SECURITIES PURCHASE AGREEMENT
EXHIBIT 99.2
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of March 20, 2006, by and among
Think Partnership Inc., (formerly known as CGI Holding Corporation), a Nevada corporation, with
headquarters located at 0 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000 (the "Company”), and
the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and
collectively, the “Buyers”).
WHEREAS:
A. The Company and each Buyer is executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as
amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.
B. The Company has authorized a new series of convertible preferred stock of the Company
designated as Series A Convertible Preferred Stock, the terms of which are set forth in the
certificate of designation for such series of preferred stock (the “Certificate of Designations”)
in the form attached hereto as Exhibit A (together with any convertible preferred shares
issued in replacement thereof in accordance with the terms thereof, the “Preferred Shares”), which
Preferred Shares shall be convertible into the Company’s common stock, par value $0.001 per share
(the “Common Stock”), in accordance with the terms of the Certificate of Designations.
C. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate number of Preferred Shares set forth
opposite such Buyer’s name in column (3) on the Schedule of Buyers (which aggregate number for all
Buyers shall be up to 26,500) (as converted, collectively, the “Conversion Shares” and (ii)
Warrants in substantially the form attached hereto as Exhibit B (the “Warrants”), to
acquire that number of shares of Common Stock (as exercised, collectively, the “Warrant Shares”)
set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers.
D. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in the form attached hereto
as Exhibit C (the “Registration Rights Agreement”), pursuant to which the Company has
agreed to provide certain registration rights with respect to the Registrable Securities (as
defined in the Registration Rights Agreement), under the 1933 Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.
E. The Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities”.
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS.
(a) Preferred Shares and Warrants. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to each Buyer, and
each Buyer severally, but not jointly, agrees to purchase from the Company on the Closing Date (as
defined below), the number of Preferred Shares, as is set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers, along with Warrants to acquire that number of Warrant Shares
as is set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers.
(b) Closing. The closing (the “Closing”) of the purchase of the Preferred Shares and
the Warrants by the Buyers shall occur at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York City Time, on the date hereof, subject to the notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7 below (or such later date as
is mutually agreed to by the Company and each Buyer). As used herein “Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
(c) Purchase Price. The aggregate purchase price for the Preferred Shares and the
Warrants to be purchased by each Buyer (the “Purchase Price”) shall be the amount set forth
opposite such Buyer’s name in column (5) on the Schedule of Buyers. Each Buyer shall pay $1,000
for each Preferred Share and related Warrants to be purchased by such Buyer at the Closing.
(d) Form of Payment. On the Closing Date, (A) each Buyer shall pay its portion of the
Purchase Price to the Company for the Preferred Shares and the Warrants to be issued and sold to
such Buyer at the Closing, by wire transfer of immediately available funds in accordance with the
Company’s written wire instructions and (B) the Company shall deliver to each Buyer the Preferred
Shares (in such denominations as is set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers), along with the Warrants (exercisable for the number of shares of Common Stock
as is set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers), each duly
executed on behalf of the Company and registered in the name of such Buyer or its designee.
2. BUYER’S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
(a) Organization; Authority. Such Buyer is an entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization with the requisite
power and authority to enter into and to consummate the transactions contemplated by the
Transaction Documents (as defined below) to which it is a party and otherwise to carry out its
obligations hereunder and thereunder.
(b) No Public Sale or Distribution. Such Buyer is (i) acquiring the Preferred Shares
and the Warrants, (ii) upon conversion of the Preferred Shares will acquire the Conversion Shares,
and (iii) upon exercise of the Warrants will acquire the Warrant Shares, in
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each case, for its own account and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, such Buyer does not agree
to hold any of the Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a registration statement or
an exemption under the 1933 Act. Such Buyer is not a broker-dealer registered, or required to be
registered, with the SEC under the 1934 Act. Such Buyer is acquiring the Securities hereunder in
the ordinary course of its business. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the Securities.
(c) Accredited Investor Status. Such Buyer is an “accredited investor” as that term
is defined in Rule 501(a) of Regulation D.
(d) Reliance on Exemptions. Such Buyer understands that the Securities 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 the Securities.
(e) Information. Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such Buyer. Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the Company. 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 herein. Such Buyer understands that its
investment in the Securities involves a high degree of risk. Such 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 Securities.
(f) No Governmental Review. Such 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 Securities or the fairness or suitability of the investment in
the Securities nor have such authorities passed upon or endorsed the merits of the offering of the
Securities.
(g) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (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, or (C) such Buyer provides the Company with reasonable assurance
that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
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144A promulgated under the 1933 Act, as amended, (or a successor rule thereto) (collectively,
“Rule 144”); (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 (as defined in Section 3(s))
through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the
0000 Xxx) may require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder. The Securities may be pledged in
connection with a bona fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer, sale or assignment
of the Securities hereunder, and no Buyer effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document (as defined in Section 3(b)), including,
without limitation, this Section 2(f).
(h) Legends. Such Buyer understands that the certificates or other instruments
representing the Preferred Shares and the Warrants and, until such time as the resale of the
Conversion Shares and the Warrant Shares have been registered under the 1933 Act as contemplated by
the Registration Rights Agreement, the stock certificates representing the Conversion Shares and
the Warrant Shares, except as set forth below, shall bear any legend as required by the “blue sky”
laws of any state and a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE
BEEN][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 MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a certificate without such
legend to the holder of the Securities upon which it is stamped, if, unless otherwise required by
state securities laws, (i) such Securities are registered for resale under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that such sale, assignment or
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transfer of the Securities may be made without registration under the applicable requirements of
the 1933 Act, or (iii) such holder provides the Company with reasonable assurance that the
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A.
(i) Validity; Enforcement. This Agreement and the Registration Rights Agreement have
been duly and validly authorized, executed and delivered on behalf of such Buyer and shall
constitute the legal, valid and binding obligations of such Buyer enforceable against such Buyer in
accordance with their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
(j) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the Registration Rights Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of such Buyer 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 such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities laws) applicable to
such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the ability of such Buyer to perform its obligations hereunder.
(k) Residency. Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.
(l) Certain Trading Activities. No Buyer has directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with such Buyer, engaged in any
transactions in the securities of the Company (including without limitation, any Short Sales
involving the Company’s securities) since the time that the Buyer was first contacted by the
Company or Xxxx Capital Partners LLC regarding an investment in the Company. Each Buyer covenants
that neither it nor any Person acting on its behalf or pursuant to any understanding with it will
engage in any transaction in the securities of the Company (including Short Sales) prior to the
time that the transactions contemplated by this Agreement are publicly disclosed pursuant to
Section 4(i). Short Sales include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the 1934 Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements (including on
a total return basis), and sales and other transactions through non-US broker dealers or foreign
regulated brokers.
