PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 22nd day of
November, 2004 by and among Airtrax, Inc., a New Jersey corporation (the
"Company"), and the Investors set forth on the signature pages affixed hereto
(each an "Investor" and collectively the "Investors").
Recitals
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended, and/or Regulation S promulgated under the Securities Act of 1933, as
amended ("Regulation S"); and
B. The Investors wish to purchase from the Company, and the Company wishes
to sell and issue to such Investors, on the First Closing Date (as defined in
Section 3 below), upon the terms and conditions stated in this Agreement, (i) up
to an aggregate of 1,125,000 shares of the Company's Common Stock, no par value
(together with any securities into which such shares may be reclassified the
"Common Stock"), and (ii) warrants to purchase an aggregate of 562,500 shares of
Common Stock in the form attached hereto as Exhibit A (the "Initial Warrants",
and together with the shares of Common Stock being sold to the Investors on the
First Closing Date, the "Initial Securities"), for an aggregate purchase price
of $900,000 (the "Initial Purchase Price"). The Investors purchasing the Initial
Securities at the First Closing Date are referred to herein as the "Initial
Investors"; and
C. Upon the satisfaction of the conditions set forth herein, the Remaining
Investors (as defined below) may purchase on one or more Subsequent Closing
Dates (as defined below) up to (i) an aggregate of 516,050 additional shares of
Common Stock and (ii) Warrants, in the form attached hereto as Exhibit A, to
purchase up to an aggregate of 258,025 shares of Common Stock (the "Subsequent
Warrants", and together with the shares of Common Stock sold to the Investors on
the Subsequent Closing Dates, the "Remaining Securities") for an aggregate
purchase price of up to $412,840 (the "Remaining Purchase Price" and,
collectively with the Initial Purchase Price, the "Purchase Price"); and
D. Contemporaneous with the sale of the Initial Securities, the Company and
the Initial Investors will execute and deliver a Registration Rights Agreement,
in the form attached hereto as Exhibit B (the "Registration Rights Agreement"),
pursuant to which the Company will agree to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws.
In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere in
this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly through one or more intermediaries Controls, is
controlled by, or is under common control with, such Person.
"Anti-Dilution Shares" means those additional shares of Common Stock issued
to the Investors pursuant to Section 7.10 hereof.
"Business Day" means a day, other than a Saturday or Sunday, on which banks
in New York City are open for the general transaction of business.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
"Company's Knowledge" means the actual knowledge of the executive officers
(as defined in Rule 405 under the 0000 Xxx) of the Company, after due inquiry.
"Confidential Information" means trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
processes, procedures and techniques, research and development information,
computer program code, performance specifications, support documentation,
drawings, specifications, designs, business and marketing plans, and customer
and supplier lists and related information).
"Control" (including the terms "controlling", "controlled by" or "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Full-Ratchet Period" means the period commencing on the date hereof and
expiring on the one hundred eightieth (180th) day after the effective date of
the registration statement covering the resale of the Shares, the Warrant Shares
and the Anti-Dilution Shares, if any, by the Investors (such period to be tolled
for each day following the effective date that sales cannot be made pursuant to
such registration statement for any reason (including without limitation by
reason of a stop order, or the Company's failure to update the registration
statement), but excluding the inability of any Investor to sell the securities
covered thereby due to market conditions).
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"Intellectual Property" means all of the following: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); (ii) trademarks, service marks, trade
dress, trade names, corporate names, logos, slogans and Internet domain names,
together with all goodwill associated with each of the foregoing; (iii)
copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).
"Material Adverse Effect" means a material adverse effect on (i) the
assets, liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole, or
(ii) the ability of the Company to perform its obligations under the Transaction
Documents.
"Person" means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.
"Per Share Purchase Price" means $.80.
"Required Investors" means the Investors holding a majority of the
outstanding Shares and outstanding Warrants being issued pursuant to this
Agreement.
"Qualified Financing" means a financing consummated after the Closing
pursuant to which the Company may raise up to $5,000,000 through the issuance of
shares of Common Stock and warrants to purchase Common Stock on the same, but no
more favorable, terms and conditions (including pricing) as the sale of the
Shares and the Warrants to the Investors.
"SEC Filings" has the meaning set forth in Section 4.6.
"Registration Statement" has the meaning set forth in the Registration
Rights Agreement.
"Securities" means the Shares, the Anti-Dilution Shares, the Warrants and
the Warrant Shares.
"Shares" means the shares of Common Stock being purchased by the Investors
hereunder on the First Closing Date and any Subsequent Closing Date.
"Transaction Documents" means this Agreement, the Warrants and the
Registration Rights Agreement.
"U.S. Person" as defined in Section 902(k) of the 1933 Act.
"Warrants" means the Initial Warrants and the Subsequent Warrants.
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"Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the Warrants.
"1933 Act" means the Securities Act of 1933, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Shares and Warrants. (a) Subject to the terms
and conditions of this Agreement, on the First Closing Date, each of the Initial
Investors shall severally, and not jointly, purchase, and the Company shall sell
and issue to the Initial Investors, the Initial Securities in the respective
amounts set forth opposite the Initial Investors' names on the signature pages
attached hereto in exchange for the Initial Purchase Price as specified in
Section 3 below.
(b) Subject to the terms and conditions of this Agreement, on any
Subsequent Closing Date, the Remaining Investors may severally, and not jointly,
purchase, and the Company may sell and issue to the Remaining Investors, up to
the balance of the Remaining Securities.
3A. Escrow.
3A.1. Simultaneously with the execution and delivery of this Agreement
by an Initial Investor, in the case of the First Closing, or a Remaining
Investor, in the case of a Subsequent Closing, such Initial Investor or
Remaining Investor, as applicable, shall promptly cause a wire transfer of
immediately available funds (U.S. dollars) in an amount representing such
Investor's portion of the Initial Purchase Price or the Remaining Purchase
Price, as the case may be, set forth on such Investor's signature page, to be
paid to the non-interest bearing escrow account of Xxxxxxxxxx Xxxxxxx PC, the
lead Investor's counsel ("Lead Investor Counsel"), set forth on Schedule I
affixed hereto (the aggregate amounts being held in escrow by Lead Investor
Counsel with respect to a particular Closing are referred to herein as the
"Escrow Amount"). Lead Investor Counsel shall hold the Escrow Amount with
respect to a particular Closing in escrow until Lead Investor Counsel receives
written instructions (the "Escrow Release Instructions") from the Company and
the Initial Investors, in the case of the First Closing, or the Remaining
Investors, in the case of any Subsequent Closing, authorizing the release of the
Escrow Amount in accordance with the written instructions delivered to Lead
Investor Counsel. If Lead Investor Counsel has not received the Escrow Release
Instructions, then, on the sooner of November 26, 2004, in the case of the First
Closing, or December 15, 2004, in the case of any Subsequent Closing, Lead
Investor Counsel shall return to each Investor the portion of the Escrow Amount,
with respect to such particular Closing, such Investor delivered to the Lead
Investor Counsel, but only to the extent of the funds actually received by the
Lead Investor Counsel pursuant to this Agreement.
