EXHIBIT 10.34
SUBSCRIPTION AGREEMENT
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THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of January 27,
2004, by and among Provo International Inc., a Delaware corporation (the
"Company"), and the subscribers identified on the signature page hereto (each a
"Subscriber" and collectively "Subscribers").
WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement in reliance upon an exemption from securities registration
afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers, in the aggregate, shall
purchase One Million Two Hundred Thousand Dollars ($1,200,000) (the "Purchase
Price") of principal amount of secured 8% promissory notes of the Company
("Note" or "Notes") convertible into shares of the Company's common stock, $.01
par value (the "Common Stock") at a per share conversion price of twenty-five
cents ($.25) ("Conversion Price"); and share purchase warrants (the "Warrants"),
in the form attached hereto as EXHIBIT A, to purchase shares of Common Stock
(the "Warrant Shares"). The Notes, shares of Common Stock issuable upon
conversion of the Notes (the "Shares"), the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities"; and
WHEREAS, the aggregate proceeds of the sale of the Notes and the
Warrants contemplated hereby shall be held in escrow pursuant to the terms of a
Funds Escrow Agreement to be executed by the parties substantially in the form
attached hereto as EXHIBIT B (the "Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscribers hereby
agree as follows:
1. Closing. Subject to the satisfaction or waiver of the terms
and conditions of this Agreement, on the Closing Date, each Subscriber shall
purchase and the Company shall sell to each Subscriber a Note in the principal
amount designated on the signature page hereto. The aggregate amount of the
Notes to be purchased by the Subscribers on the Closing Date shall, in the
aggregate, be equal to the Purchase Price. The Closing Date shall be the date
that subscriber funds representing the net amount due the Company from the
Purchase Price is transmitted by wire transfer or otherwise to or for the
benefit of the Company.
2. Security Interest. The Subscribers will be granted a
security interest in all the assets of the Company to be memorialized in a
Security Agreement. The Company will execute such other agreements, documents
and financing statements to be filed at the Company's expense with such
jurisdictions, states and counties designated by the Subscribers. The Company
will also execute all such documents reasonably necessary in the opinion of
Subscriber to memorialize and further protect the security interest described
herein. A form of Security Agreement is annexed hereto as EXHIBIT C. The
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Subscribers will appoint a Collateral Agent to represent them collectively in
connection with the security interest to be granted in the Company's assets. The
appointment will be pursuant to a Collateral Agent Agreement, a form of which is
annexed hereto as EXHIBIT D.
3. Warrants. On the Closing Date, the Company will issue
Warrants to the Subscribers. One (1) Warrant will be issued for each two Shares
that would be issuable upon conversion of the Notes. The per Warrant Share
exercise price to acquire a Warrant Share upon exercise of a Warrant shall be
equal to the closing price of the Common Stock on the trading day preceding the
Closing Date, as reported by Bloomberg L.P. for the American Stock Exchange
("Amex"). The Warrants shall be exercisable for five years after the Closing
Date. The exercise price of the Warrants issuable shall be equitably adjusted to
offset the effect of stock splits, stock dividends, pro rata distributions of
property or equity interests to the Company's shareholders, after the date of
this Agreement. The entire Purchase Price shall be deemed allocated to the
Common Stock.
4. Subscriber's Representations and Warranties. Each
Subscriber hereby represents and warrants to and agrees with the Company as to
such Subscriber that:
(a) Information on Company. The Subscriber has been
furnished with or has obtained from the ▇▇▇▇▇ Website of the Securities and
Exchange Commission (the "Commission") the Company's Form 10-KSB for the year
ended December 31, 2002 as filed with the Commission, together with all
subsequently filed Forms 10-QSB, 8-K, and filings made with the Commission
available at the ▇▇▇▇▇ website (hereinafter referred to collectively as the
"Reports"). In addition, the Subscriber has received in writing from the Company
such other information concerning its operations, financial condition and other
matters as the Subscriber has requested in writing (such other information is
collectively, the "Other Written Information"), and considered all factors the
Subscriber deems material in deciding on the advisability of investing in the
Securities.
(b) Information on Subscriber. The Subscriber is, and
will be at the time of the conversion of the Notes and exercise of any of the
Warrants, an "accredited investor", as such term is defined in Regulation D
promulgated by the Commission under the Securities Act of 1933, as amended (the
"1933 Act"), is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable the Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment. The Subscriber has the authority and is
duly and legally qualified to purchase and own the Securities. The Subscriber is
able to bear the risk of such investment for an indefinite period and to afford
a complete loss thereof. The information set forth on the signature page hereto
regarding the Subscriber is accurate.
(c) Purchase of Notes and Warrants. On the Closing Date,
the Subscriber will purchase the Notes and Warrants as principal for its own
account and not with a view to any distribution thereof.
