EXHIBIT 4.1
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of
February ____, 2004, by and among American Water Star, 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 "Commission") under the Securities Act of 1933,
as amended (the "1933 Act").
WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue and
sell to the Subscribers, as provided herein, and the Subscribers
shall purchase, in the aggregate, $8,000,000 (the "Purchase
Price") of the Company's common stock, $.0001 par value (the
"Common Stock" or "Shares") at a per share price of $.90; and
share purchase warrants (the "Warrants"), in the forms attached
hereto as Exhibit A and Exhibit B, to purchase shares of Common
Stock (the "Warrant Shares"). Four Million Dollars ($4,000,000)
of the Purchase Price shall be payable to the Company on the
Initial Closing Date, as defined in Section 1 hereof ("Initial
Closing Purchase Price"). Four Million Dollars ($4,000,000) of
the Purchase Price will be payable to the Company within five (5)
business days after the actual filing date ("Actual Filing Date")
of the Registration Statement as defined in Section 11.1(iv) of
this Agreement ("Second Closing Purchase Price"). The Common
Stock, the Warrants and the Warrant Shares are collectively
referred to herein as the "Securities"; and
WHEREAS, the aggregate proceeds of the sale of the Common
Stock 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 C (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 Common Stock for the
principal amount designated on the signature page hereto
("Initial Closing Shares"). The aggregate amount of the Common
Stock to be purchased by the Subscribers on the Initial Closing
Date shall, in the aggregate, be equal to the Initial Closing
Purchase Price. On the Initial Closing Date, the Company will
deliver to each Subscriber such Subscriber's Initial Closing
Shares, Initial Closing Warrants (as hereinafter defined) and
Green Shoe Warrants (as hereinafter defined). The Initial
Closing Date shall be the date that subscriber funds representing
the net amount due the Company from the Initial Closing Purchase
Price is transmitted by wire transfer or otherwise to or for the
benefit of the Company.
2. Second Closing.
(a) Second Closing. The closing date in
relation to the Second Closing Purchase Price shall be the fifth
(5th) business day after the Actual Filing Date (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 Common Stock in the principal amount
designated on the signature page hereto "Second Closing Shares".
The aggregate Purchase Price of the Second Closing Shares for all
Subscribers shall be equal to the Second Closing Purchase Price.
(b) Conditions to Second Closing. The
occurrence of the Second Closing is expressly contingent on (i)
the truth and accuracy on the Actual Filing Date and the Second
Closing Date of the representations and warranties of the Company
and Subscriber contained in this Agreement, (ii) compliance with
the covenants and undertakings of the Company set forth in this
Agreement, (iii) the non-occurrence of any default by the Company
of its obligations and undertakings contained in this Agreement,
(iv) the delivery on the Second Closing Date of Second Closing
Shares which have been included in the Registration Statement,
which must have been filed within five (5) business days prior to
the Second Closing Date, and (v) the delivery of the Second
Closing Warrants for which the Warrant Shares issuable upon
exercise have been included in the Registration Statement, which
must have been filed within five (5) days prior to the Second
Closing Date.
(c) Second Closing Deliveries. On the Second
Closing Date, the Company will deliver the Second Closing Shares
and Second Closing Warrants to the Escrow Agent and each
Subscriber will deliver its portion of the respective Purchase
Price to the Escrow Agent. On the Second Closing Date, the
Company will deliver a certificate ("Second Closing Certificate")
signed by its chief operating officer or 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 Filing
Date, and the Second Closing Date, as if such representations and
warranties were made and given on all 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 Shares,
and (iii) representing the timely compliance by the Company with
the Company's registration requirements set forth in Section 11
of this Agreement, and all other provisions of this Agreement. 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 Shares and Second Closing Warrants ("Second
Closing Legal Opinion"). The Second Closing Legal Opinion must
also state that all of the Registrable Securities (as defined in
Section 11) have been included for registration in the
Registration Statement which has been accepted for filing by the
Commission.
(d) Second Closing Limitation. A Second Closing
may not take place in connection with that amount of Second
Closing Shares to be sold to each Subscriber which would be in
excess of the sum of (y) the number of shares of Common Stock
beneficially owned by such Subscriber on the Second Closing Date,
and (z) the number of Second Closing Shares 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 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. A Subscriber may revoke the
restriction described in this paragraph upon and effective after
61 days prior notice to the Company. Each Subscriber shall have
the right to determine which of the equity of the Company deemed
beneficially owned by such Subscriber shall be included in the
9.99% amount described above and which shall be allocated to the
excess above 9.99%, except that the Warrant Shares issuable upon
exercise of the Second Closing Warrants will all be allocated to
the amount above 9.99%.
3. Warrants.
(a) Initial Closing Warrants and Second Closing
Warrants. On each closing date, the Company will issue Warrants
to the Subscribers. One (1) Warrant will be issued for each two
(2) Initial Closing Shares and Second Closing Shares issued on
the Initial Closing Date and Second Closing Date, respectively.
