SUBSCRIPTION AGREEMENT
THE SECURITIES WHICH ARE THE SUBJECT OF THIS SUBSCRIPTION
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1993 (THE "ACT") OR UNDER THE LAWS OF ANY STATE OR OTHER
JURISDICTION. THEY MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES OR TO U.S. PERSONS (AS THAT TERM IS DEFINED IN
REGULATION S UNDER THE ACT), UNLESS THEY ARE REGISTERED UNDER
THE ACT AND UNDER THE LAWS OF THE STATES WHERE EACH SALE IS
MADE, OR AN EXEMPTION FROM REGISTRATION REQUIREMENTS IS
AVAILABLE IN THE OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY.
You (the "Subscriber") hereby agree to purchase, and Multi-Media
Tutorial Service, Inc., a Delaware corporation (the "Company") hereby agrees to
issue and to sell to the Subscriber, a convertible subordinated note of the
Company in the principal amount of $100,000.00 and in the form annexed as
Exhibit B (the "Note"), convertible in accordance with the terms thereof into
shares of the Company's common stock (the "Company Shares"). (The Company Shares
are sometimes referred to herein as the "Shares"). (The Note and the Company
Shares are collectively referred to herein as, the "Securities"). Upon
acceptance of this Agreement by the Subscriber, the Company shall issue and
deliver to the Subscriber the Note against payment, by wire transfer or bank
cashier's check, of the principal amount of the Note.
The following terms and conditions shall apply to this
subscription.
1. Subscriber's Representations and Warranties. The
Subscriber hereby represents and warrants to and agrees with the Company that:
2. Information on Company. The Subscriber has
been furnished with and has read the Company's registration statement on Form
S-1 declared effective by the Securities and Exchange Commission on April 13,
1995, and all of its Forms 10-Q and 8-K reports filed subsequent thereto,
(collectively, with exhibits thereto, hereinafter referred to as the "Reports").
In addition, the Subscriber has received from the Company such
other information concerning its operations, financial condition and other
matters as the Subscriber has requested, and considered all factors the
Subscriber deems material in deciding on the advisability of investing in the
Securities (such information in writing is collectively, the "Other Written
Information").
3. Information on Subscriber. The Subscriber
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 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. The Subscriber has the authority and is duly and
legally qualified to purchase and own the Securities.
4. Site and Condition of Sale. The Subscriber
is not a U.S. Person (as that term is defined in Exhibit A attached hereto). The
Subscriber acknowledges that the Company has not solicited this offer to
purchase the Securities within the United States and that the sale of the Note
and conversion into the Shares will not take place within the United States (for
this purpose, the "United States" means the Unites States of America, its
territories and possessions, and any state of the United States and the District
of Columbia). The Subscriber also acknowledges that the Securities have not been
registered under the laws of any other country or jurisdiction and that the
Company takes no responsibility for complying with any such laws.
5. Investment Intent. The Subscriber is
subscribing for the Securities for its own account and benefit and not as a
nominee or for the account of any other person or entity. The Subscriber has no
present intention of selling or distributing the Securities or any part thereof.
The Subscriber has sufficient financial resources to hold the Securities for an
indefinite period of time.
6. No Market Manipulation; Short Sales. The
Subscriber 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 a
manipulation of the price of the Company Shares (including making, or causing to
be made, any short sales of the Company's common stock) in order to facilitate
the sale or resale of the Company Shares or affect the price at which such
shares are purchasable upon conversion of the Note.
7. No Offer in United States. No offer to buy
the Securities was made to the Company by the Subscriber in the United States.
8. No Pre-Arranged Transaction. The
transactions contemplated by this Agreement:
0.0.0.1.Have not been pre-arranged with a
purchaser who is in the United States or is a U.S. Person; and
0.0.0.2. are not part of a plan or scheme to
evade the registration provisions of the Securities and Exchange Act of 1933
(the "Act").
(h) No Directed Selling Efforts in Regard to
this Transaction. To the best knowledge of the Subscriber, neither the Company
nor any distributor, if any, participating in the offering of the Securities nor
any person acting for the Company or any such distributor has conducted any
"directed selling efforts" as that term is defined in Regulation S. Such
activity includes, without limitation, the mailing of printed material to
investors residing in the United States, the holding of promotional seminars in
the United States, the placement of advertisements with radio or television
stations broadcasting in the United States or in publications with a general
circulation in the United States, which discuss the offering of Preferred Stock.
0.0.0.2.1. Company Representations and
Warranties. The Company represents and warrants to and agrees with the
Subscriber that:
0.0.0.2.2. Due Incorporation. The Company and
each of its subsidiaries has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Delaware.
0.0.0.2.3. 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.
0.0.0.2.4. Authority; Enforceability. This
Agreement has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement enforceable in accordance with its 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 and to
perform its obligations hereunder.
