PREFERRED STOCK PURCHASE AGREEMENT (SERIES A) BETWEEN QSGI INC., a Delaware Corporation AND GUERRILLA PARTNERS LP DATED December 20, 2005 SERIES A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN QSGI INC. AND PIKE CAPITAL PARTNERS, LP
Exhibit
99.2b
(SERIES
A)
BETWEEN
QSGI
INC., a Delaware Corporation
AND
GUERRILLA
PARTNERS LP
DATED
December
20, 2005
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
PAGE
1 OF 21
(SERIES
A)
This
SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement")
is
made and entered into as of the 20th day of December, 2005 by and among
QSGI
INC., a
corporation organized and existing under the laws of the State of Delaware
(“QSGI”
or
the
“Company”)
and
GUERRILLA PARTNERS LP (hereinafter referred to as “Investor”).
PRELIMINARY
STATEMENT:
WHEREAS,
the
Investor wishes to purchase Series A Preferred Stock of the Company which
is
convertible into Common Stock of the Company in accordance with the terms
and
subject to the conditions of this Agreement; and
WHEREAS,
the
parties intend to memorialize the purchase and sale of such Series A Preferred
Stock;
NOW,
THEREFORE,
in
consideration of the mutual covenants and premises contained herein, and
for
other good and valuable consideration, the receipt and adequacy of which
are
hereby conclusively acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE
I
INCORPORATION
BY REFERENCE, SUPERSEDER AND DEFINITIONS
1.1 Incorporation
by Reference.
The
foregoing recitals and the Exhibits attached hereto and referred to herein
are
hereby acknowledged to be true and accurate and are incorporated herein by
this
reference.
1.2 Superseder.
This
Agreement, and the Registration Rights Agreement are the full and complete
agreement between the parties relating to the Series A. preferred Stock and
shall supersede any other instrument or understanding to the fullest extent
permitted by law. A copy of this Agreement shall be filed at the Company’s
principal office.
1.3 Certain
Definitions.
For
purposes of this Agreement, the following terms shall have the following
meanings (all terms used in this Agreement that are not defined in this Article
1 shall have the meanings set forth elsewhere in this Agreement):
1.3.1 “1933
Act”
means
the Securities Act of 1933, as amended.
1.3.2 “1934
Act”
means
the Securities Exchange Act of 1934, as amended.
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
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21
1.3.3 “Affiliate”
means
that definition as disclosed in the 1933 Act and/or 1934 Act and shall also
mean
a Person or Persons directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with the Person(s) in
question. The term “control,” as used in the immediately preceding sentence,
means, with respect to a Person that is a corporation, the right to the
exercise, directly or indirectly, of more than 50 percent of the voting rights
attributable to the shares of such controlled corporation and, with respect
to a
Person that is not a corporation, the possession, directly or indirectly,
of the
power to direct or cause the direction of the management or policies of such
controlled Person.
1.3.4 “Articles”.
The
Articles of Incorporation of the Company, as the same may be amended from
time
to time.
1.3.5 “Closing
Date”
means
the earlier of December 20, 2005 or the date on which all of the conditions
of
Article VIII and Article IX herein are satisfied, unless extended by mutual
consent by the Company and the Investor.
1.3.6 “Common
Stock”
means
the shares of common stock of QSGI INC., a Delaware Corporation, par value
$0.001 per share.
1.3.7 "Effective
Date"
shall
mean the date the Registration Statement of the Company covering the Common
Stock into which the Series A Preferred Stock may be converted is declared
effective.
1.3.8 "Material
Adverse Effect"
shall
mean any adverse effect on the business, operations, properties or financial
condition of the Company that is material and adverse to the Company and
its
subsidiaries and affiliates, taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its material obligations
under
this Agreement or the Registration Rights Agreement or to perform its
obligations under any other material agreement.
1.3.9 “Person”
means an
individual, partnership, firm, limited liability company, trust, joint venture,
association, corporation, or any other legal entity.
1.3.10 “Purchase
Price”
means
the purchase price for the Series A Preferred Stock.
1.3.11 “Registration
Rights Agreement"
shall
mean the registration rights agreement between the Investor and the Company
attached hereto as Exhibit
A.
1.3.12 "Registration
Statement"
shall
mean the registration statement under the 1933 Act to be filed with the
Securities and Exchange Commission for the registration of the Shares pursuant
to the Registration Rights Agreement attached hereto as Exhibit
A.
1.3.13 “SEC”
means
the Securities and Exchange Commission.
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
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21
1.3.14 "SEC
Documents"
shall
mean the Company's latest Form 10-K or 10-KSB as of the time in question,
all
Forms 10-Q or 10-QSB and 8-K filed thereafter, and the Proxy Statement for
its
latest fiscal year as of the time in question until such time as the Company
no
longer has an obligation to maintain the effectiveness of a Registration
Statement as set forth in the Registration Rights Agreement.