The Warrants issuable on the Initial Closing Date are referred to
as Initial Closing Warrants. The Warrants issuable on the Second
Closing Date are referred to as Second Closing Warrants. The per
Warrant Share exercise price to acquire a Warrant Share upon
exercise of an Initial Closing Warrant and Second Closing Warrant
shall be $1.65. The Initial Closing Warrants and Second Closing
Warrants shall be exercisable for five (5) years after the
Initial Closing Date and Second Closing Date, respectively.
(b) Green Shoe Warrants. On the Initial Closing
Date, the Company will deliver to each Subscriber one Warrant for
each one Initial Closing Share purchased by each Subscriber
("Green Shoe Warrants"). The per Warrant Share exercise price to
acquire a Warrant Share upon exercise of a Green Shoe Warrant
shall be $1.25. The Green Shoe Warrants shall be exercisable for
the first forty-five business days after the actual effective
date of the Registration Statement ("Actual Effective Date")
during which such Registration Statement shall continue to be
current and available for use in connection with the public
resale and delivery of Warrant Shares.Collectively, the Initial
Closing Warrants, Second Closing Warrants and Green Shoe Warrants
are referred to herein as Warrants.
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 had access at the ▇▇▇▇▇ Website of the
Commission to the Company's Form 10-KSB for the year ended
December 31, 2002 as filed with the Commission, together with all
subsequently filed Forms 10-QSB, 8-K, and filings made with the
Commission available at the ▇▇▇▇▇ website (hereinafter referred
to collectively as the "Reports"). 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 Common Stock
and exercise of any of the Warrants, an "accredited investor", as
such term is defined in Regulation D promulgated by the
Commission under the 1933 Act, is experienced in investments and
business matters, has made investments of a speculative nature
and has purchased securities of United States publicly-owned
companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial,
tax and other business matters as to enable the Subscriber to
utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment
decision with respect to the proposed purchase, which represents
a speculative investment. The Subscriber has the authority and
is duly and legally qualified to purchase and own the Securities.
The Subscriber is able to bear the risk of such investment for an
indefinite period and to afford a complete loss thereof. The
information set forth on the signature page hereto regarding the
Subscriber is accurate.
(c) Purchase of Common Stock and Warrants. On
each closing date, the Subscriber will purchase the Common Stock
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. The amount of shares of Common
Stock which may be affected by transactions described in the
previous sentence shall be limited to an amount equal to the
Shares, Warrant Shares and any Securities which may be issued
pursuant to Section 12 hereof. The share limitation shall no
longer apply after a Subscriber has transferred all of its Shares
and Warrant Shares.
(e) Shares Legend. The Shares and the Warrant
Shares shall bear the following or similar legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THESE SHARES MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES
ACT OR ANY APPLICABLE STATE SECURITIES LAW OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO AMERICAN WATER STAR, 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 AMERICAN WATER
STAR, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(g) Communication of Offer. The offer to sell
the Securities was directly communicated to the Subscriber by the
Company. At no time was the Subscriber presented with or
solicited by any leaflet, newspaper or magazine article, radio or
television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional
meeting otherwise than in connection and concurrently with such
communicated offer.
(h) Authority; Enforceability. This Agreement
and other agreements delivered together with this Agreement or in
connection herewith have been duly authorized, executed and
delivered by the Subscriber and are valid and binding agreements
enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general
principles of equity; and Subscriber has full corporate power and
authority necessary to enter into this Agreement and such other
agreements and to perform its obligations hereunder and under all
other agreements entered into by the Subscriber relating hereto.
(i) 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 will be true and correct as of each closing date
and unless a Subscriber otherwise notifies the Company prior to
any closing date, shall be true and correct as of such closing
dates. The foregoing representations and warranties shall
survive the Second Closing Date and shall not expire until the
later of two years after the Second Closing Date or the final
exercise date of the Warrants.
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 Common Stock, the Warrants, 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 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 American Stock Exchange, the National Association
of Securities Dealers, Inc., Nasdaq, SmallCap Market, the OTC
Bulletin Board ("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.
(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;
or
(iii) result in the activation of any
anti-dilution rights or a reset or repricing of any debt or
security instrument of any other creditor or equity holder of the
Company, nor result in the acceleration of the due date of any
obligation of the Company.
(g) The Securities. The Securities upon
issuance:
(i) are, or will be, free and clear of any
security interests, liens, claims or other encumbrances, subject
to restrictions upon transfer under the 1933 Act and any
applicable state securities laws;
(ii) have been, or will be, duly and validly
authorized and on the date of issuance of the Shares, and upon
exercise of the Warrants, the Shares and Warrant Shares
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.
(h) Litigation. There is no pending or, to the
best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency
or body, or arbitrator having jurisdiction over the Company, or
any of its affiliates that would affect the execution by the
Company or the performance by the Company of its obligations
under 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,
basis for or threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its affiliates
which litigation if adversely determined 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 Section
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 not 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.
