Multiband Corporation
Shares of Series A Convertible Preferred Stock and Common Stock Warrants
SUBSCRIPTION AGREEMENT
February __, 2005
Mercator Advisory Group LLC
Mercator Momentum Fund, LP
Mercator Momentum Fund III, LP
Monarch Pointe Fund, Ltd.
Pentagon Special Purpose Fund, Ltd.
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Multiband Corporation a Minnesota corporation (the "Company"), hereby confirms
its agreement with Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP,
Monarch Pointe Fund, Ltd., and Pentagon Special Purpose Fund, Ltd.
(collectively, the "Purchasers") and Mercator Advisory Group, LLC ("MAG"), as
set forth below.
1. The Securities. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the Purchasers an aggregate of: (a)
One Hundred Thousand (100,000) shares of its Series I Convertible Preferred
Stock (the "Series I Stock"), which shall be convertible into shares (the
"Conversion Shares") of the Company's Common Stock (the "Common Stock") in
accordance with the formula set forth in the Certificate of Determination
further described below and (b) Seven Million One Hundred Forty-Two Thousand
Eight Hundred Fifty-Eight (7,142,858) warrants, substantially in the form
attached hereto at Exhibit A (the "Warrants"), to acquire up to Seven Million
One Hundred Forty-Two Thousand Eight Hundred Fifty-Eight (7,142,858) shares of
Common Stock (the "Warrant Shares"). The rights, preferences and privileges of
the Series I Stock are as set forth in the Certificate of Determination of
Series A Preferred Stock as filed with the Secretary of State of the State of
Minnesota (the "Certificate of Determination") in the form attached hereto as
Exhibit B. The number of Conversion Shares and Warrant Shares that any Purchaser
may acquire at any time are subject to limitation in the Certificate of
Determination and in the Warrants, respectively, so that the aggregate number of
shares of Common Stock of which such Purchaser and all persons affiliated with
such Purchaser have beneficial ownership (calculated pursuant to Rule 13d-3 of
the Securities Exchange Act of 1934, as amended) does not at any time exceed
9.99% of the Company's then outstanding Common Stock (the "9.99% Limitation").
The Series I Stock and the Warrants are sometimes herein collectively
referred to as the "Securities." This Agreement, the Certificate of
Determination, Registration Rights Agreement and the Warrant Agreements are
sometimes herein collectively referred to as the "Transaction Documents."
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The Securities will be offered and sold to the Purchasers without such
offers and sales being registered under the Securities Act of 1933, as amended
(together with the rules and regulations of the Securities and Exchange
Commission (the "SEC") promulgated thereunder, the "Securities Act"), in
reliance on exemptions therefrom.
In connection with the sale of the Securities, the Company has made
available (including electronically via the SEC's XXXXX system) to Purchasers
its periodic and current reports, forms, schedules, proxy statements and other
documents (including exhibits and all other information incorporated by
reference) filed with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These reports, forms, schedules, statements,
documents, filings and amendments, are collectively referred to as the
"Disclosure Documents." All references in this Agreement to financial statements
and schedules and other information which is "contained," "included" or "stated"
in the Disclosure Documents (or other references of like import) shall be deemed
to mean and include all such financial statements and schedules, documents,
exhibits and other information which is incorporated by reference in the
Disclosure Documents.
2. Representations and Warranties of the Company. Except as set forth on
the Disclosure Schedule (the "Disclosure Schedule") delivered by the Company to
Purchasers on the Closing Date (as defined in Section 3 below), the Company
represents and warrants to and agrees with Purchasers and MAG as follows:
(a) The Disclosure Documents as of their respective dates did not,
and will not (after giving effect to any updated disclosures therein) as of the
Closing Date, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Disclosure
Documents and the documents incorporated or deemed to be incorporated by
reference therein, at the time they were filed or hereafter are filed with the
SEC, complied and will comply, at the time of filing, in all material respects
with the requirements of the Securities Act and/or the Exchange Act, as the case
may be, as applicable.
(b) Schedule A attached hereto sets forth a complete list of the
subsidiaries of the Company (the "Subsidiaries"). Each of the Company and its
Subsidiaries has been duly incorporated and each of the Company and the
Subsidiaries is validly existing in good standing as a corporation under the
laws of its jurisdiction of incorporation, with the requisite corporate power
and authority to own its properties and conduct its business as now conducted as
described in the Disclosure Documents and is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
business, condition (financial or other), properties, prospects or results of
operations of the Company and the Subsidiaries, taken as a whole (any such
event, a "Material Adverse Effect"); as of the Closing Date, the Company will
have the authorized, issued and outstanding capitalization set forth in on
Schedule B attached hereto (the "Company Capitalization"); except as set forth
in the Disclosure Documents or on Schedule A, the Company does not have any
subsidiaries or own directly or indirectly any of the capital stock or other
equity or long-term debt securities of or have any equity interest in any other
person; all of the outstanding shares of capital stock of the Company and the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights and are owned free and clear of all liens, encumbrances, equities, and
restrictions on transferability (other than those imposed by the Securities Act
and the state securities or "Blue Sky" laws) or voting; except as set forth in
the Disclosure Documents, all of the outstanding shares of capital stock of the
Subsidiaries are owned, directly or indirectly, by the Company; except as set
forth in the Disclosure Documents, no options, warrants or other rights to
purchase from the Company or any Subsidiary, agreements or other obligations of
the Company or any Subsidiary to issue or other rights to convert any obligation
into, or exchange any securities for, shares of capital stock of or ownership
interests in the Company or any Subsidiary are outstanding; and except as set
forth in the Disclosure Documents or on Schedule C, there is no agreement,
understanding or arrangement among the Company or any Subsidiary and each of
their respective stockholders or any other person relating to the ownership,
registration or disposition of any capital stock of the Company or any
Subsidiary or the election of directors of the Company or any Subsidiary or the
governance of the Company's or any Subsidiary's affairs, and, if any, such
agreements, understandings and arrangements will not be breached or violated as
a result of the execution and delivery of, or the consummation of the
transactions contemplated by, the Transaction Documents.