0.0.0.2.5. Additional Issuances. There are
no outstanding agreements or preemptive or similar rights affecting the
Company's common stock and no outstanding rights, warrants or options to
acquire, or instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of, any shares of common
stock or equity of the Company or other equity interest in any of the
subsidiaries of the Company, except as described in the Reports or Other Written
Information, or with respect to Existing Option Obligations, as defined in
paragraph 2.1(e)D of the Note, attached hereto.
0.0.0.2.6. 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 is required for
execution of this Agreement, including, without limitation, issuance and sale of
the Note and the issuance of the Shares upon any conversion of the Note or the
performance of obligations hereunder.
0.0.0.2.7. No Violation or Conflict. Assuming
the representations and warranties of the Subscriber in paragraph 1 are true
and
correct and the Subscriber complies with its obligations under this Agreement,
neither the sale of the Note nor any conversion of the Note, nor the issuance of
the Company Shares upon any conversion of the Note nor the performance of its
obligations under this Agreement by the Company will:
0.0.0.3. violate, conflict with, result in a
breach of, or constitute a default (or an event which with the giving of notice
of 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, or
any of its affiliates, (B) any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company, or any of its affiliates
of any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its affiliates or over the properties or assets of
the Company, or any of its affiliates, (C) the terms of any bond, debenture,
note or any other evidence of indebtedness, or any agreement, stock option or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company, or any of its affiliates is a party, by which
the Company, or any of its affiliates is bound, or to which any of the
properties of the Company, or any of its affiliates is subject, or (D) the terms
of any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company, or any of its affiliates is a party; or
0.0.0.4. result in the creation or
imposition of any lien, charge or encumbrance upon the Securities or any of the
assets of the Company, or any of its affiliates.
0.0.0.4.1. The Securities. The Securities upon
issuance:
0.0.0.5. are, or will be, free and clear of
any security interests, liens, claims or other encumbrances;
0.0.0.6. have been, or will be, duly and
validly authorized and on the date of issuance (hereinafter the "Closing Date")
or the Conversion Date as such term is defined in the Note (hereinafter the
"Conversion Date"), as the case may be, the Note and Shares issuable upon
conversion of the Note, will be duly and validly issued, fully paid and
nonassessable;
0.0.0.7. 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;
0.0.0.8. will not subject the holders
thereof to personal liability by reason of being such holders; and
0.0.0.9. the Company Shares, are quoted
on, and to the best knowledge of Company will be, at the completion of the
Restricted Period, eligible for trading on, the National Association of
Securities Dealers Automated Quotations Systems ("NASDAQ") SmallCap Market.
0.0.0.9.1. 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
materially affect the execution by the Company or the performance by the Company
of its obligations under this Agreement.
(i)No Directed Selling Efforts in Regard to this
Transaction. Neither the Company nor any distributor, if any, participating in
the offering of the Securities nor any person acting for the Company or any such
distributor has conducted any "directed selling efforts" as that term is defined
in Regulation S. Such activity includes, without limitation, the mailing of
printed material to investors residing in the United States, the holding of
promotional seminars in the United States, the placement of advertisements with
radio or television stations broadcasting in the United States or in
publications with a general circulation in the United States, which discuss the
offering of Preferred Stock.
(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 Company Shares or affect the price at which the Company
Shares are purchasable upon conversion of the Note.
(k)Reporting Company. The Company is a publicly-held
company whose common stock is (and has been for the past 90 days) registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the "1934
Act") and is duly listed for trading on The NASDAQ SmallCap Market. Pursuant to
the provisions of the 1934 Act, the Company has filed all reports and other
materials required to be filed thereunder with the Securities and Exchange
Commission during the preceding twelve months.
(l)Information Concerning Company. The Reports and
Other Written Information 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 set forth in the Reports, there has been no material
adverse change in the Company's business, financial condition or affairs not
disclosed in the Reports. The Reports and Other Written Information 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.
(m)Offer to Buy. No offer to buy the Note was made
to the Company by any person in the United States.
(n)Pre-Arranged Transaction. The transactions
contemplated by this Agreement:
(i) have not been pre-arranged with a
purchaser who is in the United States or is a U.S. Person; and
(ii) are not part of a plan or scheme to
evade the registration provisions of the Act.
(o)Stop Transfer. The Company has not issued, and
provided nothing comes to the Company's attention after the closing date that
will cause it to believe in good faith that the issuance of the Note or the
Shares underlying the Note was in contravention with any United States law, will
not issue, any stop transfer order or other order impeding the sale and delivery
of the Securities, or any underlying shares.
(p)Use of Funds. To the extent the Subscribers
identified on Schedule A to the Escrow Agreement annexed as Exhibit C hereto
collectively purchase Notes in the principal amount of $750,000 or more, then
the Company agrees that no more than $250,000 of the sums advanced by the
Subscribers to purchase the Note will be used to satisfy any non-trade accounts
payable or debt. In the event less than $750,000 of principal Note amount is
purchased, then none of the sums advanced will be used to satisfy non-trade
accounts payable or debt.