(d) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act or any applicable state securities laws, by reason of their issuance in
a transaction that does not require registration under the 1933 Act (based in
part on the accuracy of the representations and warranties of Subscriber
contained herein), and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any
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applicable state securities laws or is exempt from such registration. In any
event, and subject to compliance with applicable securities laws, the Subscriber
may enter into hedging transactions with third parties, which may in turn engage
in short sales of the Securities in the course of hedging the position they
assume and the Subscriber may also enter into short positions or other
derivative transactions relating to the Securities, or interests in the
Securities, and deliver the Securities, or interests in the Securities, to close
out their short or other positions or otherwise settle short sales or other
transactions, or loan or pledge the Securities, or interests in the Securities,
to third parties that in turn may dispose of these Securities.
(e) Shares Legend. The Shares and the Warrant Shares
shall bear the following or similar legend:
"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 PROVO INTERNATIONAL 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 PROVO INTERNATIONAL INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(g) Note Legend. The Note shall bear the following
legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO PROVO INTERNATIONAL
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
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(h) Communication of Offer. The offer to sell the
Securities was directly communicated to the Subscriber by the Company. At no
time was the Subscriber presented with or solicited by any leaflet, newspaper or
magazine article, radio or television advertisement, or any other form of
general advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such communicated offer.
(i) Authority; Enforceability. This Agreement and other
agreements delivered together with this Agreement or in connection herewith have
been duly authorized, executed and delivered by the Subscriber and are valid and
binding agreements enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity; and Subscriber has full corporate
power and authority necessary to enter into this Agreement and such other
agreements and to perform its obligations hereunder and under all other
agreements entered into by the Subscriber relating hereto.
(j) Correctness of Representations. Each Subscriber
represents as to such Subscriber only 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 Closing
Date for a period of three (3) years.
5. Company Representations and Warranties. The Company
represents and warrants to and agrees with each Subscriber that:
(a) Due Incorporation. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdictions of their incorporation
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. The Company and each of its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or financial condition of the
Company.
(b) Outstanding Stock. All issued and outstanding shares
of capital stock of the Company and each of its subsidiaries has been duly
authorized and validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement, the
Notes, the 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 Notes, the Warrants, the
Escrow Agreement and such other agreements delivered together with this
Agreement or in connection herewith 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
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understandings with respect to the sale or issuance of any shares of common
stock or equity of the Company or other equity interest in any of the
subsidiaries of the Company except as described on SCHEDULE 5(D), or the
Reports.
(e) Consents. No consent, approval, authorization or
order of any court, governmental agency or body or arbitrator having
jurisdiction over the Company, or any of its affiliates, the Amex, the National
Association of Securities Dealers, Inc., Nasdaq, SmallCap Market, the OTC
Bulletin Board nor the Company's Shareholders is required for the execution and
compliance by the Company of its obligations under this Agreement, and all other
agreements entered into or to be 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 hereto 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) will not result in the activation of any
anti-dilution rights or a reset or repricing of any debt or security instrument
of any other debtor or equity holder 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 conversion of the Notes, and upon exercise of the
Warrants, the Shares and Warrant Shares respectively, will be duly and validly
issued, fully paid and nonassessable (and if registered pursuant to the 1933
Act, and resold pursuant to an effective registration statement will be free
trading and unrestricted, provided that each Subscriber complies with the
prospectus delivery requirements of the ▇▇▇▇ ▇▇▇);
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(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 on SCHEDULE 5(H) or in the Reports, there is no pending or,
to the best knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its affiliates which litigation
if adversely determined could have a material adverse effect on the Company.
(i) Reporting Company. The Company is a publicly-held
company subject to reporting obligations pursuant to Sections 15(d) and 13 of
the Securities Exchange Act of 1934, as amended (the "1934 Act"). The Company's
$.01 par value common stock is 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. Each of the Company and its subsidiaries
is not in violation of its Articles of Incorporation or ByLaws. Except as set
forth in SCHEDULE 5(M), the Company and each of its subsidiaries are (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 or a subsidiary of 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
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knowledge in violation of any statute, rule or regulation of any governmental
authority which violation would have a material adverse effect on the Company or
a subsidiary of the Company.
(n) No Integrated Offering. Neither the Company, nor any
of its subsidiaries or 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
and/or sale 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 Amex. Nor will the Company or any of its affiliates or
subsidiaries take any action or steps that would cause the offer and/or sale 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 listed on the
Amex. The Company has not received any oral or written notice that its common
stock will be delisted from the Amex nor that its common stock does not meet all
requirements for the continuation of such quotation. The Company satisfies the
requirements for the continued listing of its common stock on the Amex.
(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
September 30, 2003 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
September 30, 2003, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.
(s) Capitalization. The authorized and outstanding
capital stock of the Company as of the date of this Agreement and the Closing
Date are set forth on SCHEDULE 5(S). Except as set forth in the Reports and
Other Written Information and SCHEDULE 5(D), there are no options, warrants, or
rights to subscribe to, securities, rights or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares of capital
stock of the Company. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
nonassessable.