(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 is not eligible nor
will become ineligible for quotation on the Bulletin Board nor
that its common stock does not meet all requirements for the
continuation of such quotation and the Company satisfies the
requirements for the continued quotation 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 Initial 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 understand the nature of the Securities being sold
hereby and recognize that the issuance of the Securities will have
a potential dilutive effect on the equity holdings of other holders
of the Company's equity or rights to receive equity of the
Company. The board of directors of the Company has concluded, in
its good faith business judgment, that the issuance of the
Securities is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the
Securities is binding upon the Company and enforceable, except as
otherwise described in this Agreement 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
each closing date, and unless the Company otherwise notifies the
Subscribers prior to any closing date, shall be true and correct
as of such closing dates. The foregoing representations and
warranties shall survive the Second Closing Date and shall not
expire until the later of two years after the Second Closing Date
or the final exercise of the Warrants.
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 each 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 D. The Company
will provide, at the Company's expense, such other legal opinions
in the future as are reasonably necessary for the resale of the
Common Stock and exercise of the Warrants and resale of the
Warrant Shares.
7. Legal Fee. The Company shall pay to Grushko &
▇▇▇▇▇▇▇, P.C., a fee of $30,000 ("Legal Fees") as reimbursement
for services rendered to the Subscribers in connection with this
Agreement and the purchase and sale of the Shares and Warrants
(the "Offering") and acting as Escrow Agent for the Offering.
The Legal Fees will be payable out of funds held pursuant to the
Escrow Agreement.
8. Finder. The Company on the one hand, and each
Subscriber (for itself only) on the other hand, agrees to
indemnify the other against and hold the other harmless from any
and all liabilities to any persons claiming brokerage commissions
or finder's fees (each a "Finder") on account of services
purported to have been rendered on behalf of the indemnifying
party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party's actions.
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. Each Subscriber's liability hereunder is several and
not joint. The Company represents that there are no parties
entitled to receive fees, commissions, or similar payments in
connection with the Offering except the Finder identified on
Schedule 8 hereto, in the amount designated on Schedule 8.
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 and the Warrant Shares
upon each national securities exchange, or automated quotation
system upon which they are or become eligible for listing
(subject to official notice of issuance) and shall maintain such
listing so long as any Warrants are outstanding. The Company
will maintain the listing of its Common Stock on the American
Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market
System, Bulletin Board, or New York Stock Exchange (whichever of
the foregoing is at the time the principal trading exchange or
market for the Common Stock (the "Principal Market")), and will
comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Principal
Market, as applicable. The Company will provide the Subscribers
copies of all notices it receives notifying the Company of the
threatened and actual delisting of the Common Stock from any
Principal Market. As of the date of this Agreement and the
Initial 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 the sooner of (i) two (2) years after
the Actual Filing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitation, the Company will (v) cause
its Common Stock to continue to be registered under Section 12(b)
or 12(g) of the 1934 Act, (x) comply in all respects with its
reporting and filing obligations under the 1934 Act, (y) 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 (z) 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 two
(2) years after the Actual Filing Date. Until the earlier of the
resale of the Common Stock 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. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to
provide a copy thereof to each Subscriber promptly after such
filing.
(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. 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. The Company undertakes to
reserve, pro rata on behalf of each Subscriber and holder of a
Warrant, from its authorized but unissued common stock the amount
of Common Shares issuable upon the Second Closing Date and at all
times that Warrants remain outstanding, a number of common shares
equal to the amount of Warrant Shares issuable upon exercise of
the Warrants. Failure to have sufficient shares reserved
pursuant to this Section 9(f) for three (3)consecutive business
days or ten (10) days in the aggregate shall be a material
default of the Company's obligations under this Agreement.
(g) Taxes. From the date of this Agreement and
until the sooner of (i) two (2) years after the Actual Filing
Date, or (ii) until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to
volume limitation, the Company will promptly pay and discharge,
or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the
Company; provided, however, that any such tax, assessment, charge
or levy need not be paid if the validity thereof shall currently
be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have
attached as security therefore.
(h) Insurance. From the date of this Agreement
and until the sooner of (i) two (2) years after the Actual Filing
Date, or (ii) until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to
volume limitation, the Company will 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 and until the sooner of (i) two (2) years after the
Actual Filing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitation, the Company will keep true
records and books of account in which full, true and correct
entries will be made of all dealings or transactions in relation
to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.
(j) Governmental Authorities. From the date of
this Agreement and until the sooner of (i) two (2) years after
the Actual Filing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitation, the Company shall duly
observe and conform in all material respects to all valid
requirements of governmental authorities relating to the conduct
of its business or to its properties or assets.
(k) Intellectual Property. From the date of this
Agreement and until the sooner of (i) two (2) years after the
Actual Filing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitation, the Company shall maintain
in full force and effect its corporate existence, rights and
franchises and all licenses and other rights to use intellectual
property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business.
(l) Properties. From the date of this Agreement
and until the sooner of (i) two (2) years after the Actual Filing
Date, or (ii) until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144, without regard to
volume limitation, the Company will 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/Public Announcement. From
the date of this Agreement and until the sooner of (i) two (2)
years after the Actual Filing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to
Rule 144, without regard to volume limitation, the Company 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. In any event and
subject to the foregoing, the Company undertakes to file a form 8-
K or make a public announcement describing the Offering not later
than the business day immediately following the Initial Closing
Date and Second Closing Date. In each form 8-K or public
announcement, the Company will specifically disclose the amount
of common stock outstanding immediately after each Closing.
