SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
SECURITIES
PURCHASE
AGREEMENT (the “Agreement”), dated as of September 21, 2007 by and
between KMA GLOBAL SOLUTIONS INTERNATIONAL, INC., a Nevada
corporation (the “Company”), and the purchasers identified on the signature page
hereto (each a “Buyer” and collectively, the “Buyers”). Capitalized
terms used herein and not otherwise defined herein are defined in Section
1
hereof.
WHEREAS:
Subject
to the terms and conditions set
forth in this Agreement and pursuant to Section 4(2) of the Securities Act
of
1933, as amended, the Company desires to issue and sell to the Buyers, and
the
Buyers, desire to purchase from the Company, Securities of the Company as
more
fully described in this Agreement,
And
in
addition to the offer and sale to the Buyers of Securities contemplated hereby,
the Company is concomitantly granting Securities to Incendia Management Group
Inc., a Canadian corporation (the “Agent”), in consideration for services
rendered in connection with the sale and purchase of Securities pursuant
to this
Agreement, as more fully described hereunder.
NOW
THEREFORE, in
consideration of the mutual covenants contained in this Agreement, and for
other
good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and the Buyers hereby agree as follows:
1. CERTAIN
DEFINED TERMS.
For
purposes of this Agreement, the following terms shall have the following
meanings:
(a) “Action”
means any action, suite, inquiry, notice of violation, proceeding (including
any
partial proceeding such as a deposition) or investigation pending or threatened
in writing against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local
or
foreign), stock market, stock exchange or trading facility.
(b) “Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
a
Person, as such terms are used in and construed under Rule 144.
(c) “Bankruptcy
Law” means Title 11, U.S. Code, or any similar federal or state law for the
relief of debtors.
(d) “Business
Day” means any day except Saturday, Sunday and any day which is a federal legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to
close.
(e) “Common
Stock” means the common stock of the Company, par value $0.001 per share, and
any securities into which such common stock may hereafter be
reclassified.
(f) “Company
Counsel” means Baker, Donelson, Bearman, Xxxxxxxx & Xxxxxxxxx,
PC.
(g) “Closing”
means the closing of the purchase and sale of the Securities pursuant to
this
Agreement.
(h) “Closing
Date” means the date of the Closing.
(i) “Custodian”
means any receiver, trustee, assignee, liquidator or similar official under
any
Bankruptcy Law.
(j) “Effective
Date” means the date that the Registration Statement is declared effective by
the SEC.
(k) “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
(l) “Filing
Date” means a day on or before November 21, 2007 on which date the Company shall
have filed the Registration Statement with the SEC.
(m) “Losses”
means any and all losses, claims, damages, liabilities, settlement costs
and
expenses, including without limitation costs of preparation and reasonable
attorneys' fees.
(n) “Material
Adverse Effect” means any of (i) a material and adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material and
adverse effect on the results of operations, assets, prospects, business
or
condition (financial or otherwise) of the Company and the Subsidiaries, if
any,
taken as a whole, or (iii) an adverse impairment to the Company’s ability to
perform on a timely basis its obligations under any Transaction
Document.
(o) “Person”
means an individual or entity including any limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(p) “Principal
Market” means The Nasdaq OTC/ Bulletin Board market, provided, however, that in
the event the Company’s Common Stock is ever listed for trading on the Nasdaq
Global Market, Nasdaq SmallCap Market or the American Stock Exchange, than
the
“Principal Market” shall mean such other market on which the Company’s Common
Stock is then listed, and (ii) for purposes of Section 10(c) hereof only,
“Principal Market” shall mean The Nasdaq SmallCap Market in respect of the
requirements for continued listing on the Principal Market.
(q) “Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted
from a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
(r) “Registrable
Securities” means any Common Stock (including Warrant Shares and Penalty Shares,
upon an Event of Default) issued or issuable pursuant to the Transaction
Documents, together with any securities issued or issuable upon any stock
split,
dividend or other distribution, recapitalization or similar event with respect
to the foregoing.
(s) “Registration
Statement” means each registration statement required to be filed under Section
5, including (in each case) the Prospectus, amendments and supplements to
such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference
or
deemed to be incorporated by reference in such registration
statement.
(t) “Required
Effectiveness Date” means the 60th day following the Filing Date of the
Registration Statement.
(u) “Rule
144” means Rule 144 promulgated by the SEC pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
(v) “SEC”
means the United States Securities and Exchange Commission.
(w) “Securities”
means the Shares, the Warrants and the Warrant Shares.
(x) “Securities
Act” means the Securities Act of 1933, as amended.
(y) “Shares”
means an aggregate of 8,000,000 shares of Common Stock to be purchased by
the
Buyers pursuant to this Agreement (the “Commitment Shares”), and 1,400,000
additional shares of Common Stock that are issued to the Agent (the “Fee
Shares”) upon Closing.
(z) “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,
swaps
and similar arrangements (including on a total return basis), and sales and
other transactions through non-US broker dealers or foreign regulated
brokers.
(aa) “Subsidiary”
means any Person in which the Company directly or indirectly owns capital
stock
or holds an equity or similar interest.
(bb)
“Trading Day” means any day on which the Principal Market is open for
customary
"Securities"
means the Shares, the Warrants and the Warrant Shares.
(cc) “Transaction
Documents” means this Agreement, the Registration Rights Agreement, the Warrants
and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
(dd) “Warrants”
means a Common Stock purchase warrant, in the form of Exhibit
F.