(t) Dilution. The Company's executive officers and
directors have studied and fully understand the nature of the Securities being
sold hereby and recognize that they have a potential dilutive effect on the
equity holdings of other holders of the Company's equity or rights to receive
equity of the Company. The board of directors of the Company has concluded, in
its good faith business judgment, that such issuance is in the best interests of
the Company. The Company specifically acknowledges that its obligation to issue
the Shares upon conversion of the Note and exercise of the Warrants is binding
upon the Company and enforceable, except as otherwise described in this
Subscription
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Agreement or the Note, regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company or parties
entitled to receive equity of the Company.
(u) No Disagreements with Accountants and Lawyers.
Except as set forth on SCHEDULE 5(U), 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) Investment Company. The Company is not, and is not
an Affiliate (as defined in Rule 405 under the ▇▇▇▇ ▇▇▇) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(w) S-3 Eligibility. The Company currently meets, and will use commercially
reasonable efforts to take all necessary action to continue to meet, the
"registrant requirements" set forth in the General Instruction I.A. to Form S-3.
(x) 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 Closing Date for a period of
three (3) years.
6. Regulation D Offering. The offer and issuance of the
Securities to the Subscribers is being made pursuant to the exemption from the
registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6)
of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. On 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 E. The Company will provide, at the Company's expense, such other legal
opinions in the future as are reasonably necessary for the conversion of the
Notes and exercise of the Warrants and resale of the Shares and Warrant Shares.
7.1. Conversion of Note.
(a) Upon the conversion of the Note or part thereof, the
Company shall, at its own cost and expense, take all necessary action, including
obtaining and delivering, an opinion of counsel to assure that the Company's
transfer agent shall issue stock certificates in the name of Subscriber (or its
nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of shares of
common stock issuable upon such conversion. The Company warrants that no
instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that, unless waived by the
Subscriber, the Shares will be free-trading, and freely transferable, and will
not contain a legend restricting the resale or transferability of the Shares
provided the Shares are being sold pursuant to an effective registration
statement covering the Shares or are otherwise exempt from registration.
(b) Subscriber will give notice of its decision to
exercise its right to convert the Note or part thereof by telecopying an
executed and completed Notice of Conversion (a form of which is annexed to
EXHIBIT A to the Note) to the Company via confirmed telecopier transmission or
otherwise pursuant to Section 13(a) of this Agreement. The Subscriber will not
be required to surrender the Note until the Note has been fully converted or
satisfied. Each date on which a Notice of Conversion is
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telecopied to the Company in accordance with the provisions hereof shall be
deemed a Conversion Date. The Company will itself or cause the Company's
transfer agent to transmit the Company's Common Stock certificates representing
the Shares issuable upon conversion of the Note to the Subscriber via express
courier for receipt by such Subscriber within three (3) business days after
receipt by the Company of the Notice of Conversion (the "Delivery Date"). In the
event the Shares are electronically transferable, then delivery of the Shares
must be made by electronic transfer provided request for such electronic
transfer has been made by the Subscriber. A Note representing the balance of the
Note not so converted will be provided by the Company to the Subscriber if
requested by Subscriber, provided the Subscriber delivers an original Note to
the Company. To the extent that a Subscriber elects not to surrender a Note for
reissuance upon partial payment or conversion, the Subscriber hereby indemnifies
the Company against any and all loss or damage attributable to a third-party
claim in an amount in excess of the actual amount then due under the Note.
(c) The Company understands that a delay in the delivery
of the Shares in the form required pursuant to Section 7 hereof, or the
Mandatory Redemption Amount described in Section 7.2 hereof, beyond the Delivery
Date or Mandatory Redemption Payment Date (as hereinafter defined) could result
in economic loss to the Subscriber. As compensation to the Subscriber for such
loss, the Company agrees to pay to the Subscriber for late issuance of Shares in
the form required pursuant to Section 7 hereof upon Conversion of the Note in
the amount of $100 per business day after the Delivery Date for each $10,000 of
Note principal amount being converted, of the corresponding Shares which are not
timely delivered. The Company shall pay any payments incurred under this Section
in immediately available funds upon demand. Furthermore, in addition to any
other remedies which may be available to the Subscriber, in the event that the
Company fails for any reason to effect delivery of the Shares by the Delivery
Date or make payment by the Mandatory Redemption Payment Date, the Subscriber
will be entitled to revoke all or part of the relevant Notice of Conversion or
rescind all or part of the notice of Mandatory Redemption by delivery of a
notice to such effect to the Company whereupon the Company and the Subscriber
shall each be restored to their respective positions immediately prior to the
delivery of such notice, except that late payment charges described above shall
be payable through the date notice of revocation or rescission is given to the
Company.
(d) Nothing contained herein or in any document referred
to herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Subscriber and thus refunded to the
Company.