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3A.2. The Company and the Investors acknowledge and agree for the
benefit of Lead Investor Counsel (which shall be deemed to be a third party
beneficiary of this Section 3A) as follows:
(a) Lead Investor Counsel (i) is not responsible for the performance
by the Company or the Investors of this Agreement or any of the Transaction
Documents or for determining or compelling compliance therewith, (ii) is only
responsible for (A) holding the Escrow Amount in escrow pending receipt of the
Escrow Release Instructions and (B) disbursing the Escrow Amount in accordance
with the Escrow Release Instructions, each of the responsibilities of Lead
Investor Counsel in clause (A) and (B) is ministerial in nature, and no implied
duties or obligations of any kind shall be read into this Agreement against or
on the part of Lead Investor Counsel (collectively, the "Lead Investor Counsel
Duties"), (iii) shall not be obligated to take any legal or other action
hereunder which might in its judgment involve or cause it to incur any expense
or liability unless it shall have been furnished with indemnification acceptable
to it, in its sole discretion, (iv) may rely on and shall be protected in acting
or refraining from acting upon any written notice, instruction (including,
without limitation, wire transfer instructions, whether incorporated herein or
provided in a separate written instruction), instrument, statement, certificate,
request or other document furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper Person, and shall
have no responsibility for making inquiry as to, or for determining, the
genuineness, accuracy or validity thereof, or of the authority of the Person
signing or presenting the same, and (v) may consult counsel satisfactory to it,
and the written opinion or advice of such counsel in any instance shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
opinion or advice of such counsel. Documents and written materials referred to
in this Section 3A.2(a) include, without limitation, e-mail and other electronic
transmissions capable of being printed, whether or not they are in fact printed;
and any such e-mail or other electronic transmission may be deemed and treated
by Lead Investor Counsel as having been signed or presented by a Person if it
bears, as sender, the Person's e-mail address.
(b) Lead Investor Counsel shall not be liable to anyone for any action
taken or omitted to be taken by it hereunder, except in the case of Lead
Investor Counsel's gross negligence or willful misconduct in breach of the Lead
Investor Counsel Duties. IN NO EVENT SHALL LEAD INVESTOR COUNSEL BE LIABLE FOR
INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGE OR LOSS (INCLUDING BUT NOT
LIMITED TO LOST PROFITS) WHATSOEVER, EVEN IF LEAD INVESTOR COUNSEL HAS BEEN
INFORMED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF
ACTION.
(c) The Company and the Investors hereby indemnify and hold harmless
Lead Investor Counsel from and against, any and all loss, liability, cost,
damage and expense, including, without limitation, reasonable counsel fees and
expenses, which Lead Investor Counsel may suffer or incur by reason of any
action, claim or proceeding brought against Lead Investor Counsel arising out of
or relating to the performance of the Lead Investor Counsel Duties, unless such
action, claim or proceeding is the result of the willful misconduct, bad faith
or gross negligence of Lead Investor Counsel.
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(d) Lead Investor Counsel has acted as legal counsel to certain of the
Investors in connection with this Agreement and the other Transaction Documents,
is merely acting as a stakeholder under this Agreement and is, therefore, hereby
authorized to continue acting as legal counsel to such Investors including,
without limitation, with regard to any dispute arising out of this Agreement,
the other Transaction Documents, the Escrow Amount or any other matter. Each of
the Company and the Investors hereby expressly consents to permit Lead Investor
Counsel to represent such Investors in connection with all matters relating to
this Agreement, including, without limitation, with regard to any dispute
arising out of this Agreement, the other Transaction Documents, the Escrow
Amount or any other matter, and hereby waives any conflict of interest or
appearance of conflict or impropriety with respect to such representation. Each
of the Company and the Investors has consulted with its own counsel specifically
about this Section 3A to the extent they deemed necessary, and has entered into
this Agreement after being satisfied with such advice.
3. Closing. (a) Upon confirmation that the other conditions to closing
specified herein have been satisfied or duly waived by the Initial Investors,
the Company shall deliver to Xxxxxxxxxx Xxxxxxx PC, in trust, a certificate or
certificates, registered in such name or names as the Initial Investors may
designate, representing the Initial Securities, with instructions that such
certificates are to be held for release to the Initial Investors only upon
release of the Initial Purchase Price in accordance with the terms of the Escrow
Release Instructions. On the date (the "First Closing Date") the Initial
Purchase Price is released by Lead Investor Counsel in accordance with the
Escrow Release Instructions, the certificates evidencing the Initial Securities
shall be released to the Investors (the "First Closing"). The First Closing
shall take place at the offices of Xxxxxxxxxx Xxxxxxx PC, 1251 Avenue of the
Americas, 21st Floor, New York, New York, or at such other location and on such
other date as the Company and the Initial Investors shall mutually agree.
(b) At any time on or before December 15, 2004 or at such time
thereafter as the Company and the Required Investors may mutually agree, the
Company sell up to the balance of the Remaining Securities to such additional
investors as may be approved by the Company (the "Remaining Investors") at one
or more additional closings. All such sales made at any additional closing (each
a "Subsequent Closing") shall be made on the terms and conditions set forth in
this Agreement. Any Remaining Investor shall become a party to this Agreement by
executing a counterpart signature page hereto and shall be deemed to be an
"Investor" for all purposes of this Agreement. Upon confirmation that the
conditions to closing specified herein have been satisfied, the Company shall
deliver to Xxxxxxxxxx Xxxxxxx PC, in trust, a certificate or certificates,
registered in such name or names as the Remaining Investors may designate,
representing the Remaining Securities, with instructions that such certificates
are to be held for release to the Remaining Investors only upon release of the
Remaining Purchase Price in accordance with the terms of the Escrow Release
Instructions. On the date the Remaining Purchase Price is released by Lead
Investor Counsel in accordance with the Escrow Release Instructions, the
certificates evidencing the Remaining Securities shall be released to the
Remaining Investors (a "Subsequent Closing Date").
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4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedules"):
4. 1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to carry on its business as now conducted and to own its
properties. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property makes such qualification or
leasing necessary unless the failure to so qualify has not and could not
reasonably be expected to have a Material Adverse Effect.
4.2 Authorization. The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Transaction Documents, (ii) authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the Securities. The
Transaction Documents constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors'
rights generally.
4.3 Capitalization. Schedule 4.3 sets forth (a) the authorized capital
stock of the Company on the date hereof; (b) the number of shares of capital
stock issued and outstanding; (c) the number of shares of capital stock issuable
pursuant to the Company's stock plans; and (d) the number of shares of capital
stock issuable and reserved for issuance pursuant to securities (other than the
Shares, the Anti-Dilution Shares and the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock of the Company.
All of the issued and outstanding shares of the Company's capital stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of pre-emptive rights and were issued in full compliance with applicable
state and federal securities law and any rights of third parties. Except as
described on Schedule 4.3, no Person is entitled to pre-emptive or similar
statutory or contractual rights with respect to any securities of the Company.
Except as described on Schedule 4.3, there are no outstanding warrants, options,
convertible securities or other rights, agreements or arrangements of any
character under which the Company or any of its Subsidiaries is or may be
obligated to issue any equity securities of any kind and except as contemplated
by this Agreement, neither the Company nor any of its Subsidiaries is currently
in negotiations for the issuance of any equity securities of any kind. Except as
described on Schedule 4.3 and except for the Registration Rights Agreement and
Section 7.9 hereof, there are no voting agreements, buy-sell agreements, option
or right of first purchase agreements or other agreements of any kind among the
Company and any of the securityholders of the Company relating to the securities
of the Company held by them. Except as described on Schedule 4.3 and except as
provided in the Registration Rights Agreement, no Person has the right to
require the Company to register any securities of the Company under the 1933
Act, whether on a demand basis or in connection with the registration of
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securities of the Company for its own account or for the account of any other
Person.
Except as described on Schedule 4.3, the issuance and sale of the
Securities hereunder will not obligate the Company to issue shares of Common
Stock or other securities to any other Person (other than the Investors) and
will not result in the adjustment of the exercise, conversion, exchange or reset
price of any outstanding security.
