NOTE PURCHASE AGREEMENT
JULY
7,
2008
This
Note Purchase Agreement (the
“Agreement”) is
made
as of July 7, 2008 (the “Effective
Date”) by
and
among DRIFTWOOD VENTURES,
Inc., a
Delaware corporation (the “Company”), and
the
persons and entities named on the Schedule of Purchasers attached hereto
(individually, a
“Purchaser”
and
collectively, the “Purchasers”).
RECITAL
WHEREAS,
the
Company has requested that the Purchasers make loans to the Company in the
aggregate principal amount of at least $7,000,000.00;
WHEREAS,
the
Purchasers are willing to make such loans to the Company pursuant to the terms
and conditions set forth in this Agreement;
WHEREAS,
as a
condition to making such loans to the Company, the Company has agreed to grant
a
security interest in all of its assets to secure the Company’s obligations under
the Notes (as defined below); and
WHEREAS,
certain
capitalized terms have the meaning ascribed to such terms in Section 10
below.
AGREEMENT
NOW
THEREFORE, in
consideration of the foregoing, and the representations, warranties, covenants
and conditions set forth below, the Company and each Purchaser, severally and
not jointly, intending to be legally bound, hereby agree as
follows:
1. Amount
and Terms of the Loans; Warrants. Subject
to the terms of this Agreement, each Purchaser, severally and not jointly,
agrees to lend to the Company up to that amount (the “Total
Loan Amount”)
set
forth opposite each such Purchaser’s name under the heading “Total Loan Amount”
on the Schedule
of Purchasers
attached
hereto against the issuance and delivery by the Company of a senior secured
convertible promissory note or notes in substantially the form attached hereto
as Exhibit A
(each, a
“Note”
and
collectively, the “Notes”).
The
Purchasers will also receive common stock purchase warrants in
the
form attached hereto as Exhibit
B
(each, a
“Warrant”
and
collectively, the “Warrants”),
which
Warrants when exercised will result in the issuance of common stock of the
Company as set forth therein (the “Warrant
Shares”).
Subject
to the terms and conditions of this Agreement, the Company agrees to issue
and
sell to each Purchaser at Closing (as defined below), as partial inducement
to
purchase the Notes purchased by such Purchaser at Closing and against payment
by
such Purchaser of the amount set forth on the Schedule
of Purchasers,
a
Warrant entitling such Lender to purchase capital stock as set forth in such
Warrant.
2
2.
The Closing
(a) Initial
Closing. The
initial closing of the sale and purchase of the Notes (the “Initial
Closing”) shall
be
held on the Effective Date or at such other date and time (the “Initial
Closing Date”) as
the
Company and holders representing at least a majority of the aggregate principal
amount of Notes outstanding or, if no amounts are outstanding, Purchasers
representing at least a majority of the aggregate principal amount of Notes
outstanding (the “Majority
Purchasers”)
shall
agree. At
the
Initial Closing, (i) each Purchaser shall deliver to the Company by check or
wire transfer of immediately available funds such Purchaser’s Drawdown Amount
(such Purchaser’s “Drawdown
Amount”)
and
(ii) the Company shall issue and deliver to each Purchaser a Note in favor
of
such Purchaser in the corresponding principal amount equal to such Purchaser’s
Drawdown Amount, and the Company agrees to issue to each Purchaser a Warrant
in
accordance with Section 1.
(b) Subsequent
Closing(s).
At any
time and from time to time on or before July 15, 2008, the Company may issue
additional Notes to one or more additional persons or entities (an “Additional
Purchaser”)
at one
or more subsequent closings (each a “Subsequent
Closing”
and the
date of closing of any Subsequent Closing, a “Subsequent
Closing Date”).
At
each Subsequent Closing, (i) each Additional Purchaser shall deliver to the
Company by check or wire transfer of immediately available funds such
Purchaser’s Drawdown Amount and (ii) the Company shall issue and deliver to each
Purchaser a Note in favor of such Purchaser in the corresponding principal
amount equal to such Purchaser’s Drawdown Amount, and the Company agrees to
issue to each Purchaser a Warrant in accordance with Section 1. Each Subsequent
Closing shall be made on the terms and conditions set forth in this Agreement.