1.3.15 "Series
A Preferred Stock"
shall
mean the shares of Series A Preferred Stock of the Company being subscribed
for
hereunder.
ARTICLE
II
SALE
AND PURCHASE OF PREFERRED STOCK
AND
PURCHASE PRICE
2.1 Sale
of Series A Preferred Stock. Upon
the
terms and subject to the conditions set forth herein, and in accordance with
applicable law, the Company agrees to sell, and the Investor agrees to purchase,
ten thousand (10,000) shares of the Series A Preferred Stock of the Company
for
the sum of Two Hundred and Forty Thousand Dollars ($240,000.00).
2.2 Limitation
and Preference.
The
Series A Preferred Stock shall be non-voting stock. Series A Preferred Stock
shall be entitled to preference over all common stock of the Company in the
event of liquidation or dissolution of the Company. The Company shall not
enter
into any agreement pertaining to unsecured financing for the Company without
the
prior written consent of Investor if such financing would be superior in
right
or interest to the Series A Preferred Stock. Investor shall not withhold
consent
to such financing unreasonably.
2.3 Dividends.
Each
share of the Series A Preferred Stock shall pay an annual dividend of 6%
(6% of
$30.00 per share or $1.80 per share). Dividends shall be paid quarterly.
The
first dividend (including a pro-rated amount through December 31, 2005) shall
be
paid by the Company to Investor on March 31, 2006 and all dividends thereafter
shall be paid on the last day of every quarter during which any of the Series
A
Preferred Stock is outstanding. In the Company’s sole discretion, dividends may
be paid either in cash or in shares of the Company’s Series A Preferred Stock.
2.4 Voluntary
Conversion.
Investor may at any time convert all or part of its holdings of the Series
A
Preferred Stock into shares of the Company’s Common Stock. Each share of Series
A Preferred Stock shall be convertible into 13.33333 shares of the Company’s
Common Stock.
2.5 Mandatory
Conversion.
In the
event that the closing price for the Company’s Common Stock remains at $2.75 per
share or higher for a period of twenty (20) consecutive business days at
any
time after the date of this Agreement (a business day is any day not a Saturday,
Sunday or Federal Holiday), Investor must, upon receipt of written demand
from
the Company, immediately convert its Series A Preferred Stock into the Company’s
Common Stock. The Company, in its sole discretion, may demand that Investor
convert all or an amount less than all of Investor’s Series A Preferred Stock
and the Company may make multiple demands for partial conversion from time
to
time (notwithstanding a reduction in the Company’s Common Stock price below
$2.75 per share) until all of Investor’s Series A Preferred Stock has been
converted. Each share of Series A Preferred Stock shall be converted into
13.33333 of the Company’s Common Stock.
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
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2.6 Redemption.
After
December 10, 2007, the Company may, at its sole discretion, redeem all or
part
of the Series A Preferred Stock for cash as follows: (a) After December 10,
2007
and before December 11, 2008 each share of Series A Preferred Stock may be
redeemed for a payment by Company to Investor of $30.60 in cash; (b) After
December 10, 2008 and before December 11, 2009 each share of Series A Preferred
Stock may be redeemed for a payment by Company to Investor of $30.30 in cash;
and (c) After December 10, 2009 each share of Series A Preferred Stock may
be
redeemed for a payment by Company to Investor of $30.00 in cash.
2.7 Investor
Option.
After
December 10, 2010, Investor may, by written notice to the Company, require
the
Company to repurchase all shares of the Series A Preferred Stock then held
by
the Investor for the sum of $30.00 per share.
2.8
Purchase
Price
The
purchase price to be paid by Investor on the Closing Date shall be $240,000.00
for ten thousand (10,000) shares of Series A Preferred Stock. The purchase
price
shall be payable in United States Dollars. Payment to the Company of the
Purchase Price shall be made on the Closing Date by wire transfer of funds
to
the account specified by the Company and provided to the
Investor.
2.9
Lock-Up
of Common Stock.
Investor agrees that for one year from the date of this Agreement, or until
the
closing market price for the Common Stock attains or exceeds $4.00 for
twenty
(20) consecutive business days, whichever first occurs, Investor will not
sell,
transfer or otherwise dispose of any of the Company’s Common Stock currently
owned, held or controlled by Investor and will not sell, transfer or otherwise
dispose of any of the Company’s Commons Stock subsequently
acquired.
ARTICLE
III
CLOSING
DATE AND DELIVERIES AT CLOSING
3.1
Closing
Date The
closing of the transactions contemplated by this Agreement (the “Closing”),
unless expressly determined herein, shall be held at the offices of the Company
in Palm Beach, Florida at 10:00 a.m. local time, on the Closing Date or on
such
other date and at such other place as may be mutually agreed by the parties.