Except as described on Schedule 4.3, the Company does not have outstanding
stockholder purchase rights or "poison pill" or any similar arrangement in
effect giving any Person the right to purchase any equity interest in the
Company upon the occurrence of certain events.
The Company does not (a) own, directly or indirectly, any shares of stock
of, equity interest in or other ownership in, as applicable, any Person or (b)
control or have the right (whether or not presently exercisable) to control or
elect the board of directors or similar governing body of any other Person by
means of ownership, management contract or otherwise.
4.4 Valid Issuance. The Shares have been duly and validly authorized
and, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. Subject to the Stockholder Approval (as
defined in Section 7.12), the Anti-Dilution Shares have been duly and validly
authorized and, when issued pursuant to Section 7.10 hereof, will be validly
issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. Subject to the Stockholder Approval, the
Company has reserved a sufficient number of shares of Common Stock for the
issuance of the Anti-Dilution Shares in accordance with Section 7.10. The
Warrants have been duly and validly authorized. Upon the due exercise of the
Warrants, the Warrant Shares will be validly issued, fully paid and
non-assessable free and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws and except for those created by the Investors. The
Company has reserved a sufficient number of shares of Common Stock for issuance
upon the exercise of the Warrants, free and clear of all encumbrances and
restrictions, except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws and except for those created
by the Investors.
4.5 Consents. The execution, delivery and performance by the Company
of the Transaction Documents and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws which the Company undertakes to
file within the applicable time periods. Subject to the accuracy of the
representations and warranties of each Investor set forth in Section 5 hereof,
the Company has taken all action necessary to exempt (i) the issuance and sale
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of the Securities, (ii) the issuance of the Warrant Shares upon due exercise of
the Warrants, and (iii) the other transactions contemplated by the Transaction
Documents from the provisions of any shareholder rights plan or other "poison
pill" arrangement, any anti-takeover, business combination or control share law
or statute binding on the Company or to which the Company or any of its assets
and properties may be subject and any provision of the Company's Certificate of
Incorporation or By-laws that is or could reasonably be expected to become
applicable to the Investors as a result of the transactions contemplated hereby,
including without limitation, the issuance of the Securities and the ownership,
disposition or voting of the Securities by the Investors or the exercise of any
right granted to the Investors pursuant to this Agreement or the other
Transaction Documents.
4.6 Delivery of SEC Filings; Business. The Company has made available
to the Investors through the XXXXX system, true and complete copies of the
Company's most recent Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2003 (the "10-KSB"), and all other reports filed by the Company
pursuant to the 1934 Act since the filing of the 10-KSB and prior to the date
hereof (collectively, the "SEC Filings"). The SEC Filings are the only filings
required of the Company pursuant to the 1934 Act for such period. The Company
and its Subsidiaries are engaged in all material respects only in the business
described in the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company and its
Subsidiaries, taken as a whole.
4.7 Use of Proceeds. The net proceeds of the sale of the Shares and
the Warrants hereunder shall be used by the Company for working capital and
general corporate purposes.
4.8 No Material Adverse Change. Since December 31, 2003, except as
identified and described in the SEC Filings or as described on Schedule 4.8,
there has not been:
(i) any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the 10-KSB, except for changes in the ordinary
course of business which have not and could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether or not
covered by insurance to any assets or properties of the Company or its
Subsidiaries;
(iv) any waiver, not in the ordinary course of business, by the
Company of a material right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
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financial condition, operating results or business of the Company and its
Subsidiaries taken as a whole (as such business is presently conducted and as it
is proposed to be conducted);
(vi) any change or amendment to the Company's Certificate of
Incorporation or by-laws, or material change to any material contract or
arrangement by which the Company is bound or to which any of its assets or
properties is subject;
(vii) any material labor difficulties or labor union organizing
activities with respect to employees of the Company;
(viii) any material transaction entered into by the Company other
than in the ordinary course of business;
(ix) the loss of the services of any key employee, or material
change in the composition or duties of the senior management of the Company;
(x) the loss or threatened loss of any customer which has had or
could reasonably be expected to have a Material Adverse Effect; or
(xi) any other event or condition of any character that has had
or could reasonably be expected to have a Material Adverse Effect.
4.9 SEC Filings.
(a) At the time of filing thereof, the SEC Filings complied as to
form in all material respects with the requirements of the 1934 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each registration statement and any amendment thereto filed
by the Company since January 1, 2002 pursuant to the 1933 Act and the rules and
regulations thereunder, as of the date such statement or amendment became
effective, complied as to form in all material respects with the 1933 Act and
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein not misleading; and each prospectus filed pursuant to
Rule 424(b) under the 1933 Act, as of its issue date and as of the closing of
any sale of securities pursuant thereto did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
4.10 No Conflict, Breach, Violation or Default. The execution,
delivery and performance of the Transaction Documents by the Company and the
issuance and sale of the Securities will not conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a default
under (i) the Company's Certificate of Incorporation or the Company's Xxxxxx,
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both as in effect on the date hereof (true and complete copies of which have
been made available to the Investors through the XXXXX system), or (ii)(a) any
statute, rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company or any of its
assets or properties, or (b) any agreement or instrument to which the Company is
a party or by which the Company is bound or to which any of its assets or
properties is subject.
4.11 Tax Matters. The Company has timely prepared and filed all tax
returns required to have been filed by the Company with all appropriate
governmental agencies and timely paid all taxes shown thereon or otherwise owed
by it. The charges, accruals and reserves on the books of the Company in respect
of taxes for all fiscal periods are adequate in all material respects, and there
are no material unpaid assessments against the Company nor, to the Company's
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which is not material to the Company. All
taxes and other assessments and levies that the Company is required to withhold
or to collect for payment have been duly withheld and collected and paid to the
proper governmental entity or third party when due. There are no tax liens or
claims pending or, to the Company's Knowledge, threatened against the Company or
any of its assets or property. Except as described on Schedule 4.11, there are
no outstanding tax sharing agreements or other such arrangements between the
Company and any other corporation or entity.
4.12 Title to Properties. Except as disclosed in the SEC Filings, the
Company has good and marketable title to all real properties and all other
properties and assets owned by it, in each case free from liens, encumbrances
and defects that would materially affect the value thereof or materially
interfere with the use made or currently planned to be made thereof by them; and
except as disclosed in the SEC Filings, the Company holds any leased real or
personal property under valid and enforceable leases with no exceptions that
would materially interfere with the use made or currently planned to be made
thereof by them.
4.13 Certificates, Authorities and Permits. The Company possess
adequate certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by it, and the
Company has not received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely to the Company, could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate.
4.14 No Labor Disputes. No material labor dispute with the employees
of the Company exists or, to the Company's Knowledge, is imminent.
4.15 Intellectual Property.
(a) All Intellectual Property of the Company and its Subsidiaries
is currently in compliance with all legal requirements (including timely
filings, proofs and payments of fees) and is valid and enforceable. No
Intellectual Property of the Company or its Subsidiaries which is necessary for
the conduct of Company's and each of its Subsidiaries' respective businesses as
currently
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conducted or as currently proposed to be conducted has been or is now involved
in any cancellation, dispute or litigation, and, to the Company's Knowledge, no
such action is threatened. No patent of the Company or its Subsidiaries has been
or is now involved in any interference, reissue, re-examination or opposition
proceeding.
