SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
SECURITIES
PURCHASE AGREEMENT (this “Agreement”), dated as of September 13, 2007, by and
among Juniper Group, Inc. a Nevada corporation, with headquarters located at
00000 Xxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000 (the “Company”), and each
of the purchasers set forth on the signature pages hereto (the
“Buyers”).
WHEREAS:
A. The
Company and the Buyers are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the rules and
regulations as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”);
B. Buyers
desire to purchase and the Company desires to issue and sell, upon the terms
and
conditions set forth in this Agreement (i) 8% convertible debentures of the
Company, in the form attached hereto as Exhibit “A”, in the aggregate principal
amount of Six Hundred Thousand Dollars ($600,000) (together with any
debenture(s) issued in replacement thereof or as a dividend thereon or otherwise
with respect thereto in accordance with the terms thereof, the “Debentures”),
convertible into shares of common stock, par value $.001 per share, of the
Company (the “Common Stock”), upon the terms and subject to the limitations and
conditions set forth in such Debentures and (ii) warrants, in the form attached
hereto as Exhibit “B”, to purchase 20,000,000 shares of Common Stock (the
“Warrants”).
C. Each
Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, such principal amount of Debentures and number of Warrants as is
set
forth immediately below its name on the signature pages hereto; and
D. Contemporaneous
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the form attached
hereto as Exhibit “C” (the “Registration Rights Agreement”), pursuant to which
the Company has agreed to provide certain registration rights under the 1933
Act
and the rules and regulations promulgated thereunder, and applicable state
securities laws.
NOW
THEREFORE, the Company and each of the Buyers severally (and not jointly) hereby
agree as follows:
1. PURCHASE
AND SALE OF DEBENTURES AND WARRANTS.
a. Purchase
of Debentures and Warrants. On the Closing Date (as defined
below), the Company shall issue and sell to each Buyer and each Buyer severally
agrees to purchase from the Company such principal amount of Debentures and
number of Warrants as is set forth immediately below such Buyer’s name on the
signature pages hereto.
b. Form
of Payment. On the Closing Date (as defined below), (i) each
Buyer shall pay the purchase price for the Debentures and the Warrants to be
issued and sold to it at the Closing (as defined below) (the “Purchase Price”)
by wire transfer of immediately available funds to the Company, in accordance
with the Company’s written wiring instructions, against delivery of the
Debentures in the principal amount equal to the Purchase Price and the number
of
Warrants as is set forth immediately below such Buyer’s name on the signature
pages hereto, and (ii) the Company shall deliver such Debentures and Warrants
duly executed on behalf of the Company, to such Buyer, against delivery of
such
Purchase Price.
c. Closing
Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and
time
of the issuance and sale of the Debentures and the Warrants pursuant to this
Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on
September 13, 2007, or such other mutually agreed upon time. The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
occur on the Closing Date at such location as may be agreed to by the
parties.
2. BUYERS’
REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and not
jointly) represents and warrants to the Company solely as to such Buyer
that:
a. Investment
Purpose. As of the date hereof, the Buyer is purchasing the
Debentures and the shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Debentures (including, without limitation, such
additional shares of Common Stock, if any, as are issuable (i) on account of
interest on the Debentures, (ii) as a result of the events described in Sections
1.3 and 1.4(g) of the Debentures and Section 2(c) of the Registration Rights
Agreement or (iii) in payment of the Standard Liquidated Damages Amount (as
defined in Section 2(f) below) pursuant to this Agreement, such shares of Common
Stock being collectively referred to herein as the “Conversion Shares”) and the
Warrants and the shares of Common Stock issuable upon exercise thereof (the
“Warrant Shares” and, collectively with the Debentures, Warrants and Conversion
Shares, the “Securities”) for its own account and not with a present view
towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act; provided,
however, that by making the representations herein, the 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.
b. Accredited
Investor Status. The Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D (an “Accredited
Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws
and
that the Company is relying upon the truth and accuracy of, and the Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire
the
Securities.
d. Information. The
Buyer and its advisors, if any, have been, and for so long as the Debentures
and
Warrants remain outstanding will continue to be, 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
the Buyer or its advisors. The Buyer and its advisors, if any, have
been, and for so long as the Debentures and Warrants remain outstanding will
continue to be, afforded the opportunity to ask questions of the
Company. Notwithstanding the foregoing, the Company has not disclosed
to the Buyer any material nonpublic information and will not disclose such
information unless such information is disclosed to the public prior to or
promptly following such disclosure to the Buyer. Neither such
inquiries nor any other due diligence investigation conducted by Buyer or any
of
its advisors or representatives shall modify, amend or affect Buyer’s right to
rely on the Company’s representations and warranties contained in Section 3
below. The Buyer understands that its investment in the Securities
involves a significant degree of risk.
e. Governmental
Review. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed upon
or
made any recommendation or endorsement of the Securities.