At each Subsequent Closing, the representations and warranties of the Company
in
Section 3 hereof (and the Schedule of Exceptions delivered to the Purchasers
in
the Initial Closing (the “Schedule
of Exceptions”))
shall
be deemed to speak as of the Initial Closing Date and
the
Company shall have no obligation to update any such disclosure
and
the
representations and warranties of the Additional Purchasers in Section 4 hereof
shall speak as of such Subsequent Closing.
(c)
Additional Purchaser(s).
This
Agreement, including without limitation, the Schedule
of Purchasers,
may be
amended by the Company to include any Additional Purchasers upon the execution
by such Additional Purchaser of a counterpart signature page hereto. Any Notes
or Warrants issued pursuant to Section 2(c) shall be deemed to be “Notes” or
“Warrants” for all purposes under this Agreement and any Additional Purchasers
thereof shall be deemed to be “Purchasers” for all purposes under this Agreement
and the Security Agreement (as hereinafter defined).
3.
Representations,
Warranties and Covenants of the Company
Except
as
set forth on the Schedule of Exceptions, the Company hereby represents and
warrants to each Purchaser as follows:
3.1 Organization,
Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has the requisite corporate
power to own and operate its properties and assets and to carry on its business
as now conducted and as proposed to be conducted. The Company is duly qualified
and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its activities and
of
its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
Material Adverse Effect (as defined below).
3
3.2 Subsidiaries.
The
Company (i) has no subsidiaries, (ii) does not own, directly or indirectly,
any
securities issued by any other corporation, business organization or
governmental authority and (iii) is not a partner or participant in any joint
venture or partnership of any kind.
3.3 Corporate
Power.
The
Company has all requisite corporate power and authority to execute and deliver
this Agreement and the other Loan Documents (as defined below) and to carry
out
and perform its obligations under the terms of this Agreement and the other
Loan
Documents.
3.4 Authorization.
All
corporate action on the part of the Company, its directors, officers and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement and each other Loan Document by the Company and
the performance of the Company’s obligations hereunder and thereunder, including
the issuance and delivery of the Notes and the Warrant Shares, and the
reservation of the equity securities issuable upon conversion of the Notes
(the
“Note
Securities”)
and
upon conversion of the Note Securities or exercise of the Warrants has been
taken or will be taken prior to the issuance of such equity securities. This
Agreement and each of the other Loan Documents, when executed and delivered
by
the Company, shall constitute valid and binding obligations of the Company
enforceable in accordance with their terms, subject to laws of general
application relating to bankruptcy, insolvency, the relief of debtors and,
with
respect to rights to indemnity, subject to federal and state securities
laws.
3.5 Governmental
Consents.
All
consents, approvals, orders, or authorizations of, or registrations,
qualifications, designations, declarations, or filings with, any governmental
authority, required on the part of the Company in connection with the valid
execution and delivery of this Agreement, the offer, sale or issuance of the
Notes, the Note Securities, the Warrants, the Warrant Shares and the securities
issuable upon conversion of the Note Securities, or the consummation of any
other transaction contemplated hereby or by any other Loan Document have been
obtained and will be effective at the Closing, other
than filings required to be made after the Closing under applicable federal
and
state securities laws and as required to perfect the security interest granted
under the Security Agreement.
3.6 Compliance
with Laws. The
Company has complied with all laws, statutes, rules, regulations, orders or
restrictions of any domestic or foreign government or any instrumentality or
agency thereof applicable to the Company or its operations, properties, assets,
products or services, or to the conduct of its business, and is not in violation
or default (or with due notice or lapse of time or both would be in violation
or
default) of any of the foregoing, the non-compliance or violation of which
would, either individually or in the aggregate, have a material adverse effect
on the business, assets, liabilities, financial condition, operations or
prospects of the Company (a “Material
Adverse Effect”).
The
Company has not received any notice of any violation of any laws, governmental
rules, regulations or orders, judgment, decrees, injunctions or
awards.
