SECURITIES PURCHASE AGREEMENT
THIS SECURITIES
PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of July 3, 2007, by and among TELEPLUS
WORLD, CORP.,
a Nevada
corporation (the “Company”),
and
the Buyers listed on Schedule I attached hereto (individually, a
“Buyer”
or
collectively “Buyers”).
WITNESSETH
WHEREAS,
the
Company and the Buyer(s) are executing and delivering this Agreement in reliance
upon an exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”);
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Buyer(s), as provided herein,
and the Buyer(s) shall purchase up to Three Million Dollars ($3,000,000) of
secured convertible debentures (the “Convertible
Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value $0.001
(the “Common
Stock”)
(as
converted, the “Conversion
Shares”),
which
shall be funded on the fifth (5th)
business day following the date hereof (the “Closing”),
for a
total purchase price of up to Three Million Dollars ($3,000,000), (the
“Purchase
Price”)
in the
respective amounts set forth opposite each Buyer(s) name on Schedule I (the
“Subscription
Amount”);
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering an Investor Registration Rights Agreement
substantially in the form attached hereto as Exhibit
A
(the
“Investor
Registration Rights Agreement”)
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated there under,
and applicable state securities laws;
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Security Agreement substantially in the
form attached hereto as Exhibit
B
(the
“Security
Agreement”)
pursuant to which the Company has agreed to provide the Buyer a security
interest in Pledged Collateral (as this term is defined in the Security
Agreement) to secure the Company’s obligations under this Agreement, the
Convertible Debenture, the Investor Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions, the Security Agreement, the Pledge
and
Escrow Agreement or any other obligations of the Company to the
Buyer;
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Second Amended and Restated Pledge and
Escrow Agreement substantially in the form attached hereto as Exhibit
C
(the
“Pledge
and Escrow Agreement”)
pursuant to which the Company has agreed to provide the Buyer a security
interest in the Pledged Shares (as this term is defined in the Pledge and Escrow
Agreement) to secure the Company’s obligations under this Agreement, the
Convertible Debenture, the Investor Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions, the Security Agreement, the Pledge
and
Escrow Agreement or any other obligations of the Company to the Buyer;
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering an Irrevocable Transfer Agent Instructions
substantially in the form attached hereto as Exhibit
D
(the
“Irrevocable
Transfer Agent Instructions”);
and
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Third Amended and Restated Security
Agreement by and among the Company, the Buyer and TelePlus Connect Corp, an
Ontario corporation and a wholly owned subsidiary of the Company (a
“Subsidiary”),
and a
Third Amended and Restated Security Agreement by and among the Company, the
Buyer and TelePlus Wireless Corp., a Nevada corporation and a wholly owned
subsidiary of the Company (a “Subsidiary”),
substantially in the form attached hereto as Exhibit
E
(collectively, the “Subsidiary
Security Agreements”)
pursuant to which the Company and the Subsidiary have agreed to provide the
Buyer a security interest in Pledged Collateral (as this term is defined in
the
Subsidiary Security Agreements) to secure the Company’s obligations under this
Agreement, the Convertible Debenture, the Investor Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions, the Security Agreement,
the Subsidiary Security Agreements, the Pledge and Escrow Agreement or any
other
obligations of the Company to the Buyer.
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:
1. PURCHASE
AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase
of Convertible Debentures. Subject to the satisfaction (or waiver) of the terms
and conditions of this Agreement, each Buyer agrees, severally and not jointly,
to purchase at the Closing and the Company agrees to sell and issue to each
Buyer, severally and not jointly, at the Closing, Convertible Debentures in
amounts corresponding with the Subscription Amount set forth opposite each
Buyer’s name on Schedule I hereto.
(b) Closing
Date. The Closing of the purchase and sale of the Convertible Debentures shall
take place at 10:00 a.m. Eastern Standard Time within two (2) business day
following the date hereof, subject to notification of satisfaction of the
conditions to the Closing set forth herein and in Sections 6 and 7 below (or
such later date as is mutually agreed to by the Company and the Buyer(s)) (the
“Closing Date”). The Closing shall occur on the Closing Date at the offices of
Yorkville Advisors, LLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx
00000 (or such other place as is mutually agreed to by the Company and the
Buyer(s)).
(c) Form
of
Payment. Subject to the satisfaction of the terms and conditions of this
Agreement, on the Closing Date, (i) the Buyers shall deliver to the Company
such
aggregate proceeds for the Convertible Debentures to be issued and sold to
such
Buyer(s), minus the fees to be paid directly from the proceeds of the Closing
as
set forth herein, and (ii) the Company shall deliver to each Buyer,
Convertible Debentures which such Buyer(s) is purchasing in amounts indicated
opposite such Buyer’s name on Schedule I, duly executed on behalf of the
Company.
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2. BUYER’S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer represents and warrants, severally and not jointly, that:
(a) Investment
Purpose. Each Buyer is acquiring the Convertible Debentures and, upon conversion
of Convertible Debentures, the Buyer will acquire the Conversion Shares then
issuable, for its own account for investment only and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the Securities Act;
provided, however, that by making the representations herein, such Buyer
reserves the right to dispose of the Conversion Shares at any time in accordance
with or pursuant to an effective Registration Statement (the “Registration
Statement”) covering such Conversion Shares or an available exemption under the
Securities Act.
(b) Accredited
Investor Status. Each Buyer is an “Accredited Investor” as that term is defined
in Rule 501(a)(3) of Regulation D.
(c) Reliance
on Exemptions. Each Buyer understands that the Convertible Debentures are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire
such securities.
(d) Information.
Each Buyer and its advisors (and his or, its counsel), if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and information he deemed material to making an informed
investment decision regarding his purchase of the Convertible Debentures and
the
Conversion Shares, which have been requested by such Buyer. Each Buyer and
its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained in Section 3 below. Each
Buyer understands that its investment in the Convertible Debentures and the
Conversion Shares involves a high degree of risk. Each Buyer is in a position
regarding the Company, which, based upon employment, family relationship or
economic bargaining power, enabled and enables such Buyer to obtain information
from the Company in order to evaluate the merits and risks of this investment.
Each Buyer has sought such accounting, legal and tax advice, as it has
considered necessary to make an informed investment decision with respect to
its
acquisition of the Convertible Debentures and the Conversion
Shares.