(ee) “Warrant
Shares” means the shares of Common Stock issuable upon exercise of the Warrants
as per Section 2 hereof.
2. PURCHASE
OF COMMON STOCK.
Subject
to the terms and conditions set
forth hereunder, the Company hereby agrees to sell to the Buyers, and the
Buyers
hereby agree to purchase from the Company, shares of Common Stock as
follows:
(a) Purchase
of Securities. The Buyers shall purchase, severally and not
jointly, and the Company shall issue and sell to the Buyers for the sum of
Two
Million Dollars ($2,000,000.00) (the “Purchase Price”): (i) an aggregate of
Eight Million (8,000,000) shares of the Company’s Common Stock (the “Commitment
Shares”) at a price of $0.25 per share, together with the issuance by the
Company of (ii) an aggregate of Eight Million (8,000,000) Warrants, exercisable
only within two (2) years of the Effective Date of the Registration Statement,
to purchase additional shares of the Company's Common Stock (“Warrant Shares”)
at an exercise price of $0.30 per share. The Purchase Price shall be
payable to the Company in traunches by, or on behalf of, the Buyers as
follows: the first payment of $200,000.00 shall be due upon the filing of
the
Registration Statement, a payment of $600,000.00 shall be due sixty (60)
days
after the Effective Date of the Registration Statement, a further payment
of
$600,000.00 shall be due ninety (90) days after the Effective Date of the
Registration Statement,
and a final payment of $600,000.00 shall be due one hundred twenty (120)
days
after the Effective Date of the Registration Statement. All payments made
under
this Agreement shall be made in lawful money of the United States of America
by
check or wire transfer of immediately available funds to such account as
the
Company may from time to time designate by written notice in accordance with
the
provisions of this Agreement.
(b) Certain
Fees. At the Closing, the Agent shall be granted by the Company,
and the Company shall issue to the Agent in connection with the purchase
of
Securities in (a) above: (i) One Million Four Hundred Thousand (1,400,000)
shares of the Company’s Common Stock (the “Fee Shares”), together with (ii) an
aggregate of One Million Four Hundred Thousand (1,400,000) Warrants,
exercisable only within two (2) years of the Effective Date of the Registration
Statement, to purchase Warrant Shares at an exercise price of $0.30 per
share.
(c) Company
Deliverables upon Closing.
To
Buyers: The Company shall deliver or cause to be delivered to
each Buyer the following: (i) one or more stock certificates, free and clear
of
all restrictive and other legends (except as expressly provided in Section
5(f)
hereof), evidencing the number of Shares, registered in the name of the
respective Buyer; (ii) Warrants, registered in the name of the Buyer, pursuant
to which the Buyer shall have the right to acquire the number of shares of
Common Stock, on the terms set forth therein; (iii) a legal opinion of Company
Counsel, in the form of Exhibit B, executed by such
counsel and delivered to the Agent on behalf of the Buyers.
To
Agent: The Company shall deliver or cause to be delivered to the
Agent the following: (i) one or more stock certificates, free and clear of
all
restrictive and other legends (except as expressly provided in Section 5(f)
hereof), evidencing Eight Hundred Thousand (800,000) shares of Common Stock
registered in the name of the Agent; (ii) Warrants, registered in the name
of
the Agent, pursuant to which the Agent shall have the right to acquire up
to
Eight Hundred Thousand (800,000) Warrant Shares, on the terms set forth therein;
(iii) a legal opinion of Company Counsel, in the form of Exhibit
B, executed by such counsel and delivered to the
Agent.
(d) Buyers’
Deliverables upon
Closing. The
Buyers shall deliver or cause to be delivered to the Company by the Agent
payment of the Purchase Price of Two Million Dollars ($2,000,000.00), in
accordance with Section 2(a) hereof.
(e) Limitation
on Beneficial Ownership. The Company shall not effect any
purchase under this Agreement and a Buyer shall not have the right to purchase
shares of Common Stock under this Agreement to the extent that after giving
effect to such purchase the Buyer together with its affiliates would
beneficially own in excess of 4.99% of the outstanding shares of the Common
Stock following such purchase. For purposes hereof, the number of
shares of Common Stock beneficially owned by a Buyer and its Affiliates or
acquired by the Buyer and its Affiliates, as the case may be, shall include
the
number of shares of Common Stock issuable in connection with a purchase under
this Agreement with respect to which the determination is being made and
the
number of shares of Common Stock which would be issuable upon exercise or
conversion of the unexercised or unconverted portion of any other Securities
of
the Company (including, without limitation, any Warrants). For
purposes of this Section, in determining the number of outstanding shares
of
Common Stock the Buyers may rely on the number of outstanding shares of Common
Stock as reflected in (1) the Company's most recent Form 10-Q or Form 10-K,
as
the case may be, (2) a more recent public announcement by the Company or
(3) any
other written communication by the Company or its transfer agent setting
forth
the number of shares of Common Stock outstanding. Upon the reasonable
written or oral request of a Buyer, the Company shall promptly confirm orally
and in writing to the Buyers the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to any purchases under this
Agreement by the Buyers since the date as of which such number of outstanding
shares of Common Stock was reported. Except as otherwise set forth
herein, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended.