7.2. Mandatory Redemption at Subscriber's Election. In the
event the Company is prohibited from issuing Shares, or fails to timely deliver
Shares on a Delivery Date, or upon the occurrence of any other Event of Default
(as defined in the Note or in this Agreement) or for any reason other than
pursuant to the limitations set forth in Section 7.3 hereof, then at the
Subscriber's election, the Company must pay to the Subscriber ten (10) business
days after request by the Subscriber or on the Delivery Date (if requested by
the Subscriber) at the Subscriber's election, a sum of money determined by (i)
multiplying up to the outstanding principal amount of the Note designated by the
Subscriber by 130%, or (ii) multiplying the number of Shares otherwise
deliverable upon conversion of an amount of Note principal and/or interest
designated by the Subscriber (with the date of giving of such designation being
a Deemed Conversion Date) at the then Conversion Price that would be in effect
on the Deemed Conversion Date by the highest closing price of the Common Stock
on the principal market for the period commencing on the Deemed Conversion Date
until the day prior to the receipt of the Mandatory Redemption Payment,
whichever is greater, together with accrued but unpaid interest thereon
("Mandatory Redemption
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Payment"). The Mandatory Redemption Payment must be received by the Subscriber
on the same date as the Company Shares otherwise deliverable or within ten (10)
business days after request, whichever is sooner ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the corresponding Note
principal and interest will be deemed paid and no longer outstanding.
7.3. Maximum Conversion. The Subscriber shall not be entitled
to convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of common stock beneficially owned by the Subscriber and its
affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Subscriber and its affiliates of more than 9.99% of
the outstanding shares of common stock of the Company on such Conversion Date.
For the purposes of the provision to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 9.99% and aggregate conversion by the Subscriber may exceed
9.99%. The Subscriber may void the conversion limitation described in this
Section 7.3 upon and effective after (sixty-one) 61 days prior written notice to
the Company. The Subscriber may allocate which of the equity of the Company
deemed beneficially owned by the Subscriber shall be included in the 9.99%
amount described above and which shall be allocated to the excess above 9.99%.
7.4. Injunction - Posting of Bond. In the event a Subscriber
shall elect to convert a Note or part thereof or exercise the Warrant in whole
or in part, the Company may not refuse conversion or exercise based on any claim
that such Subscriber or any one associated or affiliated with such Subscriber
has been engaged in any violation of law, or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining conversion of
all or part of said Note 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 Note, or
aggregate purchase price of the Warrant Shares which are subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Subscriber to the extent Subscriber obtains judgment.
7.5. Buy-In. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if ten (10) days
after the Delivery Date the Subscriber purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
such Subscriber of the Common Stock which the Subscriber anticipated receiving
upon such conversion (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored, together with interest thereon
at a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if the Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of $10,000 of note principal and/or interest, the
Company shall be required to pay the Subscriber $1,000, plus interest. The
Subscriber shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In.
7.6 Adjustments. The Conversion Price and amount of Shares
issuable upon conversion of the Notes shall be adjusted to offset the effect of
stock splits, stock dividends, pro rata
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distributions of property or equity interests to the Company's shareholders and
similar events.
7.7. Redemption. The Company may not redeem or call the Note
without the consent of the holder of the Note.
8. Legal Fee/Escrow Agent and Broker's Fee.
(a) Legal Fee. The Company shall pay to Grushko &
▇▇▇▇▇▇▇, P.C., a fee of $20,000 ("Legal Fees") as reimbursement for services
rendered to Subscribers in connection with this Agreement and the purchase and
sale of the Notes and Warrants (the "Offering") and acting as Escrow Agent for
the Offering. Five Thousand Dollars ($5,000) of the Legal Fees shall be payable
prior to Closing by delivery to Grushko & ▇▇▇▇▇▇▇, P.C. of 40,000_Shares of the
Company's Common Stock. The holder of such Common Stock is granted the same
registration rights with respect to such Shares as the Subscribers are granted
in connection with the Shares and such Common Stock is included in the
definition of Registrable securities set forth in Section 10.1 of this
Agreement.
(b) Broker's Fee. The Company on the one hand, and each
Subscriber (for himself only) on the other hand, agree to indemnify the other
against and hold the other harmless from any and all liabilities to any persons
claiming brokerage commissions or broker's fees other than Berry-Shino
Securities, Inc. ("Broker") 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 agrees that it will pay the Broker a fee equal to ten
percent (10%) of the Purchase Price ("Broker's Fees") and ten percent (10%) of
the cash proceeds received by the Company from Warrant exercise ("Warrant
Exercise Compensation"). The Warrant Exercise Compensation shall be payable to
the Broker within ten (10) days after receipt of Warrant exercise proceeds by
the Company. The Broker will also receive on the Closing Date, one (1) Warrant
for each five (5) Warrants issued to the Subscribers ("Broker's Warrants"). The
Broker's Warrants will be identical to the Warrants except that the "Purchase
Price" as defined in the Broker's Warrants shall be $.25 per Warrant Share. The
Company represents that there are no other parties entitled to receive fees,
commissions, or similar payments in connection with the Offering except the
Broker. All the representations, covenants, warranties, undertakings, remedies,
liquidated damages, indemnification, and other rights including but not limited
to registration rights made or granted to or for the benefit of the Subscribers
are hereby also made and granted to the Broker in respect of the Broker's
Warrants and Warrant Shares issuable upon exercise of the Broker's Warrants.
References herein to Warrants and Warrant Shares shall include Broker's Warrants
and Warrant Shares issuable upon exercise of the Broker's Warrants.