Document signatures may be transmitted by facsimile with originals to follow.
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
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3.2 Deliveries
by the Company.
In
addition to and without limiting any other provision of this Agreement, the
Company agrees to deliver, or cause to be delivered, to the Investor, the
following:
|
(a)
|
Within
thirty (30) business days of the closing, Certificate(s) representing
ten
thousand (10,000) shares of Series A Preferred Stock, which certificates
shall be duly endorsed to the Investor;
|
|
(b)
|
At
or prior to Closing, an executed
Agreement;
|
|
(c)
|
At
or prior to Closing, an executed Registration Rights Agreement
between the
Investor and the Company in the form attached hereto as Exhibit
A;
|
|
(d)
|
At
or prior to Closing, confirmation that the provisions of Article
III
herein have been satisfied; and
|
|
(e)
|
Such
other documents or certificates as shall be reasonably requested
by the
Investor or its counsel.
|
3.3 Deliveries
by Investor
In
addition to and without limiting any other provision of this Agreement, Investor
agrees to deliver, or cause to be delivered, to the Company, as appropriate,
the
following:
|
(a)
|
At
or prior to Closing, the Purchase
Price;
|
|
(b)
|
At
or prior to Closing, an executed
Agreement;
|
|
(c)
|
At
or prior to Closing, an executed Registration Rights Agreement
between
Investor and the Company in the form attached hereto as Exhibit
A;
and
|
|
(d)
|
Such
other documents or certificates as shall be reasonably requested
by the
Company or its counsel.
|
In
the
event any document provided to the other party in Paragraphs 3.2 and 3.3
herein
are provided by facsimile, the party shall forward an original document to
the
other party within seven (7) business days of Closing.
3.4 Further
Assurances.
The
Company and Investor shall, upon request, on or after the Closing Date,
cooperate with each other by furnishing any additional information, executing
and delivering any additional documents and/or other instruments and doing
any
and all such things as may be reasonably required to consummate or otherwise
implement the transactions contemplated by this Agreement
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
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The
Company represents and warrants to the Investor (which warranties and
representations shall survive the Closing regardless of examinations,
inspections, audits and other investigations the Investor has heretofore
made or
may hereinafter make with respect to such warranties and representations)
as
follows:
4.1 Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted and is duly qualified to do business
in
any other jurisdiction by virtue of the nature of the businesses conducted
by it
or the ownership or leasing of its properties, except where the failure to
be so
qualified will not, when taken together with all other such failures, have
a
Material Adverse Effect on the business, operations, properties, assets,
financial condition or results of operation of the Company and its subsidiaries
taken as a whole.
4.2 Articles
of Incorporation and By-Laws.
Complete and correct copies of the Company’s Articles of Incorporation and
By-Laws, as amended or restated to date have been filed with the Securities
and
Exchange Commission as of the Closing Date.
4.3 Capitalization.
4.3.1
The
authorized and outstanding capital stock of the Company is set forth in the
Company’s Annual Report on Form 10-KSB and Form 10-KSBA filed with the
Securities and Exchange Commission and is updated on subsequent SEC Documents.
All shares of capital stock have been duly authorized and are validly issued,
and are fully paid and non-assessable, and free of preemptive
rights.
4.3.2
Except pursuant to this Agreement, and as set forth in the Company’s Annual
Report on Form 10-KSB and Form 10-KSBA filed with the SEC, as of the date
hereof
and as of the Closing Date, there are no outstanding options, warrants, rights
to subscribe for, calls or commitments of any character whatsoever relating
to,
or securities or rights convertible into or exchangeable for, shares of any
class of capital stock of the Company, or agreements, understandings or
arrangements to which the Company is a party, or by which the Company is
or may
be bound, to issue additional shares of its capital stock or options, warrants,
scrip or rights to subscribe for, calls or commitment of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, any shares of any class of its capital stock except for options granted
to
directors and certain employees of the Company and agreements with third
parties
to issue Common Stock for services which have been or will be disclosed to
Investor.
4.3.3
The
Company on the Closing Date (i) will have full right, power, and authority
to
sell, assign, transfer, and deliver, by reason of record and beneficial
ownership, to Investor, the Series A Preferred Stock free and clear of all
liens, charges, claims, options, pledges, restrictions, and encumbrances
whatsoever; and (ii) upon delivery of and payment by Investor of the Purchase
Price to the Company, such Investor will acquire good and marketable title
to
the Series A Preferred Stock, free and clear of all liens, charges, claims,
options, pledges, restrictions, and encumbrances whatsoever.
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
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4.4 Authority.