f. Transfer
or Re-sale. The Buyer understands that (i) except as provided in
the Registration Rights Agreement, the sale or re-sale of the Securities has
not
been and is not being registered under the 1933 Act or any applicable state
securities laws, and the Securities may not be transferred unless (a) the
Securities are sold pursuant to an effective registration statement under the
1933 Act, (b) the Buyer shall have delivered to the Company an opinion of
counsel that shall be in form, substance and scope customary for opinions of
counsel in comparable transactions to the effect that the Securities to be
sold
or transferred may be sold or transferred pursuant to an exemption from such
registration, which opinion shall be accepted by the Company, (c) the Securities
are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated
under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees
to sell or otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation
S
under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall
have delivered to the Company an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities
made in reliance on Rule 144 may be made only in accordance with the terms
of
said Rule and further, if said Rule is not applicable, any re-sale of such
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined
in
the 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 such Securities
under the 1933 Act or any state securities laws or to comply with the terms
and
conditions of any exemption thereunder (in each case, other than pursuant to
the
Registration Rights Agreement). Notwithstanding the foregoing or
anything else contained herein to the contrary, the Securities may be pledged
as
collateral in connection with a bonafide margin account or other
lending arrangement. In the event that the Company does not accept
the opinion of counsel provided by the Buyer with respect to the transfer of
Securities pursuant to an exemption from registration, such as Rule 144 or
Regulation S, within three (3) business days of delivery of the opinion to
the
Company, the Company shall pay to the Buyer liquidated damages of three percent
(3%) of the outstanding amount of the Debentures per month plus accrued and
unpaid interest on the Debentures, prorated for partial months, in cash or
shares at the option of the Company (“Standard Liquidated Damages
Amount”). If the Company elects to pay the Standard Liquidated
Damages Amount in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment. Notwithstanding anything herein to
the
contrary, in the event the Company has to pay the Standards Liquidated Damages
Amount pursuant to any provision of this Agreement, the Buyers shall first
have
to give the Company advance written notice of such breach and in such event,
the
Company shall have 30 days from the receipt of such notice to cure such breach
before the Standard Liquidated Damages Amount shall be due and payable to the
Buyers.
g. Legends. The
Buyer understands that the Debentures and the Warrants and, until such time
as
the Conversion Shares and Warrant Shares have been registered under the 1933
Act
as contemplated by the Registration Rights Agreement or otherwise may be sold
pursuant to Rule 144 or Regulation S without any restriction as to the number
of
securities as of a particular date that can then be immediately sold, the
Conversion Shares and Warrant Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such Securities):
“The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended. The securities may not be sold,
transferred or assigned in the absence of an effective registration statement
for the securities under said Act, or an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable transactions, that
registration is not required under said Act or unless sold pursuant to Rule
144
or Regulation S under said Act.”
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it
is
stamped, if, unless otherwise required by applicable state securities laws,
(a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Security may be made without registration under the
1933 Act, which opinion shall be accepted by the Company so that the sale or
transfer is effected or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144 or Regulation
S. The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if
any.
h. Authorization;
Enforcement. This Agreement and the Registration Rights Agreement have been
duly and validly authorized. This Agreement has been duly executed
and delivered on behalf of the Buyer, and this Agreement constitutes, and upon
execution and delivery by the Buyer of the Registration Rights Agreement, such
agreement will constitute, valid and binding agreements of the Buyer enforceable
in accordance with their terms.
i. Residency. The
Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s
name on the signature pages hereto.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to each Buyer that:
a. Organization
and Qualification. The Company and each of its Subsidiaries (as
defined below), if any, is a corporation duly organized, validly existing and
in
good standing under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. Schedule 3(a) sets forth a list
of all of the Subsidiaries of the Company and the jurisdiction in which each
is
incorporated. The Company and each of its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature
of
the business conducted by it makes such qualification necessary except where
the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. “Material Adverse Effect” means any material adverse effect
on the business, operations, assets, financial condition or prospects of the
Company or its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be entered into
in
connection herewith. “Subsidiaries” means any corporation or other
organization, whether incorporated or unincorporated, in which the Company
owns,
directly or indirectly, any equity or other ownership interest.
b. Authorization;
Enforcement. (i) The Company has all requisite corporate power
and authority to enter into and perform this Agreement, the Registration Rights
Agreement, the Debentures and the Warrants and to consummate the transactions
contemplated hereby and thereby and to issue the Securities, in accordance
with
the terms hereof and thereof, (ii) the execution and delivery of this Agreement,
the Registration Rights Agreement, the Debentures and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby
and
thereby (including without limitation, the issuance of the Debentures and the
Warrants and the issuance and reservation for issuance of the Conversion Shares
and Warrant Shares issuable upon conversion or exercise thereof) have been
duly
authorized by the Company’s Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its shareholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company by its authorized representative, and such authorized representative
is
the true and official representative with authority to sign this Agreement
and
the other documents executed in connection herewith and bind the Company
accordingly, and (iv) this Agreement constitutes, and upon execution and
delivery by the Company of the Registration Rights Agreement, the Debentures
and
the Warrants, each of such instruments will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
c. Capitalization. As
of the date hereof, the authorized capital stock of the Company consists of
(i)
750,000,000 shares of Common Stock, of which 30,646,421 shares are issued and
outstanding, no shares are reserved for issuance pursuant to the Company’s stock
option plans, 4,190,000 shares are reserved for issuance pursuant to securities
(other than the Debentures and the Warrants) exercisable for, or convertible
into or exchangeable for shares of Common Stock and, subject to obtaining
Stockholder Approval (as defined in Section 4(k)), 65,823,530 shares are
reserved for issuance upon conversion of the Debentures and the Additional
Debentures (as defined in Section 4(m)) and exercise of the Warrants and the
Additional Warrants (as defined in Section 4(m)); and (ii) 875,000 shares
of preferred stock, of which 25,357 shares are issued and
outstanding. All of such outstanding shares of capital stock are, or
upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject
to preemptive rights or any other similar rights of the shareholders of the
Company or any liens or encumbrances imposed through the actions or failure
to
act of the Company. Except as disclosed in Schedule 3(c), as of the
effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights of any
character whatsoever relating to, or securities or rights convertible into
or
exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries
is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries, (ii) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of its or their securities under the 1933 Act (except the Registration
Rights Agreement) and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any agreement
providing rights to security holders) that will be triggered by the issuance
of
the Debentures, the Warrants, the Conversion Shares or Warrant
Shares. The Company has furnished to the Buyer true and correct
copies of the Company’s Articles of Incorporation as in effect on the date
hereof (“Articles of Incorporation”), the Company’s By-laws, as in effect on the
date hereof (the “By-laws”), and the terms of all securities convertible into or
exercisable for Common Stock of the Company and the material rights of the
holders thereof in respect thereto. The Company shall provide the
Buyer with a written update of this representation signed by the Company’s Chief
Executive or Chief Financial Officer on behalf of the Company as of the Closing
Date.
