Exhibit 10.4
PURCHASE AGREEMENT
This Purchase Agreement (this "AGREEMENT") is dated as of December 7,
2005, among Epicus Communications Group, Inc., a Florida corporation (the
"COMPANY"), and the investors identified on the signature pages hereto (each an
"INVESTOR" and, collectively, the "INVESTORS").
WHEREAS, the Company is the successor to Epicus Communications Group,
Inc., pursuant to the Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code (the "JOINT PLAN"), confirmed by an order (the "CONFIRMATION
ORDER") issued by the United States Bankruptcy Court for the Southern District
of Florida (the "BANKRUPTCY COURT") in the chapter 11 cases styled IN RE EPICUS
COMMUNICATIONS GROUP, INC., Chapter 11 Case No. 04-34915-BKC-PGH and IN RE
EPICUS, INC., Chapter 11 Case No. 04-34916-BKC-PGH.
WHEREAS, Epicus Communications Group, Inc. and its wholly-owned
subsidiary, Epicus, Inc. (collectively, the "Debtors") filed their petitions for
relief under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy
Court on October 25, 2004 (the "PETITION DATE").
WHEREAS, prior to the Petition Date, the Debtors entered into certain
purchase agreements with the Investors for the purchase and sale of secured
convertible notes and/or debentures (the "OLD DEBENTURES") and warrants pursuant
to various purchase agreements, registrations rights agreements, security
agreements and related documents (the "OLD DEBENTURE DOCUMENTS").
WHEREAS, under the Joint Plan, the Old Debentures shall be reinstated,
pursuant to the terms and conditions of the Old Debenture Documents, as of the
Effective Date of the Joint Plan.
WHEREAS, in connection with the Joint Plan, subject to the terms and
conditions set forth in the Joint Plan and this Agreement, the Company desires
to borrow certain sums from each of the Investors and, in consideration thereof
issue certain convertible notes and warrants to each of the Investors, and each
Investor, severally and not jointly, desires to make a loan to the Company and
accept such notes and warrants from the Company, all pursuant to the terms set
forth 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 the Investors agree
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 shall have
the meanings indicated in this Section 1.1:
"ACTION" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"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.
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company or any Subsidiary commences a proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Subsidiary thereof; (b) there is commenced against the Company or
any Subsidiary any such case or proceeding that is not dismissed within 60 days
after commencement; (c) the Company or any Subsidiary is adjudicated by a court
of competent jurisdiction insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (d) the Company or any
Subsidiary suffers any appointment of any custodian or the like for it or any
substantial part of its property that is not discharged or stayed within 60
days; (e) under applicable law the Company or any Subsidiary makes a general
assignment for the benefit of creditors; (f) the Company or any Subsidiary fails
to pay, or states that it is unable to pay or is unable to pay, its debts
generally as they become due; (g) the Company or any Subsidiary calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Company or any Subsidiary, by any act or
failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing.
"BENEFIT ARRANGEMENT" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or
Multiemployer Plan and which is maintained or otherwise contributed by the
Company.
"BENEFIT PLAN" has the meaning set forth in Section
3.1(aa)(ii).
"BUSINESS DAY" means any day except Saturday, Sunday and any
day that is a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.
"CLOSING" means the closing of the purchase and sale of Notes
and Warrants contemplated by Section 2.1.
"CLOSING DATE" means the Business Day immediately following
the date on which all of the conditions set forth in Section 2.1(d) and 2.1(e)
have been satisfied, or such other date as the parties may agree.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $.001 per share, and any securities into which such common stock may
hereafter be reclassified, converted or exchanged.
"COMMON STOCK EQUIVALENTS" means any securities of the Company
or any Subsidiary which entitle the holder thereof to acquire Common Stock at
any time, 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 or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"COMPANY COUNSEL" means Xxxx & Xxxxx, P.A.
"CONTINGENT LIABILITY" means, as to any Person, any
obligation, contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing or agreeing to pay or become responsible for any
Debt or obligation of any other Person in any manner, whether directly or
indirectly, including without limitation any obligation of such Person, direct
or indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Debt, (b) to purchase property
or services for the purpose of assuring the owner of such Debt of its payment,
or (c) to maintain the solvency, working capital, equity, cash flow, fixed
charge or other coverage ratio, or any other financial condition of the primary
obligor so as to enable the primary obligor to pay any Debt or to comply with
any agreement relating to any Debt or obligation.
"DEBT" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others guaranteed by such Person.
"DISCLOSURE MATERIALS" has the meaning set forth in Section
3.1(h).
"EFFECTIVE DATE" means the date that the Registration
Statement required by Section 2(a) of the Registration Rights Agreement is first
declared effective by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock Exchange,
American Stock Exchange, NASDAQ National Market or NASDAQ SmallCap Market.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA GROUP" means the Company and each Subsidiary and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Company or any Subsidiary, are treated as a single employer under the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means U.S. generally accepted accounting principles.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in
Section 3.1(p).
"INVESTMENT AMOUNT" means, with respect to each Investor, the
investment amount indicated below such Investor's signature page to this
Agreement.
"INVESTOR DELIVERABLES" has the meaning set forth in Section
2.1(c).
"INVESTOR PARTY" has the meaning set forth in Section 4.12.
"LIEN" means any lien, charge, encumbrance, security interest,
right of first refusal or other restrictions of any kind.
"LOSSES" has the meaning set forth in Section 4.12.
"MATERIAL ADVERSE EFFECT" means any of (i) a material and
adverse effect on the legality, validity or enforceability of any Transaction
Document, (ii) a material and adverse effect on the results of operations,
assets, prospects, business or condition (financial or otherwise) of the Company
and the Subsidiaries or (iii) an adverse impairment to the Company's ability to
timely perform its obligations under any Transaction Document.
"NEW YORK COURTS" means the state and federal courts sitting
in the City of New York, Borough of Manhattan.
"NOTES" means the secured convertible promissory notes
issuable by the Company to the Investors at Closing in the Form of EXHIBIT A,
due on the three year anniversary of the Closing Date.
"OUTSIDE DATE" means December 8, 2005.
"PBGC" means the Pension Benefit Guarantee Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERMITTED INDEBTEDNESS" has the meaning set forth in Section
5.3.
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"PERMITTED LIENS" means: (a) Liens for taxes, assessments or
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and for which adequate reserves in accordance with GAAP
are maintained on the books of the Company or the applicable Subsidiary; (b)
Liens arising out of deposits in connection with workers' compensation,
unemployment insurance, old age pensions or other social security or retirement
benefits legislation; (c) deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds, and other obligations of like nature arising in the
ordinary course of business of the Company or a Subsidiary; (d) Liens imposed by
law, such as mechanics', workers', materialmens', carriers' or other like liens
arising in the ordinary course of business of the Company or a Subsidiary which
secure the payment of obligations which are not past due or which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP are maintained on the books of the
Company or the applicable Subsidiary; (e) Liens existing on the Closing Date,
and described on Schedule 3.1(o); (f) purchase money security interests or Liens
for the purchase of fixed assets to be used in the business of the Company or a
Subsidiary, securing solely the fixed assets so purchased and the proceeds
thereof; (g) capitalized leases which do not violate any provision of this
Agreement; (h) Liens of commercial depository institutions, arising in the
ordinary course of business, constituting a statutory or common law right of
setoff against amounts on deposit with such institution; and (i) rights of way,
zoning restrictions, easements and similar encumbrances affecting the Company's
real property which do not materially interfere with the use of such property.
