SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of April
___, 2006, among Globetel Communications Corporation, a Delaware corporation
(the "COMPANY"), and the purchasers identified on the signature pages
hereto(each a "PURCHASER" and collectively the "PURCHASERS"); and
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule
506 and/Regulation S promulgated thereunder, the Company desires to issue and
sell to the Purchasers, and the Purchasers, severally and not jointly, desires
to purchase from the Company in the aggregate, up to 2,000,000 shares of Common
Stock under the terms and conditions stated herein.
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 each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"ACTION" shall have the meaning ascribed to such term in Section
3.1(j).
"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. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be 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.
"CLOSING" means the closing of the purchase and sale of the Common
Stock and the Warrants pursuant to Section 2.1.
"CLOSING DATE" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) the Purchasers' obligations
to pay the Subscription Amount and (ii) the Company's obligations to
deliver the Securities have been satisfied or waived. There may be more
than one closing date
"CLOSING PRICE" means on any particular date (a) the last reported
closing bid price per share of Common Stock on such date on the Trading
Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b)
if there is no such price on such date, then the closing bid price on the
Trading Market on the date nearest preceding such date (as reported by
Bloomberg L.P. at 4:15 PM (New York time) for the closing bid price for
regular session trading on such day), or (c) if the Common Stock is not
then listed or quoted on the Trading Market and if prices for the Common
Stock are then reported in the "pink sheets" published by the National
Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported, or (d) if the shares of
Common Stock are not then publicly traded the fair market value of a share
of Common Stock as determined by an appraiser selected in good faith by
the Purchasers of a majority in interest of the Shares then outstanding.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, $0.00001 par
value per share, and any securities into which such common stock may
hereafter be reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
"COMPANY COUNSEL" means Xxxxxxxx X. Xxxxxxxx, General Counsel of
GlobeTel.
"DISCLOSURE SCHEDULES" means the Disclosure Schedules delivered
concurrently herewith.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed to
such term in Section 3.1(o).
"LIENS" means a lien, charge, security interest, encumbrance, right
of first refusal, preemptive right or other restriction.
"MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to such
term in Section 3.1(b).
"MATERIAL PERMITS" shall have the meaning ascribed to such term in
Section 3.1(m).
"PER SHARE PURCHASE PRICE" equals 84% of the Closing price on the
day that the Company requests a closing but not less than $2.00 subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur
after the date of this Agreement.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"REQUIRED APPROVALS" shall have the meaning ascribed to such term in
Section 3.1(e).
"RULE 144" means Rule 144 promulgated by the Commission 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.
"SEC REPORTS" shall have the meaning ascribed to such term in
Section 3.1(h).
"SECURITIES" means the Shares, the Warrants and the Warrant Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the shares of Common Stock issued or issuable to the
Purchaser pursuant to this Agreement.
"SUBSIDIARY" shall mean the subsidiaries of the Company, if any, set
forth on Schedule 3.1(a).
"TRADING DAY" means (i) a day on which the Common Stock is traded on
a Trading Market, or (ii) if the Common Stock is not quoted on a Trading
Market, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting
prices); provided, that in the event that the Common Stock is not listed
or quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean
a Business Day.
"TRADING MARKET" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question:
the OTC Bulletin Board, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
"TRANSACTION DOCUMENTS" means this Agreement, the Warrants and the
Registration Rights Agreement and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
ARTICLE II.
PURCHASE AND SALE
2.1 CLOSING.
(a) On the first Closing Date, the Purchaser shall purchase from the
Company, and the Company shall issue and sell to the Purchaser, 500,000
shares at a purchase price of $2.10 per share. The first closing date
shall be April 27, 2006.