4
3.7 Compliance
with Other Instruments. The
Company is not in violation or default of any term of (1) its certificate of
incorporation or by-laws or (ii) any judgment, decree, order or writ binding
upon the Company. Neither the execution, delivery and performance of this
Agreement or any of other Loan Document, the consummation of the transactions
contemplated hereby or thereby, or the issuance and delivery of the Notes,
the
Warrants, the Note Securities, the Warrant Shares or any other securities of
the
Company upon conversion of the Note Securities will conflict with or result
in a
breach of or default under (or with due notice or lapse of time or both would
result in a breach or default under) the Company’s certificate of incorporation
or by-laws, or any statute, law, rule, regulation, judgment, decree, writ,
injunction, order or award of any arbitrator, court or governmental authority,
material agreement or instrument which is applicable to the Company or by which
the Company or any of its assets is bound, or result in the creation or
imposition of any Lien upon any of the assets of the Company (other than Liens
pursuant to the Security Agreement), or the suspension, revocation, impairment,
forfeiture, or nonrenewal of any material permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties. Without limiting the foregoing, the Company has obtained
all waivers necessary with respect to any preemptive rights, rights of first
refusal or similar rights, including any notice or offering periods provided
for
as part of any such rights, in order for the Company to consummate the
transactions contemplated hereunder without any third party obtaining any rights
to cause the Company to offer or issue any securities of the Company as a result
of the consummation of the transactions contemplated hereunder.
3.8 Offering.
The
Company and its representatives have complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Notes, Warrants, Note Securities, Warrant Shares and
securities issuable upon conversion of the Note Securities. Assuming the
accuracy of the representations and warranties of the Purchasers contained
in
Section 4 hereof, the offer, issue, and sale of the Notes, Warrants, Note
Securities, Warrant Shares and securities issuable upon conversion of the Note
Securities are and will be exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the “Act”), and
have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit, or qualification requirements of all applicable
state securities laws.
3.9 Litigation.
There
is
no action, suit, claim, litigation, proceeding, arbitration, investigation
or
governmental inquiry, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency
or
instrumentality, domestic or foreign, or arbitration involving private parties
(collectively, a “Proceeding”) pending
or, to the knowledge of the Company, threatened against the Company or affecting
any of its properties or assets, or, to the knowledge of the Company, against
any officer, employee, consultant or holder of any of the securities of the
Company relating to the Company or its business, which might result in a
Material Adverse Effect. There are no Proceedings pending or, or to the
Company’s knowledge, threatened (or any basis therefor known to the Company)
which might call into question the validity of this Agreement or any of the
other Loan Documents or any action taken or to be taken pursuant hereto or
thereto.
5
3.10 Bankruptcy.
The
Company has not admitted in writing its inability to pay its debts generally
as
they become due, filed or consented to the filing against it of a petition
in
bankruptcy or a petition to take advantage of any insolvency act, made an
assignment for the benefit of creditors, consented to the appointment of a
receiver for itself or for the whole or any substantial part of its property,
or
had a petition in bankruptcy filed against it, been adjudicated a bankrupt,
or
filed a petition or answer seeking reorganization or arrangement under the
federal bankruptcy laws or any other law or statute of the United States of
America or any other jurisdiction.
3.11 Agreements.
Each
material written or oral contract, instrument, agreement, commitment,
obligation, plan and arrangement to which the Company is a party or by which
it
or any of its assets is bound (the “Material
Agreements”)
is in
full force and effect, and neither the Company nor, to the knowledge of the
Company, any other party thereto, is in breach or violation of, or default
under, nor is the Company aware of any reasonable basis for a claim of such
breach or violation of, or default under, the terms of any Material Agreement,
and no event has occurred which constitutes or, with the lapse of time or the
giving of notice or both, would constitute a breach or violation of, or default
under, any Material Agreement by the Company, or to the knowledge of the
Company, any other party thereto, in any case, which breach, violation or
default could, either individually or in the aggregate, have a Material Adverse
Effect. There is no anticipated or threatened default or material failure of
performance or observance of any obligations or conditions contained in the
Company Agreements by the Company, or, to the knowledge of the Company, by
any
other party thereto which could, either individually or in the aggregate, have
a
Material Adverse Effect. Except as contemplated in connection with the Initial
Closing, the Company has not provided to, or received from, any other party
to
any Company Agreement, any notice of default or notice of its intention to
terminate any of the Company Agreements, and, to the knowledge of the Company,
does any party to any Company Agreement intend to terminate such Company
Agreement prior to the scheduled expiration of term of such Company
Agreement.
3.12 No
Undisclosed Liabilities. Except
as
set forth in Schedule
3.12
of the
Schedule of Exceptions or in the Company’s filings with the Securities and
Exchange Commission, the Company does not have any liabilities or obligations
of
any nature whatsoever, contingent or otherwise, other than liabilities incurred
in the ordinary course of the Company’s business, which liabilities are not,
individually or in the aggregate, material.
