NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT, dated as of December 21, 2005, by and among
Integrated Technologies & Systems, Inc., a British Virgin Islands company
("Seller"), Sigma Opportunity Fund, LLC, a Delaware limited liability company
("Purchaser"), and Integrated Data Corp., a Delaware corporation ("IDC").
WHEREAS, Seller is the beneficial owner of a Promissory Note (the "Note"),
dated February 1, 2005, in the aggregate principal amount of $600,000, which
Note is convertible into 7,500,000 shares (the "Datawave Shares") of common
stock ("Common Stock") of Datawave Systems Inc. (the "Company");
WHEREAS, IDC, an affiliate of the Company, acquired the Note from the
Company for investment without a view to distribution in partial consideration
of the termination of a license to certain of the intellectual property of the
Company;
WHEREAS, Seller, an affiliate of IDC, acquired the Note from IDC for
investment without a view to distribution in consideration of the repayment of
certain loans made from Seller to IDC;
WHEREAS, subsequent to the acquisition of the Note by Seller from IDC, the
Company requested Seller to transfer the Note to Purchaser;
WHEREAS, Seller and IDC believe that it is in the best interest of the
Company, IDC and Seller to transfer the Note to Purchaser;
WHEREAS, the Seller now desires to sell to Purchaser and Purchaser
desires to purchase from the Seller the Note on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. Sale of Note.
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1.1. Sale and Purchase of Note. At the Closing, upon the terms and subject
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to the conditions contained in this Agreement, Seller shall sell to Purchaser
and Purchaser shall purchase from Seller all right, title and interest in and to
the Note for a purchase price of ONE MILLION FIVE HUNDRED THOUSAND ($1,500,000)
DOLLARS (the "Purchase Price"). In the event that the Datawave Shares become
registered for resale by Purchaser, Purchaser shall pay to Seller an additional
$475,000 within twenty days after the effectiveness of the registration
statement registering such shares for resale (the "Contingent Purchase Price")
1.2. Closing. The closing of the sale and purchase of the Note shall take
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place simultaneously with the execution and delivery of this Agreement at the
offices of Xxxxxxxx & Xxxxx, LLP at 000 Xxxxxxx Xxxxxxxxxx, Xxxxxxx, Xxx Xxxx
00000, or at such other time and place as Purchaser and Seller shall mutually
agree (the "Closing").
1.3. Deliveries at the Closing. At the Closing:
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(a) Purchaser shall deliver the Purchase Price to Seller by wire transfer
to such account as Seller may designate to Purchaser prior to the Closing.
(b) Seller shall deliver to Purchaser (i) the Note, together with an
assignment thereof assigning the Note to Purchaser, and (ii) an opinion of
Seller's counsel as to the availability of an exemption from the registration
requirements under the Securities Act of 1933 (the "Securities Act") in the form
mutually agreed.
(c) The Company and Purchaser shall execute and deliver a Registration
Rights Agreement (the "Registration Rights Agreement") in the form mutually
agreed.
Section 2. Representations and Warranties of Purchaser.
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Purchaser hereby represents and warrants to Seller as follows:
2.1. Authorization. Purchaser has all requisite corporate power and
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authority to execute, deliver and perform this Agreement and the transactions
contemplated hereby, and the execution, delivery and performance by Purchaser of
this Agreement has been duly authorized by all requisite action by Purchaser and
this Agreement, when executed and delivered by Purchaser, constitutes a valid
and binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
2.2. Investment Representations. Purchaser hereby represents and warrants
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to Seller as follows:
(a) Available Information. Purchaser acknowledges that it is familiar
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with the business, management, operations, financial condition and affairs of
the Company and is therefore able to evaluate the merits and risks of a purchase
of the Note.
(b) Restricted Securities. Purchaser understands and agrees that, when
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acquired by the Purchaser pursuant to the Agreement, the Note will be restricted
within the meaning of the Securities Act, and may not be sold, transferred or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom.
(c) Legend. Purchaser understands and acknowledges that the Note and
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the certificates representing the Datawave Shares upon conversion of the Note
shall bear a legend substantially as follows until (i) such securities shall
have been registered under the Act; or (ii) in the opinion of counsel for the
Company such securities may be sold without registration under the Securities
Act as well as any applicable "Blue Sky" or state securities laws:
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
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AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES
SECURITIES LAWS, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION
OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
(d) Investment. The Note and, until effectiveness of a registration
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statement registering the Datawave Shares for resale by Purchaser, any Datawave
Shares to be acquired by Purchaser, will be acquired for investment purposes
only for Purchaser's own account and not with a view to the distribution
thereof.
