EXHIBIT 10.20
SUBSCRIPTION AGREEMENT
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THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of September
____, 2003, by and among One Voice Technologies Inc., a Nevada 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 "SEC") 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
purchase $750,000 (the "Purchase Price") of principal amount of 6% secured
promissory notes of the Company ("Note" or "Notes") convertible into shares of
the Company's common stock, $.001 par value (the "Common Stock") at a per share
conversion price equal to the lesser of $.0474, or seventy-eight percent (78%)
of the average of the three lowest intraday trading prices of the Common Stock
as reported by Bloomberg L.P. for the OTC Bulletin Board ("Bulletin Board") for
the thirty (30) trading days preceding, but not including the Conversion Date,
as defined in Section 7.1(b) of this Agreement ("Conversion Price"); and share
purchase warrants (the "Warrants"), in the form attached hereto as EXHIBIT A, to
purchase shares of Common Stock (the "Warrant Shares") (i.e. 60 Warrant Shares
for each 100 shares of Common Stock, which would be issuable upon conversion of
the entire Purchase Price on the Initial Closing Date, as defined in Section 1
hereof. Three Hundred and Seventy-Five Thousand Dollars ($375,000) of the
Purchase Price shall be payable on the Initial Closing Date ("Initial Closing
Purchase Price"). Up to the balance of the Purchase Price will be payable within
five (5) business days after the effectiveness of the Registration Statement (as
defined in Section 11.1(iv) of this Agreement) ("Second Closing Purchase
Price"). 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. INITIAL CLOSING. Subject to the satisfaction or waiver of the terms
and conditions of this Agreement, on the Initial Closing Date, each Subscriber
shall purchase and the Company shall sell to each Subscriber a Note in the
principal amount designated on the signature page hereto ("Initial Closing
Notes") and the amount of the Notes on the Initial Closing Date for all
Subscribers shall be equal to the Initial Closing Purchase Price. The Initial
Closing Date shall be the date that subscriber funds representing the net amount
due the Company from the Purchase Price of the Offering is transmitted by wire
transfer or otherwise to or for the benefit of the Company.
2. SECOND CLOSING.
(a) SECOND CLOSING PURCHASE PRICE. The closing date in
relation to the Second Closing Purchase Price shall be the fifth (5th) business
day after the actual effective date of the Registration Statement described in
Section 11.1(iv) (the "Second Closing Date"). Subject to the satisfaction or
waiver of the terms and conditions of this Agreement, on the Second Closing Date
each Subscriber shall purchase and the Company shall sell to each Subscriber a
Note in the principal amount designated on the signature page hereto ("Second
Closing Notes"). The aggregate Purchase Price of the Second Closing Notes for
all Subscribers shall be equal to the Second Closing Purchase Price. The Second
Closing Note shall be identical to the Note issuable on the Initial Closing Date
except that the maturity date on the Second Closing Note shall be three years
after the Second Closing Date.
(b) CONDITIONS TO SECOND CLOSING. The occurrence of the Second
Closing is expressly contingent on (i) the truth and accuracy, on the Effective
Date and the Second Closing Date of the representations and warranties of the
Company and Subscriber contained in this Agreement, and (ii) continued
compliance with the covenants of the Company set forth in this Agreement. The
Second Closing is further expressly contingent on the non-occurrence of any
Event of Default (as defined in the Note) or other default by the Company of its
obligations and undertakings contained in this Agreement, and the delivery of
Second Closing Notes for which the Company Shares issuable upon conversion and
exercise have been included in the Registration Statement (defined in Section
11.1(iv)) which must be effective as of the Second Closing Date.
(c) SECOND CLOSING DELIVERIES. On the Second Closing Date, the
Company will deliver the Second Closing Notes to the Escrow Agent and each
Subscriber will deliver his portion of the Second Closing Purchase Price to the
Escrow Agent. The Company will deliver a certificate ("Second Closing
Certificate") signed by its chief operating officer and chief financial officer
(i) representing the truth and accuracy of all the representations and
warranties made by the Company contained in this Agreement, as of the Initial
Closing Date, the actual effective date of the Registration Statement and the
Second Closing Date, as if such representations and warranties were made and
given on each of such dates, (ii) adopting the covenants and conditions set
forth in Sections 9, 10, 11, and 12 of this Agreement in relation to the Second
Closing Notes, (iii) representing the timely compliance by the Company with the
Company's registration requirements set forth in Section 11 of this Agreement,
and (iv) certifying that an Event of Default has not occurred. A legal opinion
nearly identical to the legal opinion referred to in Section 6 of this Agreement
shall be delivered to the Subscriber at the Second Closing in relation to the
Company and Second Closing Notes ("Second Closing Legal Opinion"). The legal
opinion must state that all of the Registrable Securities have been included for
registration in an effective registration statement effective as of the actual
effective date of the Registration Statement and Second Closing Date.