(b) All of the licenses and sublicenses and consent, royalty or
other agreements concerning Intellectual Property which are necessary for the
conduct of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted to which the
Company is a party or by which any of its assets are bound (other than generally
commercially available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $10,000 per license)
(collectively, "License Agreements") are valid and binding obligations of the
Company or its Subsidiaries that are parties thereto and, to the Company's
Knowledge, the other parties thereto, enforceable in accordance with their
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally, and
there exists no event or condition which will result in a material violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default by the Company or any of its Subsidiaries under any such License
Agreement.
(c) The Company and its Subsidiaries own or have the valid right
to use all of the Intellectual Property that is necessary for the conduct of the
Company's and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted and for the ownership,
maintenance and operation of the Company's and its Subsidiaries' properties and
assets, free and clear of all liens, encumbrances, adverse claims or obligations
to license all such owned Intellectual Property and Confidential Information,
other than licenses entered into in the ordinary course of the Company's and its
Subsidiaries' businesses. The Company and its Subsidiaries have a valid and
enforceable right to use all third party Intellectual Property and Confidential
Information used or held for use in the respective businesses of the Company and
its Subsidiaries.
(d) The conduct of the Company's and its Subsidiaries' businesses
as currently conducted does not infringe or otherwise impair or conflict with
(collectively, "Infringe") any Intellectual Property rights of any third party
or any confidentiality obligation owed to a third party, and, to the Company's
Knowledge, the Intellectual Property and Confidential Information of the Company
and its Subsidiaries which are necessary for the conduct of Company's and each
of its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted are not being Infringed by any third party.
There is no litigation or order pending or outstanding or, to the Company's
Knowledge, threatened or imminent, that seeks to limit or challenge or that
concerns the ownership, use, validity or enforceability of any Intellectual
Property or Confidential Information of the Company and its Subsidiaries and the
Company's and its Subsidiaries' use of any Intellectual Property or Confidential
Information owned by a third party, and, to the Company's Knowledge, there is no
valid basis for the same.
12
(e) The consummation of the transactions contemplated hereby and
by the other Transaction Documents will not result in the alteration, loss,
impairment of or restriction on the Company's or any of its Subsidiaries'
ownership or right to use any of the Intellectual Property or Confidential
Information which is necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted.
(f) The Company and its Subsidiaries have taken reasonable steps
to protect the Company's and its Subsidiaries' rights in their Intellectual
Property and Confidential Information. Each employee, consultant and contractor
who has had access to Confidential Information which is necessary for the
conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Confidential Information and
has executed appropriate agreements that are substantially consistent with the
Company's standard forms thereof. Except under confidentiality obligations,
there has been no material disclosure of any of the Company's or its
Subsidiaries' Confidential Information to any third party.
4.16 Environmental Matters. The Company is not in violation of any
statute, rule, regulation, decision or order of any governmental agency or body
or any court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "Environmental Laws"), owns or operates any real property
contaminated with any substance that is subject to any Environmental Laws, is
liable for any off-site disposal or contamination pursuant to any Environmental
Laws, and is subject to any claim relating to any Environmental Laws, which
violation, contamination, liability or claim has had or could reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate;
and there is no pending or, to the Company's Knowledge, threatened investigation
that might lead to such a claim.
4.17 Litigation. Except as described on Schedule 4.17, there are no
pending actions, suits or proceedings against or affecting the Company, its
Subsidiaries or any of its or their properties; and to the Company's Knowledge,
no such actions, suits or proceedings are threatened or contemplated.
4.18 Financial Statements. The financial statements included in each
SEC Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis ("GAAP") (except as may be
disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-QSB under the 1934 Act). Except as
set forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof or as described on Schedule 4.18, neither the
Company nor any of its Subsidiaries has incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business, consistent
(as to amount and nature) with past practices since the date of such financial
statements, none of which, individually or in the aggregate, have had or could
13
reasonably be expected to have a Material Adverse Effect.
4.19 Insurance Coverage. The Company maintains in full force and
effect insurance coverage that is customary for comparably situated companies
for the business being conducted and properties owned or leased by the Company,
and the Company reasonably believes such insurance coverage to be adequate
against all liabilities, claims and risks against which it is customary for
comparably situated companies to insure.
4.20 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, or an Investor for any
commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company, other than as
described in Schedule 4.20.
4.21 No Directed Selling Efforts or General Solicitation. Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.
4.22 No Integrated Offering. Neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.
4.23 Private Placement. The offer and sale of the Securities to the
Investors as contemplated hereby is exempt from the registration requirements of
the 1933 Act.
4.24 Questionable Payments. Neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former stockholders, directors, officers, employees, agents or other Persons
acting on behalf of the Company, has on behalf of the Company or in connection
with its businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company; or (e) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment of any nature.
4.25 Transactions with Affiliates. Except as disclosed in the SEC
Filings or as disclosed on Schedule 4.25, none of the officers or directors of
the Company and, to the Company's Knowledge, none of the employees of the
Company is presently a party to any transaction with the Company (other than as
holders of stock options and/or warrants, and for services as employees,
officers and directors), including any contract, agreement or other arrangement
14
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the Company's Knowledge, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
4.26 Internal Controls. The Company is in material compliance with the
provisions of the Xxxxxxxx-Xxxxx Act of 2002 currently applicable to the
Company. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and
procedures (as defined in 1934 Act Rules 13a-14 and 15d-14) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including the Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's most recently filed period report under the
1934 Act, as the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of a date within 90 days prior to the filing date of the most
recently filed periodic report under the 1934 Act (such date, the "Evaluation
Date"). The Company presented in its most recently filed periodic report under
the 1934 Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as such term is defined in Item
307(b) of Regulation S-K) or, to the Company's Knowledge, in other factors that
could significantly affect the Company's internal controls. The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP and the applicable
requirements of the 1934 Act.
4.27 Listing. The Common Stock is quoted on the Over the Counter
Bulletin Board (the "OTCBB"). The Company has not received any oral or written
notice that its Common Stock is not eligible nor will become ineligible for
quotation on the OTCBB nor that its Common Stock does not meet all requirements
for the continuation of such quotation, and the Company satisfies, and as of the
Closing Date the Company will satisfy, all the requirements for the continued
quotation of its common stock on the OTCBB.
4.28 Disclosures. Neither the Company nor any Person acting on its
behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public
information. The written materials delivered to the Investors in connection with
the transactions contemplated by the Transaction Documents do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.
15
5. Representations and Warranties of the Investors. Each of the Investors
hereby severally, and not jointly, represents and warrants to the Company that:
5.1 Organization and Existence. Such Investor is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to invest in the Securities pursuant to this Agreement. In addition to
the foregoing, to the extent such Investor is not incorporated or organized in
the United States, such Investor hereby certifies that it is not a U.S. Person,
and is not acquiring the securities for the account or benefit of any U.S.
Person.
5.2 Authorization. The execution, delivery and performance by such
Investor of the Transaction Documents to which such Investor is a party have
been duly authorized and will each constitute the valid and legally binding
obligation of such Investor, enforceable against such Investor in accordance
with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
5.3 Purchase Entirely for Own Account. The Securities to be received
by such Investor hereunder will be acquired for such Investor's own account, not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof in violation of the 1933 Act, and such Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of the 1933 Act without prejudice, however, to such
Investor's right at all times to sell or otherwise dispose of all or any part of
such Securities in compliance with applicable federal and state securities laws.
Nothing contained herein shall be deemed a representation or warranty by such
Investor to hold the Securities for any period of time. Such Investor is not a
broker dealer registered with the SEC under the 1934 or an entity engaged in a
business that would require it to be so registered.