"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.
"PLAN" means at any time an employee pension plan benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under the Code and either (i) is maintained, or contributed to, by any
member of the ERISA group for employees of any member of the ERISA group or (ii)
has at any time within the preceding five years been maintained, or contributed
to, by any Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the ERISA group.
"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.
"REGISTRATION STATEMENT" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Investors of the Underlying Shares and Warrant
Shares.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Investors, in the form of EXHIBIT B hereto.
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"REQUIRED INVESTORS" means one or more Investors representing
greater than 50% of the aggregate principal amount of all Notes then
outstanding.
"REQUIRED MINIMUM" means, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents that the Company is
obligated to issue, whether contingently or otherwise, including, without
limitation, any Underlying Shares issuable upon conversion in full of all Notes
and Warrant Shares (without regard to any otherwise applicable conversion or
exercise restrictions contained therein) (assuming for such purpose that the
Conversion Price (as defined in the Notes) and the Exercise Price (as defined in
the Warrants) equal 50% of the Conversion Price and Exercise Price in effect on
the Closing Date).
"RESTRICTED PAYMENT" means, with respect to any Person, (a)
any direct or indirect distribution, dividend or other payment on account of any
equity interest in, or shares of capital stock or other securities of, such
Person and (b) any management, consulting or other similar fees, or any interest
thereon, payable by such Person to any affiliate of such Person (other than the
Company), or to any other Person other than an unrelated third party; PROVIDED,
however, that Restricted Payments shall not include any arms length consulting
agreements with consultants of the Company which are approved by the Board of
Directors of the Company.
"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" has the meaning set forth in Section 3.1(h).
"SECURITIES" means the Notes, the Warrants and the Underlying
Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENT" has the meaning set forth in Section
2.1(b).
"SHORT SALES" include, without limitation, all "short sales"
as defined in Rule 3b-3 of the Exchange Act and Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps and
similar arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers.
"STRATEGIC TRANSACTION" means a transaction or relationship in
which the Company issues shares of Common Stock or other securities of the
Company to a Person which is, itself or through its Subsidiaries, an operating
company in a business synergistic with the business of the Company and in which
the Company receives benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.
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"SUBSEQUENT PLACEMENT" has the meaning set forth in Section
4.4.
"SUBSEQUENT PLACEMENT NOTICE" has the meaning set forth in
Section 4.4.
"SUBSIDIARY" means any subsidiary of the Company.
"TRADING DAY" means (i) a day on which the Common Stock is
traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the
Common Stock is not listed on a Trading Market (other than the OTC Bulletin
Board), a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is
not quoted on any 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 to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
"TRADING MARKET" means whichever of the New York Stock
Exchange, the American Stock Exchange, the NASDAQ National Market, the NASDAQ
SmallCap Market or OTC Bulletin Board on which the Common Stock is listed or
quoted for trading on the date in question.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes, the
Registration Rights Agreement, the Warrants, the Security Agreement, and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
"UNDERLYING SHARES" means, collectively, the Warrant Shares
and the shares of Common Stock issuable upon conversion of the Notes.
"VWAP" means, with respect to any date of determination, the
daily volume weighted average price (as reported by Bloomberg using the VAP
function) of the Common Stock on such date of determination, or if there is no
such price on such date of determination, then the daily volume weighted average
price on the date nearest preceding such date.
"WARRANT" means the Common Stock purchase warrant, in the form
of EXHIBIT C, issuable to each Investor on the Closing Date.
"WARRANT SHARES" means the shares of Common Stock issuable
upon exercise of the Warrants.
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ARTICLE II.
PURCHASE AND SALE
2.1 CLOSING.
(a) Subject to the terms and conditions set forth in this Agreement, at
the Closing the Company shall issue and sell to each Investor, and each Investor
shall, severally and not jointly, purchase from the Company, the Notes and the
Warrants representing such Investor's Investment Amount. The Closing shall take
place at the offices of Xxxxx Xxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx,
XX 00000 on the Closing Date or at such other location or time as the parties
may agree.
(b) At the Closing, the Company shall deliver or cause to be delivered
to each Investor the following (the "COMPANY Deliverables"):
(i) Notes in the aggregate principal amount of the Investment
Amount indicated below such Investor's name on its signature page of this
Agreement, registered in the name of such Investor;
(ii) Warrants, registered in the name of such Investor,
pursuant to which such Investor shall have the right to acquire the number of
shares of Common Stock equal to [ ]% of the Underlying Shares issuable upon an
assumed conversion of the Notes issuable to such Investor in accordance with
Section 2.1(b)(i) (without regard to any conversion restrictions contained
thereunder);
(iii) the legal opinion of Company Counsel, in agreed form,
addressed to the Investors;
(iv) the Registration Rights Agreement, duly executed by the
Company;
(v) a security agreement, duly executed by the Company, in the
form attached hereto as EXHIBIT D (as amended, supplemented or otherwise
modified from time to time, the "SECURITY AGREEMENT");
(vi) a certificate executed by a duly authorized officer of
the Company certifying that (i) all representations and warranties made by the
Company and information furnished by the Company in any schedules to this
Agreement, are true and correct in all material respects as of the Closing Date,
(ii) all covenants, agreements and obligations required by this Agreement to be
performed or complied with by the Company, prior to or at the Closing, have been
performed or complied with and (iii) the items referenced in Sections
2.1(d)(iv)-(vi) are true and correct as of the Closing Date;
(vii) lien and record search reports in form and substance
acceptable to the Investors showing that there are no Liens on the collateral
security granted under the Security Agreement, other than Liens expressly
permitted thereby; and
(viii) any other documents reasonably requested by such
Investor.
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(c) At the Closing, each Investor shall deliver or cause to be
delivered to the Company the following (the "INVESTOR DELIVERABLES"):
(i) the Investment Amount indicated below such Investor's name
on its signature page of this Agreement, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose;
(ii) the Registration Rights Agreement, duly executed by such
Investor; and
(iii) the Security Agreement, duly executed by such Investor.
(d) CONDITIONS PRECEDENT TO THE OBLIGATIONS OF AN INVESTOR TO PURCHASE
NOTES AND WARRANTS. The obligation of each Investor to acquire Notes and
Warrants and make loans at the Closing is subject to the satisfaction or waiver
by such Investor, at or before the Closing, of each of the following conditions:
(i) JOINT PLAN CONFIRMATION. The Confirmation Order, in form
and substance acceptable to the Investors, shall have been issued by
the Bankruptcy Court and there shall not be a stay or injunction in effect with
respect thereto.
(ii) REINSTATEMENT OF OLD DEBENTURES. The Old Debentures shall
have been reinstated, in accordance with the terms and conditions of the Old
Debenture Documents, pursuant to the Joint Plan and the Confirmation Order.
(iii) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in the Transaction Documents shall be true
and correct as of the date when made and as of the Closing Date as though made
on and as of such date;
(iv) PERFORMANCE. The Company shall have performed, satisfied
and complied with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by it at or
prior to the Closing;
(v) OFFICER'S CERTIFICATE. The officer's certificate described
in Section 2.1(b)(vii) hereof shall have been delivered;
(vi) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(vii) ADVERSE CHANGES. Since the execution of this Agreement,
no event or series of events shall have occurred that has had or would
reasonably be expected to result in a Material Adverse Effect;
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(viii) NO SUSPENSIONS OF TRADING IN COMMON STOCK; LISTING.