(e) No
Governmental Review. Each Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Convertible Debentures or the
Conversion Shares, or the fairness or suitability of the investment in the
Convertible Debentures or the Conversion Shares, nor have such authorities
passed upon or endorsed the merits of the offering of the Convertible Debentures
or the Conversion Shares.
3
(f) Transfer
or Resale. Each Buyer understands that except as provided in the Registration
Rights Agreement: (i) the Securities have not been and are not being registered
under the Securities Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) such Buyer shall have delivered to the Company an opinion of
counsel, in a generally acceptable form, to the effect that such Securities
to
be sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration requirements, or (C) such Buyer provides
the Company with reasonable assurances (in the form of seller and broker
representation letters) that such Securities can be sold, assigned or
transferred pursuant to Rule 144, Rule 144(k), or Rule 144A promulgated under
the Securities Act, as amended (or a successor rule thereto) (collectively,
“Rule
144”),
in
each case following the applicable holding period set forth therein; (ii) any
sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions
of
any exemption thereunder.
(g) Legends.
Each Buyer agrees to the imprinting, so long as is required by this Section
2(g), of a restrictive legend in substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
Certificates
evidencing the Conversion Shares or Warrant Shares shall not contain any legend
(including the legend set forth above), (i) while a registration statement
(including the Registration Statement) covering the resale of such security
is
effective under the Securities Act, (ii) following any sale of such Conversion
Shares or Warrant Shares pursuant to Rule 144, (iii) if such Conversion Shares
or Warrant Shares are eligible for sale under Rule 144(k), or (iv) if such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff
of
the SEC). The Company shall cause its counsel to issue a legal opinion to the
Company’s transfer agent promptly after the effective date (the “Effective
Date”)
of a
Registration Statement if required by the Company’s transfer agent to effect the
removal of the legend hereunder. If all or any portion of the Convertible
Debentures or Warrants are exercised by a Buyer that is not an Affiliate of
the
Company (a “Non-Affiliated
Buyer”)
at a
time when there is an effective registration statement to cover the resale
of
the Conversion Shares or the Warrant Shares, such Conversion Shares or Warrant
Shares shall be issued free of all legends. The Company agrees that following
the Effective Date or at such time as such legend is no longer required under
this Section 2(g), it will, no later than three (3) Trading Days following
the
delivery by a Non-Affiliated Buyer to the Company or the Company’s transfer
agent of a certificate representing Conversion Shares or Warrant Shares, as
the
case may be, issued with a restrictive legend (such third Trading Day, the
“Legend
Removal Date”),
deliver or cause to be delivered to such Non-Affiliated Buyer a certificate
representing such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give instructions to
any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section. Each Buyer acknowledges that the Company’s agreement
hereunder to remove all legends from Conversion Shares or Warrant Shares is
not
an affirmative statement or representation that such Conversion Shares or
Warrant Shares are freely tradable. Each Buyer, severally and not jointly with
the other Buyers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 3(g) is
predicated upon the Company’s reliance that the buyer will sell any Securities
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a Registration Statement,
they will be sold in compliance with the plan of distribution set forth
therein.
4
(h) Authorization,
Enforcement. This Agreement has been duly and validly authorized, executed
and
delivered on behalf of such Buyer and is a valid and binding agreement of such
Buyer enforceable in accordance with its terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.
(i) Receipt
of Documents. Each Buyer and his or its counsel has received and read in their
entirety: (i) this Agreement and each representation, warranty and covenant
set
forth herein, the Security Agreement, the Investor Registration Rights
Agreement, the Irrevocable Transfer Agent Agreement, and the Pledge and Escrow
Agreement; (ii) all due diligence and other information necessary to verify
the
accuracy and completeness of such representations, warranties and covenants;
(iii) the Company’s Form 10-KSB for the fiscal year ended December 31, 2006;
(iv) the Company’s Form 10-QSB for the fiscal quarter ended March 31, 2007 and
(v) answers to all questions each Buyer submitted to the Company regarding
an
investment in the Company; and each Buyer has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.
5
(j) Due
Formation of Corporate and Other Buyers. If the Buyer(s) is a corporation,
trust, partnership or other entity that is not an individual person, it has
been
formed and validly exists and has not been organized for the specific purpose
of
purchasing the Convertible Debentures and is not prohibited from doing
so.
(k) No
Legal
Advice From the Company. Each Buyer acknowledges, that it had the opportunity
to
review this Agreement and the transactions contemplated by this Agreement with
his or its own legal counsel and investment and tax advisors. Each Buyer is
relying solely on such counsel and advisors and not on any statements or
representations of the Company or any of its representatives or agents for
legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each of the Buyers that, except as set forth
in the SEC Documents (as defined herein):
(a) Organization
and Qualification. The Company and its subsidiaries are corporations duly
organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power to own their properties and to carry on their business as now being
conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(b) Authorization,
Enforcement, Compliance with Other Instruments. (i) The Company has the
requisite corporate power and authority to enter into and perform this
Agreement, the Security Agreement, the Subsidiary Security Agreements, the
Investor Registration Rights Agreement, the Irrevocable Transfer Agent
Agreement, the Pledge and Escrow Agreement, and any related agreements
(collectively the “Transaction Documents”) and to issue the Convertible
Debentures and the Conversion Shares in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby
and
thereby, including, without limitation, the issuance of the Convertible
Debentures the Conversion Shares and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion or exercise thereof,
have been duly authorized by the Company’s Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors
or
its stockholders, (iii) the Transaction Documents have been duly executed and
delivered by the Company, (iv) the Transaction Documents constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies. The
authorized officer of the Company executing the Transaction Documents knows
of
no reason why the Company cannot file the registration statement as required
under the Investor Registration Rights Agreement or perform any of the Company’s
other obligations under such documents.
6
(c) Capitalization.