5.4 Investment Experience. Such Investor acknowledges that it can bear
the economic risk and complete loss of its investment in the Securities and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. Such Investor has had an opportunity to
receive all additional information related to the Company requested by it and to
ask questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities. Such
Investor acknowledges receipt of copies of the SEC Filings. Neither such
inquiries nor any other due diligence investigation conducted by such Investor
shall modify, amend or affect such Investor's right to rely on the Company's
representations and warranties contained in this Agreement.
5.6 Restricted Securities. Such Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. Such Investor agrees to
resell such Securities only in accordance with the provisions of Regulation S,
16
pursuant to registration under the 1933 Act, or pursuant to an available
exemption from registration, and agrees not to engage in hedging transactions
with regard to such securities unless in compliance with the 1933 Act.
5.7 Legends. It is understood that, except as provided below,
certificates evidencing the Securities may bear the following or any similar
legend:
(a) "The securities represented hereby may not be transferred
unless (i) such securities have been registered for sale pursuant to the
Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to
Rule 144(k), (iii) such Securities may be sold pursuant to Regulation S, or (iv)
the Company has received an opinion of counsel reasonably satisfactory to it
that such transfer may lawfully be made without registration under the
Securities Act of 1933 or qualification under applicable state securities laws.
Hedging transactions involving the securities represented hereby may not be
conducted unless in compliance with the 0000 Xxx."
(b) If required by the authorities of any state in connection
with the issuance of sale of the Securities, the legend required by such state
authority.
5.8 Accredited Investor. Such Investor is an accredited investor
as defined in Rule 501(a) of Regulation D, as amended, under the 0000 Xxx.
5.9 No General Solicitation. Such Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
5.10 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, or an Investor for any
commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of such Investor.
6. Conditions to Closings.
6.1 Conditions to the Initial Investors' Obligations to Effect
the First Closing. The obligation of each Initial Investor to purchase the
Initial Securities at the first Closing is subject to the fulfillment to such
Initial Investor's satisfaction, on or prior to the First Closing Date, of the
following conditions, any of which may be waived by such Initial Investor (as to
itself only):
(a) The representations and warranties made by the Company in
Section 4 hereof qualified as to materiality shall be true and correct at all
times prior to and on the First Closing Date, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier
date, and, the representations and warranties made by the Company in Section 4
hereof not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the First Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct in
17
all material respects as of such earlier date. The Company shall have performed
in all material respects all obligations and conditions herein required to be
performed or observed by it on or prior to the First Closing Date.
(b) The Company shall have obtained any and all consents,
permits, approvals, registrations and waivers necessary or appropriate for
consummation of the purchase and sale of the Initial Securities and the
consummation of the other transactions contemplated by the Transaction
Documents, all of which shall be in full force and effect.
(c) The Company shall have executed and delivered the
Registration Rights Agreement.
(d) No judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding shall have been instituted by any governmental
authority, enjoining or preventing the consummation of the transactions
contemplated hereby or in the other Transaction Documents.
(e) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the First Closing Date, certifying to the fulfillment of
the conditions specified in subsections (a), (b), (d) and (h) of this Section
6.1.
(f) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the First Closing Date,
certifying the resolutions adopted by the Board of Directors of the Company
approving the transactions contemplated by this Agreement and the other
Transaction Documents and the issuance of the Securities, certifying the current
versions of the Certificate of Incorporation and Bylaws of the Company and
certifying as to the signatures and authority of persons signing the Transaction
Documents and related documents on behalf of the Company.
(g) The Initial Investors shall have received an opinion from
Sichenzia, Ross, Xxxxxxxx and Xxxxxxx, the Company's counsel, dated as of the
First Closing Date, in form and substance reasonably acceptable to the Initial
Investors and addressing such legal matters as the Initial Investors may
reasonably request.
(h) No stop order or suspension of trading shall have been
imposed by the SEC or any other governmental or regulatory body with respect to
public trading in the Common Stock.
(i) The Company shall have executed and delivered the Escrow
Release Instructions to Lead Investor Counsel.
(j) The Company shall have delivered irrevocable instructions, in
the form attached hereto as Exhibit C, to its transfer agent concerning the
issuance of any Anti-Dilution Shares with respect to the Initial Securities and
18
the removal of any legends on the Initial Securities.
(k) The Company shall have delivered an irrevocable waiver from
Xxxx Xxxxx, the sole holder of its outstanding preferred stock, waiving his
right to receive any dividends payable in Common Stock until after the Company
has received Stockholder Approval and increased its authorized capital in the
manner contemplated by Section 7.12, which waiver shall acknowledge that the
Investors are third party beneficiaries of such irrevocable waiver by Xxxx
Xxxxx.
6.2 Conditions to Obligations of the Company to Effect the First
Closing. The Company's obligation to sell and issue the Initial Securities at
the First Closing is subject to the fulfillment to the satisfaction of the
Company on or prior to the First Closing Date of the following conditions, any
of which may be waived by the Company:
(a) The representations and warranties made by the Initial
Investors in Section 5 hereof, other than the representations and warranties
contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the First Closing Date
with the same force and effect as if they had been made on and as of said date.
The Investment Representations shall be true and correct in all respects when
made, and shall be true and correct in all respects on the First Closing Date
with the same force and effect as if they had been made on and as of said date.
The Initial Investors shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by them
on or prior to the First Closing Date.
(b) The Initial Investors shall have executed and delivered the
Registration Rights Agreement.
(c) The Initial Investors shall have delivered the Initial
Purchase Price to Lead Investor Counsel.
(d) The Initial Investors shall have executed and delivered the
Escrow Release Instructions to Lead Investor Counsel.
6.3 Conditions to the Remaining Investors' Obligations to Effect
Subsequent Closings. The obligation of the Remaining Investors to purchase the
Remaining Securities at any Subsequent Closing is subject to the fulfillment to
the Remaining Investors' satisfaction, on or prior to such Subsequent Closing
Date, of the following conditions, any of which may be waived by the Remaining
Investors:
(a) The representations and warranties made by the Company in
Section 4 hereof qualified as to materiality shall be true and correct at all
times prior to and on the Subsequent Closing Date, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier
date, and, the representations and warranties made by the Company in Section 4
19
hereof not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Subsequent Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct in
all material respects as of such earlier date. The Company shall have performed
in all material respects all obligations and conditions herein required to be
performed or observed by it on or prior to the Subsequent Closing Date.
(b) The Company shall have obtained any and all consents,
permits, approvals, registrations and waivers necessary or appropriate for
consummation of the purchase and sale of the Remaining Securities and the
consummation of the other transactions contemplated by the Transaction
Documents, all of which shall be in full force and effect.
(c) The First Closing shall have been consummated in accordance
with the terms of this Agreement.
(d) No judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding shall have been instituted by any governmental
authority, enjoining or preventing the consummation of the transactions
contemplated hereby or in the other Transaction Documents.
(e) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Subsequent Closing Date, certifying to the fulfillment
of the conditions specified in subsections (a), (b), (c), (d) and (h) of this
Section 6.3.
(f) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary or Assistant Secretary, dated as of the
Subsequent Closing Date, certifying the resolutions adopted by the Board of
Directors of the Company approving the transactions contemplated by this
Agreement and the other Transaction Documents and the issuance of the Remaining
Securities, certifying the current versions of the Certificate of Incorporation
and Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company.
(g) The Remaining Investors shall have received an opinion from
Sichenzia, Ross, Xxxxxxxx and Xxxxxxx, the Company's counsel, dated as of the
Subsequent Closing Date, in substantially the form approved by the Remaining
Investors' counsel.