(f) Taxes. The
Company shall pay any and all taxes (not including income taxes or taxes
measured by the income of revenue of Buyer or the Agent) that may be payable
with respect to the issuance and delivery of any shares of Common Stock to
the
Buyers and Agent made under of this Agreement.
3. REPRESENTATIONS
AND WARRANTIES OF THE BUYERS.
The
Buyers represent and warrant to the Company that:
(a) Investment
Purpose. Each Buyers is entering into this Agreement and
acquiring the Commitment Shares and the Warrants, for its own account for
investment only and not with a view towards, or for resale in connection
with,
the public sale or distribution thereof; provided however, by making the
representations herein, the Buyers do not agree to hold any of the Securities
for any minimum or other specific term.
(b) Accredited
Investor Status. Each Buyer is an "accredited investor" as that
term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance
on Exemptions. Each Buyer 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 each
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyers set forth herein in order
to
determine the availability of such exemptions and the eligibility of the
Buyers
to acquire the Securities.
(d) Information. Each
Buyer has 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 that have been requested by the Buyers, including, without
limitation, the documents filed with the SEC. Each Buyer understands
that its investment in the Securities involves a high degree of
risk. Each Buyer (i) is able to bear the economic risk of an
investment in the Securities including a total loss, (ii) has such knowledge
and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the proposed investment in the Securities and (iii)
has
had an opportunity to ask questions of and receive answers from the officers
of
the Company concerning the financial condition and business of the Company
and
others matters related to an investment in the Securities. Neither
such inquiries nor any other due diligence investigations conducted by the
Buyers or their representatives shall modify, amend or affect the Buyers’ right
to rely on the Company's representations and warranties contained in Section
4
below. Each Buyer 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.
(e) No
Governmental Review. Each Buyer 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.
(f) Transfer
or Resale. Each Buyer 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 or (B) an exemption exists permitting such Securities
to
be sold, assigned or transferred without such registration; (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 available to a Buyer, any
resale of the Securities under circumstances in which the seller (or
the person through whom 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 or the rules and regulations of
the SEC
thereunder; 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.
(g) Validity;
Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of each Buyer and is a valid and binding
agreement of the Buyers enforceable against each Buyer in accordance with
its
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(h) No
Prior Short Selling. Each Buyer represents and warrants to the
Company that at no time prior to the date of this Agreement has any Buyer,
or
its respective agents, associates, representatives or affiliates engaged
in or
effected, in any manner whatsoever, directly or indirectly, any (i) Short
Sales
of the Common Stock or (ii) hedging transaction, which establishes a net
short
position with respect to the Common Stock.
(i) Non-U.S.
Person. Each Buyer represents and warrants to the Company that it
is not a U.S. Person as defined in Rule 402 of Regulation S.
4. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to the Buyers that:
(a) Organization
and Qualification. The Company and its Subsidiaries are
corporations duly organized and validly existing in good standing under the
laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authority to own their properties and to carry on their
business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation 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
could not reasonably be expected to have a Material Adverse
Effect. Except for KMA Global Solutions, Inc., an Ontario
corporation, and KMA Global Solutions LLC., a Nevada limited liability company,
the Company has no Subsidiaries.
(b) Authorization;
Enforcement; Validity. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement, the Warrants and each
of the
other agreements entered into by the parties on the Closing Date and attached
hereto as exhibits to this Agreement, and to issue the Securities in accordance
with the terms hereof and thereof, (ii) the execution and delivery of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation,
the
issuance of the Commitment Shares and the reservation for issuance and the
issuance of the Fee Shares issuable under this Agreement, 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
shareholders, (iii) this Agreement has been, and each other Transaction Document
shall be on the Closing Date, duly executed and delivered by the Company
and
(iv) this Agreement constitutes, and each other Transaction Document upon
its
execution on behalf of the Company, shall constitute, the valid and binding
obligations of the Company enforceable against the Company in accordance
with
their 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 creditors' rights and remedies.
(c) Capitalization. As
of the date hereof, the authorized capital stock of the Company consists
of (i)
175,000,000 shares of Common Stock, of which as of the date hereof, 65,933,319
shares are issued and outstanding, 109,066,681 are held as authorized but
unissued, 0 shares are issuable and reserved for issuance pursuant to securities
exercisable or exchangeable for, or convertible into, shares of Common Stock
and
(ii) 25,000,000 shares of Preferred Stock, $0.001 par value, of which as
of the
date hereof no shares are issued and outstanding. All of
such outstanding shares have been, or upon issuance will be, validly issued
and
are fully paid and nonassessable. Except as disclosed in the
documents filed with the SEC, (i) no shares of the Company's capital stock
are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company, (ii) there are no outstanding
debt securities, (iii) 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, 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, any shares of capital stock of the Company or any of its
Subsidiaries, (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any
of
their securities under the Securities Act (except the Registration Rights
Agreement), (v) 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, (vi)
there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in
this
Agreement and (vii) the Company does not have any stock appreciation rights
or
"phantom stock" plans or agreements or any similar plan or
agreement. The Company has furnished to the Buyers true and correct
copies of the Company's Certificate of Incorporation, as amended and as in
effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as amended and as in effect on the date hereof (the
"By-laws"), and summaries of the terms of all securities convertible into
or
exercisable for Common Stock, if any, and copies of any documents containing
the
material rights of the holders thereof in respect thereto.
