SECURITIES PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT
(the "Agreement"), dated
as of December 12, 2007, by and among Maple Mountain Explorations Inc., a Nevada
corporation having its offices at 507-1313 Xxxx Xxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxxxx 00000 (the "Company") and the investors
listed on the Schedule of Buyers attached hereto (individually, a "Buyer" and collectively,
the
"Buyers").
WHEREAS:
· The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of
the
Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of
Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC") under the 1933
Act.
· Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, that aggregate number of Units set forth
opposite such Buyer's name in column (3) on the Schedule of Buyers attached
hereto (which aggregate number for all Buyers shall be not less than
8,333,333 Units and not more than 16,666,667 Units). As used herein,
a "Unit" shall consist of (i) one share (the shares of the Common Stock to
be
issued hereunder, the "Common
Shares") of the Company's common stock, par value $.001 per share (the
"Common Stock") and
(ii) a warrant, in the form attached hereto as Exhibit A (the "Warrants"),
to acquire up to
one-half (1/2) additional share of Common Stock (as exercised, collectively,
the "Warrant
Shares").
· Pursuant
to a Share Exchange Agreement (the "Share Exchange Agreement"),
dated as of November 12, 2007, by and among the Company, Pegasi Energy Resources
Corporation, a Texas corporation ("OpCo") and each of the
individuals parties thereto, contemporaneously with the Closing, all of the
issued and outstanding capital stock of the OpCo will be exchanged for shares
of
the Company's Common Stock and OpCo will become a wholly-owned subsidiary of
the
Company (such share exchange, the "Share Exchange").
· Contemporaneously
with the Closing, the Buyers and the Company will execute and deliver a
Registration Rights Agreement, in the form attached hereto as Exhibit B (as amended
or modified from time to time, the "Registration Rights
Agreement"), pursuant to which the Company agrees to provide certain
registration rights with respect to Common Shares and the Warrant Shares under
the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
· The
Units, the Common Shares, the Warrants and the Warrant Shares collectively
are
referred to herein as the "Securities".
· The
Company, the Agents (as defined
below) and Signature Bank (the “Escrow
Agent”)
have entered into an Escrow Agreement
in the form attached hereto as Exhibit
C(the“Escrow
Agreement”)
to provide for the safekeeping of
funds received (the "Escrow
Funds") in connection with
the transactions contemplated by this Agreement. Such funds
shall be held in escrow until the Closing and delivered by the Escrow Agent
on
behalf of the Buyers to the Company upon the satisfaction of the conditions
to
the Buyers' obligations to purchase.
1
NOW,
THEREFORE, the Company
and each Buyer hereby agree as follows:
A. PURCHASE
AND SALE OF
UNITS.
a. Purchase
of
Units. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall issue and
sell
to each Buyer, and each Buyer severally, but not jointly, agrees to purchase
from the Company on the Closing Date (as defined below), a number of Units
as is
set forth opposite such Buyer's name in column (3) on the Schedule of Buyers
(the "Closing").
b. Closing. The
date and time of the Closing shall be 10:00 a.m., New York City time, on the
Closing Date (or such later date as is mutually agreed to by the Company and
each Buyer) after notification of satisfaction (or waiver) of the conditions
to
the Closing set forth in Sections 6 and 7 below, at the offices of Xxxxxxx
Xxxx
& Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
c. Purchase
Price. The aggregate purchase price for the Units to be
purchased by each Buyer at the Closing (the "Purchase Price") shall be the
amount set forth opposite such Buyer's name in column (4) of the Schedule of
Buyers. Each Buyer shall pay $1.20 for each Unit to be purchased by
such Buyer at the Closing.
d. Form
of
Payment. No later than five (5) Business Days prior to the
Closing Date, each Buyer shall deposit with the Escrow Agent its Purchase Price
for the Units to be sold by the Company to such Buyer, by wire transfer of
immediately available funds in accordance with the Escrow Agent's written wire
instructions. On the Closing Date, (i) the Escrow Agent shall release
the Escrow Funds to the Company in accordance with the terms of the Escrow
Agreement and (ii) the Company shall deliver to each Buyer the Common
Shares and Warrants comprising the Units (allocated in the numbers as such
Buyer
shall request) which such Buyer is then purchasing hereunder duly executed
on
behalf of the Company and registered in the name of such Buyer or its
designee.
2. BUYER'S
REPRESENTATIONS AND
WARRANTIES.
Each
Buyer, severally and not jointly, represents and warrants with respect to only
itself that:
a. No
Public Sale or
Distribution. Such Buyer is acquiring the Units and the Common
Shares and Warrants comprising the Units, and upon exercise of the Warrants
(other than pursuant to a Cashless Exercise (as defined in the Warrants)) will
acquire the Warrant Shares issuable upon exercise of the Warrants, for its
own
account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however,
that by
making the representations herein, such Buyer does not agree to hold any of
the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer
is acquiring the Securities hereunder in the ordinary course of its
business. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of
the
Securities.
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b. Accredited
Investor
Status. Such Buyer is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D.
c. Reliance
on
Exemptions. Such Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws
and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order
to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
d. Information. Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and its Subsidiaries
and
materials relating to the offer and sale of the Securities that have been
requested by such Buyer. Such Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on
the
Company's representations and warranties contained herein. Such Buyer
understands that its investment in the Securities involves a high degree of
risk. Such Buyer has sought such accounting, legal and tax advice as
it has considered necessary to make an informed investment decision with respect
to its acquisition of the Securities.
e. No
Governmental
Review. Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on
or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
f. Transfer
or
Resale. Such Buyer understands that except as will be provided
in the Registration Rights Agreement: (I) the Securities have not been and
are
not being registered under the 1933 Act or any state securities laws, and may
not be offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion, in generally acceptable form, of counsel selected by the Buyer and
reasonably satisfactory to the Company, to the effect that such Securities
to be
sold, assigned or transferred may be sold, assigned or transferred pursuant
to
an exemption from such registration, or (C) such Buyer provides the Company
with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor
rule thereto) (collectively, "Rule 144"); (II) any sale
of
the Securities made in reliance on Rule 144 may be made only in accordance
with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale
of
the Securities under circumstances in which the seller (or the Person (as
defined in Section 3(o)) through whom the sale is made) may be deemed to be
an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of
the
SEC thereunder; and (III) neither the Company nor any other Person is under
any
obligation to register the securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption
thereunder. The Securities may be pledged in connection with a bona
fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or
any
other Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).
