SECURITIES PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT (this
“Agreement”),
dated
as of May __, 2007, is by and between VeruTEK Technologies, Inc., a Nevada
corporation (the “Company”),
each
purchaser listed on Exhibit
A
attached
hereto (individually, a “Purchaser”
and,
collectively, the “Purchasers”),
and
Nite Capital Master, LTD, in its capacity collateral agent for the benefit
of
the Purchasers (the “Collateral
Agent”).
WHEREAS:
A. Each
Purchaser wishes to purchase, and the Company wishes to sell, upon the terms
and
subject to the conditions stated in this Agreement, (i) a 6% Secured Convertible
Note in the form attached hereto as Exhibit
B
(a
“Note”
and,
collectively, the “Notes”),
and
(ii) a warrant in the form attached hereto as Exhibit
C
(a
“Warrant”
and,
collectively, the “Warrants”).
The
Notes will be convertible under certain conditions into shares of the Company’s
common stock, par value $0.001 per share (the “Common
Stock”).
The
Warrant issued to a Purchaser will entitle the holder thereof to purchase
a
number of shares of Common Stock equal to 50% of the number of shares of
Common
Stock which the Note purchased by such Purchaser is convertible
into.
B. The
shares of Common Stock into which the Notes are convertible are referred
to
herein as the “Conversion
Shares”
and
the
shares of Common Stock into which the Warrants are exercisable are referred
to
herein as the “Warrant
Shares.”
The
Notes, the Conversion Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities.”
C. The
Company has agreed to effect the registration of the Conversion Shares and
the
Warrant Shares under the Securities Act (as defined below) pursuant to a
Registration Rights Agreement in the form attached hereto as Exhibit
D
(the
“Registration
Rights Agreement”).
D. The
sale
of the Securities to the Purchasers will be effected in reliance upon the
exemption from securities registration afforded by Section 4(2) of the Exchange
Act (as defined below) and Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the Securities and Exchange Commission (the “Commission”)
under
the Securities Act.
E. The
Notes
will rank junior to the Permitted Senior Debt (as defined below) and will
be
secured by a perfected security interest in all of the assets of the Company
pursuant to the terms of a Security Agreement in the form attached hereto
as
Exhibit
E
(the
“Security
Agreement”).
F. Upon
execution and delivery of this Agreement, each Purchaser will wire its purchase
price to an escrow account set forth in this Agreement and it is a condition
precedent to the consummation of the purchase and sale of the Notes and Warrants
and the other transactions contemplated by this Agreement and the other
Transaction Documents (as defined below) that, contemporaneously with the
Closing (as defined below), the Company shall have merged with and into
Streamscape Minerals, Inc., which is a publicly traded company (the
“Acquisition”).
NOW,
THEREFORE, in consideration of the mutual promises made herein and other
good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each Purchaser hereby agree as
follows:
1. PURCHASE
AND SALE OF NOTES AND WARRANTS; DEFINITIONS.
1.1 Purchase
and Sale of Notes and Warrants.
Upon
the terms and subject to the satisfaction or waiver of the conditions set
forth
herein, the Company agrees to sell, and each Purchaser agrees to purchase,
(i) a
Note with a principal amount equal to the amount set forth opposite such
Purchaser’s name on Exhibit
A
hereto
and (ii) a Warrant. The purchase price for the Note and the Warrant being
purchased by a Purchaser (the “Purchase
Price”)
shall
be equal to the principal amount of such Note. The date on which the closing
of
the purchase and sale of the Notes and Warrants occurs (the “Closing”)
is
hereinafter referred to as the “Closing
Date.”
The
Closing will be deemed to occur when (A) this Agreement and the other
Transaction Documents (as defined below) have been executed and delivered
by the
Company and each Purchaser (which delivery may be effected by facsimile
transmission), (B) each of the conditions to the Closing described in
Sections
6
and
7
hereof
has been satisfied or waived as specified therein and (C) full payment of
each
Purchaser’s Purchase Price has been made by wire transfer of immediately
available funds in accordance with Section
11.
1.2 Certain
Definitions.
When
used herein, the following terms shall have the respective meanings
indicated:
“Affiliate”
means,
as to any Person (the “subject Person”), any other Person (i) that directly or
indirectly through one or more intermediaries controls or is controlled by,
or
is under direct or indirect common control with, the subject Person, (ii)
that
directly or indirectly beneficially owns or holds ten percent (10%) or more
of
any class of voting equity of the subject Person, or (iii) ten percent (10%)
or
more of the voting equity of which is directly or indirectly beneficially
owned
or held by the subject Person. For the purposes of this definition, “control”
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, through representation on such Person’s board of
directors or other management committee or group, by contract or
otherwise.
“Approved
Stock Plan”
means
any employee benefit plan which has been approved or will be by the Board
of
Directors of the Company (including a majority of the independent members
of the
Board), pursuant to which the Company’s securities may be issued to any
employee, officer, director or consultant for services provided to the
Company.
-2-
“Business
Day”
means
any day other than a Saturday, a Sunday or a day on which the New York Stock
Exchange is closed or on which banks are authorized by law to close in New
York,
New York.
“Collateral”
has
the
meaning set forth in the Security Agreement.
“Common
Stock Equivalent”
means,
collectively, Options and Convertible Securities.
“Contingent
Obligation”
means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against
loss
with respect thereto.
“Convertible
Securities”
means
any (i) stock or securities (other than Options) of the Company convertible
into
or exercisable or exchangeable for Common Stock and/or (ii) any Debt but
only if
such Debt is issued in connection with the immediately preceding clause (i).
.
“Conversion
Price”
has
the
meaning set forth in the Notes.
“Debt”
means,
as to any Person at any time: (i) all indebtedness for borrowed money, (ii)
all
obligations issued, undertaken or assumed as the deferred purchase price
of
property or services (other than trade payables entered into in the ordinary
course of business), (iii) all reimbursement or payment obligations with
respect
to letters of credit, surety bonds and other similar instruments, (iv) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (v) all indebtedness created or arising
under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired
with
the proceeds of such indebtedness (even though the rights and remedies of
the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (vi) all monetary obligations under
any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby,
is
classified as a capital lease, (vii) all indebtedness referred to in clauses
(i)
through (vi) above secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any mortgage,
lien,
pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (viii) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (i) through (vii) above.
“XXXXX”
means
the Commission’s Electronic Data Gathering, Analysis, and Retrieval
system.
“Effective
Date”
has
the
meaning set forth in the Registration Rights Agreement.
-3-
“Environmental
Law”
means
all federal, state, local or foreign laws relating to pollution or protection
of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous
Materials”)
into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands
or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder.
“Event
of Default”
has
the
meaning set forth in the Notes.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended (or any successor act), and
the
rules and regulations thereunder (or respective successors
thereto).
“Excluded
Securities”
means
Common Stock or Common Stock Equivalents issued or issuable: (i) in connection
with any Approved Stock Plan; (ii) upon exercise of any Options or conversion
of
any Convertible Securities which are outstanding on the day immediately
preceding the Closing Date and are disclosed in a schedule to this Agreement,
provided that the terms of such Options or Convertible Securities are not
amended, modified or changed on or after the Closing Date; (iii) pursuant
to a
bona fide firm commitment underwritten public offering with a
nationally-recognized investment banking firm which generates gross proceeds
to
the Company in excess of $25,000,000 (other than an “at-the-market offering” as
defined in Rule 415(a)(4) under the Securities Act or an “equity line”
arrangement); and (iv) in connection with any acquisition by the Company,
whether through an acquisition of stock or a merger of any business, assets
or
technologies the primary purpose of which is not to raise equity capital
in an
amount not to exceed, in the aggregate, 10% of the outstanding shares of
Common
Stock in any calendar year.
“Exercise
Price”
has
the
meaning set forth in the Warrants.
“GAAP”
means
generally accepted accounting principles, applied on a consistent basis,
as set
forth in (i) opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants, (ii) statements of the Financial
Accounting Standards Board, and/or (iii) interpretations of the Commission
and
the Staff of the Commission and each of their respective successors and which
are applicable in the circumstances as of the date in question. Accounting
principles are applied on a “consistent basis” when the accounting principles
applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
“Governing
Documents”
means,
as of any date, (i) in the case of a corporation, its certificate of
incorporation and by-laws, (ii) in the case of a partnership, its certificate
of
partnership and partnership agreement, (iii) in the case of a limited liability
company, its certificate of organization and limited liability company operating
agreement, and (iv) any similar governing document of any such entity, in
each
such case as amended through such date.
-4-
“Governmental
Authority”
means
any nation or government, any state, provincial or political subdivision
thereof
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including without
limitation any stock exchange, securities market or self-regulatory
organization.
“Governmental
Requirement”
means
any law, statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, franchise, license or other directive or requirement of any federal,
state, county, municipal, parish, provincial or other Governmental Authority
or
any department, commission, board, court, agency or any other instrumentality
of
any of them.
“Holder(s)”
has
the
meaning set forth in the Registration Rights Agreement.
“Insolvent”
means,
with respect to the Company, that (i) the Company is unable to pay its debts
and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (ii) the Company intends to incur
or
believes that it will incur debts that would be beyond its ability to pay
as
such debts mature or (iii) the Company has unreasonably small capital with
which
to conduct the business in which it is engaged as such business is now conducted
or is about to be conducted.
“Intellectual
Property”
means
any U.S. or foreign patents, patent rights, patent applications, trademarks,
trade names, service marks, brand names, logos and other trade designations
(including unregistered names and marks), trademark and service xxxx
registrations and applications, copyrights and copyright registrations and
applications, inventions, invention disclosures, protected formulae,
formulations, processes, methods, trade secrets, computer software, computer
programs and source codes, manufacturing research and similar technical
information, engineering know-how, customer and supplier information, assembly
and test data drawings or royalty rights.
“Intercreditor
Agreement”
means
any intercreditor arrangement which is entered into between the Investors
and
the lenders under the Permitted Senior Debt.
“Lead
Investor”
means
Nite Capital Master, LTD.
“Lien”
means,
with respect to any Property, any mortgage or mortgage, pledge, hypothecation,
assignment, deposit arrangement, security interest, tax lien, financing
statement, pledge, charge, or other lien, charge, easement, encumbrance,
preference, priority or other security agreement or preferential arrangement
of
any kind or nature whatsoever on or with respect to such Property (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the
foregoing).
“Material
Adverse Effect”
means
an effect that is material and adverse to (i) the consolidated business,
operations, properties, financial condition, prospects or results of operations
of the Company and its Subsidiaries taken as a whole or (ii) the ability
of the
Company to perform its obligations under this Agreement or the other Transaction
Documents.
-5-
“Material
Contracts”
means,
as to the Company, any agreement required pursuant to Item 601 of Regulation
S-B
or Item 601 of Regulation S-K, as applicable, promulgated under the Securities
Act to be filed as an exhibit to any report, schedule, registration statement
or
definitive proxy statement filed or required to be filed by the Company with
the
Commission under the Exchange Act or any rule or regulation promulgated
thereunder, and any and all amendments, modifications, supplements, renewals
or
restatements thereof.
“NASD”
means
the National Association of Securities Dealers, Inc.
“Obligations”
means
any and all indebtedness, liabilities and obligations of the Company to the
Purchaser evidenced by and/or arising pursuant to this Agreement or the Notes
or
any other Transaction Documents, now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, including, without
limitation, the obligations of the Company to repay principal of the Notes,
to
pay interest on the Notes (including, without limitation, interest accruing
after any bankruptcy, insolvency, reorganization or other similar filing)
and to
pay all fees, indemnities, costs and expenses (including attorneys’ fees)
provided for in this Agreement or the Notes or any other Transaction
Documents.
“Options”
means
any rights, warrants or options to subscribe for, purchase or receive Common
Stock or Convertible Securities.
“Permitted
Liens”
means
the following:
(i) encumbrances
consisting of easements, rights-of-way, zoning restrictions or other
restrictions on the use of real Property or imperfections to title that do
not
(individually or in the aggregate) materially impair the ability of the Company
or any of its Subsidiaries to use such Property in its businesses, and none
of
which is violated in any material respect by existing or proposed structures
or
land use;
(ii) Liens
for
taxes, assessments or other governmental charges (including without limitation
in connection with workers’ compensation and unemployment insurance) that are
not delinquent or which are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or
sale of the Property subject to such Liens, and for which adequate reserves
(as
determined in accordance with GAAP) have been established;
(iii) Liens
of
mechanics, materialmen, warehousemen, carriers, landlords or other similar
statutory Liens securing obligations that are not yet due and are incurred
in
the ordinary course of business or which are being contested in good faith
by
appropriate proceedings, which proceedings have the effect of preventing
the
forfeiture or sale of the Property subject to such Liens, for which adequate
reserves (as determined in accordance with GAAP) have been established and
which
have been bonded over and omitted from the Title Policy;
(iv) purchase
money Liens to finance property or assets of the Company or any Subsidiary
of
the Company acquired in the ordinary course of business; provided,
however,
that
(A) the related purchase money Debt shall not exceed the cost of such property
or assets (including the cost of design, development, improvement, production,
acquisition, construction, installation and integration) and shall not be
secured by any property or assets of the Company or any Subsidiary of the
Company other than the property and assets so acquired or constructed (and
any
improvements thereto) and (B) the Lien securing such Debt shall be created
within ten (10) days of such acquisition, construction or
improvement;
-6-
(v) Liens
upon specific items of inventory or other goods and proceeds of any Person
securing such Person’s obligations in respect of bankers’ acceptances issued or
created for the account of such Person to facilitate the purchase, shipment
or
storage of such inventory or other goods;
(vi) Liens
encumbering deposits made to secure obligations arising from statutory,
regulatory, contractual, or warranty requirements of the Company or any of
its
Subsidiaries, including rights of offset and set-off; and
(vii) Liens
incurred in connection with the Permitted Senior Debt.