(d) Issuance
of Securities. The Commitment Shares, Fee Shares and Warrants
have been duly authorized and, upon issuance in accordance with the terms
hereof, the Shares and Warrant Shares, respectively, shall be (i) validly
issued, fully paid and non-assessable and (ii) free from all taxes, liens
and
charges with respect to the issue thereof. Upon issuance in accordance with
the
terms and conditions of this Agreement, the Shares shall be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock.
(e) No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the
transactions contemplated hereby and thereby (including, without limitation,
the
reservation for issuance and issuance of the Shares) will not (i) result
in a
violation of the Certificate of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or the By-laws or (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 the Company
or
any of its Subsidiaries is a party, or 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 the Principal Market
applicable to the Company or any of its Subsidiaries, assuming the
representations and warranties of the Buyers contained in Section 3 of this
Agreement are true and correct) or by which any property or asset of the
Company
or any of its Subsidiaries is bound or affected, except in the case of
conflicts, defaults and violations under clause (ii), which could not reasonably
be expected to result in a Material Adverse Effect. Neither the
Company nor its Subsidiaries is in violation of any term of or in default
under
its Certificate of Incorporation, any Certificate of Designation, Preferences
and Rights of any outstanding series of preferred stock of the Company or
By-laws or their organizational charter or by-laws,
respectively. Neither the Company nor any of its Subsidiaries is in
violation of any term of or is in default under any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree
or
order or any statute, rule or regulation applicable to the Company or its
Subsidiaries, except for possible conflicts, defaults, terminations or
amendments which could not reasonably be expected to have a Material Adverse
Effect. The business of the Company and its Subsidiaries is not being
conducted, and shall not be conducted, in violation of any law, ordinance,
and
regulation of any governmental entity, except for possible violations, the
sanctions for which either individually or in the aggregate could not reasonably
be expected to have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the Securities Act,
the
Company is not required to obtain any consent, authorization or order of,
or
make any filing or registration with, any court or governmental agency or
any
regulatory or self-regulatory agency in order for it to execute, deliver
or
perform any of its obligations under or contemplated by the Transaction
Documents in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company
is
required to obtain pursuant to the preceding sentence shall be obtained or
effected on or prior to the Closing Date. The Company is not and has
not been in violation of the listing requirements of the Principal
Market.
(f) SEC
Documents; Financial Statements. Since October 31, 2006, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed prior to the
date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC Documents"). As of their respective dates
(except as they have been correctly amended), the documents filed with the
SEC
complied in all material respects with the requirements of the 1934 Act and
the
rules and regulations of the SEC promulgated thereunder applicable to the
documents filed with the SEC, and none of the documents filed with the SEC,
at
the time they were filed with the SEC (except as they may have been properly
amended), contained any untrue statement of a material fact or omitted to
state
a material fact required to be stated therein or necessary in order to make
the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates (except as they have
been properly amended), the financial statements of the Company included
in the
documents filed with the SEC complied as to form in all material respects
with
applicable accounting requirements and the published rules and regulations
of
the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, 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 audit
adjustments).
(g) Absence
of Certain Changes. Since the 8-K filed by the Company with SEC
on July 2, 2007, there has been no material adverse change in the business,
properties, operations, financial condition or results of operations of the
Company or its Subsidiaries. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant
to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
(h) Absence
of Litigation. There is no Action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company
or any of its Subsidiaries, threatened against or affecting the Company,
the
Common Stock or any of the Company's Subsidiaries or any of the Company's
or the
Company's Subsidiaries' officers or directors in their capacities as such,
which
could reasonably be expected to have a Material Adverse Effect.
(i) Acknowledgment
Regarding Buyers’ Status. The Company acknowledges and agrees
that the Buyers are acting solely in the capacity of arm's length purchaser
with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby. The Company further acknowledges that the Buyers are not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and any advice given by the Buyers or any
of
their representatives or agents in connection with the Transaction Documents
and
the transactions contemplated hereby and thereby is merely incidental to
the
Buyers’ purchase of the Securities. The Company further represents to
the Buyers 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 and advisors.
(j) No
General Solicitation. Neither the Company, nor any of 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 under the Securities Act) in connection with the offer or sale
of
the Securities.
(k) Dilutive
Effect. The Company understands and acknowledges that the number
of Shares to be issued under this Agreement will increase in certain
circumstances. The Company further acknowledges that its obligation
to issue the Securities under this Agreement in accordance with the terms
and
conditions hereof is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
shareholders of the Company.
(l) Intellectual
Property Rights. The Company and/or its Subsidiaries own or
possess adequate rights or licenses to use all material trademarks, trade
names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. None of the Company's material
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
have expired or terminated, or, by the terms and conditions thereof, could
expire or terminate within two years from the date of this
Agreement. The Company and its Subsidiaries do not have any knowledge
of any infringement by the Company or its Subsidiaries of any material
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade
secret
or other similar rights of others, or of any such development of similar
or
identical trade secrets or technical information by others and there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its Subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service xxxx registrations, trade secret or
other
infringement, which could reasonably be expected to have a Material Adverse
Effect.
(m) Environmental
Laws. The Company and its Subsidiaries (i) are in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
(“Environmental Laws”), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where, in each of the three
foregoing clauses, the failure to so comply could not reasonably be expected
to
have, individually or in the aggregate, a Material Adverse Effect.
(n) Intentionally
Omitted.
(o) Insurance. The
Company and each of its Subsidiaries are 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 and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any 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 materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a
whole.