(n) Blackout. Except in connection with the
transactions contemplated by Section 9(p) below, 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.
(o) Further Registration Statements. Except for
a registration statement filed on behalf of the Subscribers
pursuant to Section 11 of this Agreement, the Company will not
file any registration statements, including but not limited to
Form S-8, with the Commission without the consent of the
Subscriber until one hundred and eighty (180) days after the
Actual Effective Date.
(p) Spin-Off. On January 27, 2004, the Company
announced that it will spin-off American Distribution &
Packaging, Inc., a Nevada corporation ("ADP"), a wholly-owned
subsidiary of the Company, by distributing stock of ADP to the
Company's stockholders on a one share for one share basis (the
"Spin-Off Shares"). The distribution of the Spin-Off Shares was
announced by the Company to take place once a registration
statement relating to the Spin-Off Shares is filed and declared
effective by the Commission. The Company hereby undertakes to
distribute Spin-Off Shares to the Subscribers who hold any
Securities on the record date ("Record Date") for the
determination of Company stockholders entitled to receive Spin-
Off Shares. Subscribers will be deemed to be, as of the Record
Date, stockholders of the Company in relation to the Common Stock
issued or issuable upon the Initial Closing Date and Second
Closing Date, whether or not such Common Stock is issued or
actually outstanding as of the Record Date. In the case of the
Initial Closing Shares and Second Closing Shares, the Spin-Off
Shares shall be distributed to the Subscribers upon the later of
the respective Closing Dates or the date Spin-Off Shares are
distributed to the stockholders of the Company. The Company
undertakes to reserve a sufficient number of Spin-Off Shares to
satisfy its obligations pursuant to this Section 9(p).
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.
(c) In no event shall the liability of any
Subscriber or permitted successor hereunder or under any other
agreement delivered in connection herewith be greater in amount
than the dollar amount of the net proceeds actually received by
such Subscriber upon the sale of Registrable Securities (as
defined herein) giving rise to such indemnification obligation.
(d) 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
April 3, 2004, but not later than three (3) 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 Initial Closing Shares, Second Closing Shares, and
Warrant Shares actually issued upon exercise of the Warrants
shall prepare and file with the Commission a registration
statement under the 1933 Act registering the Initial Closing
Shares, Second Closing Shares and Warrant Shares (collectively
"Registrable Securities") which are the subject of such request
for unrestricted public resale by the holder thereof. For
purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities
shall not include Securities which are registered for resale 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. Upon the receipt of
such request, the Company shall promptly give written notice to
all other record holders of the Registrable Securities that such
registration statement is to be filed and shall include in such
registration statement Registrable Securities for which it has
received written requests within ten (10) days after the Company
gives such written notice. Such other requesting record holders
shall be deemed to have exercised their demand registration right
under this Section 11.1(i).
(ii) If the Company at any time proposes to
register any of its securities under the 1933 Act for sale to the
public, whether for its own account or for the account of other
security holders or both, except with respect to registration
statements on Forms ▇-▇, ▇-▇ or another form not available for
registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered
for resale by the Subscribers or Holder pursuant to an effective
registration statement, each such time it will give at least
fifteen (15) days' prior written notice to the record holder of
the Registrable Securities of its intention so to do. Upon the
written request of the holder, received by the Company within ten
(10) days after the giving of any such notice by the Company, to
register any of the Registrable Securities not previously
registered, the Company will cause such Registrable Securities as
to which registration shall have been so requested to be included
with the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent required
to permit the sale or other disposition of the Registrable
Securities so registered by the holder of such Registrable
Securities (the "Seller" or "Sellers"). In the event that any
registration pursuant to this Section 11.1(ii) shall be, in whole
or in part, an underwritten public offering of common stock of
the Company, the number of shares of Registrable Securities to be
included in such an underwriting may be reduced by the managing
underwriter if and to the extent that the Company and the
underwriter shall reasonably be of the opinion that such
inclusion would adversely affect the marketing of the securities
to be sold by the Company therein; provided, however, that the
Company shall notify the Seller in writing of any such reduction.
Notwithstanding the foregoing provisions, or Section 11.4 hereof,
the Company may withdraw or delay or suffer a delay of any
registration statement referred to in this Section 11.1(ii)
without thereby incurring any liability to the Seller.
(iii) If, at the time any written request for
registration is received by the Company pursuant to Section
11.1(i), the Company has determined to proceed with the actual
preparation and filing of a registration statement under the 1933
Act in connection with the proposed offer and sale for cash of
any of its securities for the Company's own account and the
Company actually does file such other registration statement,
such written request shall be deemed to have been given pursuant
to Section 11.1(ii) rather than Section 11.1(i), and the rights
of the holders of Registrable Securities covered by such written
request shall be governed by Section 11.1(ii).