3.13 No
Liens.
There
are no Liens on any of the Company’s assets, properties, interests or rights,
other than the Liens contemplated by the Security Agreement.
4.
Representations
and Warranties of the Purchasers
Each
Purchaser severally, but not jointly, represents and warrants to the Company
solely to itself as follows:
4.1 Purchase
for Own Account. Each
Purchaser is acquiring the Notes, Warrants, Warrant Shares and the Note
Securities issuable upon conversion of the Notes (collectively, the “Securities”) solely
for its own account and beneficial interest for investment and not for sale
or
with a view to distribution of the Securities or any part thereof, and has
no
present intention of selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the same.
6
4.2 Experience
and Sophistication. Each
Purchaser hereby represents that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and
risk of this investment.
4.3 Ability
to Bear Economic Risk. Each
Purchaser acknowledges that investment in the Securities involves a high degree
of risk, and represents that it is able, without materially impairing its
financial condition, to hold the Securities for an indefinite period of time
and
to suffer a complete loss of its investment.
4.4 Accredited
Investor Status. Each
Purchaser is an “accredited investor” as such term is defined in Rule 501 under
the Act.
4.5 Transfer
Restrictions Imposed By Securities Laws. Each
Purchaser understands that none of the Securities have been registered under
the
Act or any other applicable securities laws, and, therefore, cannot be resold
unless they are subsequently registered under the Act and other applicable
securities laws or unless an exemption from such registration is available.
Each
Purchaser agrees not to sell or otherwise dispose of all or any part of the
Securities except as permitted by law, including, without limitation, any
regulations under the Act and other applicable securities laws; the Company
does
not have any present intention and is under no obligation to register the
Securities under the Securities Act and other applicable securities
laws.
4.6 Authorization.
This
Agreement and each of the other Loan Documents, when executed and delivered
by
each Purchaser, shall constitute valid and binding obligations of such Purchaser
enforceable in accordance with their terms, subject to laws of general
application relating to bankruptcy, insolvency, the relief of debtors and,
with
respect to rights to indemnity, subject to federal and state securities laws.
Each Purchaser has full power and authority to enter into this Agreement and
each of the other Loan Documents to which such Purchaser shall be a
Party.
5. Conditions to Purchasers’ Obligations at Initial Closing
Each
Purchaser’s obligation to purchase and pay for the Notes to be purchased by such
Purchaser at the Initial Closing is subject to the complete satisfaction by
the
Company (or waiver by such Purchaser), on or before the Initial Closing
Date, of
the
following conditions:
(a) Representations,
Warranties and Agreements. At
the
Closing, the representations and warranties of the Company contained herein
shall be true and correct and the Company shall have performed and complied
with
all conditions and agreements required to be performed or complied with by
it on
or prior to the Closing Date.
(b) Security
Agreement. The
Security Agreement attached hereto as Exhibit C
(the
“Security
Agreement”) shall
have been executed and delivered by each of the other Purchasers, the Company
and the other parties thereto required to execute the Security Agreement at
or
prior to the Initial Closing Date.
7
(c) Issuance
of Notes and Warrants. Each
Purchaser shall have received from the Company duly executed Notes and Warrants
as required by this Agreement.
(l) General.
All
instruments and legal, governmental, administrative, corporate and partnership
proceedings in connection with the transactions contemplated by Loan Documents
shall be reasonably satisfactory in form and substance to each Purchaser, and
such Purchaser shall have received copies of all documents, including, without
limitation, records of corporate or other proceedings, and any consents,
licenses, approvals, permits and orders required to be secured by the Company
in
connection with the transactions contemplated herein or which such Purchaser
may
have reasonably requested in connection therewith.
6.
Conditions
to Purchasers’ Obligations at Each Subsequent
Closing
Each
Purchaser’s obligation to purchase and pay for the Notes to be purchased by it
at a Subsequent Closing is subject to the complete satisfaction by the Company
(or waiver by such Purchaser), on or before the date of such Subsequent Closing
Date, of
the
following conditions:
(a) Representations,
Warranties and Agreements. The
representations and warranties of the Company contained herein shall be true
and
correct in all material respects as of such Subsequent Closing Date and the
Company shall have performed and complied with all conditions and agreements
required to be performed or complied with by it on or prior to the Subsequent
Closing Date.
