Offshore Loan Subscription Agreement - eRoom System Technologies Inc.
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISTRIBUTED
DIRECTLY OR INDIRECTLY, IN THE UNITED STATES, ITS TERRITORIES, POSSESSIONS, OR
AREAS SUBJECT TO ITS JURISDICTION, OR TO OR FOR THE ACCOUNT OR BENEFIT OF A
"U.S. PERSON" AS THAT TERM IS DEFINED IN RULE 902 OR REGULATION S OF THE ACT, AT
ANY TIME PRIOR TO ONE (1) YEAR AFTER THE ISSUANCE OF THIS CERTIFICATE, EXCEPT
(i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER
SUCH ACT, OR (ii) IN COMPLIANCE WITH AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT. ANY SALES, TRANSFERS OR DISTRIBUTIONS OF THE SECURITIES MUST BE MADE IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S OF THE ACT."
OFFSHORE LOAN SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and eRoom System
Technologies, Inc., a Nevada corporation (the "Company") hereby agrees to issue
and to sell to you and other Subscribers, 9% Secured, Subordinated Notes (the
"Notes") and Common Stock of the Company. The amount of your purchase is set
forth on the signature page hereof. The form of Note is annexed hereto as
Exhibit A. The Notes and the Common Stock are sometimes referred to as the
"Securities". The Company shall issue and deliver to the Subscriber, the Note
and Common Stock against payment by wire transfer of the Purchase Price.
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:
(a) INFORMATION ON COMPANY. The Subscriber has been furnished with
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 referred to as the "Written Information").
(b) INFORMATION ON SUBSCRIBER. The Subscriber is an "accredited
investor", as such term is defined by the Commission under the Securities Act of
1933, as amended, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States privately and publicly-owned companies in private placements in the past
and, with his 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.
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(c) PURCHASE OF SECURITIES. On the Closing Date, the Subscriber will
purchase the Note and Common Stock for his 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 Securities Act of
1933, as amended (the "1933 Act") by reason of their issuance in a transaction
that does not require registration under the 1933 Act, and that such Securities
must be held unless a subsequent disposition is registered under the 1933 Act or
is exempt from such registration.
(e) RESTRICTIVE LEGEND. The Securities shall bear the following
legend (the "Legend"):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISTRIBUTED DIRECTLY OR INDIRECTLY, IN THE UNITED STATES,
ITS TERRITORIES, POSSESSIONS, OR AREAS SUBJECT TO ITS JURISDICTION, OR
TO OR FOR THE ACCOUNT OR BENEFIT OF A "U.S. PERSON" AS THAT TERM IS
DEFINED IN RULE 902 OR REGULATION S OF THE ACT, AT ANY TIME PRIOR TO
ONE (1) YEAR AFTER THE ISSUANCE OF THIS CERTIFICATE, EXCEPT (i) IN
CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
UNDER SUCH ACT, OR (ii) IN COMPLIANCE WITH AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT. ANY SALES, TRANSFERS OR DISTRIBUTIONS OF
THE SECURITIES MUST BE MADE IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S OF THE ACT."
(f) TRANSFERABILITY. The Company need not register a transfer of any
Securities, and may also instruct its transfer agent not to register the
transfer of the Shares, unless the conditions specified in the foregoing Legend
and under Regulation S are satisfied, to the extent applicable.
(g) COMMUNICATION OF OFFER. The offer to sell the Securities was
directly communicated to the Subscriber. At no time was the Subscriber presented
with or solicited by any leaflet, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising or solicited
or invited to attend a promotional meeting otherwise than in connection and
concurrently with such communicated offer.
(h) CORRECTNESS OF REPRESENTATIONS. The Subscriber represents that
the foregoing representations and warranties are true and correct as of the date
hereof and, unless the Subscriber otherwise notifies the Company prior to the
Closing Date (as hereinafter defined), shall
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be true and correct as of the Closing Date. The foregoing representations and
warranties shall survive the Closing Date.