(iv) The Company shall file with the Commission
not later than April 2, 2004 (the "Filing Date"), and cause to be
declared effective within seventy-five (75) days after the (i)
Actual Filing Date, or (ii) June 16, 2004 (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 all of the Initial
Closing Shares, Second Closing Shares and Warrant Shares issuable
pursuant to this Agreement. 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 such Subscriber. The Registration Statement will
immediately be amended or additional registration statements will
be immediately filed by the Company as necessary to register
additional shares of Common Stock to allow the public resale of
all Common Stock included in and issuable by virtue of the
Registrable Securities. Without the written consent of the
Subscriber, no securities of the Company other than the
Registrable Securities will be included in the Registration
Statement except as disclosed on Schedule 11.1.
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 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
Sellers' intended method of disposition set forth in such
registration statement for such period;
(c) furnish to the Sellers, at the Company's
expense, such number of copies of the registration statement and
the prospectus included therein (including each preliminary
prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities
covered by such registration statement;
(d) use its best efforts to register or qualify
the Sellers' Registrable Securities covered by such registration
statement under the securities or "blue sky" laws of such
jurisdictions as the Sellers shall request in writing, provided,
however, that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or
to consent to general service of process in any such
jurisdiction;
(e) if applicable, list the Registrable
Securities covered by such registration statement with any
securities exchange on which the Common Stock of the Company is
then listed;
(f) immediately notify the Sellers 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 Sellers, and any attorney, accountant or
other agent retained by the Seller or underwriter, all publicly
available, non-confidential financial and other records,
pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply
all publicly available, non-confidential information reasonably
requested by the seller, attorney, accountant or agent in
connection with such registration statement.
11.3. Provision of Documents. In connection with
each registration described in this Section 11, each Seller will
furnish to the Company in writing such information and
representation letters with respect to itself and the proposed
distribution by it as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities
laws.
11.4. Non-Registration Events. The Company and the
Subscribers agree that the Sellers will suffer damages if the
Registration Statement is not filed by the Filing Date and not
declared effective by the Commission by the Effective Date, and
any registration statement required under Section 11.1(i) or
11.1(ii) is not filed within 60 days after written request and
declared effective by the Commission within 120 days after such
request, and maintained in the manner and within the time periods
contemplated by Section 11 hereof, and it would not be feasible
to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement 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 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 within ten (10) business days
by an effective replacement or amended registration statement)
for a period of time which shall exceed 30 days in the aggregate
per year (defined as a period of 365 days commencing on the date
the Registration Statement is declared effective) or more than 20
consecutive days (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 Common Stock and actually
paid "Purchase Price" (as defined in the Warrants) of Warrant
Shares issued or issuable upon actual exercise of the Warrants,
for the Registrable Securities owned of record by such holder as
of and during the pendency of such Non-Registration Event which
are subject to such Non-Registration Event, except that in
connection with a Non-Registration Event related to the Effective
Date, the Liquidated Damages in connection therewith shall accrue
at the rate of one percent (1%) for the first thirty (30) days or
part thereof. The Company may, at the Company's election, pay
the Liquidated Damages in cash or by delivery of free trading
shares of common stock. If the Company elects to pay the
Liquidated Damages by delivering free trading shares of Common
Stock, such shares of common stock will be valued at the closing
bid price of the Common Stock on the Principal Market as of the
last trading day of each thirty (30) day or such shorter period
for which Liquidated Damages are due. Payments to be made
pursuant to this Section 11.4 shall be due and payable within ten
(10) business days after the end of each thirty (30) day period
or part thereof. In the event a Registration Statement is filed
by the Filing Date but is withdrawn prior to being declared
effective by the Commission, then such Registration Statement
will be deemed to have not been filed.
11.5. Expenses. All expenses incurred by the
Company in complying with Section 11, including, without
limitation, all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying
with state securities or "blue sky" laws, fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of insurance and fee of one
counsel for all Sellers (in an amount not to exceed $5,000) 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, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company
and each such officer, director, underwriter and controlling
person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the
Seller will be liable hereunder in any such case if and only to
the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such Seller, as
such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or
prospectus, and provided, further, however, that the liability of
the Seller hereunder shall be limited to the net proceeds
actually received by the Seller from the sale of Registrable
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified
party hereunder of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party hereunder, notify the
indemnifying party in writing thereof, but the omission so to
notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than
under this Section 11.6(c) and shall only relieve it from any
liability which it may have to such indemnified party under this
Section 11.6(c), except and only if and to the extent the
indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and,
to the extent it shall wish, to assume and undertake the defense
thereof with counsel satisfactory to such indemnified party, and,
after notice from the indemnifying party to such indemnified
party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 11.6(c) for any legal
expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs
of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and
the indemnified party shall have reasonably concluded that there
may be reasonable defenses available to it which are different
from or additional to those available to the indemnifying party
or if the interests of the indemnified party reasonably may be
deemed to conflict with the interests of the indemnifying party,
the indemnified parties, as a group, shall have the right to
select one separate counsel and to assume such 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.