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g. Legends. Such
Buyer understands that the certificates or other instruments representing the
Common Shares and the Warrants and, until such time as the resale of the Warrant
Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the Warrant
Shares, except as set forth below, shall bear any legend as required by the
"blue sky" laws of any state and a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of
such
stock certificates):
[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL SELECTED BY THE HOLDER AND REASONABLY ACCEPTABLE TO THE ISSUER,
IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
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The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection
with
a sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel reasonably acceptable to the Company, in a generally
acceptable form, to the effect that such sale, assignment or transfer of the
Securities may be made without registration under the applicable requirements
of
the 1933 Act, or (iii) such holder provides the Company with reasonable
assurances of the holder's belief that the Securities can be sold, assigned
or
transferred pursuant to Rule 144 or Rule 144A. If the Company shall
fail for any reason or for no reason to issue to the holder of the Securities
within three (3) Trading Days (as defined below) (after the occurrence of any
of
(i) through (iii) above, a certificate without such legend to the holder or
to
issue such Securities to such holder by electronic delivery at the applicable
balance account at DTC or if the Company fails to deliver unlegended Securities
within 3 Trading Days of the Buyer's election to receive such unlegended
Securities pursuant to clause (ii) below, and if on or after such Trading Day
the holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the holder of such
Securities that the holder anticipated receiving without legend from the Company
(a "Buy-In"), then the
Company shall, within three (3) Business Days after the holder's request and
in
the holder's discretion, either (i) pay cash to the holder in an amount equal
to
the holder's total purchase price (including brokerage commissions, if any)
for
the shares of Common Stock so purchased (the "Buy-In Price"), at which
point the Company's obligation to deliver such unlegended Securities shall
terminate, or (ii) promptly honor its obligation to deliver to the holder such
unlegended Securities as provided above and pay cash to the holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, times (B) the Closing Bid Price (as defined
in
the Warrants) on the date of exercise.
h. Validity;
Enforcement. This Agreement has been, and when the other
Transaction Documents (as defined below) to which such Buyer is a party are
executed and delivered in accordance with the terms and conditions contemplated
hereby and thereby, such documents shall have been, duly and validly authorized,
executed and delivered on behalf of such Buyer and shall constitute the legal,
valid and binding obligations of such Buyer enforceable against such Buyer
in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, liquidation and other similar
laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
i. Residency. Such
Buyer is a resident of the jurisdiction specified below its address on the
Schedule of Buyers.
The
Buyer’s representations and
warranties made in this Section 2 are made solely for the purpose of permitting
the Company to make a determination that the offer and sale of the Securities
pursuant to this Agreement complies with applicable U.S. federal and state
securities laws and not for any other purpose. Accordingly, the
Company shall not rely on such representations and warranties for any other
purpose.
5
3. REPRESENTATIONS
AND
WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each of the Buyers that, as of the date
hereof and as of the Closing date as follows (which representations and
warranties shall be deemed to apply, as appropriate, to each Subsidiary of
the
Company, including without limitation, OpCo assuming that the Share Exchange
has
been consummated as of the date hereof):
a. Organization
and
Qualification. The Company and its "Subsidiaries" (which for
purposes of this Agreement means any entity in which the Company, directly
or
indirectly, owns capital stock or holds an equity or similar interest) are
entities duly organized and validly existing in good standing under the laws
of
the jurisdiction in which they are formed, and have the requisite power and
authority to own their properties and to carry on their business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified
as a foreign entity to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted
by it
makes such qualification necessary, except to the extent that the failure to
be
so qualified or be in good standing would not reasonably be expected to have
a
Material Adverse Effect. As used in this Agreement, "Material Adverse Effect" means
any material adverse effect on the business, properties, assets, operations,
results of operations or condition (financial or otherwise) of the Company
and
its Subsidiaries, taken as a whole, or on the transactions contemplated hereby
and the other Transaction Documents (as defined below) or by the agreements
and
instruments to be entered into in connection herewith or therewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents to which it is a party. The Company has no
Subsidiaries except as set forth on Schedule
3(a).
b. Authorization;
Enforcement;
Validity. The Company has the requisite power and authority to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement, Escrow Agreement, the Share Exchange Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the
Warrants and each of the other agreements entered into by the parties hereto
in
connection with the transactions contemplated by this Agreement to which the
Company is a party (collectively, the "Transaction
Documents.") The execution and delivery of the Transaction
Documents to which the Company is a party and the consummation by the Company
of
the transactions contemplated hereby and thereby, including, without limitation,
the issuance of the Units and the Common Share and the Warrants comprising
the
Units, the reservation for issuance and the issuance of the Common Shares and
the reservation for issuance and issuance of Warrant Shares issuable upon
exercise of the Warrants, have been duly authorized by the Company's Board
of
Directors and no further filing, consent, or authorization is required by the
Company, its Board of Directors or its stockholders. This Agreement
and the other Transaction Documents to which the Company is a party have been
duly executed and delivered by the Company, and constitute the legal, valid
and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
6
c. Issuance
of
Securities. The issuance of the Units and the Common Shares
and Warrants comprising the Units, are duly authorized and upon issuance in
accordance with the terms of the Transaction Documents shall be free from all
taxes, liens and charges with respect to the issue thereof. As of the
Closing, a number of shares of Common Stock shall have been duly authorized
and
reserved for issuance which equals or exceeds the sum of (i) 100% of the number
of Common Shares issued hereunder and (ii) 120% of the maximum number of shares
of Common Stock issuable upon exercise of the Warrants. Upon exercise
in accordance with the Warrants, the Warrant Shares will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common
Stock. Assuming the accuracy of each of the representations and
warranties set forth in Section 2 of this Agreement, the offer and issuance
by
the Company of the Securities is exempt from registration under the 1933
Act.
d. No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company (and the Share Exchange Agreement by OpCo)
and the consummation by the Company (and OpCo) of the transactions contemplated
hereby and thereby (including, without limitation, the Share Exchange, the
issuance of the Units and the Common Shares and Warrants which comprise such
Units and reservation for issuance and issuance of the Warrant Shares) will
not
(i) result in a violation of any certificate of incorporation, certificate
of
formation, any certificate of designations or other constituent documents of
the
Company or any of its Subsidiaries, any capital stock of the Company or any
of
its Subsidiaries or bylaws of the Company or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) in any respect under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including foreign, federal and state
securities laws and regulations and the rules and regulations of the National
Association of Securities Dealer's OTC Bulletin Board (the "Principal Market")) applicable
to the Company or any of its Subsidiaries or by which any property or asset
of
the Company or any of its Subsidiaries is bound or affected, except in the
case
of clauses (ii) and (iii) above, to the extent that such violations conflict,
default or right would not reasonably be expected to have a Material Adverse
Effect.
e. Consents. Neither
the Company nor any of its Subsidiaries is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof, except for the filing with the SEC of one
or
more Registration Statements in accordance with the requirements of the
Registration Rights Agreement (which is not required to be filed before the
Closing). The Company and its Subsidiaries are unaware of any facts
or circumstances that might prevent the Company from obtaining or effecting
any
of the registration, application or filings pursuant to the preceding
sentence. The Company is not in violation of the listing requirements
of the Principal Market and has no knowledge of any facts that would reasonably
lead to delisting or suspension of the Common Stock in the foreseeable
future.
7
f. Acknowledgment
Regarding
Buyer's Purchase of Securities. The Company acknowledges and
agrees that each Buyer is acting solely in the capacity of an arm's length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that no Buyer is (i) an officer or director
of the Company, (ii) an "affiliate" of the Company or any of its Subsidiaries
(as defined in Rule 144 of the 0000 Xxx) or (iii) to the knowledge of the
Company, a "beneficial owner" of more than 10% of the shares of Common Stock
(as
defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as
amended (the "1934
Act")). The Company further acknowledges that no Buyer is
acting as a financial advisor or fiduciary of the Company or any of its
Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with
the
Transaction Documents and the transactions contemplated hereby and thereby
is
merely incidental to such Buyer's purchase of the Securities. The
Company further represents to each Buyer that the Company's decision to enter
into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
g. No
General Solicitation;
Placement Agent's Fees. None of the Company, any of its
affiliates, or any Person acting on its or their behalf, has engaged in any
form
of general solicitation or general advertising (within the meaning of Regulation
D) in connection with the offer or sale of the Securities. The
Company shall be responsible for the payment of any placement agent's fees,
financial advisory fees, or brokers' commissions (other than for persons engaged
by any Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim. The Company acknowledges that it has engaged SMH
Capital and Clarion Finanz AG as placement agents (the "Agents") in connection with
the sale of the Securities. Other than the Agents, the Company has
not engaged any placement agent or other agent in connection with the sale
of
the Securities.
h. No
Integrated
Offering. None of the Company, its Subsidiaries, any of their
affiliates, or any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of any of the
Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act
or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system
on
which any of the securities of the Company are listed or
designated. None of the Company, its Subsidiaries, their affiliates
and any Person acting on their behalf will take any action or steps referred
to
in the preceding sentence that would require registration of any of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
i. Dilutive
Effect. The Company understands and acknowledges that the
number of Warrant Shares issuable upon exercise of the Warrants will increase
in
certain circumstances. The Company further acknowledges that its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is, in each case, absolute
and
unconditional regardless of the dilutive effect that such issuance may have
on
the ownership interests of other stockholders of the Company.