(q)Correctness of Representations. The Company
represents that the foregoing representations and warranties are true and
correct as of the date hereof and, unless the Company otherwise notifies the
undersigned prior to the Closing Date on which the undersigned purchases the
Note, shall be true and correct as of the Closing Date. The foregoing
representations and warranties shall survive the Closing Date.
0.0.0.9.2. Regulation S Offering. The sale of Securities
hereby is being made pursuant to Rule 903(c)(2) of the Regulation S, and is
intended to comply with the provisions of Regulation S. The Securities have not
been and will not be registered under the Act or under the securities laws of
any state or jurisdiction of the United States ("State Laws").
0.0.0.9.3. Transfer of Securities. Neither the Note nor the
Shares may be transferred or resold to any U.S. Person until the 41st day from
the date the Subscriber purchases the Note (the "Restriction Period") and then
only in accordance with the Act and applicable State Laws in the opinion of
counsel satisfactory to the Company which will not unreasonably be withheld. The
Subscriber agrees that it is solely responsible for compliance therewith with
respect to any such transfer or resale.
0.0.0.9.4. Reverse Split. The Company shall give the
Subscriber not less than thirty (30) days' prior written notice of any proposed
combination of shares or other reclassification or recapitalization of the
common stock resulting in a reduction of the number of Shares issuable upon
conversion of the Note, and the Subscriber shall have the right to consult with
the Company with respect to such proposed combination or recapitalization.
0.0.0.9.5. Legal Fees. On receipt of the purchase price for
the Note, the Company shall pay to counsel to the Subscriber its ▇▇▇▇ for
services rendered to the Subscriber in reviewing this Agreement and closing the
Note purchase. The maximum legal fees shall be 1% of the principal amount of the
Note subscribed for.
0.0.0.9.6. Covenants of the Company. The Company covenants
and agrees with the Subscriber to:
0.0.0.9.7. continue to comply with all
applicable reporting requirements of the Exchange Act;
0.0.0.9.8. refrain form engaging, and insure
that none of its affiliates will engage, in any Directed Selling Efforts, as
defined in Regulation S, with respect to the Securities; and
0.0.0.9.9. advise the Subscriber, promptly
after it receives notice of issuance by the Securities and Exchange Commission,
any state securities commission or any other regulatory authority of any stop
order or of any order preventing or suspending the use of 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.
0.0.0.9.10. Covenants of the Company and Subscriber Regarding
Indemnifications.
0.0.0.10. The Company agrees to indemnify,
hold harmless, reimburse and defend Subscriber against any claim, costs,
expense, liability, obligation, loss or damage (including legal fees) of any
nature, incurred by or imposed upon Subscriber which results, arises out of or
is based upon (a) any misrepresentation by Company or breach of any warranty by
Company in this Agreement or in any Exhibits or Schedules attached hereto, or
Reports or other Written Information; or (b) any breach or default in
performance by Company of any covenant or undertaking to be performed by Company
hereunder.
0.0.0.11. Subscriber agrees to indemnify, hold
harmless, reimburse and defend the Company at all times against any claim,
costs, expense, liability, obligation, loss or damage (including legal fees) of
any nature, incurred by or imposed upon the Company which results, arises out of
or is based upon (a) any misrepresentation by Subscriber in this Agreement or in
any Exhibits or Schedules attached hereto; or (b) any breach or default in
performance by Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder.
0.0.0.11.1. Escrow of Shares. In order to fulfill the
Company's obligation to deliver the Company Shares upon conversion of the Note,
the Company shall, deliver to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. (the "Escrow Agent"), on
the Closing Date, shares of Common Stock of the Company equal to the maximum
number of shares the principal of the Note is convertible into based upon the
minimum conversion price described in Section 2.1(d) of the Note (the "Escrowed
Shares") to be held in escrow. The certificate representing the Escrowed Shares
shall not bear a restrictive legend or have a stop transfer order placed against
it on the books of the Company's transfer agent. The terms and conditions of
escrow shall be set forth in an escrow agreement in the form annexed as Exhibit
C hereto (the "Escrow Agreement").