(h) No stop order or suspension of trading shall have been
imposed by the SEC or any other governmental or regulatory body with respect to
public trading in the Common Stock.
(i) The Company shall have executed and delivered the Escrow
Release Instructions to Lead Investor Counsel.
20
(j) The Company shall have delivered irrevocable instructions, in
the form attached hereto as Exhibit C, to its transfer agent concerning the
issuance of any Anti-Dilution Shares with respect to the Remaining Securities
and the removal of any legends on the Remaining Securities.
6.4 Conditions to Obligations of the Company to Effect the Subsequent
Closings. The Company's obligation to sell and issue the Remaining Securities at
any Subsequent Closing is subject to the fulfillment to the satisfaction of the
Company on or prior to such Subsequent Closing Date of the following conditions,
any of which may be waived by the Company:
(a) The representations and warranties made by the Remaining
Investors in Section 5 hereof, other than the Investment Representations, shall
be true and correct in all material respects when made, and shall be true and
correct in all material respects on the Subsequent Closing Date with the same
force and effect as if they had been made on and as of said date. The Investment
Representations of the Remaining Investors shall be true and correct in all
respects when made, and shall be true and correct in all respects on the
Subsequent Closing Date with the same force and effect as if they had been made
on and as of said date. The Remaining Investors shall have performed in all
material respects all obligations and conditions herein required to be performed
or observed by them on or prior to the Subsequent Closing Date.
(b) The First Closing shall have been consummated in accordance
with the terms of this Agreement.
(c) The Remaining Investors shall have delivered the Remaining
Purchase Price to Lead Investor Counsel.
(d) The Remaining Investors shall have executed and delivered the
Escrow Release Instructions to Lead Investor Counsel.
6.5 Termination; Effects.
(a) The obligations of the Company, on the one hand, and the
Initial Investors, on the other hand, to effect the First Closing shall
terminate as follows:
(i) Upon the mutual written consent of the Company and the
Initial Investors;
(ii) By the Company if any of the conditions set forth in Section
6.2 shall have become incapable of fulfillment, and shall not have been waived
by the Company;
(iii) By an Initial Investor (with respect to itself only) if any
of the conditions set forth in Section 6.1 shall have become incapable of
fulfillment, and shall not have been waived by such Initial Investor; or
21
(iv) By either the Company or any Initial Investor (with respect
to itself only) if the First Closing has not occurred on or prior to November
26, 2004;
provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the First Closing shall not then
be in breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party's seeking to
terminate its obligation to effect the First Closing.
(b) The obligations of the Company, on the one hand, and the
Remaining Investors, on the other hand, to effect any Subsequent Closing shall
terminate as follows:
(i) Upon the mutual written consent of the Company and the
Remaining Investors;
(ii) By the Company if any of the conditions set forth in Section
6.4 shall have become incapable of fulfillment, and shall not have been waived
by the Company;
(iii) By a Remaining Investor (with respect to itself only) if
any of the conditions set forth in Section 6.3 shall have become incapable of
fulfillment, and shall not have been waived by such Remaining Investor (with
respect to itself only); or
(iv) By either the Company or any Remaining Investor (with
respect to itself only) if such Subsequent Closing has not occurred on or prior
to December 15, 2004;
provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Subsequent Closing shall not
then be in breach of any of its representations, warranties, covenants or
agreements contained in this Agreement or the other Transaction Documents if
such breach has resulted in the circumstances giving rise to such party's
seeking to terminate its obligation to effect the Subsequent Closing.
(c) In the event of termination by the Company or any Investor of
its obligations to effect the First Closing or any Subsequent Closing, as
applicable, pursuant to this Section 6.5, written notice thereof shall forthwith
be given to the Company and the other Investors and the other Investors shall
have the right to terminate their obligations to effect the First Closing or
such Subsequent Closing, as applicable, upon written notice to the Company and
the other Investors. Nothing in this Section 6.5 shall be deemed to release any
party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Documents or to impair the
right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents.
7. Covenants and Agreements of the Company.
22
7.1 Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of providing for the exercise of the Warrants,
such number of shares of Common Stock as shall from time to time equal the
number of shares sufficient to permit the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective terms. In
addition, the Company shall, at all times prior to issuing any shares of Common
Stock or Common Stock Equivalents giving rise to the issuance of any
Anti-Dilution Shares, reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of providing for the
issuance of such Anti-Dilution Shares, such number of shares of Common Stock as
shall be sufficient to take into account the number of Anti-Dilution Shares to
be issued to the Investors following such issuance of shares of Common Stock or
Common Stock Equivalents.
7.2 Reports. The Company will furnish to such Investors and/or their
assignees such information relating to the Company and its Subsidiaries as from
time to time may reasonably be requested by such Investors and/or their
assignees; provided, however, that the Company shall not disclose material
nonpublic information to the Investors, or to advisors to or representatives of
the Investors, unless prior to disclosure of such information the Company
identifies such information as being material nonpublic information and provides
the Investors, such advisors and representatives with the opportunity to accept
or refuse to accept such material nonpublic information for review and any
Investor wishing to obtain such information enters into an appropriate
confidentiality agreement with the Company with respect thereto.
7.3 No Conflicting Agreements. The Company will not take any action,
enter into any agreement or make any commitment that would conflict or interfere
in any material respect with the Company's obligations to the Investors under
the Transaction Documents.
7.4 Insurance. The Company shall not materially reduce the insurance
coverages described in Section 4.19.
7.5 Compliance with Laws. The Company will comply in all material
respects with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities.
7.6 Listing of Underlying Shares and Related Matters. For so long as
the Common Stock or other securities of the Company are traded on the OTCBB, the
Shares, the Anti-Dilution Shares and the Warrant Shares will also be tradeable
on the OTCBB. If the Company applies to have its Common Stock or other
securities traded on any principal stock exchange or market, it shall include in
such application the Shares, the Anti-Dilution Shares and the Warrant Shares and
will take such other action as is necessary to cause such Common Stock to be so
listed.
7.7 Termination of Covenants. The provisions of Sections 7.2 through
7.5 shall terminate and be of no further force and effect on the date on which
the Company's obligations under the Registration Rights Agreement to register or
maintain the effectiveness of any registration covering the Registrable
23
Securities (as such term is defined in the Registration Rights Agreement) shall
terminate.
7.8 Removal of Legends. Upon the earlier of (i) registration for
resale pursuant to the Registration Rights Agreement and receipt by the Company
of the Investor's written confirmation that such Securities will not be disposed
of except in compliance with the prospectus delivery requirements of the 1933
Act, (ii) Rule 144(k) becoming available or (iii) with respect to an Investor
who is a non-U.S. Person, such time as any such Securities are transferable
without restriction under Regulation S, the Company shall, upon an Investor's
written request, promptly cause certificates evidencing the Investor's
Securities to be replaced with certificates which do not bear such restrictive
legends, and Warrant Shares subsequently issued upon due exercise of the
Warrants shall not bear such restrictive legends provided the provisions of
either clause (i) or clause (ii) above, as applicable, are satisfied with
respect to such Warrant Shares. When the Company is required to cause unlegended
certificates to replace previously issued legended certificates, if unlegended
certificates are not delivered to an Investor within three (3) Business Days of
submission by that Investor of legended certificate(s) to the Company's transfer
agent together with a representation letter in customary form, the Company shall
be liable to the Investor for liquidated damages in an amount equal to 1% of the
aggregate purchase price of the Securities evidenced by such certificate(s) for
each thirty (30) day period (or portion thereof) beyond such three (3) Business
Day period that the unlegended certificates have not been so delivered.