(b) Subsequent thereto, but prior to June 25, 2006, the Company
shall sell to the Purchaser, and the Purchaser shall purchase, an
additional 1,500,000 Shares in amounts of not less than 500,000 shares per
closing, upon the Company delivering to the Purchaser a Request for
Closing. The Per Share Purchase price, as defined above, shall be
determined using the closing price on the date that the Request for
Closing is transmitted. If such request is not transmitted on a business
day the closing price shall be determined at the end of the next business
day following transmittal. However, notwithstanding anything to contrary
contained herein, the Purchaser shall not be obligated to make subsequent
purchases of shares after the First Closing Date as stated in Section
2.1(a) above, if upon the date of the Request for Closing the closing
market price for the Shares is less than $2.25 per share.
(c) At each closing the Company shall pay to the purchaser a due
diligence fee of 25,000 Shares per 500,000 Shares, or pro rata portion
thereof, purchased by the Purchaser.
2.2 CLOSING CONDITIONS; DELIVERIES.
(a) On the first Closing date the Company shall deliver or cause to
be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a certificate evidencing a number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase
Price, registered in the name of such Purchaser;
(b) On the Closing Date, the Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount by wire transfer to
the account of the Company; and
(c) All representations and warranties of the other party contained
herein shall remain true and correct as of the Closing Date.
(d) All obligations, covenants and agreements of the parties
required to be performed at or prior to the Closing Date shall have been
performed.
(e) From the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission, and, at any time
prior to the Closing Date, trading in securities generally as reported by
Bloomberg Financial Markets shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades
are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States or New
York State authorities nor shall there have occurred any material outbreak
or escalation of hostilities or other national or international calamity
of such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of each
Purchaser, makes it impracticable or inadvisable to purchase the Shares at
the such Closing.
(f) On each subsequent Closing Date, the company shall deliver to
the Purchaser a certificate evidencing a number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price,
registered in the name of such Purchaser, and the Purchaser shall deliver
the to the Company the Purchasers Subscription Amount by wire transfer
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof and as of the Closing Date to each
Purchaser:
(a) SUBSIDIARIES. All of the subsidiaries of the Company are set
forth on SCHEDULE 3.1(a). The Company owns, directly or indirectly, all of
the capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities. If the Company has no subsidiaries, then
references in the Transaction Documents to the Subsidiaries will be
disregarded.
(b) ORGANIZATION AND QUALIFICATION. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing
as a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, could not have or reasonably be
expected to result in (i) a material adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material
adverse effect on the results of operations, assets, business, prospects
or financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company's ability to
perform in any material respect on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a "MATERIAL ADVERSE
EFFECT") and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail
such power and authority or qualification.
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no
further action is required by the Company in connection therewith other
than in connection with the Required Approvals. Each Transaction Document
has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute
the valid and binding obligation of the Company enforceable against the
Company in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally
and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
(d) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Shares
and the consummation by the Company of the other transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of
the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or
(ii) conflict with, or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company
or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including
federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected, or
(iv) conflict with or violate the terms of any agreement by which the
Company or any Subsidiary is bound or to which any property or asset of
the Company or any Subsidiary is bound or affected; except in the case of
each of clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.
(e) FILINGS, CONSENTS AND APPROVALS. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required pursuant to Section
4.6 of this Agreement, (ii) the filing with the Commission of the
Registration Statement, (iii) application(s) to each applicable Trading
Market for the listing of the Shares and Warrant Shares for trading
thereon in the time and manner required thereby, and (iv) the filing of
Form D with the Commission and such filings as are required to be made
under applicable state securities laws (collectively, the "REQUIRED
APPROVALS").
(f) ISSUANCE OF THE SECURITIES. The Securities are duly authorized
and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens. The issuance of the Shares is not subject to
any preemptive or similar rights to subscribe for or purchase securities.
The Company has reserved from its duly authorized capital stock the
maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants.