11.7. Delivery of Unlegended Shares.
(a) Within five (5) business days (such fifth
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, and (iv) in the case of sales
under Rule 144 customary representation letters of the Subscriber
and Subscriber's broker regarding compliance with the
requirements of Rule 144, the Company at its expense, (y) shall
deliver, and shall cause legal counsel selected by the Company to
deliver, to its transfer agent (with copies to Subscriber) an
appropriate instruction and opinion of such counsel, for the
delivery of shares of Common Stock without any legends including
the legends set forth in Sections 4(e) and 4(f) 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. Transfer fees shall be the
responsibility of the Seller.
(b) In lieu of delivering physical certificates
representing the Unlegended Shares, if the Company's transfer
agent is participating in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer program, upon request of a
Subscriber, so long as the certificates therefor do not bear a
legend and the Subscriber is not obligated to return such
certificate for the placement of a legend thereon, the Company
shall cause its transfer agent to electronically transmit the
Unlegended Shares by crediting the account of Subscriber's prime
Broker with DTC through its Deposit Withdrawal Agent Commission
system. Such delivery must be made on or before the Unlegended
Shares Delivery Date.
(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 Common Stock 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 as required pursuant to this Agreement, 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.
(e) In the event a Subscriber shall request
delivery of Unlegended Shares as described in Section 11.7(a),
the Company may not refuse to deliver Unlegended Shares based on
any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation
of law, or for any other reason, unless, an injunction or
temporary restraining order from a court, on notice, restraining
and or enjoining delivery of such Unlegended Shares or exercise
of all or part of said Warrant shall have been sought and
obtained and the Company has posted a surety bond for the benefit
of such Subscriber in the amount of 130% of the amount of the
aggregate purchase price of the Common Stock and Warrant Shares
which are subject to the injunction or temporary restraining
order, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Subscriber to the extent Subscriber
obtains judgment.
12. (a) Right of First Refusal. Until one year after
the Actual Effective Date of the Registration Statement (the
"Exclusion Period"), the Subscribers shall be given not less than
ten (10) 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, (iii) one million shares of common stock which
may be issued to service providers who are not officers,
directors or employees fo the Company, or (iv) as has been
described in the Reports or Other Written Information filed or
delivered prior to the Initial Closing Date (collectively
"Excepted Issuances"). The Subscribers who exercise their
rights pursuant to this Section 12(a) shall have the right during
the ten (10) business days following receipt of the notice to
purchase all of 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 Common Stock 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 ten (10) business days following the notice of
modification, whichever is longer, to exercise such right.
(b) Offering Restrictions. From the date of
this Agreement until one hundred and eighty (180) days after the
Actual Effective Date, the Company will not enter into any
agreement to, nor issue any equity, convertible debt or other
securities convertible into common stock without the prior
written consent of the Subscribers, which consent may be withheld
for any reason except in connection with the Excepted Issuances
or the Offering.
(c) Favored Nations Provision. At any time
until the Second Closing Date, if the Company shall offer, issue
or agree to issue any Common Stock or securities convertible into
or exercisable for shares of Common Stock (or modify any of the
foregoing which may be outstanding at any time prior to the
Second Closing Date 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, without
the consent of each Subscriber holding Shares, then the Company
shall issue, for each such occasion, additional shares of Common
Stock to each Subscriber so that the average per share Purchase
Price of the shares of Common Stock issued to the Subscriber (of
Common Stock or Warrant Shares still owned by the Subscriber
only) 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
Common Stock. The rights of the Subscriber set forth in this
Section 12 are in addition to any other rights the Subscriber has
pursuant to this Agreement and any other agreement referred to or
entered into in connection herewith.
(d) Maximum Exercise of Rights. In the event
the exercise of the rights described in Section 12(c) would
result in the issuance of an amount of common stock of the
Company that would exceed the maximum amount that may be issued
to a Subscriber calculated in the manner described in Section
2(d) of this Agreement, then the issuance of such additional
shares of common stock of the Company to such Subscriber will be
deferred in whole or in part until such time as such Subscriber
is able to beneficially own such common stock without exceeding
the maximum amount set forth calculated in the manner described
in Section 2(d). The determination of when such common stock may
be issued shall be made by each Subscriber as to only such
Subscriber.
13. Miscellaneous.
(a) Notices. All notices, demands, requests,
consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited
in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, or (iv) transmitted by hand delivery,
telegram, or facsimile, addressed as set forth below or to such
other address as such party 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: American Water Star, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President &
CEO, telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy by telecopier only
to: ▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-
8226, Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq., telecopier: (▇▇▇) ▇▇▇-▇▇▇▇,
and (ii) if to the Subscribers, to: the one or more addresses and
telecopier numbers indicated on the signature pages hereto, with
an additional copy by telecopier only to: Grushko & ▇▇▇▇▇▇▇,
P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇.
(b) Closing. The consummation of the
transactions contemplated herein shall take place at the offices
of Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, upon the satisfaction of all conditions to
Closing set forth in this Agreement. Each of the Initial Closing
Date and Second Closing Date is referred to herein as "Closing
Date."
