EXHIBIT 99.5
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SECURITIES PURCHASE AGREEMENT
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THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October
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27, 2004, by and among DONOBI, INC., a Nevada corporation, with headquarters
located at 0000 Xxxxx Xxx XX, Xxxxxxxxx, Xxxxxxxxxx 00000 (the "Company"), and
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the Buyers listed on Schedule I attached hereto (individually, a "Buyer" or
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collectively "Buyers").
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WITNESSETH:
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WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
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the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
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of 1933, as amended (the "1933 Act");
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WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to Three Hundred Thousand
Dollars ($300,000) of secured convertible debentures (the "Convertible
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Debentures"), which shall be convertible into shares of the Company's common
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stock, par value $0.001 per share (the "Common Stock") (as converted, the
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"Conversion Shares") of which One Hundred Fifty Thousand Dollars ($150,000)
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shall be funded on the fifth (5th) business day following the date hereof (the
"First Closing") and One Hundred Fifty Thousand Dollars ($150,000) shall be
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funded on the fifth (5th) business day following the date the registration
statement (the "Registration Statement") is filed, pursuant to the Investor
Registration Rights Agreement dated the date hereof, with the United States
Securities and Exchange Commission (the "SEC") (the "Second Closing")
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(individually referred to as a "Closing" collectively referred to as the
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"Closings"), for a total purchase price of up to Three Hundred Thousand Dollars
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($300,000), (the "Purchase Price") in the respective amounts set forth opposite
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each Buyer(s) name on Schedule I (the "Subscription Amount");
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WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Investor
Registration Rights Agreement substantially in the form attached hereto as
Exhibit A (the "Investor Registration Rights Agreement") pursuant to which the
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Company has agreed to provide certain registration rights under the 1933 Act and
the rules and regulations promulgated there under, and applicable state
securities laws;
WHEREAS, the aggregate proceeds of the sale of the Convertible Debentures
contemplated hereby shall be held in escrow pursuant to the terms of an Escrow
Agreement substantially in the form attached hereto as Exhibit B;
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WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions substantially in the form attached hereto as Exhibit C (the
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"Irrevocable Transfer Agent Instructions"); and
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WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Security Agreement
substantially in the form attached hereto as Exhibit D (the "Security
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Agreement") pursuant to which the Company has agreed to provide the Buyer a
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security interest in Pledged Collateral (as this term is defined in the Security
Agreement) to secure Company's obligations under this Agreement, the Convertible
Debenture, the Investor Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions, the Security Agreement or any other obligations of the
Company to the Investor; and
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s)hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
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a. Purchase of Convertible Debentures. Subject to the satisfaction (or
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waiver) of the terms and conditions of this Agreement, each Buyer
agrees, severally and not jointly, to purchase at Closing (as defined
herein below) and the Company agrees to sell and issue to each Buyer,
severally and not jointly, at Closing, Convertible Debentures in
amounts corresponding with the Subscription Amount set forth opposite
each Buyer's name on Schedule I hereto. Upon execution hereof by a
Buyer, the Buyer shall wire transfer the Subscription Amount set forth
opposite his name on Schedule I in same-day funds or a check payable
to "Xxxxx Xxxxxxxx, Esq., as Escrow Agent for Donobi, Inc. /Cornell
Capital Partners, LP", which Subscription Amount shall be held in
escrow pursuant to the terms of the Escrow Agreement (as hereinafter
defined) and disbursed in accordance therewith. Notwithstanding the
foregoing, a Buyer may withdraw his Subscription Amount and terminate
this Agreement as to such Buyer at any time after the execution hereof
and prior to Closing (as hereinafter defined).
b. Closing Date. The First Closing of the purchase and sale of the
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Convertible Debentures shall take place at 10:00 a.m. Eastern Standard
Time on the fifth (5th) business day following the date hereof,
subject to notification of satisfaction of the conditions to the First
Closing set forth herein and in Sections 6 and 7 below (or such later
date as is mutually agreed to by the Company and the Buyer(s)) (the
"First Closing Date") and the Second Closing of
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the purchase and sale of the Convertible Debentures shall take place
at 10:00 a.m. Eastern Standard Time on the fifth (5th) business day
following the date the Registration Statement is filed with the SEC,
subject to notification of satisfaction of the conditions to the
Second Closing set forth herein and in Sections 6 and 7 below (or such
later date as is mutually agreed to by the Company and the Buyer(s))
(the "Second Closing Date") (collectively referred to a the "Closing
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Dates"). The Closings shall occur on the respective Closing
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Dates at the offices of Yorkville Advisors, LLC, 0000 Xxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000 (or such other place as is
mutually agreed to by the Company and the Buyer(s)).