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(c) The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Transaction Documents.
Each of the Transaction Documents has been duly and validly authorized by the
Company and, when executed and delivered by the Company, will constitute a valid
and legally binding agreement of the Company, enforceable against the Company in
accordance with its terms except as the enforcement thereof may be limited by
(A) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally or (B) general principles of equity and the
discretion of the court before which any proceeding therefore may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity) (collectively, the "Enforceability Exceptions").
(d) The Series I Stock and the Warrants have been duly authorized
and, when issued upon payment thereof in accordance with this Agreement, will
have been validly issued, fully paid and non-assessable. The Conversion Shares
issuable have been duly authorized and validly reserved for issuance, and when
issued upon conversion of the Series I Stock in accordance with the terms of the
Certificate of Determination, will have been validly issued, fully paid and
non-assessable. The Warrant Shares have been duly authorized and validly
reserved for issuance, and when issued upon exercise of the Warrants in
accordance with the terms thereof, will have been validly issued, fully paid and
non-assessable. The Common Stock of the Company conforms to the description
thereof contained in the Disclosure Documents. The stockholders of the Company
have no preemptive or similar rights with respect to the Common Stock.
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(e) No consent, approval, authorization, license, qualification,
exemption or order of any court or governmental agency or body or third party is
required for the performance of the Transaction Documents by the Company or for
the consummation by the Company of any of the transactions contemplated thereby,
or the application of the proceeds of the issuance of the Securities as
described in this Agreement, except for such consents, approvals,
authorizations, licenses, qualifications, exemptions or orders (i) as have been
obtained on or prior to the Closing Date, (ii) as are not required to be
obtained on or prior to the Closing Date that will be obtained when required, or
(iii) the failure to obtain which would not, individually or in the aggregate,
have a Material Adverse Effect.
(f) Except as set forth on Schedule D, none of the Company or the
Subsidiaries is (i) in material violation of its articles of incorporation or
bylaws (or similar organizational document), (ii) in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to it or any of
its properties or assets, which breach or violation would, individually or in
the aggregate, have a Material Adverse Effect, or (iii) except as described in
the Disclosure Documents, in default (nor has any event occurred which with
notice or passage of time, or both, would constitute a default) in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate or agreement or
instrument to which it is a party or to which it is subject, which default
would, individually or in the aggregate, have a Material Adverse Effect.
(g) The execution, delivery and performance by the Company of the
Transaction Documents and the consummation by the Company of the transactions
contemplated thereby and the fulfillment of the terms thereof will not (a)
violate, conflict with or constitute or result in a breach of or a default under
(or an event that, with notice or lapse of time, or both, would constitute a
breach of or a default under) any of (i) the terms or provisions of any
contract, indenture, mortgage, deed of trust, loan agreement, note, lease,
license, franchise agreement, permit, certificate or agreement or instrument to
which any of the Company or the Subsidiaries is a party or to which any of their
respective properties or assets are subject, (ii) the Certificate of
Incorporation or bylaws of any of the Company or the Subsidiaries (or similar
organizational document) or (iii) any statute, judgment, decree, order, rule or
regulation of any court or governmental agency or other body applicable to the
Company or the Subsidiaries or any of their respective properties or assets or
(b) result in the imposition of any lien upon or with respect to any of the
properties or assets now owned or hereafter acquired by the Company or any of
the Subsidiaries; which violation, conflict, breach, default or lien would,
individually or in the aggregate, have a Material Adverse Effect.
(h) The audited consolidated financial statements included in the
Disclosure Documents present fairly the consolidated financial position, results
of operations, cash flows and changes in shareholders' equity of the entities,
at the dates and for the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis; the interim un-audited consolidated financial statements included in the
Disclosure Documents present fairly the consolidated financial position, results
of operations and cash flows of the entities, at the dates and for the periods
to which they relate subject to year-end audit adjustments and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis with the audited consolidated financial statements included
therein; the selected financial and statistical data included in the Disclosure
Documents present fairly the information shown therein and have been prepared
and compiled on a basis consistent with the audited financial statements
included therein, except as otherwise stated therein; and each of the auditors
previously engaged by the Company or to be engaged in the future by the Company
is an independent certified public accountant as required by the Securities Act
for an offering registered thereunder.
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(i) Except as described in the Disclosure Documents, there is not
pending or, to the knowledge of the Company, threatened any action, suit,
proceeding, inquiry or investigation, governmental or otherwise, to which any of
the Company or the Subsidiaries is a party, or to which their respective
properties or assets are subject, before or brought by any court, arbitrator or
governmental agency or body, that, if determined adversely to the Company or any
such Subsidiary, would, individually or in the aggregate, have a Material
Adverse Effect or that seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to be sold hereunder
or the application of the proceeds therefrom or the other transactions described
in the Disclosure Documents.
(j) The Company and the Subsidiaries own or possess adequate
licenses or other rights to use all patents, trademarks, service marks, trade
names, copyrights and know-how that are necessary to conduct their businesses as
described in the Disclosure Documents. None of the Company or the Subsidiaries
has received any written notice of infringement of (or knows of any such
infringement of) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how that, if such
assertion of infringement or conflict were sustained, would, individually or in
the aggregate, have a Material Adverse Effect.