(p) Regulatory
Permits. The Company and its Subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such Subsidiary has received
any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(q) Tax
Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other material tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless
and
only to the extent that the Company and each of its Subsidiaries has set
aside
on its books provisions reasonably adequate for the payment of all unpaid
and
unreported taxes) and 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 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.
(r) Transactions
With Affiliates. Except as disclosed in the Company's reports
filed with the SEC, 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 services as employees, officers and 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 officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any
such
employee has an interest or is an officer, director, trustee or
partner.
(s) Application
of Takeover Protections. The Company and its board of directors
have taken or will take prior to the Closing Date 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 the Certificate of Incorporation
or the laws of the state of its incorporation which is or could become
applicable to the Buyers as a result of the transactions contemplated by
this
Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyers’ ownership of the Securities.
(t) Foreign
Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person
acting
on behalf of the Company or any of its Subsidiaries has, in the course of
its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
5. COVENANTS.
(a) Filing
of Registration Statement. On or before November 21, 2007, the
Company shall file a Registration Statement in respect of the Registrable
Securities and the transactions contemplated herein. The Buyers and
their respective counsel shall have a reasonable opportunity to review and
comment upon such Registration Statement or amendment to such Registration
Statement and any related Prospectus prior to its filing with the
SEC. The Company shall use its best efforts to have such Registration
Statement or amendment declared effective by the SEC at the earliest possible
date, but no later than the Required Effectiveness Date.
(b) Blue
Sky. The Company shall take such action, if any, as the Company shall
reasonably determine is necessary in order to obtain an exemption for or
to
qualify the Shares for sale to the Buyers pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States,
and
shall provide evidence of any such action so taken to the Buyers. 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.
(c)
No Equity Financing. (c) For two years from the
Closing Date, the Company will not, directly or indirectly, offer, sell,
grant
any option to purchase, or otherwise dispose of (or announce any offer, sale,
grant or any option to purchase or other disposition of) any of its equity
or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life
and
under any circumstances, convertible into or exchangeable or exercisable
for
Common Stock or common stock equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a “Subsequent Placement”)
unless the Company shall have first complied with the following:
(i) The
Company shall deliver to each Buyer a written notice (the “Offer”) of any
proposed or intended issuance or sale or exchange of the securities being
offered (the “Offered Securities”) in a Subsequent Placement, which Offer shall
(w) identify and describe the Offered Securities, (x) describe the price
and
other terms upon which they are to be issued, sold or exchanged, and the
number
or amount of the Offered Securities to be issued, sold or exchanged, (y)
identify the Persons or entities to which or with which the Offered Securities
are to be offered, issued, sold or exchanged and (z) offer to issue and sell
to
or exchange with each Buyer the Offered Securities based on such Buyer’s pro
rata portion of the Buyer’s Shares purchased hereunder (the “Basic Amount”), and
(B) with respect to each Buyer that elects to purchase its Basic Amount,
any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Buyers as such Buyer shall indicate it will purchase or acquire
should
the other Buyers subscribe for less than their Basic Amounts (the
“Undersubscription Amount”).
(ii) To
accept
an Offer, in whole or in part, a Buyer must deliver a written notice to the
Company prior to the end of the five (5) Trading Day period of the Offer,
setting forth the portion of the Buyer’s Basic Amount that such Buyer elects to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
the
Undersubscription Amount, if any, that such Buyer elects to purchase (in
either
case, the “Notice of Acceptance”). If the Basic Amounts subscribed
for by all Buyers are less than the total of all of the Basic Amounts, then
each
Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance
shall be entitled to purchase, in addition to the Basic Amounts subscribed
for,
the Undersubscription Amount it has subscribed for; provided,
however, that if the Undersubscription Amounts subscribed for exceed
the
difference between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the “Available Undersubscription Amount”), each Buyer who has
subscribed for any Undersubscription Amount shall be entitled to purchase
on
that portion of the Available Undersubscription Amount as the Basic Amount
of
such Buyer bears to the total Basic Amounts of all Buyers that have subscribed
for Undersubscription Amounts, subject to rounding by the Board of Directors
to
the extent its deems reasonably necessary.
(iii) The
Company shall have three (3) Trading Days from the expiration of the period
set
forth in Section 5(c)(ii) above to issue, sell or exchange all or any part
of
such Offered Securities as to which a Notice of Acceptance has not been given
by
the Buyers (the “Refused Securities”), but only to the offerees described in the
Offer and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to
the
acquiring Person or Persons or less favorable to the Company than those set
forth in the Offer.
(iv) In
the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
5(c)(iii) above), then each Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified
in
its Notice of Acceptance to an amount that shall be not less than the number
or
amount of the Offered Securities that the Buyer elected to purchase pursuant
to
Section 5(c)(ii) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 5(c)(ii) above prior to such reduction)
and (ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Buyer so elects to reduce the
number or amount of Offered Securities specified in its Notice of Acceptance,
the Company may not issue, sell or exchange more than the reduced number
or
amount of the Offered Securities unless and until such securities have again
been offered to the Buyers in accordance with Section 5(c)(i)
above.
(v) Upon
the
closing of the issuance, sale or exchange of all or less than all of the
Refused
Securities, the Buyers shall acquire from the Company, and the Company shall
issue to the Buyers, the number or amount of Offered Securities specified
in the
Notices of Acceptance, as reduced pursuant to Section 5(c)(iv) above if the
Buyers have so elected, upon the terms and conditions specified in the
Offer. The purchase by the Buyers of any Offered Securities is
subject in all cases to the preparation, execution and delivery by the Company
and the Buyers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Buyers and their respective
counsel.