c. Escrow Arrangements; Form of Payment. Upon execution hereof by
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Buyer(s) and pending the Closings, the aggregate proceeds of the sale
of the Convertible Debentures to Buyer(s) pursuant hereto shall be
deposited in a non-interest bearing escrow account with Xxxxx
Xxxxxxxx, Esq., as escrow agent (the "Escrow Agent"), pursuant to the
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terms of the Escrow Agreement between the Company, the Buyer(s) and
the Escrow Agent. Subject to the satisfaction of the terms and
conditions of this Agreement, on the Closing Dates, (i) the Escrow
Agent shall deliver to the Company in accordance with the terms of the
Escrow Agreement such aggregate proceeds for the Convertible
Debentures to be issued and sold to such Buyer(s), minus the
structuring fees and expenses of Yorkville Advisors Management, LLC of
Seven Thousand Five Hundred Dollars ($7,500) which shall be paid
directly from the gross proceeds held in escrow of the First Closing
and the retainer of Xxxxxxxxxxx & Xxxxxxxx LLP of Twenty-Five Thousand
Dollars (US$25,000), of which Twelve Thousand Five Hundred Dollars
(US$12,500) shall be paid directly from the gross proceeds of the
First Closing and Twelve Thousand Five Hundred Dollars (US$12,500)
shall be paid directly from the gross proceeds of the Second Closing,
by wire transfer of immediately available funds in accordance with the
Company's written wire instructions, and (ii) the Company shall
deliver to each Buyer, Convertible Debentures which such Buyer(s) is
purchasing in amounts indicated opposite such Buyer's name on Schedule
I, duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants, severally and not jointly, that:
a. Investment Purpose. Each Buyer is acquiring the Convertible Debentures
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and, upon conversion of Convertible Debentures, the Buyer will acquire
the Conversion Shares then issuable, 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, except
pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Buyer
reserves the right to dispose of the Conversion Shares at any time in
accordance with or pursuant to an effective registration statement
covering such Conversion Shares or an available exemption under the
1933 Act.
b. Accredited Investor Status. Each Buyer is an "Accredited Investor" as
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that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Each Buyer understands that the Convertible
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Debentures 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 Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
d. Information. Each Buyer and its advisors (and his or, its counsel), if
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any, have been furnished with all materials relating to the business,
finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his
purchase of the Convertible Debentures and the Conversion Shares,
which have been requested by such Buyer. Each Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the
Company and its management. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer's
right to rely on the Company's representations and warranties
contained in Section 3 below. Each Buyer understands that its
investment in the Convertible Debentures and the Conversion Shares
involves a high degree of risk. Each Buyer is in a position regarding
the Company, which, based upon employment, family relationship or
economic bargaining power, enabled and enables such Buyer to obtain
information from the Company in order to evaluate the merits and risks
of this investment. 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 Convertible
Debentures and the Conversion Shares.
e. No Governmental Review. Each Buyer understands that no United States
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federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the
Convertible Debentures or the Conversion Shares, or the fairness or
suitability of the investment in the Convertible Debentures or the
Conversion Shares, nor have such authorities passed upon or endorsed
the merits of the offering of the Convertible Debentures or the
Conversion Shares.
f. Transfer or Resale. Each Buyer understands that except as provided in
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the Investor Registration Rights Agreement: (i) the Convertible
Debentures have not been and are not being registered under the 1933
Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered
thereunder, or (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that
such securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such
registration requirements; (ii) any sale of such securities made in
reliance on Rule 144 under the 1933 Act (or a successor rule thereto)
("Rule 144") may be made only in accordance with the terms of Rule 144
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and further, if Rule 144 is not applicable, any resale of such
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 0000 Xxx) may require compliance with some
other exemption under the 1933 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 such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions
of any exemption thereunder. The Company reserves the right to place
stop transfer instructions against the shares and certificates for the
Conversion Shares.
g. Legends. Each Buyer understands that the certificates or other
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instruments representing the Convertible Debentures and or the
Conversion Shares shall bear a restrictive legend in substantially the
following form (and a stop -transfer order may be placed against
transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS.