8
j. Application
of Takeover
Protections; Rights Agreement. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation (as defined
in
Section 3(r)) or the laws of the state of its incorporation which is or could
become applicable to any Buyer as a result of the transactions contemplated
by
this Agreement, including, without limitation, the Company's issuance of the
Securities and any Buyer's ownership of the Securities. The Company
and its board of directors have taken all necessary action, if any, in order
to
render inapplicable any stockholder rights plan or similar arrangement relating
to accumulations of beneficial ownership of Common Stock or a change in control
of the Company.
k. SEC
Documents; Financial
Statements. During the 12 months prior to the date hereof, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Exchange Act (all of the foregoing filed prior to the date hereof and
all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred
to as
the "SEC
Documents"). As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they
were filed with the SEC, contained any untrue statement of a material fact
or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
l. Absence
of Certain
Changes. Since July 31, 2007, there has been no change or
development in the business, properties, operations, condition (financial or
otherwise) or results of operations of the Company or its Subsidiaries that
has
had or could reasonably be expected to have a Material Adverse
Effect. Since July 31, 2007, the Company has not (i) declared or paid
any dividends, (ii) sold any assets, individually or in the aggregate, in excess
of $100,000 outside of the ordinary course of business, (iii) had capital
expenditures, individually or in the aggregate, in excess of $250,000 or (iv)
waived any material rights with respect to any Indebtedness or other rights
in
excess of $100,000 owed to it. The Company has not taken any steps to
seek protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company and its
Subsidiaries, taken as a whole, is not as of the date hereof, and after giving
effect to the transactions contemplated hereby to occur at the Closing will
not
be, Insolvent (as defined below). For purposes of this Section 3(m),
"Insolvent" means (i)
the present fair saleable value of the assets of the Company and its
Subsidiaries is less than the amount required to pay the total Indebtedness
(as
defined in Section 3(r)) of the Company and its Subsidiaries, (ii) the Company
or any of its Subsidiaries is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) the Company or any of its Subsidiaries intends
to
incur or believes that it will incur debts that would be beyond its ability
to
pay as such debts mature or (iv) the Company and its Subsidiaries, taken as
a
whole, has unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is proposed to be
conducted.
9
m. No
Undisclosed Events,
Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists with respect
to
the Company, its Subsidiaries or their respective business, properties,
operations or financial condition, that would be required to be disclosed by
the
Company under applicable securities laws on a registration statement on Form
S-1
filed with the SEC relating to an issuance and sale by the Company of its Common
Stock and which has not been publicly announced.
n. Conduct
of Business;
Regulatory Permits. Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under its Certificate
of Incorporation, any certificate of designations of any outstanding series
of
preferred stock of the Company or the Bylaws or their organizational charter
or
bylaws, respectively. Neither the Company nor any of its Subsidiaries
is in violation of any judgment, decree or order or any statute, ordinance,
rule
or regulation applicable to the Company or its Subsidiaries, and neither the
Company nor any of its Subsidiaries will conduct its business in violation
of
any of the foregoing, except for possible violations which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Without limiting the generality of the foregoing, the
Company is not in violation of any of the rules, regulations or requirements
of
the Principal Market and has no knowledge of any facts or circumstances that
would reasonably lead to delisting or suspension of the Common Stock by the
Principal Market in the foreseeable future. Since September 5, 2006,
(i) the Common Stock has been designated for quotation on the Principal Market,
(ii) trading in the Common Stock has not been suspended by the SEC or the
Principal Market and (iii) the Company has received no communication, written
or
oral, from the SEC or the Principal Market regarding the suspension or delisting
of the Common Stock from the Principal Market. The Company and its
Subsidiaries possess all certificates, authorizations and permits issued by
the
appropriate regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate,
a
Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification
of
any such certificate, authorization or permit.
o. Foreign
Corrupt
Practices. Neither the Company nor any of its Subsidiaries nor
any director, officer, agent, employee or other Person acting on behalf of
the
Company or any of its Subsidiaries has, in the course of its actions for, or
on
behalf of, the Company or any of its Subsidiaries (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the
U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to
any foreign or domestic government official or employee.
x. Xxxxxxxx-Xxxxx
Act. The Company is in compliance with any and all applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the
date
hereof, and any and all applicable rules and regulations promulgated by the
SEC
thereunder that are effective as of the date hereof.
10
q. Transactions
With
Affiliates. Other than the grant of restricted stock or stock
options disclosed on Schedule 3(r), none
of the officers, directors or employees of the Company or any of its
Subsidiaries is presently a party to any transaction with the Company or any
of
its Subsidiaries (other than for ordinary course services as employees, officers
or directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company or OpCo,
any corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
r. Equity
Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 75,000,000 shares of common stock, $.001
par value, of which as of the date hereof, 21,000,000 are issued and
outstanding, 1,170,000 shares of which are reserved for issuance pursuant to
the
Company's stock option and purchase plans and no other shares are reserved
for
issuance pursuant to securities (other than the Common Shares and the Warrants)
exercisable or exchangeable for, or convertible into, shares of Common
Stock. All of such outstanding shares have been, or upon issuance
will be, validly issued and are fully paid and nonassessable. Except
as disclosed in Schedule 3(r): (i)
none of the Company's capital stock is subject to preemptive rights or any
other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) there
are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933
Act
(except pursuant to the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of
its
Subsidiaries is or may become bound to redeem a security of the Company or
any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's
or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The
Company has furnished to the Buyers true, correct and complete copies of the
Company's Certificate of Incorporation, as amended and as in effect on the
date
hereof (the "Certificate of
Incorporation"), and the Company's Bylaws, as amended and as in effect on
the date hereof (the "Bylaws"), and the terms
of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock and the material rights of the holders thereof in respect
thereto.