(d) SECOND CLOSING LIMITATION. A Second Closing may not take
place in connection with that amount of Second Closing Securities which would be
in excess of the sum of (y) the number of shares of Common Stock beneficially
owned by a Subscriber on the Second Closing Date, and (z) the number of Company
Shares issuable upon the conversion of the Second Closing Note with respect to
which the determination of this proviso is being made on a Second Closing Date,
which would result in beneficial ownership by the Subscriber of more than 9.99%
of the outstanding shares of Common Stock of the Company on the on a Second
Closing Date. For the purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. The Subscriber may revoke the restriction described in this
paragraph upon 61 days prior notice to the Company. The Subscriber shall have
the right to determine which of the equity of the Company deemed beneficially
owned by the Subscriber shall be included in the 9.99% described above and which
shall be allocated to the excess above 9.99%.
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3. WARRANTS. The per Warrant Share exercise price to acquire a Warrant
Share shall be equal to the Conversion Price that would be in effect on the
Initial Closing Date, as if the Initial Closing Date were a Conversion Date. The
Warrants will be issued on the Initial Closing Date. The Warrants shall be
exercisable for seven years after the Issue Date (as defined in the Warrant).
4. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. Each Subscriber hereby
represents and warrants to and agrees with the Company as to such Subscriber
that:
(a) INFORMATION ON COMPANY. The Subscriber has been furnished
with or has obtained from the ▇▇▇▇▇ Website of the Securities and Exchange
Commission (the "Commission") the Company's Form 10-KSB for the year ended
December 31, 2002 as filed with the Commission as of March 31, 2003, 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"). 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.
(b) INFORMATION ON SUBSCRIBER. The Subscriber is, and will be
at the time of the conversion of the Notes and exercise of any of the Warrants,
an "accredited investor", as such term is defined in Regulation D promulgated by
the Commission under the Securities Act of 1933, as amended (the "1933 Act"), 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.
(c) PURCHASE OF NOTES AND WARRANTS. On the Closing Date, the
Subscriber will purchase the Notes and Warrants as principal for its own account
and not with a view to any distribution thereof.
(d) COMPLIANCE WITH SECURITIES ACT. The Subscriber understands
and agrees that the Securities have not been registered under the 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. In any event, and subject to
compliance with applicable securities laws, the Subscriber may enter into
hedging transactions with third parties, which may in turn engage in short sales
of the Securities in the course of hedging the position they assume and the
Subscriber may also enter into short positions or other derivative transactions
relating to the Securities, or interests in the Securities, and deliver the
Securities, or interests in the Securities, to close out their short or other
positions or otherwise settle short sales or other transactions, or loan or
pledge the Securities, or interests in the Securities, to third parties that in
turn may dispose of these Securities.
(e) SHARES LEGEND. The Shares and the Warrant Shares shall
bear the following or similar legend:
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"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 ONE VOICE TECHNOLOGIES INC. THAT SUCH REGISTRATION IS
NOT REQUIRED."
(f) 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 ONE VOICE TECHNOLOGIES
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(g) NOTE LEGEND. The Note shall bear the following legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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 ONE VOICE
TECHNOLOGIES INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(h) 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.
(i) 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
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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.
(j) 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 Initial Closing Date and Second Closing Date, shall be
true and correct as of such Closing Dates. The foregoing representations and
warranties shall survive the Second 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 duly organized, validly existing and in good
standing under the laws of the respective jurisdictions of their incorporation
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. The Company and each of its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or financial condition of the
Company.
(b) OUTSTANDING STOCK. All issued and outstanding shares of
capital stock of the Company and each of its subsidiaries has been duly
authorized and validly issued and are fully paid and non-assessable.
(c) AUTHORITY; ENFORCEABILITY. This Agreement, the Notes, the
Warrant, the Escrow Agreement and any other agreements delivered together with
this Agreement or in connection herewith have been duly authorized, executed and
delivered by the Company and are valid and binding agreements enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity; and the Company has full corporate power and authority necessary to
enter into this Agreement, the Notes, the Warrant, the Escrow Agreement and such
other agreements and to perform its obligations hereunder and under all other
agreements entered into by the Company relating hereto.
(d) ADDITIONAL ISSUANCES. 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), or the Reports.
(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 Amex, the National Association of
Securities Dealers, Inc., Nasdaq, SmallCap Market, the OTC Bulletin Board nor
the Company's Shareholders is required for the execution and compliance by the
Company of its obligations under this Agreement, and all other agreements
entered into by the Company relating hereto, including, without limitation, the
issuance and sale of the Securities, and the performance of the Company's
obligations hereunder and under all such other agreements.
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(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 of incorporation, charter or bylaws of the Company, (B) to the
Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation
or determination applicable to the Company of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or any of its
subsidiaries 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 or subsidiaries is a party, by which the Company or any of its
affiliates or subsidiaries is bound, or to which any of the properties of the
Company or any of its affiliates or subsidiaries 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 or subsidiaries is a party except
the violation, conflict, breach, or default of which would not have a material
adverse effect on the Company; or
(ii) result in the creation or imposition of any
lien, charge or encumbrance upon the Securities or any of the assets of the
Company, its subsidiaries or any of its affiliates.