The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation of the transactions contemplated hereby
have
been duly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby except as disclosed
in
this Agreement. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as may
be
limited by bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally and general
principles of equity.
4.5 No
Conflict; Required Filings and Consents. The
execution and delivery of this Agreement by the Company does not, and the
performance by the Company of the obligations hereunder will not: (i) conflict
with or violate the Articles or By-Laws of the Company; (ii) conflict with,
breach or violate any federal, state, foreign or local law, statute, ordinance,
rule, regulation, order, judgment or decree (collectively, "Laws")
in
effect as of the date of this Agreement and applicable to the Company; or
(iii)
result in any breach of, constitute a default (or an event that with notice
or
lapse of time or both would become a default) under, give to any other entity
any right of termination, amendment, acceleration or cancellation of, require
payment under, or result in the creation of a lien or encumbrance on any
of the
properties or assets of the Company pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party. Excluding from
the
foregoing are such violations, conflicts, breaches, defaults, terminations,
accelerations, creations of liens, or incumbency that would not, in the
aggregate, have a Material Adverse Effect.
4.6 Report
and Financial Statements.
The
Company’s Annual Report on Form 10-KSB and 10-KSBA filed with the Securities and
Exchange Commission contains the audited financial statements of the Company
as
of December 31, 2004 (the “Financial
Statements”).
Each
of the balance sheets contained in or incorporated by reference into any
such
Financial Statements (including the related notes and schedules thereto)
fairly
presented the financial position of the Company as of its date, and each
of the
statements of income and changes in stockholders’ equity and cash flows or
equivalent statements in such Financial Statements (including any related
notes
and schedules thereto) fairly presents and will fairly present the results
of
operations, changes in stockholders’ equity and changes in cash flows, as the
case may be, of the Company for the periods to which they relate, in each
case
in accordance with United States generally accepted accounting principles
(“U.S.
GAAP”)
consistently applied during the periods involved, except in each case as
may be
noted therein, subject to normal year-end audit adjustments in the case of
unaudited statements. The books and records of the Company have been, and
are
being, maintained in all material respects in accordance with U.S. GAAP and
any
other applicable legal and accounting requirements and reflect only actual
transaction.
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
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4.7 Compliance
with Applicable Laws.
The
Company is not in knowing violation of any Law or regulation of any governmental
agency which would have a Material Adverse Effect.
4.8 Brokers.
No
broker, finder or investment banker is entitled to any brokerage, finder's
or
other fee or commission in connection with the transactions contemplated
by this
Agreement based upon arrangements made by or on behalf of the
Company.
4.9 SEC
Documents.
Investor acknowledges that the Company is a publicly held company and has
made
available to the Investor true and complete copies of any requested SEC
Documents. The Company has registered its Common Stock pursuant to Section
12 of
the 1934 Act, and the Common Stock is listed and traded on the Pacific Exchange.
The Company has received no notice, either oral or written, with respect
to the
continued eligibility of the Common Stock for such listing, and the Company
has
maintained all requirements for the continuation of such listing. The Company
has not provided to the Investor any information that, according to applicable
law, rule or regulation, should have been disclosed publicly prior to the
date
hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the 1934 Act and rules and regulations of the SEC promulgated
thereunder and the SEC Documents did not contain any untrue statement of
a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4.10 Litigation.
No
litigation, claim, or other proceeding before any court or governmental agency
is currently pending or threatened against the Company which would have a
Material Adverse Impact on the Company.
4.11 Exemption
from Registration.
Subject
to the accuracy of the Investor’s representations in Article V, except as
required pursuant to the Registration Rights Agreement, the sale of the Series
A
Preferred Stock will not require registration under the 1933 Act and/or any
applicable state securities law. When validly converted in accordance with
the
terms of this Agreement, the Common Stock into which the Series A Preferred
Stock may be converted will be duly and validly issued, fully paid, and
non-assessable. The Company is issuing the Series A Preferred Stock in
accordance with and in reliance upon the exemption from securities registration
afforded, inter alia, by Rule 506 under Regulation D as promulgated by the
SEC
under the 1933, and/or Section 4(2) of the 1933 Act.
4.12 No
General Solicitation or Advertising in Regard to this
Transaction.
Neither
the Company nor any of its Affiliates nor, to the knowledge of the Company,
any
Person acting on its or their behalf (i) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation D
as
promulgated by the SEC under the 0000 Xxx) or general advertising with respect
to the sale of the Series A Preferred Stock, or (ii) made any offers or sales
of
any security or solicited any offers to buy any security under any circumstances
that would require registration under the 1933 Act, except as required
herein.
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
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4.13 No
Material Adverse Change.
Since
December 31, 2004, no Material Adverse Change has occurred or exists with
respect to the Company that has not been disclosed in the SEC Documents.