“Permitted
Senior Debt”
means
the following: (1) the Company, as borrower, executed a term promissory note
with Xxxxxxx National Bank, N.A. (the “Bank”)
on
August 16, 2006 in the amount of $82,500 for a term of sixty months at the
rate
of 9.25% per year (the “Term
Note”);
(2)
the Company, as borrower, executed a revolving credit promissory note with
the
Bank on May 26, 2006 in the amount of $350,000, terminating on May 25, 2007
(the
“Revolving
Note”);
and
(3) any debt facility which replaces and satisfies the Term Note or the
Revolving Note in its entirety, including but not limited to outstanding
principal, accrued interest, default penalties and any other payments
thereunder.
“Person”
means
any individual, corporation, trust, association, company, partnership, joint
venture, limited liability company, joint stock company, Governmental Authority
or other entity.
“Property”
means
property and/or assets of all kinds, whether real, personal or mixed, tangible
or intangible (including, without limitation, all rights relating
thereto).
“Registrable
Securities”
has
the
meaning set forth in the Registration Rights Agreement.
“Required
Holders”
means
the holders of at least two-thirds (2/3) of the Registrable Securities into
which all of the Notes then outstanding are convertible (without regard to
any
limitation on such conversion or exercise); provided,
however,
that
solely with respect to Section
12.5,
“Required Holders” means the holders of at least two-thirds (2/3) of the
Registrable Securities into which all of the Notes and Warrants then outstanding
are convertible or exercisable (without regard to any limitation on such
conversion or exercise).
“Restricted
Payment”
means
(i) any dividend or other distribution (whether in cash, Property or
obligations), direct or indirect, on account of (or the setting apart of
money
for a sinking or other analogous fund for the benefit of) any shares of any
class of capital stock of the Company or any of its Subsidiaries now or
hereafter outstanding, except a dividend payable solely in shares of that
class
of stock to all of the holders of that class; (ii) any redemption, exchange,
retirement, sinking fund or similar payment, purchase or other acquisition
for
value, direct or indirect, of any shares of any class of capital stock of
the
Company or any of its Affiliates now or hereafter outstanding, except the
Securities; (iii) except in connection with any replacement debt facility
as
contemplated in clause (3) of the “Permitted Senior Debt” definition, any
prepayment of principal of, premium, if any, or interest on, or any redemption,
conversion, exchange, purchase, retirement, sinking fund or defeasance of,
any
Debt (whether upon acceleration of such Debt or otherwise) other than the
Securities; and (iv) any loan, advance or payment to any officer, director
or
stockholder of the Company or any of its Affiliates, exclusive of (A) reasonable
compensation and reimbursements paid to officers or directors in the ordinary
course of business and (B) the scheduled repayment of principal and interest
with respect to any loans made by any such Affiliate to the Company and
outstanding as of the date hereof and set forth on Schedule
1.2
hereto;
provided,
however,
that
the following shall not be deemed to constitute a Restricted Payment: (I)
the
issuance of securities upon exercise or conversion of the Company’s Options or
Convertible Securities under an Approved Stock Plan, and (II) the issuance
of
equity securities to, or making payments under license, joint venture or
similar
agreements with, persons with whom the Company has a joint venture, strategic
alliance or other commercial relationship in connection with the operation
of
the Company’s business, and not in connection with a transaction the purpose of
which is to raise equity capital.
-7-
“Securities
Act”
means
the Securities Act of 1933, as amended (or any successor act), and the rules
and
regulations thereunder (or respective successors thereto).
“Security
Documents”
means
the Security Agreement and any other agreement certificate, document, instrument
or agreement delivered in connection herewith or the Security Agreement which
purports to grant or perfect a Lien in favor of Purchaser to secure all or
any
of the obligations hereunder or under any of the other Transaction Documents,
including, without limitation, financing statements, each of the patent,
trademark and copyright security agreements to be filed with the United States
Patent and Trademark Office and/or the United States Copyright Office, as
may be
applicable, and all other certificates and instruments necessary to perfect
the
security interests granted under the Security Agreement.
“Subordinated
Debt”
means
Debt of the Company which meets each of the following requirements: (i) such
Debt is wholly unsecured or any Liens securing such Debt constitute Permitted
Liens; and (ii) such Debt is contractually subordinated, as to payment and
liquidation, to the payment in full of the Notes and the Obligations on such
terms and pursuant to written agreements in such form and substance as are
reasonably satisfactory to Purchasers holding at least fifty percent (50%)
of
the aggregate principal amount of the Notes outstanding on the date such
Debt is
incurred.
“Subsidiary”
means,
exclusive of HES, LLC, a company wholly owned by Xxxxxx Xxxx, with respect
to
any Person, any corporation or other entity of which at least a majority
of the
outstanding shares of stock or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors
(or
Persons performing similar functions) of such corporation or entity
(irrespective of whether or not at the time, in the case of a corporation,
stock
of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by such Person or one or more
of its
Subsidiaries or by such Person and one or more of its Subsidiaries.
-8-
“Termination
Date”
means
the first date on which there are no Notes or Obligations
outstanding.
“Transaction
Documents”
means
(i) this Agreement, (ii) the Notes, (iii) the Warrants, (iv) the Registration
Rights Agreement, (v) the Security Documents, (vi) the Intercreditor Agreement,
if any, and (vii) all other agreements, documents and other instruments executed
and delivered by or on behalf of the Company or its officers at the
Closing.
1.3 Other
Definitional Provisions.
All
definitions contained in this Agreement are equally applicable to the singular
and plural forms of the terms defined. The words “hereof”, “herein” and
“hereunder” and words of similar import referring to this Agreement refer to
this Agreement as a whole and not to any particular provision of this
Agreement.
2. REPRESENTATIONS
AND WARRANTIES OF THE PURCHASERS.
Each
Purchaser represents and warrants to the Company, with respect to itself
only,
and agrees with the Company, that:
2.1 No
Public Sale or Distribution.
Such
Purchaser is acquiring the Note and the Warrant being purchased by it in
the
ordinary course of business for its own account and not with a view towards,
or
for resale in connection with, the public sale or distribution thereof, except
pursuant to sales that are registered under the Securities Act or are exempt
from the requirement to be registered thereunder. Such Purchaser does not
presently have any agreement, arrangement or understanding, directly or
indirectly, with any Person to distribute or effect any distribution of any
of
the Securities (or any securities which are derivatives thereof) to or through
any person or entity; provided,
however,
that in
making such representations, such Purchaser does not agree to hold any of
the
Securities for any minimum or other specific term and reserves the right
to
dispose of the Securities at any time in accordance with or pursuant to an
effective registration statement or an exemption under the Securities
Act.
2.2 Accredited
Investor Status.
Such
Purchaser is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D.
2.3 Reliance
on Exemptions.
Such
Purchaser understands that the Securities are being offered and sold to it
in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying
in part
upon the truth and accuracy of, and such Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Purchaser set forth herein in order to determine the availability of
such
exemptions and the eligibility of such Purchaser to acquire the
Securities.
2.4 Information.
Such
Purchaser and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which have been requested
by
such Purchaser. Such Purchaser and its advisors, if any, have been afforded
the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Purchaser or its advisors,
if any, or its representatives shall modify, amend or affect such Purchaser’s
right to rely on the Company’s representations and warranties contained herein.
Such Purchaser understands that its investment in the Securities involves
a high
degree of risk and is able to afford a complete loss of such investment.
Such
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Securities.
-9-
2.5 No
Governmental Review.
Such
Purchaser understands that no United States federal or state agency or any
other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
2.6 Transfer
or Resale.
Such
Purchaser understands that, except as provided in the Registration Rights
Agreement: (i) the Securities have not been and are not being registered
under
the Securities Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) such Purchaser shall have delivered to the Company an opinion
of
counsel, in a form reasonably acceptable to the Company, to the effect that
the
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such
Purchaser provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act, (collectively, “Rule
144”);
(ii)
any sale of the Securities made in reliance on Rule 144 may be made only
in
accordance with the terms of Rule 144 and, further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the
seller
(or the Person through which the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act and (iii) neither
the Company nor any other Person is under any obligation to register the
Securities under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder. Notwithstanding
the
foregoing, the Securities may be pledged in connection with a bona fide margin
account or other loan or financing arrangement secured by the Securities
and
such pledge of Securities shall not be deemed to be a transfer, sale or
assignment of the Securities hereunder, and no Purchaser effecting a pledge
of
Securities shall be required to provide the Company with an opinion of counsel
or otherwise make delivery of any notice or document to the Company pursuant
to
this Agreement or any other Transaction Document, including, without limitation,
this Section
2.6;
provided,
that in
order to make any sale, transfer or assignment of Securities, such Purchaser
and
its pledgee must make such disposition in accordance with or pursuant to
a
registration statement or an exemption under the Securities Act.
2.7 Legends.
Such
Purchaser understands that until the certificates or other instruments
representing the Securities have been registered under the Securities Act,
the
certificates representing the Securities, except as set forth below, shall
bear
any legend required by the “blue sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such certificates):
-10-
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE OR EXERCISEABLE HAVE
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped or, if applicable, issue to such holder by electronic delivery at
the
applicable balance account at DTC, if, unless otherwise required by state
securities laws, (i) such Securities are registered for resale under the
Securities Act, (ii) in connection with a sale, assignment or other transfer
other than to an Affiliate or partner, shareholder or member of such holder,
such holder provides the Company, at the sole expense of the Company, with
an
opinion of legal counsel reasonably acceptable to the Company to the effect
that
such sale, assignment or transfer of the Securities may be made without
registration under the Securities Act, or (iii) such holder provides the
Company
with reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144.
If
the
Company shall fail for any reason or for no reason to issue to the holder
of the
Securities within three (3) Business Days after the occurrence of any of
(i)
through (iii) above, a certificate without such legend to the holder or,
if
applicable, to issue such Securities to such holder by electronic delivery
at
the applicable balance account at DTC, and if on or after such Business Day
the
holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the holder of such Securities
that
the holder anticipated receiving without legend from the Company (a
“Buy-In”),
then
the Company shall, within three (3) Business Days after such three (3) Business
Day period, and at the holder’s request and in the holder’s discretion, either
(i) pay cash to the holder in an amount equal to the holder’s total purchase
price (including brokerage commissions, if any) for the shares of Common
Stock
so purchased (the “Buy-In
Price”),
at
which point the Company’s obligation to deliver such unlegended Securities shall
terminate, or (ii) promptly honor its obligation to deliver to the holder
such
unlegended Securities as provided above and pay cash to the holder in an
amount
equal to the excess (if any) of the Buy-In Price over the product of (A)
such
number of shares of Common Stock, times (B) the closing sales price of the
Common Stock on the date of exercise.
-11-
2.8 Validity;
Enforcement.
This
Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of such Purchaser and, when
executed by all of the parties thereto (including such Purchaser), shall
constitute the legal, valid and binding obligations of such Purchaser
enforceable against such Purchaser in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity
or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement
of
applicable creditors’ rights and remedies.
2.9 No
Conflicts.
The
execution, delivery and performance by such Purchaser of this Agreement and
the
Registration Rights Agreement and the consummation by such Purchaser of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the Governing Documents of such Purchaser, (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which
such Purchaser is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to such Purchaser, except, in the case of clauses (ii) and
(iii) above, for such conflicts, defaults, rights or violations which would
not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
2.10 Residency.
Such
Purchaser is a resident of the jurisdiction specified below its address on
Exhibit
A.
2.11 Short
Sales; Trading Restriction.
No
Purchaser, directly or indirectly, and no Person acting on behalf of or pursuant
to any understanding with any Purchaser, has engaged in any transactions
in the
securities of the Company (including, without limitation, any Short Sales
involving any of the Company’s securities) since the time that such Purchaser
was first contacted by the Company, or
any
other Person regarding an investment in the Company. Such Purchaser covenants
that neither it nor any Person acting on its behalf or pursuant to any
understanding with such Purchaser will engage, directly or indirectly, in
any
transactions in the securities of the Company (including Short Sales) prior
to
the time the transactions contemplated by this Agreement are publicly disclosed
or while the Purchaser is in possession of any material non-public information.