(k) Each of the Company and the Subsidiaries possesses all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made all declarations and filings with, all federal, state, local
and other governmental authorities, all self-regulatory organizations and all
courts and other tribunals presently required or necessary to own or lease, as
the case may be, and to operate its respective properties and to carry on its
respective businesses as now or proposed to be conducted as set forth in the
Disclosure Documents ("Permits"), except where the failure to obtain such
Permits would not, individually or in the aggregate, have a Material Adverse
Effect and none of the Company or the Subsidiaries has received any notice of
any proceeding relating to revocation or modification of any such Permit, except
as described in the Disclosure Documents and except where such revocation or
modification would not, individually or in the aggregate, have a Material
Adverse Effect.
(l) Other than dividends on preferred stock totaling $20,660 paid in
the fourth quarter of 2004, subsequent to the respective dates as of which
information is given in the Disclosure Documents and except as described
therein, (i) the Company and the Subsidiaries have not incurred any material
liabilities or obligations, direct or contingent, or entered into any material
transactions not in the ordinary course of business or (ii) the Company and the
Subsidiaries have not purchased any of their respective outstanding capital
stock, or declared, paid or otherwise made any dividend or distribution of any
kind on any of their respective capital stock or otherwise (other than, with
respect to any of such Subsidiaries, the purchase of capital stock by the
Company), (iii) there has not been any material increase in the long-term
indebtedness of the Company or any of the Subsidiaries, (iv) there has not
occurred any event or condition, individually or in the aggregate, that has a
Material Adverse Effect, and (v) the Company and the Subsidiaries have not
sustained any material loss or interference with respect to their respective
businesses or properties from fire, flood, hurricane, earthquake, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding.
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(m) There are no material legal or governmental proceedings nor are
there any material contracts or other documents required by the Securities Act
to be described in a prospectus that are not described in the Disclosure
Documents. Except as described in the Disclosure Documents, none of the Company
or the Subsidiaries is in default under any of the contracts described in the
Disclosure Documents, has received a notice or claim of any such default or has
knowledge of any breach of such contracts by the other party or parties thereto,
except for such defaults or breaches as would not, individually or in the
aggregate, have a Material Adverse Effect.
(n) Each of the Company and the Subsidiaries has good and marketable
title to all real property described in the Disclosure Documents as being owned
by it and good and marketable title to the leasehold estate in the real property
described therein as being leased by it, free and clear of all liens, charges,
encumbrances or restrictions, except, in each case, as described in the
Disclosure Documents or such as would not, individually or in the aggregate,
have a Material Adverse Effect. All material leases, contracts and agreements to
which the Company or any of the Subsidiaries is a party or by which any of them
is bound are valid and enforceable against the Company or any such Subsidiary,
are, to the knowledge of the Company, valid and enforceable against the other
party or parties thereto and are in full force and effect.
(o) Each of the Company and the Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid all taxes shown as due thereon; and
other than tax deficiencies which the Company or any Subsidiary is contesting in
good faith and for which adequate reserves have been provided in accordance with
generally accepted accounting principles, there is no tax deficiency that has
been asserted against the Company or any Subsidiary that would, individually or
in the aggregate, have a Material Adverse Effect.
(p) None of the Company or the Subsidiaries is, or immediately after
the Closing Date will be, required to register as an "investment company" or a
company "controlled by" an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act").
(q) None of the Company or the Subsidiaries or, to the knowledge of
any of such entities' directors, officers, employees, agents or controlling
persons, has taken, directly or indirectly, any action designed, or that might
reasonably be expected, to cause or result in the stabilization or manipulation
of the price of the Common Stock.
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(r) None of the Company, the Subsidiaries or any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act)
directly, or through any agent, engaged in any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) in connection with the offering of the Securities or engaged in
any other conduct that would cause such offering to be constitute a public
offering within the meaning of Section 4(2) of the Securities Act. Assuming the
accuracy of the representations and warranties of the Purchasers in Section 6
hereof, it is not necessary in connection with the offer, sale and delivery of
the Securities to the Purchasers in the manner contemplated by this Agreement to
register any of the Securities under the Securities Act.
(s) There is no strike, labor dispute, slowdown or work stoppage
with the employees of the Company or any of the Subsidiaries which is pending
or, to the knowledge of the Company or any of the Subsidiaries, threatened.
(t) Each of the Company and the Subsidiaries carries general
liability insurance coverage comparable to other companies of its size and
similar business.
(u) Each of the Company and the Subsidiaries maintains internal
accounting controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B) transactions are
recorded as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, and (C) access to its material assets is
permitted only in accordance with management's authorization and (D) the values
and amounts reported for its material assets are compared with its existing
assets at reasonable intervals.
(v) Except for a due diligence fee payable to MAG, and a finder's
fee payable to X.X. Xxxxxxxxxx , the Company does not know of any claims for
services, either in the nature of a finder's fee or financial advisory fee, with
respect to the offering of the Securities and the transactions contemplated by
the Transaction Documents.
(w) The Common Stock is traded on the NADSAQ Small Cap Index. Except
as described in the Disclosure Documents, the Company currently is not in
violation of, and the consummation of the transactions contemplated by the
Transaction Documents will not violate, any rule of the National Association of
Securities Dealers.
(x) The Company is eligible to use S-1 for the resale of the
Conversion Shares and the Warrant Shares by Purchasers or their transferees and
the Warrant Shares by Purchasers, MAG or their transferees. The Company has no
reason to believe that it is not capable of satisfying the registration or
qualification requirements (or an exemption therefrom) necessary to permit the
resale of the Conversion Shares and the Warrant Shares under the securities or
"blue sky" laws of any jurisdiction within the United States.