As of the date hereof, the authorized capital stock of the Company consists
of
600,000,000 shares of Common Stock, par value $0.001 per share and 10,000,000
shares of Preferred Stock, $0.001 par value per share (“Preferred Stock”), of
which 141,459,741 shares of Common Stock and no shares of Preferred Stock were
issued and outstanding. All of such outstanding shares have been validly issued
and are fully paid and nonassessable. Except as disclosed in the SEC Documents
(as defined in Section 3(f)), no shares of Common Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as disclosed in the SEC Documents,
as of the date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights
to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any
of
their securities under the Securities Act (except pursuant to the Registration
Rights Agreement) and (iv) there are no outstanding registration statements
and
there are no outstanding comment letters from the SEC or any other regulatory
agency. There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Convertible
Debentures as described in this Agreement. The Company has furnished to the
Buyer true and correct copies of the Company’s Articles of Incorporation, as
amended and as in effect on the date hereof (the “Articles of Incorporation”),
and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and
the terms of all securities convertible into or exercisable for Common Stock
and
the material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants.
(d) Issuance
of Securities. The Convertible Debentures are duly authorized and, upon issuance
in accordance with the terms hereof, shall be duly issued, fully paid and
nonassessable, are free from all taxes, liens and charges with respect to the
issue thereof. The Conversion Shares issuable upon conversion of the Convertible
Debentures have been duly authorized and reserved for issuance. Upon conversion
or exercise in accordance with the Convertible Debentures the Conversion Shares
will be duly issued, fully paid and nonassessable.
(e) No
Conflicts. Except as disclosed in the SEC Documents, the execution, delivery
and
performance of the Transaction Documents by the Company and the consummation
by
the Company of the transactions contemplated hereby will not (i) result in
a
material violation of the Certificate of Incorporation, any certificate of
designations of any outstanding series of preferred stock of the Company or
the
By-laws or (ii) conflict with or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of The National Association of
Securities Dealers Inc.’s OTC Bulletin Board on which the Common Stock is
quoted) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. Except as disclosed in the SEC Documents, neither the Company nor
its
subsidiaries is in violation of any term of or in default under its Articles
of
Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted, and shall not be conducted
in violation of any material law, ordinance, or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state securities laws, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for
it to
execute, deliver or perform any of its obligations under or contemplated by
this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. Except as disclosed in the SEC Documents, all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected
on
or prior to the date hereof. The Company and its subsidiaries are unaware of
any
facts or circumstance, which might give rise to any of the
foregoing.
7
(f) SEC
Documents: Financial Statements. Since January 1, 2004, the Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC under of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) (all of the foregoing filed prior to the date
hereof or amended after the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to as the “SEC Documents”). The
Company has delivered to the Buyers or their representatives, or made available
through the SEC’s website at xxxx://xxx.xxx.xxx., true and complete copies of
the SEC Documents. As of their respective dates, the financial statements of
the
Company disclosed in the SEC Documents (the “Financial Statements”) complied as
to form in all material respects with applicable accounting requirements and
the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as
may
be otherwise indicated in such Financial Statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in
all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company
to
the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary
in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
8
(g) 10(b)-5.
The SEC Documents do not include any untrue statements of material fact, nor
do
they omit to state any material fact required to be stated therein necessary
to
make the statements made, in light of the circumstances under which they were
made, not misleading.
(h) Absence
of Litigation. Except as disclosed in the SEC Documents and the Disclosure
Schedule (the “Disclosure Schedule”) attached hereto as Exhibit F, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would (i)
have
a material adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operations of the Company and
its
subsidiaries taken as a whole.
(i) Acknowledgment
Regarding Buyer’s Purchase of the Convertible Debentures. The Company
acknowledges and agrees that the Buyer(s) is acting solely in the capacity
of an
arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the Buyer(s) is
not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by the Buyer(s) or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Buyer’s purchase of the
Convertible Debentures or the Conversion Shares. The Company further represents
to the Buyer that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation by the Company and its
representatives.
(j) No
General Solicitation. Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of the Convertible
Debentures or the Conversion Shares.
(k) No
Integrated Offering. Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Convertible
Debentures or the Conversion Shares under the Securities Act or cause this
offering of the Convertible Debentures or the Conversion Shares to be integrated
with prior offerings by the Company for purposes of the Securities
Act.
(l) Employee
Relations. Neither the Company nor any of its subsidiaries is involved in any
labor dispute nor, to the knowledge of the Company or any of its subsidiaries,
is any such dispute threatened. None of the Company’s or its subsidiaries’
employees is a member of a union and the Company and its subsidiaries believe
that their relations with their employees are good.
9
(m) Intellectual
Property Rights. The Company and its subsidiaries own or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and rights
necessary to conduct their respective businesses as now conducted. The Company
and its subsidiaries do not have any knowledge of any infringement by the
Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, and, to
the
knowledge of the Company there is no claim, action or proceeding being made
or
brought against, or to the Company’s knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement; and the Company and
its
subsidiaries are unaware of any facts or circumstances which might give rise
to
any of the foregoing.
(n) Environmental
Laws. The Company and its subsidiaries are (i) in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating
to
the protection of human health and safety, the environment or hazardous or
toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license
or
approval.
(o) Title.
Any real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use
made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
(p) Insurance.
The Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company
nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(q) Regulatory
Permits. The Company and its subsidiaries possess all material certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
(r) Internal
Accounting Controls. The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance
that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, and (iii) the
recorded amounts for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
10
(s) No
Material Adverse Breaches, etc. Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule
or
regulation which in the judgment of the Company’s officers has or is expected in
the future to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries. Except as set forth in the SEC Documents, neither
the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company’s officers, has or is
expected to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
(t) Tax
Status. Except as set forth in the SEC Documents, the Company and each of its
subsidiaries has made and filed all federal and state income and all other
tax
returns, reports and declarations required by any jurisdiction to which it
is
subject and (unless and only to the extent that the Company and each of its
subsidiaries has set aside on its books provisions reasonably adequate for
the
payment of all unpaid and unreported taxes) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to
the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority
of
any jurisdiction, and the officers of the Company know of no basis for any
such
claim.
(u) Certain
Transactions. Except as set forth in the SEC Documents, and except for arm’s
length transactions pursuant to which the Company makes payments in the ordinary
course of business upon terms no less favorable than the Company could obtain
from third parties and other than the grant of stock options disclosed in the
SEC Documents, none of the officers, directors, or employees of the Company
is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which
any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
(v) Fees
and
Rights of First Refusal. The Company is not obligated to offer the securities
offered hereunder on a right of first refusal basis or otherwise to any third
parties including, but not limited to, current or former shareholders of the
Company, underwriters, brokers, agents or other third parties.