The legend set forth above shall be removed and the Company within two
(2) business days shall issue a certificate without such legend to the
holder of the Conversion Shares upon which it is stamped, if, unless
otherwise required by state securities laws, (i) in connection with a
sale transaction, provided the Conversion Shares are registered under
the 1933 Act or (ii) in connection with a sale transaction, after such
holder provides the Company with an opinion of counsel, which opinion
shall be in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale,
assignment or transfer of the Conversion Shares may be made without
registration under the 1933 Act.
h. Authorization, Enforcement. This Agreement has been duly and validly
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authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance
with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
i. Receipt of Documents. Each Buyer and his or its counsel has received
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and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein, the Security
Agreement, the Investor Registration Rights Agreement, the Escrow
Agreement, and the Irrevocable Transfer Agent Instructions; (ii) all
due diligence and other information necessary to verify the accuracy
and completeness of such representations, warranties and covenants;
(iii) the Company's Form 10-KSB for the fiscal year ended January 31,
2004; (iv) the Company's Form 10-QSB for the fiscal quarter ended July
31, 2004 and (v) answers to all questions each Buyer submitted to the
Company regarding an investment in the Company; and each Buyer has
relied on the information contained therein and has not been furnished
any other documents, literature, memorandum or prospectus.
j. Due Formation of Corporate and Other Buyers. If the Buyer(s) is a
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corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not
been organized for the specific purpose of purchasing the Convertible
Debentures and is not prohibited from doing so.
k. No Legal Advice From the Company. Each Buyer acknowledges, that it had
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the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and
investment and tax advisors. Each Buyer is relying solely on such
counsel and advisors and not on any statements or representations of
the Company or any of its representatives or agents for legal, tax or
investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any
jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that, except as
set forth in the SEC Documents (as defined herein):
a. Organization and Qualification. The Company and its subsidiaries are
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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 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 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 on the
Company and its subsidiaries taken as a whole.
b. Authorization, Enforcement, Compliance with Other Instruments. (i) The
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Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Security Agreement, the Investor
Registration Rights Agreement, the Escrow Agreement, the Irrevocable
Transfer Agent Instructions, and any related agreements, and to issue
the Convertible Debentures and the Conversion Shares in accordance
with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Security Agreement, the Investor Registration
Rights Agreement, the Escrow Agreement, the Irrevocable Transfer Agent
Instructions (as defined herein) and any related agreements by the
Company and the consummation by it of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the
Convertible Debentures the Conversion Shares and the reservation for
issuance and the issuance of the Conversion Shares issuable upon
conversion or exercise thereof, 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, (iii) this Agreement, the Security Agreement, the
Investor Registration Rights Agreement, the Escrow Agreement, the
Irrevocable Transfer Agent Instructions and any related agreements
have been duly executed and delivered by the Company, (iv) this
Agreement, the Security Agreement, the Investor Registration Rights
Agreement, the Escrow Agreement, the Irrevocable Transfer Agent
Instructions and any related agreements 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. The authorized officer of the Company executing
this Agreement, the Security Agreement, the Investor Registration
Rights Agreement, the Escrow Agreement, the Irrevocable Transfer Agent
Instructions and any related agreements knows of no reason why the
Company cannot file the registration statement as required under the
Investor Registration Rights Agreement or perform any of the Company's
other obligations under such documents.
c. Capitalization. The authorized capital stock of the Company consists
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of 100,000,000 shares of Common Stock, par value $0.001 per share and
5,000,000 shares of Preferred Stock, par value $0.001 per share. As of
the date hereof, the Company has 15,290,007 shares of Common Stock and
no shares of Preferred Stock issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed in the SEC Documents (as defined in
Section 3(f)), no shares of Common Stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as disclosed in the SEC
Documents, as of the date of this Agreement, (i) 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, (ii) there
are no outstanding debt securities and (iii) 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
1933 Act (except pursuant to the Registration Rights Agreement) and
(iv) there are no outstanding registration statements and there are no
outstanding comment letters from the SEC or any other regulatory
agency. There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the
issuance of the Convertible Debentures as described in this Agreement.
The Company has furnished to the Buyer true and correct copies of the
Company's Articles of Incorporation, as amended and as in effect on
the date hereof (the "Articles of Incorporation"), and the Company's
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By-laws, as in effect on the date hereof (the "By-laws"), and the
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terms of all securities convertible into or exercisable for Common
Stock and the material rights of the holders thereof in respect
thereto other than stock options issued to employees and consultants.
d. Issuance of Securities. The Convertible Debentures are duly authorized
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and, upon issuance in accordance with the terms hereof, shall be duly
issued, fully paid and nonassessable, are free from all taxes, liens
and charges with respect to the issue thereof. The Conversion Shares
issuable upon conversion of the Convertible Debentures have been duly
authorized and reserved for issuance. Upon conversion or exercise in
accordance with the Convertible Debentures the Conversion Shares will
be duly issued, fully paid and nonassessable.