(y) Set forth on Schedule E is the Company's intended use of the
proceeds from this transaction.
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(z) Except as set forth on Schedule F, none of the officers or
directors of the Company (i) has been convicted of any crime (other than traffic
violations or misdemeanors not involving fraud) or is currently under
investigation or indictment for any such crime, (ii) has been found by a court
or governmental agency to have violated any securities or commodities law or to
have committed fraud or is currently a party to any legal proceeding in which
either is alleged, (iii) has been the subject of a proceeding under the
bankruptcy laws or any similar state laws, or (iv) has been an officer,
director, general partner, or managing member of an entity which has been the
subject of such a proceeding.
3. Purchase, Sale and Delivery of the Securities.
(a) Issuance of Series I Stock and Warrants. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Purchasers, and Purchasers agree to purchase from the
Company, 100,000 shares of Series I Stock at $100.00 per share in the amounts
shown on the signature page hereto. In connection with the purchase and sale of
Series I Stock, for no additional consideration, the Purchasers and MAG will
receive Warrants to purchase up to an aggregate of Seven Million One Hundred
Forty-Two Thousand Eight Hundred Fifty-Eight (7,142,858) shares of Common Stock,
as set forth on the signature page hereto.
(b) Closing. The closing of the transactions described herein (the
"Closing") shall take place at a time and on a date (the "Closing Date") to be
specified by the parties, which will be no later than 5:00 p.m. (Pacific time)
on February 3, 2005. On the Closing Date, the Company shall deliver (a)
certificates in definitive form for the Series I Stock in the names and amounts
set forth on the signature page hereto, (b) Warrants, in the names and amounts
set forth on the signature page hereto, (c) the Subscription Agreement,
Certificate of Designation and Registration Rights Agreement, each duly executed
on behalf of the Company, and (d) the Opinion of Counsel in the form attached
hereto as Exhibit C. On the Closing Date, Purchasers shall deliver the Purchase
Price or $10,000,000 by wire transfer of immediately available funds to an
escrow account mutually acceptable to the parties, and (ii) the Subscription
Agreement and Registration Rights Agreement, each duly executed on behalf of the
Purchasers and MAG. The Closing will occur when all documents and instruments
necessary or appropriate to effect the transactions contemplated herein are
exchanged by the parties and all actions taken at the Closing will be deemed to
be taken simultaneously.
(c) Release from Escrow. Upon receipt of written confirmation from
MAG that all documents and instruments have been duly executed and delivered,
the escrow holder shall release (a) to the Company, the sum of $9,580,000 and
(b) to MAG, the Due Diligence Fee in the amount of $400,000, and the legal fees
in the amount of $20,000.
4. Certain Covenants of the Company. The Company covenants and agrees with
each Purchaser as follows:
(a) None of the Company or any of its Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Securities Act) which could be integrated with the
sale of the Securities in a manner which would require the registration under
the Securities Act of the Securities.
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(b) The Company will not become, at any time prior to the expiration
of three years after the Closing Date, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under the Investment Company
Act.
(c) None of the proceeds of the Series I Stock will be used to
reduce or retire any insider note or convertible debt held by an officer or
director of the Company.
(d) Subject to Section 10 of this Agreement, the Conversion Shares
and the Warrant Shares will be eligible for trading on the NASDAQ Small Cap or
such market on which the Company's shares are subsequently listed or traded,
immediately following the effectiveness of the Registration Statement.
(e) The Company will use best efforts to do and perform all things
required to be done and performed by it under this Agreement and the other
Transaction Documents and to satisfy all conditions precedent on its part to the
obligations of the Purchasers to purchase and accept delivery of the Securities.
(f) Subject to any rights of first refusal held by the persons
listed on Schedule 4(f), commencing on the Closing Date and continuing until the
earlier of (A) one (1) year after the Closing Date, or (B) all shares of Series
I Stock have been converted into Common Stock, the Purchasers shall have a right
of first refusal on any financing in which the Company is the issuer of debt or
equity securities.
5. Conditions of the Purchasers' Obligations. The obligation of each
Purchaser to purchase and pay for the Securities is subject to the following
conditions unless waived in writing by the Purchaser:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects (other than
representations and warranties with a Material Adverse Effect qualifier, which
shall be true and correct as written) on and as of the Closing Date; the Company
shall have complied in all material respects with all agreements and satisfied
all conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Date.
(b) None of the issuance and sale of the Securities pursuant to this
Agreement or any of the transactions contemplated by any of the other
Transaction Documents shall be enjoined (temporarily or permanently) and no
restraining order or other injunctive order shall have been issued in respect
thereof; and there shall not have been any legal action, order, decree or other
administrative proceeding instituted or, to the Company's knowledge, threatened
against the Company or against any Purchaser relating to the issuance of the
Securities or any Purchaser's activities in connection therewith or any other
transactions contemplated by this Agreement, the other Transaction Documents or
the Disclosure Documents.
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(c) The Purchasers shall have received certificates, dated the
Closing Date and signed by the Chief Executive Officer and the Chief Financial
Officer of the Company, to the effect of paragraphs 5(a) and (b).
(d) The Purchasers shall have received an opinion of Xxxxxx Xxxx
with respect to the authorization of the Series I Stock, the Conversion Shares,
the Warrants and the Warrant Shares and other customary matters in the form
attached hereto as Exhibit C.
(e) The Purchasers shall have received all of the Disclosure
Schedules attached hereto completed by the Company.