(b) Absence
of Defaults.
No
Default or Event of Default shall have occurred and be continuing.
(c) Issuance
of Notes and Warrants. Such
Purchaser shall have received from the Company a duly executed Note and Warrant
as required by this Agreement.
(e) General.
All
instruments and legal, governmental, administrative, corporate and partnership
proceedings in connection with the transactions contemplated by Loan Documents
shall be reasonably satisfactory in form and substance to such Purchaser, and
such Purchaser shall have received copies of all documents, including, without
limitation, records of corporate or other proceedings, and any consents,
licenses, approvals, permits and orders required to be secured by the Company
in
connection with the transactions contemplated herein or which such Purchaser
may
have reasonably requested in connection therewith.
7.
Conditions
to Company’s Obligations
The
Company’s obligation to sell and issue the Notes pursuant to this Agreement at
the Initial Closing and at each Subsequent Closing (each, a “Closing”)
is
subject to the complete satisfaction by each Purchaser purchasing Notes at
such
Closing (or waiver by the Company), on or before the date of such Closing,
of
the following conditions:
(a) Representations
and Warranties. The
representations and warranties of such Purchaser contained herein shall be
true
and correct as of the Closing Date.
8
(b) Payment
of Purchase Price. Such
Purchaser shall have delivered to the Company, and the Company shall have
received, payment in full of the purchase price relating to the Notes and
Warrants being purchased by such Purchaser at the Closing.
8.
Affirmative
Covenants
Until
such time as all Obligations have been paid in full, the Company shall do all
of
the following:
(a) Government
Compliance.
The
Company shall maintain its legal existence and good standing in its jurisdiction
of formation and maintain qualification in each jurisdiction in which the
failure to so qualify would reasonably be expected to constitute a Material
Adverse Effect. The Company shall comply in all material respects with all
laws,
ordinances and regulations to which it is subject.
(b) Financial
Information; Reports and Inspection.
The
Company shall:
(i) deliver
to the Purchasers such financial information as may be reasonably requested
by
the Purchasers from time to time, which may include, but not be limited to,
quarterly financial statements; and
(ii) deliver
promptly (and in no event later than 5 business days after the occurrence
thereof) notice of any Default or Event of Default.
(c) Taxes.
The
Company shall make timely payment of all federal, state, and local taxes or
assessments (other than taxes and assessments which the Company is contesting
in
good faith, with adequate reserves maintained in accordance with U.S. generally
accepted accounting principles) and will deliver to the Purchasers, on demand,
appropriate certificates attesting to such payments.
(d) Insurance.
The
Company will maintain insurance consistent with past practice.
(e) Use
of Proceeds. The Purchasers acknowledge and agree that the Company will
use the proceeds of loans made by the Purchasers hereunder for the purchase
of
senior secured convertible notes in Green Screen Interactive Software, Inc.
in
accordance with the terms and conditions of the documents governing that
transaction.
9.
Negative
Covenants
Until
such time as all Obligations shall have been paid in full, the Company shall
not
do any of the following, without the prior written consent of the Majority
Purchasers:
9
(a) Indebtedness.
The
Company will not create, incur, assume or suffer to exist any (nor allow any
of
its Subsidiaries to create, incur, assume or suffer to exist) any Indebtedness,
except for:
(i) Indebtedness
owed to the Purchasers, including, without limitation, the Indebtedness
represented by the Notes;
(ii) Indebtedness
of the Company for taxes, assessments and governmental charges or levies not
yet
due and payable;
(iii) unsecured
current liabilities of the Company (other than for money borrowed or for
purchase money Indebtedness with respect to fixed assets) incurred upon
customary terms in the ordinary course of business; and
(iv)
$750,000
of Indebtedness to Xxxxxx Management, LLC in connection with the termination
of
that certain Management Agreement between the Company and Xxxxxx Management,
LLC, which Indebtedness will be on the same terms and pari
passu
with the
Indebtedness to the Purchasers under the Loan Documents.
(b) Liens.