(g) THE SECURITIES. The Securities upon issuance:
(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 conversion of
the Notes, and upon exercise of the Warrants, the Shares and Warrant Shares
respectively, will be duly and validly issued, fully paid and nonassessable (and
if registered pursuant to the 1933 Act, and resold pursuant to an effective
registration statement will be free trading and unrestricted, provided that each
Subscriber complies with the prospectus delivery requirements of the 1933 Act);
(iii) will not have been issued or sold in violation
of any preemptive or other similar rights of the holders of any securities of
the Company; and
(iv) will not subject the holders thereof to personal
liability by reason of being such holders.
(v) will not result in the activation of any
anti-dilution rights or a reset or repricing of any debt or security instrument
of any other debt or equity holder of the Company.
(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
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or the performance by the Company of its obligations under this Agreement, and
all other agreements entered into by the Company relating hereto. Except as
disclosed in the Reports, there is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates which litigation if adversely determined could have a
material adverse effect on the Company.
(i) REPORTING COMPANY. The Company is a publicly-held company
subject to reporting obligations pursuant to Sections 15(d) and 13 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and has a class of
common shares registered pursuant to Section 12(g) of the 1934 Act. Pursuant to
the provisions of the 1934 Act, the Company has timely filed all reports and
other materials required to be filed thereunder with the Commission during the
preceding twelve months.
(j) NO MARKET MANIPULATION. The Company has not taken, and
will not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the common stock of the Company to facilitate the sale or resale of
the Securities or affect the price at which the Securities may be issued or
resold.
(k) INFORMATION CONCERNING COMPANY. The Reports contain all
material information relating to the Company and its operations and financial
condition as of their respective dates which information is required to be
disclosed therein. Since the date of the financial statements included in the
Reports, and except as modified in the Other Written Information or in the
Schedules hereto, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the Reports. The
Reports do not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances when made.
(l) STOP TRANSFER. The Securities, when issued, will be
restricted securities. 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. The Company is (i) not in default under or in
violation of any other material agreement or instrument to which it is a party
or by which it or any of its properties are bound or affected, which default or
violation would have a material adverse effect on the Company, (ii) not in
default with respect to any order of any court, arbitrator or governmental body
or subject to or party to any order of any court or governmental authority
arising out of any action, suit or proceeding under any statute or other law
respecting antitrust, monopoly, restraint of trade, unfair competition or
similar matters, or (iii) to its knowledge in violation of any statute, rule or
regulation of any governmental authority which violation would have a material
adverse effect on the Company.
(n) NO INTEGRATED OFFERING. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board. Nor will the Company or any of its affiliates or
subsidiaries take any action or steps that would cause the offer of the
Securities to be integrated with other offerings. The Company will not conduct
any offering other than the transactions contemplated hereby that will be
integrated with the offer or issuance of the Securities.
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(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 Company's common stock is quoted on the
Bulletin Board. The Company has not received any oral or written notice that its
common stock will be delisted from the Bulletin Board nor that its common stock
does not meet all requirements for the continuation of such quotation and the
Company satisfies the requirements for the continued listing of its 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,
2002 and which, individually or in the aggregate, would reasonably be expected
to have a material adverse effect on the Company's financial condition, other
than as set forth in Schedule 5(q).
(r) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since December 31,
2002, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.
(s) CAPITALIZATION. The authorized and outstanding capital
stock of the Company as of the date of this Agreement and the Closing Date are
set forth on Schedule 5(s). Except as set forth in the Reports and Other Written
Information and 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. 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
have studied and fully understand the nature of the Securities being sold hereby
and recognize that they 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 such issuance is in the best interests of the Company.
The Company specifically acknowledges that its obligation to issue the Shares
upon conversion of the Note and exercise of the Warrants is binding upon the
Company and enforceable, except as otherwise described in this Subscription
Agreement or the Note, 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 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) CORRECTNESS OF REPRESENTATIONS. The Company represents
that the foregoing representations and warranties are true and correct as of the
date hereof and will be true and correct as of the Initial Closing Date and
Second Closing Date, and unless the Company otherwise notifies the Subscribers
prior to the Initial Closing Date, shall be true and correct as of such Closing
Dates. The foregoing representations and warranties shall survive the Second
Closing Date for a period of three years.
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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. A form of the legal opinion is annexed hereto as EXHIBIT C. The
Company will provide, at the Company's expense, such other legal opinions in the
future as are reasonably necessary for the conversion of the Notes and exercise
of the Warrants and resale of the Shares and Warrant Shares.
7.1. CONVERSION OF NOTE.
(a) Upon the conversion of the 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 or part thereof by telecopying an executed and
completed Notice of Conversion (a form of which is annexed to 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 Notice of Conversion
(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. 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 an original Note
is delivered to the Company. To the extent that a Subscriber elects not to
surrender a Note for reissuance upon partial payment or conversion, the
Subscriber hereby indemnifies the Company against any and all loss or damage
attributable to a third-party claim in an amount in excess of the actual amount
then due under the Note.