(f) The Market Price of the Common Stock on the Closing Date shall
be less than or equal to $1.50 per share.
6. Representations and Warranties of the Purchasers.
(a) Each Purchaser and MAG represents and warrants to the Company
that the Securities to be acquired by it hereunder (including the Conversion
Shares and the Warrant Shares that it may acquire upon conversion or exercise
thereof, as the case may be) are being acquired for its own account for
investment and with no intention of distributing or reselling such Securities
(including the Conversion Shares and the Warrant Shares that it may acquire upon
conversion or exercise thereof, as the case may be) or any part thereof or
interest therein in any transaction which would be in violation of the
securities laws of the United States of America or any State. Nothing in this
Agreement, however, shall prejudice or otherwise limit a Purchaser's right to
sell or otherwise dispose of all or any part of such Conversion Shares or
Warrant Shares under an effective registration statement under the Securities
Act and in compliance with applicable state securities laws or under an
exemption from such registration. By executing this Agreement, each Purchaser
further represents that such Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to any Person with respect to any of the Securities.
(b) Each Purchaser and MAG understands that the Securities
(including the Conversion Shares and the Warrant Shares that it may acquire upon
conversion or exercise thereof, as the case may be) have not been registered
under the Securities Act and may not be offered, resold, pledged or otherwise
transferred except (a) pursuant to an exemption from registration under the
Securities Act (and, if requested by the Company, based upon an opinion of
counsel acceptable to the Company) or pursuant to an effective registration
statement under the Securities Act and (b) in accordance with all applicable
securities laws of the states of the United States and other jurisdictions.
Each Purchaser and MAG agrees to the imprinting, so long as appropriate,
of the following legend on the Securities (including the Conversion Shares and
the Warrant Shares that it may acquire upon conversion or exercise thereof, as
the case may be):
The shares of stock evidenced by this certificate have not been
registered under the U.S. Securities Act of 1933, as amended, and
may not be offered, sold, pledged or otherwise transferred
("transferred") in the absence of such registration or an applicable
exemption therefrom. In the absence of such registration, such
shares may not be transferred unless, if the Company requests, the
Company has received a written opinion from counsel in form and
substance satisfactory to the Company stating that such transfer is
being made in compliance with all applicable federal and state
securities laws.
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The legend set forth above may be removed if and when the Conversion
Shares or the Warrant Shares, as the case may be, are disposed of pursuant to an
effective registration statement under the Securities Act or in the opinion of
counsel to the Company experienced in the area of United States Federal
securities laws such legends are no longer required under applicable
requirements of the Securities Act. The Series I Stock, the Warrants, the
Conversion Shares and the Warrant Shares shall also bear any other legends
required by applicable Federal or state securities laws, which legends may be
removed when in the opinion of counsel to the Company experienced in the
applicable securities laws, the same are no longer required under the applicable
requirements of such securities laws. The Company agrees that it will provide
each Purchaser, upon request, with a substitute certificate, not bearing such
legend at such time as such legend is no longer applicable. Each Purchaser
agrees that, in connection with any transfer of the Conversion Shares or the
Warrant Shares by it pursuant to an effective registration statement under the
Securities Act, such Purchaser will comply with all prospectus delivery
requirements of the Securities Act. The Company makes no representation,
warranty or agreement as to the availability of any exemption from registration
under the Securities Act with respect to any resale of the Series I Stock, the
Warrants, the Conversion Shares or the Warrant Shares.
(c) Each Purchaser and MAG is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act. Neither
Purchaser nor MAG learned of the opportunity to acquire Securities or any other
security issuable by the Company through any form of general advertising or
public solicitation.
(d) Each Purchaser and MAG represents and warrants to the Company
that it has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, having been represented by counsel,
and has so evaluated the merits and risks of such investment and is able to bear
the economic risk of such investment and, at the present time, is able to afford
a complete loss of such investment.
(e) Each Purchaser represents and warrants to the Company that (i)
the purchase of the Securities to be purchased by it has been duly and properly
authorized and this Agreement has been duly executed and delivered by it or on
its behalf and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; (ii) the
purchase of the Securities to be purchased by it does not conflict with or
violate its charter, by-laws or any law, regulation or court order applicable to
it; and (iii) the purchase of the Securities to be purchased by it does not
impose any penalty or other onerous condition on the Purchaser under or pursuant
to any applicable law or governmental regulation.
- 11 -
(f) Each Purchaser and MAG represents and warrants to the Company
that neither it nor any of its directors, officers, employees, agents, partners,
members, controlling persons or shareholders holding 5% or more of the Common
Stock outstanding on the Closing Date, has taken or will take, directly or
indirectly, any actions designed, or might reasonably be expected to cause or
result in the stabilization or manipulation of the price of the Common Stock.
(g) Each Purchaser and MAG acknowledges it or its representatives
have reviewed the Disclosure Documents and further acknowledges that it or its
representatives have 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 Company's financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment in the Securities; and (iii) the opportunity to
obtain such additional information which the Company possesses or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
and completeness of the information contained in the Disclosure Documents.
(h) Each Purchaser and MAG represents and warrants to the Company
that it has based its investment decision solely upon the information contained
in the Disclosure Documents and such other information as may have been provided
to it or its representatives by the Company in response to their inquiries, and
has not based its investment decision on any research or other report regarding
the Company prepared by any third party ("Third Party Reports"). Each Purchaser
understands and acknowledges that (i) the Company does not endorse any Third
Party Reports and (ii) its actual results may differ materially from those
projected in any Third Party Report.