The
Company will not create, incur, assume or suffer to exist (nor allow any of
its
Subsidiaries to create, incur, assume or suffer to exist) any Liens upon or
with
respect to any of its property or assets, now owned or hereafter acquired,
except for the lien of Xxxxxx Management, LLC (which lien will be pari
passu
with the
lien of the Purchasers) and as permitted by Section 5(f) of the Security
Agreement.
(c) Guaranties.
The
Company will not guarantee, endorse or otherwise become directly or contingently
liable for (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) (and will not permit any of its Subsidiaries so to assume,
guaranty or become directly or contingently liable for) in connection with
any
Indebtedness of any other Person, except guaranties by endorsement for deposit
or collection in the ordinary course of business.
(d) Dividends;
Distributions; Redemptions.
The
Company will not make any distributions to its stockholders, pay any dividends
or distributions or redeem, purchase, or otherwise acquire directly or
indirectly any of its equity interests; provided, the foregoing not apply to
(i)
distributions, dividends or like transactions, paid in equity of the Company,
or
(ii) repurchases, redemptions, or similar acquisitions of shares of the
Company’s common stock issued to or held by employees, officers, directors or
other service providers pursuant to agreements providing for such repurchase
at
the original purchase price, at a purchase price not exceeding the fair market
value of such common stock, or in connection with the exercise of a contractual
right of first refusal entitling the Company to purchase the shares upon the
terms offered by a third party.
(e) Loans
and Advances.
Except
for the loan to Green Screen Interactive Software, Inc. as contemplated by
Section 8(e) above, in connection with any Investor Sale (as defined in the
Note) or the $750,000 Indebtedness to Xxxxxx Management, LLC, the Company will
not make any loans or advances to any Person, including, without limitation,
the
Company's directors, officers and employees, except advances to directors,
officers or employees with respect to expenses incurred by them in the ordinary
course of their duties consistent with past practice.
10
(f) Investments.
Except
in connection with the consummation of the transactions contemplated by that
certain Agreement and Plan of Merger, by and among the Company, DFTW Merger
Sub,
Inc., Green Screen Interactive Software, Inc. and Xxx Xxxxxxxxxx as the
Representative, dated as of July 7, 2008 or in connection with any Investor
Sale, the Company will not invest in, hold or purchase any stock or securities
of any Person except: (i) readily marketable direct obligations of, or
obligations guarantied by, the United States of America or any agency thereof;
(ii) other investment grade debt securities; and (iii) mutual funds, the
assets of which are primarily invested in items of the kind described in the
foregoing clauses (i) and (ii) of this Section 9(f).
(g) No
Margin Stock.
No
proceeds of any loan to the Company shall be used directly or indirectly to
purchase or carry any margin security or margin stock, as such terms are used
in
Regulations U and X of the Board of Governors of the Federal Reserve System,
12
CFR parts 221 and 224.
10. Certain
Definitions
In
addition to the terms defined above, the following terms used in this Agreement
shall be construed to have the meanings set forth or referenced
below.
“Affiliate”
means
any Person which, directly or indirectly, controls or is controlled by or is
under common control with the Company; any officer or director of the Company;
any Person owning of record or beneficially, directly or indirectly, 5% or
more
of the capital stock of the Company; and any member of the immediate family
of
any of the foregoing. “Control”
means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of any Person, whether through ownership
of voting equity, by contract or otherwise.
“Contingent
Obligation”
means,
as applied to the Company, any direct or indirect liability, contingent or
otherwise, of that the Company with respect to (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed,
co-made or discounted or sold with recourse by that the Company, or in respect
of which that the Company is otherwise directly or indirectly liable;
(ii) any obligations with respect to undrawn letters of credit, corporate
credit cards, or merchant services issued or provided for the account of that
the Company; and (iii) all obligations arising under any interest rate,
currency or commodity swap agreement, interest rate cap agreement, interest
rate
collar agreement, or other agreement or arrangement designed to protect such
the
Company against fluctuation in interest rates, currency exchange rates or
commodity prices; provided, however, that the term “Contingent Obligation” shall
not include endorsements for collection or deposit in the ordinary course of
business.
“Default”
means
any event or circumstance which, with the passage of time or the giving of
notice or both, would become an Event of Default.
“Event
of Default”
has the
meaning ascribed to such term in the Notes.
11
“GAAP”
shall
mean U.S. generally accepted accounting principles as in effect from time to
time.