(m) General Solicitation. No Buyer is purchasing the Securities as a result of any
advertisement, article, notice or other communication (including a research report issued by the
Agent) regarding the Securities published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
(a) Organization and Qualification. The Company and its “Subsidiaries” (which for
purposes of this Agreement means any entity in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest) are entities duly organized and validly
existing and in good standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authorization 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 entity to
do business and is in good standing in every jurisdiction in which its ownership of property or 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. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on
the business, properties, assets, operations, results of operations, condition (financial or
otherwise) or current prospects of the Company and its Subsidiaries, both taken as a whole and
individually as to any Subsidiary that is a Significant Subsidiary (as defined in Regulation S-X),
or on the transactions contemplated hereby or in the other Transaction Documents or by the
agreements and instruments to be entered into in connection herewith or therewith, or on the
authority or ability of the Company to perform its obligations under the Transaction Documents (as
defined below). The Company has no Subsidiaries, except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. Except as set forth in Schedule
3(b), the Company has the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Certificate of Designations, the Warrants, the Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), and
each of the other agreements entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the “Transaction Documents”) and to issue the
Securities in accordance with the terms hereof and thereof. The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of the Preferred
Shares, the reservation for issuance and the issuance of the Conversion Shares issuable upon
conversion of the Preferred Shares, the issuance of the Warrants and the reservation for issuance
and issuance of the Warrant Shares issuable upon exercise of the Warrants, have been duly
authorized by the Company’s Board of Directors and (other than the filing with the SEC of one or
more Registration Statements in accordance with the requirements of the Registration Rights
Agreement and any other filings as may be required by any state securities agencies) no further
filing, consent, or authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other Transaction Documents of even date herewith have been
duly executed and delivered by the Company, and constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their respective 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 applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state securities law. The
Certificate of Designations in the form attached
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hereto as Exhibit A shall be filed with the Secretary of State of the State of Nevada
on or prior to Closing.
(c) Issuance of Securities. The issuance of the Preferred Shares and the Warrants are
duly authorized and upon issuance in accordance with the terms of the Transaction Documents shall
be free from all taxes, liens and charges with respect to the issue thereof, and the Preferred
Shares shall be entitled to the rights and preferences set forth in the Certificate of
Designations. As of the Closing, the Company shall have reserved from its duly authorized capital
stock not less than the sum of (i) the maximum number of shares of Common Stock issuable upon
conversion of the Preferred Shares (without taking into account any limitations on the conversion
of the Preferred Shares set forth in the Certificate of Designations) and (ii) the maximum number
of shares of Common Stock issuable upon exercise of the Warrants (assuming for purposes hereof that
the Exercise Price (as defined in the Warrants) is equal to $2.00, subject to adjustment for stock
dividends and stock splits and without taking into account any limitations on the exercise of the
Warrants set forth in the Warrants). Upon issuance or conversion in accordance with the
Certificate of Designations or exercise in accordance with the Warrants, as the case may be, the
Conversion Shares and the Warrant Shares, respectively, will be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights, taxes, liens and charges with respect
to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common
Stock. Subject to the representations and warranties of the Buyers in this Agreement, the offer
and issuance by the Company of the Securities is exempt from registration under the 1933 Act.
(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Preferred Shares, the
Warrants, and reservation for issuance of the Conversion Shares and the Warrant Shares) will not
(i) result in a violation of the Articles of Incorporation (as defined in Section 3(r)) of the
Company or any of its Subsidiaries, any capital stock of the Company or Bylaws (as defined in
Section 3(r)) or the Certificate of Designations of the Company or any of its Subsidiaries 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, except to the extent such conflict, default or termination right would not
reasonably be expected to have a Material Adverse Effect, or (iii) 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 American Stock Exchange (the “Principal Market”)
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, in the case of clause (ii) or (iii)
above, to the extent such violations that would not reasonably be expected to have a Material
Adverse Effect.
(e) Consents. The Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental agency or any regulatory
or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents, in each case in accordance with
the terms hereof or thereof. All consents, authorizations, orders, filings
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and registrations which the Company is required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the Closing Date, and the Company and its
Subsidiaries are unaware of any facts or circumstances which might prevent the Company from
obtaining or effecting any of the registration, application or filings pursuant to the preceding
sentence. The Company is not in violation of the requirements of the Principal Market and has no
knowledge of any facts which would reasonably lead to delisting or suspension of the Common Stock
in the foreseeable future.
(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges
and agrees that each Buyer is acting solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions contemplated hereby and thereby and that
no Buyer is (i) an officer or director of the Company, (ii) an “affiliate” of the Company or any of
its Subsidiaries (as defined in Rule 144) or (iii) to its knowledge, a “beneficial owner” of more
than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the “1934 Act”)). The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any
similar capacity) with respect to the Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Buyer’s purchase of the Securities. The Company further represents to
each Buyer that the Company’s decision to enter into the Transaction Documents has been based
solely on the independent evaluation by the Company and its representatives.
(g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of
its Subsidiaries or 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) in
connection with the offer or sale of the Securities. The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than
for persons engaged by any Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket
expenses) arising in connection with any such claim. The Company acknowledges that it has engaged
Xxxx Capital Partners LLC as placement agent (the “Agent”) in connection with the sale of the
Securities. Other than the Agent, neither the Company nor any of its Subsidiaries has engaged any
placement agent or other agent in connection with the sale of the Securities.
(h) No Integrated Offering. None of the Company, its Subsidiaries, any of their
affiliates, and any Person acting on 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 any of the Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the securities of the
Company are listed or designated. None of the Company, its Subsidiaries, their affiliates and any
Person acting on their behalf will take any action or steps referred to in the preceding
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sentence that would require registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other offerings.
(i) Dilutive Effect. The Company understands and acknowledges that the Warrant Shares
issuable upon exercise of the Warrants, will increase in certain circumstances. The Company
further acknowledges that its obligation to issue Conversion Shares upon conversion of the
Preferred Shares in accordance with this Agreement and the Certificate of Designations and its
obligation to issue the Warrant Shares upon exercise of the Warrants in accordance with this
Agreement and the Warrants is, in each case, absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other stockholders of the Company.
(j) Application of Takeover Protections; Rights Agreement. The Company and its board
of directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Articles of Incorporation or the laws
of the jurisdiction of its incorporation which is or could become applicable to any Buyer as a
result of the transactions contemplated by this Agreement, including, without limitation, the
Company’s issuance of the Securities and any Buyer’s ownership of the Securities. The Company has
not adopted a stockholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.