11
s. Share
Exchange. OpCo has the requisite power and authority to enter
into and perform its obligations under the Share Exchange
Agreement. The execution and delivery of the Share Exchange Agreement
and the consummation by OpCo of the transactions contemplated by the Share
Exchange Agreement has been duly authorized by OpCo's Board of Directors and
no
further filing, consent, or authorization is required by OpCo, its Board of
Directors or its stockholders. The Share Exchange Agreement has been
duly executed and delivered by OpCo, and constitute the legal, valid and binding
obligations of OpCo, enforceable against OpCo in accordance with their
respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, liquidation or similar laws relating to,
or
affecting generally, the enforcement of applicable creditors' rights and
remedies. Immediately after giving effect to the Share Exchange, (i)
all of the OpCo's issued and outstanding capital stock shall be owned by the
Company and (ii) all other securities issued by OpCo shall have been exchanged
for shares of the Company.
t. Indebtedness
and Other
Contracts. Except as disclosed in Schedule
3(s),
neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement
or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating
to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is
a
party to any contract, agreement or instrument relating to any Indebtedness,
the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect. Schedule 3(s)
provides a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) "Indebtedness" of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including (without limitation) "capital leases" in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and
other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect
to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in
the
event of default are limited to repossession or sale of such property), (F)
all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment
of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent
Obligation" means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will
be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or
in
part) against loss with respect thereto; and (z) "Person" means an individual,
a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.
12
u. Absence
of
Litigation. . Except as set forth in Schedule
3(t), there
is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or OpCo,
threatened against or affecting the Company or any of its Subsidiaries, the
Common Stock or any of the Company's or its Subsidiaries' officers or
directors.
v. Insurance. The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason
to
believe that it will not be able to renew its existing insurance coverage as
and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have
a
Material Adverse Effect.
w. Employee
Relations.
i. Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its
Subsidiaries believe that their relations with their employees are
good. No executive officer of the Company or any of its Subsidiaries
(as defined in Rule 501(f) of the 0000 Xxx) has notified the Company that such
officer intends to leave the Company or otherwise terminate such officer's
employment with the Company. No executive officer of the Company or
any of its Subsidiaries, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing
matters.
13
ii. The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or
in
the aggregate, reasonably be expected to result in a Material Adverse
Effect.
x. Title. The
Company and its Subsidiaries have good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
them which is material to the business of the Company and its Subsidiaries,
in
each case free and clear of all liens, encumbrances and defects or such as
do
not materially affect the value of such property and do not interfere with
the
use made and proposed to be made of such property by the Company and any of
its
Subsidiaries. Any real property and facilities held under lease by
the Company and any of its Subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
y. Intellectual
Property
Rights. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, service marks, and all
applications and registrations therefor, trade names, patents, patent rights,
copyrights, original works of authorship, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights ("Intellectual Property
Rights") necessary to conduct their respective businesses as now
conducted. None of the Company's Intellectual Property Rights have
expired or terminated, or are expected to expire or terminate, within three
years from the date of this Agreement. The Company does not have any
knowledge of any infringement by the Company or its Subsidiaries of Intellectual
Property Rights of others. There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company or OpCo, being
threatened, against the Company or its Subsidiaries regarding its Intellectual
Property Rights. The Company is unaware of any facts or circumstances
which might give rise to any of the foregoing infringements or claims, actions
or proceedings. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their Intellectual Property Rights.
z. Environmental
Laws. The Company and its Subsidiaries (i) are in compliance
with any and all applicable Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license
or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or
in
the aggregate, a Material Adverse Effect. The term "Environmental Laws" means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous Materials") into
the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as
all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
14
aa. Subsidiary
Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or each Subsidiary.
bb. Tax
Status. The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that
are
material in amount, shown or determined to be due on such returns, reports
and
declarations, except those being contested in good faith and (iii) has set
aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction, and the officers of the Company
know of no basis for any such claim.
cc. Internal
Accounting and
Disclosure Controls. The Company and each of its 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 and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management's general or specific authorization and
(iv)
the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any difference. The Company maintains
disclosure controls and procedures (as such term is defined in Rule 13a-14
under
the 0000 Xxx) that are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the
1934
Act is recorded, processed, summarized and reported, within the time periods
specified in the rules and forms of the SEC, including, without limitation,
controls and procedures designed in to ensure that information required to
be
disclosed by the Company in the reports that it files or submits under the
1934
Act is accumulated and communicated to the Company's management, including
its
principal executive officer or officers and its principal financial officer
or
officers, as appropriate, to allow timely decisions regarding required
disclosure. During the twelve months prior to the date hereof neither
the Company nor any of its Subsidiaries have received any notice or
correspondence from any accountant relating to any potential material weakness
in any part of the system of internal accounting controls of the Company or
any
of its Subsidiaries.
dd. Transfer
Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the sale and transfer of the Securities to be sold to each Buyer hereunder
will be, or will have been, fully paid or provided for by the Company, and
all
laws imposing such taxes will be or will have been complied with.
15
ee. Manipulation
of
Price. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) other than the Agents, sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any of the Securities, or
(iii) other than the Agents, paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
ff. Off
Balance Sheet
Arrangements. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance
sheet entity that is required to be disclosed by the Company in its 1934 Act
filings and is not so disclosed or that otherwise would be reasonably likely
to
have a Material Adverse Effect.
gg. Investment
Company
Status. The Company is not, and upon consummation of the sale
of the Securities will not be, an "investment company," a company controlled
by
an "investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended.
hh. Bank
Holding Company
Act. Neither the Company nor any of its affiliates is subject
to the Bank Holding Company Act of 1956, as amended (the "BHCA") and to regulation
by
the Board of Governors of the Federal Reserve System (the "Federal
Reserve"). Neither the Company nor any of its affiliates owns
or controls, directly or indirectly, five percent (5%) or more of the
outstanding shares of any class of voting securities or twenty-five percent
or
more of the total equity of a bank or any entity that is subject to the BHCA
and
to regulation by the Federal Reserve. Neither the Company affiliates
exercises a controlling influence over the management or policies of a bank
or
any entity that is subject to the BHCA and to regulation by the Federal
Reserve.
ii. Acknowledgement
Regarding
Buyers' Trading Activity. Anything in this Agreement or
elsewhere herein to the contrary notwithstanding, but subject to compliance
by
the Buyers with applicable law, it is understood and acknowledged by the Company
(i) that none of the Buyers have been asked by the Company or its Subsidiaries
to agree, nor has any Buyer agreed with the Company or its Subsidiaries, to
desist from purchasing or selling, long and/or short, securities of the Company,
or "derivative" securities based on securities issued by the Company or to
hold
the Securities for any specified term; (ii) that past or future open market
or
other transactions by any Buyer, including, without limitation, short sales
or
"derivative" transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company's
publicly-traded securities; (iii) that any Buyer, and counter parties in
"derivative" transactions to which any such Buyer is a party, directly or
indirectly, presently may have a "short" position in the Common Stock, and
(iv)
that each Buyer shall not be deemed to have any affiliation with or control
over
any arm's length counter-party in any "derivative" transaction. The
Company further understands and acknowledges that (a) one or more Buyers may
engage in hedging and/or trading activities at various times during the period
that the Securities are outstanding, including, without limitation, during
the
periods that the value of the Warrant Shares deliverable with respect to
Securities are being determined and (b) such hedging and/or trading activities
(if any) could reduce the value of the existing stockholders' equity interests
in the Company at and after the time that the hedging and/or trading activities
are being conducted.
16
jj. Share
Exchange
Agreement. The Share Exchange Agreement has not been amended
in any way and no provisions thereof have been waived.
kk. Disclosure. The
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Buyers or their agents or counsel with any information
that
constitutes or could reasonably be expected to constitute material, nonpublic
information. The Company understands and confirms that each of the
Buyers will rely on the foregoing representations in effecting transactions
in
securities of the Company. All disclosure provided to the Buyers
regarding the Company or any of its Subsidiaries, their business and the
transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of
the
circumstances under which they were made, not misleading. Each press
release issued by the Company or any of its Subsidiaries during the twelve
(12)
months preceding the date of this Agreement did not at the time of release
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or
disclosed.
