or equity of the Company nor modify any of the foregoing
which may be outstanding at anytime, without the prior written
consent of the Subscriber, which consent may be withheld for any
reason. For so long as 40% of the Notes and/or Common Stock
issued and issuable upon conversion of the Notes is held by the
Subscribers or their permitted assigns, the Company will not
enter into any equity line of credit or similar agreement, nor
issue or agree to issue any floating or variable priced equity
linked instruments nor any of the foregoing or equity with price
reset rights.
(c) FAVORED NATIONS PROVISION. Except for the
Excepted Issuances, for so long as 20% of the Note principal,
Warrants or Common Stock issued and issuable upon conversion of
the Notes or Warrants is held by the Subscribers or their
permitted assigned is outstanding, the Company shall offer, issue
or agree to issue any common stock or securities convertible into
or exercisable for shares of common stock (or modify any of the
foregoing which may be outstanding) to any person or entity at a
price per share or conversion or exercise price per share which
shall be less than the Conversion Price in respect of the Shares,
or if less than the Warrant exercise price in respect of the
Warrant Shares, without the consent of each Subscriber holding
Notes, Shares, Warrants, or Warrant Shares, then the Company
shall issue, for each such occasion, additional shares of Common
Stock to each Subscriber so that the average per share purchase
price of the shares of Common Stock issued to the Subscriber (of
only the Common Stock or Warrant Shares still owned by the
Subscriber) is equal to such other lower price per share and the
Conversion Price and Warrant Exercise Price shall automatically
be reduced to such other lower price per share. The average
Purchase Price of the Shares and average exercise price in
relation to the Warrant Shares shall be calculated separately for
the Shares and Warrant Shares. The foregoing calculation and
issuance shall be made separately for Shares received upon Note
conversion and separately for Warrant Shares. The delivery to
the Subscriber of the additional shares of Common Stock shall be
not later than the closing date of the transaction giving rise to
the requirement to issue additional shares of Common Stock. The
Subscriber is granted the registration rights described in
Section 11 hereof in relation to such
-25-
additional shares of Common Stock except that the Filing Date and
Effective Date vis-a-vis such additional common shares shall be,
respectively, the thirtieth (30th) and sixtieth (60th) date after
the closing date giving rise to the requirement to issue the
additional shares of Common Stock. For purposes of the issuance
and adjustment described in this paragraph, the issuance of any
security of the Company carrying the right to convert such
security into shares of Common Stock or of any warrant, right or
option to purchase Common Stock shall result in the issuance of
the additional shares of Common Stock upon the sooner of the
agreement to or actual issuance of such convertible security,
warrant, right or option and again at any time upon any
subsequent issuances of shares of Common Stock upon exercise of
such conversion or purchase rights if such issuance is at a price
lower than the Conversion Price or Warrant exercise price in
effect upon such issuance. Additionally, if the Company shall
offer, issue or agree to issue any of the aforementioned services
to any person, firm or corporation at terms deemed by Subscriber
to be more favorable to the other investor than the terms or
conditions of this Offering, then Subscriber is granted the right
to modify any such term or condition of the Offering to be the
same as any such term or condition of any subsequent offering.
The rights of the Subscriber set forth in this Section 12 are in
addition to any other rights the Subscriber has pursuant to this
Agreement, the Note, any Transaction Document, and any other
agreement referred to or entered into in connection herewith.
(d) OPTION PLAN RESTRICTIONS. The only officer,
director and employee stock option or stock incentive plan
currently in effect or contemplated by the Company has been
submitted to the Subscribers or is described with Reports. No
other plan except substantially similar plans for the benefit of
only directors or full time employees will be adopted nor may any
options or equity not included in such plans be issued until
after the Exclusion Period.
(e) PAID IN KIND. The Subscriber may demand
that some or all of the sums payable to the Subscriber pursuant
to Sections 7.1(c), 7.2, 7.5, 11.4, 11.7(c), 11.7(d) and 11.7(e)
that are not paid within ten business days of the required
payment date be paid in shares of Common Stock valued at the
Conversion Price in effect at the time Subscriber makes such
demand or, at the Subscriber's election, at such other valuation
described in the Transaction Documents. In addition to any other
rights granted to the Subscriber herein, the Subscriber is also
granted the registration rights set forth in Section 11.1(ii)
hereof in relation to such shares of Common Stock and the Common
Stock issuable pursuant to this Section 12(e). For purposes only
of determining any liquidated damages pursuant to the Transaction
Documents, the entire Purchase Price shall be allocated to the
Notes and none to the Warrants; and the Warrant Shares shall be
valued at the actual exercise price thereof.