d. Issuance
of Shares. Subject to obtaining Stockholder Approval (as defined
in Section 4(k)), the Conversion Shares and Warrant Shares are duly authorized
and reserved for issuance and, upon conversion of the Debentures and exercise
of
the Warrants in accordance with their respective terms, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and
encumbrances with respect to the issue thereof and shall not be subject to
preemptive rights or other similar rights of shareholders of the Company and
will not impose personal liability upon the holder thereof.
e. Acknowledgment
of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares and Warrant Shares upon conversion of the Debenture or
exercise of the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares and Warrant Shares upon conversion of
the
Debentures or exercise of the Warrants in accordance with this Agreement, the
Debentures and the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.
f. No
Conflicts. Subject to obtaining Stockholder Approval (as defined
in Section 4(k)), the execution, delivery and performance of this Agreement,
the
Registration Rights Agreement, the Debentures and the Warrants by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby (including, without limitation, the issuance and reservation for
issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
with
or result in a violation of any provision of the Articles of Incorporation
or
By-laws or (ii) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time
or
both could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument to which the Company or any of its Subsidiaries
is
a party, or (iii) to the Company’s knowledge, result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) 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 for such
conflicts, defaults, terminations, amendments, accelerations, cancellations
and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its Subsidiaries is
in violation of its Articles of Incorporation, By-laws or other organizational
documents and neither the Company nor any of its Subsidiaries is in default
(and
no event has occurred which with notice or lapse of time or both could put
the
Company or any of its Subsidiaries in default) under, and neither the Company
nor any of its Subsidiaries has taken any action or failed to take any action
that would give to others any rights of termination, amendment, acceleration
or
cancellation of, any agreement, indenture or instrument to which the Company
or
any of its Subsidiaries is a party or by which any property or assets of the
Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its Subsidiaries, if any, are not
being conducted, and shall not be conducted so long as a Buyer owns any of
the
Securities, in violation of any law, ordinance or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or any third party in
order
for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement, the Debentures or the Warrants
in
accordance with the terms hereof or thereof or to issue and sell the Debentures
and Warrants in accordance with the terms hereof and to issue the Conversion
Shares upon conversion of the Debentures and the Warrant Shares upon exercise
of
the Warrants. Except as disclosed in Schedule 3(f), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected
on
or prior to the date hereof. The Company is not in violation of the
listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”) and
does not reasonably anticipate that the Common Stock will be delisted by the
OTCBB in the foreseeable future. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing.
g. SEC
Documents; Financial Statements. Except as disclosed in Schedule
3(g), the Company has timely 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 Securities Exchange Act of 1934, as amended (the
“1934 Act”) (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the “SEC
Documents”). 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 light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except
for
such statements as have been amended or updated in subsequent filings prior
the
date hereof). 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. Such financial
statements have been prepared in accordance with United States 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 not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to September 30, 2005 and (ii)
obligations under contracts and commitments incurred in the ordinary course
of
business and not required under generally accepted accounting principles to
be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the
Company.
h. Absence
of Certain Changes. Except as set forth on Schedule 3(h), since
September 30, 2005, there has been no material adverse change and no material
adverse development in the assets, liabilities, business, properties,
operations, financial condition, results of operations or prospects of the
Company or any of its Subsidiaries.
i. Absence
of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of
the
Company or any of its Subsidiaries, threatened against or affecting the Company
or any of its Subsidiaries, or their officers or directors in their capacity
as
such, that could have a Material Adverse Effect. Schedule 3(i)
contains a complete list and summary description of any pending or, to the
knowledge of the Company, threatened proceeding against or affecting the Company
or any of its Subsidiaries, without regard to whether it would have a Material
Adverse Effect. The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the
foregoing.