7.9 Right of First Refusal on Future Financings. From the date hereof
until the one hundred eightieth (180th) day following the effective date of the
registration statement covering the resale of the Shares, the Warrant Shares and
the Anti-Dilution Shares, if any, by the Investors, upon any financing by the
Company of its Common Stock or Common Stock Equivalents (a "Subsequent
Financing"), each Investor shall have the right to participate in up to 100% of
such Subsequent Financing. At least five (5) Business Days prior to the closing
of the Subsequent Financing, the Company shall deliver to each Investor a
written notice of its intention to effect a Subsequent Financing ("Pre-Notice"),
which Pre-Notice shall ask such Investor if it wants to review the details of
such financing (such additional notice, a "Subsequent Financing Notice"). Upon
the request of an Investor, and only upon a request by such Investor, for a
Subsequent Financing Notice, the Company shall promptly, but no later than one
Business Day after such request, deliver a Subsequent Financing Notice to such
Investor. Subsequent Financing Notice shall describe in reasonable detail the
proposed terms of such Subsequent Financing, the amount of proceeds intended to
be raised thereunder, the Person with whom such Subsequent Financing is proposed
to be effected, and attached to which shall be a term sheet or similar document
relating thereto. Each Investor shall notify the Company by 6:30 p.m. (New York
City time) on the fifth (5th) Business Day after their receipt of the Subsequent
Financing Notice of its willingness to provide the Subsequent Financing on the
terms described in the Subsequent Financing Notice, subject to completion of
mutually acceptable documentation. If one or more Investors shall fail to so
notify the Company of their willingness to participate in the Subsequent
Financing, the Investors agreeing to participate in the Subsequent Financing
(the "Participating Investors") shall have the right to provide all of the
Subsequent Financing. If one or more Investors fail to notify the Company of
their willingness to provide all of the Subsequent Financing and the
Participating Investors do not agree to provide all of the Subsequent Financing,
24
the Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice; provided
that the Company must provide the Investors with a second Subsequent Financing
Notice, and the Investors will again have the right of first refusal set forth
above in this Section 7.9, if the Subsequent Financing subject to the initial
Subsequent Financing Notice is not consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 30 calendar days after the date
of the initial Subsequent Financing Notice with the Person identified in the
Subsequent Financing Notice. In the event the Company receives responses to
Subsequent Financing Notices from Investors seeking to purchase more than the
financing sought by the Company in the Subsequent Financing such Investors shall
have the right to purchase their Pro Rata Portion (as defined below) of the
Common Stock or Common Stock Equivalents to be issued in such Subsequent
Financing. "Pro Rata Portion" is the ratio of (x) the amount invested by such
Investor pursuant to this Agreement (the "Subscription Amount") and (y) the
aggregate sum of all of the Subscription Amounts. Notwithstanding the foregoing,
this Section 7.9 shall not apply in respect of the issuance of (a) shares of
Common Stock or options to employees, consultants, officers or directors of the
Company pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such
purpose, (b) securities upon the exercise of or conversion of any convertible
securities, options or warrants issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement, (c) shares of Common Stock and warrants to purchase Common Stock
pursuant to the Qualified Financing, (d) up to 900,000 shares of Common Stock
issuable in connection with the acquisition by the Company of shares of capital
stock of Filco GmbH, a German corporation, and (e) up to 100,000 shares of
Common Stock issuable to Fil Filipov in consideration of his agreeing to serve
as a director of the Company (collectively, "Excluded Issuances").
7.10. Favored Nations Provision. Except with respect to Excluded
Issuances, if at any time during the Full-Ratchet Period, the Company shall
issue or sell or agree to issue or sell any shares of Common Stock or Common
Stock Equivalents to any Person for a price per share (as determined in
accordance with Section 8(f) of the Warrants) less than the Per Share Purchase
Price in effect immediately prior to the time of such issue or sale or agreement
related thereto (the "Lower Per Share Purchase Price"), then and in each such
case (a "Trigger Issuance"), the Company shall issue, in connection with such
Trigger Issuance, a number of additional shares of Common Stock to each Investor
equal to (A) the number of Shares that would have been issued to such Investor,
based on such Investor's portion of the Purchase Price, if the Per Share
Purchase Price immediately prior to such Trigger Issuance was equal to the Lower
Per Share Purchase Price, minus (B) the number of Shares initially issued to
such Investor upon payment of its portion of the Purchase Price (and, to the
extent there has been a previous adjustment to the Per Share Purchase Price, any
Anti-Dilution Shares previously issued to such Investor). The price per share at
which the Company issues or sells or agrees to issue or sell shares of Common
Stock or Common Stock Equivalents shall be determined in accordance with the
provisions of Section 8(f) of the Warrants. For the avoidance of doubt, the
issuance of Common Stock Equivalents (and not the actual conversion or exercise
of such Common Stock Equivalent into shares of Common Stock) is the event that
gives rise to the issuance of Anti-Dilution Shares pursuant to this Section
7.10. Promptly following the occurrence of any event giving rise to the issuance
25
of any Anti-Dilution Shares (but in no event more than two (2) Business Days
thereafter), the Company shall issue irrevocable instructions authorizing its
transfer agent to issue such Anti-Dilution Shares to the Investors.
7.11. Transfers. The Company shall refuse to register any transfer of
Securities originally issued pursuant to Regulation S, where the transfer is not
made in accordance with the provisions of Regulation S (Rule 901 through Rule
905, and Preliminary Notes), pursuant to registration under the 1933 Act or
pursuant to an available exemption from such registration.
7.12. Stockholder Approval. The Company acknowledges that it only has
sufficient authorized capital to issue the Securities (and the warrants to be
issued to the Company's placement agent in connection with the issuance of the
Securities as set forth on Schedule 4.20 hereof). Accordingly, the Company
hereby covenants not to issue any additional shares of Common Stock or Common
Stock Equivalents or to take any action that would result in the issuance of any
Anti-Dilution Shares or Warrant Shares prior to taking any and all necessary
action to increase its authorized capital to provide for the issuance of any
such additional shares of Common Stock or Common Stock Equivalents (including
the Anti-Dilution Shares and additional Warrant Shares issuable as a result
thereof). The Company shall obtain, on or before January 14, 2004, approval of
the Company's stockholders, in accordance with and as may be required by New
Jersey law and any applicable rules or regulations of the OTCBB, to increase the
authorized capital of the Company to a sufficient number to enable the Company
to issue any and all Anti-Dilution Shares and additional Warrant Shares that may
from time to time become issuable to the Investors pursuant to this Agreement or
the Warrants (the "Stockholder Approval"). The Company shall furnish to each
Investor and its legal counsel promptly (but in no event less than two (2)
Business Days) before the same is filed with the SEC, one copy of the
information statement relating to the Stockholder Approval and any amendment
thereto, and shall deliver to each Investor promptly each letter written by or
on behalf of the Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
such information statement (other than any portion thereof which contains
information for which the Company has sought confidential treatment). The
Company will promptly (but in no event more than three (3) Business Days)
respond to any and all comments received from the SEC (which comments shall
promptly be made available to each Buyer). The Company shall comply with the
filing and disclosure requirements of Section 14 under the 1934 Act in
connection with the Stockholder Approval. The Company represents and warrants
that its Board of Directors has approved the proposal contemplated by this
Section 7.12 and shall indicate such approval in the information statement used
in connection with the Stockholder Approval.