(c) The Company understands that a delay in the delivery of
the Shares in the form required pursuant to Section 7 hereof, or the Mandatory
Redemption Amount described in Section 7.2 hereof, beyond the Delivery Date or
Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber. As compensation to the Subscriber for such
loss, the Company agrees to pay to the Subscriber for late issuance of Shares in
the form required pursuant to Section 7 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. The Company shall pay any payments
9
incurred under this Section in immediately available funds upon demand.
Furthermore, in addition to any other remedies which may be available to the
Subscriber, in the event that the Company fails for any reason to effect
delivery of the Shares by the Delivery Date or make payment by the Mandatory
Redemption Payment Date, the Subscriber will be entitled to revoke all or part
of the relevant Notice of Conversion or rescind all or part of the notice of
Mandatory Redemption by delivery of a notice to such effect to the Company
whereupon the Company and the Subscriber shall each be restored to their
respective positions immediately prior to the delivery of such notice, except
that late payment charges described above shall be payable through the date
notice of revocation or rescission is given to the Company.
(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) or for any reason other than pursuant
to the limitations set forth in Section 7.3 hereof, then at the Subscriber's
election, the Company must pay to the Subscriber ten (10) business days after
request by the Subscriber or on the Delivery Date (if requested 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 130%, 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
("Mandatory Redemption Payment"). The Mandatory Redemption Payment must be
received by the Subscriber on the same date as the Company Shares otherwise
deliverable or within 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.
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 9.99% 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 9.99% and aggregate conversion by the Subscriber may exceed
9.99%. The Subscriber may void the conversion limitation described in this
Section 7.3 upon 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 9.99% amount described above and which shall
be allocated to the excess above 9.99%.
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7.4. INJUNCTION - POSTING OF BOND. In the event a Subscriber shall
elect to convert a Note or part thereof, the Company may not refuse conversion
based on any claim that such 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 said Note shall have been sought and
obtained and the Company has posted a surety bond for the benefit of such
Subscriber in the amount of 130% of the amount of the Note, which is subject to
the injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Subscriber to the extent 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 ten (10) days
after the Delivery Date the Subscriber purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
such Subscriber of the Common Stock which the Subscriber anticipated receiving
upon such conversion (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored, together with interest thereon
at a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if the Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of $10,000 of note principal and/or interest, the
Company shall be required to pay the Subscriber $1,000, plus interest. The
Subscriber shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In. The delivery date by which
Common Stock must be delivered pursuant to this Section 7.5 shall be tolled for
the amount of days that the Subscriber does not deliver information reasonably
requested by the Company's transfer agent.
7.6 ADJUSTMENTS. The Conversion Price and amount of Shares issuable
upon conversion of the Notes shall be adjusted to offset the effect of stock
splits, stock dividends, pro rata distributions of property or equity interests
to the Company's shareholders.
7.7. REDEMPTION. The Company may not redeem or call the Note without
the consent of the holder of the Note.
8. LEGAL FEE/ESCROW AGENT AND FINDER'S FEE.
(a) LEGAL FEE. The Company shall pay to Grushko & ▇▇▇▇▇▇▇,
P.C., a fee of $________ ("Legal Fees") as reimbursement for services rendered
to Alpha Capital Aktiengesellschaft 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. $__________ of the Legal Fees shall be payable on
the Initial Closing Date and $________ shall be payable on the Second Closing
Date. The Legal Fees will be payable out of funds held pursuant to the Escrow
Agreement.
(b) FINDER. The Company on the one hand, and each Subscriber
on the other hand, agree to indemnify the other against and hold the other
harmless from any and all liabilities to any persons claiming finder's fees or
brokerage commissions other than the parties identified on Schedule 8(b)
("Finder" or "Finders") 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.
11
Anything to the contrary in this Agreement notwithstanding, each Subscriber is
providing indemnification only for such Subscriber's own actions and not for any
action of any other Subscriber. The Company agrees that it will pay the Finders
a cash fee equal to six percent (6%) of the Purchase Price on the Closing Date
(as defined herein) directly out of the funds held pursuant to the Escrow
Agreement ("Finder's Fees"). The Company represents that there are no other
parties entitled to receive fees, commissions, or similar payments in connection
with the offering described in this Agreement except the Finders.
9. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Subscribers as follows:
(a) STOP ORDERS. The Company will advise the Subscribers,
promptly 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 of Common Stock to be purchased hereunder and the Warrant Shares upon
each national securities exchange, or quotation system, if any, upon which
shares of common stock are then listed (subject to official notice of issuance)
and shall maintain such listing so long as any Securities are outstanding. The
Company will maintain the listing of its Common Stock on the American Stock
Exchange, Nasdaq SmallCap Market, Nasdaq National Market System, OTC 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) REPORTING REQUIREMENTS. From the date of this Agreement
and until at least two (2) years after the actual effective date of the
Registration Statement described in Section 11.1(iv) hereof, the Company will
(i) cause its Common Stock to continue to be registered under Section 12(b) or
12(g) of the 1934 Act, (ii) comply in all respects with its reporting and filing
obligations under the 1934 Act, (iii) comply with all reporting requirements
that are applicable to an issuer with a class of shares registered pursuant to
Section 12(b) or 12(g) of the 1934 Act, as applicable, and (iv) comply with all
requirements related to any registration statement filed pursuant to this
Agreement. The Company will use its best efforts not to take any action or file
any document (whether or not permitted by the 1933 Act or the 1934 Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said acts until the later of
two (2) years after the actual effective date of the Registration Statement
described in Section 11.1(iv) hereof. Until the earlier of the resale of the
Shares and the Warrant Shares by each Subscriber or at least two (2) 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 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.