(e) Accredited Investor. Purchaser is an "Accredited Investor" as that
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term is defined in Rule 501 of Regulation D promulgated under the Securities
Act. Purchaser is able to bear the economic risk of the purchase of the Note
pursuant to the terms of this Agreement, including a complete loss of
Purchaser's investment in the Note.
(f) Financial Experience. The Purchaser represents that by reason of
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Purchaser's business or financial experience or the business or financial
experience of Purchaser's professional advisors who are unaffiliated with and
who are not compensated by either Seller or the Company or any affiliate or
selling agent of either Seller or the Company, directly or indirectly, Purchaser
has the capacity to protect Purchaser's own interests in connection with the
transactions contemplated by this Agreement.
Purchaser understands that the foregoing representations and warranties are
to be relied upon by Seller as a basis for exemption of the sale of the Note
under the Securities Act and under the securities laws of all applicable states
and for other purposes. Purchaser warrants that the information provided to
Seller is true and correct as of the date hereof.
Section 3. Representations and Warranties and Covenants of Seller and IDC.
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Seller and IDC hereby jointly and severally represent, warrant and covenant
to Purchaser as follows:
3.1. Ownership of Note. The Note is solely owned by Seller, beneficially
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and of record, free and clear of any and all liens, encumbrances, claims,
charges and assessments, and Seller has the full and sole right, power and
authority to sell, transfer and deliver the Note. The Note is not subject to any
options or contractual restrictions with respect to transferability.
3.2. Authorization. Seller and IDC each have all requisite corporate power
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and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereby, and the execution, delivery and performance by
Seller and IDC of this Agreement has been duly authorized by all requisite
action by Seller and IDC and this Agreement, when executed and delivered by
Seller and IDC, constitutes a valid and binding obligation of Seller and IDC,
enforceable against Seller and IDC in accordance with its terms, subject to
applicable
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bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
3.3. Approvals and Consents. No action, approval, consent or authorization,
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including, but not limited to, any action, approval, consent or authorization by
any governmental or quasi-governmental agency, commission, board, bureau, or
instrumentality is necessary or required as to Seller or IDC in order to
constitute this Agreement as a valid, binding and enforceable obligation of
Seller and IDC in accordance with its terms.
3.4 Board of Directors. It is contemplated that a designee of Purchaser
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will be nominated to the Board of Directors of the Company. IDC and Seller
acknowledge that, absent a reasonable basis to vote otherwise, each will vote
the shares of Common Stock held by them in favor of the nominees to the board of
directors recommended by management of the Company.
3.5 Guarantee. In the event that the Note is for any reason required to be
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transferred back to Seller or the Datawave Shares underlying the Note for any
reason unable to be registered for resale by Purchaser, IDC, or another party
designated by IDC and acceptable to Purchaser, shall transfer or cause to be
transferred to Purchaser 7,500,000 shares of Common Stock (subject to adjustment
for stock splits, stock dividends, reorganizations and the like) which may be
transferred to Purchaser pursuant to an appropriate exemption under the
Securities Act and that may be registered for resale by Purchaser. Upon such
transfer of shares, Purchaser shall transfer the Note back to Seller. The party
transferring such shares, if other than Seller, shall be entitled to receive
from Seller a proportionate amount of the Purchase Price paid by Purchaser to
Seller and the Contingent Purchase Price to be paid by Purchaser. IDC agrees
that, until such time as the Datawave Shares are registered for resale by
Purchaser, it shall retain a minimum of 7,500,000 shares of Common Stock
(subject to adjustment as provided above) that would be so transferable to
Purchaser.
3.6 Registration Expenses. Seller agrees that it shall pay all of the
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out-of-pocket expenses of the Company incurred in connection with preparation
and filing of the registration statement to be filed pursuant to the
Registration Rights Agreement and any amendments or supplements thereto.
Section 4. Indemnification.