e. No Conflicts. Except as disclosed in the SEC Documents, the execution,
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delivery and performance of this Agreement, the Security Agreement,
the Investors Registration Rights Agreement, the Escrow Agreement and
the Irrevocable Transfer Agent Instructions by the Company and the
consummation by the Company of the transactions contemplated hereby
will not (i) result in a violation of the Articles of Incorporation,
any certificate of designations 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
National Association of Securities Dealers Inc.'s OTC Bulletin Board
on which the Common Stock is quoted) applicable to the Company or any
of its subsidiaries or by which any property or asset of the Company
or any of its subsidiaries is bound or affected. Except as disclosed
in the SEC Documents, neither the Company nor its subsidiaries is in
violation of any term of or in default under its Articles of
Incorporation or By-laws or their organizational charter or by-laws,
respectively, or 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. The business of the Company and its subsidiaries is not
being conducted, and shall not be conducted in violation of any
material law, ordinance, or regulation of any governmental entity.
Except as specifically contemplated by this Agreement and as required
under the 1933 Act and any applicable state securities laws, 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 in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the
Registration Rights Agreement in accordance with the terms hereof or
thereof. Except as disclosed in the SEC Documents, all consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and
its subsidiaries are unaware of any facts or circumstance, which might
give rise to any of the foregoing.
f. SEC Documents: Financial Statements. Since January 1, 2002, the
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Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC under of the
Securities Exchange Act of 1934, as amended (the "1934 Act") (all of
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the foregoing filed prior to the date hereof or amended after 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"). The Company has
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delivered to the Buyers or their representatives, or made available
through the SEC's website at xxxx://xxx.xxx.xxx., true and complete
copies of the SEC Documents. As of their respective dates, the
financial statements of the Company disclosed in the SEC Documents
(the "Financial Statements") complied as to form in all material
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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). No other information provided by or on
behalf of the Company to the Buyer which is not included in the SEC
Documents, including, without limitation, information referred to in
this Agreement, 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 circumstances under which they
were made, not misleading.
g. 10(b)-5. The SEC Documents do not include any untrue statements of
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material fact, nor do they omit to state any material fact required to
be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.
h. Absence of Litigation. Except as disclosed in the SEC Documents, there
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is no action, suit, proceeding, inquiry or investigation before or by
any court, public board, government agency, self-regulatory
organization or body pending against or affecting the Company, the
Common Stock or any of the Company's subsidiaries, wherein an
unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any
of the documents contemplated herein, or (iii) except as expressly
disclosed in the SEC Documents, have a material adverse effect on the
business, operations, properties, financial condition or results of
operations of the Company and its subsidiaries taken as a whole.
i. Acknowledgment Regarding Buyer's Purchase of the Convertible
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Debentures. The Company acknowledges and agrees that the Buyer(s) is
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acting solely in the capacity of an arm's length purchaser with
respect to this Agreement and the transactions contemplated hereby.
The Company further acknowledges that the Buyer(s) is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer(s) or any of
their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely
incidental to such Buyer's purchase of the Convertible Debentures or
the Conversion Shares. The Company further represents to the Buyer
that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation by the Company and its
representatives.
j. No General Solicitation. Neither the Company, nor any of its
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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 0000 Xxx) in connection with the
offer or sale of the Convertible Debentures or the Conversion Shares.
k. No Integrated Offering. Neither the Company, nor any of its
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affiliates, nor any person acting on its or their behalf has, directly
or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Convertible Debentures or the Conversion Shares
under the 1933 Act or cause this offering of the Convertible
Debentures or the Conversion Shares to be integrated with prior
offerings by the Company for purposes of the 1933 Act.
l. Employee Relations. Neither the Company nor any of its subsidiaries is
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involved in any labor dispute nor, to the knowledge of the Company or
any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and
the Company and its subsidiaries believe that their relations with
their employees are good.
m. Intellectual Property Rights. The Company and its subsidiaries own or
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possess adequate rights or licenses to use all 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. The Company and
its subsidiaries do not have any knowledge of any infringement by the
Company or its subsidiaries of 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, and, to the knowledge of the Company 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; and the
Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.
n. Environmental Laws. The Company and its subsidiaries are (i) in
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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
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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.
o. Title. Any real property and facilities held under lease by the
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Company and its subsidiaries are held by them 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 and its subsidiaries.
p. 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.
q. 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.
r. Internal Accounting Controls. The Company and each of its subsidiaries
----------------------------
maintain a system of internal accounting controls 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 generally accepted accounting
principles and to maintain asset accountability, and (iii) the
recorded amounts for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
s. No Material Adverse Breaches, etc. Except as set forth in the SEC
-------------------------------------
Documents, neither the Company nor any of its subsidiaries is subject
to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a material
adverse effect on the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries. Except as set forth in the SEC Documents, neither the
Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has
or is expected to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or
prospects of the Company or its subsidiaries.
t. Tax Status. Except as set forth in the SEC Documents, the Company and
-----------
each of its subsidiaries has made and filed all federal and state
income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject and (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) 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.
u. Certain Transactions. Except as set forth in the SEC Documents, and
---------------------
except for arm's length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other
than the grant of stock options disclosed in the SEC Documents, none
of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company (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 a substantial interest or is an officer,
director, trustee or partner.
v. Fees and Rights of First Refusal. The Company is not obligated to
-------------------------------------
offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to,
current or former shareholders of the Company, underwriters, brokers,
agents or other third parties.