(k) SEC Documents; Financial Statements. During the two (2) years prior to the date
hereof, the Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
of the foregoing filed prior to the date hereof and all exhibits included therein and financial
statements, notes 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
respective representatives true, correct and complete copies of each of the SEC Documents not
available on the XXXXX system that have been requested by each Buyer. As of their respective
dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act
and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the circumstances under which
they were made, not misleading. Except as set forth in Schedule 3(k), as of their
respective dates, the financial statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto as in effect as of the time of filing. 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 Buyers which is not
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included in the SEC Documents, including, without limitation, information referred to in
Section 2(e) of 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 not misleading, in the light of
the circumstance under which they are or were made.
(l) Absence of Certain Changes. Except as disclosed in Schedule 3(l), since
the date of the Company’s most recent audited or reviewed financial statements contained in a Form
10-KSB or Form 10-QSB, there has been no material adverse change and no material adverse
development in the business, assets, properties, operations, condition (financial or otherwise),
results of operations or prospects of the Company or its Subsidiaries. Except as disclosed in
Schedule 3(l), since the date of the Company’s most recent audited financial statements
contained in a Form 10-KSB or Form 10-QSB, neither the Company nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess
of $500,000 outside of the ordinary course of business or (iii) had capital expenditures,
individually or in the aggregate, in excess of $500,000. Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor
to do so. The Company and its Subsidiaries, individually and on a consolidated basis, are not as
of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below). For purposes of this Section 3(l), “Insolvent”
means, with respect to the Company, on a consolidated basis with its Subsidiaries, (i) the present
fair saleable value of the Company’s and its Subsidiaries’ assets is less than the amount required
to pay the Company’s and its Subsidiaries’ total Indebtedness (as defined in Section 3(s)), (ii)
the Company and its Subsidiaries are unable to pay their debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and matured or (iii) the
Company and its Subsidiaries intend to incur or believe that they will incur debts that would be
beyond their ability to pay as such debts mature. The Company has not engaged in business or in
any transaction, and is not about to engage in business or in any transaction, for which the
Company’s remaining assets constitute unreasonably small capital.
(m) No Undisclosed Events, Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists, or is contemplated to occur with
respect to the Company, its Subsidiaries or their respective business, properties, prospects,
operations or financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to
an issuance and sale by the Company of its Common Stock and which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the Company nor its Subsidiaries
is in violation of any term of or in default under its Articles of Incorporation, the Certificate
of Designations, any other certificate of designation, preferences or rights of any other
outstanding series of preferred stock of the Company or Bylaws or their organizational charter or
Articles of Incorporation or bylaws, respectively. Neither the Company nor any of its Subsidiaries
is in violation of any judgment, decree or order or any statute, ordinance, rule or
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regulation applicable to the Company or its Subsidiaries, and neither the Company nor any of
its Subsidiaries will conduct its business in violation of any of the foregoing, except in all
cases for possible violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Company is not in violation
of any of the rules, regulations or requirements of the Principal Market and has no knowledge of
any facts or circumstances that would reasonably lead to delisting or suspension of the Common
Stock by the Principal Market in the foreseeable future. Except as set forth in Schedule
3(n), since March 3, 2005, (i) the Common Stock has been designated for quotation on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the
Principal Market and (iii) the Company has received no communication, written or oral, from the SEC
or the Principal Market regarding the suspension or delisting of the Common Stock from the
Principal Market. The Company and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, 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.
(o) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries nor
any director, officer, agent, employee or other Person acting on behalf of the Company or any of
its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its
Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any and all applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date hereof, and any
and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of
the date hereof.
(q) Transactions With Affiliates. Except as set forth in the SEC Documents filed at
least ten (10) days prior to the date hereof and other than the grant of stock options disclosed on
Schedule 3(q), none of the officers, directors or employees of the Company or any of its
Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries
(other than for ordinary course services as employees, officers or 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 such officer, director or employee or, to the knowledge of the Company or any of its
Subsidiaries, any corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director, trustee or partner.
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(r) Equity Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of (i) 200,000,000 shares of Common Stock, of which as of the date hereof,
43,904,261 including 2,500,000 shares held in treasury are issued and outstanding and 11,769,949
shares are reserved for issuance pursuant to securities (other than the Preferred Shares and the
Warrants) exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii)
5,000,000 shares of preferred stock, none of which, as of the date hereof, are issued and
outstanding. All of such outstanding shares have been, or upon issuance will be, validly issued
and are fully paid and nonassessable. Except as disclosed in Schedule 3(r): (i) none of
the Company’s capital stock is subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company; (ii) 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, or exercisable or exchangeable for, any 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 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, or exercisable or exchangeable for, any capital stock of the Company or
any of its Subsidiaries; (iii) there are no outstanding debt securities, notes, credit agreements,
credit facilities or other agreements, documents or instruments evidencing Indebtedness (as defined
in Section 3(s)) of the Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements securing obligations in
any material amounts, either singly or in the aggregate, filed in connection with the Company or
any of its Subsidiaries; (v) there are no agreements or arrangements under which the Company or any
of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act
(except pursuant to the Registration Rights Agreement); (vi) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or
any of its Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Securities; (viii) the Company
does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar
plan or agreement; and (ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC Documents, other than
those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses
and which, individually or in the aggregate, do not or would not have a Material Adverse Effect.
The Company has furnished to the Buyers true, correct and complete 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 Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the
terms of all securities convertible into, or exercisable or exchangeable for, shares of Common
Stock and
the material rights of the holders thereof in respect thereto.
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule 3(s), neither
the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as defined below),
(ii) is a party to any contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any term of or in default
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under any contract, agreement or instrument relating to any Indebtedness, except where such
violations and defaults would not result, individually or in the aggregate, in a Material Adverse
Effect, or (iv) is a party to any contract, agreement or instrument relating to any Indebtedness,
the performance of which, in the judgment of the Company’s officers, has or is expected to have a
Material Adverse Effect. Schedule 3(s) provides a detailed description of the material
terms of any such outstanding Indebtedness. For purposes of this Agreement: (x) “Indebtedness” of
any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations
issued, undertaken or assumed as the deferred purchase price of property or services (including,
without limitation, “capital leases” in accordance with generally accepted accounting principles)
(other than trade payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition of property, assets
or businesses, (E) all indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to any property or
assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied for the periods
covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or
other encumbrance upon or in any property or assets (including accounts and contract rights) owned
by any Person, even though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above;
(y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent
or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation
of another Person if the primary purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. Except as set forth in Schedule 3(t), there is no
action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge
of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common
Stock or any of the Company’s Subsidiaries or any of the Company’s or its Subsidiaries’ officers or
directors which is outside of the ordinary course of business or individually or in the aggregate
material to the Company.
(u) 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
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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 have a Material Adverse Effect.