11
4. COVENANTS.
(a) Best
Efforts. Each party shall use its best efforts to timely satisfy each of the
conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.
(b) Form
D.
The Company agrees to file a Form D with respect to the Conversion Shares as
required under Regulation D and to provide a copy thereof to each Buyer promptly
after such filing. The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary to qualify the
Conversion Shares, or obtain an exemption for the Conversion Shares for sale
to
the Buyers at the Closing pursuant to this Agreement under applicable securities
or “Blue Sky” laws of the states of the United States, and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date.
(c) Reporting
Status. Until the earlier of (i) the date as of which the Buyer(s) may sell
all
of the Conversion Shares without restriction pursuant to Rule 144(k) promulgated
under the Securities Act (or successor thereto), or (ii) the date on which
(A)
the Buyer(s) shall have sold all the Conversion Shares and (B) none of the
Convertible Debentures are outstanding (the “Registration Period”), the Company
shall file in a timely manner all reports required to be filed with the SEC
pursuant to the Exchange Act and the regulations of the SEC thereunder, and
the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination.
(d) Use
of
Proceeds. The Company will use the proceeds from the sale of the Convertible
Debentures to repay the outstanding obligations to the former shareholders
of
Telizon Inc. in the principal amount of CDN$1,631,776.00 (the “Telizon Payment”)
and to repay the outstanding obligations to the former shareholders of 1500536
ONTARIO INC (One Xxxx) in the principal amount of CDN$168,224.28 for a total
CDN$1,800,000.28 and for general corporate and working capital
purposes.
(e) Reservation
of Shares. The Company shall take all action reasonably necessary to at all
times have authorized, and reserved for the purpose of issuance, such number
of
shares of Common Stock as shall be necessary to effect the issuance of the
Conversion Shares. If at any time the Company does not have available such
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Conversion Shares, the Company shall call and hold
a
special meeting of the shareholders within thirty (30) days of such occurrence,
for the sole purpose of increasing the number of shares authorized. The
Company’s management shall recommend to the shareholders to vote in favor of
increasing the number of shares of Common Stock authorized. Management shall
also vote all of its shares in favor of increasing the number of authorized
shares of Common Stock.
(f) Listings
or Quotation. The Company shall promptly secure the listing or quotation of
the
Conversion Shares upon each national securities exchange, automated quotation
system or The National Association of Securities Dealers Inc.’s Over-The-Counter
Bulletin Board (“OTCBB”) or other market, if any, upon which shares of Common
Stock are then listed or quoted (subject to official notice of issuance) and
shall use its best efforts to maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Conversion Shares from time to
time issuable under the terms of this Agreement. The Company shall maintain
the
Common Stock’s authorization for quotation on the OTCBB.
12
(g) Fees
and
Expenses.
(i) Each
of
the Company and the Buyer(s) shall pay all costs and expenses incurred by such
party in connection with the negotiation, investigation, preparation, execution
and delivery of the Transaction Documents. The Company shall pay Yorkville
Advisors LLC a fee equal to ten percent (10%) of the Purchase Price.
(ii) The
Company shall pay a structuring fee to Investor’s legal counsel, Sichenzia Xxxx
Xxxxxxxx Xxxxxxx, LLP, of Twenty Thousand Dollars ($20,000), which shall be
paid
directly from the proceeds of the Closing.
(iii) Warrants. Upon
the
execution of this Agreement, the Company shall issue to the Investor warrants
(the “Warrants”)
to
purchase in the aggregate of Eighty Million (80,000,000) shares of the Company’s
Common Stock as follows: (A) a warrant to purchase Fifty Million (50,000,000)
shares of the Company’s Common Stock for a period of five (5) years at an
exercise price of $0.03 per share; and (B) a warrant to purchase Thirty Million
(30,000,000) shares of the Company’s Common Stock for a period of five (5)
years at an exercise price of $0.05 per share (the shares of Common Stock
underlying the above Warrants shall collectively be referred to as the
“Warrant
Shares”).
The
Warrant Shares shall have “piggy-back” and demand registration
rights.
(iv) The
Company shall pay Yorkville Advisors, LLC a non-refundable due diligence fee
of
Five Thousand Dollars ($5,000) which shall be paid directly from the proceeds
of
the Closing
(v) Upon
the
execution of this Agreement, the Company shall issue to the Buyer Four Million
(4,000,000) shares of the Company’s Common Stock (the “Commitment
Shares”).
The
Commitment Shares shall be deemed fully earned on the date hereof and shall
have
“piggy-back” and demand registration rights.
(h) Corporate
Existence. So long as any of the Convertible Debentures remain outstanding,
the
Company shall not directly or indirectly consummate any merger, reorganization,
restructuring, reverse stock split consolidation, sale of all or substantially
all of the Company’s assets or any similar transaction or related transactions
(each such transaction, an “Organizational Change”) unless, prior to the
consummation an Organizational Change, the Company obtains the written consent
of each Buyer. In any such case, the Company will make appropriate provision
with respect to such holders’ rights and interests to insure that the provisions
of this Section 4(h) will thereafter be applicable to the Convertible
Debentures.
(i) Transactions
With Affiliates. So long as any Convertible Debentures are outstanding, the
Company shall not, and shall cause each of its subsidiaries not to, enter into,
amend, modify or supplement, or permit any subsidiary to enter into, amend,
modify or supplement any agreement, transaction, commitment, or arrangement
with
any of its or any subsidiary’s officers, directors, person who were officers or
directors at any time during the previous two (2) years, stockholders who
beneficially own five percent (5%) or more of the Common Stock, or Affiliates
(as defined below) or with any individual related by blood, marriage, or
adoption to any such individual or with any entity in which any such entity
or
individual owns a five percent (5%) or more beneficial interest (each a “Related
Party”), except for (a) customary employment arrangements and benefit programs
on reasonable terms, (b) any investment in an Affiliate of the Company, (c)
any
agreement, transaction, commitment, or arrangement on an arms-length basis
on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, (d) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the disinterested
directors of the Company; for purposes hereof, any director who is also an
officer of the Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. “Affiliate” for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a ten percent (10%) or more equity interest in that person or entity,
(ii) has ten percent (10%) or more common ownership with that person or entity,
(iii) controls that person or entity, or (iv) shares common control with
that person or entity. “Control” or “controls” for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
13
(j) Transfer
Agent. The Company covenants and agrees that, in the event that the Company’s
agency relationship with the transfer agent should be terminated for any reason
prior to a date which is two (2) years after the Closing Date, the Company
shall
immediately appoint a new transfer agent and shall require that the new transfer
agent execute and agree to be bound by the terms of the Irrevocable Transfer
Agent Instructions (as defined herein).