Trading in the Common Stock shall not have been suspended by the Commission or
any Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
an Eligible Market; and
(ix) COMPANY DELIVERABLES. The Company shall have delivered
the Closing Company Deliverables in accordance with Section 2.1(b).
(e) CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY TO SELL
NOTES AND WARRANTS. The obligation of the Company to sell Notes and Warrants at
the Closing is subject to the satisfaction or waiver by the Company, at or
before the Closing, of each of the following conditions:
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Investor contained herein shall be true and correct as of the
date when made and as of the Closing Date as though made on and as of such date;
(ii) PERFORMANCE. Each Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by such Investor at or prior to the Closing;
(iii) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents; and
(iv) INVESTORS DELIVERABLES. Each Investor shall have
delivered its Investor Deliverables in accordance with Section 2.1(c).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
makes the following representations and warranties to each Investor:
(a) SUBSIDIARIES. The Company has no direct or indirect Subsidiaries
other than as specified in SCHEDULE 3.1(A). Except as disclosed in SCHEDULE
3.1(A), the Company owns, directly or indirectly, all of the capital stock of
each Subsidiary free and clear of any and all Liens (other than Permitted
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.
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(b) ORGANIZATION AND QUALIFICATION. The Company and each Subsidiary are
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 of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company and each Subsidiary are duly
qualified to conduct its respective businesses and are 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, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate
power and authority, and is authorized, pursuant to the Joint Plan and the
Confirmation Order, 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. 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 as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(d) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
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, 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) 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; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. Payments
of cash on account of principal of or interest under the Notes, upon any Event
of Default under the Notes, as a result of liquidated damages under any
Transaction Document or upon a Buy-In under and as such term is defined in a
Warrant will not require the consent of, any payment to, or the springing of any
Lien in favor of any lender to or creditor of the Company or any Subsidiary
(under a credit facility, loan agreement or otherwise) and will not result in a
default under any such credit facilities, loans or other agreements.
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(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) the filing with the Commission of one or more Registration
Statements in accordance with the requirements Registration Rights Agreement,
(ii) filings required by state securities laws, (iii) the filing of a Notice of
Sale of Securities on Form D with the Commission under Regulation D of the
Securities Act (iv) the filings required in accordance with Section 4.7 and
4.10, and (iv) those that have been made or obtained prior to the date of this
Agreement.
(f) ISSUANCE OF THE SECURITIES. The Securities have been 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 Company has reserved from its duly authorized
capital stock a number of shares of Common Stock issuable upon conversion of the
Notes and upon exercise of the Warrants to be issued at the Closing, which
number of reserved shares is not less than the Required Minimum calculated as of
the date hereof.
(g) CAPITALIZATION. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company, and all shares of Common
Stock reserved for issuance under the Company's various option and incentive
plans, is specified in the SEC Reports. Except as specified in the SEC Reports,
no securities of the Company are entitled to preemptive or similar rights, and
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 specified in the SEC
Reports, there are no outstanding options, warrants, scrip 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, immediately or with the passage
of time, obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Investors) 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.
12
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports, forms or other information 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 twelve months preceding the date hereof (or such shorter
period as the Company was required by law to file such reports) (the foregoing
materials being collectively referred to herein as the "SEC REPORTS" and,
together with the Schedules to this Agreement (if any), the "DISCLOSURE
MATERIALS") on a timely basis or has timely filed 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 GAAP applied on a
consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, 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. For
purposes of this Agreement, any reports, forms or other information provided to
the Commission whether by filing, furnishing or otherwise providing, is included
in the term "filed" (or any derivations thereof).
(i) PRESS RELEASES. The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.
(j) MATERIAL CHANGES. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports or in the Disclosure Statement or other documents filed with the
Bankruptcy Court in connection with the Joint Plan, (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, accrued
expenses and other liabilities incurred in the ordinary course of business
consistent with past practice and (B) liabilities (not to exceed [$50,000]) 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 or the identity of its
auditors, (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 and consistent
with past practice. The Company does not have pending before the Commission any
request for confidential treatment of information.
13
(k) LITIGATION. There is no Action which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as specifically disclosed in the SEC
Reports or in the Disclosure Statement or other documents filed with the
Bankruptcy Court in connection with the Joint Plan, would, if there were an
unfavorable decision, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof (in his or her capacity as
such), 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, except as specifically disclosed in the SEC Reports or in the
Disclosure Statement or other documents filed with the Bankruptcy Court in
connection with the Joint Plan. There has not been, and to the knowledge of the
Company, there is not pending any investigation by the Commission involving the
Company or any current or former director or officer of the Company (in his or
her capacity as such). 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.
(l) 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.
(m) COMPLIANCE. 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 relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect. The Company is in compliance
with all effective requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended,
and the rules and regulations thereunder, that are applicable to it, except
where such noncompliance could not have or reasonably be expected to result in a
Material Adverse Effect.
(n) 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, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such permits.
14
(o) 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 their respective businesses and good and valid title in all personal
property owned by them that is material to their respective businesses, in each
case free and clear of all Liens, except for Permitted Liens and Liens that 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. 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,
except as could not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.
(p) PATENTS AND TRADEMARKS. 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, individually or in the aggregate, 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. Except as set forth in the
SEC Reports or in the Disclosure Statement or other documents filed with the
Bankruptcy Court in connection with the Joint Plan, to the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual Property
Rights.
(q) 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. The Company has no reason to believe that it will
not be able to renew its and the Subsidiaries' 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 on terms consistent with
market for the Company's and such Subsidiaries' respective lines of business.
(r) 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.
15
(s) INTERNAL ACCOUNTING CONTROLS. The Company and the 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
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-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's Form 10-KSB or 10-QSB, as the case may be, is
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures in accordance with Item
307 of Regulation S-K under the Exchange Act for the Company's most recently
ended fiscal quarter or fiscal year-end (such date, the "EVALUATION DATE"). The
Company presented in its most recently filed Form 10-KSB or Form 10-QSB 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 changes in the Company's internal
controls that would be required to be disclosed pursuant to Item 308(c) of
Regulation S-K under the Exchange Act or, to the Company's knowledge, in other
factors that could reasonably be expected to have a Material Adverse Effect on
the Company's internal controls.
(t) SOLVENCY. Based on the financial condition of the Company as of the
Closing Date at issue (and assuming that such Closing shall have occurred), (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 has no current intention
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).
(u) 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 Investors shall have no
obligation with respect to any fees or with respect to any claims (other than
such fees or commissions owed by a Investor pursuant to written agreements
executed by such Investor which fees or commissions shall be the sole
responsibility of such Investor) 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.
16
(v) CERTAIN REGISTRATION MATTERS. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Investors under the Transaction Documents. The
Company is eligible to register the resale of its Common Stock for resale by the
Investors under Form SB-2 promulgated under the Securities Act. The Company has
not granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority that have not been satisfied or
exercised.