“Short
Sales”
include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act and all types of
direct
and indirect stock pledges, forward sale contracts, options, puts, calls,
short
sales, swaps, derivatives and similar arrangements (including on a total
return
basis), and sales and other transactions through non-U.S. broker-dealers
or
foreign regulated brokers.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each Purchaser and the Placement Agent,
and
agrees with each Purchaser and the Placement Agent, that upon the consummation
of the Acquisition:
-12-
3.1 Organization
and Qualification.
The
Company is a corporation or other legal entity duly organized and validly
existing and in good standing under the laws of the jurisdiction in which
it is
incorporated or organized, and has the requisite power and authority (corporate
or otherwise) to own its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign entity to do business
and
is in good standing in every jurisdiction in which its ownership of property
or
the nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. The Company has no Subsidiaries
except
as set forth on Schedule
3.1
hereto.
3.2 Authorization;
Enforcement; Validity.
The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and the other Transaction
Documents, including, with respect to the Company, its obligation to issue
the
Securities in accordance with the terms hereof and thereof. The execution
and
delivery of the Transaction Documents by the Company and the consummation
by the
Company of the transactions contemplated hereby and thereby, including without
limitation (i), with respect to the Company, the issuance of the Notes and
the
Warrants and the reservation for issuance and issuance of Conversion Shares
and
Warrant Shares and (ii) the granting and perfecting of the security interests
pursuant to the Security Documents, have been duly authorized by the Company’s
Board of Directors and no further consent or authorization is required by
the
Company, its Board of Directors or its stockholders. This Agreement and the
other Transaction Documents have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity
or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.
3.3 Issuance
of Securities.
The
Notes and the Warrants are duly authorized and, upon issuance in accordance
with
the terms of this Agreement, will be validly issued and free from all taxes,
Liens and charges with respect to the issue thereof. The Conversion Shares
and
the Warrant Shares are duly authorized and, upon issuance in accordance with
the
terms of the Notes and the Warrants, respectively, will be validly issued,
fully
paid and non-assessable and free from all preemptive or similar rights, taxes,
Liens and charges with respect to the issue thereof. The issuance by the
Company
of the Securities is exempt from registration under the Securities
Act.
3.4 No
Conflicts.
Except
with respect to any default under the Term Note or the Revolving Note which
may
be triggered by the consummation of the transactions contemplated hereunder
and
under the other Transaction Documents, the execution, delivery and performance
of the Transaction Documents by the Company and the consummation by each
of the
Company of the transactions contemplated hereby and thereby (including, with
respect to the Company, the issuance of the Notes and Warrants and the
reservation for issuance and issuance of the Conversion Shares or the Warrant
Shares) will not (i) result in a violation of the Governing Documents of
the
Company or any of its Subsidiaries, (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
in any respect under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of any securities
exchange or securities market) applicable to the Company or by which any
property or asset of the Company is bound or affected.
-13-
3.5 Consents.
The
filing by the Company of a Form D in accordance with Regulation D, and any
filings to be made with state securities regulatory authorities, the Company
is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental agency or any regulatory
or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof. The
Company and its Subsidiaries is unaware of any facts or circumstances that
might
prevent the Company from obtaining or effecting any of the registration,
application or filings pursuant to the preceding sentence.
3.6 Acknowledgment
Regarding Purchaser’s Purchase of Securities.
The
Company acknowledges and agrees that each Purchaser is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and that no Purchaser
is
(i) an officer or director of the Company, (ii) an Affiliate of the Company
or
any of its Subsidiaries or (iii) to the knowledge of the Company, a “beneficial
owner” of more than 10% of the Common Stock (as defined for purposes of Rule
13d-3 of the Exchange Act). The Company further acknowledges that no Purchaser
is acting as a financial advisor or fiduciary of the Company or any of its
Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and has not
received or relied on any advice given by a Purchaser or any of its
representatives or agents in connection with the Transaction Documents and
the
transactions contemplated hereby and thereby. The Company further represents
to
each Purchaser that the Company’s decision to enter into the Transaction
Documents has been based solely on the independent evaluation by the Company
and
its representatives.
3.7 No
General Solicitation; Fees.
Neither
the Company, nor its Affiliates, nor any Person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for
Persons engaged by any Purchaser or its investment advisor, if any) relating
to
or arising out of the transactions contemplated hereby. The Company shall
pay,
and hold each Purchaser harmless against, any liability, loss or expense
(including, without limitation, attorney’s fees and out-of-pocket expenses)
arising in connection with any such claim.
3.8 No
Integrated Offering.
None of
the Company, any of its Affiliates, nor any Person acting on 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 require
registration of any of the Securities under the Securities Act or cause the
offer and sale of the Securities pursuant to this Agreement and the Transaction
Documents to be integrated with prior offerings by the Company for purposes
of
the Securities Act in a manner that would make unavailable the exemption
from
registration afforded by Section 4(2) of the Securities Act or Rule 506 of
Regulation D promulgated under the Securities Act, or any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of
the
securities of the Company are listed or designated. None of the Company,
its
Affiliates or any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of
any of
the Securities under the Securities Act or cause the offering of the Securities
to be so integrated with other offerings.
-14-
3.9 Dilutive
Effect.
The
Company understands and acknowledges that the issuance of Conversion Shares
upon
conversion of the Notes and the issuance of Warrant Shares upon exercise
of the
Warrants may result in dilution of the outstanding shares of Common Stock,
which
dilution may be substantial under certain market conditions. The Company
understands and acknowledges that its obligation to issue Conversion Shares
and
Warrants Shares is absolute and unconditional regardless of the dilutive
effect
that any such issuance may have on the ownership interests of other stockholders
of the Company. The Company acknowledges and agrees that such Purchaser may
enter into short sales in the Company’s securities to the extent permitted by
this Agreement and applicable law, and that such transactions may result
in
selling pressure on the outstanding shares of Common Stock.
3.10 Application
of Takeover Protections; Rights Agreement.
The
Company and its Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under its Governing Documents or
the
laws of State of Nevada which is or could become applicable to any Purchaser
as
a result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and any Purchaser’s
ownership of the Securities. The Company has not adopted a shareholder rights
plan or similar arrangement relating to accumulations of beneficial ownership
of
Common Stock or a change in control of the Company. The transactions and
obligations of the Company contemplated by the Transaction Documents, including
without limitation, the issuance and sale of the Securities, will not trigger
any preemptive or anti-dilution rights (including without limitation pursuant
to
any “reset” or similar provisions) or rights of first refusal or first offer, or
any other rights that would allow or permit the holders of the Company’s
securities or other Persons to purchase shares of Common Stock or other
securities of the Company.
3.11 Commission
Documents; Financial Statements.
The
Company is subject to the reporting requirements of the Exchange Act, as
of the
Closing Date, and has filed with the Commission all reports, schedules,
registration statements and definitive proxy statements (if any) that the
Company was required to file with the Commission (collectively, the
“SEC
Documents”).
The
Company is not aware of any event occurring or expected to occur on or prior
to
the Closing Date (other than the transactions effected hereby and related
hereto) that would require the filing of, or with respect to which the Company
intends to file, a Form 8-K after the Closing. Each SEC Document, as of the
date
of the filing thereof with the Commission, complied in all material respects
with the requirements of the Securities Act or Exchange Act, as applicable,
and
the rules and regulations promulgated thereunder and, as of the date of such
filing (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), such SEC Document (including
all
exhibits and schedules thereto and documents incorporated by reference therein)
did not contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
All
documents required to be filed as exhibits to the SEC Documents have been
filed
as required. Except as set forth in SEC Documents filed and available to
the
public on XXXXX at least five (5) Business Days prior to the date of this
Agreement (the “Disclosure
Documents”),
the
Company has no liabilities, contingent or otherwise, other than liabilities
incurred in the ordinary course of business which, under GAAP, are not required
to be reflected in the financial statements included in the Disclosure Documents
and which, individually or in the aggregate, are not material to the
consolidated business or financial condition of the Company and its Subsidiaries
taken as a whole. As of their respective dates, the financial statements
of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules
and
regulations of the Commission with respect thereto. Such financial statements
have been prepared in accordance with GAAP consistently applied at the times
and
during the periods involved (except (i) as may be otherwise indicated in
such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end adjustments). No other information
provided by or on behalf of the Company to the Purchasers which is not included
in the SEC Documents, including, without limitation, the information referred
to
in Section
2.4
of this
Agreement and the disclosure schedules attached hereto, contains any untrue
statement of a material fact or omits to state any material fact necessary
in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading.
-15-
3.12 Absence
of Certain Changes.
Since
December 31, 2006, there has been no material adverse change or development
in
the business, properties, operations, condition (financial or otherwise),
results of operations or prospects of the Company. Since December 31, 2006,
the
Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of the ordinary
course of business or (iii) effected capital expenditures, individually or
in
the aggregate, in excess of $100,000. The Company has not taken any steps
to
seek protection pursuant to any bankruptcy law nor does the Company have
any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not, as of the date hereof,
and will not be, after giving effect to the transactions contemplated by
this
Agreement or the Transaction Documents, Insolvent.
3.13 No
Undisclosed Events, Liabilities, Developments or Circumstances.
No
event, liability, development or circumstance has occurred or exists, or
is
contemplated to occur with respect to the Company or its business, properties,
prospects, operations or financial condition, that would be required to be
disclosed by the Company as of the date hereof under applicable securities
laws
and which has not been publicly announced.
3.14 Conduct
of Business; Regulatory Permits.
The
Company is not in violation of any term of or in default under its Governing
Documents. To the best knowledge of the Company, the Company is not in violation
of any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company, and the Company will not conduct its business
in
violation of any of the foregoing, except in each case for possible violations
which could not, individually or in the aggregate, have a Material Adverse
Effect. The Company possesses all certificates, authorizations and permits
issued by the appropriate federal, state or foreign regulatory authorities
necessary to conduct their respective businesses, except where the failure
to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and the Company
has
not received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
-16-
3.15 Foreign
Corrupt Practices.
The
Company, nor any director, officer, agent, employee or other Person acting
on
behalf of the Company has, in the course of its actions for, or on behalf
of,
the Company (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity;
(ii)
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or is
in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as
amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
3.16 Xxxxxxxx-Xxxxx
Act.
The
Company is in compliance with any and all requirements of the Xxxxxxxx-Xxxxx
Act
of 2002 that are effective and applicable to the Company as of the date hereof,
and any and all applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof.
3.17 Transactions
With Affiliates.
Except
for employment agreements with senior management of the Company, and except
as
set forth in the SEC Documents filed at least ten (10) days prior to the
date
hereof, none of the officers, directors or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (other
than for ordinary course services as employees, officers or directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
3.18 Equity
Capitalization; Registration Rights.
As of
the date hereof, the authorized capital stock of the Company consists of
150,000,000
shares of Common Stock and 150,000,000 shares of Preferred Stock, of which
as of
the date hereof, 19,096,334 are issued and outstanding; 1,560,751 shares
are reserved
(or to
be reserved) for issuance pursuant to the Company’s employee incentive plan and
other options and warrants outstanding and other securities exercisable or
exchangeable for, or convertible into, shares of Common Stock. All of such
outstanding shares have been, or upon issuance will be, validly issued and
are
fully paid and non-assessable. Except as set forth on Schedule
3.18:
(i) no
shares of the Company’s capital stock are subject to preemptive rights or any
other similar rights or any Liens suffered or permitted by the Company; (ii)
there are no outstanding options, warrants, scrip, rights to subscribe to,
calls
or commitments of any character whatsoever relating to, or securities or
rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
shares of capital stock of the Company or any of its Subsidiaries; (iii)
there
are no agreements or arrangements (except the Registration Rights Agreement)
under which the Company or any of its Subsidiaries is obligated to register
the
sale of any of their securities under the Securities Act (including “piggy-back”
registration rights); (iv) there are no outstanding securities or instruments
of
the Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (v)
there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities; (vi) the Company
does
not have any stock appreciation rights or “phantom stock” plans or agreements or
any similar plan or agreement; and (vii) the Company and its Subsidiaries
have
no liabilities or obligations required to be disclosed in the Disclosure
Documents (as defined herein) but not so disclosed in the SEC Documents.
The
Company has furnished or made available to each Purchaser upon such Purchaser’s
request, true, correct and complete copies of the Company’s Governing Documents,
as amended and as in effect on the date hereof, and the terms of all securities
convertible into, or exercisable or exchangeable for, shares of Common Stock
and
the material rights of the holders thereof in respect thereto. Schedule
3.18
sets
forth the shares of Common Stock owned beneficially or of record and Common
Stock Equivalents held by each director and executive officer of the Company.