(k) Restriction
on Issuance of the Capital Stock. So long as any Convertible Debentures are
outstanding, the Company shall not, without the prior written consent of the
Buyer(s) which shall not be unreasonably withheld, (i) issue or sell shares
of
Common Stock or Preferred Stock without or without consideration (ii) issue
any
warrant, option, right, contract, call, or other security instrument granting
the holder thereof, the right to acquire Common Stock with or without
consideration, (iii) enter into any security instrument granting the holder
a
security interest in any and all assets of the Company except as otherwise
provided in the Security Agreement of even date between the Company and the
Buyers, or (iv) file any registration statement on Form S-8, except for a
registration statement on Form S-8 registering up to Two Million (2,000,000)
shares of Common Stock under an Employee Stock Option Plan.
The
foregoing restriction shall exclude options granted and outstanding before
July
3, 2007 under the Company’s bona fide Employee Stock Option Plan, and any
options, warrants or other securities convertible or exchangeable into shares
of
Common Stock of the Company (as outlined in the Disclosure Schedule) that were
granted and outstanding prior to July 3, 2007. In addition, the foregoing
restriction shall exclude the issuance of restricted shares of Common Stock
of
the Company in connection with an acquisition of another business or equity
financing up to Two Million (2,000,000) shares of Common Stock in the
aggregate.
(l) Neither
the Buyer(s) nor any of its affiliates have an open short position in the Common
Stock of the Company, and the Buyer(s) agrees that it shall not, and that it
will cause its affiliates not to, engage in any short sales of or hedging
transactions with respect to the Common Stock as long as any Convertible
Debenture or warrants to purchase the Warrant Shares shall remain outstanding.
14
(m) Rights
of
First Refusal. For a period of eighteen (18) months from the date hereof,
if
the
Company intends to raise additional capital by the issuance or sale of capital
stock of the Company, including without limitation shares of any class of common
stock, any class of preferred stock, options, warrants or any other securities
convertible or exercisable into shares of common stock (whether the offering
is
conducted by the Company, underwriter, placement agent or any third party)
the
Company shall be obligated to offer to the Buyers such issuance or sale of
capital stock, by providing in writing the principal amount of capital it
intends to raise and outline of the material terms of such capital raise, prior
to the offering such issuance or sale of capital stock to any third
parties including, but not limited to, current or former officers or directors,
current or former shareholders and/or investors of the obligor, underwriters,
brokers, agents or other third parties. The Buyers shall have ten (10)
business days from receipt of such notice of the sale or issuance of capital
stock to accept or reject such capital raising offer. The Buyer’s acceptance
shall be made in writing and shall be on the same terms as the issuance or
sale
presented by the Company to the Buyer.
(n) Post-Effective
Amendment. The
Company shall use its best efforts to have the Post-Effective Amendment filed
with the SEC on June 25, 2007 declared effective by September 1, 2007. In the
event that the Post-Effective Amendment is not declared effective by October
1,
2007 at the Buyer’s Option, the exercise price of Warrants CCP-001, CCP-002,
CCP-003, and CCP-004 shall reset to $0.023 (or subsequently adjusted as provided
in each of the Warrants), and the Fixed Conversion Price (as defined in the
Debenture issued pursuant to the Securities Purchase Agreement dated December
13, 2005) shall be reset from $0.275 to $0.03, the interest rate shall reset
to
14% and the discount to market will reset to 10%. If the Post effective is
declared effective by September 1, 2007 the Company shall immediately amend
the
registration statement to reflect the reset of Warrants CCP-001, CCP-002,
CCP-003, and CCP-004 to $0.023 and can force Investor to exercise these warrants
so long as TLPE shares maintain a minimum bid of $.05 cents and trade a minimum
of 750,000 shares for 10 consecutive trading days as reported by Bloomberg
prior
to forced exercise and to the extent that the forced exercise doesn’t not put
the investor over 9.99% holder of TLPE shares.
(o) Liens.
The
Company hereby acknowledges, confirms and agrees that Buyer has and shall
continue to have valid, enforceable and perfected first-priority liens upon
and
security interests in the Pledged Property and the Pledged Shares as further
detailed in the Transaction Documents and new subsidiaries heretofore granted
pursuant to any
and
all security agreements or otherwise granted to or held by Buyer.
(p) Increase
in Authorized Capital. The Company shall take all actions necessary to increase
its authorized shares of common stock to 1,500,000,000 within one hundred and
twenty (120) days hereof. The Company shall furnish to each Buyer and its legal
counsel promptly before the same is filed with the SEC, one copy of the proxy
or
information statement and any amendment thereto, and shall deliver to each
Buyer
promptly each letter written by or on behalf of the Company to the SEC or the
staff of the SEC, and each item of correspondence from the SEC or the staff
of
the SEC, in each case relating to such proxy or information statement (other
than any portion thereof which contains information for which the Company has
sought confidential treatment). The Company will promptly respond to any and
all
comments received from the SEC (which comments shall promptly be made available
to each Buyer). The Company shall comply with the filing and disclosure
requirements of Section 14 under the 1934 Act in connection with obtaining
the
approval of the Company’s stockholders to increase its authorized shares of
common stock. The Company represents and warrants that its Board of Directors
has approved the proposal contemplated by this Section 4(p) and shall indicate
such approval in the proxy or information statement used in connection with
the
Stockholder Approval.
15
(q) Cash
Flow
Monitor. So long as any amounts remain outstanding under the Debentures, the
Company shall provide the Buyer an estimate of the monthly cash flow, accounts
receivable and payable statements on or before fourteen (14) days following
the
end of each month with final monthly cash flow, accounts receivable and payable
statements on or before the end of such month.
(r) Targets.