j. Patents,
Copyrights, etc. The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
(“Intellectual Property”) necessary to enable it to conduct its business as now
operated (and, except as set forth in Schedule 3(j) hereof, to the best of
the
Company’s knowledge, as presently contemplated to be operated in the future);
there is no claim or action by any person pertaining to, or proceeding pending,
or to the Company’s knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary
to enable it to conduct its business as now operated (and, except as set forth
in Schedule 3(j) hereof, to the best of the Company’s knowledge, as presently
contemplated to be operated in the future); to the best of the Company’s
knowledge, the Company’s or its Subsidiaries’ current and intended products,
services and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The
Company and each of its Subsidiaries have taken reasonable security measures
to
protect the secrecy, confidentiality and value of their Intellectual
Property.
k. No
Materially Adverse Contracts, Etc. Neither the Company nor any of
its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company’s officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment
of
the Company’s officers has or is expected to have a Material Adverse
Effect.
l. Tax
Status. Except as set forth on Schedule 3(l), the Company and
each of its Subsidiaries has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject (unless and only to the extent that the Company and
each
of its Subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) and has paid all taxes
and
other governmental assessments and charges that are material in amount, shown
or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provisions
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. The Company has not executed a waiver with
respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, state or local tax. Except as set forth on
Schedule 3(l), none of the Company’s tax returns is presently being audited by
any taxing authority.
m. Certain
Transactions. Except as set forth on Schedule 3(m) and except for
arm’s length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties, none of the officers, directors, or employees of the Company
is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee
has a
substantial interest or is an officer, director, trustee or
partner.
n. Disclosure. All
information relating to or concerning the Company or any of its Subsidiaries
set
forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby
is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein
or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or 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 or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company’s reports filed under the 1934 Act
are being incorporated into an effective registration statement filed by the
Company under the 1933 Act).
o. Acknowledgment
Regarding Buyers’ Purchase of Securities. The Company
acknowledges and agrees that the Buyers are acting solely in the capacity of
arm’s length purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyers’ purchase of the Securities. The Company further
represents to each Buyer that the Company’s decision to enter into this
Agreement has been based solely on the independent evaluation of the Company
and
its representatives.
p. No
Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers
to
buy any security under circumstances that would require registration under
the
1933 Act of the issuance of the Securities to the Buyers. The
issuance of the Securities to the Buyers will not be integrated with any other
issuance of the Company’s securities (past, current or future) for purposes of
any shareholder approval provisions applicable to the Company or its
securities.
q. No
Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, transaction fees or similar
payments relating to this Agreement or the transactions contemplated
hereby.
r. Permits;
Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the “Company Permits”), and there is
no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits. Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since
September 30, 2005, neither the Company nor any of its Subsidiaries has received
any notification with respect to possible conflicts, defaults or violations
of
applicable laws, except for notices relating to possible conflicts, defaults
or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
s. Environmental
Matters.
(i) Except
as set forth in Schedule 3(s), there are, to the Company’s knowledge, with
respect to the Company or any of its Subsidiaries or any predecessor of the
Company, no past or present violations of Environmental Laws (as defined below),
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980
or similar federal, state, local or foreign laws and neither the Company nor
any
of its Subsidiaries has received any notice with respect to any of the
foregoing, nor is any action pending or, to the Company’s knowledge, threatened
in connection with any of the foregoing. 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.
(ii) Other
than those that are or were stored, used or disposed of in compliance with
applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company’s
or any of its Subsidiaries’ business.
(iii) Except
as set forth in Schedule 3(s), there are no underground storage tanks on or
under any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
t. Title
to Property. 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 are described in Schedule 3(t) or such
as would not have a Material Adverse Effect. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by
them
under valid, subsisting and enforceable leases with such exceptions as would
not
have a Material Adverse Effect.
u. Insurance. Except
as set forth in Schedule 3(u), the Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary
has 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. The Company has
provided to Buyer true and correct copies of all policies relating to directors’
and officers’ liability coverage, errors and omissions coverage, and commercial
general liability coverage.
v. Internal
Accounting Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment
of
the Company’s board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences.
w. 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 Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated
or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of
1977,
as amended, or made any bribe, rebate, payoff, influence payment, kickback
or
other unlawful payment to any foreign or domestic government official or
employee.
x. Solvency. Except
as provided on Schedule 3(x), the Company (after giving effect to the
transactions contemplated by this Agreement) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not, after giving effect to the transaction
contemplated by this Agreement, have the ability to, nor does it intend to
take
any action that would impair its ability to, pay its debts from time to time
incurred in connection therewith as such debts mature. Except as
provided on Schedule 3(x), the Company did not receive a qualified opinion
from
its auditors with respect to its most recent fiscal year end and, after giving
effect to the transactions contemplated by this Agreement, does not anticipate
or know of any basis upon which its auditors might issue a qualified opinion
in
respect of its current fiscal year.
y. No
Investment Company. The Company is not, and upon the issuance and
sale of the Securities as contemplated by this Agreement will not be an
“investment company” required to be registered under the Investment Company Act
of 1940 (an “Investment Company”). The Company is not controlled by
an Investment Company.
z. Breach
of Representations and Warranties by the Company. If the Company
breaches any of the representations or warranties set forth in this Section
3,
and in addition to any other remedies available to the Buyers pursuant to this
Agreement, the Company shall pay to the Buyer the Standard Liquidated Damages
Amount in cash or in shares of Common Stock at the option of the Company, until
such breach is cured. If the Company elects to pay the Standard
Liquidated Damages Amounts in shares of Common Stock, such shares shall be
issued at the Conversion Price at the time of payment.