(i) Each Purchaser and MAG understands and acknowledges that (i) any
forward-looking information included in the Disclosure Documents supplied to
Purchaser by the Company or its management is subject to risks and
uncertainties, including those risks and uncertainties set forth in the
Disclosure Documents; and (ii) the Company's actual results may differ
materially from those projected by the Company or its management in such
forward-looking information.
(j) Each Purchaser and MAG understands and acknowledges that (i) the
Securities are offered and sold without registration under the Securities Act in
a private placement that is exempt from the registration provisions of the
Securities Act and (ii) the availability of such exemption depends in part on,
and that the Company and its counsel will rely upon, the accuracy and
truthfulness of the foregoing representations and Purchaser hereby consents to
such reliance.
7. Covenants of Purchasers Not to Short Stock and Volume Limitation.
Purchasers, on behalf of themselves and their affiliates, hereby covenant and
agree not to, directly or indirectly, offer to "short sell", contract to "short
sell" or otherwise "short sell" the securities of the Company, including,
without limitation, shares of Common Stock that will be received as a result of
the conversion of the Series I Stock or the exercise of the Warrants.
- 12 -
Purchaser and MAG, on behalf of themselves and their affiliates,
shall not, directly or indirectly, sell in the aggregate during any trading day
shares of Common Stock totaling more than twenty percent (20%) of the total
shares of Common Stock traded on such day.
8. Termination.
(a) This Agreement may be terminated in the sole discretion of the
Company by notice to each Purchaser if at the Closing Date:
(i) the representations and warranties made by any Purchaser
in Section 6 are not true and correct in all material respects; or
(ii) as to the Company, the sale of the Securities hereunder
(i) is prohibited or enjoined by any applicable law or governmental regulation
or (ii) subjects the Company to any penalty, or in its reasonable judgment,
other onerous condition under or pursuant to any applicable law or government
regulation that would materially reduce the benefits to the Company of the sale
of the Securities to such Purchaser, so long as such regulation, law or onerous
condition was not in effect in such form at the date of this Agreement.
(b) This Agreement may be terminated by any Purchaser or MAG by
notice to the Company given in the event that the Company shall have failed,
refused or been unable to satisfy all material conditions on its part to be
performed or satisfied hereunder on or prior to the Closing Date, or if after
the execution and delivery of this Agreement and immediately prior to the
Closing Date, trading in securities of the Company on the NASDAQ Small Cap shall
have been suspended.
(c) This Agreement may be terminated by mutual written consent of
all parties.
9. Registration. Within 30 days after the Closing Date, the Company shall
prepare and file with the SEC a Registration Statement covering the resale of
the maximum number of Conversion Shares issuable upon conversion of the Series I
Stock and the Warrant Shares (collectively, the "Registrable Securities"), as
set forth in the Registration Rights Agreement attached hereto as Exhibit D. The
Company shall use its best efforts to have the Registration Statement declared
effective by the SEC within 70 days after filing.
10. Event of Default.
The Purchaser and MAG need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind, and the Purchaser and
MAG may immediately and without expiration of any grace period enforce any and
all of its rights and remedies hereunder and all other remedies available to it
under applicable law. Such declaration may be rescinded and annulled by
Xxxxxxxxx and MAG at any time prior to payment hereunder. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
- 13 -
An "Event of Default" shall include (a) the Company's failure to:
(i) file the Registration Statement with the SEC within 30 days after the
Closing Date or after receipt of a written request for registration of Common
Stock received as payment of a Dividend, (ii) respond to comments received from
the SEC regarding the Registration Statement or subsequent registration
statement within 10 days after receipt of such comments; (iii) pay the expenses
referred to below or the Due Diligence Fee within three (3) days after the
Closing; or (iv) deliver to Purchasers, or Purchasers' broker, as directed,
Common Stock that Purchasers have converted within three (3) business days of
such conversions.
IN THE EVENT OF A DEFAULT, AS A REMEDY, COMPANY SHALL PAY TO PURCHASERS, IN
CASH, $6,666 FOR EACH DAY THAT THE DEFAULT REMAINS UNCURED. PURCHASERS AND
COMPANY ACKNOWLEDGE AND AGREE THAT THEY HAVE MUTUALLY DISCUSSED THE
IMPRACTICALITY AND EXTREME DIFFICULTY OF FIXING THE ACTUAL DAMAGES PURCHASERS
WOULD INCUR IN THE CASE OF AN EVENT OF DEFAULT, AND THAT AS A RESULT OF SUCH
DISCUSSION THE PARTIES AGREE THAT $6,666 FOR EACH DAY THAT THE DEFAULT REMAINS
UNCURED REPRESENTS A REASONABLE ESTIMATE OF THE ACTUAL DAMAGES WHICH PURCHASERS
WOULD INCUR IN THE CASE OF AN EVENT OF DEFAULT. PURCHASERS AND COMPANY
SPECIFICALLY AND EXPRESSLY AGREE TO ABIDE BY THE TERMS AND PROVISIONS OF THIS
PARAGRAPH CONCERNING LIQUIDATED DAMAGES.
11. Notices. All communications hereunder shall be in writing and shall be
hand delivered, mailed by first-class mail, couriered by next-day air courier or
by facsimile and confirmed in writing (i) if to the Company, at the addresses
set forth below, or (ii) if to a Purchaser or MAG, to the address set forth for
such party on the signature page hereto.
If to the Company:
Multiband Technologies, Inc.