(g) CAPITALIZATION. The capitalization of the Company is as
described in the Company's most recent periodic report filed with the
Commission. The Company has not issued any capital stock since such filing
other than pursuant to the exercise of employee stock options under the
Company's stock option plans, the issuance of shares of Common Stock to
employees pursuant to the Company's employee stock purchase plan and
pursuant to the conversion or exercise of outstanding Common Stock
Equivalents outstanding. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities, there are
no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional
shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issue and sale of the
Securities will not obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities. All
of the outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable, have been issued in compliance with
all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. No further approval or authorization
of any stockholder, the Board of Directors of the Company or others is
required for the issuance and sale of the Shares. Except as disclosed in
the SEC Reports, there are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company's capital stock to
which the Company is a party or, to the knowledge of the Company, between
or among any of the Company's stockholders.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto, being collectively referred to
herein as the "SEC REPORTS") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior
to the expiration of any such extension. As of their respective dates, the
SEC Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when
filed, 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. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position
of the Company and its consolidated subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) MATERIAL CHANGES. Since the date of the latest audited financial
statements included within the SEC Reports, except as disclosed in the SEC
Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in
the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made
with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its
capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company
stock option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
(j) LITIGATION. Except as disclosed in the SEC Reports, there is no
action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county,
local or foreign) (collectively, an "ACTION") which (i) adversely affects
or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not
been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or
any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company or any Subsidiary under
the Exchange Act or the Securities Act.
(k) LABOR RELATIONS. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect.
(l) COMPLIANCE. Except as disclosed in the SEC Reports, neither the
Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse
of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument
to which it is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or
(iii) is or has been in violation of any statute, rule or regulation of
any governmental authority, including without limitation all foreign,
federal, state and local laws applicable to its business except in each
case as could not have a Material Adverse Effect.
(m) REGULATORY PERMITS. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not have or
reasonably be expected to result in a Material Adverse Effect ("MATERIAL
PERMITS"), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any
Material Permit.
(n) TITLE TO ASSETS. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries
and Liens for the payment of federal, state or other taxes, the payment of
which is neither delinquent nor subject to penalties. Any real property
and facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases of which the
Company and the Subsidiaries are in compliance.
(o) PATENTS AND TRADEMARKS. To the knowledge of the Company and each
Subsidiary, the Company and the Subsidiaries have, or have rights to use,
all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights
that are necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so
have could have or reasonably be expected to result in a Material Adverse
Effect (collectively, the "INTELLECTUAL PROPERTY RIGHTS"). Neither the
Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. To the knowledge of
the Company, all such Intellectual Property Rights are enforceable and do
not violate or infringe the Intellectual Property Rights of others.
(p) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged. Neither the Company
nor any 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 without a significant increase in cost.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set forth
in the SEC Reports, none of the officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary
(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 entity in which
any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
$60,000 other than (i) for payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) INTERNAL ACCOUNTING CONTROLS. The Company and each of the
Subsidiaries maintains 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 GAAP and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such
disclosure controls and procedures to ensure that material information
relating to the Company, including the Subsidiaries, is made known to the
certifying officers by others within those entities, particularly during
the period in which the Company's most recently filed period report under
the Exchange Act, as the case may be, is being prepared. The Company's
certifying officers have evaluated the effectiveness of the Company's
controls and procedures as of a date within 90 days prior to the filing
date of the most recently filed periodic report under the Exchange Act
(such date, the "EVALUATION DATE"). The Company presented in its most
recently filed period report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the Company's
internal controls (as such term is defined in Item 307(b) of Regulation
S-K under the Exchange Act) or, to the Company's knowledge, in other
factors that could significantly affect the Company's internal controls.
The Company maintains and will continue to maintain a standard system of
accounting established and administered in accordance with GAAP and the
applicable requirements of the Exchange Act.
(s) CERTAIN FEES. No brokerage or finder's fees or commissions are
or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement.
The Purchasers shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
(t) PRIVATE PLACEMENT. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the
rules and regulations of the Trading Market.
(u) INVESTMENT COMPANY. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Shares, will not be
or be an Affiliate of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. The Company shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(v) REGISTRATION RIGHTS. No Person has any right to cause the
Company to effect the registration under the Securities Act of any
securities of the Company.