4. COVENANTS.
a. Best
Efforts. The parties shall use their best efforts to satisfy
timely each of the conditions described in Section 6 and 7 of this
Agreement.
b. Form
D; Blue Sky Laws. 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 to qualify the Securities for sale to the Buyers at
the
applicable 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 each Buyer on or prior to the Closing Date.
c. Reporting
Status; Eligibility to Use Form S-3, SB-2 or Form
S-1. The
Company’s Common Stock is registered under Section 12(g) of the 1934 Act. The
Company represents and warrants that it meets the requirements for the use
of
Form S-3 (or if the Company is not eligible for the use of Form S-3 as of the
Filing Date (as defined in the Registration Rights Agreement), the Company
may
use the form of registration for which it is eligible at that time) for
registration of the sale by the Buyer of the Registrable Securities (as defined
in the Registration Rights Agreement). So long as the Buyer
beneficially owns any of the Securities, 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 permit such termination. The Company further agrees to file all
reports required to be filed by the Company with the SEC in a timely manner
so
as to become eligible, and thereafter to maintain its eligibility, for the
use
of Form S-3. The Company shall issue a press release describing the
material terms of the transaction contemplated hereby as soon as practicable
following the Closing Date but in no event more than two (2) business days
of
the Closing Date, which press release shall be subject to prior review by the
Buyers. The Company agrees that such press release shall not disclose
the name of the Buyers unless expressly consented to in writing by the Buyers
or
unless required by applicable law or regulation, and then only to the extent
of
such requirement.
d. Use
of Proceeds. The Company shall use the proceeds from the sale of
the Debentures and the Warrants in the manner set forth in Schedule 4(d)
attached hereto and made a part hereof and shall not, directly or indirectly,
use such proceeds for any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with its currently
existing direct or indirect Subsidiaries)
e. Future
Offerings. Subject to the exceptions described below, the Company
will not, without the prior written consent of a majority-in-interest of the
Buyers, not to be unreasonably withheld, (A) negotiate or contract with any
party to obtain additional equity financing (including debt financing with
an
equity component) that involves the issuance of convertible securities that
are
convertible into an indeterminate number of shares of Common Stock or (B) grant
any registration rights in connection with any issuance of Common Stock or
warrants during the period (the “Lock-up Period”) beginning on the Closing Date
and ending on the later of (i) two hundred seventy (270) days from the Closing
Date or (ii) one hundred eighty (180) days from the date the Registration
Statement (as defined in the Registration Rights Agreement) is declared
effective (plus any days in which sales cannot be made
thereunder). Notwithstanding the foregoing, the Company shall be
permitted to obtain additional equity financing (including debt financing with
an equity component) that does not involve the issuance of convertible
securities that are convertible into an indeterminate number of shares of Common
Stock and which involves the grant of registration rights, so long as such
registration rights do not become effective or may not be invoked by the holder
thereof for a period of at least 320 days from the Closing Date. In
addition, subject to the exceptions described below, the Company will not
conduct any equity financing (including debt with an equity component) (“Future
Offerings”) during the period beginning on the Closing Date and ending two (2)
years after the end of the Lock-up Period unless it shall have first delivered
to each Buyer, at least twenty (20) business days prior to the closing of such
Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection therewith, and providing each Buyer an option
during the fifteen (15) day period following delivery of such notice to purchase
its pro rata share (based on the ratio that the aggregate principal amount
of
Debentures purchased by it hereunder bears to the aggregate principal amount
of
Debentures purchased hereunder) of the securities being offered in the Future
Offering on the same terms as contemplated by such Future Offering (the
limitations referred to in this sentence and the preceding sentence are
collectively referred to as the “Capital Raising Limitations”). In the
event the terms and conditions of a proposed Future Offering are amended in
any
respect after delivery of the notice to the Buyers concerning the proposed
Future Offering, the Company shall deliver a new notice to each Buyer describing
the amended terms and conditions of the proposed Future Offering and each Buyer
thereafter shall have an option during the fifteen (15) day period following
delivery of such new notice to purchase its pro rata share of the securities
being offered on the same terms as contemplated by such proposed Future
Offering, as amended. The foregoing sentence shall apply to
successive amendments to the terms and conditions of any proposed Future
Offering. The Capital Raising Limitations shall not apply to any
transaction involving (i) issuances of securities in a firm commitment
underwritten public offering (excluding a continuous offering pursuant to Rule
415 under the 0000 Xxx) or (ii) issuances of securities as consideration for
a
merger, consolidation or purchase of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company. The Capital Raising
Limitations also shall not apply to the issuance of securities upon exercise
or
conversion of the Company’s options, warrants or other convertible securities
outstanding as of the date hereof or to the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan approved by the shareholders of the
Company.