(v) Employee Relations. (i) Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union. The Company and its
Subsidiaries believe that their relations with their employees are good. No executive officer of
the Company or any of its Subsidiaries (as defined in Rule 501(f) of the 0000 Xxx) has notified the
Company or any such Subsidiary that such officer intends to leave the Company or any such
Subsidiary or otherwise terminate such officer’s employment with the Company or any such
Subsidiary. No executive officer of the Company or any of its Subsidiaries is, or is now expected
to be, in violation of any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to any of the
foregoing matters.
(ii) The Company and its Subsidiaries are in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to be in compliance
would not, either individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(w) Title. Except as set forth on Schedule 3(w), the Company and its
Subsidiaries have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any
real property and facilities held under lease by the Company or any of 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.
(x) 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 other intellectual property rights (“Intellectual
Property Rights”) necessary to conduct their respective businesses as now conducted. None of the
Company’s or its Subsidiaries’ Intellectual Property Rights have expired, terminated or been
abandoned, or are expected to expire, terminate or be abandoned, within three years from the date
of this Agreement. The Company does not have any knowledge of any infringement by the Company or
any of its Subsidiaries of Intellectual Property Rights of others. There is no claim, action or
proceeding being made or brought, or to the knowledge of the
- 14 -
Company, being threatened, against the Company or any of its existing Subsidiaries regarding
its Intellectual Property Rights. The Company is unaware of any facts or circumstances which might
give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their Intellectual Property Rights.
(y) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with
any and all Environmental Laws (as hereinafter defined), (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 where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply
could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution
or protection of human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into
the environment, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or
approved thereunder.
(z) Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted
right to vote, and (subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the Company or such
Subsidiary.
(aa) Investment Company. The Company is not, and is not an affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940, as amended.
(bb) Tax Status. The Company and each of its Subsidiaries (i) has made or filed all
foreign, federal and state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject, (ii) 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 (iii) 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.
(cc) Internal Accounting and Disclosure Controls. Except as set forth in Schedule
3(cc), the Company and each of its Subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii) access to assets or
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incurrence of liabilities is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets and liabilities is compared
with the existing assets and liabilities at reasonable intervals and appropriate action is taken
with respect to any difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the 0000 Xxx) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits under the 1934 Act
is recorded, processed, summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures designed in to ensure that
information required to be disclosed by the Company in the reports that it files or submits under
the 1934 Act is accumulated and communicated to the Company’s management, including its principal
executive officer or officers and its principal financial officer or officers, as appropriate, to
allow timely decisions regarding required disclosure. Except as set forth in Schedule
3(cc), during the twelve months prior to the date hereof neither the Company nor any of its
Subsidiaries have received any notice or correspondence from any accountant relating to any
potential material weakness in any part of the system of internal accounting controls of the
Company or any of its Subsidiaries.
(dd) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise would be reasonably likely to have a Material Adverse Effect.
(ee) Investment Company Status. The Company is not, and upon consummation of the sale
of the Securities will not be, an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company Act of 1940, as amended.
(ff) Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other
than income or similar taxes) which are required to be paid in connection with the sale and
transfer of the Securities to be sold to each Buyer hereunder will be, or will have been, fully
paid or provided for by the Company, and all laws imposing such taxes will be or will have been
complied with.
(gg) Acknowledgement Regarding Buyers’ Trading Activity. It is understood and
acknowledged by the Company (i) that following the public disclosure of the transactions
contemplated by the Transaction Documents, in accordance with the terms thereof, none of the Buyers
have been asked by the Company or its Subsidiaries to agree, nor has any Buyer agreed with the
Company or its Subsidiaries, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) that any Buyer, and counter parties in “derivative”
transactions to which any such Buyer is a party, directly or indirectly, presently may have a
“short” position in the Common Stock which were established prior to such Buyer’s knowledge of the
transactions contemplated by the Transaction Documents, and (iii) that each Buyer shall not be
deemed to have any affiliation with or control over any arm’s length counter party in any
“derivative” transaction. The Company further understands and acknowledges that following the
public disclosure of the transactions contemplated by the Transaction Documents,
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in accordance with the terms thereof, one or more Buyers may engage in hedging and/or trading
activities at various times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Conversion Shares and the Warrant
Shares deliverable with respect to Securities are being determined and (b) such hedging and/or
trading activities, if any, can reduce the value of the existing stockholders’ equity interest in
the Company both at and after the time the hedging and/or trading activities are being conducted.
The Company acknowledges that such aforementioned hedging and/or trading activities do not
constitute a breach of this Agreement, the Notes, the Warrants or any of the documents executed in
connection herewith.
(hh) Registration Eligibility. The Company is eligible to register the Conversion
Shares and the Warrant Shares for resale by the Buyers using Form S-3 promulgated under the 1933
Act.
(ii) Manipulation of Price. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in
the stabilization or manipulation of the price of any security of the Company to facilitate the
sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any person
any compensation for soliciting another to purchase any other securities of the Company.
(jj) U.S. Real Property Holding Corporation. The Company is not, nor has ever been, a
U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue
Code of 1986, as amended, and the Company shall so certify upon Buyer’s request.
(kk) Disclosure. The Company confirms that neither it nor any other Person acting on
its behalf has provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, nonpublic information. The
Company understands and confirms that each of the Buyers will rely on the foregoing representations
in effecting transactions in securities of the Company. All disclosure provided to the Buyers
regarding the Company and its Subsidiaries, their business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company is true
and correct and does not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Except as set forth on Schedule
3(kk), each press release issued by the Company or its Subsidiaries during the twelve (12)
months preceding the date of this Agreement did not at the time of release contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the circumstances under which
they are made, not misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or regulation, requires
public disclosure at or before the date hereof or announcement by the Company but which has not
been so publicly announced or disclosed.
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4. COVENANTS.
(a) Best Efforts. Each party shall use its reasonable best efforts timely to satisfy
each of the conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the
Securities 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 in order to obtain an exemption for or to qualify
the Securities 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 (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to the Buyers on or
prior to the Closing Date. The Company shall make all filings and reports relating to the offer
and sale of the Securities required under applicable securities or “Blue Sky” laws of the states of
the United States following the Closing Date.
(c) Reporting Status. Until the date on which the Buyers shall have sold all the
Conversion Shares and Warrant Shares, and none of the Preferred Shares or Warrants is outstanding
(the “Reporting Period”), the Company shall timely file all reports required to be filed with the
SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would no longer require or otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale of the
Securities solely as set forth on Schedule 4(d).
(e) Financial Information. The Company agrees to send the following to each Investor
(as defined in the Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through XXXXX and are available to the public through the XXXXX
system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual
Reports and Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports or any
consolidated balance sheets, income statements, stockholders’ equity statements and/or cash flow
statements for any period other than annual, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same
day as the release thereof, facsimile copies of all press releases issued by the Company or any of
its Subsidiaries, and (iii) copies of any notices and other information made available or given to
the stockholders of the Company generally, contemporaneously with the making available or giving
thereof to the stockholders.