0000 Xxxxxxx Xxxxxx Xx.
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Phone: 000.000.0000
Fax: 000.000.0000
All such notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered; (ii) five business
days after being deposited in the mail, postage prepaid, if mailed certified
mail, return receipt requested; (iii) one business day after being timely
delivered to a next-day air courier guaranteeing overnight delivery; (iv) the
date of transmission if sent via facsimile to the facsimile number as set forth
in this Section or the signature page hereof prior to 6:00 p.m. on a business
day, or (v) the business day following the date of transmission if sent via
facsimile at a facsimile number set forth in this Section or on the signature
page hereof after 6:00 p.m. or on a date that is not a business day. Change of a
party's address or facsimile number may be designated hereunder by giving notice
to all of the other parties hereto in accordance with this Section.
- 14 -
12. Survival Clause. The respective representations, warranties,
agreements and covenants of the Company and the Purchasers set forth in this
Agreement shall survive until the first anniversary of the Closing.
13. Fees and Expenses. Within three (3) days of Closing, the Company
agrees to pay Purchasers' legal expenses incurred in connection with the
preparation and negotiation of the Transaction Documents in the amount of
$20,000.
14. Legal Fees. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the Warrants or the Certificate of
Determination, the prevailing party or parties shall be entitled to receive from
the other party or parties reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which the prevailing party or
parties may be entitled.
15. Successors. This Agreement shall inure to the benefit of and be
binding upon Purchasers, MAG and the Company and their respective successors and
legal representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person. Neither the Company nor any Purchaser may
assign this Agreement or any rights or obligation hereunder without the prior
written consent of the other party.
16. No Waiver; Modifications in Writing. No failure or delay on the part
of the Company, MAG or any Purchaser in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company, MAG or any Purchaser at law or in
equity or otherwise. No waiver of or consent to any departure by the Company,
MAG or any Purchaser from any provision of this Agreement shall be effective
unless signed in writing by the party entitled to the benefit thereof, provided
that notice of any such waiver shall be given to each party hereto as set forth
below. Except as otherwise provided herein, no amendment, modification or
termination of any provision of this Agreement shall be effective unless signed
in writing by or on behalf of each of the Company, MAG and the Purchasers. Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by the Company, MAG or any Purchaser from the terms of any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances.
- 15 -
17. Entire Agreement. This Agreement, together with Transaction Documents,
constitutes the entire agreement among the parties hereto and supersedes all
prior agreements, understandings and arrangements, oral or written, among the
parties hereto with respect to the subject matter hereof and thereof.
18. 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.
19. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE PARTIES HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR FEDERAL
COURTS LOCATED IN THE CITY OF LOS ANGELES, CALIFORNIA AND HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE.
20. Counterparts. This Agreement may be executed in two or more
counterparts and may be delivered by facsimile transmission, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
21. If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this Agreement shall constitute a binding agreement among the Company,
the Purchasers and MAG.
22. Mandatory Conversion. If more than 36 months has elapsed since the
Closing Date and shares of Series I Stock are outstanding, and provided there is
an effective registration statement for the shares of Common Stock to be issued
upon conversion of the Series I Stock, then within 45 days after receipt of
written notice from Company and subject to the 9.99% Limitation, Purchaser shall
submit a conversion notice(s) to the Company to convert such shares of Series I
Stock into Common Stock.
Very truly yours,
Multiband Corporation
By: ___________________________
Name: ____________________
Title: ____________________
- 16 -
ACCEPTED AND AGREED:
--------------------------------------------------------------------------------
Mercator Momentum Fund, LP Mercator Momentum Fund III, LP
By: Mercator Advisory Group LLC By: Mercator Advisory Group LLC
Its: General Partner Its:General Partner
--------------------- ---------------------
Xxxxx Xxxxxxxxx Xxxxx Xxxxxxxxx
Managing Member Managing Member
--------------------------------------------------------------------------------
Mercator Advisory Group, LLC Monarch Pointe Fund, Ltd.
By:_____________________ By:_____________________
Name: Xxxxx Xxxxxxxxx Name: Xxxxx Xxxxxxxxx
Its: Managing Member Its: President
--------------------------------------------------------------------------------
Pentagon Special Purpose Fund, Ltd.
By:_____________________
Name: __________________
Its: _____________________
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Pentagon
Mercator Mercator Monarch Pointe Mercator Special Total
Momentum Fund, Momentum Fund Advisory Purpose Fund,
LP III, LP Fund, Ltd. Group, LLC Ltd.
-------------------------------------------------------------------------------------------------------------------------
Purchase Price $ 2,100,000 $ 1,450,000 $ 4,450,000 -- $ 2,000,000 10,000,000
-------------------------------------------------------------------------------------------------------------------------
Preferred Shares 21,000 14,500 44,500 -- 20,000 100,000
-------------------------------------------------------------------------------------------------------------------------
Warrants @ $1.575 375,000 258,929 794,643 1,428,571 714,286 3,571,429
-------------------------------------------------------------------------------------------------------------------------
Warrants @ $1.725 375,000 258,929 794,643 1,428,571 714,286 3,571,429
-------------------------------------------------------------------------------------------------------------------------
- 17 -
Addresses for Notice to Purchasers and MAG
Addresses for Notice to Mercator Momentum Fund, LP, Mercator Momentum Fund III,
LP, Monarch Pointe Fund, Ltd., and MAG:
Mercator Advisory Group, LLC
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
with copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxxxxx, Xxxxxx, Xxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Address for Notice to Pentagon Special Purpose Fund, Ltd.