No
material supplier has given notice, oral or written, that it intends to cease
or
reduce the volume of its business with the Company from historical levels.
Since
December 31, 2004, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, prospects, operations or financial
condition, that, under any applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which
has
not been so publicly announced.
4.14 Internal
Controls And Procedures.
The
Company maintains books and records and internal accounting controls which
provide reasonable assurance that (i) all transactions to which the Company
or
any subsidiary is a party or by which its properties are bound are executed
with
management's authorization; (ii) the recorded accounting of the Company's
consolidated assets is compared with existing assets at regular intervals;
(iii)
access to the Company's consolidated assets is permitted only in accordance
with
management's authorization; and (iv) all transactions to which the Company
or
any subsidiary is a party or by which its properties are bound are recorded
as
necessary to permit preparation of the financial statements of the Company
in
accordance with U.S. generally accepted accounting principles.
4.15 Full
Disclosure.
No
representation or warranty made by the Company in this Agreement and no
certificate or document furnished or to be furnished to the Investor pursuant
to
this Agreement contains or will contain any untrue statement of a material
fact,
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR
The
Investor represents and warrants to the Company that:
5.1 Organization
and Standing of the Investor.
The
Investor is duly organized, validly existing and in good standing under the
laws
of the state in which it was formed. The state in which any offer to purchase
shares hereunder was made or accepted by such Investor is the state shown
as
such Investor’s address. The Investor was not formed for the purpose of
investing solely in the Series A Preferred Stock.
5.2 Authorization
and Power.
The
Investor has the requisite power and authority to enter into and perform
this
Agreement and to purchase the Series A Preferred Stock being sold to it
hereunder. The execution, delivery and performance of this Agreement by the
Investor and the consummation by the Investor of the transactions contemplated
hereby have been duly authorized by all necessary action where appropriate.
This
Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Investor and at the Closing shall constitute valid and binding
obligations of the Investor enforceable against the Investor in accordance
with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
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5.3 No
Conflicts.
The
execution, delivery and performance of this Agreement and the consummation
by
the Investor of the transactions contemplated hereby or relating hereto do
not
and will not (i) result in a violation of the Investor's charter documents
or
bylaws where appropriate or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default)
under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which the Investor
is
a party, or result in a violation of any law, rule, or regulation, or any
order,
judgment or decree of any court or governmental agency applicable to the
Investor or its properties (except for such conflicts, defaults and violations
as would not, individually or in the aggregate, have a Material Adverse Effect
on such Investor). The Investor is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of
the
Investor’s obligations under this Agreement or to purchase the Series A
Preferred Stock in accordance with the terms hereof, provided that for purposes
of the representation made in this sentence, the Investor is assuming and
relying upon the accuracy of the relevant representations and agreements
of the
Company herein.
5.4 Financial
Risks.
The
Investor acknowledges that the Investor is able to bear the financial risks
associated with an investment in the Series A Preferred Stock and that it
has
been given full access to such records of the Company and the subsidiaries
and
to the officers of the Company and subsidiaries as it has deemed necessary
or
appropriate to conduct its due diligence investigation. The Investor is capable
of evaluating the risks and merits of an investment in the Series A Preferred
Stock by virtue of its experience as an investor and its knowledge, experience,
and sophistication in financial and business matters and the Investor is
capable
of bearing the entire loss of its investment in the Series A Preferred
Stock.
5.5 Accredited
Investor.
The
Investor is (i) an “accredited investor” as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act by reason of Rule 501(a)(3) and
(6),
(ii) experienced in making investments of the kind described in this Agreement
and the related documents, (iii) able, by reason of the business and financial
experience of its officers (if an entity) and professional advisors (who
are not
affiliated with or compensated in any way by the Company or any of its
affiliates or selling agents), to protect its own interests in connection
with
the transactions described in this Agreement, and the related documents,
and
(iv) able to afford the entire loss of its investment in the Series A Preferred
Stock.
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INC. AND PIKE CAPITAL PARTNERS, LP
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5.6 Brokers.
No
broker, finder or investment banker is entitled to any brokerage, finder's
or
other fee or Commission in connection with the transactions contemplated
by this
Agreement based upon arrangements made by or on behalf of the
Investor.
5.7 Knowledge
of Company.
Investor
and Investor’s advisor(s-), if any, have been, upon request, furnished with all
materials relating to the business, finances and operations of the Company
and
materials relating to the offer and sale of the Series A Preferred Stock.
The
Investor and the Investor’s advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received complete and satisfactory
answers to any such inquiries.
5.8 Risk
Factors
Investor
understands that the Investor’s investment in the Series A Preferred Stock
involves a high degree of risk. The Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Series A Preferred
Stock. The Investor warrants that the Investor is able to bear the complete
loss
of its investment in the Series A Preferred Stock.