(c) Entire Agreement; Assignment. This Agreement
and other documents delivered in connection herewith represent
the entire agreement between the parties hereto with respect to
the subject matter hereof and may be amended only by a writing
executed by both parties. Neither the Company nor the
Subscribers have relied on any representations not contained or
referred to in this Agreement and the documents delivered
herewith. No right or obligation of either party shall be
assigned by that party without prior notice to and the written
consent of the other party.
(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
referred to herein or delivered in connection herewith on behalf
of the Company agree to submit to the jurisdiction of such courts
and waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees
and costs. In the event that any provision of this Agreement or
any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any such provision
which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of
any agreement.
(f) Specific Enforcement, Consent to
Jurisdiction. The Company and Subscriber acknowledge and agree
that irreparable damage would occur in the event that any of the
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, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Subject to Section 13(e) hereof, each of the Company, Subscriber
and any signator hereto in his personal capacity hereby waives,
and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction
in New York of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Nothing in this Section shall
affect or limit any right to serve process in any other manner
permitted by law.
(g) Independent Nature of Subscribers'
Obligations and Rights. The obligations of each Subscriber
hereunder are several and not joint with the obligations of any
other Subscriber hereunder, and no such Subscriber shall be
responsible in any way for the performance of the obligations of
any other hereunder.
(h) Equitable Adjustment. The Securities,
purchase prices of Securities, and the amount of common stock
issuable pursuant to Section 12(a)(iii) hereof shall be equitably
adjusted to offset the effect of stock splits, stock dividends,
and distributions of property or equity interests of the Company
to its shareholders.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:______________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February ___, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
ENABLE GROWTH PARTNERS
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By:____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇, Managing Member
Initial Closing Purchase Price: $62,500.00
Initial Closing Shares: 69,444
Initial Closing Warrants: 34,722
Green Shoe Warrants: 69,444
Second Closing Purchase Price: $62,500.00
Second Closing Shares: 69,444
Second Closing Warrants: 34,722
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.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
GRYPHON MASTER FUND, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By:____________________________________
▇.▇. ▇▇▇▇ ▇▇
Initial Closing Purchase Price: $950,000.00
Initial Closing Shares: 1,055,556
Initial Closing Warrants: 527,778
Green Shoe Warrants: 1,055,556
Second Closing Purchase Price: $950,000.00
Second Closing Shares: 1,055,556
Second Closing Warrants: 527,778
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.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
WESTERN RESERVE HEDGED EQUITY, LP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By:____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Initial Closing Purchase Price: $50,000.00
Initial Closing Shares: 55,556
Initial Closing Warrants: 27,778
Green Shoe Warrants: 55,556
Second Closing Purchase Price: $50,000.00
Second Closing Shares: 55,556
Second Closing Warrants: 27,778
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)
Please acknowledge your acceptance of the foregoing
Subscription Agreement by signing and returning a copy to the
undersigned whereupon it shall become a binding agreement between
us.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
_______________________________________
Initial Closing Purchase Price: $125,000.00
Initial Closing Shares: 138,889
Initial Closing Warrants: 69,444
Green Shoe Warrants: 138,889
Second Closing Purchase Price: $125,000.00
Second Closing Shares: 138,889
Second Closing Warrants: 69,444
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (E)
Please acknowledge your acceptance of the foregoing
Subscription Agreement by signing and returning a copy to the
undersigned whereupon it shall become a binding agreement between
us.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
▇▇▇▇▇▇▇▇▇▇▇ LIMITED PARTNERSHIP
C/o Canaccord Capital Corporation
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By:____________________________________
Initial Closing Purchase Price: $175,000.00
Initial Closing Shares: 194,444
Initial Closing Warrants: 97,222
Green Shoe Warrants: 194,444
Second Closing Purchase Price: $175,000.00
Second Closing Shares: 194,444
Second Closing Warrants: 97,222
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (F)
Please acknowledge your acceptance of the foregoing
Subscription Agreement by signing and returning a copy to the
undersigned whereupon it shall become a binding agreement between
us.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
GREENWICH GROWTH FUND LIMITED
C/o Consolidated Fund Management Ltd.