0.0.0.11.2. Registration Rights; Procedure; Indemnification.
0.0.0.11.3. Registration Rights.
0.0.0.11.4. If available under the securities
laws in effect on the date of conversion, the shares of Common Stock issuable
upon full or partial conversion of the Note shall be issued pursuant to
Regulation S of the Securities Act of 1933, as amended, and shall be
transferable and assignable pursuant to Regulation S. Provided the shares issued
upon the conversion of the Note so qualify, the shares will be issued without
any restrictive or other legend. In the event the Common Stock that may be
acquired upon conversion of the Note cannot upon issuance, be resold in the
United States without any restrictive legend and unless registered under the
Securities Act of 1933, as amended (the "Securities Act"):
0.0.0.12. On one occasion, for a period
commencing 41 days after the date hereof, but not later than three years from
the date hereof, the Company, upon a written request therefor from any record
holder or holders of more than 50% of the aggregate of the Company's shares
issued on the conversion of the Notes, which are still held by the Subscribers
on the day the Shares are no longer transferable without any restricting legend
(the common stock of the Company issued and issuable on conversion of the Note
being, the "Registrable Securities"), shall prepare and file with the SEC a
registration statement under the Securities Act covering the Registrable
Securities which are the subject of such request. 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 20 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
10.1. As a condition precedent to the inclusion of Registrable Securities, the
holder thereof shall provide the Company with such information as the
Company reasonably requests and shall enter into an appropriate underwriting
agreement with the underwriter(s), if any, of the Registrable Securities. The
obligation of the Company under this Section 10.1(a)(i) shall be limited to one
registration statement.
0.0.0.13. If the Company at any time proposes
to register any of its securities under the Securities 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 that may
be acquired upon exercise of the Note for sale to the public, each such time it
will give at least 45 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 30 days after the giving of any such
notice by the Company, to register any of the Registrable Securities, the
Company will cause such Registrable Securities as to which registration shall
have been so requested to be included in 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 10.1 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 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 forgoing provisions, the Company may
withdraw any registration statement referred to in this Section 10.1 without
thereby incurring any liability to the Seller.
0.0.0.14. If, at the time any written request for
registration is received by the Company pursuant to Section 10.1(a)(i), the
Company has determined to proceed with the actual preparation and filing of a
registration statement under the Securities Act in connection with the proposed
offer and sale for cash of any of its securities for the Company's own account,
such written request shall be deemed to have been given pursuant to Section
10.1(a)(ii) rather than Section 10.1(a)(i), and the rights of the holders of
Registrable Securities covered by such written request shall be governed by
Section 10.1(a)(ii).
0.0.0.14.1. Registration Procedures. If and whenever the
Company is required by the provisions hereof to effect the registration of any
shares of Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible:
0.0.0.14.0.1. prepare and file with the Securities
and Exchange Commission (the "Commission") a registration statement 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 hereinafter provided):
0.0.0.14.0.2. 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 for the period specified in paragraph (a) above and comply with the
provisions of the Securities 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;
0.0.0.14.0.3. furnish to the Seller, and to each
underwriter 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;
0.0.0.14.0.4. 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 or, in the case of an underwritten public offering, the managing
underwriter reasonably shall request, 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;
0.0.0.14.0.5. list the Registrable Securities
covered by such registration statement with any securities exchange on which the
Registrable Securities of the Company is then listed;
(f) immediately notify the Seller and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities 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;
(g) make available for inspection by the Seller, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by the Seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by the seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
(h)at the request of the Holder, provided a demand
registration has been made pursuant to section 10.1(a)(i) or 10.1(a)(ii), the
shares issuable upon the conversion of the unpaid note will be included in a
registration statement filed pursuant to this Section 10.
For purposes of this Section 10, the period of distribution of
securities in a firm commitment underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of all securities
purchased by it, or sooner if the managing underwriter consents, and the period
of distribution of securities in any other registration shall be deemed to
extend until the earlier of the sale of all securities covered thereby and 120
days after the effective date thereof.
In connection with each registration hereunder, the Seller
will furnish to the Company in writing such information 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. In
connection with each registration pursuant to this Section 10 covering an
underwritten public offering, the Company and the Seller agree to enter into a
written agreement with the managing underwriter in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature.
0.0.0.14.0.5.1. Expenses. All expense's incurred by the
Company in complying with Section 10, 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 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 and costs
of insurance are called "Registration Expenses". All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities, including
any fees and disbursements of any special counsel to the Seller, are called
"Selling Expenses".
The Company will pay all Registration Expenses in connection
with each registration statement under Section 10. All Selling Expenses in
connection with each registration statement under Section 10 shall be borne by
the Seller 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.
0.0.0.14.0.5.2. Indemnification and Contribution.
0.0.0.14.0.6. In the event of a registration of any
Registrable Securities under the Securities Act pursuant to Section 10, the
Company will 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 Securities 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 Securities 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 Securities Act pursuant to Section 10, 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 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 will not be liable in any such case if and 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, the underwriter or any
such controlling person in writing specifically for use in such registration
statement or prospectus.
0.0.0.14.0.7. In the event of a registration of any
of the Registrable Securities under the Securities Act pursuant to Section 10,
the Seller will indemnify and hold harmless the Company, each person, if any,
who controls the Company within the meaning of the Securities 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 Securities 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 Securities 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 was registered under the Securities Act
pursuant to Section 10, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such Seller, as such, furnished in
writing to the Company by such Seller specifically for use in such registration
statement or prospectus, and provided, further, however, that the liability of
the Seller hereunder shall be limited to the proportion of any such loss, claim,
damage, liability or expense which is equal to the proportion that the public
offering price of the Registrable Securities sold by the Seller under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the
proceeds received by the Seller from the sale of Registrable Securities covered
by such registration statement.