f. Expenses. At
the Closing, the Company shall reimburse Buyers for expenses incurred by them
in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the other agreements to be executed in
connection herewith (“Documents”), including, without limitation, attorneys’ and
consultants’ fees and expenses, transfer agent fees, fees for stock quotation
services, fees relating to any amendments or modifications of the Documents
or
any consents or waivers of provisions in the Documents, fees for the preparation
of opinions of counsel, escrow fees, and costs of restructuring the transactions
contemplated by the Documents. When possible, the Company must pay
these fees directly, otherwise the Company must make immediate payment for
reimbursement to the Buyers for all fees and expenses immediately upon written
notice by the Buyer or the submission of an invoice by the Buyer If
the Company fails to reimburse the Buyer in full within three (3) business
days
of the written notice or submission of invoice by the Buyer, the Company shall
pay interest on the total amount of fees to be reimbursed at a rate of 15%
per
annum.
g. Financial
Information. The Company agrees to send the following reports to
each Buyer until such Buyer transfers, assigns, or sells all of the Securities:
(i) within ten (10) days after the filing with the SEC, a copy of its Annual
Report on Form
10-KSB
its Quarterly Reports on Form 10-QSB and any Current Reports on Form 8-K; (ii)
within one (1) day after release, copies of all press releases issued by the
Company or any of its Subsidiaries; and (iii) contemporaneously with the making
available or giving to the shareholders of the Company, copies of any notices
or
other information the Company makes available or gives to such
shareholders.
h. Authorization
and Reservation of Shares. Subject to obtaining Stockholder
Approval (as defined in Section 4(k)), the Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion or exercise of the
outstanding Debentures and Warrants and issuance of the Conversion Shares and
Warrant Shares in connection therewith (based on the Conversion Price of the
Debentures or Exercise Price of the Warrants in effect from time to time) and
as
otherwise required by the Debentures. The Company shall not reduce
the number of shares of Common Stock reserved for issuance upon conversion
of
Debentures and exercise of the Warrants without the consent of each
Buyer. The Company shall at all times maintain the number of shares
of Common Stock so reserved for issuance at an amount (“Reserved Amount”) equal
to no less than two (2) times the number that is then actually issuable upon
full conversion of the Debentures and Additional Debentures and upon exercise
of
the Warrants and the Additional Warrants (based on the Conversion Price of
the
Debentures or the Exercise Price of the Warrants in effect from time to
time). If at any time the number of shares of Common Stock authorized
and reserved for issuance (“Authorized and Reserved Shares”) is below the
Reserved Amount, the Company will promptly take all corporate action necessary
to authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of shareholders to authorize additional
shares to meet the Company’s obligations under this Section 4(h), in the case of
an insufficient number of authorized shares, obtain shareholder approval of
an
increase in such authorized number of shares, and voting the management shares
of the Company in favor of an increase in the authorized shares of the Company
to ensure that the number of authorized shares is sufficient to meet the
Reserved Amount. If the Company fails to obtain such shareholder
approval within thirty (30) days following the date on which the number of
Reserved Amount exceeds the Authorized and Reserved Shares, the Company shall
pay to the Borrower the Standard Liquidated Damages Amount, in cash or in shares
of Common Stock at the option of the Buyer. If the Buyer elects to be
paid the Standard Liquidated Damages Amount in shares of Common Stock, such
shares shall be issued at the Conversion Price at the time of
payment. In order to ensure that the Company has authorized a
sufficient amount of shares to meet the Reserved Amount at all times, the
Company must deliver to the Buyer at the end of every month a list detailing
(1)
the current amount of shares authorized by the Company and reserved for the
Buyer; and (2) amount of shares issuable upon conversion of the Debentures
and
upon exercise of the Warrants and as payment of interest accrued on the
Debentures for one year. If the Company fails to provide such list
within five (5) business days of the end of each month, the Company shall pay
the Standard Liquidated Damages Amount, in cash or in shares of Common Stock
at
the option of the Buyer, until the list is delivered. If the Buyer
elects to be paid the Standard Liquidated Damages Amount in shares of Common
Stock, such shares shall be issued at the Conversion Price at the time of
payment.
i. Listing. The
Company shall promptly secure the listing of the Conversion Shares and Warrant
Shares upon each national securities exchange or automated quotation system,
if
any, upon which shares of Common Stock are then listed (subject to official
notice of issuance) and, so long as any Buyer owns any of the Securities, shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares and Warrant Shares from time to time issuable
upon conversion of the Debentures or exercise of the Warrants. The
Company will obtain and, so long as any Buyer owns any of the Securities,
maintain the listing and trading of its Common Stock on the OTCBB or any
equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the
Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange
(“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the National Association of Securities Dealers (“NASD”) and
such exchanges, as applicable. The Company shall promptly provide to
each Buyer copies of any notices it receives from the OTCBB and any other
exchanges or quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing on such
exchanges and quotation systems.
j. Corporate
Existence. So long as a Buyer beneficially owns any Debentures or
Warrants, the Company shall maintain its corporate existence and shall not
sell
all or substantially all of the Company’s assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company’s
assets, where the surviving or successor entity in such transaction (i) assumes
the Company’s obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap,
NYSE or AMEX.