12
(e) USE OF PROCEEDS. The Company undertakes to use the
proceeds of the Subscribers' funds for the purposes set forth on SCHEDULE 9(E)
hereto. A deviation from the use of proceeds set forth on SCHEDULE 9(E) of more
than 10% per item or more than 20% in the aggregate shall be deemed a material
breach of the Company's obligations hereunder. 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 redeemable notes or equity instruments of the Company nor non-trade
obligations outstanding on the Initial Closing Date.
(f) RESERVATION. From and after October 15, 2003, the Company
undertakes to reserve, pro rata on behalf of each holder of a Note or Warrant,
from its authorized but unissued common stock, at all times that Notes or
Warrants remain outstanding, a number of common shares equal to not less than
200% of the amount of common shares necessary to allow each such holder at all
times to be able to convert all such outstanding Notes, and one common share for
each Warrant Share. Failure to have sufficient shares reserved pursuant to this
Section 9(f) for three consecutive business days or ten days in the aggregate
shall be an Event of Default under the Note.
(g) TAXES. From the date of this Agreement until two (2) years
after the Closing Date (or Second Closing Date if the Second Closing Notes are
issued), 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 until two (2)
years after the Closing Date (or Second Closing Date if the Second Closing Notes
are issued), the Company will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than 100% of
the insurable value of the property insured; and the Company will maintain, with
financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated and to the
extent available on commercially reasonable terms.
(i) BOOKS AND RECORDS. From the date of this Agreement until
two (2) years after the Closing Date (or Second Closing Date if the Second
Closing Notes are issued), 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
until two (2) years after the Closing Date (or Second Closing Date if the Second
Closing Notes are issued), 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.
13
(k) INTELLECTUAL PROPERTY. From the date of this Agreement
until two (2) years after the Closing Date (or Second Closing Date if the Second
Closing Notes are issued), 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 until two (2)
years after the Closing Date (or Second Closing Date if the Second Closing Notes
are issued), the Company will keep its properties in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company will at all times comply with each provision of all
leases to which it is a party or under which it occupies property if the breach
of such provision could reasonably be expected to have a material adverse
effect.
(m) CONFIDENTIALITY. From the date of this Agreement until two
(2) years after the Closing Date (or Second Closing Date if the Second Closing
Notes are issued), the Company agrees that 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 ten
days prior notice to Subscriber.
(n) BLACKOUT. The Company undertakes and covenants that until
the first to occur of (i) the registration statement described in Section
11.1(iv) having been effective for one hundred and eighty (180) business days,
or (ii) until all the Shares and Warrant Shares have been resold pursuant to
said registration statement, the Company will not enter into any acquisition,
merger, exchange or sale or other transaction that could have the effect of
delaying the effectiveness of any pending registration statement, causing an
already effective registration statement to no longer be effective or current,
or require the filing of an amendment to an already effective registration
statement.
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 Subscribes relating hereto.
14
(c) The procedures set forth in Section 11.6 shall apply to
the indemnifications set forth in Sections 10(a) and 10(b) above.
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 91 days after the
Initial Closing Date, but not later than three years after the Second Closing
Date ("Request Date"), the Company, 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 issued Initial Closing Notes, Second Closing Notes and Warrant
Shares actually issued upon exercise of the Warrants (collectively "Registrable
Securities"), shall prepare and file with the Commission a registration
statement under the 1933 Act covering the Shares and Warrant Shares which are
the subject of such request. For purposes of Sections 11.1(i) and 11.1(ii),
Registrable Securities shall not include Securities which are included in an
effective registration statement or included for registration in a pending
registration statement, or which have been issued without further transfer
restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act.
In addition, upon the receipt of such request, the Company shall promptly give
written notice to all other record holders of the Registrable Securities that
such registration statement is to be filed and shall include in such
registration statement Registrable Securities for which it has received written
requests within 10 days after the Company gives such written notice. Such other
requesting record holders shall be deemed to have exercised their demand
registration right under this Section 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 15 days' prior written notice to the record
holder of the Registrable Securities of its intention so to do. Upon the written
request of the holder, received by the Company within 10 days after the giving
of any such notice by the Company, to register any of the Registrable Securities
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"). In the event that any registration pursuant to this
Section 11.1(ii) shall be, in whole or in part, an underwritten public offering
of common stock of the Company, the number of shares of Registrable Securities
to be included in such an underwriting may be reduced by the managing
underwriter if and to the extent that the Company and the underwriter shall
reasonably be of the opinion that such inclusion would adversely affect the
marketing of the securities to be sold by the Company therein; provided,
however, that the Company shall notify the Seller in writing of any such
reduction. Notwithstanding the foregoing provisions, or Section 11.4 hereof, the
Company may withdraw or delay or suffer a delay of any registration statement
referred to in this Section 11.1(ii) without thereby incurring any liability to
the Seller.