(i) OFFSHORE TRANSACTION. The Subscriber represents and warrants to
the Company as follows:
(i) The Subscriber is not a "U.S. Person" as defined in
Regulation S under the 1933 Act ("Regulation S"); specifically the Subscriber is
not:
(1) a natural person resident in the United States of
America, including its territories and possessions ("United States");
(2) a partnership or corporation organized or incorporated
under the laws of the United States;
(3) an estate of which any executor or administrator is a
U.S. Person;
(4) a trust of which any trustee is a U.S. Person;
(5) an agency or branch of a foreign entity located in the
United States;
(6) a 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;
(7) a 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
(8) a partnership or corporation:
(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 1933 Act, unless it
is organized or incorporated, and owned, by accredited investors (as defined in
Rule 501(a) under the Act) who are not natural persons, estates or trusts.
(ii) At the time the buy-order for the Securities was originated,
the Subscriber was outside the United States.
(iii) The Subscriber is purchasing the Securities for its own
account and not on behalf of any U.S. Person and a sale of the Securities has
not been pre-arranged with a purchaser in the United States.
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(iv) All offers and sales of the Securities prior to the
expiration of a period (the "Distribution Compliance Period") commencing on the
Closing Date (as defined herein) and ending one year thereafter shall only be
made in compliance with Regulation S, pursuant to registration of the Securities
under the 1933 Act and applicable state securities laws or pursuant to an
exemption from such registration; and all offers and sales after the expiration
of the Distribution Compliance Period shall be made only pursuant to such
registration or to such exemption from registration.
(v) The Subscriber understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States and state securities laws and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Subscriber set forth
herein and in the Subscription Agreement in order to determine the applicability
of such exemptions and the suitability of the Subscriber to acquire the
Securities.
(vi) The purchase of the Securities by the Subscriber is not a
transaction (or an element of a series of transactions) that is part of any plan
or scheme to evade the registration provisions of the 1933 Act.
2. COMPANY REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to and agrees with the Subscriber, except as disclosed in the
Reports and Other Written Information, 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; and 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 prospects or condition
(financial or otherwise) of the Company, except in Utah, the District of
Columbia, New York, Florida, Georgia and Illinois.
(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 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 and all other agreements entered into by the Company relating hereto.
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(d) ADDITIONAL ISSUANCES. There are no outstanding agreements or
preemptive or similar rights affecting the Company's Common Stock or equity and
no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of any shares of Common Stock or equity of the
Company or other equity interest in any of the subsidiaries of the Company,
except as described in the Written Information or except as waived.
(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 NASD, NASDAQ or the Company's
Shareholders is required for execution of this Agreement, and all other
agreements entered into by the Company relating thereto, including, without
limitation, issuance and sale of the Securities, and the performance of the
Company's obligations hereunder.
(f) 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
issuance and sale of the Securities nor the performance of its obligations under
this Agreement and all other agreements entered into by the Company relating
thereto by the Company will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the articles of incorporation, charter or by laws of the Company, or any of its
affiliates, (B) to the Company's knowledge, 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
(ii) result in the creation or imposition of any lien,
charge or encumbrance upon the Securities or any of the assets of the Company,
or any of its affiliates.
(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 State laws;
(ii) have been, or will be, duly and validly authorized and
on the date of issuance on the Closing Date, as hereinafter defined, will be
duly and validly issued, fully paid and nonassessable;
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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. Other than as described in the Reports and other
Written Information, 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.
(i) INFORMATION CONCERNING COMPANY. The 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 included in
the Written Information, and except as modified in the Written Information,
there has been no material adverse change in the Company's business, financial
condition or affairs not disclosed in the Written Information. The Written
Information does 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.
(j) STOP TRANSFER. The Securities are restricted securities as
of the date of this Agreement. The Company will not issue any stop transfer
order or other order impeding the sale and delivery of the Securities at such
time as the Securities are registered for public sale or an exemption from
registration is available.
(k) DEFAULTS. Neither the Company nor any of its subsidiaries is
in violation of its Articles of Incorporation or By Laws. Neither the Company
nor any of its subsidiaries is (i) 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 (except as to agreements in default as of
the date hereof), (ii) in default with respect to any order of any court,
arbitrator or governmental body or subject to or party to any order of any court
or governmental authority arising out of any action, suit or proceeding under
any statute or other law respecting antitrust, monopoly, restraint of trade,
unfair competition or similar matters, or (iii) to its knowledge in violation of
any statute, rule or regulation of any governmental authority material to its
business, excluding qualifications otherwise referred to in this Securities Loan
Agreement.