0.0.0.14.0.8. 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 10.4(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.4(c) 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 10.4(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
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
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
0.0.0.14.0.9. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any case
in which either (i) the Seller, or any controlling person of the Seller, makes a
claim for indemnification pursuant to this Section 10.4 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 10.4 provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
part of the Seller or controlling person of the Seller in circumstances for
which indemnification is provided under this Section 10.4; 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 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, and the Company
is responsible for the remaining portion; provided, however, that, in any such
case, (A) 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 (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
11. (a)Exclusive Option. For a period of six months from the
issue date of the Convertible Note, Subscriber is hereby granted the option of
lending to the Company additional sums to be evidenced by convertible notes in
the principal amount up to two times the amount of the principal amount of this
Convertible Note. The terms of such other convertible note shall be identical to
the terms of this Convertible Note except that the Conversion Price described in
Section 2.1(b) of the Convertible Note shall be equal to 75% of the average bid
price of the Company's common stock for the five trading days immediately
preceding the Subscriber's exercise of the option described in this Section
11(a). The Company agrees to pay commissions and finders fees to the same
parties and entities entitled to receive same in connection with the Convertible
Note, in the same proportions as payable by the Company in connection with the
Convertible Note. This option will not be exercisable by the Subscriber unless
Subscriber is able to make the same representations, warranties and undertakings
as made and undertaken herein.
(b)Right of First Refusal. Until the later of
December 31, 1997 or for so long as the principal and interest of the Note are
outstanding, the Subscriber shall be given not less than fifteen (15) days prior
written notice of any proposed sale by the Company of its common stock or other
securities in offerings made pursuant to the provisions of Regulation D or
Regulation S under the 1933 Act, or any other exemption from registration,
whether state or federal. The Subscriber shall have the right during the fifteen
(15) days following the notice to purchase an amount of securities in the same
proportion as being purchased in the aggregate offering to which this
Subscription Agreement relates, of those securities proposed to be issued and
sold, in accordance with the terms and conditions set forth in the notice of
sale, provided that, in the case of securities offered pursuant to Regulation D,
the Subscriber may purchase such securities pursuant to Regulation S if it is
then not a U.S. Person, and such regulation is then available to the Company. In
the event such terms and conditions are modified during the notice period, the
Subscriber shall be given prompt notice of such modification and shall have the
right during the original notice period or for a period of ten (10) days
following the notice of modification, whichever is longer, to exercise such
right.
(c)Right of Participation. The Subscriber shall be
given not less than thirty (30) days' prior written notice of any proposed
public offering by the Company of its common stock. The Subscriber shall have
the right during such thirty (30) day period to irrevocably subscribe for up to
that percentage of the total number of Shares being offered by the Company in
such public offering as equals the percentage obtained by dividing by the number
of the Company Shares owned by the Subscriber immediately prior to such public
offering together with such Common Shares issuable upon conversion of the Note,
by the number of shares of the Company's outstanding common stock immediately
prior to such public offering. This right of participation shall expire on
December 31, 1997, with respect to
any public offering by the Company that has not commenced prior to such date.
12. Miscellaneous.
0.0.0.14.0.9.1. Notices. All notices or other
communications given or made hereunder shall be in writing and shall be deemed
delivered the day telecopied (with copy mailed by certified or registered
mail, or overnight courier) to the party to receive the same at its address set
forth below or to such other address as either party shall hereafter give to the
other by notice duly made under this Section 14(a): (i) if to the Company, to
▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer, Multi-Media Tutorial Service, Inc., ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopier number (▇▇▇) ▇▇▇-▇▇▇▇; and
(ii) if to the Subscriber, to the name, address and telecopy number set forth on
the first page hereof.
0.0.0.14.0.9.2. Entire Agreement; Assignment. This
Agreement represents 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. 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.
0.0.0.14.0.9.3. Execution. This Agreement may be
executed by facsimile transmission, followed by delivery of an executed original
copy.
0.0.0.14.0.9.4. Law Governing this Agreement. This
Agreement shall be governed by and construed in accordance with the laws of the
United States of America and the State of New York. 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. Both parties agree to submit to
the jurisdiction of such courts.
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.
Very truly yours,
MULTI-MEDIA TUTORIAL
SERVICE, INC.
By:___________________________
Dated: April ____, 1996
Accepted:
By:____________________________
Dated as of April ____, 1996
EXHIBIT A
U.S. PERSON
1. "U.S. Person" means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or
incorporated under the laws of the United States;
(iii) Any estate of which any executor or administrator
is a U.S. person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located in
the United States;
(vi) Any non-discretionary account or similar account
(other than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person;
(vii) Any discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary organized, incorporated, or
(if an individual) resident in the United States; and
(viii) Any partnership or corporation if: (A) organized or incorporated
under the laws of any foreign jurisdiction; and (B) formed by a U.S. person
principally for the purpose of investing in securities not registered under the
Act, unless it is organized or incorporated, and owned, by accredited investors
(as defined in Rule 501(a)) who are not natural persons, estates or trusts.