(iii) If, at the time any written request for registration is
received by the Company pursuant to Section 11.1(i), the Company has determined
to proceed with the actual preparation and filing of a registration statement
under the 1933 Act in connection with the proposed offer and sale for cash of
any of its securities for the Company's own account and the Company actually
does file such other registration statement, such written request shall be
deemed to have been given pursuant to Section 11.1(ii) rather than Section
11.1(i), and the rights of the holders of Registrable Securities covered by such
written request shall be governed by Section 11.1(ii).
15
(iv) The Company shall file with the Commission not later than
thirty (30) days after the Initial Closing Date (the "Filing Date"), and cause
to be declared effective within ninety (90) days after the Initial Closing Date
(the "Effective Date"), a Form SB-2 registration statement (the "Registration
Statement") (or such other form that it is eligible to use) in order to register
the Registrable Securities for resale and distribution under the 1933 Act. The
Company will register not less than a number of shares of common stock in the
aforedescribed registration statement that is equal to 200% of the Shares
issuable upon conversion of the Initial Closing Notes and Second Closing Notes
(using the Conversion Price on the Initial Closing Date or the trading day
immediately preceding the filing date of the Registration Statement, or any
amendment thereto, whichever results in the greatest number of registrable
Shares) and 100% 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 not issued, employed or reserved for anyone
other than each Subscriber. Such 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. No securities of the Company other than the Registrable
Securities will be included in the registration statement described in this
Section 11.1(iv) except as disclosed on Schedule 11.1, without the written
consent of Subscriber.
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 shares of 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), and promptly
provide to the holders of Registrable Securities (the "Sellers") copies of all
filings and Commission letters of comment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until such registration statement has been effective for a period of two (2)
years, and comply with the provisions of the 1933 Act with respect to the
disposition of all of the Registrable Securities covered by such registration
statement in accordance with the Seller's intended method of disposition set
forth in such registration statement for such period;
(c) furnish to the Seller, at the Company's expense, such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller, provided,
however, that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction;
(e) 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;
16
(f) immediately notify the Seller when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event of which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; 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
Seller, and any attorney, accountant or other agent retained by the Seller or
underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration statement.
11.3. PROVISION OF DOCUMENTS. In connection with each registration
described in this Section 11, the Seller will furnish to the Company in writing
such information and representation letters with respect to itself and the
proposed distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.
11.4. NON-REGISTRATION EVENTS. The Company and the Subscribers agree
that the Seller will suffer damages if any registration statement required under
Section 11.1(iv) above 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 (i) the registration
statement on Form SB-2 or such other form described in Section 11.1(iv) is not
filed on or before the Filing Date or is not declared effective on or before the
sooner of the Effective Date, or within ten (10) business days of receipt by the
Company of a written or oral communication from the Commission that the
registration statement described in Section 11.1(iv) will not be reviewed, (ii)
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 (iii) 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
immediately by an additional registration statement filed and declared
effective) for a period of time which shall exceed 30 days in the aggregate per
year or more than 20 consecutive days (defined as a period of 365 days
commencing on the date the Registration Statement is declared effective) (each
such event referred to in clauses (i), (ii) and (iii) of this Section 11.4 is
referred to herein as a "Non-Registration Event"), then the Company shall
deliver to the holder of Registrable Securities, as Liquidated Damages, an
amount equal to two percent (2%) for each thirty days or part thereof, of the
Purchase Price of the Notes remaining unconverted and attributable to Shares
issued upon conversion of the Notes and actually paid "Purchase Price" (as
defined in the Warrants) of Warrant Shares issued or issuable upon actual
exercise of the Warrants, during the pendency of such Non-Registration Event,
for the Registrable Securities owned of record by such holder as of or
subsequent to the occurrence of such Non-Registration Event which are subject to
such Non-Registration Event. Payments to be made pursuant to this Section 11.4
shall be payable in cash and due and payable within ten (10) business days after
the end of each thirty (30) day period or part thereof.
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"
17
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 any additional 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
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,
18
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the gross proceeds received by the Seller from the sale of Registrable
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 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 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 offered by it
pursuant to such registration statement; and (z) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the ▇▇▇▇
▇▇▇) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
19
11.7. DELIVERY OF UNLEGENDED SHARES.
(a) Within three (3) business days (such third business day,
the "Unlegended Shares Delivery Date") after the business day on which the
Company has received (i) a notice that Registrable Securities have been sold
either 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, have been satisfied, and (iii) the
original share certificates representing the shares of Common Stock that have
been sold, 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, for the
delivery of shares of Common Stock without any legends including the legends set
forth in Sections 4(e) and 4(g) above, issuable 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 unsold shares of
Common Stock, if any, to the Subscriber at the address specified in the notice
of sale, via express courier, by electronic transfer or otherwise on or before
the Unlegended Shares Delivery Date.