4. COVENANTS.
a. Best
Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections
6
and 7 of this Agreement.
b.
Form D and Blue
Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to
each
Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for or to qualify the Securities
for
sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of
the
Securities required under applicable securities or "Blue Sky" laws of the states
of the United States following the Closing Date.
c. Reporting
Status. Until the date on which the Investors (as defined in
the Registration Rights Agreement) shall have sold all the Common Shares and
Warrant Shares and
none of the Warrants is outstanding, (the "Reporting Period"), the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
d. Use
of
Proceeds. The Company will use the proceeds from the sale of
the Securities as set forth on Schedule 4(d), and
not for any other purposes.
17
e. Financial
Information. The Company agrees to send the following to each
Investor (as defined in the Registration Rights Agreement) during the Reporting
Period (i) unless the following are filed with the SEC through XXXXX and are
available to the public through the XXXXX system, within one (1) Business Day
after the filing thereof with the SEC, a copy of its Annual Reports and
Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports
or
any consolidated balance sheets, income statements, stockholders' equity
statements and/or cash flow statements for any period other than annual, any
Current Reports on Form 8-K and any registration statements (other than on
Form
S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as
the
release thereof, facsimile or e-mailed copies of all press releases issued
by
the Company or any of its Subsidiaries, and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to
the
stockholders. As used herein, "Business Day" means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.
f. Listing. The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock
is
then listed (subject to official notice of issuance) and shall maintain, in
accordance with the Warrants, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stocks'
authorization for quotation on the Principal Market. Neither the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting or suspension of the Common
Stock
on the Principal Market. The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section
4(f).
g. Fees. The
Company shall reimburse Investcorp Interlachen Multi-Strategy Master Fund (a
Buyer) or its designee(s) for all reasonable costs and expenses (in addition
to
any amounts previously paid) incurred in connection with the transactions
contemplated by the Transaction Documents (including all reasonable and
documented legal fees and disbursements in connection therewith, documentation
and implementation of the transactions contemplated by the Transaction Documents
and due diligence in connection therewith), which amount shall not exceed
$50,000 in the aggregate and may be, at the sole option of Investcorp
Interlachen Multi-Strategy Master Fund, withheld by such Buyer from its Purchase
Price at the Closing. The Company shall be responsible for the
payment of any placement agent's fees, financial advisory fees, or broker's
commissions (other than for Persons engaged by any Buyer) relating to or arising
out of the transactions contemplated hereby, including, without limitation,
any
fees or commissions payable to the Agents. The Company shall pay and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, reasonable attorney's fees and out-of-pocket expenses)
arising in connection with any claim relating to any such
payment. Except as otherwise set forth in the Transaction Documents,
each party to this Agreement shall bear its own expenses in connection with
the
sale of the Securities to the Buyers.
18
h. Pledge
of
Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge
of Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall
be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof; provided that
an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and
deliver such documentation as a pledgee of the Securities may reasonably request
in connection with a pledge of the Securities to such pledgee by an
Investor.
i. Disclosure
of Transactions
and Other Material Information. On or before 8:30 a.m., New
York City time, on the first Business Day following the Closing Date, the
Company shall issue a press release and file a Current Report on Form 8-K within
four Business Days following the Closing Date describing the terms of the
transactions contemplated by the Transaction Documents and the Exchange
Agreement in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this Agreement, the form
of Warrant, the form of Escrow Agreement and the form of the Registration Rights
Agreement and such financial statements and other information as required in
connection with the Exchange Agreement) as exhibits to such filing (including
all attachments, the "8-K
Filing"). From and after the filing of the 8-K Filing with the
SEC, no Buyer shall be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of their respective
officers, directors, employees or agents that is not disclosed in the 8-K
Filing. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide any Buyer with any material, nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing
of
the 8-K Filing with the SEC without the express written consent of such
Buyer. If a Buyer has, or believes it has, received any such
material, nonpublic information regarding the Company or any of its
Subsidiaries, it shall provide the Company with written notice
thereof. The Company shall, within five (5) Trading Days (as defined
in the Warrants) of receipt of such notice, make public disclosure of such
material, nonpublic information. In the event of a breach of the
foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to
any
other remedy provided herein or in the Transaction Documents, a Buyer shall
have
the right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without
the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall
have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents for any such
disclosure. Subject to the foregoing, neither the Company, its
Subsidiaries nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of
any
Buyer, to make any press release or other public disclosure with respect to
such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Without the prior written
consent of any applicable Buyer, neither the Company nor any of its Subsidiaries
or affiliates shall disclose the name of such Buyer in any filing, announcement,
release or otherwise, unless required by law.
19
j. Variable
Securities;
Dilutive Issuances. So long as any Buyer beneficially owns any
Warrants, the Company will not issue any other securities that would cause
a
breach or default under the Warrants. For so long as any Warrants
remain outstanding, the Company shall not, in any manner, issue or sell any
rights, warrants or options to subscribe for or purchase Common Stock or
directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at a price which varies or may vary with the market price of the
Common Stock, including by way of one or more reset(s) to any fixed price unless
the conversion, exchange or exercise price of any such security cannot be less
than the then applicable Exercise Price (as defined in the Warrants) with
respect to the Common Stock into which any Warrant is
exercisable. For so long as any Warrants remain outstanding, the
Company shall not, in any manner, enter into or affect any Dilutive Issuances
(as defined in the Warrants) if the effect of such Dilutive Issuance is to
cause
the Company to be required to issue upon exercise of any Warrant any shares
of
Common Stock in excess of that number of shares of Common Stock which the
Company may issue upon exercise of the Warrants without breaching the Company's
obligations under the rules or regulations of the Principal Market.
k. Corporate
Existence. So long as any Buyer beneficially owns any
Securities, the Company shall not to be party to any Fundamental Transaction
(as
defined in the Warrants) unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the
Warrants.
l. Reservation
of Shares. The Company shall
take all action necessary to at all times have authorized, and reserved for
the
purpose of issuance, no less than (i) 100% of the number of Common Shares
issuable hereunder and (ii) 120% of the maximum number of shares of Common
Stock
issuable upon exercise of the Warrants issued at the Closing (without taking
into account any limitations on the exercise of the Warrants set forth in the
Warrants).
m. Conduct
of
Business. The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of
any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.
n. Additional
Issuances of
Securities.
i. For
purposes of this Section 4(n), the following definitions shall
apply.
a. "Convertible
Securities" means
any stock or securities (other than Options) convertible into or exercisable
or
exchangeable for shares of Common Stock.
b. "Options"
means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or Convertible
Securities.
c. "Common
Stock Equivalents"
means, collectively, Options and Convertible Securities.