4. COVENANTS.
----------
a. Best Efforts. Each party shall use its best efforts timely to satisfy
-------------
each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to the
-------
Conversion Shares as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall,
on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Conversion Shares, or
obtain an exemption for the Conversion Shares for sale to the Buyers
at the Closing 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 on or prior
to the Closing Date.
c. Reporting Status. Until the earlier of (i) the date as of which the
-----------------
Buyer(s) may sell all of the Conversion Shares without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Buyer(s) shall have sold
all the Conversion Shares and (B) none of the Convertible Debentures
are outstanding (the "Registration Period"), the Company shall file in
-------------------
a timely manner all reports required to be filed with the SEC pursuant
to the 1934 Act and the regulations of the SEC thereunder, and the
Company shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale of
-----------------
the Convertible Debentures for general corporate and working capital
purposes.
e. Reservation of Shares. The Company shall take all action reasonably
-----------------------
necessary to at all times have authorized, and reserved for the
purpose of issuance, such number of shares of Common Stock as shall be
necessary to effect the issuance of the Conversion Shares. If at any
time the Company does not have available such shares of Common Stock
as shall from time to time be sufficient to effect the conversion of
all of the Conversion Shares of the Company shall call and hold a
special meeting of the shareholders within sixty (60) days of such
occurrence, for the sole purpose of increasing the number of shares
authorized. The Company's management shall recommend to the
shareholders to vote in favor of increasing the number of shares of
Common Stock authorized. Management shall also vote all of its shares
in favor of increasing the number of authorized shares of Common
Stock.
f. Listings or Quotation. The Company shall promptly secure the listing
-----------------------
or quotation of the Conversion Shares upon each national securities
exchange, automated quotation system or The National Association of
Securities Dealers Inc.'s Over-The-Counter Bulletin Board ("OTCBB") or
-----
other market, if any, upon which shares of Common Stock are then
listed or quoted (subject to official notice of issuance) and shall
use its best efforts to maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Conversion Shares
from time to time issuable under the terms of this Agreement. The
Company shall maintain the Common Stock's authorization for quotation
on the OTCBB.
g. Fees and Expenses. Each of the Company and the Buyer(s) shall pay all
------------------
costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of
this Agreement, the Escrow Agreement, the Investor Registration Rights
Agreement, the Security Agreement and the Irrevocable Transfer Agent
Instructions. The Buyer(s) shall be entitled to a ten percent (10%)
discount on the Purchase Price.
h. The costs and expenses of the Buyer(s) and the structuring fee of
Yorkville Advisors Management, LLC of Seven Thousand Five Hundred
Dollars ($7,500) shall be paid directly from the proceeds of the First
Closing and the retainer of Xxxxxxxxxxx & Xxxxxxxx LLP of Twenty-Five
Thousand Dollars ($25,000), of which Twelve Thousand Five Hundred
Dollars ($12,500) shall be paid for by the Company directly from the
gross proceeds of the First Closing and Twelve Thousand Five Hundred
Dollars ($12,500) shall be paid for by the Company directly from the
gross proceeds of the Second Closing.
i. Corporate Existence. So long as any of the Convertible Debentures
--------------------
remain outstanding, the Company shall not directly or indirectly
consummate any merger, reorganization, restructuring, reverse stock
split consolidation, sale of all or substantially all of the Company's
assets or any similar transaction or related transactions (each such
transaction, an "Organizational Change") unless, prior to the
----------------------
consummation an Organizational Change, the Company obtains the written
consent of each Buyer. In any such case, the Company will make
appropriate provision with respect to such holders' rights and
interests to insure that the provisions of this Section 4(h) will
thereafter be applicable to the Convertible Debentures.