7.13. Breach of Covenants. If the Company does not obtain Stockholder
Approval and increase its authorized capital in the manner contemplated by
Section 7.12 on or before January 14, 2004, in addition to any other remedies
available to the Investors pursuant to this Agreement, the Company shall pay to
the Investors liquidated damages of two percent (2%) of the aggregate amount
invested by such Investor for each 30-day period or pro rata for any portion
thereof, in cash or shares at the option of the Company ("Standard Liquidated
Damages Amount"), following January 14, 2004 until such date that both the
Stockholder Approval has been obtained and the authorized capital of the Company
has been increased in the manner contemplated by Section 7.12. If the Company
26
elects to pay the Standard Liquidated Damages Amount in shares of Common Stock,
such shares shall be issued at the then current market price at the time payment
becomes due.
8. Survival and Indemnification.
8.1 Survival. The representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing of the
transactions contemplated by this Agreement.
8.2 Indemnification. The Company agrees to indemnify and hold harmless
each Investor and its Affiliates and their respective directors, officers,
employees and agents from and against any and all losses, claims, damages,
liabilities and expenses (including without limitation reasonable attorney fees
and disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively, "Losses") to which such
Person may become subject as a result of any breach of representation, warranty,
covenant or agreement made by or to be performed on the part of the Company
under the Transaction Documents, and will reimburse any such Person for all such
amounts as they are incurred by such Person.
8.3 Conduct of Indemnification Proceedings. Promptly after receipt by
any Person (the "Indemnified Person") of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.
27
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Investors,
as applicable, provided, however, that an Investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate or to a third
party acquiring some or all of its Securities in a private transaction without
the prior written consent of the Company or the other Investors, after notice
duly given by such Investor to the Company and the other Investors, provided,
that no such assignment or obligation shall affect the obligations of such
Investor hereunder. The provisions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
9.2 Counterparts; Faxes. 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. This Agreement may also
be executed via facsimile, which shall be deemed an original.
9.3 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.
9.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three (3) days after such notice is deposited in first class
mail, postage prepaid, and (iv) if given by an internationally recognized
overnight air courier, then such notice shall be deemed given one business day
after delivery to such carrier. All notices shall be addressed to the party to
be notified at the address as follows, or at such other address as such party
may designate by ten days' advance written notice to the other party:
If to the Company:
Airtrax, Inc.
000X Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention:
Fax:
28
With a copy to:
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
1065 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
If to the Investors:
to the addresses set forth on the signature pages hereto.
9.5 Expenses. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of Xxxxxxxxxx Xxxxxxx PC, not to exceed $40,000.
Such expenses shall be paid not later than the Closing. The Company shall
reimburse the Investors upon demand for all reasonable out-of-pocket expenses
incurred by the Investors, including without limitation reimbursement of
attorneys' fees and disbursements, in connection with any amendment,
modification or waiver of this Agreement or the other Transaction Documents. In
the event that legal proceedings are commenced by any party to this Agreement
against another party to this Agreement in connection with this Agreement or the
other Transaction Documents, the party or parties which do not prevail in such
proceedings shall severally, but not jointly, pay their pro rata share of the
reasonable attorneys' fees and other reasonable out-of-pocket costs and expenses
incurred by the prevailing party in such proceedings.
9.6 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investors. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Securities purchased under this Agreement at the time outstanding,
each future holder of all such Securities, and the Company.
9.7 Publicity. Except as set forth below, no public release or
announcement concerning the transactions contemplated hereby shall be issued by
the Company or the Investors without the prior consent of the Company (in the
case of a release or announcement by the Investors) or the Investors (in the
case of a release or announcement by the Company) (which consents shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the applicable rules or regulations of any securities exchange or
securities market, in which case the Company or the Investors, as the case may
be, shall allow the Investors or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance. By 8:30 a.m. (New York City
time) on the trading day immediately following the Closing Date, the Company
shall issue a press release disclosing the consummation of the transactions
contemplated by this Agreement. No later than the third trading day following
the Closing Date, the Company will file a Current Report on Form 8-K attaching
the press release described in the foregoing sentence as well as copies of the
Transaction Documents. In addition, the Company will make such other filings and
29
notices in the manner and time required by the SEC. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Investor, or
include the name of any Investor in any filing with the SEC (other than the
Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the 0000 Xxx)
or any regulatory agency, without the prior written consent of such Investor,
except to the extent such disclosure is required by law or trading market
regulations, in which case the Company shall provide the Investors with prior
notice of such disclosure.
9.8 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
9.9 Entire Agreement. This Agreement, including the Exhibits and the
Disclosure Schedules, and the other Transaction Documents constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.
9.10 Further Assurances. The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
9.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of New York without regard to the choice of law
principles thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
30
9.12 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
[signature page follows]
31
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.
The Company: AIRTRAX, INC.
By:_________________________
Name:
Title:
32
The Initial Investors: EXCALIBUR LIMITED PARTNERSHIP
By:_________________________
Name:
Title:
Aggregate Purchase Price: $400,000
Number of Shares: 500,000
Number of Warrants: 250,000
Address for Notice: 00 Xxxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Fax: 000.000.0000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
Address for Delivery of the Shares and
Warrants: Canaccord Capital
000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX X0X 0X0
Attention: Xxxxx/Xxxxx
XXXXXXXXXXX LIMITED PARTNERSHIP
By:_________________________
Name:
Title:
Aggregate Purchase Price: $325,000
Number of Shares: 406,250
Number of Warrants: 203,125
33
Address for Notice: 00 Xxxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxxx Xxxxxxxxxxx
Fax: 000.000.0000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
Address for Delivery of the Shares and
Warrants: Canaccord Capital
000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX X0X 0X0
Attention: Xxxxx/Xxxxx
WHALEHAVEN CAPITAL FUND
By:_________________________
Name:
Title:
Aggregate Purchase Price: $175,000
Number of Shares: 218,750
Number of Warrants: 109,375
Address for Notice: 0xx Xxxxx, 00 Xxx-Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx XX00
Xxxxxxxxx:
34
[insert fax # and the person or
title to whom notices should be
delivered]
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
Address for Delivery of the Shares and
Warrants: Canaccord
000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX X0X 0X0
Attention: Xxxxx/Xxxxx
35
SCHEDULE I
LEAD INVESTOR COUNSEL WIRE INSTRUCTIONS
Wire Room of: PNC Bank New Jersey
ABA # 000000000
For credit to: Xxxxxxxxxx Xxxxxxx PC
Attorney Trust Account
Account # 8100612350
For International wires please use SWIFT Code: XXXXXX00
36
SCHEDULE 4.3
CAPITALIZATION
(a) the authorized capital stock of the Company on the date hereof;
20,000,000 common shares
500,000 preferred shares
(b) the number of shares of capital stock issued and outstanding;
13,793,922 shares of common stock
275,000 shares of preferred stock
(c) the number of shares of capital stock issuable pursuant to the Company's
stock plans;
None.
(d) the number of shares of capital stock issuable and reserved for issuance
pursuant to securities (other than the Shares, the Anti-Dilution Shares and the
Warrants) exercisable for, or convertible into or exchangeable for any shares of
capital stock of the Company.
2,615,375 warrants exercisable at $1.25 per share
865,000 warrants exercisable at $2.50 per share
100,000 warrants exercisable at $1.00 per share
37
SCHEDULE 4.20
BROKERS AND FINDERS
First Montauk Securities Corp. - 10% cash commission
3% non-accountable cash expense allowance
10% warrants based on the number of shares
sold (not including shares issuable upon
exercise of the Warrants)
38