20
ii. From
the
date hereof until the date that is the earlier of (i) one hundred and eighty
(180) Trading Days (as defined in the Warrants) following the Initial Effective
Date (as defined in the Registration Rights Agreement) and (ii) thirty (30)
months following the Closing Date (the "Trigger Date"), the Company
will not, directly or indirectly, file any registration statement (other than
on
Form S-8) with the SEC other than the Registration Statement (as defined in
the
Registration Rights Agreement). From the date hereof until the
Trigger Date, the Company will not, directly or indirectly, offer, sell, grant
any option to purchase, or otherwise dispose of (or announce any offer, sale,
grant or any option to purchase or other disposition of) any of its or its
Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is,
at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for shares of Common Stock or Common Stock
Equivalents (any such offer, sale, grant, disposition or announcement being
referred to as a "Subsequent
Placement").
iii. From
the
Trigger Date until the second anniversary of the Closing Date, the Company
will
not, directly or indirectly, effect any Subsequent Placement unless the Company
shall have first complied with this Section 4(n)(iii).
a. The
Company shall deliver to each Buyer an irrevocable written notice
(the "Offer
Notice") of any proposed or intended issuance or sale or exchange
(the "Offer") of
the securities being offered (the "Offered Securities") in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they
are to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the persons or
entities (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (z) offer to issue and sell to or
exchange with such Buyers the Offered Securities, allocated among such Buyers
(a) based on such Buyer's pro rata portion of the number of Common Shares
purchased hereunder (the "Basic
Amount"), and (b) with respect to each Buyer that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable
to
the Basic Amounts of other Buyers as such Buyer shall indicate it will purchase
or acquire should the other Buyers subscribe for less than their Basic Amounts
(the "Undersubscription
Amount"), which process shall be repeated until the Buyers shall have an
opportunity to subscribe for any remaining Undersubscription
Amount.
b. To
accept
an Offer, in whole or in part, such Buyer must deliver a written notice to
the
Company prior to the end of the tenth (10th)
Business Day after such Buyer's receipt of the Offer Notice (the "Offer Period"), setting forth
the portion of such Buyer's Basic Amount that such Buyer elects to purchase
and,
if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the "Notice of
Acceptance"). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then each Buyer
who
has set forth an Undersubscription Amount in its Notice of Acceptance shall
be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however,
that if the
Undersubscription Amounts subscribed for exceed the difference between the
total
of all the Basic Amounts and the Basic Amounts subscribed for (the "Available Undersubscription
Amount"), each Buyer who has subscribed for any Undersubscription Amount
shall be entitled to purchase only that portion of the Available
Undersubscription Amount as the Basic Amount of such Buyer bears to the total
Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts,
subject to rounding by the Company to the extent its deems reasonably
necessary.
21
c. The
Company shall have fifteen (15) Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the Buyers
(the "Refused
Securities"), but only to the offerees described in the Offer Notice (if
so described therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to
the
acquiring person or persons or less favorable to the Company than those set
forth in the Offer Notice and (ii) to publicly announce (a) the execution of
such Subsequent Placement Agreement, and (b) either (x) the consummation of
the
transactions contemplated by such Subsequent Placement Agreement or (y) the
termination of such Subsequent Placement Agreement, which shall be filed with
the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement
and any documents contemplated therein filed as exhibits thereto.
d. In
the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(n)(iii)(3) above), then each Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified
in
its Notice of Acceptance to an amount that shall be not less than the number
or
amount of the Offered Securities that such Buyer elected to purchase pursuant
to
Section 4(n)(iii)(2) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 4(n)(iii)(3) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of
the
Offered Securities. In the event that any Buyer so elects to reduce
the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities
have
again been offered to the Buyers in accordance with Section 4(n)(iii)(1)
above.
e. Upon
the
closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, the Buyers shall acquire from the Company, and the Company shall
issue to the Buyers, the number or amount of Offered Securities specified in
the
Notices of Acceptance, as reduced pursuant to Section 4(n)(iii)(3) above if
the
Buyers have so elected, upon the terms and conditions specified in the
Offer. Notwithstanding anything to the contrary contained in this
Agreement, if the Company does not consummate the closing of the issuance,
sale
or exchange of all or less than all of the Refused Securities within fifteen
(15) Business Days of the expiration of the Offer Period, the Company shall
issue to the Buyers the number or amount of Offered Securities specified in
the
Notices of Acceptance, as reduced pursuant to Section 4(n)(iii)(4) above if
the
Buyers have so elected, upon the terms and conditions specified in the
Offer. The purchase by the Buyers of any Offered Securities is
subject in all cases to the preparation, execution and delivery by the Company
and the Buyers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Buyers and their respective
counsel.
22
f. Any
Offered Securities not acquired by the Buyers or other persons in accordance
with Section 4(n)(iii)(3) above may not be issued, sold or exchanged until
they
are again offered to the Buyers under the procedures specified in this
Agreement.
g. The
Company and the Buyers agree that if any Buyer elects to participate in the
Offer, (x) neither the Subsequent Placement Agreement with respect to such
Offer
nor any other transaction documents related thereto (collectively, the "Subsequent Placement
Documents") shall include any term or provisions whereby any Buyer shall
be required to agree to any restrictions in trading as to any securities of
the
Company owned by such Buyer prior to such Subsequent Placement, and (y) any
registration rights set forth in such Subsequent Placement Documents shall
be
similar in all material respects to the registration rights contained in the
Registration Rights Agreement.
h. Notwithstanding
anything to the contrary in this Section 4(n) and unless otherwise agreed to
by
the Buyers, the Company shall either confirm in writing to the Buyers that
the
transaction with respect to the Subsequent Placement has been abandoned or
shall
publicly disclose its intention to issue the Offered Securities, in either
case
in such a manner such that the Buyers will not be in possession of material
non-public information, by the fifteen (15th)
Business Day following delivery of the Offer Notice. If by the
fifteen (15th)
following delivery of the Offer Notice no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice
regarding the abandonment of such transaction has been received by the Buyers,
such transaction shall be deemed to have been abandoned and the Buyers shall
not
be deemed to be in possession of any material, non-public information with
respect to the Company. Should the Company decide to pursue such
transaction with respect to the Offered Securities, the Company shall provide
each Buyer with another Offer Notice and each Buyer will again have the right
of
participation set forth in this Section 4(n)(iii). The Company shall
not be permitted to deliver more than one such Offer Notice to the Buyers in
any
60 day period.
iv. The
restrictions contained in subsections (ii) and (iii) of this Section 4(n) shall
not apply in connection with (i) the issuance of any Excluded Securities (as
defined in the Warrants) and (ii) the issuance of the warrants to purchase
shares of Common Stock to SMH Capital at the Closing.
o. Share
Exchange
Agreement. Neither the Company nor OpCo may amend or waive any
provision of the Share Exchange Agreement without the consent of the Buyers
holding at least a majority of the number of Registrable Securities issued
and
issuable hereunder.
23
p. D&O
Insurance; Corporate
Governance. As soon as practicable, but in no event later than
90 days after the Closing Date, the Company shall (i) obtain directors and
officers insurance coverage for its directors and officers in coverage and
amounts determined reasonably sufficient by the Company's Board of Directors,
consistent with other similarly situated companies in the same industry and
(ii)
institute corporate governance procedures necessary to effect the listing of
the
Company's Common Stock on The NASDAQ Capital Market.
q. Integration. None
of the Company, their Subsidiaries, their affiliates and any Person acting
on
their behalf will take any action or steps referred to in Section 3(h) that
would require registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other
offerings.
r. Lock-Up. The
Company shall not amend or waive any provision of any of the Lock-Up Agreements
(as defined below).
s. Issued
and Outstanding
Shares. For so long as any Purchaser holds any of the Securities,
the Company shall not reduce the number of shares of Common Stock issued and
outstanding or otherwise alter the capitalization of the Company in a manner
that would cause any of the Purchasers to own more than 4.99% of the issued
and
outstanding Common Stock.