j. Transactions With Affiliates. So long as any Convertible Debentures
------------------------------
are outstanding, the Company shall not, and shall cause each of its
subsidiaries not to, enter into, amend, modify or supplement, or
permit any subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or
any subsidiary's officers, directors, person who were officers or
directors at any time during the previous two (2) years, stockholders
who beneficially own five percent (5%) or more of the Common Stock, or
Affiliates (as defined below) or with any individual related by blood,
marriage, or adoption to any such individual or with any entity in
which any such entity or individual owns a five percent (5%) or more
beneficial interest (each a "Related Party"), except for (a) customary
-------------
employment arrangements and benefit programs on reasonable terms, (b)
any investment in an Affiliate of the Company, (c) any agreement,
transaction, commitment, or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable
from a person other than such Related Party, (d) any agreement
transaction, commitment, or arrangement which is approved by a
majority of the disinterested directors of the Company, for purposes
hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with
respect to any such agreement, transaction, commitment, or
arrangement. "Affiliate" for purposes hereof means, with respect
---------
to any person or entity, another person or entity that, directly or
indirectly, (i) has a ten percent (10%) or more equity interest in
that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity.
"Control" or "controls" for purposes hereof means that a person or
------- --------
entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
k. Transfer Agent. The Company covenants and agrees that, in the event
---------------
that the Company's agency relationship with the transfer agent should
be terminated for any reason prior to a date which is two (2) years
after the Closing Date, the Company shall immediately appoint a new
transfer agent and shall require that the new transfer agent execute
and agree to be bound by the terms of the Irrevocable Transfer Agent
Instructions (as defined herein).
l. Restriction on Issuance of the Capital Stock. So long as any
--------------------------------------------------
Convertible Debentures are outstanding, the Company shall not, without
the prior written consent of the Buyer(s), issue or sell shares of
Common Stock or Preferred Stock (i) without consideration or for a
consideration per share less than the Bid Price of the Common Stock
determined immediately prior to its issuance, (ii) issue any warrant,
option, right, contract, call, or other security instrument granting
the holder thereof, the right to acquire Common Stock without
consideration or for a consideration less than such Common Stock's Bid
Price value determined immediately prior to it's issuance, (iii) enter
into any security instrument granting the holder a security interest
in any and all assets of the Company, or (iv) file any registration
statement on Form S-8.
m. Non-Disclosure of Non-Public Information.
--------------------------------------------
i. The Company shall not disclose non-public information to the
Buyer(s), its advisors, or its representatives, unless prior to
disclosure of such information the Company identifies such
information as being non-public information and provides the
Buyer(s), such advisors and representatives with the opportunity
to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any
non-public information hereunder, require the Buyer(s)' advisors
and representatives to enter into a confidentiality agreement in
form reasonably satisfactory to the Company and the Buyer(s).
ii. Nothing herein shall require the Company to disclose non-public
information to the Buyer(s) or its advisors or representatives,
and the Company represents that it does not disseminate
non-public information to any investors who purchase stock in the
Company in a public offering, to money managers or to securities
analysts, provided, however, that notwithstanding anything herein
to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence
of any circumstance (without any obligation to disclose the
specific event or circumstance) of which it becomes aware,
constituting non-public information (whether or not requested of
the Company specifically or generally during the course of due
diligence by such persons or entities), which, if not disclosed
in the prospectus included in the Registration Statement would
cause such prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to
make the statements, therein, in light of the circumstances in
which they were made, not misleading. Nothing contained in this
Section 4(m) shall be construed to mean that such persons or
entities other than the Buyer(s) (without the written consent of
the Buyer(s) prior to disclosure of such information) may not
obtain non-public information in the course of conducting due
diligence in accordance with the terms of this Agreement and
nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration
Statement contains an untrue statement of material fact or omits
a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein,
in light of the circumstances in which they were made, not
misleading.
5. TRANSFER AGENT INSTRUCTIONS.
------------------------------
The Company shall issue the Irrevocable Transfer Agent Instructions to its
transfer agent irrevocably appointing Xxxxx Xxxxxxxx, Esq. as its agent for
purpose of having certificates issued, registered in the name of the Buyer(s) or
its respective nominee(s), for the Conversion Shares representing such amounts
of Convertible Debentures as specified from time to time by the Buyer(s) to the
Company upon conversion of the Convertible Debentures, for interest owed
pursuant to the Convertible Debenture, and for any and all Liquidated Damages
(as this term is defined in the Investor Registration Rights Agreement).