(b) In lieu of delivering physical certificates representing
the Unlegended Shares, 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 therefore do not bear
a legend and the Subscriber is not obligated to return such certificate for the
placement of a legend thereon, the Company shall 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.
(c) The Company understands that a delay in the delivery of
the Unlegended Shares pursuant to Section 11 hereof beyond 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 purchase all or any portion
of the Shares and Warrant Shares subject to such default at a price per share
equal to 130% of the Purchase Price of such Shares and Warrant Shares. The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand.
(d) In addition to any other rights available to a Subscriber,
if the Company fails to deliver to a Subscriber Unlegended Shares within ten
(10) calendar 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 anticipated receiving from the Company (a "Buy-In"),
then the Company shall pay in cash to the Subscriber (in addition to any
remedies available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of common stock so purchased exceeds (B) the aggregate purchase price
of the 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.
20
12. (a) RIGHT OF FIRST REFUSAL. Until 180 days after the registration
statement to be filed with the Commission pursuant to Section 11.1(iv) hereof is
actually declared effective by the Commission (the "Exclusion Period"), the
Subscribers shall be given not less than fourteen (14) 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) employee stock
options or compensation plans, (ii) as full or partial consideration in
connection with any merger, consolidation or purchase of substantially all of
the securities or assets of any corporation or other entity, or (iii) as has
been described in the Reports or Other Written Information filed or delivered
prior to the Closing Date (collectively "Excepted Issuances"). The Subscribers
shall have the right during the fourteen (14) business days following the notice
to purchase 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 original notice period or for a period of fourteen (14)
business days following the notice of modification, whichever is longer, to
exercise such right.
(b) OFFERING RESTRICTIONS. Except as disclosed in the Reports
or Other Written Information filed with the Commission or made available to the
Subscriber prior to the Closing Date, or in connection with Excepted Issuances,
the Company will not issue any equity, convertible debt or other securities
convertible into common stock on any terms more favorable to such other investor
than any of the terms of the Offering, until after the Exclusion Period without
the prior written consent of the Subscriber, which consent may be withheld for
any reason.
(c) FAVORED NATIONS PROVISION. If during the Exclusion Period,
except for the Excepted Issuances, the Company shall offer, issue or agree to
issue any Common Stock or securities convertible into or exercisable for shares
of Common Stock to any person, firm or corporation at a price per share or
conversion or exercise price per share which shall be less than the per share
purchase price of the Shares, or upon any other term more favorable to such
other investor, without the consent of a Subscriber still holding Shares, then
the Company shall issue, for each such occasion, additional shares of Common
Stock to such Subscriber so that the average per share purchase price of the
shares of Common Stock issued to such Subscriber is equal to such other lower
price per share. 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 additional shares of Common Stock except that the Filing Date
and Effective Date vis-a-vis such additional common shares shall be,
respectively, the sixtieth (60th) and one hundred and twentieth (120th) 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 issuance of such convertible security, warrant,
right or option and again 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 then purchase price per share of the shares of Company
Stock. The Subscriber is also granted the right to accept vis-a-vis any term or
condition of the Offering, any term of the subsequent offering that Subscriber
deems more favorable than the term or condition of the Offering.
21
(d) MAXIMUM EXERCISE OF RIGHTS. In the event the exercise of
the rights described in Sections 12(a) or 12(c) would result in the issuance of
an amount of common stock of the Company that would exceed the maximum amount
described in Section 7.3, then the purchase and/or issuance of such other Common
Stock or Common Stock equivalents of the Company will be deferred in whole or in
part until such time as the Subscriber is able to beneficially own such Common
Stock or Common Stock equivalents without exceeding the maximum amount set forth
in Section 7.3 of this Agreement. The determination of when such Common Stock or
Common Stock equivalents may be issued shall be made by each Subscriber as to
only such Subscriber.
13. SECURITY INTEREST. The Subscribers will be granted a security
interest in all the assets of the Company to be memorialized in a Security
Agreement. 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. A form of Security Agreement is annexed hereto as EXHIBIT D. The
Subscribers will appoint a Collateral Agent to represent them collectively in
connection with the security interest to be granted in the Company's assets. The
appointment will be pursuant to a Collateral Agent Agreement, a form of which is
annexed hereto as EXHIBIT E.
14. MISCELLANEOUS.
(a) NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: One Voice Technologies
Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, telecopier number:
(▇▇▇) ▇▇▇-▇▇▇▇, with a copy by telecopier only to: Sichenzia, Ross, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, Esq., telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇, and (ii) if to the
Subscribers, to: the address and telecopier number indicated on the signature
page hereto, with a copy by telecopier only to: Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopier number: (212)
697-3575.
(b) CLOSING. The consummation of the transactions contemplated
herein shall take place at the offices of Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, upon the satisfaction of all
conditions to Closing set forth in this Agreement.