(w) LISTING AND MAINTENANCE REQUIREMENTS. Except as specified in the
SEC Reports, the Company has not, in the two years preceding the date hereof,
received notice from any Trading Market to the effect that the Company is not in
compliance with the listing or maintenance requirements thereof. The Company is,
and has no reason to believe that it will not in the foreseeable future continue
to be, in compliance with the listing and maintenance requirements for continued
listing of the Common Stock on the Trading Market on which the Common Stock is
currently listed or quoted. The issuance and sale of the Securities under the
Transaction Documents does not contravene the rules and regulations of the
Trading Market on which the Common Stock is currently listed or quoted, and no
approval of the shareholders of the Company thereunder is required for the
Company to issue and deliver to the Investors the Securities contemplated by
Transaction Documents.
(x) INVESTMENT COMPANY. The Company is not, and is not an Affiliate of,
and immediately following Closing will not have become, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(y) APPLICATION OF TAKEOVER PROTECTIONS. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors or
shareholders of the Company prior to any Closing Date as a result of the
Investors and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including without limitation the
Company's issuance of the Securities and the Investors' ownership of the
Securities.
(z) NO ADDITIONAL AGREEMENTS. The Company does not have any agreement
or understanding with any Investor with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction
Documents.
17
(aa) COMPLIANCE WITH ERISA. (i) Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Code in respect of any Plan, (ii)
failed to make any required contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan
or Benefit Arrangement, which has resulted or could result in the imposition of
a Lien or the posting of a bond or other security under ERISA or the Code or
(iii) incurred any liability under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA.
(ii) The benefit plans not covered under clause (a) above
(including profit sharing, deferred compensation, stock option, employee stock
purchase, bonus, retirement, health or insurance plans, collectively the
"BENEFIT PLANS") relating to the employees of the Company are duly registered
where required by, and are in good standing in all material respects under, all
applicable laws. All required employer and employee contributions and premiums
under the Benefit Plans to the date hereof have been made, the respective fund
or funds established under the Benefit Plans are funded in accordance with
applicable laws, and no past service funding liabilities exist thereunder.
(iii) No Benefit Plans have any unfunded liabilities, either
on a "going concern" or "winding up" basis and determined in accordance with all
applicable laws and actuarial practices and using actuarial assumptions and
methods that are reasonable in the circumstances. No event has occurred and no
condition exists with respect to any Benefit Plans that has resulted or could
reasonably be expected to result in any pension plan having its registration
revoked or wound up (in whole or in part) or refused for the purposes of any
applicable laws or being placed under the administration of any relevant pension
benefits regulatory authority or being required to pay any taxes or penalties
(in any material amounts) under any applicable laws.
(bb) TAXES. All United States federal, state, county, municipality
local or foreign income tax returns and all other material tax returns
(including foreign tax returns) which are required to be filed by or on behalf
of the Company and each Subsidiary have been filed and all material taxes due
pursuant to such returns or pursuant to any assessment received by the Company
and each Subsidiary have been paid except those being disputed in good faith and
for which adequate reserves have been established. The charges, accruals and
reserves on the books of the Company and each Subsidiary in respect of taxes or
other governmental charges have been established in accordance with GAAP.
(cc) ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL CALLS. Except
for litigation described in the SEC Reports, there are no liabilities of the
Company or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than (i) those liabilities provided for in
the Company's financial statements and (ii) other undisclosed liabilities which,
individually or in the aggregate, could not have, or reasonably be expected to
result in, a Material Adverse Effect.
18
(dd) SECURED INDEBTEDNESS. As of each Closing Date, other than as set
forth in SCHEDULE 3.1(DD), the Company has no Debt that is secured by any Lien.
(ee) SENIORITY. As of the date of this Agreement, except as set forth
on SCHEDULE 3.1(EE), no indebtedness of the Company is senior to the Notes in
right of payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise.
(ff) DISCLOSURE. The Company confirms that neither it nor any Person
acting on its behalf has provided any Investor or its respective agents or
counsel with any information that the Company believes constitutes material,
non-public information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information. The Company understands
and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Investors regarding the Company, its business and the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Company's representations and warranties set forth in this
Agreement) are true and correct in all material respects 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.
3.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
hereby, for itself and for no other Investor, represents and warrants to the
Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Investor is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such Investor.
Each of this Agreement, the Registration Rights Agreement and the Security
Agreement has been duly executed by such Investor, and when delivered by such
Investor in accordance with terms hereof, will constitute the valid and legally
binding obligation of such Investor, enforceable against it in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
(b) INVESTMENT INTENT. Such Investor 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 Investor'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 Investor to hold the Securities for any period of time. Such Investor is
acquiring the Securities hereunder in the ordinary course of its business. Such
Investor does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.
19
(c) INVESTOR STATUS. At the time such Investor 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 Investor is not a
registered broker-dealer under Section 15 of the Exchange Act.
(d) GENERAL SOLICITATION. Such Investor 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.
(e) ACCESS TO INFORMATION. Such Investor acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(f) CERTAIN TRADING ACTIVITIES. Such Investor has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Investor, engaged in any transactions in the securities
of the Company (including, without limitations, any Short Sales involving the
Company's securities) since the earlier to occur of (1) the time that such
Investor was first contacted by the Company or placement agent engaged by the
Company regarding an investment in the Company and (2) the 20th day prior to the
time that the transactions contemplated by this Agreement are publicly disclosed
by the Company. Such Investor covenants that neither it nor any Person acting on
its behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company (including Short Sales) prior to
the time that the transactions contemplated by this Agreement are publicly
disclosed. Notwithstanding the foregoing, in the case of an Investor that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Investor's assets and the portfolio managers have no
actual knowledge of the investment decisions made by the portfolio managers
managing other portions of such Investor's assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement.
20
(g) INDEPENDENT INVESTMENT DECISION. Such Investor has independently
evaluated the merits of its decision to purchase Securities pursuant to this
Agreement, and such Investor confirms that it has not relied on the advice of
any other Investor's business and/or legal counsel in making such decision.
The Company acknowledges and agrees that no Investor has made or makes
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 (a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of the Securities
other than pursuant to an effective registration statement, to the Company, to
an Affiliate of an Investor 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.
(b) Certificates evidencing the Securities will contain the following
legend, until such time as they are not required under Section 4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
CONVERSION OR EXERCISE OF THESE SECURITIES HAVE BEEN
REGISTERED] [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 REASONABLY ACCEPTABLE TO THE
COMPANY. [THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
CONVERSION OR EXERCISE OF THESE SECURITIES] [THESE SECURITIES]
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
SECURED BY SUCH SECURITIES.
21
The Company acknowledges and agrees that an Investor may from time to
time pledge, and/or grant a security interest in some or all of the Securities
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or account, such
Investor may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval or consent
of the Company and no legal opinion of legal counsel to the pledgee, secured
party or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Investor transferee of the pledge. No notice shall be required of
such pledge. At the appropriate Investor'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 a pledge or transfer of the
Securities including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of selling
stockholders thereunder.
(c) Certificates evidencing Underlying Shares and Warrant Shares shall
not contain any legend (including the legend set forth in Section 4.1(b)): (i)
while a registration statement (including the Registration Statement) covering
such Underlying Shares or Warrant Shares is then effective, or (ii) following a
sale or transfer of such Securities pursuant to Rule 144 (assuming the
transferor is not an Affiliate of the Company), or (iii) while such Securities
are eligible for sale under Rule 144(k). 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. The Company
agrees that it shall, within three Trading Days following such time as
restrictive legends would not then be required under this Section 4.1(c), issue
and deliver to such Investor certificates that are free of restrictive legends
representing Underlying Shares or Warrant Shares in replacement of Underlying
Shares or Warrant Shares previously issued with restrictive legends.