5.9 Full
Disclosure. No
representation or warranty made by the Investor in this Agreement and no
certificate or document furnished or to be furnished to the Company pursuant
to
this Agreement contains or will contain any untrue statement of a material
fact,
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading. Except as set forth or referred
to
in this Agreement, Investor does not have any
agreement
or understanding with any other person relating to acquiring,
holding,
voting
or
disposing of any equity securities of the Company.
ARTICLE
VI
COVENANTS
OF THE COMPANY
6.1
Registration
Rights.
The
Company shall cause the Registration Rights Agreement to remain in full force
and effect and the Company shall comply in all material respects with the
terms
thereof.
6.2
Reservation
Of Common Stock.
As of
the date hereof, the Company has reserved and the Company shall continue
to
reserve and keep available at all times, free of preemptive rights, shares
of
Common Stock for the purpose of enabling the Company to issue the shares
of
Common Stock into which the Series A Preferred Stock may be converted.
6.3
Listing
Of Common Stock.
The
Company hereby agrees to maintain the listing of its Common Stock on a publicly
trading market. The Company will take all action to continue the listing
and
trading of its Common Stock on a publicly traded market and will comply in
all
respects with the Company's reporting, filing and other obligations under
the
bylaws or rules of the a publicly traded market.
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INC. AND PIKE CAPITAL PARTNERS, LP
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6.4 Exchange
Act Registration.
The
Company will cause its Common Stock to continue to be registered under Section
12(b) or (g) of the 1934 Act, will use its best efforts to comply in all
respects with its reporting and filing obligations under the 1934 Act, and
will
not take any action or file any document (whether or not permitted by the
1934
Act or the rules thereunder) to terminate or suspend such registration or
to
terminate or suspend its reporting and filing obligations under the 1934
until
the Investor has disposed of all of its Series A Preferred Stock or the shares
of Common Stock into which the Series A Preferred Stock may be
converted.
6.5 Corporate
Existence; Conflicting Agreements.
The
Company will take all steps necessary to preserve and continue the corporate
existence of the Company. The Company shall not enter into any agreement,
the
terms of which agreement would restrict or impair the right or ability of
the
Company to perform any of its obligations under this Agreement or any of
the
other agreements attached as exhibits hereto.
ARTICLE
VII
COVENANTS
OF THE INVESTOR
7.1 Compliance
with Law.
The
Investor's trading activities with respect to shares of the Company's Series
A
Preferred Stock and Common Stock will be in compliance with all applicable
state
and federal securities laws, rules and regulations and rules and regulations
of
any public market on which the Company's Common Stock is listed.
7.2 Transfer
Restrictions.
The
Investor acknowledges that (1) the Series A Preferred Stock and Common Stock
into which the Series A Preferred Stock may be converted have not been
registered under the provisions of the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Investor shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in
form,
scope and substance to the Company, to the effect that the Series A Preferred
Stock or Commons Stock to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; and (2) any sale of the
Series
A Preferred Stock or Common Stock made in reliance on Rule 144 promulgated
under
the 1933 Act may be made only in accordance with the terms of said Rule and
further, if said Rule is not applicable, any resale 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 used in the 1933 Act,
may
require compliance with some other exemption under the 1933 Act or the rules
and
regulations of the SEC thereunder.
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INC. AND PIKE CAPITAL PARTNERS, LP
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7.3 Restrictive
Legend.
The
Investor acknowledges and agrees that certificates representing the Series
A
Preferred Stock and Common Stock into which the Series A Preferred Stock
may be
converted, until such time as the Common Stock has been registered under
the
1933 Act and sold in accordance with an effective Registration Statement,
shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of any such
Securities):
"THE
SHARES OF COMMON STOCK (SERIES A PREFERRED STOCK) REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER
SUCH
SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO
IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS,
OR (2) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, OR (3) PURSUANT
TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT."