(l) NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would prevent the offering from
qualifying for the exemption from registration under the 1933 Act. Neither the
Company nor any of its affiliates or subsidiaries will take any action or steps
that would cause the offering of the Securities to be so effected.
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(m) USE OF PROCEEDS. The proceeds of the Subscriber's funds to
be released to the Company will be used for working capital and for expenses of
its offering.
(n) 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 the Act) in connection with the offer or sale of the Securities.
(o) OFFSHORE TRANSACTION. The Company has not offered the
Securities to any person in the United States, any identifiable groups of U.S.
citizens abroad or to any "U.S. Person" as that term is defined in Regulation S.
(p) NO DIRECTED SELLING EFFORTS. In regard to this transaction,
the Company has not conducted any "directed selling efforts" as that term is
defined in Rule 902 of Regulation S nor has the Company conducted any general
solicitation relating to the offer and sale of the securities that are the
subject of this transaction to persons resident within the United States or
elsewhere.
(q) CORRECTNESS OF REPRESENTATIONS. The Company represents that
the foregoing representations and warranties are true and correct as of the date
hereof in all material respects and, unless the Company otherwise notifies the
Subscriber prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date.
3. EXEMPT OFFERING. This Offering is being made pursuant to an
exemption from the registration provisions of the Securities Act of 1933, as
amended. On the Closing Date, the Company will provide an opinion acceptable to
Subscriber from the Company's legal counsel opining on the exemption as it
relates to the offer and issuance of the Securities and as to other matters. A
form of the legal opinion is annexed hereto as Exhibit B. The Company will
provide, at the Company's expense, such other legal opinions in the future as
are reasonably necessary for the sale of the Common Stock.
4. REISSUANCE OF SECURITIES. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Sections 1(e) and 1(f) above at such time as (a) the holder thereof is permitted
to dispose of such Securities pursuant to Rule 144(k) under the Act, or (b) upon
resale subject to an effective registration statement after the Securities are
registered under the Act. The Company agrees to cooperate with the Subscriber in
connection with all resales pursuant to Rule 144(d) and Rule 144(k) and provide
legal opinions necessary to allow such resales provided the Company and its
counsel receive reasonably requested certifications from the Subscriber and
selling broker, if any.
5. REDEMPTION. The Company may not redeem the Securities without the
consent of the holder of the Securities.
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6. LEGAL EXPENSE. The Company shall pay to counsel to the
Subscribers its fee of for services rendered to the Subscribers in reviewing
this Agreement in the maximum amount of $25,000.
7. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Subscriber as follows:
(a) The Company will 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 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) The Company will use its best efforts to obtain a listing
and trading of its Common Stock on the NASDAQ SmallCap Stock Market, and will
comply in all respects with the Company's reporting, filing and other
obligations under the by laws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company will provide the
Subscriber, copies of all notices it receives notifying the Company of the
threatened and actual delisting of the Common Stock on any exchange or quotation
system on which the Common Stock becomes listed.
(c) The Company shall notify the SEC, NASD 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 Subscriber
and promptly provide copies thereof to Subscriber.
(d) Until at least three (3) years after the effectiveness of
the Registration Statement on Form SB-2 or such other Registration Statement
described in Section 10 hereof, the Company will (i) cause its Common Stock to
be registered under Sections 12(b) or 12(g) of the Exchange Act, (ii) comply in
all respects with its reporting and filing obligations under the Exchange Act,
(iii) comply with all requirements related to any registration statement filed
pursuant to this Agreement and (iv) use its commercial best efforts to obtain
and continue the listing or trading of the Common Stock on NASDAQ SmallCap Stock
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the by laws or rules of the NASD and NASDAQ, as
appropriate. The Company will not take any action or file any document (whether
or not permitted by the Act or the Exchange 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 (i) three (3) years
after the effective date of the Registration Statement on Form SB-2 or such
other Registration Statement described in Section 10 hereof, or (ii) the sale by
the Subscribers of all the Common Stock issued pursuant to this Agreement.