k. Stockholder
Approval. The Company shall file a proxy or information statement
with the SEC no later than January 31, 2006 and use its best efforts
to obtain, on or before April 30, 2006, such approvals of the Company’s
stockholders as may be required to issue all of the shares of Common Stock
issuable upon conversion or exercise of, or otherwise with respect to, the
Debentures and the Warrants in accordance with Nevada law and any applicable
rules or regulations of the OTCBB and/or Nasdaq, either through a reverse stock
split of the Common Stock or an increase in authorized capital (the “Stockholder
Approval”). The Company shall furnish to each Buyer and its legal
counsel promptly (but in no event less than two (2) business days) before the
same is filed with the SEC, one copy of the proxy or information statement
and
any amendment thereto, and shall deliver to each Buyer promptly each letter
written by or on behalf of the Company to the SEC or the staff of the SEC,
and
each item of correspondence from the SEC or the staff of the SEC, in each case
relating to such proxy or information statement (other than any portion thereof
which contains information for which the Company has sought confidential
treatment). The Company will promptly (but in no event more than
three (3) business days) respond to any and all comments received from the
SEC
(which comments shall promptly be made available to each Buyer). The
Company shall comply with the filing and disclosure requirements of Section
14
under the 1934 Act in connection with the Stockholder Approval.
l. No
Integration. The Company shall not make any offers or sales of
any security (other than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder under the 1933
Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
m. Restriction
on Short Sales. The Buyers agree that, so long as any of the Notes remain
outstanding, but in no event less than two (2) years from the date hereof,
the
Buyers will not enter into or effect any “short sales” (as such term is defined
in Rule 3b-3 of the 0000 Xxx) of the Common Stock or hedging transaction which
establishes a net short position with respect to the Common Stock.
n. Breach
of Covenants. If the Company breaches any of the covenants set
forth in this Section 4, and in addition to any other remedies available to
the
Buyers pursuant to this Agreement, the Company shall pay to the Buyers the
Standard Liquidated Damages Amount, in cash or in shares of Common Stock at
the
option of the Company, until such breach is cured. If the Company
elects to pay the Standard Liquidated Damages Amount in shares, such shares
shall be issued at the Conversion Price at the time of payment.
5. TRANSFER
AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the
name
of each Buyer or its nominee, for the Conversion Shares and Warrant Shares
in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Debentures or exercise of the Warrants in accordance with
the
terms thereof (the “Irrevocable Transfer Agent Instructions”). Prior
to registration of the Conversion Shares and Warrant Shares under the 1933
Act
or the date on which the Conversion Shares and Warrant Shares may be sold
pursuant to Rule 144 without any restriction as to the number of Securities
as
of a particular date that can then be immediately sold, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and
stop
transfer instructions to give effect to Section 2(f) hereof (in the case of
the
Conversion Shares and Warrant Shares, prior to registration of the Conversion
Shares and Warrant Shares under the 1933 Act or the date on which the Conversion
Shares and Warrant Shares may be sold pursuant to Rule 144 without any
restriction as to the number of Securities as of a particular date that can
then
be immediately sold), will be given by the Company to its transfer agent and
that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and
the
Registration Rights Agreement. Nothing in this Section shall affect
in any way the Buyer’s obligations and agreement set forth in Section 2(g)
hereof to comply with all applicable prospectus delivery requirements, if any,
upon re-sale of the Securities. If a Buyer provides the Company with
(i) an opinion of counsel in form, substance and scope customary for opinions
in
comparable transactions, to the effect that a public sale or transfer of such
Securities may be made without registration under the 1933 Act and such sale
or
transfer is effected or (ii) the Buyer provides reasonable assurances that
the
Securities can be sold pursuant to Rule 144, the Company shall permit the
transfer, and, in the case of the Conversion Shares and Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates, free from
restrictive legend, in such name and in such denominations as specified by
such
Buyer. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers, by vitiating
the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Section 5 may be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section, that the Buyers shall be entitled, in addition
to
all other available remedies, to an injunction restraining any breach and
requiring immediate transfer, without the necessity of showing economic loss
and
without any bond or other security being required.
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL. The obligation of the
Company hereunder to issue and sell the Debentures and Warrants to a Buyer
at
the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are
for
the Company’s sole benefit and may be waived by the Company at any time in its
sole discretion:
a. The
applicable Buyer shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Company.
b. The
applicable Buyer shall have delivered the Purchase Price in accordance with
Section 1(b) above.
c. The
representations and warranties of the applicable 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 the applicable 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 the applicable Buyer at or prior to the Closing Date.
d. No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or
in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
7. CONDITIONS
TO EACH BUYER’S OBLIGATION TO PURCHASE. The obligation of each
Buyer hereunder to purchase the Debentures and 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 such Buyer’s sole
benefit and may be waived by such Buyer at any time in its sole
discretion:
a. The
Company shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Buyer.
b. The
Company shall have delivered to such Buyer duly executed Debentures (in such
denominations as the Buyer shall request) and Warrants in accordance with
Section 1(b) above.
c. The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to a
majority-in-interest of the Buyers, shall have been delivered to and
acknowledged in writing by the Company’s Transfer Agent.
d. The
representations and warranties of the Company 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 such time (except for representations and warranties that speak as
of a
specific date) and the Company shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Company at
or
prior to the Closing Date. The Buyer shall have received a
certificate or certificates, 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 including, but not
limited to certificates with respect to the Company’s Articles of Incorporation,
By-laws and Board of Directors’ resolutions relating to the transactions
contemplated hereby.
e. No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or
in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
f. No
event shall have occurred which could reasonably be expected to have a Material
Adverse Effect on the Company.
g. The
Conversion Shares and Warrant Shares shall have been authorized for quotation
on
the OTCBB and trading in the Common Stock on the OTCBB shall not have been
suspended by the SEC or the OTCBB.
h. The
Buyer shall have received an opinion of the Company’s counsel, dated as of the
Closing Date, in form, scope and substance reasonably satisfactory to the Buyer
and in substantially the same form as Exhibit “D” attached hereto.
i. The
Buyer shall have received an officer’s certificate described in Section 3(c)
above, dated as of the Closing Date.