5. REGISTER;
TRANSFER AGENT
INSTRUCTIONS.
a. Register. The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Units and the Common Shares and the Warrants
that comprise the Units in which the Company shall record the name and address
of the Person in whose name the Units, Common Shares and Warrants have been
issued (including the name and address of each transferee) and the number of
Warrant Shares issuable upon exercise of the Warrants held by such
Person. The Company shall keep the register open and available at all
times during business hours for inspection of any Buyer or its legal
representatives.
b. Transfer
Agent
Instructions. The Company shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, to issue certificates
or credit shares to the applicable balance accounts at The Depository Trust
Company ("DTC"),
registered in the name of each Buyer or its respective nominee(s), for the
Warrant Shares issued upon exercise of the Warrants in such amounts as specified
from time to time by each Buyer to the Company upon exercise of the Warrants
in
the form of Exhibit
D attached hereto (the "Irrevocable Transfer
Agent
Instructions"). The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
5(b), and stop transfer instructions to give effect to Section 2(g) hereof,
will
be given by the Company to its transfer agent, and that the Securities shall
otherwise be freely transferable on the books and records of the Company as
and
to the extent provided in this Agreement and the other Transaction
Documents. If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(f), the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in
such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the event that such sale, assignment or
transfer involves Warrant Shares sold, assigned or transferred pursuant to
an
effective registration statement or pursuant to Rule 144, the transfer agent
shall issue such Securities to the Buyer, assignee or transferee, as the case
may be, without any restrictive legend.
24
c. Breach. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this Section 5
will
be inadequate and agrees, in the event of a breach or threatened breach by
the
Company of the provisions of this Section 5, that a Buyer shall be entitled,
in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS
TO THE COMPANY'S
OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Units to each Buyer
at
the Closing is subject to the satisfaction, at or before the Closing Date,
of
each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its
sole
discretion by providing each Buyer with prior written notice
thereof:
a. Such
Buyer shall have executed each of the Transaction Documents to which it is
a
party and delivered the same to the Company.
b. Such
Buyer and each other Buyer shall have delivered to the Escrow Agent the Purchase
Price (less, in the case of Investcorp Interlachen Multi-Strategy Master Fund,
the amounts withheld pursuant to Section 4(g)) of the Units being purchased
by
such Buyer at the Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
c. The
representations and warranties of such Buyer shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date.
d. Contemporaneously
with the Closing, the transactions contemplated in the Share Exchange Agreement
shall have been consummated.
e. Buyers
shall have purchased Units representing not less than $10 million and not more
than $20 million of the aggregate Purchase Price.
25
7. CONDITIONS
TO EACH BUYER'S
OBLIGATION TO PURCHASE.
The
obligation of each Buyer hereunder to purchase the Units at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion
by
providing the Company with prior written notice thereof:
a. The
Company shall have duly executed and delivered to such Buyer (i) each of the
Transaction Documents and (ii) the Common Shares (allocated in such number
as
such Buyer shall request), being purchased by such Buyer at the Closing pursuant
to this Agreement, and (iii) the related Warrants (allocated in such amounts
as
such Buyer shall request) being purchased by such Buyer at the Closing pursuant
to this Agreement.
b. Such
Buyer shall have received the opinion of Sichenzia Xxxx Xxxxxxxx & Xxxxxxx
LLP, the Company's outside counsel, dated as of the Closing Date, in
substantially the form of Exhibit E
attached hereto.
c. The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
d. The
Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries
(including OpCo) in such entity's jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction, as of a date
within 10 days of the Closing Date.
e. The
Company shall have delivered to such Buyer a certificate evidencing the
Company's and OpCo's qualification as a foreign corporation and good standing
issued by the Secretary of State (or comparable office) of each jurisdiction
in
which the Company and OpCo conducts business, as of a date within 10 days of
the
Closing Date.
f. The
Company shall have delivered to such Buyer a certified copy of (i) the
Certificate of Incorporation as certified by the Secretary of State of the
State
of Nevada within ten (10) days of the Closing Date and (ii) the certificate
of
incorporation of OpCo as certified by the Secretary of State of the State of
Texas within ten (10) days of the Closing Date.
g. The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company's Board
of
Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit F.
h. The
representations and warranties of the Company shall be true and correct in
all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
(after giving effect to the transactions contemplated hereby to occur at the
Closing, including without limitation, the Share Exchange) as though made at
that time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such specified date) and the Company
shall have performed, satisfied and complied in all material respects with
the
covenants, agreements and conditions required by the Transaction Documents
to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. Such Buyer shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested
by
such Buyer in the form attached hereto as Exhibit
G.
26
i. The
Company shall have delivered to such Buyer a letter from the Company's transfer
agent certifying the number of shares of Common Stock outstanding as of a date
within five days of the Closing Date.
j. The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B)
by
falling below the minimum listing maintenance requirements of the Principal
Market, if any.
k. The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.
l. Each
of
Xxxx Xxxxxxx, Xxxxxxx Xxxxxxxxxxx, Xxxx Sudderith, Xxxxx Xxxx and Xxxx Xxxxxxx
shall have entered into a Lock-Up Agreement in the form attached hereto as
Exhibit H (the "Lock-Up
Agreements").
m. Contemporaneously
with the Closing, the transactions contemplated by the Share Exchange Agreement
shall have been consummated and none of the conditions to closing contained
in
the Share Exchange Agreement shall have been waived or amended unless the Buyers
holding at least a majority of the number of Registrable Securities issued
and
issuable hereunder shall have approved such waiver or amendment.
n. Buyers
shall have purchased Units representing not less than $10 million and not more
than $20 million of the aggregate Purchase Price.
o. There
shall not have developed, occurred, or come into effect or existence after
the
date hereof any change, or any development involving a prospective change,
in or
affecting the position of the Company or OpCo, financial or otherwise, that
has
had, or would be expected to have, a Material Adverse Effect on the Company's
or
OpCo’s general affairs, management, financial condition, shareholders’ equity or
results of operations.
p. The
financing documents securing a senior debt facility reasonably satisfactory
to
the Buyers and attached hereto as Exhibit I shall have
been executed by Pegasi Energy Resources Corporation and the other parties
thereto.
27
q. The
Company shall have delivered to such Buyer such other customary documents
relating to the transactions contemplated by this Agreement as such Buyer or
its
counsel may reasonably request.
8. TERMINATION. In
the event that the Closing shall not have occurred with respect to a Buyer
on or
before December 31, 2007 due to the Company's or such Buyer's failure to satisfy
the conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching
party
at the close of business on such date without liability of any party to any
other party, except as set forth below; provided, however, if this Agreement
is
terminated pursuant to this Section 8, the Company shall remain obligated to
reimburse the non-breaching Buyers for the amounts described in Section 4(g)
above.
9. MISCELLANEOUS.
a. Governing
Law; Jurisdiction;
Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed
by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York
or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by
law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,
A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
b. Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
c. Headings. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
28
d. Severability.