(e) The Company undertakes to use the proceeds of the
Subscriber's funds for working capital and expenses of its initial public
offering.
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(f) The Company covenants and agrees that until the Note is
fully paid, the Company will not seek the protection of any bankruptcy
protection or insolvency laws or encourage, solicit or assist any other person
to seek such protection on the Company's or its creditors' behalf.
(g) EXCEPTIONS TO CORPORATE STANDING OF SUBSIDIARIES. The
Company will promptly take such action as may be necessary to cause the Company
and each of its subsidiaries to eliminate the exceptions to the affirmative
representations made in Section 2(a) of this Loan Subscription Agreement.
(h) MOST FAVORED NATION PROVISION. Until the Notes are paid
in full, in the event the Company offers to sell any securities to any person
in any public offering or private placement, the Company shall offer to
exchange the Securities purchased by the Subscribers for the securities
offered to such other person, on the same basis and for the same
consideration as offered to such other person; provided however, that such
right shall not apply to the anticipated initial public offering or to the
offer and sale of securities to employees, consultants, officers or
directors, or to the exercise of options. The Company shall give the
Subscribers five (5) days notice of the intent to make any such offering,
during which period the Subscribers shall have the right to accept such offer
in exchange for the full amount of such Subscribers Note plus accrued
interest. After the lapse of the five (5) day period the right to such
exchange will be extinguished unless the Subscriber gives prior notice of
acceptance of the exchange. The Company will be relieved of the obligation
hereunder if it does not consummate the offer to other investors.
8. COVENANTS OF THE COMPANY AND SUBSCRIBER REGARDING
INDEMNIFICATIONS.
(a) The Company agrees to indemnify, hold harmless, reimburse
and defend Subscriber, Subscriber's 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 Subscriber which results, arises out of or
is based upon (i) any misrepresentation by Company or breach of any warranty by
Company in this Agreement or in any Exhibits or Schedules attached hereto, or
the Written Information; or (ii) any breach or default in performance by Company
of any covenant or undertaking to be performed by Company hereunder, or any
other agreement entered into by the Company and Subscribers relating hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company at all times against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable 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, or any other agreement entered into by the Company and
Subscribers relating hereto.
(c) The procedures set forth in Section 10.6 shall apply to the
indemnifications set forth in Sections 8(a) and 8(b) above.
9. INTENTIONALLY DELETED.
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10.1 REGISTRATION OF COMPANY SECURITIES AND REGISTRATION RIGHTS OF
SUBSCRIBERS.
(a) The Company shall file with the Commission within 25 days of
the Closing Date (the "Filing Date"), and use its reasonable commercial efforts
to cause to be declared effective a Form SB-2 registration statement, (or such
other form that it is eligible to use) in order to register the Registerable
Securities (the Common Stock and securities issued or issuable by virtue of
ownership of the Common Stock being the "Registerable Securities") for resale
and distribution under the Act. The Company shall use its reasonable commercial
efforts to cause the registration statement described in this paragraph to be
declared effective by the Commission on or before 180 days after the Closing
Date ("Effective Date").
(b) Provided the Registrable Securities are not otherwise
registered for resale by the Subscriber or Holder pursuant to an effective
registration statement or exempt from registration under the Act, until five
years after the Closing Date, the Company at any time proposes to register
any of its securities under the 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 S-4, S-8 or another form not
available for registering the Registrable Securities for sale to the public,
each such time it will give at least 30 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 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").
10.2 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 Act, the Company will, as expeditiously as possible:
(a) prepare and file with 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 herein provided), and promptly
provide to the holders of Registrable Securities copies of all filings and
Commission letters of comment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
eighteen (18) months following the effective date of such registration date and
comply with the provisions of the 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, and to each underwriter if any, such
number of copies of the registration statement and the prospectus included
therein (including each preliminary
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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 and in the
case of an underwritten public offering, the managing underwriter shall
reasonably 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;
(e) 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 and each underwriter under
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the 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 publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
10.3 PROVISION OF DOCUMENTS.
(a) At the request of the Seller, provided a demand for
registration has been made pursuant to Section 10, the Registrable Securities
will be included in a registration statement filed pursuant to this Section 10.