The Company covenants and agrees to: (i) achieve no less than 80% of the
milestones set forth on the attached Schedule 4(q) (the “Targets”) which shall
be monitored by the Buyer on a quarterly and annual basis. So long as any
amounts remain outstanding under the Convertible Debentures, if the Company
shall fail to make the Mandatory Redemption payments as outlined in the
Convertible Debenture issued simultaneously herewith (the “July 2007 Debenture)
or fails to both
(i) make
the Mandatory Redemption payments as outlined in the July 2007 Debenture and
(ii) achieve at least 80% of Targets, the Buyer shall be entitled to the
following: (a) upon the first occurrence, the Buyer shall have the right to
receive stock certificate # 2189 dated November 16, 2005 in the amount of
6,412,500 shares of the Company, stock certificate #2009 dated December 30,
2003
in the amount of 13,750,000 shares of the Company, and stock certificate #
2008
dated December 17, 2003 in the amount of 10,000,000 share of the Company
registered to Visioneer Holdings Group, Inc.; (b) upon the second occurrence,
the Buyer shall have the option to require the officers of the Company to
promptly submit their resignations as officers of the Company and forego any
compensation or severance that they may be entitled to. The foregoing shall
not
apply to any directors or officers joining the Company after July 3,
2007.
(s) Obligations.
Company covenants and agrees that all amounts owed, together with interest
accrued and accruing thereon, and fees, costs, expenses and other charges
(collectively, the “Obligations”)
now or
hereafter payable by the Company to Buyer under the Convertible Debentures
and
all other agreements, contracts, instruments or other items delivered in
connection therewith (collectively, along with this Agreement and the agreements
executed in connection herewith, shall be referenced herein as the “Transaction
Documents”)
are
unconditionally owing by the Company to Buyer, without offset, setoff, defense
or counterclaim of any kind, nature or description whatsoever. All terms of
the
Transaction Documents not modified by this Agreement shall remain in full force
and effect. An event of default under any of the Transaction Document shall
constitute an Event of Default on all other Transaction Documents.
5. TRANSFER
AGENT INSTRUCTIONS.
16
(a) The
Company shall issue the Irrevocable Transfer Agent Instructions to its transfer
agent, and any subsequent transfer agent, irrevocably appointing Xxxxx Xxxxxxxx,
Esq. as the Company’s agent for purpose instructing its transfer agent to issue
certificates or credit shares to the applicable balance accounts at The Deposity
Trust Company (“DTC”),
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares issued upon conversion of the
Convertible Debentures or exercise of the Warrants as specified from time to
time by each Buyer to the Company upon conversion of the Convertible Debentures
or exercise of the Warrants. The Company shall not change its transfer agent
without the express written consent of the Buyers, which may be withheld by
the
Buyers in their sole discretion. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
5,
and stop transfer instructions to give effect to Section 2(g) hereof (in the
case of the Conversion Shares or Warrant Shares prior to registration of such
shares under the Securities Act) will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents. If a Buyer effects a sale, assignment
or
transfer of the Securities in accordance with Section 2(f), the Company shall
promptly instruct its transfer agent to issue one or more certificates or credit
shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Buyer to effect such sale, transfer or
assignment and, with respect to any transfer, shall permit the transfer. In
the
event that such sale, assignment or transfer involves Conversion Shares or
Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall issue
such Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend. Nothing in this Section 5 shall affect in any
way the Buyer’s obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares. The Company acknowledges
that
a breach by it of its obligations hereunder will cause irreparable harm to
the
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees,
in
the event of a breach or threatened breach by the Company of the provisions
of
this Section 5, that the Buyer(s) shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss
and without any bond or other security being required.
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Convertible Debentures
to the Buyer(s) at the Closing is subject to the satisfaction, at or before
the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:
(a) Each
Buyer shall have executed the Transaction Documents and delivered them to the
Company.
(b) The
Buyer(s) shall have delivered to the Escrow Agent the Purchase Price for
Convertible Debentures in respective amounts as set forth next to each Buyer
as
outlined on Schedule I attached hereto and the Escrow Agent shall have delivered
the net proceeds to the Company by wire transfer of immediately available U.S.
funds pursuant to the wire instructions provided by the Company.
17
(c) The
representations and warranties of the Buyer(s) shall be true and correct in
all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as
of a
specific date), and the Buyer(s) shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Buyer(s)
at or
prior to the Closing Date.
7. CONDITIONS
TO THE BUYER’S OBLIGATION TO PURCHASE.
(a) The
obligation of the Buyer(s) hereunder to Purchase the Convertible Debentures
at
the Closing is subject to the satisfaction, at or before the Closing Date,
of
each of the following conditions:
(i) The
Company shall have executed the Transaction Documents and delivered the same
to
the Buyer(s).
(ii) The
Common Stock shall be authorized for quotation on the OTCBB, trading in the
Common Stock shall not have been suspended for any reason, and all the
Conversion Shares issuable upon the conversion of the Convertible Debentures
shall be approved by the OTCBB.
(iii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. If requested by the Buyer, the Buyer
shall have received a certificate, executed by the President of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by the Buyer including, without
limitation an update as of the Closing Date regarding the representation
contained in Section 3(c) above.
(iv) The
Company shall have executed and delivered to the Buyer(s) the Convertible
Debentures in the respective amounts set forth opposite each Buyer(s) name
on
Schedule I attached hereto.
(v) The
Buyer(s) shall have received an opinion of counsel from Xxxxxxxx
& Xxxx LLP
in a
form satisfactory to the Buyer(s).
(vi) The
Company shall have provided to the Buyer(s) a certificate of good standing
from
the secretary of state from the state in which the company is
incorporated.
18
(vii) The
Company shall have delivered to the Escrow Agent the Pledged Shares as well
executed and medallion guaranteed stock bond powers as required pursuant to
the
Pledge and Escrow Agreement.
(viii) The
Company shall have provided to the Buyer an acknowledgement, to the satisfaction
of the Buyer, from the Company’s independent certified public accountants as to
its ability to provide all consents required in order to file a registration
statement in connection with this transaction.
(ix) The
Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Convertible
Debentures, shares of Common Stock to effect the conversion of all of the
Conversion Shares then outstanding.