(f) Listing. The Company shall promptly secure the listing of all of the Registrable
Securities (as defined in the Registration Rights Agreement) upon each national securities exchange
and automated quotation system, if any, upon which the Common Stock is then listed (subject to
official notice of issuance) and shall maintain such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents on such exchange or automated
quotation system or an Eligible Market. The Company shall maintain the Common Stocks’
authorization for quotation on the Principal Market. Neither the
- 18 -
Company nor any of its Subsidiaries shall take any action which would be reasonably expected
to result in the delisting or suspension of the Common Stock on an Eligible Market. The Company
shall pay all fees and expenses in connection with satisfying its obligations under this Section
4(f).
(g) Fees. The Company shall reimburse Magnetar Financial LLC or its designee(s) (in
addition to any other expense amounts paid to any Buyer prior to the date of this Agreement) for
all reasonable costs and expenses, not to exceed $65,000, incurred in connection with the
transactions contemplated by the Transaction Documents and due diligence in connection therewith),
which amount shall be non-accountable and withheld by Magnetar Capital Master Fund, Ltd. from its
Purchase Price at the Closing or paid by the Company upon termination of this Agreement. The
Company shall reimburse Xxxxxxx Xxxxx Small Cap Fund or its designee(s) (in addition to any other
expense amounts paid to any Buyer prior to the date of this Agreement) for all reasonable costs and
expenses, not to exceed $20,000, incurred in connection with the transactions contemplated by the
Transaction Documents and due diligence in connection therewith), which amount shall be
non-accountable. The Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or broker’s commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby, including, without limitation,
any fees payable to the Agent. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney’s fees and
out-of-pocket expenses) arising in connection with any claim relating to any such payment.
(h) Pledge of Securities. The Company acknowledges and agrees that the Securities may
be pledged by an Investor (as defined in the Registration Rights Agreement) in connection with a
bona fide margin agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document. The Company hereby agrees to execute and
deliver such documentation as a pledgee of the Securities may reasonably request in connection with
a pledge of the Securities to such pledgee by an Investor.
(i) Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York Time, on the second Business Day following the date of this Agreement, the Company
shall file a Current Report on Form 8-K describing the terms of the transactions contemplated by
the Transaction Documents in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this Agreement (and all schedules to this
Agreement), the form of Certificate of Designations, the form of Warrant and the Registration
Rights Agreement) (including all attachments, the “8-K Filing”). From and after the filing of the
8-K Filing with the SEC, the Company shall have disclosed any material nonpublic information
delivered to the Buyers by the Company or any of its Subsidiaries, or any of their respective
officers, directors, employees or agents. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees and agents, not
to, provide any Buyer with any material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the 8-K Filing with the SEC without the express written
consent of such Buyer. In the event of a breach of the foregoing
- 19 -
covenant by the Company, or any of its Subsidiaries, or any of its or their respective
officers, directors, employees and agents, in addition to any other remedy provided herein or in
the Transaction Documents, a Buyer shall have the right to make a public disclosure, in the form of
a press release, public advertisement or otherwise, of such material, nonpublic information without
the prior approval by the Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Buyer shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees, stockholders or
agents, for any such disclosure. Subject to the foregoing, neither the Company, its Subsidiaries
nor any Buyer shall issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and regulations (provided
that in the case of clause (i) each Buyer shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release). Without the prior written
consent of any applicable Buyer, neither the Company nor any of its Subsidiaries shall disclose the
name of any Buyer in any filing, announcement, release or otherwise.
(j) Restriction on Redemption and Cash Dividends; Additional Registration Statements.
So long as any Preferred Shares are outstanding, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, the Common Stock without the prior
express written consent of the holders of Preferred Shares representing not less than a majority of
the aggregate number of the then outstanding Preferred Shares. Except as set forth on Schedule
4(j), until the Effective Date (as defined in the Registration Rights Agreement), the Company
shall not file a registration statement under the 1933 Act relating to securities that are not the
Securities.
(k) Additional Preferred Shares; Variable Securities; Dilutive Issuances. So long as
any Buyer beneficially owns any Securities, the Company will not, without the prior written consent
of Buyers holding a majority of the Preferred Shares, issue any Preferred Shares (other than to the
Buyers as contemplated hereby) and the Company shall not issue any other securities that would
cause a breach or default under the Certificate of Designations or the Warrants. For so long as
any Preferred Shares or Warrants remain outstanding, the Company shall not, in any manner, issue or
sell any rights, warrants or options to subscribe for or purchase Common Stock or directly or
indirectly convertible into or exchangeable or exercisable for Common Stock at a conversion,
exchange or exercise price which varies or may vary after issuance with the market price of the
Common Stock at the time of issuance, including by way of one or more reset(s) to any fixed price
unless the conversion, exchange or exercise price of any such security cannot be less than the then
applicable Conversion Price (as defined in the Certificate of Designations) with respect to the
Common Stock into which any Preferred Shares are convertible or the then applicable Exercise Price
(as defined in the Warrants) with respect to the Common Stock into which any Warrant is
exercisable. For so long as any Preferred Shares or Warrants remain outstanding, the Company shall
not, in any manner, enter into or affect any Dilutive Issuance (as defined in the Certificate of
Designations) if the effect of such Dilutive Issuance is to cause the Company to be required to
issue upon conversion of any Preferred Shares or exercise of any Warrant any shares of Common Stock
in excess of that number of shares of Common Stock which the Company may issue upon conversion of
the Preferred Shares
- 20 -
and exercise of the Warrants without breaching the Company’s obligations under the rules or
regulations of the Principal Market. The Company shall not, in any manner, enter into or affect
any Dilutive Issuance if the effect of such Dilutive Issuance would cause the Conversion Price (as
defined in the Certificate of Designations) or the Exercise Price (as defined in the Warrant), as
applicable, to be reduced below $2.00 (as adjusted for stock splits or stock dividends).
(l) Corporate Existence. So long as any Buyer beneficially owns any Preferred Shares
or Warrants, the Company shall not be party to any Fundamental Transaction (as defined in the
Certificate of Designations) unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Certificate of Designations and the Warrants.
(m) Reservation of Shares. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less than (i) the maximum
number of shares of Common Stock issuable upon conversion of the Preferred Shares (assuming for
purposes hereof, that the Preferred Shares are convertible at the Conversion Price and without
taking into account any limitations on the conversion of the Preferred Shares set forth in the
Certificate of Designations) and (ii) the maximum number of shares of Common Stock issuable upon
exercise of the Warrants (assuming for purposes hereof that the Exercise Price (as defined in the
Warrants) is equal to $2.00, subject to adjustment for stock splits and stock dividends and without
taking into account any limitations on the exercise of the Warrants set forth in the Warrants).