(vi) Any
Offered Securities not acquired by the Buyers or other Persons in accordance
with Section 5(c)(iii) above may not be issued, sold or exchanged until they
are
again offered to the Buyers under the procedures specified in this
Agreement.
(d) Listing. The
Company shall promptly secure the listing of all of the Shares 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 such securities from time to time issuable under
the
terms of the Transaction Documents. The Company shall maintain the
Common Stock's authorization for quotation on the Principal
Market. Neither the Company nor any of its Subsidiaries shall take
any action that would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market. The Company
shall promptly, and in no event later than the following Trading Day, provide
to
the Buyers copies of any notices it receives from the Principal Market regarding
the continued eligibility of the Common Stock for listing on such automated
quotation system or securities exchange. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section.
(e) Limitation
on Short Sales and Hedging Transactions. The Buyers agree that
beginning on the date of this Agreement and ending on the date of termination
of
this Agreement, the Buyers and their agents, representatives and affiliates
shall not in any manner whatsoever enter into or effect, directly or indirectly,
any (i) Short Sales of the Common Stock or (ii) hedging transaction, which
establishes a net short position with respect to the Common Stock; provided,
however, that such restrictions shall not apply if an Event of Default has
occurred, including any failure by the Company to timely issue any Fee Shares
required to be issued pursuant to the terms of this Agreement.
(f) Issuance
of the Shares. Immediately upon the execution of this Agreement,
the Company shall issue to the Buyers an aggregate of 8,000,000 shares of
Common
Stock (the "Commitment Shares"), and issue to the Agent 1,400,000 shares
of
Common Stock (the “Fee Shares”).
The
Shares shall be issued in certificated form and shall bear the following
restrictive legend:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR ANY STATE
SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES
FOR
THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED ONLY (A) OUTSIDE THE UNITED STATES IN ACCORDANCE
WITH
RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE
WITH
APPLICABLE LOCAL LAWS AND REGULATIONS, (B) WITHIN THE UNITED STATES, EITHER
(1)
IF REGISTERED PURSUANT TO THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES
ACT OR (2) THE TRANSACTION IS EXEMPT OR NOT SUBJECT TO REGISTRATION AFTER
PROVIDING A SATISFACTORY LEGAL OPINION TO THE COMPANY. THE HOLDER
ALSO AGREES THAT HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT
BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.
(g) Due
Diligence. Each Buyer shall have the right, from time to time as
the Buyer may reasonably deem appropriate, to perform reasonable due diligence
on the Company during normal business hours. The Company and its
officers and employees shall reasonably cooperate with the Buyers in connection
with any reasonable request by the Buyers related to the Buyers’ due diligence
of the Company.
(h) Registration
Statement. Two days prior to the Filing Date, the Company shall have
prepared and delivered to the Buyers a final form of the Registration Statement
to be used by the Buyers in connection with any sales of any Commitment Shares,
Fee Shares or Warrant Shares. The Company shall have made all filings under
all
applicable federal and state securities laws necessary to consummate the
issuance of the Commitment Shares, Fee Shares and the Warrant Shares pursuant
to
this Agreement in compliance with such laws.
6. TRANSFER
AGENT INSTRUCTIONS.
On
the
Effective Date of the Registration Statement, the Company shall cause any
restrictive legend on the Commitment Shares and Fee Shares to be removed
and all
of the Shares, including the Warrant Shares to be issued under this Agreement
shall be issued without any restrictive legend. The Company shall
issue irrevocable instructions to the Transfer Agent, and any subsequent
transfer agent, to issue the Shares in the name of the Buyer, or the Agent
as
the case may be (the "Irrevocable Transfer Agent Instructions"). The
Company warrants that no instruction other than the Irrevocable Transfer
Agent
Instructions referred to in this Section 6, will be given by the Company
to the
Transfer Agent with respect to the Shares and that the Commitment Shares,
Warrant Shares and the Fee Shares shall otherwise be freely transferable
on the
books and records of the Company as and to the extent provided in this Agreement
and the Registration Rights Agreement.
7. COMPANY'S
CLOSING CONDITIONS.
The
obligation of the Company hereunder to commence sale of the Securities is
subject to the satisfaction of each of the following conditions on or before
the
Closing Date and may be waived by the Company at any time in its sole discretion
by providing the Buyers with prior written notice thereof:
(a) The
Buyers shall have executed each of the Transaction Documents to which it
is a
party and delivered the same to the Company including the Registration Rights
Agreement substantially in the form of Exhibit A hereto
(the “Registration Rights Agreement”).
(b) The
representations and warranties of the Buyers 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 the Buyers 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 the Buyers
at or
prior to the Closing Date. The Seller shall have received a
certificate, executed by the Agent on behalf of the Buyers, dated as of the
Closing Date, to the foregoing effect.
8. BUYERS'
CLOSING CONDITIONS.
The
obligation of the Buyers to commence purchase of the Securities under this
Agreement is subject to the satisfaction of each of the following conditions
on
or before the Closing Date and may be waived by the Buyers at any time in
its
sole discretion by providing the Company with prior written notice
thereof:
(a) The
Company shall have executed each of the Transaction Documents and delivered
the
same to the Buyers including the Registration Rights Agreement substantially
in
the form of Exhibit A hereto.