(x) The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to
the Buyer, shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(xi) The
Company shall have reset the exercise price of Warrants XXXX-000, XXXX-000,
XXXX-000, XXXX-000 to an exercise price of $0.03 (or subsequently adjusted
as
provided in Section 8 of each of the warrants). Buyers shall continue to have
“piggy back” registration rights with respect to the shares of common stock
underlying the warrants and the right to demand the registration of the shares
underlying the warrants by providing the Company with thirty (30) days advance
written notice of such request in accordance with the Investor Registration
Rights Agreement between Cornell and the Company dated July 28, 2006.
(xii) The
Company shall have reset the Fixed Conversion Price (as defined in the Debenture
issued pursuant to the Securities Purchase Agreement between Cornell and the
Company dated July 28, 2006 (the “July Debenture”) of $0.20 to $0.035 and the
interest rate shall be reset to 14% (or as subsequently adjusted pursuant to
the
terms of the July Debenture). In connection herewith, the Buyers agree to waive
its right to receive the Mandatory Redemption Amount (as such term is defined
in
the July Debenture) pursuant to the July Debenture. Said Mandatory Redemption
payments shall resume on February 2nd
2009.
(xiii) The
Company shall have delivered to the Buyer a statements of it’s cash position as
of the date of Closing.
8. INDEMNIFICATION.
(a) In
consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder, and
in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
each
other holder of the Convertible Debentures and the Conversion Shares, and all
of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Buyer Indemnitees”) from and against any and
all actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective
of
whether any such Buyer Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified Liabilities”), incurred by the Buyer
Indemnitees or any of them as a result of, or arising out of, or relating to
(a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Convertible Debentures or the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, or the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from
the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the parties
hereto, any transaction financed or to be financed in whole or in part, directly
or indirectly, with the proceeds of the issuance of the Convertible Debentures
or the status of the Buyer or holder of the Convertible Debentures the
Conversion Shares, as a Buyer of Convertible Debentures in the Company. To
the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment
and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
19
(b) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Buyer’s other obligations under this Agreement, the Buyer
shall defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company Indemnitees”) from and against any and all
Indemnified Liabilities incurred by the Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of
any
representation or warranty made by the Buyer(s) in this Agreement, instrument
or
document contemplated hereby or thereby executed by the Buyer, (b) any breach
of
any covenant, agreement or obligation of the Buyer(s) contained in this
Agreement, the Investor Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby executed by the Buyer,
or
(c) any cause of action, suit or claim brought or made against such Company
Indemnitee based on material misrepresentations or due to a material breach
and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement, the Investor Registration Rights Agreement or
any
other instrument, document or agreement executed pursuant hereto by any of
the
parties hereto. To the extent that the foregoing undertaking by each Buyer
may
be unenforceable for any reason, each Buyer shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which
is
permissible under applicable law.
9. GOVERNING
LAW: MISCELLANEOUS.
(a) Governing
Law. This Agreement shall be governed by and interpreted in accordance with
the
laws of the State of New Jersey without regard to the principles of conflict
of
laws. The parties further agree that any action between them shall be heard
in
Xxxxxx County, New Jersey, and expressly consent to the jurisdiction and venue
of the Superior Court of New Jersey, sitting in Xxxxxx County and the United
States District Court for the District of New Jersey sitting in Newark, New
Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.
20
(b) Counterparts.
This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party. In the event any signature page is delivered by facsimile transmission,
the party using such means of delivery shall cause four (4) additional original
executed signature pages to be physically delivered to the other party within
five (5) days of the execution and delivery hereof.
(c) Headings.
The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement, Amendments. This Agreement supersedes all other prior oral or written
agreements between the Buyer(s), the Company, their affiliates and persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor
any
Buyer makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
(f) Notices.
Any notices, consents, waivers, or other communications required or permitted
to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
21
|
If
to the Company, to:
|
Teleplus
World Corp.
|
|
0000
Xxxx Xxxxxx Xxxxx, Xxxxx 000
|
|
|
Xxxxx,
Xxxxxxx 00000
|
|
|
Attention: Marius
Silvasan, CEO
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000
) 000-0000
|
|
|
With
a copy to:
|
Xxxxxxxx
& Xxxx LLP
|
|
000
Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 0000
|
|
|
Xxxxxxx,
Xxxxxxxx 00000-0000
|
|
|
Attention: Xxxxxx
X. Xxxxxx, Esq.
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
If
to the
Buyer(s), to its address and facsimile number on Schedule I, with copies to
the
Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5)
days’ prior written notice to the other party of any change in address or
facsimile number.
(g) Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of
the parties and their respective successors and assigns. Neither the Company
nor
any Buyer shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other party hereto.
(h) No
Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for
the
benefit of, nor may any provision hereof be enforced by, any other
person.
(i) Survival.
Unless this Agreement is terminated under Section 9(l), the representations
and
warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing
for
a period of two (2) years following the date on which the Convertible Debentures
are converted in full. The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Publicity.
The Company and the Buyer(s) shall have the right to approve, before issuance
any press release or any other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that the Company
shall
be entitled, without the prior approval of the Buyer(s), to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company shall
use
its best efforts to consult the Buyer(s) in connection with any such press
release or other public disclosure prior to its release and Buyer(s) shall
be
provided with a copy thereof upon release thereof).
(k) Further
Assurances. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated
hereby.
22
(l) Termination.
In the event that the Closing shall not have occurred with respect to the Buyers
on or before five (5) business days from the date hereof due to the Company’s or
the Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
above (and the non-breaching party’s failure to waive such unsatisfied
condition(s)), the non-breaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on
such
date without liability of any party to any other party; provided, however,
that
if this Agreement is terminated by the Company pursuant to this Section 9(l),
the Company shall remain obligated to reimburse the Buyer(s) for the fees and
expenses of Yorkville Advisors Management, LLC described in Section 4(g)
above.