(n) Conduct of Business. The business of the Company and its Subsidiaries shall not
be conducted in violation of any law, ordinance or regulation of any governmental entity, except
where such violations would not result, either individually or in the aggregate, in a Material
Adverse Effect.
(o) Additional Issuances of Securities.
(i) For purposes of this Section 4(o), the following definitions shall apply.
(1) “Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for shares of Common Stock.
(2) “Options” means any rights, warrants or options to subscribe for or purchase shares
of Common Stock or Convertible Securities.
(3) “Common Stock Equivalents” means, collectively, Options and Convertible Securities.
(ii) From the date hereof until the date that is thirty (30) Trading Days (as defined in the
Certificate of Designations) after the Effective Date (as defined in the Registration Rights
Agreement) (the “Trigger Date”), the Company will not, directly or indirectly, offer, sell, grant
any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option
to purchase or other disposition of) any of its or its Subsidiaries’
- 21 -
(other than Real Estate Online, Inc. and Cherish, Inc. and its Subsidiaries) equity or equity
equivalent securities, including without limitation any debt, preferred stock or other instrument
or security that is, at any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for shares of Common Stock or Common Stock Equivalents (any such offer,
sale, grant, disposition or announcement being referred to as a “Subsequent Placement”);
provided, that the term Subsequent Placement shall not include the issuance of any Excluded
Securities (as defined in the Certificate of Designations).
(iii) From the Trigger Date until the two year anniversary of the Closing Date, the Company
will not, directly or indirectly, effect any Subsequent Placement unless the Company shall have
first complied with this Section 4(o)(iii).
(1) The Company shall deliver to each Buyer a written notice (the “Offer Notice”) of any
proposed or intended issuance or sale or exchange (the “Offer”) of the securities being offered
(the “Offered Securities”) in a Subsequent Placement, which Offer Notice shall (w) identify and
describe the Offered Securities, (x) describe the price and other terms upon which they are to be
issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or
exchanged, (y) identify the persons or entities (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or
exchange with such Buyers at least 50% of the Offered Securities allocated among such Buyers (a)
based on such Buyer’s pro rata portion of the aggregate number of Preferred Shares purchased
hereunder (the “Basic Amount”), and (b) with respect to each Buyer that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of
other Buyers as such Buyer shall indicate it will purchase or acquire should the other Buyers
subscribe for less than their Basic Amounts (the “Undersubscription Amount”), which process shall
be repeated until the Buyers shall have an opportunity to subscribe for any remaining
Undersubscription Amount.
(2) To accept an Offer, in whole or in part, such Buyer must deliver a written notice to the
Company prior to the end of the tenth (10th) Business Day after such Buyer’s receipt of
the Offer Notice (the “Offer Period”), setting forth the portion of such Buyer’s Basic Amount that
such Buyer elects to purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
the Undersubscription Amount, if any, that such Buyer elects to purchase (in either case, the
“Notice of Acceptance”). If the Basic Amounts subscribed for by all Buyers are less than the total
of all of the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount in its
Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed
for, the Undersubscription Amount it has subscribed for; provided, however, that if
the Undersubscription Amounts subscribed for exceed the difference between the total of all the
Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), each
Buyer who has subscribed for any Undersubscription Amount shall be entitled to purchase only that
portion of the Available Undersubscription Amount as the Basic Amount of such Buyer bears to the
total Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent its deems reasonably necessary. Notwithstanding the
foregoing, if the Company desires to modify or amend the terms and conditions of the Offer prior to
the expiration of the Offer Period, the Company may deliver to the Buyers a new Offer Notice and
- 22 -
the Offer Period shall expire on the seventh (7th) Business Day after such Buyer’s
receipt of such new Offer Notice.
(3) The Company shall have ten (10) Business Days from the expiration of the Offer Period
above (i) to offer, issue, sell or exchange all or any part of such Offered Securities as to which
a Notice of Acceptance has not been given by the Buyers (the “Refused Securities”) pursuant to a
definitive agreement(s) (the “Subsequent Placement Agreement”), but only to the offerees described
in the Offer Notice (if so described therein) and only upon terms and conditions (including,
without limitation, unit prices and interest rates) that are not more favorable to the acquiring
person or persons or less favorable to the Company than those set forth in the Offer Notice and
(ii) to publicly announce (a) the execution of such Subsequent Placement Agreement, and (b) either
(x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y)
the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a
Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated
therein filed as exhibits thereto.
(4) In the event the Company shall propose to sell less than all the Refused Securities (any
such sale to be in the manner and on the terms specified in Section 4(o)(iii)(3) above), then each
Buyer may, at its sole option and in its sole discretion, reduce the number or amount of the
Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that such Buyer elected to purchase pursuant to
Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of which shall be the number
or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including
Offered Securities to be issued or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to
such reduction) and (ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Buyer so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more
than the reduced number or amount of the Offered Securities unless and until such securities have
again been offered to the Buyers in accordance with Section 4(o)(iii)(1) above.
(5) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, the Buyers shall acquire from the Company, and the Company shall issue to the Buyers,
the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 4(o)(iii)(3) above if the Buyers have so elected, upon the terms and conditions
specified in the Offer. The purchase by the Buyers of any Offered Securities is subject in all
cases to the preparation, execution and delivery by the Company and the Buyers of a purchase
agreement relating to such Offered Securities reasonably satisfactory in form and substance to the
Buyers and their respective counsel.
(6) Any Offered Securities not acquired by the Buyers or other persons in accordance with
Section 4(o)(iii)(3) above may not be issued, sold or exchanged until they are again offered to the
Buyers under the procedures specified in this Agreement.
(7) The Company and the Buyers agree that if any Buyer elects to participate in the Offer,
neither the securities purchase agreement (the “Subsequent
- 23 -
Placement Agreement”) with respect to such Offer nor any other transaction documents related
thereto (collectively, the “Subsequent Placement Documents”) shall include any term or provisions
whereby any Buyer shall be required to agree to any restrictions in trading as to any securities of
the Company owned by such Buyer prior to such Subsequent Placement.