“Indebtedness”
means
(a) indebtedness for borrowed money or the deferred price of property or
services (other than trade and other payables incurred in the ordinary course
of
business), such as reimbursement and other obligations for surety bonds and
letters of credit, (b) obligations evidenced by notes, bonds, debentures or
similar instruments, (c) capital lease obligations and (d) Contingent
Obligations.
“Lien”
means
any mortgage, deed of trust, pledge, lien, security interest, or other charge
or
encumbrance (including the lien or retained security title of a conditional
vendor) of any nature upon or with respect to any of the property, assets or
rights of the Company, now owned or hereafter acquired, except:
(i) Liens
for
taxes, assessments or governmental charges or levies on property of the Company
if the same shall not at the time be delinquent or thereafter can be paid
without interest or penalty or which are being contested in good faith and
by
appropriate proceedings which serve as a matter of law to stay the enforcement
thereof and as to which adequate reserves have been made and are
maintained;
(ii) Liens
imposed by law, such as carriers', warehousemen's and mechanics' liens and
other
similar Liens arising in the ordinary course of business for sums not yet due
or
which are being contested in good faith and by appropriate proceedings which
serve as a matter of law to stay the enforcement thereof and as to which
adequate reserves have been made and are maintained;
(iii)
pledges
or deposits under workmen's compensation laws, unemployment insurance, social
security, retirement benefits or similar legislation; and
(iv) Liens
created pursuant to the Loan Documents.
“Loan
Documents”
shall
mean this Agreement and all other agreements and documents contemplated hereby,
including, without limitation, the Notes, the Warrants, the Security Agreement,
and the UCC-1 Financing Statements executed and filed in connection
therewith.
“Obligations”
means
and includes all principal, interest, costs and expenses and other amounts
the
Company owes any Purchaser now or later under the Loan Documents, and including
without limitation, interest accruing on the Notes after any bankruptcy,
insolvency or similar proceeding or action begins.
“Person”
means
any individual, sole proprietorship, partnership, limited liability company,
joint venture, company, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, firm, joint stock company,
estate, entity or government agency.
Accounting
terms not defined in this Agreement shall be construed in accordance with
GAAP.
12
11.
Miscellaneous
(a) Binding
Agreement. The
terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties. Nothing in this
Agreement, expressed or implied, is intended to confer upon any third party
any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
(b) Governing
Law. This
Agreement shall be governed by and construed under the laws of the State of
Delaware as applied to agreements among Delaware residents, made and to be
performed entirely within the State of Delaware, without giving effect to
conflicts of laws principles.
(c) Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
(d) Titles
and Subtitles. The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
(e) Notices.
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified,
(b)
when sent by confirmed telex, electronic mail or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, (c)
five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company at
Driftwood Ventures, Inc., 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000, Xxx Xxxxxxx,
XX
00000, and to Purchasers at the address(es) set forth on the Schedule of
Purchasers attached hereto or at such other address(es) as the Company or
Purchaser may designate by ten (10) days advance written notice to the other
parties hereto.
(f) Modification;
Waiver. No
modification or waiver of any provision of this Agreement or consent to
departure therefrom shall be effective unless in writing and approved by the
Company and the Majority Purchasers.
(g) Delays
or Omissions. It
is
agreed that no delay or omission to exercise any right, power or remedy accruing
to each Purchaser, upon any breach or default of the Company under this
Agreement or any Note shall impair any such right, power or remedy, nor shall
it
be construed to be a waiver of any such breach or default, or any acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any
other
breach or default theretofore or thereafter occurring. It is further agreed
that
any waiver, permit, consent or approval of any kind or character by Purchaser
of
any breach or default under this Agreement, or any waiver by any Purchaser
of
any provisions or conditions of this Agreement must be in writing and shall
be
effective only to the extent specifically set forth in writing and that all
remedies, either under this Agreement, or by law or otherwise afforded to the
Purchaser, shall be cumulative and not alternative.
13
(h) Entire
Agreement. This
Agreement and the Exhibits and Schedules hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof and no party shall be liable or bound to any other party
in
any manner by any representations, warranties, covenants and agreements except
as specifically set forth herein or therein.
(i) Survival.
All
representations and warranties made by the parties hereto in this Agreement
or
in any other agreement, certificate or instrument provided for or contemplated
hereby, shall survive (i) the execution and delivery hereof, (ii) any
investigations made by or on behalf of the parties and (iii) the Closing, and
shall remain in full force and effect thereafter.