(b) The
Common Stock shall be authorized for quotation on the Principal Market, trading
in the Common Stock shall not have been within the last nine (9) months
suspended by the SEC or the Principal Market and the Shares shall be approved
for listing upon the Principal Market.
(c) The
Company shall provide to the Agent on behalf of the Buyers the form of opinion
of the Company Counsel in the form of Exhibit
B.
(d) The
representations and warranties of the Company shall be true and correct in
all
material respects as of the Closing Date (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied 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. The Buyers shall
have received a certificate, executed by the CEO, President or CFO of the
Company, dated as of the Closing Date, to the foregoing effect in the form
attached hereto as Exhibit C.
(e) The
Board of Directors of the Company shall have adopted resolutions in the form
attached hereto as Exhibit D which shall be in full
force and effect without any amendment or supplement thereto as of the Closing
Date.
(f) As
of the Closing Date, the Company shall have reserved out of its authorized
and
unissued Common Stock at least 20,680,000 shares of Common Stock, solely
for the
purpose of effecting (i) purchase of the Shares, (ii) the Warrant Shares
issuable under the Warrants and (iii) the Penalty Shares.
(g) The
Irrevocable Transfer Agent Instructions, in form acceptable to the Buyers
shall
have been delivered to and acknowledged in writing by the Company and the
Company's Transfer Agent.
(h) The
Company shall have delivered to the Buyers a Secretary's Certificate executed
by
the Secretary of the Company, dated as of the Closing Date, in the form attached
hereto as Exhibit E.
(i) Intentionally
Omitted.
(j) Intentionally
Omitted.
(k) No
Event of Default has occurred, or any event which, after notice and/or lapse
of
time, would become an Event of Default has occurred.
(l) On
or prior to the Closing Date, the Company shall take all necessary action,
if
any, and such actions as reasonably requested by the Buyers, in order to
render
inapplicable any control share acquisition, business combination, shareholder
rights plan or poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the state of its incorporation which is or could become
applicable to the Buyers as a result of the transactions contemplated by
this
Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyers’ ownership of the Securities.
9. INDEMNIFICATION.
In
consideration of the Buyers’ execution and delivery of the Transaction Documents
and acquiring the Securities hereunder and in addition to all of the Company's
other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless the Buyers and all of their affiliates,
shareholders, officers, directors, employees and direct or indirect investors
and any of the foregoing person's 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 and arising
out of
or resulting from the execution, delivery, performance or enforcement of
the
Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, other than with respect
to Indemnified Liabilities which directly and primarily result from the gross
negligence or willful misconduct of the 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 which is permissible
under
applicable law.
10. EVENTS
OF DEFAULT.
An
"Event
of Default" shall be deemed to have occurred at any time as any of the following
events occurs:
(a) a
Registration Statement covering the sale of all of the Shares and Warrants
was
not filed on or before the Filing Date.
(b) the
Registration Statement filed with the SEC is not declared effective under
the
Securities Act by the SEC on or before the Required Effectiveness Date, and/or
a
stop order with respect to the Registration Statement shall be pending or
threatened by the SEC.
(c) during
the period that any registration statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of such registration statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the
Buyers (other than as a result of acts or omissions of the Buyers) for sale
of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights Agreement,
and such lapse or unavailability continues for a period of ten (10) consecutive
Trading Days or for more than an aggregate of thirty (30) Trading Days in
any
365-day period;
(d) the
suspension from trading or failure of the Common Stock to be listed on the
Principal Market for a period of ten (10) consecutive Trading Days or for
more
than an aggregate of thirty (30) Trading Days in any 365-day
period;
(e) the
failure of the Company or the Common Stock to fully meet the requirements
for
continued listing on the Principal Market for a period of ten (10) consecutive
Trading Days or for more than an aggregate of thirty (30) Trading Days in
any
365-day period; and
(f) the
Company breaches any representation, warranty, covenant or other term or
condition under any Transaction Document if such breach could have a Material
Adverse Effect and except, in the case of a breach of a covenant which is
reasonably curable, only if such breach continues for a period of at least
ten
(10) Trading Days.
11. EVENT
OF DEFAULT PENALTY
Within
Five Trading Days of an Event of Default, the Company shall issue and the
Buyers
and Agent shall receive 1,880,000 additional shares of the Company’s Common
Stock (the “Penalty Shares”). Each Buyer and the Agent shall receive
Penalty Shares in pro ration to their respective purchases under the
Agreement. The parties to this Agreement acknowledge and agree that
the Penalty Shares are the sole remedy for an Event of Default.
12. MISCELLANEOUS.
(a) Governing
Law; Jurisdiction; Jury Trial. The corporate laws of the State of
Nevada shall govern all issues concerning the relative rights of the Company
and
its shareholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the other Transaction
Documents shall be governed by the internal laws of the State of Nevada,
without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Nevada or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of
Nevada. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Las Vegas,
for the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, 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 HEREWITH OR ARISING OUT OF THIS AGREEMENT
OR
ANY TRANSACTION CONTEMPLATED HEREBY.
(b) 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 a facsimile (or scanned and e-mailed) signature shall be
considered due execution and shall be binding upon the signatory thereto
with
the same force and effect as if the signature were an original, not a facsimile
)or scanned and e-mailed) signature.