(f) MAXIMUM EXERCISE OF RIGHTS. In the event
the exercise of the rights described in Sections 12(a), 12(c) and
12(e) would result in the issuance of an amount of common stock
of the Company that would exceed the maximum amount that may be
issued to a Subscriber calculated in the manner described in
Section 7.3 of this Agreement, then the issuance of such
additional shares of common stock of the Company to such
Subscriber will be deferred in whole or in part until such time
as such Subscriber is able to beneficially own such common stock
without exceeding the maximum amount set forth calculated in the
manner described in Section 7.3 of this Agreement. The
determination of when such common stock may be issued shall be
made by each Subscriber as to only such Subscriber.
13. MISCELLANEOUS.
(a) NOTICES. All notices, demands, requests,
consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited
in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, or (iv) transmitted by hand delivery,
telegram, or facsimile, addressed as set forth below or to such
other address as such party
-26-
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: VoIP, Inc.,
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President and CEO, telecopier: (▇▇▇) ▇▇▇-▇▇▇▇,
with a copy by telecopier only to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., ▇▇▇▇▇▇▇
▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, and (ii) if to the Subscribers, to:
the one or more addresses and telecopier numbers indicated on the
signature pages hereto, with an additional copy by telecopier
only to: Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇.
(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. Each of the Closing Date
and Closing Date is referred to as a "Closing 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
Subscribers have relied on any representations not contained or
referred to in this Agreement and the documents delivered
herewith. No right or obligation of the Company shall be
assigned without prior notice to and the written consent of the
Subscribers.
(d) COUNTERPARTS/EXECUTION. This Agreement may
be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when
so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
This Agreement may be executed by facsimile signature and
delivered by facsimile transmission.
(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 conflicts of laws
principles that would result in the application of the
substantive laws of another jurisdiction. Any action brought by
either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state
courts of New York or in the federal courts located in the state
of New York. The parties and the individuals executing this
Agreement and other agreements referred to herein or delivered in
connection herewith 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
-27-
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 one or
more preliminary and final injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, this being in
addition to any other remedy to which any of them may be entitled
by law or equity. Subject to Section 13(e) hereof, each of the
Company, Subscriber and any signator hereto in his personal
capacity 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 in New York of such court, that the
suit, action or proceeding is brought in an inconvenient forum or
that the venue of the suit, action or proceeding is improper.
Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.
(g) INDEPENDENT NATURE OF SUBSCRIBERS. The
Company acknowledges that the obligations of each Subscriber
under the Transaction Documents are several and not joint with
the obligations of any other Subscriber, and no Subscriber shall
be responsible in any way for the performance of the obligations
of any other Subscriber under the Transaction Documents. The
Company acknowledges that each Subscriber has represented that
the decision of each Subscriber to purchase Securities has been
made by such Subscriber independently of any other Subscriber and
independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets,
properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may
have been made or given by any other Subscriber or by any agent
or employee of any other Subscriber, and no Subscriber or any of
its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any
such information, materials, statements or opinions. The Company
acknowledges that nothing contained in any Transaction Document,
and no action taken by any Subscriber pursuant hereto or thereto
(including, but not limited to, the (i) inclusion of a Subscriber
in the Registration Statement and (ii) review by, and consent to,
such Registration Statement by a Subscriber) shall be deemed to
constitute the Subscribers as a partnership, an association, a
joint venture or any other kind of entity, or create a
presumption that the Subscribers are in any way acting in concert
or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The
Company acknowledges that each Subscriber shall be entitled to
independently protect and enforce its rights, including without
limitation, the rights arising out of the Transaction Documents,
and it shall not be necessary for any other Subscriber to be
joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide
all Subscribers with the same terms and Transaction Documents for
the convenience of the Company and not because Company was
required or requested to do so by the Subscribers. The Company
acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Subscribers
are in any way acting in concert or as a group with respect to
the Transaction Documents or the transactions
contemplated thereby.
(h) As used in the Agreement, "consent of the
Subscribers" or similar language means the consent of holders of
not less than 80% of the total of the Shares issued and issuable
upon conversion of outstanding Notes owned by Subscribers on the
date consent is requested.
(i) No consideration shall be offered or paid to
any person to amend or consent to a waiver or modification of any
provision of the Transaction Documents unless the same
consideration is also offered to all the parties to the
Transaction Documents.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-28-
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
--------------------------------------------
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.
VOIP, INC.
a Texas corporation
By: /s/ B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CEO
Dated: February 2, 2006
PAYMENT
AFTER
ORIGINAL
PURCHASE ISSUE CLASS A CLASS B
SUBSCRIBER PRICE DISCOUNT WARRANTS WARRANTS
-------------------------------- ----------- ----------- -------- --------
BRISTOL INVESTMENT FUND, LTD. $910,346.00 $800,000.00 345,351 345,351
Caledonian House, ▇▇▇▇▇▇▇ Street
▇▇▇▇▇▇ Town, Grand Cayman
Cayman Islands
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
(Signature)
By: ▇▇▇▇ ▇▇▇▇▇▇▇, Director
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
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.