(j) Indemnification.
The
Company hereby agrees to indemnify, exonerate and hold harmless each Purchaser,
its stockholders, officers, directors, employees and agents and its general
and
limited partners and their stockholders, officers, directors, employees and
agents, and their respective successors, predecessors and permitted assigns
(each a “Purchaser
Indemnitee”) from
and
against any and all actions, causes of action, suits, losses, liabilities,
damages and expenses, including, without limitation, reasonable attorneys’ fees
and disbursements (“Damages”), incurred
by any of the Purchaser Indemnitees as a result of or relating to (i) any
transaction entered into by the Company with third parties which are financed
or
to be financed in whole or in part, directly or indirectly, with proceeds from
the sale of any of the Notes; (ii) the performance by or enforcement against
the
Company of the Loan Documents or any other agreement contemplated hereby or
thereby (including, without limitation, any failure by the Company to comply
with any of its covenants) and (iii) the Company’s breach of any representation,
warranty or covenant of the Company in any of the Loan Documents, or any
agreement, instrument, certificate or document delivered by the Company pursuant
hereto or thereto.
(k) Further
Assurances. From
and
after the date of this Agreement, upon the request of any Purchaser or the
Company, the Company and the Purchasers shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
[Signature
Page Follows]
14
IN
WITNESS WHEREOF,
each
Purchaser and the Company have caused their respective signature page to this
Note Purchase Agreement to be duly executed as of the date first written
above.
|
COMPANY:
|
|
|
By:/s/
Xxxxxxx Xxxxx
Name:
Xxxxxxx
Xxxxx
Title:
Chief
Financial Officer
|
[Additional
Signature Page Follows]
15
IN
WITNESS WHEREOF,
each
Purchaser and the Company have caused their respective signature page to this
Note Purchase Agreement to be duly executed as of the date first written
above.
|
PURCHASERS:
|
|
|
XXXXXX
CAPITAL MASTER FUND, LTD.
By: /s/
Xxx Xxxx
Name:
Xxx Xxxx
Title:
Managing
Director of Xxxxxx Management, LLC, its Manager
|
|
|
BACK
BAY LLC
By: /s/
Xxxxxx Xxxxxxxx
Name:
Xxxxxx Xxxxxxxx
Title:
Chief Financial Officer of Roxbury LLC, its
Manager
|
[Additional
Signature Page Follows]
16
Counterpart
Signature Page
to
By
execution and delivery of this Counterpart Signature Page, the undersigned
does
hereby become a party to that certain Note Purchase Agreement by and among
Driftwood Ventures, Inc., a Delaware corporation (the “Company”), and the
Purchasers (as defined therein) dated as of July 7, 2008 (the “Note Purchase
Agreement”), as a Purchaser, and is entitled to all of the benefits under and is
subject to all of the obligations, restrictions and limitations set forth in
the
Note Purchase Agreement that are applicable to the Purchasers. This Counterpart
Signature Page shall take effect and shall become a part of said Note Purchase
Agreement immediately upon execution.
|
PURCHASER:
CIPHER
06 LLC
|
|
|
By:
/s/
Xxxxx Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
Managing Member
|
[Additional
Signature Page Follows]
17
SCHEDULES
AND EXHIBITS
Schedule
of Purchasers
| Exhibit A: |
Form
of Senior Secured Convertible Promissory
Note
|
| Exhibit B: |
Form
of Warrant
|
| Exhibit C: |
Form
of Security Agreement
|
18
SCHEDULE
OF PURCHASERS
|
Name
and Address
|
Total
Loan Amount
|
Warrants
|
|
Xxxxxx
Capital Master Fund, Ltd.
0000
Xxxxxx xx xxx Xxxxx
Xxxxx
0000
Xxx
Xxxxxxx, XX 00000
|
$2,500,000
|
2,272,727
|
|
Back
Bay LLC
c/o
Roxbury LLC
0000
Xxxxxxx Xxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxxxx
Xxxxx, XX 00000
|
$2,000,000
|
1,818,182
|
|
Cipher
06 LLC
000
Xxxxxxx Xxx - Xxxxx Xxxxx
Xxx
Xxxx, XX 00000
|
$150,000
|
136,364
|
|
TOTAL
|
$________
|
__________
|
19