2. Notwithstanding paragraph 1 of this rule, any discretionary account
or similar account (other than an estate or trust) held for the benefit or
account of a non-U.S. person by a dealer or other professional fiduciary
organized, incorporated, or (if an individual) resident in the United States
shall not be deemed a "U.S. person."
3. Notwithstanding paragraph 1, any estate of which any professional
fiduciary acting as executor or administrator is a U.S. person shall not be
deemed a U.S. person if:
(i) An executor or administrator of the estate who is not
a U.S. person has sole or shared investment discretion with respect to the
assets of the estate; and
(ii) The estate is governed by a foreign law.
4. Notwithstanding paragraph 1, any trust of which any professional
fiduciary acting as trustee is a U.S. person shall not be deemed a U.S. person
if a trustee who is not a U.S. person has sole or shared investment discretion
with respect to the trust assets, and no beneficiary of the trust (and no
settlor if the trust is revocable) is a U.S. person.
5. Notwithstanding paragraph 1, an employee benefit plan established and
administered in accordance with the law of a country other than the United
States and customary practices and documentation of such country shall not be
deemed a U.S. person.
6. Notwithstanding paragraph 1, any agency or branch of a U.S. person
located outside the United States shall not be deemed a "U.S. person" if:
(i) The agency or branch operates for valid business
reasons; and
(ii) The agency or branch is engaged in the business of insurance or
banking and is subject to substantive insurance or banking regulation,
respectively, in the jurisdiction where located.
7. The International Monetary Fund, the International Bank for Reconstruction
and Development, the Inter-American Development Bank, the Asian Development
Bank, the African Development Bank, the United Nations, and their agencies,
affiliates and pension plans, and any other similar international organizations,
their agencies, affiliates and pension plans shall not be deemed "U.S. persons."
CONVERTIBLE NOTE
THIS NOTE AND THE COMMON STOCK INTO WHICH IT IS CONVERTIBLE
(COLLECTIVELY, THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER THE LAWS
OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES MAY NOT BE
OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS
THAT TERM IS DEFINED IN REGULATION S UNDER THE ACT), UNLESS
THEY ARE REGISTERED UNDER THE ACT AND UNDER THE LAWS OF THE
STATES WHERE EACH SALE IS MADE, OR AN EXEMPTION OR SAFE HARBOR
FROM REGISTRATION REQUIREMENTS IS AVAILABLE IN THE OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY.
FOR VALUE RECEIVED, MULTI-MEDIA TUTORIAL SERVICE, INC., a
Delaware corporation (hereinafter called "Borrower"), hereby promises to pay to
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(the "Holder") or order, without demand, the sum of $100,000, with interest
accruing at the annual rate of 10%, on December 31, 1997 (the "Maturity Date"),
as such date may be extended by agreement of the parties hereto.
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a thirty
(30) day grace period to pay any monetary amounts due under this Note, after
which grace period a default interest rate of 17% per annum shall apply to the
amounts owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth
in Article II shall remain in full force and effect from the 41st day after the
date hereof until the Note principal is paid in full.
1.3 Interest Rate. At the Maturity Date, accelerated or
otherwise but only to the extent the Borrower is required to repay such
principal then the Borrower shall pay interest at the annual rate of 10% per
annum together with such principal payment.
/ /
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal
amount due under this Note into Shares of the Borrower's Common Stock as set
forth below.
2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right from and after the date 41
days following issuance of this Note and then at any time on or prior to the
Maturity Date, as it may be extended by agreement of the parties hereto, to
convert any outstanding and unpaid principal portion of this Note and accrued
interest of $25,000 or greater amount (or any lesser amount representing the
full remaining outstanding and unpaid principal portion and accrued interest on
Note (the date of giving of such notice of conversion being a "Conversion Date")
into fully paid and nonassessable shares of Common Stock of Borrower as such
stock exists on the date of issuance of this Note, or any shares of capital
stock of Borrower into which such stock shall hereafter be changed or
reclassified (the "Common Stock") at the conversion price as defined in Section
2.1(b) hereof (the "Conversion Price"), determined as provided herein. Upon the
surrender of this Note, accompanied by the Holder's written request for
conversion, Borrower shall issue and deliver to the Holder that number of shares
of Common Stock for the portion of the Note converted and a new Note in the form
hereof for the balance of the principal amount hereof, if any. The number of
shares of Common Stock to be issued upon each conversion of this Note shall be
determined by dividing that portion of the principal and interest on the Note to
be converted by the Conversion Price. In the event the Holder does not convert
the entire principal amount of this Note before the Maturity Date, Borrower
shall have the option of compelling the conversion of the Note or paying
Borrower the remaining unpaid principal of the Note and interest as herein
described.