(m) No
Strict
Construction. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules
of
strict construction will be applied against any party.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
23
IN
WITNESS WHEREOF,
the
Buyers and the Company have caused this Securities Purchase Agreement to be
duly
executed as of the date first written above.
|
COMPANY:
|
|
|
By:
|
|
|
Name: Marius
Silvasan
|
|
|
Title: CEO
|
|
24
EXHIBIT
A
FORM
OF INVESTOR REGISTRATION RIGHTS AGREEMENT
EXHIBIT
B
SECURITY
AGREEMENT
EXHIBIT
C
PLEDGE
AND ESCROW AGREEMENT
2
EXHIBIT
D
IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS
3
EXHIBIT
E
SUBSIDIARY
SECURITY AGREEMENTS
4
EXHIBIT
F
DISCLOSURE
SCHEDULE
Proposed
Tax Assessment:
3577996
Canada, Inc. which the Company had acquired substantially all of their assets,
is involved in proceedings with the Minister of Revenue of Quebec (“MRQ”). The
MRQ has proposed an assessment for the Goods and Services Tax (“GST”) and Quebec
Sales Tax (“QST”) of approximately $642,000 (CND $) and penalties of
approximately $110,000 (CND $). The proposed tax assessment including penalties
is for $322,000 (CND $) for QST and $320,000 (CND $) for GST. In mid to late
2006, the MRQ issued Amended Reassessments after the Company contested. These
amounts were reduced (including penalties) to approximately QST $350,000 (CND
$)
and GST $308,000 (CND $). The Company again contested these Amended
Reassessments and believes that certain deductions initially disallowed by
the
MRQ for the QST are deductible and is in the process of compiling the deductions
to the MRQ.
Wrongful
Dismissal:
A
former employee of a subsidiary of the Company, has instigated a claim in Quebec
Superior Court in the amount of $90,000 (CND $) against the Company for wrongful
dismissal. The Company does not believe the claim to be founded and intends
to
vigorously contest such claim. The parties are in the discovery stages with
no
further action exisitng.
Wrongful
Dismissal:
There
is a claim from three individuals in British Columbia in the amount of
approximately $147,000 and the issuance of 510,00 shares of common stock for
which a letter of demand has been served to the Company. The Company does not
believe the claim to be founded and intends to vigorously contest such claim.
No
court proceedings have been instituted and the Company has been in discussions
with the aforementioned individuals; the individuals have not been responsive
to
offers of settlement.
Consulting
Fee:
On
April 13, 2005, a lawsuit was filed in the United States District Court,
District of New Jersey (Newark) (Case No. 05-2058) by Xxxxxx Xxxxxxx d/b/a
“Salamon Brothers” (as the plaintiff) against the Company. This matter arises
out of an alleged agreement between the plaintiff and the Company. The plaintiff
is seeking specific performance of the alleged agreement, monetary damages
and a
declaratory judgment for the payment of a commission allegedly due to the
plaintiff in an amount equal to 10% of all funds received by the Company from
Cornell. The Company has filed a counterclaim against the plaintiff seeking
rescission of the alleged agreement and a refund of $100,000 paid by the Company
to the plaintiff. The Company believes that this lawsuit is without merit,
that
the plaintiff’s claims are unfounded and that the Company has good defenses
against the claims asserted by the plaintiff. The Company also believes that
it
has good claims for the rescission of the alleged agreement and for the refund
of the amount paid to the plaintiff and is vigorously defending the case. The
parties are in the process of discovery.
Breach
of contract: Former
landlord of leased office space in Montreal, Quebec has filed lawsuit in
Montreal, Quebec against the Company. The Company effectively terminated the
lease March 31, 2007 and is reviewing the merits of said lawsuit and will
vigorously defend the case.
The
following claim has been instigated by the Company:
A
subsidiary of the Company has instigated a claim against Wal-Mart Canada Corp.
on September 23, 2004 in the Ontario Superior Court of Justice in Xxxxxxx,
Xxxxxxx, Xxxxxx in the amount of approximately $7,000,000 (CDN $) for breach
of
an agreement between the parties. The parties are attempting to settle the
matter.
5
On
February 1, 2007 the Company’s subsidiary, Teleplus Wireless, Corp. d/b/a
Liberty Wireless (“Liberty”) filed a lawsuit against Mobile Technology Services,
LLC (“MTS”) alleging that MTS had breached a number of provisions of the Mobile
Virtual Network Enabler (“MVNE Agreement”) Services Agreement between Liberty
and MTS, despite repeated attempts by Liberty requesting that MTS cure all
the
breaches under the MVNE Agreement. The lawsuit was filed in the U.S. District
Court for the Southern District of Florida. Currently, Liberty has alleged
damages in the amount of approximately $975,000. MTS has since filed a
counterclaim alleging breach of the MVNE Agreement for failure to pay invoices
that have been contested by Liberty.
6
SCHEDULE
I
SCHEDULE
OF BUYERS
|
Name
|
Signature
|
Address/Facsimile
Number
of Buyer
|
Amount
of Subscription
|
|
Cornell
Capital Partners, LP
|
By: Yorkville
Advisors, LLC
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
$3,000,000
|
|
Its: General
Partner
|
Xxxxxx
Xxxx, XX 00000
|
||
|
Facsimile: (000)
000-0000
|
|||
|
By:
|
|||
|
Name: Xxxx
Xxxxxx
|
|||
|
Its: Portfolio
Manager
|
|||
|
With
a copy to:
|
Xxxxx
Xxxxxxxx, Esq.
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
|
|
Xxxxxx
Xxxx, XX 00000
|
|||
|
Facsimile:
(000) 000-0000
|
|||
SCHEDULE
4(q)
TARGETS
SCHEDULE
1.
Operating Income as outlined in the Company’s K and Qs plus depreciation and
amortization:
A.
$18,490 of 2nd
Quarter
2007
B.
$107,632 of 3rd
Qtr 2007
C.
$198,398 of 4th
Qtr 2007
D.
$67,065 of 1st
Qtr
2008
E.
$448,126 of 2nd
Qtr
2008
F.
$668,339 of 3rd
Qtr
2008
G.
$861,350 of 4th
Qtr
2008
2.
Cash
Provided by (Used in) Operating Activities as outlined in the Company’s K and
Qs:
A.
($314,491) of 2nd
Quarter
2007
B.
($296,099) of 3rd
Qtr 2007
C.
($12,471) of 4th
Qtr 2007
D.
$213,776 of 1st
Qtr
2008
E.
$392,047 of 2nd
Qtr
2008
F.
$615,593 of 3rd
Qtr
2008
G.
$572,915 of 4th
Qtr
2008
2