4.2 FURNISHING OF INFORMATION. As long as any Investor owns the
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 Investor owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Investors and make publicly available in accordance with Rule 144(c) such
information as is required for the Investors to sell the Underlying Shares and
Warrant Shares 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 the
Underlying Shares and Warrant Shares without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144.
22
4.3 LISTING OF SECURITIES. The Company agrees, (i) if the Company
applies to have the Common Stock traded on any other Trading Market, it will
include in such application the Underlying Shares and Warrant Shares, and will
take such other action as is necessary or desirable to cause the Underlying
Shares and Warrant Shares to be listed on such other Trading Market as promptly
as possible, and (ii) it 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 material respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Trading Market.
4.4 SUBSEQUENT SECURITIES OFFERINGS.
(a) During such time as an Investor holds any principal amount of
Notes, in the event the Company, directly or indirectly, offers, sells, grants
any option to purchase, or otherwise disposes of (or announces any offer, sale,
grant or any option to purchase or other disposition of any of Common Stock or
Common Stock Equivalents or any of its Subsidiaries' equity or Common Stock
Equivalents (such offer, sale, grant, disposition or announcement being referred
to as "SUBSEQUENT PLACEMENT"), the Company shall deliver to each Investor a
written notice (each, a "SUBSEQUENT PLACEMENT NOTICE") of its intention to
effect such Subsequent Placement, which specifies in reasonable detail all of
the material terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the names of the investors (including the investment
manager of such investors, if any) and the investment bankers with whom such
Subsequent Placement is proposed to be effected, and attached to which shall be
a term sheet or similar document. Each Investor shall have until 6:30 p.m. (New
York City time) on the fifth Trading Day after its respective receipt of the
Subsequent Placement Notice to notify Company of its intention to provide,
subject to completion of mutually acceptable documentation, in all or a portion
of such financing on the same terms as set forth in the Subsequent Placement
Notice. In the event that the Investors do not timely elect to provide the
entire financing subject to the Subsequent Placement Notice and the Company
shall not have consummated the portion of the Subsequent Placement for which
such elections shall not have been so made on the terms and to the Persons
specified in the Subsequent Placement Notice within 30 days following the
expiration of the time to so elect, the Company shall provide each Investor with
a second Subsequent Placement Notice and each Investor will again have the right
of first refusal set forth in this Section. If the Investors indicate in the
aggregate a willingness to provide financing in excess of the amount set forth
in the Subsequent Placement Notice, then each Investor will be entitled to
provide financing pursuant to such Subsequent Placement Notice up to an amount
of all such proceeds equal to such Investor's pro rata portion of all Investment
Amounts hereunder.
(b) The Company's obligations under this Section 4.4 shall not apply to
any grant or issuance by the Company of any of the following: (i) the issuance
of securities upon the exercise or conversion of any Common Stock Equivalents
issued by the Company prior to the date of this Agreement (but will apply to any
amendments, modifications and reissuances thereof), (ii) the grant of options or
warrants, or the issuance of additional securities, under any duly authorized
Company stock option, restricted stock plan or stock purchase plan whether now
existing or approved by the Company and its stockholders in the future (but not
as to any amendments or other modifications to the number of Common Stock
issuable thereunder, the terms set forth therein, or the exercise price set
forth therein, unless such amendments or other modifications are approved by the
Company's stockholders), or (iii) the issuance of Common Stock Equivalents
pursuant to a Strategic Transaction. 4.5 ACKNOWLEDGMENT OF DILUTION. The Company
acknowledges that the issuance of Underlying Shares upon conversion of Notes and
Warrant Shares upon exercise of Warrants will result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial. The
Company further acknowledges that its obligation to honor conversions under the
Notes is unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim that the Company may have against any Investor.
23
4.6 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, 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 Investors, or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market in a manner that would require
stockholder approval of the sale of the Securities to the Investors.
4.7 RESERVATION OF SHARES. The Company shall maintain a reserve from
its duly authorized shares of Common Stock to comply with its conversion
obligations under the Notes. If on any date the Company would be, if notice of
conversion were to be delivered on such date, precluded from issuing the number
of (i) Underlying Shares, as the case may be, issuable upon conversion in full
of the Notes or (ii) Warrant Shares, as the case may be, issuable upon exercise
in full of the Warrants, due to the unavailability of a sufficient number of
authorized but unissued or reserved shares of Common Stock, then the Board of
Directors of the Company shall promptly prepare and mail to the stockholders of
the Company proxy materials or other applicable materials requesting
authorization to amend the Company's certificate of incorporation or other
organizational document to increase the number of shares of Common Stock which
the Company is authorized to issue so as to provide enough shares for issuance
of the Underlying Shares and Warrant Shares. In connection therewith, the Board
of Directors shall (a) adopt proper resolutions authorizing such increase, (b)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders as soon as practicable, but in any event not later than the
60th day after delivery of the proxy or other applicable materials relating to
such meeting) and (c) within five Business Days of obtaining such stockholder
authorization, file an appropriate amendment to the Company's certificate of
incorporation or other organizational document to evidence such increase.
4.8 CONVERSION PROCEDURES. The form of Conversion Notice included in
and as defined in the Notes sets forth the totality of the procedures required
by the Investors in order to convert the Notes. The Company shall honor
conversions of the Notes and shall deliver Underlying Shares in accordance with
the terms, conditions and time periods set forth in the Transaction Documents.
24
4.9 SUBSEQUENT REGISTRATIONS. Other than pursuant to the Registration
Statement, prior to the Effective Date, the Company may not file any
registration statement with the Commission with respect to any securities of the
Company other than registration statements on Form S-8 promulgated by the
Commission.
4.10 SECURITIES LAWS DISCLOSURE; PUBLICITY. By 9:00 a.m. (New York City
time) on the Trading Day following the execution of this Agreement, and by 9:00
a.m. (New York City time) on the Trading Day following the Closing Date, the
Company shall issue press releases in forms approved by the Investors disclosing
the transactions contemplated hereby. On the Trading Day following the execution
of this Agreement the Company will file a Current Report on Form 8-K disclosing
the material terms of the Transaction Documents (and attach as exhibits thereto
the Transaction Documents), and on the Trading Day following the Closing Date
the Company will file an additional Current Report on Form 8-K to disclose the
Closing. In addition, the Company will make such other filings and notices in
the manner and time required by the Commission and the Trading Market on which
the Common Stock is listed. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Investor, or include the name of any Investor
in any filing with the Commission (other than the Registration Statement and any
exhibits to filings made in respect of this transaction in accordance with
periodic filing requirements under the Exchange Act) or any regulatory agency or
Trading Market, without the prior written consent of such Investor, except to
the extent such disclosure is required by law or Trading Market regulations.
4.11 LIMITATION ON ISSUANCE OF FUTURE PRICED SECURITIES. During the six
months following the Closing Date, the Company shall not issue any "Future
Priced Securities" as such term is described by NASD IM-4350-1.
4.12 INDEMNIFICATION OF INVESTORS. In addition to the indemnity
provided in the Registration Rights Agreement, the Company will indemnify and
hold the Investors and their directors, officers, shareholders, partners,
employees and agents (each, an "INVESTOR 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 (collectively, "Losses")
that any such Investor Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party 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.