8. GOVERNING
LAW; MISCELLANEOUS.
a. Governing
Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW
YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES
FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY
IN
ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER
PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY
SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL
MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.
b. Counterparts;
Signatures by Facsimile. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
c. Headings. The
headings of this Agreement are for convenience of reference only and shall
not
form part of, or affect the interpretation of, this Agreement.
d. Severability. In
the event that any provision of this Agreement is invalid or unenforceable
under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision
hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
e. Entire
Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by an instrument
in writing signed by the party to be charged with enforcement.
f. Notices. Any
notices required or permitted to be given under the terms of this Agreement
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed
in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile, in each case addressed to a party. The addresses for
such communications shall be:
|
If
to the Company:
|
Juniper
Group, Inc.
|
|
|
00000
Xxxxx Xxxx, Xxxxx
000 Xxxx
Xxxxx, Xxxxxxx 00000
|
|
|
Attention: Chief
Executive Officer
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile:
(000) 000-0000
|
With
copies
to: Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx, XX 00000
Attention: Xxxxxxx
Xxxxxxxxx, Esq.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
If
to a Buyer: To the address set forth immediately below such Buyer’s
name on the signature pages hereto.
With
copy
to: Xxxxxxx
Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000
Xxxxxx Xxxxxx
00xx
Xxxxx
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000
Attention: Xxxxxx
X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxx.xxx
Each
party shall provide notice to the other party of any change in
address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns. Neither
the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other;
provided, however, that subject to Section 2(f), any Buyer
may assign its rights hereunder to any person that purchases Securities in
a
private transaction from a Buyer or to any of its “affiliates,” as that term is
defined under the 1934 Act, without the consent of the Company; and provided
further, that the Buyers shall not assign this Agreement or any rights or
obligations hereunder until the Registration Debentures and Registration
Warrants are purchased by the Buyers.
h. 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. The
representations and warranties of the Company and the agreements and covenants
set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of
the
Buyers. The Company agrees to indemnify and hold harmless each of the
Buyers and all their officers, directors, employees and agents for loss or
damage arising as a result of or related to any breach or alleged breach by
the
Company of any of its representations, warranties and covenants set forth in
Sections 3 and 4 hereof or any of its covenants and obligations under this
Agreement or the Registration Rights Agreement, including advancement of
expenses as they are incurred.
j. Publicity. The
Company and each of the Buyers shall have the right to review a reasonable
period of time before issuance of any press releases, SEC, OTCBB or NASD
filings, 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 each of the Buyers, to make any press
release or SEC, OTCBB (or other applicable trading market) or NASD filings
with
respect to such transactions as is required by applicable law and regulations
(although each of the Buyers shall be consulted by the Company in connection
with any such press release prior to its release and shall be provided with
a
copy thereof and be given an opportunity to comment thereon).
k. Further
Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other
party may reasonably request in order to carry out the intent and accomplish
the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
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. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Agreement will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement, that the Buyers
shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement
and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being
required.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Agreement to be duly executed as of the date first above written.
JUNIPER
GROUP, INC.
/s/Xxxxx X. Xxxxxxxxxxx
________________________________
Xxxxx
X. Xxxxxxxxxxx
Chief
Executive Officer
AJW
PARTNERS, LLC
By: SMS
Group, LLC
/s/ Xxxxx X. Xxxxxxxx
______________________________________
Xxxxx
X. Xxxxxxxx
Manager
RESIDENCE: Delaware
ADDRESS: 0000
Xxxxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxx,
Xxx Xxxx 00000
Facsimile: (000)
000-0000
Telephone: (000)
000-0000
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate
Principal Amount of
Debentures:
$________
Number
of
Warrants: ________
Aggregate
Purchase
Price: $________
AJW
MASTER FUND, LTD.
By: First
Street Manager II, LLC
/s/Xxxxx X. Xxxxxxxx
______________________________________
Xxxxx
X. Xxxxxxxx
Manager
RESIDENCE: Cayman
Islands
ADDRESS: AJW
Offshore, Ltd.
X.X.
Xxx 00000 XXX
Xxxxx
Xxxxxx, Xxxxxx Xxxxxx, B.W.I.
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate
Principal Amount of Debentures: $_______
Number
of Warrants: _______
Aggregate
Purchase Price: $_______
NEW
MILLENNIUM CAPITAL PARTNERS II, LLC
By: First
Street Manager II, LLP
/s/Xxxxx
X. Xxxxxxxx
____________________________________
Xxxxx
X. Xxxxxxxx
Manager
RESIDENCE: New
York
ADDRESS: 0000
Xxxxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxx,
Xxx Xxxx 00000
Facsimile: (000)
000-0000
Telephone: (000)
000-0000
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate
Principal Amount of Notes: $________
Number
of
Warrants:
________
Aggregate
Purchase
Price:
$________