7.4 Patriot
Act. The
Company and Investor certify that they have not been designated,
and are not owned or controlled, by a “suspected terrorist” as defined in
Executive Order 13224. The parties seek to comply with all applicable laws
concerning money laundering and related activities. In furtherance of those
efforts, the parties hereby represent, warrant and agree that: (i) none of
the
cash or property that Investor will use to purchase the Series A Preferred
Stock
or has been or shall be derived from, or related to, any activity that is
deemed
criminal under United States law; (ii) no disbursement by the Investor to
the
Company, to the extent within the Investor’s control, shall cause any party to
be in violation of the United States Bank Secrecy Act, the United States
International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act
of
2001; (iii) Investor has complied with the United States Bank Secrecy Act,
the
United States International Money Laundering Control Act of 1986 and/or the
United States International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001 and Investor’s business is not derived from, or related
to, any activity that is deemed criminal under United States law. Investor
shall
promptly notify the Company if any of these representations ceases to be
true
and accurate regarding the Investor. The Investor agrees to provide the Company
any additional information regarding the Investor that the Company deems
necessary or convenient to ensure compliance with all applicable laws concerning
money laundering and similar activities. The parties understand and agree
that
if at any time it is discovered that any of the foregoing representations
are
incorrect, or if otherwise required by applicable law or regulation related
to
money laundering similar activities, the parties may undertake appropriate
actions to ensure compliance with applicable law or regulation. The Parties
understand that either may release information about the other and, if
applicable, any underlying beneficial owners, to proper authorities, in their
sole discretion, if they determine that it is in their best interests in
light
of relevant rules and regulations under the laws set forth in this
section.
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INC. AND PIKE CAPITAL PARTNERS, LP
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ARTICLE
VIII
CONDITIONS
PRECEDENT TO THE COMPANY’S OBLIGATIONS
The
obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:
8.1 No
Termination.
This
Agreement shall not have been terminated pursuant to Article X
hereof.
8.2 Representations
True and Correct.
The
representations and warranties of the Investor contained in this Agreement
shall
be true and correct in all material respects on and as of the Closing Date
with
the same force and effect as if made on as of the Closing Date.
8.3 Compliance
with Covenants.
The
Investor shall have performed and complied in all material respects with
all
covenants, agreements, and conditions required by this Agreement to be performed
or complied by it prior to or at the Closing Date.
8.4 No
Adverse Proceedings. On
the
Closing Date, no action or proceeding shall be pending by any public authority
or individual or entity before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
ARTICLE
IX
CONDITIONS
PRECEDENT TO INVESTOR’S OBLIGATIONS
The
obligation of the Investor to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:
9.1 No
Termination.
This
Agreement shall not have been terminated pursuant to Article X
hereof.
9.2 Representations
True and Correct.
The
representations and warranties of the Company contained in this Agreement
shall
be true and correct in all material respects on and as of the Closing Date
with
the same force and effect as if made on as of the Closing
Date.
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INC. AND PIKE CAPITAL PARTNERS, LP
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9.3 Compliance
with Covenants .
The
Company shall have performed and complied in all material respects with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied by it prior to or at the Closing Date.
9.4 No
Adverse Proceedings. On
the
Closing Date, no action or proceeding shall be pending by any public authority
or individual or entity before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
ARTICLE
X
TERMINATION,
AMENDMENT AND WAIVER
10.1 Termination.
This
Agreement may be terminated at any time prior to the Effective
Time:
10.1.1 by
mutual
written consent of the Investor and the Company;
10.1.2 by
the
Company upon a material breach of any representation, warranty, covenant
or
agreement on the part of the Investor set forth in this Agreement, or by
the
Investor upon a material breach of any representation, warranty, covenant
or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company or the Investor, respectively,
shall
have become untrue, in either case such that any of the conditions set forth
in
Article VIII or Article IX hereof would not be satisfied (a "Terminating
Breach"),
and
such breach shall, if capable of cure, not have been cured within five (5)
days
after receipt by the party in breach of a notice from the non-breaching party
setting forth in detail the nature of such breach;
10.1.3 by
either
party prior to closing, if the Closing Date is after December 31, 2005.
10.2 Effect
of Termination.
In the
event of the termination of this Agreement pursuant to Paragraph 10.1 hereof,
there shall be no liability on the party of the Company or the Investor or
any
of their respective officers, directors, agents or other representatives
and all
rights and obligations of any party hereto shall cease,.
10.3 Amendment.
This
Agreement may be amended by the parties hereto in writing any time prior
to the
Closing Date by an instrument in writing signed by the parties
hereto.
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INC. AND PIKE CAPITAL PARTNERS, LP
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ARTICLE
XI
GENERAL
PROVISIONS
11.1 Transaction
Costs.
Except
as otherwise provided herein, each of the parties shall pay all of his or
its
costs and expenses (including attorney fees and other legal costs and expenses
and accountants’ fees and other accounting costs and expenses) incurred by that
party in connection with this Agreement.
11.2 Indemnification.
Investor agrees to defend and hold the Company (following the Closing Date)
and
its officers and directors harmless against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities or damages,
including interest, penalties and reasonable attorney’s fees, that it shall
incur or suffer, which arise out of, result from or relate to any breach
of this
Agreement by such Investor or failure by such Investor to perform with respect
to any of its representations, warranties or covenants contained in this
Agreement or in any exhibit or other instrument furnished or to be furnished
under this Agreement. The Company agrees to defend and hold the Investor
harmless against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities or damages, including interest, penalties
and
reasonable attorney’s fees, that it shall incur or suffer, which arise out of,
result from or relate to any breach of this Agreement or failure by the Company
to perform with respect to any of its representations, warranties or covenants
contained in this Agreement or in any exhibit or other instrument furnished
or
to be furnished under this Agreement.