(8) Notwithstanding anything to the contrary in this Section 4(o) and unless otherwise agreed
to by the Buyers, the Company shall either confirm in writing to the Buyers that the transaction
with respect to the Subsequent Placement has been abandoned or shall publicly disclose its
intention to issue the Offered Securities, in either case in such a manner such that the Buyers
will not be in possession of material non-public information, by the tenth (10th)
Business Day following delivery of the Offer Notice. If by the tenth (10th) Business
Day following delivery of the Offer Notice no public disclosure regarding a transaction with
respect to the Offered Securities has been made, and no notice regarding the abandonment of such
transaction has been received by the Buyers, such transaction shall be deemed to have been
abandoned and the Buyers shall not be deemed to be in possession of any material, non-public
information with respect to the Company. Should the Company decide to pursue such transaction with
respect to the Offered Securities, the Company shall provide each Buyer with another Offer Notice
and each Buyer will again have the right of participation set forth in this Section 4(o)(iii). The
Company shall not be permitted to deliver more than one such Offer Notice to the Buyers in any 60
day period.
(9) The restrictions contained in subsections (ii) and (iii) of this Section 4(o) shall not
apply in connection with the issuance of any Excluded Securities (as defined in the Certificate of
Designations).
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company shall maintain at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to each holder of Securities),
a register for the Preferred Shares and the Warrants in which the Company shall record the name and
address of the Person in whose name the Preferred Shares and the Warrants have been issued
(including the name and address of each transferee), the number of Preferred Shares held by such
Person, the number of Conversion Shares issuable upon conversion of the Preferred Shares and
Warrant Shares issuable upon exercise of the Warrants held by such Person. The Company shall keep
the register open and available at all times during business hours for inspection of any Buyer or
its legal representatives.
(b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to
its transfer agent, and any subsequent transfer agent, to issue certificates or credit shares to
the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of
each Buyer or its respective nominee(s), for the Conversion Shares and the Warrant Shares in such
amounts as specified from time to time by each Buyer to the Company upon conversion of the
Preferred Shares or exercise of the Warrants in the form of Exhibit E attached hereto (the
“Irrevocable Transfer Agent Instructions”). The Company warrants that no instruction other than
the Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and stop transfer
instructions to give effect to Section 2(f) hereof, will be given by the Company to its transfer
agent with respect to the Securities, and that the Securities shall
- 24 -
otherwise be freely transferable on the books and records of the Company, as applicable, 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
permit the transfer and 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. In the event
that such sale, assignment or transfer involves Conversion Shares and Warrant Shares sold, assigned
or transferred pursuant to an effective registration statement or in compliance with Rule 144, the
transfer agent shall issue such Securities to the Buyer, assignee or transferee, as the case may
be, without any restrictive legend. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5(b), that a Buyer shall be entitled, in addition to all other available
remedies, to an order and/or 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.
(a) The obligation of the Company hereunder to issue and sell the Preferred Shares and the
related Warrants to each Buyer 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 by
providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction Documents to which it is a party
and delivered the same to the Company.
(ii) Such Buyer and each other Buyer shall have delivered to the Company the Purchase Price
(less, in the case of Magnetar Capital Master Fund, Ltd. the amount withheld pursuant to Section
4(g)) for the Preferred Shares and the related Warrants being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire instructions provided
by the Company.
(iii) The representations and warranties of such Buyer 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 such Buyer 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 such Buyer at
or prior to the Closing Date.
(iv) The Company shall have obtained approval of the Principal Market to list the Conversion
Shares and the Warrant Shares.
- 25 -
7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.
(a) The obligation of each Buyer hereunder to purchase the Preferred Shares and the related
Warrants 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 each Buyer’s sole benefit and may
be waived by such Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:
(i) The Company shall have duly executed and delivered to such Buyer (A) each of the
Transaction Documents and (B) the Preferred Shares (in such numbers as is set forth across from
such Buyer’s name in column (3) of the Schedule of Buyers and the related Warrants (in such numbers
as is set forth across from such Buyer’s name in column (4) of the Schedule of Buyers) being
purchased by such Buyer at the Closing pursuant to this Agreement.
(ii) Such Buyer shall have received the opinion of Xxxxxxx & Xxxxxxxx Ltd., Rosenfeld,
Roberson, Xxxxx & Xxxxxx Group the Company’s outside counsel, dated as of the Closing Date, in
substantially the form of Exhibit F attached hereto.
(iii) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form of Exhibit E attached hereto, which instructions shall have been
delivered to and acknowledged in writing by the Company’s transfer agent.
(iv) The Company shall have delivered to such Buyer a certificate evidencing the formation and
good standing of the Company and each of its Subsidiaries in each such entity’s jurisdiction of
formation issued by the Secretary of State (or equivalent) of such jurisdiction of formation as of
a date within thirty (30) days of the Closing Date.
(v) The Company shall have delivered to such Buyer a certificate evidencing the Company’s
qualification as a foreign corporation and good standing issued by the Secretary of State (or
comparable office) of each jurisdiction in which the Company conducts business and is required to
so qualify, as of a date within thirty (30) days of the Closing Date, provided, that the
Buyers and the Company shall receive verbal affirmation from the Secretary of State of the states
of Nevada and Illinois that the Company is in good standing on the Closing Date.
(vi) The Company shall have delivered to such Buyer a certified copy of the Articles of
Incorporation as certified by the Secretary of State of the State of Nevada within twenty (20) days
of the Closing Date.
(vii) The Company shall have delivered to such Buyer a certificate, executed by the Secretary
of the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section
3(b) as adopted by the Company’s board of directors in a form reasonably acceptable to such Buyer,
(ii) the Articles of Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit G.
- 26 -
(viii) The representations and warranties of the Company shall be true and correct 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 respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. Such Buyer shall have received a certificate, executed by the Chief Executive
Officer 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 such Buyer in the form attached hereto as Exhibit
H.
(ix) The Company shall have delivered to such Buyer a letter from the Company’s transfer agent
certifying the number of shares of Common Stock outstanding as of a date within five days of the
Closing Date.
(x) The Common Stock (I) shall be designated for quotation or listed on the Principal Market
and (II) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market
from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened, as of the Closing Date, either (A) in writing by the SEC or the Principal Market
or (B) by falling below the minimum maintenance requirements of the Principal Market.
(xi) The Company shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the sale of the Securities, including without limitation, those
required by the Principal Market.
(xii) The Certificate of Designations in the form attached hereto as Exhibit A shall
have been filed with the Secretary of State of the State of Nevada and shall be in full force and
effect, enforceable against the Company in accordance with its terms and shall not have been
amended.
(xiii) The aggregate Purchase Price paid to the Company for the Securities by the Buyers at
the Closing shall not be less than $25 million.
(xiv) The Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.
8. TERMINATION.
In the event that the Closing shall not have occurred with respect to a Buyer on or before
five (5) Business Days from the date hereof due to the Company’s or such Buyer’s failure to satisfy
the conditions set forth in Sections 6 and 7 above (and the nonbreaching party’s failure to waive
such unsatisfied condition(s)), the nonbreaching 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, if this Agreement is terminated
pursuant to this Section 8, the Company shall remain obligated to reimburse the non-breaching
Buyers for the expenses described in Section 4(g) above.