25
4.13 NON-PUBLIC INFORMATION. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Investor
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Investor
shall have executed a written agreement regarding the confidentiality and use of
such information.
4.14 USE OF PROCEEDS. The Company will use the net proceeds from the
sale of the Securities hereunder only for working capital purposes and to
satisfy the Company's obligations under the Joint Plan.
4.15 PAYMENT OF CASH DIVIDEND. The Company agrees, so long as any of
the Notes are outstanding, not to declare, pay or make any provision for any
cash dividend or distribution with respect to the Common Stock of the Company,
without first obtaining the approval of the Required Investors.
4.16 EXISTENCE; CONDUCT OF BUSINESS. The Company will, and will cause
each of the Subsidiaries to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business, PROVIDED, that the foregoing shall not prohibit (a) any sale,
lease, transfer or other disposition permitted by this Agreement, or (b) any
merger of (i) any domestic Subsidiary with any other domestic Subsidiary, (ii)
any domestic Subsidiary with and into the Company, or (iii) any foreign
Subsidiary with any other foreign Subsidiary.
ARTICLE V.
NEGATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof until
the date that the Notes have either been repaid in their entirety and/or
converted entirely into Common Stock, the Company shall be bound according to
the restrictions set forth in each of the following negative covenants unless
any such restriction shall have been expressly waived in writing by the Required
Investors:
5.1 RESTRICTIONS ON CERTAIN AMENDMENTS. The Company will not amend the
rights and privileges granted under the Notes, to adversely affect the rights or
privileges granted under the Notes.
5.2 RESTRICTED PAYMENT. The Company shall not make any Restricted
Payment.
5.3 DEBT. The Company shall not create, incur, assume, become or be
liable in any manner in respect of, or suffer to exist, any Debt, except (a)
Debt in existence on the date hereof, as shown on Schedule 5.3(a), (b) trade
payables incurred and paid in the ordinary course of business, (c) Contingent
Liabilities in existence on the date hereof, as shown on Schedule 5.3(c), and
(d) Contingent Liabilities resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business (collectively (a)
through (d) shall be referred to as the "PERMITTED INDEBTEDNESS").
26
5.4 LIENS. The Company shall not create or suffer to exist any Lien
upon any of its properties, except (a) Liens created by the Security Agreement,
(b) Liens in existence on the date hereof, as disclosed herein, (c) tax,
mechanics', materialmen's, warehousemen's, laborer's and landlord and other
similar Liens relating to amounts that are not yet due and payable, or that are
being contested in good faith by appropriate proceedings, for which adequate
reserves have been established, (d) Liens incurred in the ordinary course of
business in connection with worker's compensation, unemployment insurance or
similar legislation and (e) Liens to secure the Permitted Indebtedness, provided
that (x) any Lien securing any purchase money financing shall be created
substantially simultaneously with the acquisition of such fixed or capital
asset, (y) such Liens do not at any time encumber any property other than the
property that is the subject of the purchase money financing, and (z) the
principal amount of Debt secured by any such purchase money financing shall at
no time exceed one hundred percent (100%) of the original purchase price of such
property at the time it was acquired. Except as provided in this Section 5.4,
the Company shall not hereafter agree with any Person (other than the Investors)
to xxxxx x Xxxx on any of its assets or to permit the pledge of any of its
equity interests.
5.5 AMENDMENT OF ORGANIZATIONAL DOCUMENTS. The Company shall not permit
any amendment to its articles of incorporation so as to adversely affect the
rights or privileges granted under the Notes.
5.6 SALE AND LEASEBACK. The Company shall not enter into any
arrangement whereby it sells or transfers any of its assets, and thereafter
rents or leases such assets.
5.7 BUSINESS. The Company shall not change the nature of its business
as now conducted (as described in the SEC Reports).
5.8 TRANSACTIONS WITH AFFILIATES. The Company shall not, directly or
indirectly, pay any funds to or for the account of, make any investment (whether
by acquisition of stock or indebtedness, by loan, advance, transfer of property,
guarantee or other agreement to pay, purchase or service, directly or
indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to, or participate in, or effect
any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate, except, on terms no less favorable than terms
that could be obtained by the Company from a Person that is not an Affiliate of
the Company upon negotiation at arms' length, as determined in good faith by the
Board; PROVIDED that no determination of the Board of Directors shall be
required with respect to any such transactions entered into in the ordinary
course of business.
5.9 LIMITATION ON RESTRICTIONS. The Company shall not enter into, or
suffer to exist, any agreement with any Person which prohibits or limits the
ability of the Company to (a) pay Debt owed to the Investors, except as
expressly permitted by the Security Agreement, (b) make loans or advances to the
Company or (c) transfer any of its properties or assets to the Company.
27
ARTICLE VI.
MISCELLANEOUS
6.1 FEES AND EXPENSES. At the Closing, the Company shall pay to Xxxxx
Xxxx LLP Four Hundred Twenty-Five Thousand Dollars ($425,000.00) as partial
reimbursement of Investors for their respective legal fees in the approximate
total amount of Five Hundred Seventy-Five Thousand Dollars ($575,000.00) in
connection with the Transaction Documents, it being understood that Xxxxx Xxxx
LLP has only rendered legal advice to Investors, and not to the Company or any
other Investor in connection with the transactions contemplated hereby, and that
each of the Company and the other Investors has relied for such matters on the
advice of its own respective counsel. Except as specified in the immediately
preceding sentence, 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 the Transaction Documents. The Company shall pay all stamp and
other taxes and duties levied in connection with the sale of the Notes.
6.2 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,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
6.3 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 (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 5:30 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 specified in this Section on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the 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 follows:
If to the Company: Epicus Communications Group, Inc.
0000 Xxxxxxx Xxxxx
Xxxx Xxxx Xxxxx, XX 00000
Facsimile: 000-000-0000
Attention: Chief Financial Officer
With a copy to: Xxxx & Xxxxx, P.A.
One Boca Place
Suite 337W
0000 Xxxxxx Xxxx
Xxxx Xxxxx, XX 00000
Facsimile: 000-000-0000
Attention: Xxxxx X. Xxxxxxxxx
If to an Investor: To the address set forth under such Investor's name
on the signature pages hereof;
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or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.4 AMENDMENTS; WAIVERS; NO ADDITIONAL CONSIDERATION. No provision of
this Agreement may be waived or amended except in a written instrument signed by
the Company and the Required Investors except that the conditions precedent set
forth in Sections 2.1(b) and 2.2(b) may only be waived by each Investor to be
bound by such waiver. 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. No consideration shall be offered or paid to any
Investor to amend or consent to a waiver or modification of any provision of any
Transaction Document unless the same consideration is also offered to all
Investors who then hold Notes. Without the written consent or the affirmative
vote of each Investor of Securities affected thereby, an amendment or waiver
under this Section 6.4 may not:
(a) change the maturity of the principal amount of, or the
interest payment date under, or the payment of liquidated damages, is due on,
any Note or Warrant;
(b) make any change that impairs the conversion or exercise
rights of any Securities;
(c) reduce the Event Equity Value under the Notes or amend or
modify in any manner adverse to the Holders of Securities the Company's
obligation to make such payments;
(d) amend the definition of Required Investors;
(e) change the currency of any amount owed or owing under the
Securities or any interest thereon from U.S. Dollars;
(f) impair the right of any Investor to institute
suit for the enforcement of any payment with respect to, or conversion or
exercise of, any Security; or
(g) modify the provisions of this Section 6.4 or
Section 6.5.