(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
either party shall be assigned by that party without prior notice to and the
written consent of the other party.
22
(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 principles of conflicts of laws. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. The parties and the individuals
executing this Agreement and other agreements on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
(f) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION. The Company
and Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 14(e) hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
[THIS SPACE INTENTIONALLY LEFT BLANK]
23
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.
ONE VOICE TECHNOLOGIES INC.
A Nevada Corporation
By:
-------------------------------
Name:
Title:
Dated: September __, 2003
------------------------------------------ --------------------- ---------------
SUBSCRIBER INITIAL CLOSING SECOND CLOSING
DATE PURCHASE DATE PURCHASE
PRICE PRICE
------------------------------------------ --------------------- ---------------
$150,000.00 $150,000.00
_______________________________________
(Signature)
ALPHA CAPITAL AKTIENGESELLSCHAFT
▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Vaduz, Lichtenstein
Fax: ▇▇▇-▇▇-▇▇▇▇▇▇▇▇
------------------------------------------ --------------------- ---------------
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.
ONE VOICE TECHNOLOGIES INC.
A Nevada Corporation
By:
-------------------------------
Name:
Title:
Dated: September __, 2003
------------------------------------------ --------------------- ---------------
SUBSCRIBER INITIAL CLOSING SECOND CLOSING
DATE PURCHASE DATE PURCHASE
PRICE PRICE
------------------------------------------ --------------------- ---------------
$150,000.00 $150,000.00
_____________________________________
(Signature)
BRISTOL INVESTMENT FUND, LTD.
Caledonian House, ▇▇▇▇▇▇▇ Street
Georgetown, Grand Cayman
Cayman Islands
Fax: ▇▇▇-▇▇▇-▇▇▇▇
------------------------------------------ --------------------- ---------------
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.
ONE VOICE TECHNOLOGIES INC.
A Nevada Corporation
By:
-------------------------------
Name:
Title:
Dated: September __, 2003
------------------------------------------ --------------------- ---------------
SUBSCRIBER INITIAL CLOSING SECOND CLOSING
DATE PURCHASE DATE PURCHASE
PRICE PRICE
------------------------------------------ --------------------- ---------------
$75,000.00 $75,000.00
______________________________________
(Signature) ▇▇▇▇▇ INTERNATIONAL LTD.
53rd Street Urbanizacion Obarrio
Swiss Tower, 16th Floor, Panama
Republic of Panama
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------ --------------------- ---------------
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibit A Form of Warrant
Exhibit B Escrow Agreement
Exhibit C Form of Legal Opinion
Exhibit D Form of Security Agreement
Exhibit E Form of Collateral Agent Agreement
Schedule 5(d) Additional Issuances
Schedule 5(q) Undisclosed Liabilities
Schedule 5(s) Capitalization
Schedule 8(b) Finders
Schedule 9(e) Use of Proceeds
Schedule 11.1 Other Securities to be Registered
EXHIBIT A to the SUBSCRIPTION AGREEMENT - FORM OF WARRANT
EXHIBIT B to the SUBSCRIPTION AGREEMENT - ESCROW AGREEMENT
EXHIBIT C to the SUBSCRIPTION AGREEMENT - FORM OF LEGAL OPINION
EXHIBIT D to the SUBSCRIPTION AGREEMENT - FORM OF SECURITY AGREEMENT
EXHIBIT E to the SUBSCRIPTION AGREEMENT - FORM OF COLLATERAL AGENT AGREEMENT
SCHEDULE 5(d) to the SUBSCRIPTION AGREEMENT - ADDITIONAL ISSUANCES
SCHEDULE 5(q) to the SUBSCRIPTION AGREEMENT - UNDISCLOSED LIABILITIES
SCHEDULE 5(s) to the SUBSCRIPTION AGREEMENT - CAPITALIZATION
SCHEDULE 8(b) to the SUBSCRIPTION AGREEMENT - FINDERS
SCHEDULE 9(e) to the SUBSCRIPTION AGREEMENT - USE OF PROCEEDS
SCHEDULE 11.1 to the SUBSCRIPTION AGREEMENT - OTHER SECURITIES TO BE REGISTERED
SCHEDULE 8(b) - FINDERS
-----------------------
------------------------------------ ----------------------- -------------------
FINDER INITIAL CLOSING SECOND CLOSING
------------------------------------ ----------------------- -------------------
LIBRA FINANCE, S.A. (1) $7,500.00 $7,500.00
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
------------------------------------ ----------------------- -------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ $6,000.00 $6,000.00
SECURITIES, INC. (2)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
------------------------------------ ----------------------- -------------------
UNISOURCE, INC. (3) $9,000.00 $9,000.00
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
------------------------------------ ----------------------- -------------------
TOTAL $22,500.00 $22,500.00
------------------------------------ ----------------------- -------------------
(1) In relation to investments by Alpha Capital Aktiengesellschaft and ▇▇▇▇▇
International Ltd.
(2) In relation to investment by Bristol Investment Fund, Ltd.
(3) In relation to investments by all Subscribers.