(b) Subject to adjustment as provided in Section 2.1(e)
hereof, the Conversion Price shall be $1.2656.
(c) Notwithstanding the foregoing sections 2.1(a) and 2.1(b)
the Holder may, on or before six months after the date hereof, elect in writing
the alternate conversion price as defined in Section 2.1(d) hereof ("Alternate
Conversion Price"). In the event the Holder elects in writing the Alternative
Conversion Price, then the Holder must convert the entire principal portion of
this Note and accrued interest on or before the Maturity Date. In the event the
Holder elects the Alternate Conversion Price, but does not convert the entire
principal of this Note on or before the Maturity Date then the remaining
unconverted principal of this Note and accrued interest shall be converted into
shares of Borrower's Common Stock at the Alternate Conversion Price, at the
Borrower's election, and the Maturity Date shall be the Conversion Date.
(d) Subject to adjustment as provided in Section 2.1(e)
hereof, the Alternate Conversion Price shall be (i) seventy-five percent (75%)
of the average closing bid price for the Common Stock on the NASDAQ SmallCap
Market, or on any securities exchange or other securities market on which the
Common Stock is then being traded, for the five (5) trading days
immediately preceding the Conversion Date (the "Average Bid Price"), provided,
however, that notwithstanding anything to the contrary contained in this
agreement or the Subscription Agreement, relating hereto, in no event shall the
Alternate Conversion Price be less than $.55 per share or more than $3.55 per
share, subject to adjustment as provided in Section 2.1(e)A, 2.1(e)B and
2.1(e)C, below.
(e) The Conversion Price, Alternate Conversion Price and
number and kind of shares of other securities to be issued upon conversion
determined pursuant to Section 2.1(a), 2.1(b), 2.1(c) and 2.1(d), shall be
subject to adjustment from time to time upon the happening of certain events
while this conversion right remains outstanding, as follows:
A. Merger, Sale of Assets, etc. If the Borrower at any
time shall consolidate with or merge into or sell or convey all or substantially
all its assets to any other corporation, this Note shall thereafter evidence the
right to purchase such number and kind of shares or other securities and
property as would have been issuable or distributable on account of such
consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section 2.1(e) shall apply to such securities
of such successor or purchaser after any such consolidation, merger, sale or
conveyance.
B. Reclassification, etc. If the Borrower at any time
shall, by reclassification or otherwise, change the Common Stock into the same
or a different number of securities of any class or classes, this Note shall
thereafter evidence the right to purchase such number and kind of securities as
would have been issuable as the result of such change with respect to the Common
Stock immediately prior to such reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
in shares of Common Stock, the Conversion Price or Alternate Conversion Price,
as the case may be, shall be proportionately reduced in case of subdivision of
shares or stock dividend or proportionately increased in the case of combination
of shares, in each such case by the ratio which the total number of shares of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.
D. Share Issuance. Subject to the provisions of
Section 2.1(e), if the Borrower at any time shall issue any shares of Common
Stock prior to the conversion of the entire principal amount of the Note
(otherwise than as: (i) provided in Sections 2.1(e)A, 2.1(e)B or 2.1(e)C or this
subparagraph D; (ii) pursuant to options, warrants, or other obligations to
issue shares, outstanding on the date hereof as described in the Reports and
Other Written Information, as such terms are defined in the Subscription
Agreement; [(i) and (ii) above, are hereinafter referred to as the "Existing
Option Obligations"] for a consideration less than the Conversion Price or
Alternate Conversion Price that would be in effect at the time of such issue,
then, and
thereafter successively upon each such issue, the Conversion Price or Alternate
Conversion Price shall be reduced as follows: (i) the number of shares of Common
Stock outstanding immediately prior to such issue shall be multiplied by the
Conversion Price in effect or Alternate Conversion Price at the time of such
issue and the product shall be added to the aggregate consideration, if any,
received by the Borrower upon such issue of additional shares of Common Stock;
and (ii) the sum so obtained shall be divided by the number of shares of Common
Stock outstanding immediately after such issue. The resulting quotient shall be
the adjusted conversion price. Except for the Existing Option Obligations and
options that may be issued under any employee incentive stock option and/or any
nonqualified stock option plan adopted by the Company, for purposes of this
adjustment, the issuance of any security of the Borrower carrying the right to
convert such security into shares of Common Stock or of any warrant, right or
option to purchase Common Stock shall be deemed to constitute the issuance of
the maximum number of shares of Common Stock issuable on full exercise of such
conversion or purchase rights, and the consideration for such security plus any
consideration payable upon exercise of its conversion or purchase right shall be
deemed to have been paid to the Borrower. Upon the expiration of any such
conversion or purchase right, the adjustment to the Conversion Price or Adjusted
Conversion Price shall be extinguished.