(w) LISTING AND MAINTENANCE REQUIREMENTS. The Company's Common Stock
is registered pursuant to Section 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received
notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with
the listing or maintenance requirements of such Trading Market. The
Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
(x) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its Board
of Directors have not implemented any poison pill (including any
distribution under a rights agreement) or other similar anti-takeover
provision under the Company's Certificate of Incorporation (or similar
charter documents) or the laws of its state of incorporation.
(y) DISCLOSURE. Other than the terms of the transaction contemplated
by this Agreement, the Company confirms that, neither the Company nor any
other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations
and covenants in effecting transactions in securities of the Company. All
disclosure provided to the Purchasers regarding the Company, its business
and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
(z) NO INTEGRATED OFFERING. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation
system on which any of the securities of the Company are listed or
designated.
(aa) SOLVENCY. Based on the financial condition of the Company as of
the Closing Date after giving effect to the receipt by the Company of the
proceeds from the sale of the Securities hereunder, (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to
be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii)
the Company's assets do not constitute unreasonably small capital to carry
on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the
Company, and projected capital requirements and capital availability
thereof; and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such
amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of
its debt).
(bb) TAXES. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and each Subsidiary has filed all necessary
federal, state and foreign income and franchise tax returns and has paid
or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
(cc) GENERAL SOLICITATION. Neither the Company nor any person acting
on behalf of the Company has offered or sold any of the Shares by any form
of general solicitation or general advertising. The Company has offered
the Shares for sale only to the Purchasers and certain other "accredited
investors" within the meaning of Rule 501 under the Securities Act.
(dd) FOREIGN CORRUPT PRACTICES. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any corrupt funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or
made by any person acting on its behalf of which the Company is aware)
which is in violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended.
(ee) ACCOUNTANTS. To the Company's knowledge, Dohan & Company, the
Company's accountants, who have expressed their opinion with respect to
the financial statements to be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2005, are independent
accountants as required by the Securities Act and the rules and
regulations promulgated thereunder.
(ff) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF SHARES. The
Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby. The
Company further acknowledges that no Purchaser is 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 any Purchaser or any of their respective representatives
or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Purchasers' purchase of
the Shares. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely on
the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate or similar action on the part
of such Purchaser. Each Transaction Document to which it is party has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right at all
times to sell or otherwise dispose of all or any part of such Securities
in compliance with applicable federal and state securities laws. Subject
to the immediately preceding sentence, nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold the
Securities for any period of time. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such
Purchaser does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is an "accredited investor"
as defined in Rule 501(a) under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the
Exchange Act.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(e) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth
in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to
the Company, to an Affiliate of a Purchaser or in connection with a pledge
as contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall be bound by the
terms of this Agreement and shall have the rights of a Purchaser under
this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Securities in the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the
Securities to a financial institution that is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and who agrees to be bound
by the provisions of this Agreement and, if required under the terms of
such arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer
would not be subject to approval of the Company and no legal opinion of
legal counsel of the pledgee, secured party or pledgor shall be required
in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser's expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with pledge or transfer of
the Securities.
(c) Certificates evidencing the Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) following any sale
of such Shares pursuant to Rule 144, or (ii) if such Shares are eligible
for sale under Rule 144(k), or (iii) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
The Company shall cause its counsel to issue a legal opinion to the
Company's transfer agent promptly after the Effective Date if required by
the Company's transfer agent to effect the removal of the legend
hereunder. The Company agrees that at such time as such legend is no
longer required under this Section 4.1(c), it will, no later than three
Trading Days following the delivery by a Purchaser to the Company or the
Company's transfer agent of a certificate representing Shares or Warrant
Shares, as the case may be, issued with a restrictive legend (such date,
the "LEGEND REMOVAL DATE"), deliver or cause to be delivered to such
Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section.
(d) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as liquidated damages and not
as a penalty, for each $1,000 of Shares or Warrant Shares (based on the
Closing Price of the Common Stock on the date such Securities are
submitted to the Company's transfer agent) subject to Section 4.1(c), $10
per Trading Day (increasing to $20 per Trading Day five (5) Trading Days
after such damages have begun to accrue) for each Trading Day after such
fifth Trading Day after the Legend Removal Date until such certificate is
delivered. Nothing herein shall limit such Purchaser's right to pursue
actual damages for the Company's failure to deliver certificates
representing any Securities as required by the Transaction Documents, and
such Purchaser shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.