Yorkville Advisors Management, LLC shall be paid a cash fee of Fifty Dollars
($50) for every occasion they act pursuant to the Irrevocable Transfer Agent
Instructions. The Company shall not change its transfer agent without the
express written consent of the Buyer(s), which may be withheld by the Buyer(s)
in its sole discretion. Prior to registration of the Conversion Shares under
the 1933 Act, all such certificates shall bear the restrictive legend specified
in Section 2(g) of this Agreement. The Company warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5, and stop transfer instructions to give effect to Section 2(g) hereof
(in the case of the Conversion Shares prior to registration of such shares under
the 0000 Xxx) will be given by the Company to its transfer agent and that the
Conversion 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
Investor Registration Rights Agreement. Nothing in this Section 5 shall affect
in any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares. If the Buyer(s) provides the
Company with an opinion of counsel, in form, scope and substance customary for
opinions of counsel in comparable transactions to the effect that registration
of a resale by the Buyer(s) of any of the Conversion Shares is not required
under the 1933 Act, the Company shall within two (2) business days instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyer(s) shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
-----------------------------------------------------
The obligation of the Company hereunder to issue and sell the Convertible
Debentures to the Buyer(s) at the Closings is subject to the satisfaction, at or
before the Closing Dates, 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:
a. Each Buyer shall have executed this Agreement, the Security Agreement,
the Escrow Agreement and the Investor Registration Rights Agreement
and the Irrevocable Transfer Agent Instructions and delivered the same
to the Company.
b. The Buyer(s) shall have delivered to the Escrow Agent the Purchase
Price for Convertible Debentures in respective amounts as set forth
next to each Buyer as outlined on Schedule I attached hereto and the
Escrow Agent shall have delivered the net proceeds to the Company by
wire transfer of immediately available U.S. funds pursuant to the wire
instructions provided by the Company.
c. The representations and warranties of the Buyer(s) shall be true and
correct in all material respects as of the date when made and as of
the Closing Dates as though made at that time (except for
representations and warranties that speak as of a specific date), and
the Buyer(s) 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 Buyer(s) at or prior to the Closing Dates.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------------
The obligation of the Buyer(s) hereunder to purchase the Convertible
Debentures at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions:
a. The Company shall have executed this Agreement, the Security
Agreement, the Convertible Debenture, the Escrow Agreement, the
Irrevocable Transfer Instructions and the Investor Registration Rights
Agreement, and delivered the same to the Buyer(s).
b. The Common Stock shall be authorized for quotation on the OTCBB,
trading in the Common Stock shall not have been suspended for any
reason and all of the Conversion Shares issuable upon conversion of
the Convertible Debentures shall be approved the OTCBB.
c. The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations
and warranties shall be true and correct without further
qualification) as of the date when made and as of the Closing Dates 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 material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to
the Closing Dates. If requested by the Buyer, the Buyer shall have
received a certificate, executed by the President of the Company,
dated as of the Closing Dates, to the foregoing effect and as to such
other matters as may be reasonably requested by the Buyer including,
without limitation an update as of the Closing Dates regarding the
representation contained in Section 3(c) above.
d. The Company shall have executed and delivered to the Buyer(s) the
Convertible Debentures in the respective amounts set forth opposite
each Buyer(s) name on Schedule I attached hereto.
e. The Buyer(s) shall have received an opinion of counsel from
Xxxxxxxxxxx & Xxxxxxxx, LLP in a form satisfactory to the Buyer(s).
f. The Company shall have provided to the Buyer(s) a certificate of good
standing from the secretary of state from the state in which the
company is incorporated.
g. As of the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Convertible Debentures, shares of
Common Stock to effect the conversion of all of the Conversion Shares
then outstanding.
h. The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
i. The Company shall have provided to the Investor an acknowledgement, to
the satisfaction of the Investor, from Xxxxxxxxxxx & Associates CPA's
as to its ability to provide all consents required in order to file a
registration statement in connection with this transaction.
j. The Company shall have filed a form UCC-1 or such other forms as may
be required to perfect the Buyer's interest in the Pledged Property
and Pledged Collateral as detailed in the Security Agreement dated the
date hereof and provided proof of such filing to the Buyer(s). The
Buyer(s) hereby acknowledge that as of the date hereof, the Company
has granted prior security interests with respect to the Company's
assets as evidenced by previously filed from UCC-1's.