-17-
3.19 Debt
and Other Contracts.
Except
with respect to any default under the Term Note or the Revolving Note which
may
be triggered by the consummation of the transactions contemplated hereunder
and
under the other Transaction Documents, this
Company (i) is not a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument would result in a Material Adverse Effect,
(ii) is not in violation of any term of or in default under any contract,
agreement or instrument relating to any Debt, except where such violations
and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iii) is not a party to any contract, agreement or instrument
relating to any Debt, the performance of which, in the judgment of the Company’s
officers, has or is expected to have a Material Adverse Effect. Except as
set
forth in Schedule
3.19,
there
is no outstanding Debt of the Company or by which the Company is or may become
bound.
3.20 Absence
of Litigation.
Except
as set forth in Schedule
3.20,
there
is no action, suit, proceeding, inquiry or investigation before or by any
securities exchange or securities market, any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge
of the
Company, threatened against or affecting the Company, the Common Stock or
any of
the Company’s officers or directors, whether of a civil or criminal nature or
otherwise. The matters set forth on Schedule
3.20,
if
determined adversely to the Company, would not have a Material Adverse
Effect.
-18-
3.21 Insurance.
The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as management of the Company believes
to be prudent and customary in the businesses in which the Company is engaged.
The Company has not been refused any insurance coverage sought or applied
for.
The Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
3.22 Employee
Relations.
The
Company is not a party to any collective bargaining agreement or employs
any
member of a union. The Company believes that its relations with its employees
are in good standing. No executive officer of the Company (as defined in
Rule
501(f) of the Securities Act) has notified the Company that such officer
intends
to leave the Company or otherwise terminate such officer’s employment with the
Company. No executive officer of the Company is, or is now expected to be,
in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement,
or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company to
any
liability with respect to any of the foregoing matters. The Company is in
compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms
and
conditions of employment and wages and hours, except where failure to be
in
compliance would not, either individually or in the aggregate, reasonably
be
expected to result in a Material Adverse Effect.
3.23 Title.
The
Company has good and marketable title in fee simple to all real property
and
good and marketable title to all personal property owned by it which is material
to the business of the Company, in each case free and clear of all Liens
and
defects except for Permitted Liens. Any real property and facilities held
under
lease by the Company are held by it under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with
the
use made and proposed to be made of such property and buildings by the
Company.
3.24 Intellectual
Property Rights.
The
Company owns or possesses adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations and applications,
service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights, including without limitation the intellectual property acquired pursuant
to the Acquisition (collectively, “Intellectual
Property Rights”)
necessary to conduct their respective businesses as now conducted. Each such
Intellectual Property Right is set forth on Schedule
3.24.
None of
the Intellectual Property Rights have expired or terminated or have been
abandoned, or are expected to expire or terminate or expected to be abandoned
within three years from the date of this Agreement. The Company does not
have
any knowledge of any infringement by the Company of Intellectual Property
Rights
of others. There is no claim, action or proceeding being made or brought,
or to
the knowledge of the Company, being threatened, against the Company regarding
its Intellectual Property Rights. The Company is not aware of any facts or
circumstances which might give rise to any of the foregoing infringements
or
claims, actions or proceedings. The Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
Intellectual Property Rights.
-19-
3.25 Environmental
Laws.
The
Company and its Subsidiaries (i) are in compliance with any and all applicable
Environmental Laws, (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses, (iii) are in compliance with all terms and conditions of any
such
permit, license or approval, (iv) do not own or operate any real property
contaminated with any substance that is in violation of Environmental Laws,
and
(v) is liable for any off-site disposal or contamination pursuant to any
Environmental Laws where, in each of the foregoing clauses (i), (ii), (iii),
(iv) and (v) the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect. There is no
civil,
criminal or administrative action, suit, investigation, inquiry or proceeding
pending or, to the knowledge of the Company, threatened by or before any
court
or governmental authority against the Company relating to or arising from
the
Company’s non-compliance with any Environmental Laws, nor has the Company
received written notice of any alleged violations of Environmental
Laws.
3.26 Subsidiary
Rights.
The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by
the
Company or such Subsidiary.
3.27 Ranking
of Notes.
Except
for Permitted Senior Debt, no Debt of the Company is senior to or ranks
pari
passu
with the
Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise.
3.28 Acquisition.
Contemporaneously with the Closing, the Company shall have consummated the
Acquisition.
3.29 Tax
Status.
The
Company (i) has made or filed all foreign, federal and state income and all
other tax returns, reports and declarations (or extensions thereof) required
by
any jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to
the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority
of
any jurisdiction, and the officers of the Company know of no basis for any
such
claim.
3.30 Internal
Accounting and Disclosure Controls.
The
Company maintains its internal accounting controls in a manner sufficient
to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with its system of accounting and reporting and to maintain asset
and
liability accountability, (iii) access to assets or incurrence of liabilities
is
permitted only in accordance with management’s general or specific authorization
and (iv) the recorded accountability for assets and liabilities is compared
with
the existing assets and liabilities at reasonable intervals and appropriate
action is taken with respect to any difference. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-14 under the
Exchange Act) that are effective in ensuring that information required to
be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the
time
periods specified in the rules and forms of the Commission, including, without
limitation, controls and procedures designed in to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company’s
management, including its principal executive officer or officers and its
principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. Except as disclosed in the audited
financial statements of the Company, during the twelve (12) months prior
to the
date hereof neither the Company nor any of its Subsidiaries have received
any
notice or correspondence from any accountant relating to any potential material
weakness in any part of the system of internal accounting controls of the
Company.
-20-
3.31 Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Company
and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Exchange Act filings and is not so disclosed
or
that otherwise would be reasonably likely to have a Material Adverse
Effect.
3.32 Manipulation
of Price.
The
Company has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result
in the
stabilization or manipulation of the price of any security of the Company
to
facilitate the sale or resale of any of the Securities, (ii) other than any
placement agent, sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) other than any
placement agent, paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
3.33 Transfer
Taxes.
On the
Closing Date, all stock transfer or other taxes (other than income or similar
taxes) which are required to be paid in connection with the sale and transfer
of
the Securities to be sold to each Purchaser hereunder will be, or will have
been, fully paid or provided for by the Company, and all laws imposing such
taxes will be or will have been complied with.
3.34 Disclosure.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Purchasers or their respective agents or counsel with
any
information that constitutes or could reasonably be expected to constitute
material, nonpublic information. The Company understands and confirms that
each
of the Purchasers will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the schedules to this Agreement, furnished by or on behalf
of
the Company is true and correct and does not contain any untrue statement
of a
material fact or omit to state any material fact necessary in order to make
the
statements made therein, in the light of the circumstances under which they
were
made, not misleading. Each press release issued by the Company did not at
the
time of release contain any untrue statement of a material fact or omit to
state
a material fact required to be stated therein or necessary in order to make
the
statements therein, in the light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company or its respective business, properties,
prospects, operations or financial conditions, which, under applicable law,
rule
or regulation, requires public disclosure or announcement by the Company
but
which has not been so publicly announced or disclosed (assuming for this
purpose
that the Company’s reports filed under the Exchange Act are being incorporated
into an effective registration statement filed by the Company under the
Securities Act). The Company acknowledges and agrees that no Purchaser makes
or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section
2.
-21-
3.35 Reporting
Company; Listing.
The
Company is not in violation of any of the rules, regulations or requirements
relating to trading of the Common Stock on any securities exchange or securities
market and has no knowledge of any facts or circumstances that would reasonably
be expected to result in a suspension or restriction of the Common Stock
from
trading on any securities exchange or securities market in the foreseeable
future.
3.36 Form
SB-2.
The
Company is eligible to register the Conversion Shares and Warrant Shares
for
resale in a secondary offering by each Purchaser on a registration statement
on
Form SB-2 under the Securities Act. To the Company’s knowledge, there exist no
facts or circumstances (including without limitation any required approvals
or
waivers of any circumstances that may delay or prevent the obtaining of
accountant’s consents) that could reasonably be expected to prohibit or delay
the preparation and filing of a registration statement on Form SB-2 that
will be
available for the resale of all Conversion Shares and Warrant Shares by each
Purchaser.
3.37 Investment
Company Status.
The
Company is not, and immediately after receipt of payment for the Notes and
the
Warrants issued under this Agreement will not be, an “investment company” or an
entity “controlled” by an “investment company” within the meaning of the
Investment Company Act of 1940, as amended (the “Investment
Company Act”),
and
shall conduct its business in a manner so that it will not become subject
to the
Investment Company Act.
3.38 Customers
and Suppliers.
The
Company maintains relationships with their material customers and suppliers
on
commercially reasonable terms. To the Company’s knowledge, no customer or
supplier of the Company has any plan or intention to terminate any agreement
or
arrangement with the Company, which termination would reasonably be expected
to
have a Material Adverse Effect.
3.39 No
Other Agreements.
The
Company has not, directly or indirectly, entered into any agreement with
or
granted any right to any Purchaser relating to the terms or conditions of
the
transactions contemplated by the Transaction Documents, except as expressly
set
forth in the Transaction Documents.
4. COVENANTS
AND ACKNOWLEDGEMENTS OF THE PARTIES.
4.1 Best
Efforts.
Each
party shall use its best efforts to timely satisfy each of the terms and
conditions of this Agreement.
4.2 Form
D
and Blue Sky; Other Filings and Consents.
The
Company agrees to file a Form D with respect to the Securities as required
under
Regulation D and to provide a copy thereof to each Purchaser promptly after
such
filing. The Company shall, on or before the Closing Date, take such action
as
the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Securities for sale to the Purchasers at
the
Closing pursuant to this Agreement under applicable securities or “Blue Sky”
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to
the
Purchasers on or before the Closing Date. The Company shall make all filings
and
reports relating to the offer and sale of the Securities required under
applicable securities or “Blue Sky” laws of the states of the United States
following the Closing Date. The Company undertakes as promptly as reasonably
practicable after the date hereof to (i) make such filings and apply for
such
registrations, or (ii) use its reasonable best efforts to obtain, as applicable,
all such consents, authorizations and orders, in each such case, which are
required to be made or obtained by the Company pursuant to applicable law,
rule
or regulation in order to consummate the transactions contemplated by this
Agreement and the other Transaction Documents.
-22-
4.3 Reporting
Status.
Until
the date on which the Holders have sold all Registrable Securities to the
public
pursuant to an effective registration statement or Rule 144 (the “Reporting
Period”),
the
Company shall timely file all reports required to be filed with the Commission
pursuant to the Exchange Act, and the Company shall not terminate its status
as
an issuer required to file reports under the Exchange Act even if the Exchange
Act or the rules and regulations thereunder would otherwise permit such
termination.
4.4 Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Securities for general
corporate purposes, and not for (i) the repayment of any outstanding
Indebtedness of the Company or any of its Subsidiaries or (ii) redemption
or
repurchase of any of its or its Subsidiaries’ equity securities.
4.5 Financial
Information.
The
Company agrees to send the following to each Holder during the Reporting
Period
(i) unless the following are filed with the Commission and are available
to the
public through XXXXX, within one (1) Business Day after the filing thereof
with
the Commission, a copy of its Annual Reports on Form 10-KSB or 10-K, its
Quarterly Reports on Form 10-QSB or 10-Q, any Current Reports on Form 8-K
and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the Securities Act, (ii) on the same day as the release thereof,
facsimile copies of all press releases issued by the Company or any of its
Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
4.6 Listing.
In
accordance with the Registration Rights Agreement, the Company shall promptly
secure the listing of all of the Registrable Securities upon each national
securities exchange and automated quotation system, if any, upon which shares
of
Common Stock are then listed (subject to official notice of issuance) and
shall
maintain, so long as any other shares of Common Stock shall be so listed,
such
listing of all Registrable Securities from time to time issuable under the
terms
of the Transaction Documents. Upon securing a listing in accordance with
this
Section
4.6,
the
Company shall maintain the Common Stock’s authorization for listing on the
applicable securities exchange or securities market and neither the Company
nor
any of its Subsidiaries shall take any action which would be reasonably expected
to result in the delisting or suspension of the Common Stock on the applicable
securities exchange or securities market. The Company shall pay all fees
and
expenses in connection with satisfying its obligations under this Section
4.6.
-23-
4.7 Fees.
Subject
to Section
8
below,
at the Closing, the Company shall reimburse the Lead Investor for its legal
and
due diligence expenses incurred in connection with the transactions contemplated
by the Transaction Documents in an amount not to exceed $40,000, which amount
(to the extent not already paid by the Company) shall be withheld from the
Purchase Price payable by the Lead Investor at the Closing. The Company shall
be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or broker’s commissions relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Purchaser harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment.
4.8 Pledge
by Purchaser.