In the event of a firm commitment underwritten public offering in which the
Registrable Securities are so included, other than the Company's initial public
offering, the lockup, if any, requested by the managing underwriter may not
exceed ninety (90) days after the effective date thereof.
(b) In connection with each registration hereunder, 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. In connection with each registration pursuant to Section
10.1(ii) 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.
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10.4 RESTRICTION ON SALE OF COMMON STOCK. The Common Stock purchased
pursuant to this Loan Subscription Agreement may not be sold until the lapse of
180 days from the closing of the initial public offering unless the consent of
the Company thereto is obtained in writing. The Seller shall also defer sale of
such Common Stock if required by the NASD or NASDAQ in connection with the
Company's initial public offering, but not for any period exceeding one year
from the closing of the initial public offering, unless the consent to do so is
granted in writing by Anthony Heller.
10.5. EXPENSES. All expenses 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, fee of one counsel, if any, to represent all the
Sellers, 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 Seller shall pay the
fees of its own additional counsel, if any.
The Company will pay all Registration Expenses in connection
with the registration statement under Section 10. All Selling Expenses in
connection with each registration statement under Section 10 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.
10.6. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any Registrable Securities
under the 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 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 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 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
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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 Act pursuant to Section 10, the Seller will indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the 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 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 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 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 gross proceeds received by the Seller from the sale of
Registrable Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.6(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 10.6(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
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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 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 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 10.6 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 10.6 provides for indemnification in such case, or (ii)
contribution under the 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 10.6; 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, (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 Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
11. MISCELLANEOUS.
(a) NOTICES. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being telecopied (provided that a copy is
delivered by first class mail) 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: (i) if to the Company, to
eRoom System Technologies, Inc., c/o Gregory L. Hrncir, 3770 Howard Hughes
Parkway, Suite 175, Las Vegas, Nevada 89109, telecopier number (702) 792-2403
with a copy to Michael J. Bonner, Esq., Kummer Kaempfer Bonner & Renshaw, 3800
Howard Hughes Parkway, 7th Floor, Las Vegas, Nevada, 89109, telecopier number
(702) 796-7181 (ii) if to the Subscriber, to the name, address and telecopy
number set forth on the signature page hereto, with a copy by telecopier only to
Anthony Heller. Any notice that may be given pursuant to this Agreement, or any
document delivered in connection with the foregoing may be given by the
Subscriber on the first business day after the observance dates in the United
States of America by Orthodox Jewry of Rosh Hashanah, Yom Kippur, the first two
days of the Feast of Tabernacles, Shemini Atzeret, Simchat Torah, the first two
and final two days of Passover and Pentecost, with such notice to be deemed
given and effective, at the election
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of the Subscriber on a holiday date that precedes such notice. Any notice
received by the Subscriber on any of the aforedescribed holidays may be deemed
by the Subscriber to be received and effective as if such notice had been
received on the first business day after the holiday.
(b) CLOSING. The consummation of the transactions contemplated
herein shall take place at the offices of Snow Becker Krauss P.C., New York, New
York upon the satisfaction of all conditions to Closing set forth in this
Agreement. The closing date shall be April 13, 2000 (the "Closing Date").
(c) 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.
(d) EXECUTION. This Agreement may be executed by facsimile
transmission, and in counterparts, each of which will be deemed an original.
(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. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
(f) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION. The Company
and Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 13(e) hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
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(g) AUTOMATIC TERMINATION. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing shall
not have occurred by the fifteenth (15th) business day following the date this
Agreement is accepted by the Subscriber.
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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.
eRoom System Technologies, Inc.
By:
-----------------------------------
STEVEN L. SUNYICH
Chief Executive Officer
Dated: April ___, 2000
Purchase Price: $
-----------------
Amount of Note $
-----------------
(Equal to the Purchase Price)
Number of Shares of Common Stock:
---------------------------------
(Equal to the product of 0.13334 multiplied by the Purchase Price)
ACCEPTED: Dated as of April ___, 2000
By:
----------------------------
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