29
It shall not be necessary for the consent of the Investors under this
Section 6.4 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
6.5 TERMINATION. This Agreement may be terminated prior to the Closing:
(a) by written agreement of the Investors and the Company;
(b) by the Company or an Investor (as to itself but no other Investor)
upon written notice to the other, if the Closing shall not have taken place by
5:30 p.m. (New York City time) on the Outside Date; PROVIDED, that the right to
terminate this Agreement under this Section 6.5(b) shall not be available to any
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such time.
(c) by an Investor (as to itself but no other Investor) if it concludes
in good faith that any of the conditions precedent contained in Sections
2.1(d)(iv), (v) or (vi) shall have been breached or shall not be capable of
being satisfied by the Outside Date despite the assumed best efforts of the
Company.
In the event of a termination pursuant to this Section, the Company
shall promptly notify all non-terminating Investors and shall pay to the
terminating Investor(s) all of the fees and expenses incurred by such Investors
(including reasonable legal fees and expenses) in connection with this Agreement
and the transactions contemplated by this Agreement through the termination
date. Other than as to the foregoing fees and expenses, upon a termination in
accordance with this Section 6.5, the Company and the terminating Investor(s)
shall not have any further obligation or liability (including as arising from
such termination) to the other and no Investor will have any liability to any
other under the Transaction Documents Investor as a result therefrom.
6.6 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. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
6.7 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 the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Notes, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Investors."
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6.8 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 4.12 (as to each
Investor Party).
6.9 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all 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, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts 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 the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or 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 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 a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys' fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
6.10 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery of the
Securities.
6.11 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.
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6.12 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.
6.13 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not timely perform
its related obligations within the periods therein provided, then such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
6.14 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. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
6.15 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors 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.
6.16 PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to any Investor pursuant to any Transaction Document or an Investor
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.
6.17 INDEPENDENT NATURE OF INVESTORS' OBLIGATIONS AND RIGHTS. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
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6.18 LIMITATION OF LIABILITY. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
EPICUS COMMUNICATIONS GROUP, INC.
By:_______________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]
34
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
AJW PARTNERS, LLC
By: SMS Group, LLC
/s/ Xxxxx X. Xxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: Delaware
ADDRESS: 0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes:$________
Number of Warrants: ________
Aggregate Purchase Price:$________
35
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
/s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: Cayman Islands
ADDRESS: AJW Offshore, Ltd.
X.X. Xxx 00000 XXX
Xxxxx Xxxxxx, Xxxxxx Xxxxxx B.W.I.
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $_______
Number of Warrants: _______
Aggregate Purchase Price: $_______
36
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
/s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: New York
ADDRESS: 0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $________
Number of Warrants: ________
Aggregate Purchase Price: $________
37
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLP
/s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: New York
ADDRESS: 0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $______
Number of Warrants: ______
Aggregate Purchase Price: $______
38
EXHIBITS
Exhibit A Notes
Exhibit B Registration Rights Agreement
Exhibit C Warrant
Exhibit D Security Agreement
SCHEDULES
3.1(a) LIST OF SUBSIDIARIES.
3.1(dd) SECURED INDEBTEDNESS. The BellSouth Cure Claim
(as that term is defined in the Joint Plan).
3.1(ee) SENIORITY. The BellSouth Cure Claim
(as that term is defined in the Joint Plan).
5.3(a) DEBT. BellSouth Cure Claim (as that term is
defined in the Joint Plan);
claims of the Investors under the Old Debentures.
5.3(c) CONTINGENT LIABILITIES.
39
Epicus Communications Group, Inc.
0000 Xxxxxxx Xxxxx
Xxxx Xxxx Xxxxx, XX 00000
December 7, 2005
To the Undersigned Parties:
Re: Amended and Restated Purchase Agreement
Gentlemen:
This letter confirms certain agreements among Epicus Communications Group, Inc.,
a Florida corporation ("Epicus"), and certain investors identified below (the
"INVESTORS") in connection with the Purchase Agreement by and among Epicus and
the Investors (the "PURCHASE AGREEMENT") as approved by that certain Order of
the United States Bankruptcy Court, Southern District of Florida, West Palm
Beach Division dated September 30, 2005 (the "ORDER") which authorized the
Debtors' First Amended Joint Plan of Reorganization (the "PLAN").
The parties hereto acknowledge and agree that they intend to close the
transactions described in the Order and Purchase Agreement on or about December
7, 2005 (the "CLOSING"), however, the Purchase Agreement and the documents
described therein are to be amended and restated to encompass the terms provided
on the term sheet attached hereto as Exhibit A (such agreements collectively
referred to as the "AMENDED AND RESTATED Agreements"). Epicus and its officers
agree to use their best efforts to deliver fully executed versions of the
Amended and Restated Agreements no later than December 12, 2005. Until such
execution and delivery, the Investors will disburse only those amounts provided
for in the Plan. Upon execution and delivery of the Amended and Restated
Agreements, the Investors shall advance such sums as are required by the Amended
and Restated Agreements.
Further, the Notes and Debentures signed on or about May 28, 2004 between the
Company and the Investors (the "Old Debentures") shall be amended and restated
to provide the following:
1. To reflect the actual amount currently due and owing of
5,247,262.89;
2. The conversion price shall be changed from a variable conversion
price to a fixed conversion at 47.5 cents per share;
3. That such Notes and Debentures shall be guaranteed by Ocean Avenue
Advisors, LLC ("OAA") by a non-recourse personal guaranty which shall be secured
by a pledge of 100% of the common stock of Epicus owned by OAA and such pledge
shall provide that after the second year, on a quarterly basis, OAA will allowed
to sell such shares equal to the lesser of the following: a) the amount allowed
by applicable securities laws and b) such proportion of the shares that is equal
to the proportion of the total amount of cash or stock actually paid to the
Investors against the total obligations owed to the Investors under the Old
Debentures.
4. Furthermore, Xx. Xxxxxxx'x and Aptek's Communications Products
Inc.'s ("Aptek") shares shall be subject to a lock-up agreement with the
certificates being held in escrow by Xxxxx Xxxx, LLP. Xx. Xxxxxxx and Aptek will
be allowed, on a quarterly basis, to sell up to 36,000 shares collectively per
quarter, but only if the amount of shares proposed to be sold is in compliance
with all securities laws and the Company, Haryman and Aptek are in compliance
with all other agreements with the Investors.
5. Furthermore, Xxxxxx Xxxxxxxxx'x shares shall be subject to a lock-up
agreement with the certificates being held in escrow by Xxxxx Xxxx, LLP. Xx.
Xxxxxxxxx will be allowed, on a quarterly basis, to sell up to 5,200 shares per
quarter, but only if the amount of shares proposed to be sold is in compliance
with all securities laws and the Company, and Xxxxxxxxx are in compliance with
all other agreements with the Investors.
Remainder of Page Intentionally Left Blank
Nothing contained herein shall limit or otherwise affect the rights or
obligations of the parties under the Purchase Agreement.
If you are in agreement with the foregoing, please execute this letter in the
space indicated.