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9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(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;
provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.
(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 and the other Transaction Documents
supersede all other prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf with respect to the matters discussed herein, and
this Agreement, the other Transaction Documents and the instruments referenced herein and therein
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 amended other than by an
- 28 -
instrument in writing signed by the Company and the holders of at least a majority of the
Preferred Shares issued and issuable hereunder, and any amendment to this Agreement made in
conformity with the provisions of this Section 9(e) shall be binding on all Buyers and holders of
Securities, as applicable. No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the Preferred Shares
then outstanding. No consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents unless the same
consideration also is offered to all of the parties to the Transaction Documents, holders of
Preferred Shares or holders of the Warrants, as the case may be. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in the Transaction
Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any
financing to the Company or otherwise.
(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 receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If to the Company:
Think Partnership Inc.
0 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
0 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
With a copy (for informational purposes only) to:
Xxxxxxx & Xxxxxxxx Ltd.
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
If to the Transfer Agent:
Colonial Stock Transfer
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
- 29 -
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx
If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies
to such Buyer’s representatives as set forth on the Schedule of Buyers,
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change provided, that Xxxxxxx Xxxx & Xxxxx LLP shall only
receive notices sent to clients of its firm. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C) provided by an
overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or
receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including any purchasers of the
Preferred Shares or the Warrants. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at least a majority of
the aggregate number of Registrable Securities issued and issuable hereunder, including by way of a
Fundamental Transaction (unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Certificate of Designations and the Warrants).
A Buyer may assign some or all of its rights hereunder in connection with transfer of any of its
Preferred Shares or Warrants without the consent of the Company, in which event such assignee shall
be deemed to be a Buyer hereunder with respect to such assigned rights.
(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 8, the
representations and warranties of the Company and the Buyers contained in Sections 2 and 3 and the
agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each Buyer
shall be responsible only for its own representations, warranties, agreements and covenants
hereunder.
- 30 -
(j) 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 any 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.
(k) Indemnification. In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each affiliate of a Buyer that holds Preferred Shares or
Warrants and all of their stockholders, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “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 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 any Indemnitee 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 the Transaction Documents, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or (c) any cause of
action, suit or claim brought or made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of
the Securities, (iii) any disclosure made by such Buyer pursuant to Section 4(i), or (iv) the
status of such Buyer or holder of the Securities as an investor in the Company pursuant to the
transactions contemplated by the Transaction Documents; provided, that no Buyer shall be
entitled to indemnification to the extent any of the foregoing is caused by its gross negligence or
willful misconduct. 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.
Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(k) shall be the same as those set forth in Section 6 of the
Registration Rights Agreement.
(l) 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.
(m) Remedies. Each Buyer and each affiliate of a Buyer that holds Preferred Shares or
Warrants shall have all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other agreement or contract
and all of the rights which such holders have under any law. Any Person having any rights under
any provision of this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any
- 31 -
breach of any provision of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any remedy at law may
prove to be inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall be
entitled to seek temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages and without posting a bond or other security.
(n) Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Buyer exercises a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods therein provided, then
such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to
the Company, any relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights
(o) Payment Set Aside. To the extent that the Company makes a payment or payments to
the Buyers hereunder or pursuant to any of the other Transaction Documents or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, foreign, state or federal law, common law or
equitable cause of action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not occurred.
(p) Independent Nature of Buyers’ Obligations and Rights. The obligations of each
Buyer under any Transaction Document are several and not joint with the obligations of any other
Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any
other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction Documents and the
Company acknowledges that the Buyers are not acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction contemplated hereby
with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights arising out of this
Agreement or out of any other Transaction Documents, and it shall not be necessary for any other
Buyer to be joined as an additional party in any proceeding for such purpose.
[Signature Page Follows]
- 32 -
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| COMPANY: THINK PARTNERSHIP INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Name: | Xxxxxx X. Xxxxxx | |||
| Title: | Chief Executive Officer | |||
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| BUYERS: | ||||
| MAGNETAR CAPITAL MASTER FUND, LTD. | ||||
| By: Magnetar Financial LLC | ||||
| Its: Investment Manager | ||||
| /s/ Xxxx Xxxxx
|
||||
| Its: General Counsel |
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.
| BUYERS: [OTHER BUYERS] |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
SCHEDULE OF BUYERS
| (1) | (2) | (3) | (4) | (5) | (6) | |||||||||||
| Aggregate | ||||||||||||||||
| Number of | Aggregate | |||||||||||||||
| Preferred | Number of | Legal Representative’s | ||||||||||||||
| Buyer | Address and Facsimile Number | Shares | Warrants | Purchase Price | Address and Facsimile Number | |||||||||||
Magnetar Capital
Master Fund, Ltd.
|
0000 Xxxxxxxxx Xxxxxx Xxxxxxxx, XX 00000 Attn: Xxxxxxx Xxxx and Xxxxxxx Xxx Facsimile: (000) 000-0000 Telephone: (000) 000-0000 |
5,000 | 1,000,000 | $ | 5,000,000 | Xxxxxxx Xxxx & Xxxxx LLP 000 Xxxxx Xxxxxx Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxxxxx Xxxxx, Esq. Facsimile: (000) 000-0000 Telephone: (000) 000-0000 |
||||||||||
[Other Buyers]
|
[ ] | [ ] | [ ] | $[ ] | ||||||||||||
EXHIBITS
Exhibit A
|
Form of Certificate of Designations | |
Exhibit B
|
Form of Warrants | |
Exhibit C
|
Form of Registration Rights Agreement | |
Exhibit D
|
[Intentionally Omitted] | |
Exhibit E
|
Form of Irrevocable Transfer Agent Instructions | |
Exhibit F
|
Form of Outside Company Counsel Opinion | |
Exhibit G
|
Form of Secretary’s Certificate | |
Exhibit H
|
Form of Officer’s Certificate |
Schedule 3(a)
|
Subsidiaries | |
Schedule 3(b)
|
Authorization; Enforcement; Validity | |
Schedule 3(k)
|
SEC Documents; Financial Statements | |
Schedule 3(l)
|
Absence of Certain Changes | |
Schedule 3(n)
|
Conduct of Business | |
Schedule 3(q)
|
Transactions with Affiliates | |
Schedule 3(r)
|
Capitalization | |
Schedule 3(s)
|
Indebtedness and Other Contracts | |
Schedule 3(t)
|
Litigation | |
Schedule 3(w)
|
Title | |
Schedule 3(cc)
|
Internal Accounting and Disclosure Controls | |
Schedule 3(kk)
|
Disclosure | |
Schedule 4(d)
|
Use of Proceeds | |
Schedule 4(j)
|
Restriction on Redemption and Cash Dividends; Additional Registration Statements |