The
Company acknowledges and agrees that the Securities may be pledged by a Holder
in connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities. The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder,
and no Holder effecting a pledge of Securities shall be required to provide
the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document, including,
without
limitation, Section
2.6 of
this
Agreement; provided that a Holder and its pledgee shall be required to comply
with the provisions of Section
2.6
of this
Agreement in order to effect a sale, transfer or assignment of Securities
to
such pledgee. The Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a
Holder.
4.9 Disclosure
of Transactions and Other Material Information.
On or
before 9:00 a.m., New York City time, on the first Business Day following
the
date of this Agreement, the Company shall issue a press release announcing
the
transactions contemplated by the Transaction Documents and on or before 5:00
p.m., New York City time on the fourth day following the date of this Agreement
the Company shall file a Current Report on Form 8-K describing the terms
of the
transactions contemplated by the Transaction Documents in the form required
by
the Exchange Act, and attaching the material Transaction Documents (including,
without limitation, this Agreement (and all schedules to this Agreement)
the
form of the Note, the form of the Warrant and the Registration Rights Agreement)
as exhibits to such filing (including all attachments, the “8-K
Filing”).
The
Company acknowledges, agrees and represents that from and after the date
of the
press release and 8-K Filing, no Purchaser shall be in possession of any
material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in the press release and 8-K Filing. The Company shall
not, and shall cause each of its Subsidiaries and each of their respective
officers, directors, employees and agents, not to, provide any Purchaser
with
any material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the date of the press release and 8-K Filing
without
the express written consent of such Purchaser. From and after the deadlines
specified above, if a Purchaser has, or believes it has, received any such
material, nonpublic information regarding the Company or any of its
Subsidiaries, it shall provide the Company with written notice thereof. The
Company shall, within five (5) Business Days of receipt of such notice, make
public disclosure of such material, nonpublic information. In the event of
a
breach of the foregoing covenant by the Company, and provided that the Company
shall have failed (following proper written request therefor) to make an
appropriate public disclosure consistent with the requirements of Regulation
FD
under the Exchange Act, any Subsidiary, or its each of respective officers,
directors, employees and agents, in addition to any other remedy provided
herein
or in the Transaction Documents, a Purchaser shall have the right to make
a
public disclosure, in the form of a press release, public advertisement or
otherwise, of such material, nonpublic information without the prior approval
by
the Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Purchaser shall have any liability to
the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure. Subject
to
the foregoing, neither the Company, its Subsidiaries nor any Purchaser shall
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall
be
entitled, without the prior approval of any Purchaser, to make any press
release
or other public disclosure with respect to such transactions (i) in substantial
conformity with the press release and 8-K Filing and contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that
in the
case of clause (i) each Purchaser shall be consulted by the Company in
connection with any such press release or other public disclosure prior to
its
release).
-24-
4.10 Corporate
Existence.
Until
the date on which there are no Notes or Warrants outstanding, the Company
shall
maintain its corporate existence and shall not sell all or substantially
all of
the Company’s assets, except in the event of a merger or consolidation or sale
of all or substantially all of the Company’s assets, where the surviving or
successor entity in such transaction (i) assumes the Company’s obligations
hereunder and under the agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation whose common stock is
listed
for trading on the New York Stock Exchange, the American Stock Exchange,
the
Nasdaq Global Select Market or the Nasdaq Global Market.
4.11 Reservation
of Common Stock.
The
Company shall, on or before the Closing Date, authorize and reserve for
issuance, free from any preemptive rights, a number of shares of Common Stock
(the “Reserved
Amount”)
equal
to no less than one hundred and fifty percent (150%) of the maximum number
of
shares of Common Stock issuable upon (i) conversion of the outstanding Notes
in
full at the Conversion Price then in effect and (ii) exercise of the outstanding
Warrants in full at the Exercise Price then in effect, in each such case
without
regard to any limitation or restriction on such conversion or exercise that
may
be set forth in the Notes or the Warrants. In the event that, as a result
of an
adjustment to the Conversion Price of the Notes or the Exercise Price for
the
Warrants (pursuant to anti-dilution adjustments or otherwise), the Reserved
Amount is less than 125% of the number of shares of Common Stock then issuable
upon conversion of all of the Notes and exercise of all of the Warrants then
outstanding (without regard to any limitation or restriction on such conversion
or exercise that may be set forth in the Notes or the Warrants), the Company
shall take action (including without limitation seeking stockholder approval
for
the authorization or reservation of additional shares of Common Stock) as
soon
as practicable (but in no event later than the tenth (10th)
business day or, in the event that stockholder approval is required, the
sixtieth (60th)
day
following such date) to increase the Reserved Amount to no less than 150%
of the
number of shares of Common Stock into which such outstanding Notes are then
convertible and such outstanding Warrants are exercisable. The Company shall
not
reduce the number of shares reserved for issuance hereunder without obtaining
the written consent of the holders of two-thirds (2/3) of the Registrable
Securities. The initial Reserved Amount shall be allocated pro rata among
the
Purchasers based on the principal amount of the Notes issued to each Purchaser
at the Closing. Each increase in the Reserved Amount shall be allocated pro
rata
among the Holders based on the amount of Registrable Securities into which
all
of the Notes and Warrants held by such Holder at the time of such increase
are
convertible or exercisable (without regard to any limitation on such conversion
or exercise). In the event that a Holder shall sell or otherwise transfer
any of
such Holder’s Notes, each transferee shall be allocated a pro rata portion of
such transferor’s Reserved Amount. Any portion of the Reserved Amount which
remains allocated to any person or entity which does not hold any Notes shall
be
reallocated to the remaining Holders pro rata based on the amount of Registrable
Securities into which all of the outstanding Notes and Warrants at the time
of
such increase are convertible or exercisable (without regard to any limitation
on such conversion or exercise).
-25-
4.12 Opinion
of Counsel.
The
Company shall cause its outside counsel to deliver to each Purchaser a written
opinion, dated as of and delivered on the Closing Date, in substantially
the
form of Exhibit
G
attached
hereto.
4.13 Limitation
on Debt, Liens.
During
the period beginning on the date of this Agreement and ending on the Termination
Date, the Company shall refrain from (i) incurring any Debt (including without
limitation by issuing any Debt securities), other than Subordinated Debt,
or
increasing the amount of any existing line of credit or other Debt facility
beyond the maximum amount outstanding thereon on the date hereof or (ii)
granting, establishing or maintaining any Lien on any of its assets, including
without limitation any pledge of securities owned or held by it (including
without limitation any securities issued by any such Subsidiary), other than
Permitted Liens. Notwithstanding the foregoing, the Company may incur Debt
for
purposes of effecting one or more acquisitions (by means of purchase of all
or
substantially all of the assets of another entity), provided
that the
aggregate amount of such new Debt shall not exceed $1,000,000 and,
notwithstanding the foregoing, the Company may incur debt upon approval of
the
Required Holders.
4.14 Restricted
Payments.
During
the period beginning on the date of this Agreement and ending on the Termination
Date, the Company will not make any Restricted Payments, except
that:
(a) the
Company may make regularly schedule payments of principal and interest accrued
on the Permitted Senior Debt if and to the extent (but only if and to the
extent) permitted by the express terms of the documents governing the Permitted
Senior Debt; and
(b) the
Company may make regularly scheduled payments of principal and interest accrued
on any Subordinated Debt if and to the extent (but only if and to the extent)
permitted by the express terms of the documents governing such
Debt;
provided,
however,
that no
Restricted Payment may be made pursuant to clause (a), (b) or (c) above if
an
Event of Default (or an event or circumstance that, with the giving of notice
or
lapse of time or both, would constitute an Event of Default) exists at the
time
or would exist as a result of such Restricted Payment.
-26-
4.15 Disposition
of Property.
During
the period beginning on the date of this Agreement and ending on the Termination
Date, the Company will not, nor will it permit any Subsidiary of the Company
to,
sell, lease, assign, transfer or otherwise dispose of any of its Property,
except (i) dispositions of inventory by the Company and its Subsidiaries
in the
ordinary course of business and (ii) expenditures of money (including, without
limitation, money held in deposit accounts) made in the ordinary course of
business or for the purpose of making Restricted Payments expressly permitted
in
accordance with this Agreement.
4.16 Certain
Transactions.
During
the period beginning on the date of this Agreement and ending on the Termination
Date, and except as may be expressly permitted or required by the Transaction
Documents, the Company will not create or otherwise cause or permit to exist
or
become effective any consensual encumbrance or restriction of any kind on
the
ability of the Company to (i) pay dividends or make any other distribution
to
the Company in respect of capital stock or with respect to any other interest
or
participation in, or measured by, its profits, (ii) pay any Debt owed by
the
Company, (iii) make any loan or advance or capital contribution to the Company,
(iv) sell, lease or transfer any of its Property except in the ordinary course
of business, or (v) xxxxx x Xxxx on any of its Properties other then any
Lien
incurred in connection with any replacement debt facility contemplated in
clause
(3) of the definition “Permitted Senior Debt.”
4.17 Modification
of Certain Agreements.
During
the period beginning on the date of this Agreement and ending on the Termination
Date, the Company will not consent to or implement any termination, amendment,
modification, supplement or waiver of (i) the Governing Documents of the
Company
or (ii) any Material Contract to which it is a party; provided,
however,
that
any of such documents may be amended or modified if and to the extent that
such
change or modification is necessary in order to carry out the intent of any
Transaction Document.
4.18 Issuance
Limitation.
During
the period beginning on the date of this Agreement and ending on the Termination
Date, the Company shall not issue, sell or exchange, or agree or obligate
itself
to issue, sell or exchange or reserve, agree to or set aside for issuance,
sale
or exchange, (i) any Common Stock Equivalents, (ii) any other equity security
of
the Company, including without limitation shares of preferred stock, or (iii)
any other security of the Company which by its terms is convertible into
or
exchangeable or exercisable for preferred stock or other equity security,
which
rank senior to the preferences, rights and/or privileges of the Notes;
provided,
however,
that
the foregoing restrictions shall not apply if the holders of at least
three-fourths (3/4) of the outstanding Notes at such time consent in writing
to
such issue, sale, exchange, agreement or obligation, as the case may
be.
4.19 Right
of First Offer.
Subject
to the terms and conditions of this Section
4.19
and
applicable securities laws, if the Company proposes to offer or sell any
New
Securities, the Company shall first offer such New Securities to each Purchaser
(or any assignee thereof). A Purchaser shall be entitled to apportion the
right
of first offer hereby granted to it among itself and its Affiliates in such
proportions as it deems appropriate.
-27-
(a) The
Company shall give notice (the “Offer
Notice”)
to
each Purchaser, stating (i) its bona fide intention to offer such New
Securities, (ii) the number of such New Securities to be offered, and (iii)
the
price and terms, if any, upon which it proposes to offer such New
Securities.
(b) By
notification to the Company within ten (10) days after the Offer Notice is
given, each Purchaser may elect to purchase or otherwise acquire, at the
price
and on the terms specified in the Offer Notice, up to that portion of such
New
Securities which equals the proportion that the Common Stock issued and held,
or
issuable (directly or indirectly) upon conversion and/or exercise, as
applicable, of the Notes by such Purchaser bears to the total Common Stock
of
the Company then outstanding (assuming full conversion and/or exercise, as
applicable, of all the Notes. At the expiration of such ten (10) day period,
the
Company shall promptly notify each Purchaser that elects to purchase or acquire
all the shares available to it (each, a “Fully
Exercising Purchaser”)
of any
other Purchaser’s failure to do likewise. During the ten (10) day period
commencing after the Company has given such notice, each Fully Exercising
Purchaser may, by giving notice to the Company, elect to purchase or acquire,
in
addition to the number of shares specified above, up to that portion of the
New
Securities for which Purchasers were entitled to subscribe but that were
not
subscribed for by the Purchasers which is equal to the proportion that the
Common Stock issued and held, or issuable upon conversion and/or exercise,
as
applicable, of the Notes then held, by such Fully Exercising Purchaser bears
to
the Common Stock issued and held, or issuable (directly or indirectly) upon
conversion and/or exercise, as applicable, of the Notes then held, by all
Fully
Exercising Purchasers who wish to purchase such unsubscribed shares. The
closing
of any sale pursuant to this Section
4.19(b)
shall
occur within the later of one hundred twenty (120) days of the date that
the
Offer Notice is given and the date of initial sale of New Securities pursuant
to
Section
4.19(c).
(c) If
all
New Securities referred to in the Offer Notice are not elected to be purchased
or acquired as provided in Section
4.19(b),
the
Company may, during the ninety (90) day period following the expiration of
the
periods provided in Section
4.19(b),
offer
and sell the remaining unsubscribed portion of such New Securities to any
Person
or Persons at a price not less than, and upon terms no more favorable to
the
offeree than, those specified in the Offer Notice. If the Company does not
enter
into an agreement for the sale of the New Securities within such period,
or if
such agreement is not consummated within thirty (30) days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
New
Securities shall not be offered unless first reoffered to the Purchasers
in
accordance with this Section
4.19.