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, a
court, any state securities commission or any other regulatory authority of any
stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
(b) Listing. The Company shall promptly secure the
listing of the Shares and Warrant Shares upon each national securities exchange,
or quotation system, if any, upon which shares of
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common stock are then listed (subject to official notice of issuance) and shall
maintain such listing so long as any Securities are outstanding. The Company
will maintain the listing of its Common Stock on the Amex, Nasdaq SmallCap
Market, Nasdaq National Market System, OTC Bulletin Board, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock [the "Principal Market"]), and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this Agreement and the Closing
Date, the Amex is and will be the Principal Market.
(c) Market Regulations. The Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to Subscriber.
(d) Reporting Requirements. From the date of this Agreement
and until at least two (2) years after the sooner of (i) the actual
effectiveness ("Actual Effective Date") of the Registration Statement, or until
all the Shares and Warrant Shares have been resold pursuant to the Registration
Statement, the Company will (i) comply in all respects with its reporting and
filing obligations under the 1934 Act, (ii) comply with all reporting
requirements that are applicable to an issuer required to file reports pursuant
to Section 13 and Section 15(d) of the 1934 Act, and (iii) comply with all
requirements related to any registration statement filed pursuant to this
Agreement. The Company will use its best efforts not to take any action or file
any document (whether or not permitted by the 1933 Act or the 1934 Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said acts until the later of
two (2) years after the Actual Effective Date. Until the earlier of the resale
of the Shares and the Warrant Shares by each Subscriber or at least two (2)
years after the Warrants have been exercised, the Company will use its best
efforts to continue the listing or quotation of the Common Stock on the
Principal Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market.
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. A deviation from the use of proceeds set forth on SCHEDULE 9(E) of more
than 10% per item or more than 20% in the aggregate shall be deemed a material
breach of the Company's obligations hereunder. Except as set forth on SCHEDULE
9(E), the Purchase Price may not and will not be used for accrued and unpaid
officer and director salaries, payment of financing related debt, redemption of
outstanding redeemable notes or equity instruments of the Company nor non-trade
obligations outstanding on the Closing Date.
(f) Reservation. The Company undertakes to reserve, pro rata
on behalf of each holder of a Note or Warrant, from its authorized but unissued
common stock, at all times that Notes or Warrants remain outstanding, a number
of common shares equal to not less than 200% of the amount of common shares
necessary to allow each such holder at all times to be able to convert all such
outstanding Notes held by such holder, and one common share for each Warrant
Share. 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 during
any 365 day period shall be an Event of Default under the Note.
12
(g) Taxes. From the date of this Agreement until two (2) years
after the Closing Date, the Company will promptly pay and discharge, or cause to
be paid and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.
(h) Insurance. From the date of this Agreement until two (2)
years after the Closing Date, the Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than 100% of
the insurable value of the property insured; and the Company will maintain, with
financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated and to the
extent available on commercially reasonable terms.
(i) Books and Records. From the date of this Agreement until
two (2) years after the Closing Date, the Company will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
(j) Governmental Authorities. From the date of this Agreement
until two (2) years after the Closing Date, 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
until two (2) years after the Closing Date, the Company shall maintain in full
force and effect its corporate existence, rights and franchises and all licenses
and other rights to use intellectual property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.
(l) Properties. From the date of this Agreement until two (2)
years after the Closing Date, the Company will keep its properties in good
repair, working order and condition, reasonable wear and tear excepted, and from
time to time make all needful and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company will at all times comply
with each provision of all leases to which it is a party or under which it
occupies property if the breach of such provision could reasonably be expected
to have a material adverse effect.
(m) Confidentiality. From the date of this Agreement until two
(2) years after the Closing Date, 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 (10) days prior notice to Subscriber.
(n) Blackout. The Company undertakes and covenants that until
the first to occur of (i) the registration statement described in Section
11.1(iv) having been effective for one hundred and eighty (180) business days,
or (ii) until all the Shares and Warrant Shares have been resold pursuant to
13
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) S-8. The Company will not file a Form S-8 with the
Commission during the Exclusion Period (as defined in Section 12(a) of the
Agreement) without the consent of the Subscriber except in connection with
employee stock option plans and attorney compensation.