8. INDEMNIFICATION.
----------------
a. In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Convertible Debentures and the Conversion
Shares hereunder, and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect,
indemnify and hold harmless the Buyer(s) and each other holder of the
Convertible Debentures and the Conversion Shares, and all of their
officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Buyer
-----
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 Buyer 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 the Buyer Indemnitees or any of them 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 this Agreement,
the Convertible Debentures or the Investor Registration Rights
Agreement 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 this Agreement, or
the Investor Registration Rights Agreement 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 this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the
Indemnities, any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the
Convertible Debentures or the status of the Buyer or holder of the
Convertible Debentures the Conversion Shares, as a Buyer of
Convertible Debentures in the Company. 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.
b. In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Buyer's other obligations
under this Agreement, the Buyer shall defend, protect, indemnify and
hold harmless the Company and all of its officers, directors,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Company Indemnitees") from and against any and all
-------------------
Indemnified Liabilities incurred by the Indemnitees or any of them as
a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by
the Buyer(s) in this Agreement, , instrument or document contemplated
hereby or thereby executed by the Buyer, (b) any breach of any
covenant, agreement or obligation of the Buyer(s) contained in this
Agreement, the Investor Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby
executed by the Buyer, or (c) any cause of action, suit or claim
brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach and arising out of or
resulting from the execution, delivery, performance or enforcement of
this Agreement, the Investor Registration Rights Agreement or any
other instrument, document or agreement executed pursuant hereto by
any of the Company Indemnities. To the extent that the foregoing
undertaking by each Buyer may be unenforceable for any reason, each
Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
-------------------------------
a. Governing Law. This Agreement shall be governed by and interpreted in
--------------
accordance with the laws of the State of Nevada without regard to the
principles of conflict of laws. The parties further agree that any
action between them shall be heard in Xxxxxx County, New Jersey, and
expressly consent to the jurisdiction and venue of the Superior Court
of New Jersey, sitting in Xxxxxx County and the United States District
Court for the District of New Jersey sitting in Newark, New Jersey for
the adjudication of any civil action asserted pursuant to this
Paragraph.
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. In the event
any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause four (4) additional original
executed signature pages to be physically delivered to the other party
within five (5) days of the execution and delivery hereof.
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 Buyer(s), the Company,
their affiliates and persons acting on their behalf with respect to
the matters discussed herein, and this Agreement 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 any
Buyer makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived
or amended other than by an instrument in writing signed by the party
to be charged with enforcement.
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 confirmation of receipt,
when sent by facsimile; (iii) three (3) days after being sent by U.S.
certified mail, return receipt requested, or (iv) one (1) 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, to: Donobi, Inc.
0000 Xxxxx Xxx XX
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, III
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx - Xxxxx 0000
Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Transfer Agent, to: United Stock Transfer, Inc.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With Copy to: Xxxxx Xxxxxxxx, Esq.
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer(s), to its address and facsimile number on
Schedule I, with copies to the Buyer's counsel as set forth on
Schedule I. Each party shall provide five (5) days' prior written
notice to the other party of any change in address or facsimile
number.
g. Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties and their respective successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement
or any rights or obligations hereunder without the prior written
consent of the other party hereto.
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. Survival. Unless this Agreement is terminated under Section 9(l), the
--------
representations and warranties of the Company and the Buyer(s)
contained in Sections 2 and 3, the agreements and covenants set forth
in Sections 4, 5 and 9, and the indemnification provisions set forth
in Section 8, shall survive the Closing for a period of two (2) years
following the date on which the Convertible Debentures are converted
in full. The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and the Buyer(s) shall have the right to
---------
approve, before issuance any press release or any other public
statement with respect to the transactions contemplated hereby made by
any party; provided, however, that the Company shall be entitled,
without the prior approval of the Buyer(s), to issue any press release
or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company
shall use its best efforts to consult the Buyer(s) in connection with
any such press release or other public disclosure prior to its release
and Buyer(s) shall be provided with a copy thereof upon release
thereof).
k. 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.
l. Termination. In the event that the Closing shall not have occurred
-----------
with respect to the Buyers on or before five (5) business days from
the date hereof due to the Company's or the Buyer'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, that if this Agreement is terminated by the
Company pursuant to this Section 9(l), the Company shall remain
obligated to reimburse the Buyer(s) for the fees and expenses of
Yorkville Advisors Management, LLC described in Section 4(g) above.
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.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
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.
COMPANY:
DONOBI, INC.
By: /s/ Xxxxxxx Xxxxxx III
-------------------------
Name: Xxxxxxx Xxxxxx, III
Title: President & CEO
EXHIBIT A
FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT
----------------------------------------------
EXHIBIT B
FORM OF ESCROW AGREEMENT
------------------------
EXHIBIT C
TRANSFER AGENT INSTRUCTIONS
---------------------------
SCHEDULE I
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SCHEDULE OF BUYERS
------------------
ADDRESS/FACSIMILE AMOUNT OF
NAME SIGNATURE NUMBER OF BUYER SUBSCRIPTION
Cornell Capital Partners, LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000 $ 300,000
Its: General Partner Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
By: ________________________
Name: Xxxx X. Xxxxxx
Its: Portfolio Manager
With a copy to: Xxxxx Xxxxxxxx, Esq. 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