If any
provision of this Agreement is prohibited by law or otherwise determined to
be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does
not
substantially impair the respective expectations or reciprocal obligations
of
the parties or the practical realization of the benefits that would otherwise
be
conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).
e. Entire
Agreement;
Amendments. This Agreement and the other Transaction Documents
supersede all other prior oral or written agreements between the Buyers, the
Company, their affiliates and Persons acting on their behalf with respect to
the
matters discussed herein, and this Agreement, the other Transaction Documents
and the instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable hereunder, and any amendment to
this
Agreement made in conformity with the provisions of this Section 9(e) shall
be
binding on all Buyers and holders of Securities as applicable. No
provision hereof may be waived other than by an instrument in writing signed
by
the holders of at least two thirds (2/3) of the aggregate number of Registrable
Securities issued and issuable hereunder. No such amendment shall be
effective to the extent that it applies to less than all of the holders of
the
applicable Securities then outstanding. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification
of
any provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents, and the
holders of the Warrants. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of
the
transactions contemplated by the Transaction Documents except as set forth
in
the Transaction Documents. Without limiting the foregoing, the
Company confirms that, except as set forth in this Agreement, no Buyer has
made
any commitment or promise or has any other obligation to provide any financing
to the Company or otherwise.
f. Notices. Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day after deposit with an overnight courier
service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications
shall be:
29
If
to the
Company:
#507,
0000 Xxxx Xxxxx Xxxxxx, Xxxxx #000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile:
(000) 000-0000
Attention: Xxxxxx
Xxxx, President
Copy
to:
Sichenzia
Xxxx Xxxxxxxx & Xxxxxxx LLP
00
Xxxxxxxx
Xxx
Xxxx,
XX 00000
Telephone:
000-000-0000
Facsimile:
212-930-9725
Attention:
Xxxxx X. Xxxxxxxxx
If
to the
Transfer Agent:
Xxxxxxxx
Stock Transfer, Inc.
0000
X
00xx
Xxxxx
Xxxxxxxxxx,
XX, 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
If
to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer's representatives as set forth on the Schedule of
Buyers,
Copy
(for
informational purposes only) to:
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxx, Esq.
or
to
such other address and/or facsimile number and/or to the attention of such
other
Person as the recipient party has specified by written notice given to each
other party five days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively; provided however that the foregoing clause (B) shall only be
valid
if such communication contained in the facsimile is delivered by an overnight
courier service within 24 hours of the transmission of facsimile.
30
g. Successors
and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including
any purchasers of the Common Shares or the Warrants. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the holders of at least a majority of the aggregate
number of Registrable Securities issued and issuable hereunder, including by
way
of a Fundamental Transaction (unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth in the
Warrants). A Buyer may assign some or all of its rights hereunder
without the consent of the Company, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights
h. No
Third Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and
is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
i. Survival. Unless
this Agreement is terminated under Section 8, the representations and warranties
of the Company and the Buyers contained in Sections 2 and 3 and the agreements
and covenants set forth in Sections 4, 5, 8 and 9 shall survive the
Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents,
as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. Indemnification. In
consideration of each Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of
the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder
of
the Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or
any other certificate, instrument or document contemplated hereby or thereby
or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought
on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status
of
such Buyer or holder of the Securities as an investor in the Company pursuant
to
the transactions contemplated by the Transaction Documents. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment
and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law. Except as otherwise set forth herein, the mechanics
and procedures with respect to the rights and obligations under this Section
9(k) shall be the same as those set forth in Section 6 of the Registration
Rights Agreement.
31
l. No
Strict
Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.
m. Remedies. Each
Buyer and each holder of the Securities shall have all rights and remedies
set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract
and
all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security),
to
recover damages by reason of any breach of any provision of this Agreement
and
to exercise all other rights granted by law. Furthermore, the Company
recognizes that in the event that it fails to perform, observe, or discharge
any
or all of its obligations under the Transaction Documents, any remedy at law
may
prove to be inadequate relief to the Buyers. The Company therefore
agrees that the Buyers shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages and without posting a bond or other security.
n. Rescissionand
Withdrawal
Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Buyer exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Buyer may rescind
or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
o. Payment
Set
Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation,
any
bankruptcy law, foreign, state or federal law, common law or equitable cause
of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued
in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
32
p. Independent
Nature of
Buyers' Obligations and Rights. The obligations of each Buyer
under any Transaction Document are several and not joint with the obligations
of
any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall
be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group, and the Company will not assert any such claim
with respect to such obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges that the Buyers are not
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company
acknowledges and each Buyer confirms that it has independently participated
in
the negotiation of the transaction contemplated hereby with the advice of its
own counsel and advisors. Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitation,
the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose.
[Signature
Page Follows]
33
IN
WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Securities
Purchase Agreement to be duly executed as of the date first written
above.
| MAPLE MOUNTAIN EXPLORATIONS INC. | |||
|
|
By:
|
/s/ | |
| Name | |||
| Title | |||
34
IN
WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Securities
Purchase Agreement to be duly executed as of the date first written
above.
| BUYERS: | |||
|
|
By:
|
/s/ | |
| Name | |||
| Title | |||
35
IN
WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Securities
Purchase Agreement to be duly executed as of the date first written
above.
| OTHER BUYERS: | |||
|
|
By:
|
/s/ | |
| Name | |||
| Title | |||
36
SCHEDULE
OF BUYERS
| Buyer |
Address
and
|
Number of Units | Purchase Price |
Legal
Representative’s Address
|
| Facsimile Number | and Facsimile Number |
Investcorp
Interlachen
Multi-Strategy
Master Fund
Enable
Opportunity Partners LP
Enable
Growth Partners LP
Xxxxxx
X.
Maciolski
Aton
Balanced Fund Ltd.
Aton
Ventures Fund Ltd.
Asset
Protection Fund Ltd.
Xxxxx
Xxxx
CJL
Family Trust
Xxx
Xxxxxx
Xxxxxxx
Xxxxx
HSBC
Private Bank Monaco
Castlerigg
Master Investments Ltd.
Centrum
Bank AG VADUZ
XX
Xxxxxxxx, Zurich
Xxx.
Xxxxxxxxx Jr + CIE
Xxxxxxx
X
Xxxxxx
Xxx
Xxxx
and Xxxxx Xxxx Living Trust
Xxxxxx
X.
Xxxxxxxxxx
Xxxxxxx
Xxxxxxx
Xxxxxxx
Xxxxxxx
Xxx
Xxxx
Xxxxx
Habib
Bank AG Zurich
Xxxx
Xxxxxxx
Xxxxxxx
Xxxxxxx
Xxxxxx
Xxxx
Pie
Investments
W.L.C.P
Corp
Xxxxxxxx
Xxxxxxxx
Xxxxxxx
X. Xxxxxx
Xxxxx
and
Xxxxxx Xxxx
Xxxxxx
Bank Zeurich
Xxxxxx
Long
Titan
Investments Corp.
Xxxxxx
Xxxxxxxx
Xxxxxxx
Xxxxxxxx
Xxxxx
Xxxxxxx
Xxxx
Xxxxxxx
Xxxxxxxxx
Xxxxxxx
Xxxxxxx
Xxxxxx
Xxxxxx
Xxxxxxxx
Xxxx
Xxxxxxxx
Xxx
Xxxxxx
Miles
Xxxx
Xxx
Xxxxxxx
Xxxxx
Xxxxxx
Xxxx
Xxxxxx
37
EXHIBITS
Exhibit
A
Form of Warrants
Exhibit
B
Form of Registration Rights Agreement
Exhibit
C
Form of Escrow Agreement
Exhibit
D
Irrevocable Transfer Agent Instructions
Exhibit
E
Form of Company Counsel Opinion
Exhibit
F
Form of Secretary's Certificate
Exhibit
G
Form of Officer's Certificate
Exhibit
H
Form of Lock-Up Agreement
Exhibit
I
Financing Agreement
38