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 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 one hundred
and thirty-one (131) days after the Closing Date, but not later than three (3)
years after the Closing Date ("Request Date"), the Company, upon a written
request therefor from any record holder or holders of more than 50% of the
Shares issued and issuable upon conversion of the Notes and Warrant Shares
actually issued upon exercise of the Warrants shall prepare and file with the
Commission a registration statement under the 1933 Act covering the Shares and
Warrant Shares, including the Warrant Shares issuable upon exercise of the
Broker's Warrants (collectively "Registrable Securities") which are the subject
of such request. For purposes of Sections 11.1(i) and 11.1(ii), Registrable
Securities shall not include Securities which are
14
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. In addition, upon the receipt of such request, the
Company shall promptly give written notice to all other record holders of the
Registrable Securities that such registration statement is to be filed and shall
include in such registration statement Registrable Securities for which it has
received written requests within 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"). 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 seventy-five (75) days after the Closing Date (the "Filing Date"),
and cause to be declared effective within one hundred and thirty (130) days
after the Closing Date (the "Effective Date"), a Form S-3 registration statement
(the "Registration Statement") (or such other form that it is eligible to use)
in order to register the Registrable Securities for resale and distribution
under the 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
two hundred percent (200%) of the Shares issuable upon conversion of the Notes
(using the Conversion Price on the Closing Date or the trading day immediately
preceding the filing date of the Registration Statement, or any amendment
thereto; whichever results in the greatest number of registrable Shares, such
amount of Shares being included in the definition of Registrable Securities) and
one hundred percent (100%) of the Warrant Shares issuable upon exercise of the
Warrants. The Registrable Securities shall be reserved and set aside
15
exclusively for the benefit of each Subscriber, and not issued, employed or
reserved for anyone other than each Subscriber. Such Registration Statement will
immediately be amended or additional registration statements will be immediately
filed by the Company as necessary to register additional shares of Common Stock
to allow the public resale of all Common Stock included in and issuable by
virtue of the Registrable Securities. No securities of the Company other than
the Registrable Securities will be included in the registration statement
described in this Section 11.1(iv) except as disclosed on Schedule 11.1, without
the written consent of Subscriber. A registration that is filed but withdrawn
prior to being declared effective shall be deemed not to have been filed for
purposes of this Section 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 (the "Sellers") copies of all
filings and Commission letters of comment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until such registration statement has been effective for a period of two (2)
years, and comply with the provisions of the 1933 Act with respect to the
disposition of all of the Registrable Securities covered by such registration
statement in accordance with the Seller's intended method of disposition set
forth in such registration statement for such period;
(c) furnish to the Seller, at the Company's expense, such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller, provided,
however, that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction;
(e) if applicable, list the Registrable Securities covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(f) immediately notify the Seller when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event of which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and
(g) provided same would not be in violation of the provision
of Regulation FD under the 1934 Act, make available for inspection by the
Seller, and any attorney, accountant or other agent retained by the Seller or
underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers,
16
directors and employees to supply all publicly available, non-confidential
information reasonably requested by the seller, attorney, accountant or agent in
connection with such registration statement.
11.3. Provision of Documents. In connection with each
registration described in this Section 11, the Seller will furnish to the
Company in writing such information and representation letters with respect to
itself and the proposed distribution by it as reasonably shall be necessary in
order to assure compliance with federal and applicable state securities laws.
11.4. Non-Registration Events. The Company and the Subscribers
agree that the Seller will suffer damages if any registration statement required
under Section 11.1(iv) above is not filed by the Filing Date and not declared
effective by the Commission by the Effective Date, and any registration
statement required under Section 11.1(i) or 11.1(ii) is not filed within sixty
(60) days after written request and declared effective by the Commission within
one hundred and twenty (120) days after such request, and maintained in the
manner and within the time periods contemplated by Section 11 hereof, and it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the registration statement on Form SB-2 or such other form
described in Section 11.1(iv) is not filed on or before the Filing Date or is
not declared effective on or before the sooner of the Effective Date, or within
five (5) business days of receipt by the Company of a written or oral
communication from the Commission that the registration statement described in
Section 11.1(iv) will not be reviewed, (ii) if the registration statement
described in Sections 11.1(i) or 11.1(ii) is not filed within sixty (60) days
after such written request, or is not declared effective within one hundred and
twenty (120) days after such written request, or (iii) any registration
statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and
declared effective but shall thereafter cease to be effective (without being
succeeded immediately by an additional registration statement filed and declared
effective) for a period of time which shall exceed thirty (30) days in the
aggregate per year (defined as a period of three hundred and sixty-five days
commencing on the date the Registration Statement is declared effective) or more
than twenty (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 (30)
days or part thereof, of the greater of (i) the Purchase Price of the Notes
remaining unconverted and purchase price of Shares issued upon conversion of the
Notes and actually paid "Purchase Price" (as defined in the Warrants) of Warrant
Shares issued or issuable upon actual exercise of the Warrants, or (ii) the
closing price of the Company's common stock on the last day of each period for
which Liquidated Damages are payable, 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. Payments to be made
pursuant to this Section 11.4 shall be due and payable in cash within ten (10)
business days after the end of each thirty (30) day period or part thereof for
which Liquidated Damages are payable. It shall be deemed a Non-Registration
Event if at any time after the Effective Date the Company has registered for
unrestricted resale on behalf of each Subscriber fewer than one hundred and
fifty percent (150%) of the amount of Common Stock issuable upon full conversion
of all sums due under the Notes.