Very truly yours,
EPICUS COMMUNICATIONS GROUP, INC.
By: __________________________
Name:
Title:
Accepted and agreed to date first written above
AJW PARTNERS, LLC
By: SMS Group, LLC
/s/ Xxxxx X. Xxxxxxxx
____________________________________
Xxxxx X. Xxxxxxxx
Manager
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
/s/ Xxxxx X. Xxxxxxxx
____________________________________
Xxxxx X. Xxxxxxxx
Manager
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
/s/ Xxxxx X. Xxxxxxxx
____________________________________
Xxxxx X. Xxxxxxxx
Manager
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLP
/s/ Xxxxx X. Xxxxxxxx
____________________________________
Xxxxx X. Xxxxxxxx
Manager
Accepted and agreed to date first written above
/s/ Xxxxxx Xxxxxxx
______________________________________
Xxxxxx Xxxxxxx, an individual
APTEK COMMUNICATIONS PRODUCTS INC.
By: /s/ Xxxxxx Xxxxxxx
______________________________________
Xxxxxx Xxxxxxx, President
OCEAN AVENUE ADVISORS, LLC
By: /s/ Xxx Xxxxxx
______________________________________
Xxx Xxxxxx, Member
/s/ Xxxxxx Xxxxxxxxx
______________________________________
Xxxxxx Xxxxxxxxx, an individual
EPICUS COMMUNICATIONS
$ 3,750,000.00 INVESTMENT
PROPOSED TERM SHEET FOR AMENDED AND RESTATED
9% ASSET BACKED CONVERTIBLE NOTES
This final term sheet constitutes the agreed upon terms between the parties and
is binding upon the undersigned.
Issuer Epicus Communications
Instrument $3,750,000 9% Convertible Note due three years
after issuance.
Conversion Price 40% of the volume weighted average price
(VWAP) of the company's Common stock for the five
days immediately prior to closing.
Initial Market Price 100% of the volume weighted average
price (VWAP) of the company's Common stock for the
five days immediately prior to closing.
Term 36 months
Interest 9% maximum interest per annum payable monthly.
Interest rate resets to zero for any monthly
period in which the stock price is greater than
125% of the Initial Market Price.
Principal Payment Repayment shall be in cash or in
registered shares of common stock. The monthly
amortization shall commence 180 days after closing
according to a 30 month amortization schedule. At
the Company's option, the Company may repay in
common stock at the Conversion Price, otherwise
all payments must be in cash.
The Investor at its option may convert the note
into common stock if the market price for the
stock at the time of payment is above the Initial
Market Price.
If the Investor converts any stock prior to any
monthly amortization payment, those conversions
will be credited toward the next monthly principal
amortization and interest payment due. Any
conversions above the monthly principal
amortization and interest payment due amount will
be credit towards future payments.
Warrants Investor shall receive for each $1.00 of Note
investment warrants to purchase 2 shares of
Company common stock with an exercise price of
$.0027. Warrant terms shall include a five year
term from date of issuance, exercise price equal
to 100% of the initial market price per share,
cashless exercise will be permitted for 144k
tacking purposes. Warrants are callable by the
company if price of stock exceeds 150% of initial
market price. Upon calling the warrants company
must pay investor intrinsic value of warrant at
time of call. All existing warrants reset to the
lesser of their strike price or the Initial Market
Price.
Registration Rights With respect to the $ 3,750,000 the Company shall
undertake to register pursuant to form SB-2 200%
of the Company common stock underlying the
convertible note and any warrants referred to
herein with the SEC within 30 days of signature of
the definitive agreements and the effectiveness of
such registration shall be within 100 days of
signature. Penalties of 2% of the outstanding
principal balance (including accrued interest) per
month shall apply if the registration is not
effective within the allotted time frame. The
penalty may be paid in cash or stock at the option
of Investor, stock to be priced at average of 3
lowest intra-day trading prices within 20 trading
days prior to penalty due date discounted by 50%,
which due date shall be on a monthly basis. All
shares for this transaction shall be segregated by
the company for use in this transaction only.
Company shall also provide irrevocable transfer
agent instructions.
Collateral The company shall provide a first lien on all
assets of the Company.
Additional Penalties For default events, minimum redemption
of 130% x (outstanding principal + unpaid interest
+ any default and penalty payments due); Investor
can request payment in shares if Company unable to
pay.
Defaults Each month, if a default shall occur, then the new
Conversion Price shall be the lesser of the
current Conversion Price or 25% of the volume
weighted average price (VWAP) of the company's
Common stock for the previous five days. The
Investor for the month in which the default
occurred may freely convert into Common Stock at
the new Conversion Price.
Call Premium Prepayment available at 130% multiplied by
outstanding principal plus unpaid interest is only
available as long as the stock price of the common
stock of the Issuer is at $3.00 or less. If the
price of the common stock of the Issuer is greater
than $3.00 than the company can call these notes
by prepaying the notes for Intrinsic Value plus
unpaid interest. Intrinsic Value is computed by
outstanding principal added to the product of the
number of shares the notes are convertible into
and the difference between the price of the common
stock at the time of prepayment multiplied by the
Conversion Price:
Unpaid Interest + Outstanding Principal + (Number
of shares underlying convertible note * (Market
Price at time of redemption - Conversion Price)
Additional Costs/Fees -Audit Fees: (if the company has outstanding audit
expenses)
-Any outstanding obligations owed by the Company,
will be paid out of proceeds.
ALL COSTS/FEES TO BE DEDUCTED FROM FUNDS AS APPLICABLE.
Previous Debentures The definitive documentation shall amend
debentures previously issued by the Company to the
Investors such that the conversion price for such
debentures shall be fixed at 80% of the volume
weighted average price (VWAP) of the company's
Common stock for the five days immediately prior
to closing.
Documentation The definitive documentation shall contain such
additional provisions, including without
limitation representations, warranties, covenants,
agreements and remedies, as the Investor may
reasonably request. Documents will include:
-Secured Convertible Note Instrument
-Registration Rights Agreement
-Secured Convertible Note Purchase Agreement
-Collateral Stock Pledge as collateral
-Irrevocable Transfer Agent Instructions
-Security Agreement (UCC), assets/receivables
-Opinion of Legal Counsel
-Subject to complete due diligence/and
Use of Proceeds
-Key Man Life Insurance required on all
Key Executives
-Application to American Stock Exchange
-Acceptable evidence of valuation of
Intellectual Property
Confidentiality The Company agrees that it will not disclose, and
will not include in any public announcement, the
name of the Investor, unless expressly agreed to
by the Investor or unless and until such
disclosure is required by law or applicable
regulation, and then only to the extent of such
requirement.
Governing Law and
Jurisdiction New York law, New York Courts
Accepted and Agreed:
EPICUS COMMUNICATIONS
____________________________________
By:
Title:
AJW PARTNERS, LLC
By: SMS Group, LLC
/s/ Xxxxx X. Xxxxxxxx
____________________________________
Xxxxx X. Xxxxxxxx
Manager
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
/s/ Xxxxx X. Xxxxxxxx
____________________________________
Xxxxx X. Xxxxxxxx
Manager
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
/s/ Xxxxx X. Xxxxxxxx
____________________________________
Xxxxx X. Xxxxxxxx
Manager
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLP
/s/ Xxxxx X. Xxxxxxxx
____________________________________
Xxxxx X. Xxxxxxxx
Manager