VOIP, INC.
a Texas corporation
By: /s/ B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CEO
Dated: February 2, 2006
PAYMENT
AFTER
ORIGINAL
PURCHASE ISSUE CLASS A CLASS B
SUBSCRIBER PRICE DISCOUNT WARRANTS WARRANTS
-------------------------------- ----------- ----------- -------- --------
▇▇▇▇▇ INTERNATIONAL LTD. $796,552.00 $700,000.00 302,183 302,183
53rd Street Urbanizacion Obarrio
Swiss Tower, 16th Floor, Panama
Republic of Panama
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
(Signature)
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)
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.
VOIP, INC.
a Texas corporation
By: /s/ B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CEO
Dated: February 2, 2006
PAYMENT
AFTER
ORIGINAL
PURCHASE ISSUE CLASS A CLASS B
SUBSCRIBER PRICE DISCOUNT WARRANTS WARRANTS
-------------------------------- ----------- ----------- -------- --------
ALPHA CAPITAL AKTIENGESELLSCHAFT $227,586.00 $200,000.00 86,338 86,338
▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Vaduz, Lichtenstein
Fax: ▇▇▇-▇▇-▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------
(Signature)
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)
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.
VOIP, INC.
a Texas corporation
By: /s/ B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CEO
Dated: February 2, 2006
PAYMENT
AFTER
ORIGINAL
PURCHASE ISSUE CLASS A CLASS B
SUBSCRIBER PRICE DISCOUNT WARRANTS WARRANTS
-------------------------------- ----------- ----------- -------- --------
PLATINUM LONG TERM GROWTH II INC. $284,483.00 $250,000.00 107,923 107,923
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax: (212)
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------
(Signature)
By: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (E)
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.
VOIP, INC.
a Texas corporation
By: /s/ B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CEO
Dated: February 2, 2006
PAYMENT
AFTER
ORIGINAL
PURCHASE ISSUE CLASS A CLASS B
SUBSCRIBER PRICE DISCOUNT WARRANTS WARRANTS
-------------------------------- ----------- ----------- -------- --------
CMS CAPITAL $56,897.00 $50,000.00 21,585 21,585
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
(Signature)
By: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (F)
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.
VOIP, INC.
a Texas corporation
By: /s/ B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CEO
Dated: February 2, 2006
PAYMENT
AFTER
ORIGINAL
PURCHASE ISSUE CLASS A CLASS B
SUBSCRIBER PRICE DISCOUNT WARRANTS WARRANTS
-------------------------------- ----------- ----------- -------- --------
DKR SOUNDSHORE OASIS HOLDING $568,966.00 $500,000.00 215,844 215,844
FUND LTD.
C/o DKR Capital Partners, L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇
----------------------------
(Signature)
By: ▇▇▇▇ ▇▇▇▇, Director
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (G)
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.
VOIP, INC.
a Texas corporation
By: /s/ B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CEO
Dated: February 2, 2006
PAYMENT
AFTER
ORIGINAL
PURCHASE ISSUE CLASS A CLASS B
SUBSCRIBER PRICE DISCOUNT WARRANTS WARRANTS
-------------------------------- ----------- ----------- -------- --------
OSHER CAPITAL INC. $85,345.00 $75,000.00 32,377 32,377
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
(Signature)
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (H)
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.
VOIP, INC.
a Texas corporation
By: /s/ B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
Name: B. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CEO
Dated: February 2, 2006
PAYMENT
AFTER
ORIGINAL
PURCHASE ISSUE CLASS A CLASS B
SUBSCRIBER PRICE DISCOUNT WARRANTS WARRANTS
-------------------------------- ----------- ----------- -------- --------
GRUSHKO & ▇▇▇▇▇▇▇, P.C. $56,897.00 $50,000.00 21,585 21,585
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
(Signature)
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibit A1 Form of Class A Warrant
Exhibit A2 Form of Class B Warrant
Exhibit B Escrow Agreement
Exhibit C1 Security Agreement (Company)
Exhibit C2 Security Agreement (Subsidiary)
Exhibit D Collateral Agent Agreement
Exhibit E Form of Legal Opinion
Exhibit F Form of Public Announcement or Form 8-K
Exhibit G Form of Limited Standstill Agreement
Exhibit H Employment Agreement
Schedule 5(a) Subsidiaries
Schedule 5(d) Additional Issuances / Capitalization
Schedule 5(h) Litigation
Schedule 5(m) Defaults
Schedule 5(q) Undisclosed Liabilities
Schedule 8(a) Finder
Schedule 9(e) Use of Proceeds
Schedule 9(q) Providers of Limited Standstill Agreements
Schedule 11.1 Other Securities to be Registered