11.5. Expenses. All expenses incurred by the Company in complying
with Section 11, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including reasonable
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
fee of one counsel for all Sellers are called "Registration Expenses". All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of 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
17
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
18
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 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 three (3) business days (such third business day,
the "Unlegended Shares Delivery Date") after the business day on which the
Company has received (i) a notice that Registrable Securities have been sold
either pursuant to the Registration Statement or Rule 144 under
19
the 1933 Act, (ii) a representation that the prospectus delivery requirements,
or the requirements of Rule 144, as applicable, have been satisfied, and (iii)
the original share certificates representing the shares of Common Stock that
have been sold, the Company at its expense, (y) shall deliver, and shall cause
legal counsel selected by the Company to deliver, to its transfer agent (with
copies to Subscriber) an appropriate instruction and opinion of such counsel,
for the delivery of shares of Common Stock without any legends including the
legends set forth in Sections 4(e) and 4(g) above, issuable pursuant to any
effective and current registration statement described in Section 11 of this
Agreement or pursuant to Rule 144 under the 1933 Act (the "Unlegended Shares");
and (z) cause the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the balance of the
unsold shares of Common Stock, if any, to the Subscriber at the address
specified in the notice of sale, via express courier, by electronic transfer or
otherwise on or before the Unlegended Shares Delivery Date.
(b) In lieu of delivering physical certificates representing
the Unlegended Shares, if the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of a Subscriber, so long as the certificates therefore do not bear
a legend and the Subscriber is not obligated to return such certificate for the
placement of a legend thereon, the Company shall cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the account of
Subscriber's prime Broker with DTC through its Deposit Withdrawal Agent
Commission system. Such delivery must be made on or before the Unlegended Shares
Delivery Date.
(c) The Company understands that a delay in the delivery of
the Unlegended Shares pursuant to Section 11 hereof beyond the Unlegended Shares
Delivery Date could result in economic loss to a Subscriber. As compensation to
a Subscriber for such loss, the Company agrees to pay late payment fees (as
liquidated damages and not as a penalty) to the Subscriber for late delivery of
Unlegended Shares in the amount of $100 per business day after the Delivery Date
for each $10,000 of purchase price of the Unlegended Shares subject to the
delivery default. If during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Section 11.7 for an aggregate of thirty
(30) days, then each Subscriber or assignee holding Securities subject to such
default may, at its option, require the Company to purchase all or any portion
of the Shares and Warrant Shares subject to such default at a price per share
equal to 130% of the Purchase Price of such Shares and Warrant Shares. The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand.
(d) In addition to any other rights available to a Subscriber,
if the Company fails to deliver to a Subscriber Unlegended Shares within ten
(10) calendar days after the Unlegended Shares Delivery Date and the Subscriber
purchases (in an open market transaction or otherwise) shares of common stock to
deliver in satisfaction of a sale by such Subscriber of the shares of Common
Stock which the Subscriber anticipated receiving from the Company (a "Buy-In"),
then the Company shall pay in cash to the Subscriber (in addition to any
remedies available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of common stock so purchased exceeds (B) the aggregate purchase price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, together with interest thereon at a rate of 15% per annum,
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the Buy-In.
12. (a) Right of First Refusal. From the date of this Agreement,
until one hundred and eighty (180) days after the Actual Effective Date of the
Registration Statement (the
20
"Exclusion Period"), the Subscribers shall be given not less than fourteen (14)
business days prior written notice of any proposed sale by the Company of its
common stock or other securities or debt obligations, except in connection with
(i) employee stock options or compensation plans, (ii) as full or partial
consideration in connection with any merger, consolidation or purchase of
substantially all of the securities or assets of any corporation or other
entity, or (iii) as has been described in the Reports or Other Written
Information filed or delivered prior to the Closing Date (collectively "Excepted
Issuances"). The Subscribers shall have the right during the fourteen (14)
business days following the notice to purchase such offered common stock, debt
or other securities in accordance with the terms and conditions set forth in the
notice of sale in the same proportion to each other as their purchase of Notes
in the Offering. In the event such terms and conditions are modified during the
notice period, the Subscribers shall be given prompt notice of such modification
and shall have the right during the original notice period or for a period of
fourteen (14) business days following the notice of modification, whichever is
longer, to exercise such right. In connection with a Subscriber's exercise of
its rights pursuant to this Section 12(a), the Subscriber may tender some or all
of the Note principal and accrued interest as payment for such other stock,
securities or debt obligations being purchased.
(b) Favored Nations Provision. If, at any time a Note or
Warrant is outstanding or Registrable Securities are not then registered in an
effective Registration Statement for unrestricted resale as required by Section
11 hereof ("Outstanding Period"), except for the Excepted Issuances, the Company
shall offer, issue or agree to issue any Common Stock or securities convertible
into or exercisable for shares of Common Stock to any person, firm or
corporation at a price per share or conversion or exercise price per share which
shall be less than the Conversion Price or upon any other term more favorable to
such other investor, without the consent of a Subscriber still holding
Securities, then the Subscriber is granted the right in the Subscriber's sole
discretion to modify any term or condition of the Offering including but not
limited to the Conversion Price or other price at which Common Stock may be
purchased upon conversion of the Notes and exercise of the Warrants. The rights
of the Subscriber set forth in this Section 12(b) 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.
(c) Maximum Exercise of Rights. In the event the exercise of
the rights described in Sections 12(a) or 12(b) 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 as described in Section 7.3 of this
Agreement, then the purchase and/or issuance of such other Common Stock or
Common Stock equivalents 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 or Common Stock equivalents without exceeding the maximum
amount set forth in Section 7.3. The determination of when such Common Stock or
Common Stock equivalents may be issued shall be made by each Subscriber as to
only such Subscriber.