▇.▇. ▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇, ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
By:____________________________________
Initial Closing Purchase Price: $50,000.00
Initial Closing Shares: 55,556
Initial Closing Warrants: 27,778
Green Shoe Warrants: 55,556
Second Closing Purchase Price: $50,000.00
Second Closing Shares: 55,556
Second Closing Warrants: 27,778
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (G)
Please acknowledge your acceptance of the foregoing
Subscription Agreement by signing and returning a copy to the
undersigned whereupon it shall become a binding agreement between
us.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
WHALEHAVEN FUNDS LIMITED
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By:____________________________________
Initial Closing Purchase Price: $75,000.00
Initial Closing Shares: 83,333
Initial Closing Warrants: 41,666
Green Shoe Warrants: 83,333
Second Closing Purchase Price: $75,000.00
Second Closing Shares: 83,333
Second Closing Warrants: 41,666
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (H)
Please acknowledge your acceptance of the foregoing
Subscription Agreement by signing and returning a copy to the
undersigned whereupon it shall become a binding agreement between
us.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
MOUNTAIN RIDGE CAPITAL LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By:____________________________________
Initial Closing Purchase Price: $125,000.00
Initial Closing Shares: 138,889
Initial Closing Warrants: 69,444
Green Shoe Warrants: 138,889
Second Closing Purchase Price: $125,000.00
Second Closing Shares: 138,889
Second Closing Warrants: 69,444
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (I)
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.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
CAMDEN INTERNATIONAL LTD.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
P.O. Box N 9204
Nassau, Bahamas
Fax: ▇▇▇-▇▇▇-▇▇▇▇
By:____________________________________
Initial Closing Purchase Price: $125,000.00
Initial Closing Shares: 138,889
Initial Closing Warrants: 69,444
Green Shoe Warrants: 138,889
Second Closing Purchase Price: $125,000.00
Second Closing Shares: 138,889
Second Closing Warrants: 69,444
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (J)
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.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
LONGVIEW FUND LP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: S. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By:____________________________________
Initial Closing Purchase Price: $475,000.00
Initial Closing Shares: 527,778
Initial Closing Warrants: 263,889
Green Shoe Warrants: 527,778
Second Closing Purchase Price: $475,000.00
Second Closing Shares: 527,778
Second Closing Warrants: 263,889
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (K)
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.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
GAMMA OPPORTUNITY CAPITAL PARTNERS, LP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: S. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By:____________________________________
Initial Closing Purchase Price: $250,000.00
Initial Closing Shares: 277,778
Initial Closing Warrants: 138,889
Green Shoe Warrants: 277,778
Second Closing Purchase Price: $250,000.00
Second Closing Shares: 277,778
Second Closing Warrants: 138,889
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (L)
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.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
LONGVIEW EQUITY FUND, LP
▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: S. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By:____________________________________
Initial Closing Purchase Price: $965,625.00
Initial Closing Shares: 1,072,917
Initial Closing Warrants: 536,459
Green Shoe Warrants: 1,072,917
Second Closing Purchase Price: $965,625.00
Second Closing Shares: 1,072,917
Second Closing Warrants: 536,459
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (M)
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.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
LONGVIEW INTERNATIONAL EQUITY FUND, LP
▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: S. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
By:____________________________________
Initial Closing Purchase Price: $321,875.00
Initial Closing Shares: 357,639
Initial Closing Warrants: 178,819
Green Shoe Warrants: 357,639
Second Closing Purchase Price: $321,875.00
Second Closing Shares: 357,639
Second Closing Warrants: 178,819
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (N)
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.
AMERICAN WATER STAR, INC.
A Nevada Corporation
By:_________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & CEO
Dated: February _____, 2004
AGREED AND ACCEPTED:
SUBSCRIBER:
ALPHA CAPITAL AKTIENGESELLSCHAFT
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: ▇▇▇-▇▇-▇▇▇▇▇▇▇▇
By:____________________________________
Initial Closing Purchase Price: $250,000.00
Initial Closing Shares: 277,778
Initial Closing Warrants: 138,889
Green Shoe Warrants: 277,778
Second Closing Purchase Price: $250,000.00
Second Closing Shares: 277,778
Second Closing Warrants: 138,889
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Warrant (regular)
Exhibit B Form of Warrant (Green Shoe)
Exhibit C Escrow Agreement
Exhibit D Form of Legal Opinion
Schedule 5(d) Additional Issuances
Schedule 5(q) Undisclosed Liabilities
Schedule 5(s) Capitalization
Schedule 8 Finders
Schedule 9(e) Use of Proceeds
Schedule 11.1 Other Securities to be Registered
Schedule 5(d)
Additional Issuances
American Water Star, Inc.:
Warrants:
Table 1: Camden Unit Offering 1,207,370
Table 2: Company's Unit Offering 1,487,640
Table 3: Miscellaneous 1,927,000
-------------
Total 4,622,010
=============
American Distribution & Packaging, Inc.:
Debt convertible into shares of AD&P when
and if the spin off of AD&P is complete,
$5million principal convertible at $1.25
per share 4,000,000
=============
Schedule 5(q)
Undisclosed Liabilities
None.
Schedule 5(s)
Capitalization
Authorized Issued
------------ ----------
Preferred stock, $.0001 par value 20,000,000 -0-
Series A preferred convertible 6,000,000 -0-
Common stock, $.0001 par value: 150,000,000
Issued 63,871,017
To be issued for services and
equipment 2,000,000
Warrants to purchase common stock 4,622,010
Schedule 8
Finders
Schedule 9(e)
Use of Proceeds
The proceeds of this offering will be used to acquire
equipment and to finance accounts receivable and inventory.
Schedule 11.1
Other Securities to be Registered
Shares of common stock outstanding 4,700,000
Shares of common stock to be issued upon exercise
of warrants outstanding 4,622,010
-------------
Total 9,322,010
=============