Pentagon Special Purpose Fund, Ltd.
c/o Olympia Capital (Ireland) Limited
Harcourt Centre
6th Floor, Block 0
Xxxxxxxx Xxxx
Xxxxxx 0, Xxxxxxx
with copy to:
Pentagon Capital Management PLC
00 Xxxxx Xxxxxx
Xxxxxx X 0 X 0XX, XX
Attention: Xxxxx Xxxxxxx
- 18 -
Schedule A
Direct and Indirect Subsidiaries of Multiband Corporation
Direct, wholly owned of Multiband Corporation
Corporate Technologies USA, Inc. d/b/a Multiband
Rainbow Satellite Group, LLC
Multiband USA, Inc.
There are no indirect subsidiaries.
- 1 -
Schedule B
Company Capitalization
---------------------------------------------------------------------------------------------------------
AS OF DECEMBER
31, 2004
(ESTIMATED &
UNAUDITED)
---------------------------------------------------------------------------------------------------------
Preferred stock:
---------------------------------------------------------------------------------------------------------
8% Class A cumulative convertible - no par value 27,931 shares issued and outstanding 419,752
---------------------------------------------------------------------------------------------------------
10% Class B cumulative convertible - no par value 8,700 shares issued and outstanding 62,000
---------------------------------------------------------------------------------------------------------
10% Class C cumulative convertible - no par value 125,400 shares issued and outstanding 1,611,105
---------------------------------------------------------------------------------------------------------
10% Class F cumulative convertible - no par value 200,000 shares issued and outstanding 2,000,000
---------------------------------------------------------------------------------------------------------
10% Class G cumulative convertible - no par value 45,245 shares issued and outstanding 448,122
---------------------------------------------------------------------------------------------------------
6% Class H cumulative convertible - no par value 11.5 shares issued and outstanding 1,150,000
---------------------------------------------------------------------------------------------------------
Common stock - no par value 25,621,084 issued, 25,617,745 outstanding 16,678,538
---------------------------------------------------------------------------------------------------------
Stock Subscription receivable (367,343)
---------------------------------------------------------------------------------------------------------
Options and Warrants 31,379,338
---------------------------------------------------------------------------------------------------------
Unamortized Compensation (1,724)
---------------------------------------------------------------------------------------------------------
Accumulated deficit (42,044,715)
---------------------------------------------------------------------------------------------------------
- 1 -
Schedule C
Other Arrangements
None
- 1 -
Schedule D
Violations
None
- 1 -
Schedule E
Use of Proceeds
- 2 -
Schedule F
Criminal Records and Bankruptcies
None
Schedule 4(f)
Bushido Capital Master Fund, L.P.
Enable Growth Partners, L.P.
Gamma Opportunity Capital Partners, L.P.
Gryphon Master Fund, L.P.
GSSF Master Fund, LP
Iroquois Capital LP
RHP Master Fund, Ltd.
SRG Capital, LLC
Xxxxxxxxxxx XX
Whalehaven Capital Fund Limited
- 2 -
Exhibit A
Warrant
- 3 -
Exhibit B
Certificate of Determination of
Series A Convertible Preferred Stock
of
Multiband Corporaiton
- 4 -
Exhibit C
Form of Legal Opinion
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Minnesota, with corporate power to
own its properties and to conduct its business.
2. The Company has the corporate power to execute, deliver and perform the
Transaction Documents, including the Exhibits, thereto. The Transaction
Documents have been duly authorized by all requisite corporate action by the
Company and constitute the valid and binding obligations of the Company,
enforceable in accordance with their terms (subject to bankruptcy, equitable
principles and other customary exceptions).
(a) The authorized capital stock of the Company consists of
____________ shares of Preferred Stock, and ____________ shares of Common Stock.
(b) The shares of the Company's Series I Stock have been duly
authorized and, upon issuance, delivery, and payment therefor as described in
the Subscription Agreement, will be validly issued, fully paid and
non-assessable.
(c) The shares of the Company's Common Stock initially issuable upon
conversion of the shares of Series I Stock sold have been duly authorized and
reserved for issuance and, upon issuance and delivery upon conversion of the
Series I Stock as described in the Certificate of Determination, will be validly
issued, fully paid and non-assessable.
(d) The shares of the Company's Common Stock issuable upon exercise
of the Warrants have been duly authorized and reserved for issuance, and upon
issuance, delivery, and payment therefor in accordance with the Warrants, will
be validly issued, fully paid and non-assessable.
3. The Company's execution and delivery of the Transaction Documents and
the issue and sale of the Series I Stock and the Warrants, on the terms and
conditions set forth in the Subscription Agreement, will not violate any law of
the United States or the State of Minnesota any rule or regulation of any
governmental authority or regulatory body of the United States or the State of
Minnesota or any provision of the Company's Articles of Incorporation or Bylaws.
4. No consent, approval, order or authorization of, and no notice to or
filing with, any governmental agency or body or any court is required to be
obtained or made by the Company for the issuance and sale of the Series I Stock
and the Warrants pursuant to the Transaction Documents, except such as have been
obtained or made and such as may be required under applicable securities laws.
- 1 -
5. On the assumption that the representations of the Purchasers and MAG in
the Subscription Agreement are correct and complete, the offer and sale of the
Series I Stock and the Warrants pursuant to the terms of the Subscription
Agreement are exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended, and from the qualification requirements of
California securities statutes and regulations, and, under such securities laws
as they presently exist, the issuance of the Company's Common Stock upon
conversion of the Series I Stock and exercise of the Warrants would also be
exempt from such registration and qualification requirements.
6. We know of no pending or overtly threatened action, proceeding or
governmental investigation with respect to the Company's sale of Series I Stock
and Warrants pursuant to the Transaction Documents.
- 2 -
Exhibit D
Registration Rights Agreement
- 1 -