(e) The Purchaser agrees that the removal of the restrictive legend
from certificates representing Securities as set forth in this Section 4.1
is predicated upon the Company's reliance that the Purchaser will sellany
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom.
4.2 FURNISHING OF INFORMATION. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
4.3 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall issue a press
release or file a Current Report on Form 8-K, in each case reasonably acceptable
to each Purchaser disclosing the material terms of the transactions contemplated
hereby, prior to the opening of the principal market for the securities
purchased on the next trading day after signing. The Company and each Purchaser
shall consult with each other in issuing any press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
to the extent such disclosure is required by law or Trading Market regulations,
in which case the Company shall provide the Purchasers with prior notice of such
disclosure.
4.5 SHAREHOLDERS RIGHTS PLAN. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.6 NON-PUBLIC INFORMATION. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.7 USE OF PROCEEDS. Except as set forth on SCHEDULE 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables in the ordinary course of
the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.
4.8 INDEMNIFICATION OF PURCHASERS. The Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, employees and
agents (each, a "PURCHASER PARTY") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to: (a) any misrepresentation, breach
or inaccuracy, or any allegation by a third party that, if true, would
constitute a breach or inaccuracy, of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents; or (b) any cause of action, suit or claim brought or made
against such Purchaser Party and arising solely out of or solely resulting from
the execution, delivery, performance or enforcement of this Agreement or any of
the other Transaction Documents, other than directly resulting from the gross
negligence or willful misconduct of the Purchasers. The Company will reimburse
such Purchaser for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
4.9 RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.
4.10 LISTING OF COMMON STOCK. The Company hereby agrees to use
commercially reasonable efforts to maintain the listing of the Common Stock on a
Trading Market, and as soon as reasonably practicable following the Closing (but
not later than the earlier of the Effective Date and the first anniversary of
the Closing Date) to list all of the Shares and Warrant Shares on such Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
all of the Shares and Warrant Shares, and will take such other action as is
necessary to cause all of the Shares and Warrant Shares to be listed on such
other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market.
4.11 EQUAL TREATMENT OF PURCHASERS. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
ARTICLE V.
MISCELLANEOUS
5.1 FEES AND EXPENSES. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all stamp and
other taxes and duties levied in connection with the sale of the Securities.
5.2 ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.3 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.4 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.
5.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
5.6 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.
5.7 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Delaware, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
Miami-Dade or Broward Counties, Florida. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
Miami-Dade or Broward Counties, Florida, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), 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
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by delivering a copy thereof via overnight delivery (with evidence of
delivery) to such party at the address in effect for 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 hereto (including its affiliates, agents, officers, directors and
employees) hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.8 SURVIVAL. The representations and warranties herein shall survive the
Closing and delivery of the Shares and Warrant Shares.
5.9 EXECUTION. This Agreement may be executed in two or more counterparts,
all of which when taken together 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, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.10 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.11 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.12 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.13 PAYMENT SET ASIDE. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.14 INDEPENDENT LEGAL COUNSEL. Both the Company and the Purchaser have
sought and have had access to independent legal counsel prior to the execution
hereof.
(SIGNATURE PAGE FOLLOWS)
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
GLOBETEL COMMUNICATIONS CORP. ADDRESS FOR NOTICE:
-------------------
0000 Xxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
By:_________________________________
Name: XXXXXXX X. XXXX
Title: CEO Attn: Xxxxxxx Xxxx
Tel: 000-000-0000
Fax: 000-000-0000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
PURCHASER NAME: ADDRESS FOR NOTICE:
------------------
By: ____________________________________
Name:
Title: Attn:
Subscription Amount: $
Shares:
WITH A COPY TO:
--------------
[SPA SIGNATURE PAGE CONTINUED]