(d) The
right
of first offer in this Section
4.19
shall
not be applicable to (i) Excluded Securities; and (ii) shares of Common Stock
issued in an initial public offering.
4.20 Permitted
Senior Debt.
If the
consummation of the transactions contemplated hereunder and by the other
Transaction Documents trigger an event of default under the Term Note or
the
Revolving Note, the Company shall have sixty (60) days from the date of such
default to refinance such Debt with a debt facility which will be sufficient
to
replace and satisfy such Debt in its entirety, including but not limited
to
outstanding principal, accrued interest, default penalties and any other
payments thereunder.
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5. TRANSFER
AGENT INSTRUCTIONS.
On
or
prior to the Closing Date, the Company shall execute and deliver irrevocable
written instructions to the transfer agent for its Common Stock (the
“Transfer
Agent”),
and
provide each Purchaser with a copy thereof, directing the Transfer Agent
(i) to
issue certificates representing Conversion Shares upon conversion of the
Notes
and receipt of a valid Conversion Notice (as defined in the Notes) from a
Purchaser, in the amount specified in such Conversion Notice, in the name
of
such Purchaser or its nominee, (ii) to issue certificates representing Warrant
Shares upon exercise of the Warrants and receipt of a valid Exercise Notice
(as
defined in the Warrants) from a Purchaser, in the amount specified in such
Exercise Notice, in the name of such Purchaser or its nominee and (iii) to
deliver such certificates to such Purchaser no later than the close of business
on the third (3rd)
Business Day following the related Conversion Date (as defined in the Notes)
or
Exercise Date (as defined in the Warrant), as the case may be. Such certificates
may bear legends pursuant to applicable provisions of this Agreement or
applicable law. The Company shall instruct the transfer agent that, in lieu
of
delivering physical certificates representing shares of Common Stock to an
Purchaser upon conversion of the Notes, or exercise of the Warrants, and
as long
as the Transfer Agent is a participant in the Depository Trust Company
(“DTC”)
Fast
Automated Securities Transfer program, and such Purchaser has not informed
the
Company that it wishes to receive physical certificates therefor, and no
restrictive legend is required to appear on any physical certificate if issued,
the transfer agent may effect delivery of Conversion Shares or Warrant Shares,
as the case may be, by crediting the account of such Purchaser or its nominee
at
DTC for the number of shares for which delivery is required hereunder within
the
time frame specified above for delivery of certificates. The Company represents
to and agrees with each Purchaser that it will not give any instruction to
the
Transfer Agent that will conflict with the foregoing instruction or otherwise
restrict such Purchaser’s right to convert the Notes or to receive Conversion
Shares in accordance with the terms of the Notes or to exercise the Warrant
or
to receive Warrant Shares upon exercise of the Warrants. In the event that
the
Company’s relationship with the Transfer Agent should be terminated for any
reason, the Company shall use its best efforts to cause the Transfer Agent
to
continue acting as transfer agent pursuant to the terms hereof until such
time
that a successor transfer agent is appointed by the Company and receives
the
instructions described above.
The
legend set forth in Section
2.7
shall be
removed and the Company shall issue a certificate without such legend or
any
other legend to the holder of the applicable Securities upon which it is
stamped, if (i) such Securities are registered for resale under the Securities
Act, (ii) in connection with a sale, assignment or other transfer, such holder
provides the Company with an opinion of counsel, in a form reasonably acceptable
to the Company, to the effect that such sale, assignment or transfer of such
Securities may be made without registration under the applicable requirements
of
the Securities Act, or (iii) such holder provides the Company with reasonable
assurance that such Securities can be sold, assigned or transferred pursuant
to
Rule 144. Following the Effective Date or at such earlier time as a legend
is no
longer required, the Company will no later than three (3) Business Days
following the delivery by a Purchaser to the Company or the Company’s transfer
agent of a legended certificate representing such Securities, deliver or
cause
to be delivered to such Purchaser a certificate representing such Securities
that is free from all restrictive and other legends. Following the Effective
Date and upon the delivery to any Purchaser of any certificate representing
Securities that is free from all restrictive and other legends, such Purchaser
agrees that any sale of such Securities shall be made pursuant to the
Registration Statement and in accordance with the plan of distribution described
therein or pursuant to an available exemption from the registration requirements
of the Securities Act. Without the consent of a majority of the Holders or
specific instruction from the SEC or other applicable regulatory body, the
Company may not make any notation on its records or give instructions to
any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in Section
2.6.
The
Company will not effect or publicly announce its intention to effect any
exchange, recapitalization or other transaction that effectively requires
or
rewards physical delivery of certificates evidencing the Common
Stock.
-29-
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell a Note and Warrant
to each
Purchaser at the Closing is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Purchaser with prior
written notice thereof:
(a) Such
Purchaser shall have executed and delivered to the Company (i) this Agreement,
(ii) the Registration Rights Agreement, and (iii) each other Transaction
Document to which it is a party.
(b) Such
Purchaser shall have tendered to the Company the Purchase Price (less the
amounts withheld pursuant to Section
4.7)
for the
Note and Warrant being purchased by such Purchaser at the Closing by wire
transfer of immediately available funds pursuant to Section
11.
(c) The
representations and warranties of such Purchaser shall be true and correct
in
all material respects as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that
speak
as of a specific date), and such Purchaser shall have performed, satisfied
and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by
such
Purchaser at or prior to the Closing Date.
7. CONDITIONS
TO EACH PURCHASER’S OBLIGATION TO PURCHASE.
The
obligation of each Purchaser hereunder to purchase a Note and Warrant at
the
Closing is subject to the satisfaction, at or before the Closing Date, of
each
of the following conditions, provided that these conditions are for such
Purchaser’s sole benefit and may be waived by such Purchaser at any time in its
sole discretion by providing the Company with prior written notice
thereof:
(a) The
Company shall have executed and delivered to such Purchaser (i) this Agreement,
(ii) a Note, (iii) a Warrant, (iv) the Registration Rights Agreement, (v)
the
Security Agreement and any other Security Documents required for Closing
to
which it is a party, and (vi) each other Transaction Document to which it
is a
party.
-30-
(b) The
Company shall have delivered to such Purchaser a copy of the Irrevocable
Transfer Agent Instructions, which instructions shall have been delivered
to and
acknowledged in writing by the Company’s transfer agent.
(c) The
Company shall have delivered to such Purchaser a certificate evidencing the
incorporation or organization and good standing of the Company and each of
its
operating Subsidiaries in such entity’s state of incorporation or organization
issued by the Secretary of State of such state as of a date within ten (10)
days
of the Closing Date.
(d) The
Company shall have delivered to such Purchaser a certificate, signed by the
Secretary or an Assistant Secretary of the Company, attaching (i) the Governing
Documents of the Company, and (ii) resolutions passed by its Board of Directors,
or a duly authorized committee thereof, to authorize the transactions
contemplated hereby and by the other Transaction Documents, and certifying
that
such documents are true and complete copies of the originals and that such
resolutions have not been amended or superseded, it being understood that
such
Purchaser may rely on such certificate as a representation and warranty of
the
Company made herein.
(e) The
representations and warranties of the Company shall be true and correct as
of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date)
and
the Company shall have performed, satisfied and complied in all respects
with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company at or prior to
the
Closing Date. Such Purchaser shall have received a certificate, executed
by the
Chief Executive Officer of the Company, dated as of the Closing Date, to
the
foregoing effect and as to such other matters as may be reasonably requested
by
such Purchaser.
(f) The
Company shall have delivered an opinion of counsel as required by Section
4.12.
(g) The
Company shall have delivered to such Purchaser a letter from the Company’s
transfer agent certifying the number of shares of Common Stock outstanding
as of
a date within five (5) days of the Closing Date.
(h) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Notes, Warrants, Conversion
Shares and Warrant Shares.
(i) Concurrently
with the Closing, the Acquisition shall be consummated.
(j) The
Company shall have delivered to such Purchaser such other documents relating
to
the transactions contemplated by this Agreement as such Purchaser or its
counsel
may reasonably request.
-31-
8. TERMINATION.
In
the
event that the Closing shall not have occurred with respect to a Purchaser
on or
before May 9, 2007 due to the Company’s or such Purchaser’s failure to satisfy
the conditions set forth in Sections
6
and
7
above
(and the non-breaching party’s failure to waive such unsatisfied condition(s)),
the non-breaching party shall have the option to terminate this Agreement
with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided,
however,
this if
this Agreement is terminated pursuant to this Section
8,
the
Company shall remain obligated to reimburse the non-breaching Purchasers
for the
expenses described in Section
4.7 above.
9. APPOINTMENT,
DUTIES AND RIGHTS OF THE COLLATERAL AGENT
9.1 Appointment
and Duties of Collateral Agent.
(a) The
Purchasers hereby designate and appoint Nite Capital Master, LTD to act as
the
Collateral Agent and hereby authorize Nite Capital Master, LTD, as the
Collateral Agent, to take such actions on their behalf under the provisions
of
this Agreement, the Security Documents and the Intercreditor Agreement and
to
exercise such powers and perform such duties as are expressly delegated to
the
Collateral Agent by the terms hereof and thereof. The Collateral Agent shall
hold and safeguard the Collateral during the term of this Agreement in trust
for
the Purchasers, and shall hold the Collateral in accordance with the terms
of
the Security Documents and as security for the obligations of the Company
under
the Transaction Documents.
(b) Notwithstanding
any provision to the contrary elsewhere in this Agreement or the Security
Documents, the Collateral Agent shall not have any duties or responsibilities,
except those expressly set forth in this Agreement and the Security Documents,
or any fiduciary relationship with any Purchaser, no implied covenants,
functions or responsibilities shall be read into this Agreement or the Security
Documents or otherwise exist against the Collateral Agent and no permissive
or
discretionary power or authority available to the Collateral Agent shall
be
construed to be a duty imposed on the Collateral Agent (unless the Collateral
Agent shall have received written instructions from the Required Holders
relating to any such discretionary power or authority). The Collateral Agent
shall not be liable for any action taken or omitted to be taken by it hereunder
or under the Security Documents, or in connection herewith or therewith,
or in
connection with the Collateral, unless caused by its gross negligence or
willful
misconduct.
(c) The
Collateral Agent shall not be responsible for recording or filing or
re-recording or re-filing any financing or continuation statement or recording
or re-recording any document or instrument in any public office at any time
or
times or otherwise perfecting or maintaining the perfection of any Lien on
or
security interest in any of the Collateral unless so directed by the Required
Holders with respect to any such recording or filing.
-32-
9.2 Reliance
on the Collateral Agent.
The
Purchasers and the Company expressly acknowledge that neither the Collateral
Agent nor any of its respective officers, directors or employees has made
any
representations or warranties to it and that no act by the Collateral Agent
hereinafter taken, including, without limitation, any review of the affairs
of
the Company, shall be deemed to constitute any representation or warranty
by the
Collateral Agent to any Purchaser. Except for notices, reports and other
documents expressly required to be furnished to the Purchasers by the Collateral
Agent hereunder and under the Security Documents, the Collateral Agent shall
have no duty or responsibility to provide any Purchaser with any credit or
other
information concerning the business, operations, property, financial and
other
condition or creditworthiness of the Company which may come into the possession
of the Collateral Agent or any of its officers, directors or
employees.
9.3 Successor
Collateral Agent.
(a) The
Collateral Agent may resign as Collateral Agent upon twenty (20) days' notice
to
the Company and the Purchasers, and the Required Holders may remove the
Collateral Agent at any time with or without cause by providing notice to
such
effect to the Collateral Agent, with any such resignation or removal to become
effective only upon the appointment of a successor Collateral Agent under
this
Section
9.3.
Under
no circumstances shall the Company be entitled to remove the Collateral Agent
without the consent of each of the Required Holders.
(b) If
the
Collateral Agent shall resign or shall have been removed as Collateral Agent,
then the Required Holders shall appoint a successor collateral agent for
the
Purchasers, which successor collateral agent shall be reasonably acceptable
to
the Company and the Required Holders. If no successor Collateral Agent shall
have been so appointed within thirty days after the retiring or removed
Collateral Agent's giving, or receipt, of such notice of resignation or removal,
as the case may be, the retiring or removed Collateral Agent may, on behalf
of
the Purchasers, with the reasonable consent of the Company, appoint a successor
Collateral Agent.
(c) Any
successor collateral agent appointed in accordance with the terms hereof
shall
succeed to the rights, powers and duties of the "Collateral Agent" and the
term
"Collateral Agent" shall mean such successor collateral agent effective upon
its
appointment, and the former Collateral Agent's rights, powers and duties
as
Collateral Agent shall be terminated, without any other or further act or
deed
on the part of such former Collateral Agent (except that the resigning or
removed Collateral Agent shall deliver all Collateral then in its possession
to
the successor Collateral Agent) or any of the Purchasers. After any retiring
Collateral Agent's resignation or removal hereunder as Collateral Agent,
the
provisions of this Agreement shall inure to its benefit as to any actions
taken
or omitted to be taken by it while it was Collateral Agent.