11.3 Headings.
The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
11.4 Entire
Agreement.
This
Agreement (together with the Exhibit and documents referred to herein)
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties,
or any
of them, with respect to the subject matter hereof.
11.5 Notices.
All
notices and other communications hereunder shall be in writing and shall
be
deemed to have been given (i) on the date they are delivered if delivered
in
person; (ii) on the date initially received if delivered by facsimile
transmission followed by registered or certified mail confirmation or overnight
courier service; (iii) on the date delivered by an overnight courier service;
or
(iv) on the third business day after it is mailed by registered or certified
mail, return receipt requested with postage and other fees prepaid as
follows:
|
If
to the Company:
|
QSGI
INC.
|
|
|
00
Xxxx Xxxxx
|
||
|
Xxxxxxxxxx,
XX 00000
|
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|
With
a copy to:
|
Burger,
Xxxxxx & Xxxxx, X.X.
|
|
|
0000
Xxxxx Xxxxx, Xxxxx 000
|
||
|
Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
|
||
|
Telephone
Number: (000) 000-0000
|
||
|
Facsimile
Number: (000) 000-0000
|
||
|
If
to the Investor:
|
||
|
With
a copy to:
|
||
11.6 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions
and
provisions of this Agreement shall nevertheless remain in full force and
effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any such term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to
modify this Agreement so as to effect the original intent of the parties
as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
11.7 Binding
Effect.
All the
terms and provisions of this Agreement whether so expressed or not, shall
be
binding upon, inure to the benefit of, and be enforceable by the parties
and
their respective administrators, executors, legal representatives, heirs,
successors and assignees.
11.8 Preparation
of Agreement.
This
Agreement shall not be construed against any party regardless of who was
responsible for its preparation. The parties acknowledge each contributed
and is
equally responsible for its preparation.
11.9 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Florida, without giving effect to applicable principles of
conflicts of law.
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11.10 Jurisdiction.
This
Agreement shall be exclusively governed by and construed in accordance with
the
laws of the State of Florida. If any action is brought among the parties
with
respect to this Agreement or otherwise, by way of a claim or counterclaim,
the
parties agree that in any such action, and on all issues, the parties
irrevocably waive their right to a trial by jury. Exclusive jurisdiction
and
venue for any such action shall be the State Courts of Florida. In the event
suit or action is brought by any party under this Agreement to enforce any
of
its terms, or in any appeal therefrom, it is agreed that the prevailing party
shall be entitled to reasonable attorneys fees to be fixed by the arbitrator,
trial court, and/or appellate court.
11.11
Preparation
and Filing of Securities and Exchange Commission
filings.
Investor
shall reasonably assist and cooperate with the Company in the preparation
of all
filings with the SEC after the Closing Date.
11.12 Further
Assurances, Cooperation.
Each
party shall, upon reasonable request by the other party, execute and deliver
any
additional documents necessary or desirable to complete the transactions
herein
pursuant to and in the manner contemplated by this Agreement. The parties
hereto
agree to cooperate and use their respective best efforts to consummate the
transactions contemplated by this Agreement.
11.13 Survival.
The
representations, warranties, covenants and agreements made herein shall survive
the Closing of the transaction contemplated hereby.
11.14 Third
Parties
Except
as disclosed in this Agreement, nothing in this Agreement, whether express
or
implied, is intended to confer any rights or remedies under or by reason
of this
Agreement on any persons other than the parties hereto and their respective
administrators, executors, legal representatives, heirs, successors and
assignees. Nothing in this Agreement is intended to relieve or discharge
the
obligation or liability of any third persons to any party to this Agreement,
nor
shall any provision give any third persons any right of subrogation or action
over or against any party to this Agreement.
11.15 Failure
or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and
remedies existing under this Agreement are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
11.16 Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Agreement
shall
be legal and binding on all parties hereto.
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A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
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INC. AND PIKE CAPITAL PARTNERS, LP
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IN
WITNESS WHEREOF,
the
Investor and the Company have as of the date first written above executed
this
Agreement.
|
QSGI
INC.
By:
____________________________
Title:___________________________
|
INVESTOR
GUERRILLA
PARTNERS LP
By:_____________________________
Title:___________________________
|
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Exhibit
A
Registration
Rights Agreement
SERIES
A PREFERRED STOCK PURCHASE AGREEMENT BETWEEN
QSGI
INC. AND PIKE CAPITAL PARTNERS, LP
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