(c) Headings. The
headings of this Agreement are for convenience of reference and shall not
form
part of, or affect the interpretation of, this Agreement.
(d) 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.
(e) Entire
Agreement; Amendments. This Agreement supersedes all other prior
oral or written agreements between the Buyers, 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 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 the Buyers make any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Buyers, and no provision hereof may
be
waived other than by an instrument in writing signed by the party against
whom
enforcement is sought.
(f) 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 Trading Day after deposit with a nationally recognized overnight
delivery 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:
KMA
Global Solutions International, Inc.
0000X
Xxxxxxx Xxxx
Xxxxxxxxxxx,
Xxxxxxx X0X 0X0
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxxx
X. Xxxx
With
a
copy to: (which shall not constitute notice)
Baker,
Donelson, Bearman, Xxxxxxxx & Xxxxxxxxx, P.C.
000
Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx,
XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxx
X. Xxxxx
If
to the
Buyers:
Incendia
Management Group Inc.
000
Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxx X0X 0X0
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx
Xxxxxx
If
to the
Transfer Agent:
American
Registrar & Transfer Co.
000
Xxxx
000 Xxxxx
Xxxx
Xxxx
Xxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxxx
Xxx or Xxxxx Xxxx
or
at
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 three (3) Trading 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, and recipient facsimile number or (C) provided by a nationally recognized
overnight delivery service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above,
respectively.
(g) Successors
and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyers, including
by merger or consolidation. No Buyer may assign its rights or
obligations under this Agreement without the prior written consent of the
Company.
(h) 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.
(i) Publicity. The
Buyers shall have the right to approve before issuance any press releases
or any
other public disclosure (including any filings with the SEC) with respect
to the
transactions contemplated hereby; provided, however, that the Company shall
be
entitled, without the prior approval of the Buyers, to make any press release
or
other public disclosure (including any filings with the SEC) with respect
to
such transactions as is required by applicable law and regulations (although
the
Buyers shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
(j) 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 the
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.
(k) Reserved.
(l) Financial
Advisor, Placement Agent, Broker or Finder. The Company shall be
responsible for the payment of any fees or commissions to the Agent as per
Section 2(b) hereof and, if any, a financial advisor, placement agent, broker
or
finder relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold the Buyers and the Agent
harmless against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any
such
claim.
(m) No
Strict Construction. The language used in this Agreement 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.
(n) Remedies,
Other Obligations, Breaches and Injunctive Relief. The Buyers
remedies provided in this Agreement shall be cumulative and in addition to
all
other remedies available to the Buyers under this Agreement, at law or in
equity
(including a decree of specific performance and/or other injunctive relief),
no
remedy of the Buyers contained herein shall be deemed a waiver of compliance
with the provisions giving rise to such remedy and nothing herein shall limit
the Buyers’ rights to pursue actual damages for any failure by the Company to
comply with the terms of this Agreement. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm
to
the Buyers and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any
such breach or threatened breach, the Buyers shall be entitled, in addition
to
all other available remedies, to an injunction restraining any breach, without
the necessity of showing economic loss and without any bond or other security
being required.
(o) Changes
to the Terms of this Agreement. This Agreement and any provision
hereof may only be amended by an instrument in writing signed by the Company
and
the Buyers. The term "Agreement" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or
supplemented.
(p) Enforcement
Costs. If: (i) this Agreement is placed by the Buyers in the
hands of an attorney for enforcement or is enforced by the Buyers through
any
legal proceeding; or (ii) an attorney is retained to represent the Buyers
in any
bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent the Buyers in any other proceedings whatsoever
in connection with this Agreement, then the Company shall pay to the Buyers,
as
incurred by the Buyers, all reasonable costs and expenses including attorneys'
fees incurred in connection therewith, in addition to all other amounts due
hereunder.
(q) Failure
or Indulgence Not Waiver. No failure or delay in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof,
nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
* * * * *
IN
WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written
above.
THE
COMPANY:
KMA
GLOBAL SOLUTIONS
INTERNATIONAL,
INC.
By: /s/
Xxxxxxx X. Xxxx
Xxxxxxx
X. Xxxx
Chief
Executive
Officer
[signature
page of the Buyers and the Agent is on the following page]
BUYERS:
XXXXX
FELLOWSHIP HOLDINGS INC.
GREENOCK
EXPORT HOLDING AG INC.
ADVANCED
VENDING TECHNOLOGIES INC.
V&P
TECHNOLOGIES INC.
NVD
INTERNATIONAL INC.
By: /s/
Xxxxxx
Xxxxxx
Incendia
Management Group Inc., as authorized
Agent
for
the Buyers
Per:
Xxxxxx Xxxxxx, A.S.O. of Incendia
Management
Group Inc.
AGENT:
INCENDIA
MANAGEMENT GROUP INC.
By: /s/
Xxxxxx
Xxxxxx
Xxxxxx
Xxxxxx, A.S.O.
EXHIBITS
|
Exhibit
A
|
Form
of Registration Rights Agreement
|
|
Exhibit
B
|
Form
of Opinion of Company Counsel
|
|
Exhibit
C
|
Form
of Officer’s Certificate
|
|
Exhibit
D
|
Form
of Resolutions of Board of Directors of the
Company
|
|
Exhibit
E
|
Form
of Secretary’s Certificate
|
|
Exhibit
F
|
Form
of Warrant
|