13. 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
21
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: Provo International Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Chief
Executive Officer, telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy by telecopier only
to: ▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP, ▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq., telecopier: (202)
295-8478, (ii) if to the Subscribers, to: the address and telecopier number
indicated on the signature page hereto, with a copy by telecopier only to:
Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇, and (iii) if to the Broker, to: Berry-Shino
Securities, Inc., ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇
Brand, telecopier: (▇▇▇) ▇▇▇-▇▇▇▇.
(b) Closing. The consummation of the transactions contemplated
herein shall take place at the offices of Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, upon the satisfaction of all
conditions to Closing set forth in this Agreement.
(c) Entire Agreement; Assignment. This Agreement and other
documents delivered in connection herewith represent the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties. Neither the Company nor the
Subscribers have relied on any representations not contained or referred to in
this Agreement and the documents delivered herewith. No right or obligation of
either party shall be assigned by that party without prior notice to and the
written consent of the other party.
(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 or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 13(e) hereof, each of the Company and Subscriber
hereby
22
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
23
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
PROVO INTERNATIONAL INC.
a Delaware Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇-▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇-▇▇▇▇▇▇▇▇
Title: CEO
Dated: January 27, 2004
+----------------------------------+-----------------+------------------------+
|SUBSCRIBER | PURCHASE PRICE | WARRANTS ISSUABLE ON |
| | | CLOSING DATE |
| | | |
+----------------------------------+-----------------+------------------------+
| | $500,000.00 | |
| | | |
| ________________________________ | | |
| (Signature) | | |
| ALPHA CAPITAL AKTIENGESELLSCHAFT | | |
| Pradafant 7 | | |
| ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ | | |
| Vaduz, Lichtenstein | | |
| Fax: ▇▇▇-▇▇-▇▇▇▇▇▇▇▇ | | |
| | | |
+----------------------------------+-----------------+------------------------+
24
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.
PROVO INTERNATIONAL INC.
a Delaware Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇-▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇-▇▇▇▇▇▇▇▇
Title: CEO
Dated: January 27, 2004
+----------------------------------+-----------------+------------------------+
|SUBSCRIBER | PURCHASE PRICE | WARRANTS ISSUABLE ON |
| | | CLOSING DATE |
| | | |
+----------------------------------+-----------------+------------------------+
| | $300,000.00 | |
| | | |
| ________________________________ | | |
| (Signature) | | |
| ▇▇▇▇▇▇▇▇▇▇▇ LIMITED PARTNERSHIP| | |
| ▇/▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ | |
| ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ | | |
| ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ | | |
| Fax: (▇▇▇) ▇▇▇-▇▇▇▇ | | |
| | | |
+----------------------------------+-----------------+------------------------+
25
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.
PROVO INTERNATIONAL INC.
a Delaware Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇-▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇-▇▇▇▇▇▇▇▇
Title: CEO
Dated: January 27, 2004
+--------------------------------------------+-----------------+------------------------+
|SUBSCRIBER | PURCHASE PRICE | WARRANTS ISSUABLE ON |
| | | CLOSING DATE |
| | | |
+--------------------------------------------+-----------------+------------------------+
| | $150,000.00 | |
| | | |
| ________________________________ | | |
| (Signature) | | |
| CONGREGATION MISHKAN ▇▇▇▇▇▇ INCORPORATED | | |
| ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ | | |
| ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ | | |
| Fax: ▇▇▇-▇▇▇-▇▇▇▇ | | |
| | | |
+--------------------------------------------+-----------------+------------------------+
26
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.
PROVO INTERNATIONAL INC.
a Delaware Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇-▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇-▇▇▇▇▇▇▇▇
Title: CEO
Dated: January 27, 2004
+-----------------------------------+-----------------+------------------------+
|SUBSCRIBER | PURCHASE PRICE | WARRANTS ISSUABLE ON |
| | | CLOSING DATE |
| | | |
+-----------------------------------+-----------------+------------------------+
| | $50,000.00 | |
| | | |
| ________________________________ | | |
| (Signature) | | |
| LUCRATIVE INVESTMENTS | | |
| Ajeltake Island | | |
| ▇.▇. ▇▇▇ ▇▇▇▇ | | |
| ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ | | |
| Fax: ▇▇▇-▇▇▇▇▇▇▇▇ | | |
| | | |
+-----------------------------------+-----------------+------------------------+
27
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Warrant
Exhibit B Escrow Agreement
Exhibit C Security Agreement
Exhibit D Collateral Agent Agreement
Exhibit E Form of Legal Opinion
Schedule 5(d) Additional Issuances
Schedule 5(h) Litigation
Schedule 5(m) Defaults
Schedule 5(q) Undisclosed Liabilities
Schedule 5(s) Capitalization
Schedule 5(u) Disagreements with Accountants and Lawyers
Schedule 9(e) Use of Proceeds
Schedule 11.1 Other Securities to be Registered