9.4 Collateral
Agent May Act Through Agents.
The
Collateral Agent may execute any of its duties under any of the Transaction
Documents by or through agents or attorneys-in-fact and shall be entitled
to
advice of counsel concerning all matters pertaining to such duties and shall
not
be responsible for any misconduct or negligence on the part of any agent
or
attorney appointed hereunder with due care and the advice of such counsel
shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by the Collateral Agent hereunder or thereunder
in
good faith and in reliance thereon.
-33-
9.5 Limitation
of Liability.
(a) Neither
the Collateral Agent nor any of its officers, directors or employees shall
be
(i) liable to any Person or Persons for any action lawfully taken or omitted
to
be taken by it under or in connection with any of the Transaction Documents
(except for its gross negligence or willful misconduct), or (ii) responsible
in
any manner to any of the Purchasers for any recitals, statements,
representations or warranties made by the Company or any representative thereof
contained in this Agreement or any of the other Transaction Documents or
in any
certificate, report, statement or other document referred to or provided
for in,
or received by the Collateral Agent under or in connection with, this Agreement
or any of the other Transaction Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement
or
any of the other Transaction Documents (other than with respect to the
Collateral Agent, the due authorization, execution and delivery of this
Agreement and each other Transaction Document to which it is a party) or
for any
failure of the Company to perform its obligations hereunder or thereunder.
The
Collateral Agent shall not be under any obligation to any Purchaser to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the other Transaction
Documents, or to inspect the properties, books or records of the
Company.
(b) Anything
in this Agreement or in any other Transaction Document notwithstanding, in
no
event shall the Collateral Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Collateral Agent has been advised of such loss
or
damage and regardless of the form of action taken resulting in such loss
or
damage.
9.6 Reliance
by the Collateral Agent.
The
Collateral Agent shall be entitled to rely, and shall be fully protected
in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and in conformance with the applicable requirements (if any) of the relevant
Transaction Documents and to have been signed, sent or made by the
representative of the proper Person or Persons concerned and upon advice
and
statements of legal counsel (including, without limitation, counsel to the
the
Company), independent accountants and other experts selected by the Collateral
Agent. In connection with any request of the Required Holders, the Collateral
Agent shall be fully protected in relying on a certificate of any Person,
signed
or purported to be signed by an authorized representative of such Person.
The
Collateral Agent shall be fully justified in failing or refusing to take
any
action under this Agreement or any of the other Transaction Documents (a)
if
such action would, in the reasonable opinion of the Collateral Agent, be
contrary to law or the terms of this Agreement or any of the other Transaction
Document, (b) if such action is not specifically provided for in this Agreement
or any of the other Transaction Documents, it shall not have received any
such
advice or concurrence of the Required Holders as it deems appropriate, or
(c)
if, in connection with the taking of any such action that would constitute
an
exercise of remedies under this Agreement or any of the other Transaction
Documents, it shall not first be indemnified to its reasonable satisfaction
by
the Company or the Purchasers against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action.
The Collateral Agent shall in all cases be fully protected in acting, or
in
refraining from acting, under this Agreement or any of the other Transaction
Documents in accordance with a request of the Required Holders, and such
request
and any action taken or failure to act pursuant hereto or thereto shall be
binding upon all the Purchasers. The Collateral Agent shall be entitled to
rely,
and shall be fully protected in relying upon, any certificate of the Company
(or
any paying agent, registrar or other agent of the Company) or holder of the
Permitted Senior Debt as to the identity and amount of Permitted Senior Debt
held by a holder of the Permitted Senior Debt.
-34-
9.7 Ambiguity
or Inconsistency in this Agreement with Proposed Actions.
If,
with respect to a proposed action to be taken by it, the Collateral Agent
shall
determine in good faith that the provisions of this Agreement or any of the
other Transaction Documents relating to the functions or responsibilities
or
discretionary powers of the Collateral Agent are or may be ambiguous or
inconsistent, the Collateral Agent shall notify the Purchasers and the Company,
identifying the proposed action and the provisions that it considers are
or may
be ambiguous or inconsistent, and may decline either to perform such function
or
responsibility or to exercise such discretionary power unless it has received
written confirmation that the Required Holders and, if no Event of Default
has
occurred and is continuing, the Company, concur that the action proposed
to be
taken by the Collateral Agent is consistent with the terms of this Agreement
or
any of the other Transaction Documents or is otherwise appropriate. The
Collateral Agent shall be fully protected in acting or refraining from acting
upon the confirmation of the Required Holders and the Company in this respect,
and such confirmation shall be binding upon the Collateral Agent and the
Purchasers.
9.8 Knowledge
of Event of Default.
The
Collateral Agent shall not be deemed to have actual, constructive, direct
or
indirect knowledge or notice of the occurrence of any Default or Event of
Default unless and until the Collateral Agent has received a notice or a
certificate from any Purchaser or the Company stating that an Event of Default
has occurred. The Collateral Agent shall have no obligation whatsoever either
prior to or after receiving such notice or certificate to inquire whether
an
Event of Default has in fact occurred and shall be entitled to rely
conclusively, and shall be fully protected in so relying, on any notice or
certificate so furnished to it. No provision of this Agreement or any other
Transaction Document shall require the Collateral Agent to expend or risk
its
own funds or otherwise incur any financial liability in the performance of
any
of its duties hereunder or in the exercise of any of its rights or powers,
if it
shall have reasonable grounds for believing that repayment of such funds
or
adequate indemnity against such risk or liability is not reasonably assured
to
it. In the event that the Collateral Agent receives a notice of the occurrence
of any Event of Default from the Company or any Purchaser, the Collateral
Agent
shall give notice thereof to each of the Purchasers. The Collateral Agent
shall
take such action with respect to such Event of Default as so directed pursuant
to the terms of the Transaction Documents or, in the event such action is
discretionary on the part of the Collateral Agent, as so directed by the
Required Holders.
9.9 Indemnification.
Without
duplication of any amounts received by an Indemnitees Person (as defined
below
in this Section
11.11)
from
the Company pursuant to an indemnity provision contained in any of the Security
Documents, the Company agrees to indemnify and hold the Collateral Agent,
its
officers, directors, employees, agents, professional advisors and Affiliates
(each an “Indemnified
Person”)
harmless from and against any and all claims, damages (other than consequential
damages), losses, liabilities, costs or expenses (including reasonable
attorneys' fees and expenses) which any Indemnified Person may incur or which
may be claimed against any Indemnified Person by any Person arising out of,
relating to or in connection with this Agreement or any other Transaction
Document, including by reason of or in connection with any investigation,
litigation or other proceeding relating to this Agreement (including, without
limitation, enforcement of this Agreement or any other Transaction Document),
other than as a result of the Indemnified Person's material breach of this
Agreement, gross negligence or willful misconduct.
-35-
10. ESCROW.
10.1 Escrow
Arrangement.
(a)
Simultaneously
with the execution and delivery of this Agreement by a Purchaser, such Purchaser
shall promptly cause a wire transfer of immediately available funds (U.S.
dollars) in an amount representing such Purchaser’s Purchase Price, to be paid
to a non-interest bearing escrow account of Xxxxxxxxxx Xxxxxxx PC (the
“Lead
Investor Counsel”)
(the
aggregate amounts received being held in escrow by Lead Investor Counsel
are
referred to herein as the “Escrow
Amount”).
Lead
Investor Counsel shall hold the Escrow Amount in escrow in accordance with
Section
10.1(b).
(b) Lead
Investor Counsel shall continue to hold the Escrow Amount in escrow in
accordance with and subject to this Agreement, from the date of its receipt
of
the funds constituting the Escrow Amount until the soonest of:
(i)
the
date this Agreement is terminated pursuant to Section
8,
in
which case, if Lead Investor Counsel then holds any portion of the Escrow
Amount, then: (A) Lead Investor Counsel shall return the portion of the Escrow
Amount received from each Purchaser which it then holds, to each such Purchaser,
in accordance with written wire transfer instructions received from such
Purchaser; and (B) if Lead Investor Counsel has not received written wire
transfer instructions from any Purchaser before such termination date, then
Lead
Investor Counsel may, in its sole and absolute discretion, either (x) deposit
that portion of the Escrow Amount to be returned to such Purchaser in a court
of
competent jurisdiction on written notice to such Purchaser, and Lead Investor
Counsel shall thereafter have no further liability with respect to such
deposited funds, or (y) continue to hold such portion of the Escrow Amount
pending receipt of written wire transfer instructions from such Purchaser
or an
order from a court of competent jurisdiction; OR
(ii)
in
the case of the Closing, receipt of written instructions from both the Company
and the Lead Investor that the Closing shall have been consummated, in which
case, Lead Investor Counsel shall release the Escrow Amount as per the joint
instructions received from the Company and the Lead Investor.
-36-
10.2. Duties;
Responsibilities.
The
Company and the Purchasers acknowledge and agree for the benefit of Lead
Investor Counsel (which shall be deemed to be a third party beneficiary of
this
Section
10)
as
follows:
(a) Lead
Investor Counsel: (i) is not responsible for the performance by the Company
or
the Purchasers of this Agreement or any of the Transaction Documents or for
determining or compelling compliance therewith; (ii) is only responsible
for (A)
holding the Escrow Amount in escrow pending receipt of written instructions
from
the Company and the Lead Investor directing the release of the Escrow Amount,
and (B) disbursing the Escrow Amount in accordance with the written instructions
from the Company and the Lead Investor, each of the responsibilities of Lead
Investor Counsel in clause (A) and (B) is ministerial in nature, and no implied
duties or obligations of any kind shall be read into this Agreement against
or
on the part of Lead Investor Counsel (collectively, the “Lead
Investor Counsel Duties”);
(iii)
shall not be obligated to take any legal or other action hereunder which
might
in its judgment involve or cause it to incur any expense or liability unless
it
shall have been furnished with indemnification acceptable to it, in its sole
discretion; (iv) may rely on and shall be protected in acting or refraining
from
acting upon any written notice, instruction (including, without limitation,
wire
transfer instructions, whether incorporated herein or provided in a separate
written instruction), instrument, statement, certificate, request or other
document furnished to it hereunder and believed by it to be genuine and to
have
been signed or presented by the proper Person, and shall have no responsibility
for making inquiry as to, or for determining, the genuineness, accuracy or
validity thereof, or of the authority of the Person signing or presenting
the
same; and (v) may consult counsel satisfactory to it, and the opinion or
advice
of such counsel in any instance shall be full and complete authorization
and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or advice of such counsel.
Documents and written materials referred to in this Section
11.2(a)
include,
without limitation, e-mail and other electronic transmissions capable of
being
printed, whether or not they are in fact printed; and any such e-mail or
other
electronic transmission may be deemed and treated by Lead Investor Counsel
as
having been signed or presented by a Person if it bears, as sender, the Person’s
e-mail address.
(b) Lead
Investor Counsel shall not be liable to anyone for any action taken or omitted
to be taken by it hereunder, except in the case of Lead Investor Counsel’s gross
negligence or willful misconduct in breach of the Lead Investor Counsel Duties.
IN NO EVENT SHALL LEAD INVESTOR COUNSEL BE LIABLE FOR INDIRECT, PUNITIVE,
SPECIAL OR CONSEQUENTIAL DAMAGE OR LOSS (INCLUDING BUT NOT LIMITED TO LOST
PROFITS) WHATSOEVER, EVEN IF LEAD INVESTOR COUNSEL HAS BEEN INFORMED OF THE
LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION.
(c) The
Company and the Purchasers hereby indemnify and hold harmless Lead Investor
Counsel from and against any and all loss, liability, cost, damage and expense,
including, without limitation, reasonable counsel fees and expenses, which
Lead
Investor Counsel may suffer or incur by reason of any action, claim or
proceeding brought against Lead Investor Counsel arising out of or relating
to
the performance of the Lead Investor Counsel Duties, unless such action,
claim
or proceeding is exclusively the result of the willful misconduct, bad faith
or
gross negligence of Lead Investor Counsel.