(f) During the period the conversion right exists, Borrower
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of Common Stock upon the full conversion
of this Note. Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. Borrower agrees that its
issuance of this Note shall constitute full authority to its officers and agents
who are charged with the duty of executing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the conversion
of this Note.
(g) Anything to the contrary herein notwithstanding, in the
event the Holder would not be able to convert all or part of the Note into
Common Stock which would not within forty-five (45) days of the Conversion Date
be fully and freely tradable without restriction or filing of a registration
statement with the Securities and Exchange Commission, then Borrower shall not
have the option described in Section 2.1(a) hereof to compel conversion, nor
will the conversion described in Section 2.1(c) hereof take place without the
consent of the Holder.
2.2 Method of Conversion. This Note may be converted by the
Holder in whole or in part by the surrender of this Note at the principal office
of the Borrower. Upon partial exercise hereof, a new Note containing the same
date and provisions of this Note shall be issued by the Borrower to the Holder
for the principal balance of this Note which shall not have been converted.
ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default
("Event of Default") shall, at the option of the Holder hereof, make all sums or
principal and interest then remaining unpaid
hereon and all other amounts payable hereunder immediately due and payable, all
without demand, presentment or notice, or grace period, all of which hereby are
expressly waived, except as set forth below:
3.1 Failure to Pay Principal or Interest. The Borrower fails
to pay any installment of principal or interest hereon when due and such failure
continues for a period of thirty (30) days after written notice to the Borrower
from the Holder.
3.2 Breach of Covenant. The Borrower breaches any covenant or
other term or condition of this Note and such breach continues for a period of
ten (10) days after written notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any
representation or warranty of the Borrower made herein, in the Subscription
Agreement, or in any agreement, statement or certificate given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
material respect.
3.4 Receiver or Trustee. The Borrower shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar process
shall be entered or filed against Borrower or any of its property or other
assets for more than $100,000, and shall remain unvacated, unbonded or unstayed
for a period of forty-five (45) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower.
3.7 Material Adverse Event. The occurrence of a Material
Adverse Event involving the Company, shall mean (i) delisting of the Common
Stock from the NASDAQ SmallCap Market; (ii) a concession by the Company of a
default under any obligation in a monetary amount in excess of $100,000, except
for obligations due under Notes referred to in Note 4 of the Company's report on
Form 10Q-SB for the quarter ended November 30, 1995 and any replacement Notes,
not to exceed an aggregate $450,000 in principal amount; (iii) an SEC stop trade
order or NASDAQ trading suspension, if either applies for a period of ten days
or longer; (iv) the failure to deliver Company Common Stock to the Escrow Agent
pursuant to Section 12 of the Subscription Agreement, between the parties
hereto, executed as of this date; (v) ▇▇▇▇▇▇ ▇▇▇▇▇▇ ceasing to be Chief
Executive Officer of the Company; and (vi) receipt by the Company of a qualified
audit opinion in connection with the Company's financial statements for the year
ended February 28, 1996. A twenty (20) day grace period shall apply with respect
to defaults under this Section 3.7. Upon the occurrence of an Event of Default,
including the occurrence of a Material Adverse Event, the Borrower will not have
the option of compelling conversion of this Note into shares of the Borrower's
Common Stock, nor will the principal of the
Note and accrued interest be converted as described in Section 2.1(c) hereof
without the consent of the Holder.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgency Not Waiver. No failure or delay on
the part of Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
4.2 Notices. Any notice herein required or permitted to be
given shall be in writing and may be personally served or sent by United States
mail and shall be deemed to have been given three (3) days after being deposited
in the United States mail, certified, registered, with postage pre-paid and
properly addressed or on receipt, if sent by fax transmission (with copy sent by
certified or registered mail or by overnight courier). For the purposes hereof,
the address and fax number of the Holder is as set forth on the first page
hereof the address and fax number of the Borrower shall be Multi-Media Tutorial
Service, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, fax number (718)
▇▇▇-▇▇▇▇. Both Holder and Borrower may change the address and fax number for
service by service of written or fax notice to the other as herein provided.
Notice of Conversion shall be deemed given when made to the Escrow Agent
identified in Section 12 of the Subscription Agreement.
4.3 Amendment Provision. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented.
4.4 Assignability. This Note shall be binding upon the
Borrower and its successors and assigns, and shall inure to the benefit of the
Holder and its successors and assigns.
4.5 Cost of Collection. If default is made in the payment of
this Note, Borrower shall pay the Holder hereof costs of collection, including
attorneys' fees.
4.6 Governing Law. This Note has been executed in and shall be
governed by the internal laws of the State of New York, without regard to the
principles of conflict of laws.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed
in its name by its Chief Executive Officer on this 23rd day of April, 1996.
MULTI-MEDIA TUTORIAL SERVICE, INC.
By:
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