-37-
(d) Lead
Investor Counsel shall have the right at any time to resign for any reason
and
be discharged of its duties as escrow agent hereunder (including without
limitation the Lead Investor Counsel Duties) by giving written notice of
its
resignation to the Company and the Lead Investor at least ten (10) calendar
days
prior to the specified effective date of such resignation. All obligations
of
the Lead Investor Counsel hereunder shall cease and terminate on the effective
date of its resignation and its sole responsibility thereafter shall be to
hold
the Escrow Amount, for a period of ten (10) calendar days following the
effective date of resignation, at which time,
(i) if
a
successor escrow agent shall have been appointed and have accepted such
appointment in a writing to both the Company and the Lead Investor, then
upon
written notice thereof given to each of the Purchasers, the Lead Investor
Counsel shall deliver the Escrow Amount to the successor escrow agent, and
upon
such delivery, Lead Investor Counsel shall have no further liability or
obligation; or
(ii) if
a
successor escrow agent shall not have been appointed, for any reason whatsoever,
Lead Investor Counsel shall at its option in its sole discretion, either
(A)
deliver the Escrow Amount to a court of competent jurisdiction selected by
Lead
Investor Counsel and give written notice thereof to the Company and the
Purchasers, or (B) continue to hold Escrow Amount in escrow pending written
direction from the Company and the Lead Investor in form and formality
satisfactory to Lead Investor Counsel.
(e) In
the
event that the Lead Investor Counsel shall be uncertain as to its duties
or
rights hereunder or shall receive instructions with respect to the Escrow
Amount
or any portion thereunder which, in its sole discretion, are in conflict
either
with other instructions received by it or with any provision of this Agreement,
Lead Investor Counsel shall have the absolute right to suspend all further
performance under this Agreement (except for the safekeeping of such Escrow
Amount) until such uncertainty or conflicting instructions have been resolved
to
the Lead Investor Counsel’s sole satisfaction by final judgment of a court of
competent jurisdiction, joint written instructions from the Company and all
of
the Purchasers, or otherwise. In the event that any controversy arises between
the Company and one or more of the Purchasers or any other party with respect
to
this Agreement or the Escrow Amount, the Lead Investor Counsel shall not
be
required to determine the proper resolution of such controversy or the proper
disposition of the Escrow Amount, and shall have the absolute right, in its
sole
discretion, to deposit the Escrow Amount with the clerk of a court selected
by
the Lead Investor Counsel and file a suit in interpleader in that court and
obtain an order from that court requiring all parties involved to litigate
in
that court their respective claims arising out of or in connection with the
Escrow Amount. Upon the deposit by the Lead Investor Counsel of the Escrow
Amount with the clerk of such court in accordance with this provision, the
Lead
Investor Counsel shall thereupon be relieved of all further obligations and
released from all liability hereunder.
(f) The
provisions of this Section
10
shall
survive any termination of this Agreement.
-38-
11. MISCELLANEOUS.
11.1 Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of
New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in the City of New York, Borough of
Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein,
and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be
deemed
to limit in any way any right to serve process in any manner permitted by
law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
11.2 Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective
when
counterparts have been signed by each party and delivered to the other party;
provided , that any party may deliver an executed copy of this Agreement
to any
other party by facsimile transmission, in which case this Agreement as so
delivered shall be deemed duly executed and delivered and shall be binding
upon
the signatory thereto with the same force and effect as if the signature
were an
original.
11.3 Headings.
The
headings of this Agreement are for convenience of reference and shall not
form
part of, or affect the interpretation of, this Agreement.
11.4 Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction
or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
11.5 Entire
Agreement; Amendments.
This
Agreement and the other Transaction Documents supersede all other prior oral
or
written agreements between the Purchasers, the Company, their affiliates
and
Persons acting on their behalf with respect to the matters discussed herein,
and
this Agreement, the other Transaction Documents and the instruments referenced
herein and therein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set
forth
herein or therein, neither the Company nor any Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
Except as expressly provided herein, neither this Agreement nor any term
hereof
may be amended or waived except pursuant to a written instrument executed
by the
Company and the Required Holders, and no provision hereof may be waived other
than by a written instrument signed by the Required Holders. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No such amendment shall be effective to the extent
that
it applies to less than all of the holders of the Registrable Securities
then
outstanding. No consideration shall be offered or paid to any Person to amend
or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties
to
the Transaction Documents, holders of Registrable Securities. The Company
has
not, directly or indirectly, made any agreements with any Purchasers relating
to
the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.
-39-
11.6 Notices.
Any
notices, consents, waivers or other communications required or permitted
to be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending
party);
or (iii) one Business Day after deposit with an overnight courier service,
in
each case properly addressed to the party to receive the same. The addresses
and
facsimile numbers for such communications shall be:
if
to the
Company:
000
Xxxxxx Xxxxxx
Xxxxxxxx
0, Xxxxx 000
Xxxxxxxxxxx,
XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxx
Xxxxxxx, Ph.D.
-40-
with
a
copy (for informational purposes only) to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
X. Xxxxxxx
with
a
copy (for informational purposes only) to:
Synergy
Law Group, LLC.
000
Xxxx
Xxxxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxx
X.
Xxxxxxx
and
if to
a Purchaser, to its address and facsimile number set forth on Exhibit
A,
with
copies to such Purchaser’s representatives as set forth on Exhibit
A,
or
to
such other address and/or facsimile number and/or to the attention of such
other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
11.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any purchasers of the
Notes
or the Warrants. The Company shall not assign this Agreement or any rights
or
obligations hereunder, including by merger or consolidation, without the
prior
written consent of at least two-thirds (2/3) of the Registrable Securities
into
which all of the Notes and Warrants then outstanding are convertible or
exercisable (without regard to any limitation on such conversion or exercise).
A
Purchaser may assign some or all of its rights hereunder without the consent
of
the Company, in which event such assignee shall be deemed to be a Purchaser
hereunder in respect of such assigned rights.
11.8 No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may
any
provision hereof be enforced by, any other Person.
11.9 Survival.
Unless
this Agreement is terminated under Section
8,
the
representations and warranties of the Company and the Purchasers contained
in
Sections
2
and
3,
and the
agreements and covenants set forth in Sections
4,
5,
10
and
12 shall
survive the Closing and the delivery and exercise of Securities, as applicable.
Each Purchaser shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
-41-
11.10 Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
11.11 Indemnification.
(a) In
consideration of each of the Purchasers’ and the Collateral Agent’s execution
and delivery of the Transaction Documents, to which it is a party, and acquiring
the Securities thereunder and in addition to all of the Company’s other
obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each such Purchaser and the Collateral Agent
and
each other holder of the Securities and all of their stockholders, partners,
members, officers, directors, employees and direct or indirect investors
and any
of the foregoing Persons’ agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses,
costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for
which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified
Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating
to (a)
any misrepresentation or breach of any representation or warranty made by
the
Company in the Transaction Documents or any other certificate, instrument
or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or
any other certificate, instrument or document contemplated hereby or thereby
or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought
on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any
other
certificate, instrument or document contemplated hereby or thereby, (ii)
any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Purchaser pursuant to Section
4,
or (iv)
the status of such Purchaser or holder of the Securities as an investor in
the
Company pursuant to the transactions contemplated by the Transaction Documents.
The Company shall not be obligated to indemnify an Indemnitee pursuant to
this
Section
12.11
for
Indemnified Liabilities to the extent such Indemnified Liabilities are caused
by
acts of gross negligence or willful misconduct on the part of such Indemnitee.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities that is permissible
under applicable law. Except as otherwise set forth herein, the mechanics
and
procedures with respect to the rights and obligations under this Section
12.11
shall be
the same as those set forth in Section 5 of the Registration Rights
Agreement.
11.12 No
Strict Construction.
The
language used in this Agreement and the other Transaction Documents will
be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.
-42-
11.13 Remedies.
Each
Purchaser and each holder of the Securities shall have all rights and remedies
set forth in the Transaction Documents and all rights and remedies which
such
holders have been granted at any time under any other agreement or contract
and
all of the rights which such holders have under any law. Any Person having
any
rights under any provision of this Agreement shall be entitled to enforce
such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or
all of
its obligations under the Transaction Documents, any remedy at law may prove
to
be inadequate relief to the Purchasers. The Company therefore agrees that
the
Purchasers shall be entitled to seek temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages and without
posting a bond or other security.
11.14 Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction Document
and
the Company does not timely perform its related obligations within the periods
therein provided, then such Purchaser may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights.
11.15 Payment
Set Aside.
To the
extent that the Company makes a payment or payments to the Purchasers hereunder
or pursuant to any of the other Transaction Documents or the Purchasers enforce
or exercise their rights hereunder or thereunder, and such payment or payments
or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any
law
(including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any
such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment
had
not been made or such enforcement or setoff had not occurred.
11.16 Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of each Purchaser under any Transaction Document are several
and not
joint with the obligations of any other Purchaser, and no Purchaser shall
be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in
any
other Transaction Document, and no action taken by any Purchaser pursuant
hereto
or thereto, shall be deemed to constitute the Purchasers as, and the Company
acknowledges that the Purchasers do not so constitute, a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a
group,
and the Company will not assert any such claim with respect to such obligations
or the transactions contemplated by the Transaction Documents and the Company
acknowledges that the Purchasers are not acting in concert or as a group
with
respect to such obligations or the transactions contemplated by the Transaction
Documents. The Company acknowledges and each Purchaser confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors. Each Purchaser shall
be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Purchaser
to
be joined as an additional party in any proceeding for such
purpose.
-43-
IN
WITNESS WHEREOF,
the
undersigned have caused this Agreement to be duly executed as of the date
first
written above.
|
COMPANY:
|
||
| |
|
|
| By: | ||
|
Name:
|
||
| Title: | ||
[Signature
Page to Securities Purchase Agreement]
EXHIBIT
A
|
Purchaser
|
Address
and
Contact
Information
and
Jurisdiction
of
Organization
|
Principal
Amount
of
Note
|
Purchase
Price
|
Number
of
Warrants
|
|||||||||||
EXHIBIT
B
FORM
OF NOTE
EXHIBIT
C
FORM
OF WARRANT
EXHIBIT
D
FORM
OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT
E
SECURITY
AGREEMENT
EXHIBIT
F
FORM
OF LEGAL OPINION
(a) The
Company is a corporation validly existing under, and by virtue of, the laws
of
the State of Nevada and is in good standing under such laws. The Company
has
requisite corporate power to own and operate its properties and assets, and
to
carry on its business as presently conducted. The Company is qualified to
do
business as a foreign corporation in the states of ________, ________ and
________.
(b) The
Company has all requisite legal and corporate power to execute and deliver
the
Agreement, to sell and issue the Shares and Warrants under the Agreement,
to
issue the Warrant Shares issuable upon exercise of the Warrants and to carry
out
and perform its obligations under the terms of the Agreement.
(c) The
Shares and Warrants have been duly authorized and when issued, delivered
and
paid for in accordance with the terms of the Agreement, will be validly issued,
fully paid and nonassessable. The Warrant Shares have been duly and validly
reserved, and, when issued in accordance with the terms of the Agreement,
the
Warrant and the Company’s Certificate of Incorporation, will be validly issued,
fully paid and nonassessable
(d) All
corporate action on the part of the Company necessary for the authorization,
execution and delivery of the Agreement and the other Transaction Documents
by
the Company, the authorization, sale, issuance and delivery of the Shares,
the
Warrants and the Warrant Shares and the performance by the Company of its
obligations under such agreements has been taken. Such agreements have been
duly
and validly executed and delivered by the Company and each of them constitutes
a
valid and binding obligation of the Company, enforceable against the Company
in
accordance with their respective terms.
(e) The
execution and delivery by the Company of the Agreement and the other Transaction
Documents, the performance by the Company of its obligations under the Agreement
and the other Transaction Documents, and the issuance of the Shares does
not
violate any provision of the Certificate of Incorporation or Bylaws, or any
provision of any applicable federal or state law, rule or regulation known
to us
to be customarily applicable to transactions of this nature. The execution
and
delivery by the Company of such agreements, the performance by the Company
of
its obligations under such agreements, and the issuance of the Shares, the
Warrants and the Warrant Shares does not materially violate, or constitute
a
material default under, any contract or agreement to which the Company is
a
party or by which the Company is bound that is filed as an exhibit to the
Company’s Form 8-K filed with the Securities and Exchange Act under File Number
[__________] or any filing thereafter with the Securities and Exchange
Commission pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K.
(f) No
consent, approval or authorization of or designation, declaration or filing
with
any federal governmental authority on the part of the Company is required
in
connection with the valid execution and delivery of the Agreement and the
other
Transaction Documents, the offer, sale or issuance of the Shares or the Warrants
or the consummation by the Company of any other transaction contemplated
by the
Agreement except the filing of a Form D pursuant to Regulation D under the
Securities Act of 1933, as amended.
(g) Subject
to and assuming the accuracy of the Company’s and the Purchasers’
representations in Sections 2 and 3 of the Agreement, the offer, sale and
issuance of the Shares and the Warrants in conformity with the terms of the
Agreement constitute transactions exempt from the registration requirements
of
Section 5 of the Securities Act of 1933, as amended.
(h) The
Security Agreement creates in favor of the Collateral Agent, as security
for the
Company’s Obligations, a security interest in all the assets of the Company that
is described as “Collateral” in the Security Agreement.
DISCLOSURE
SCHEDULES