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(a) Seller and IDC agree to indemnify and hold harmless Purchaser (and
its officers, employees, partners, agents, affiliates and controlling parties)
from and against any and all losses, liabilities, damages, claims, suits,
actions, judgments or causes of action, assessments, costs and expenses,
including without limitation interest, penalties, reasonable attorneys' fees,
any and all reasonable expenses incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation, asserted against, resulting to, imposed upon, or incurred or
suffered by Purchaser, as a result of third party claims resulting or arising
from any inaccuracy in or breach or nonfulfillment of or any alleged inaccuracy
in or breach or nonfulfillment of any of
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the representations, warranties, covenants or agreements made by Seller or IDC
in this Agreement; provided, however, that the indemnity agreement contained in
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this Subsection 4(a) shall not apply to amounts paid in settlement of any such
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loss, claim, damage, liability, or action if such settlement is effected without
the consent of Seller or IDC (which consent shall not be unreasonably withheld,
conditioned or delayed).
(b) Purchaser agrees to indemnify and hold harmless Seller and IDC
(and its officers, employees, partners, agents, affiliates and controlling
parties) from and against any and all losses, liabilities, damages, claims,
suits, actions, judgments or causes of action, assessments, costs and expenses,
including without limitation interest, penalties, reasonable attorneys' fees,
any and all reasonable expenses incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation, asserted against, resulting to, imposed upon, or incurred or
suffered by Seller or IDC as a result of third party claims resulting or arising
from any inaccuracy or any alleged inaccuracy in or breach or nonfulfillment of
any of the representations, warranties, covenants or agreements made by the
Purchaser in this Agreement, provided, however, that the indemnity agreement
contained in this Subsection 4(b) shall not apply to amounts paid in settlement
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of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Purchaser (which consent shall not be
unreasonably withheld, conditioned or delayed).
Section 5. Brokers and Finders.
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No party hereto shall be obligated to pay any commission, brokerage fee or
finder's fee based on any alleged agreement or understanding between any such
party and a third person in respect of the transactions contemplated hereby.
Each party hereto hereby agrees to indemnify the other against any claim by any
third person for any commission, brokerage or finder's fee or other payment with
respect to this Agreement or the transactions contemplated hereby based on any
alleged agreement or understanding between such party and such third person,
whether express or implied from the actions of such party.
Section 6. Recitals Incorporated.
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The recitals of this Agreement are incorporated herein by this reference
and made a material part of this Agreement. IDC and Seller severally covenant,
as such recitals relate to them, that the recitals are a true and complete
description of the events leading to the sale of the Note hereunder.
Section 7. Successors and Assigns.
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This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns.
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Section 8. Entire Agreement.
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This Agreement, including any and all exhibits and schedules hereto,
contains the entire understanding of the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings among the
parties with respect thereto.
Section 9. Notices.
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All notices, demands and requests of any kind to be delivered to any party
in connection with this Agreement shall be in writing and shall be deemed to
have been duly given if personally delivered or if sent by
internationally-recognized overnight courier or by registered or certified mail,
return receipt requested and postage prepaid, addressed as follows:
(a) if to Purchaser, to:
Sigma Opportunity Fund, LLC
c/o Sigma Capital Advisors, LLC
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxx Xxxx
with a copy to:
Xxxxxxxx & Xxxxx, LLP
000 Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
(b) if to Seller, to:
Integrated Technologies & Systems Ltd.
The London Representatives Offices
Sungold Administration, Suite 4, 1st Floor,
0 Xxxxx Xxxxxx
Xxxxxx. XX00 0XX. Xxxxxx Xxxxxxx
Telecopier: 44 20 8875 1856
Attention : Xxxx Xxxxxxx
with a copy to:
Xxxxxx & Xxxxxx, LLP
000 Xxxxx 0 Xxxxx, Xxxxx 000
0
Xxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxx Xxxxxx, Esq.
(c) If to IDC, to:
Integrated Data Corp.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000-0000
Telecopier: 000-000-0000
Attention: Xxxxx X. Xxxxx
or to such other address as the party to whom notice is to be given may have
furnished to the other parties to this Agreement in writing in accordance with
the provisions of this Section. Any such notice or communication shall be deemed
to have been received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of nationally-recognized overnight courier, on the
next business day after the date when sent and (iii) in the case of mailing, on
the third business day following that on which the piece of mail containing such
communication is posted.
Section 10. Amendments.
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This Agreement may not be modified or amended, or any of the provisions of
this Agreement waived, except by written agreement of all parties hereto.
Section 11. Governing Law; Waiver of Jury Trial.
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(a) All questions concerning the construction, interpretation and
validity of this Agreement shall be governed by and construed and enforced in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether in the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York. In furtherance of the
foregoing, the internal law of the State of New York will control the
interpretation and construction of this Agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily or necessarily apply.
(b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS
RELATED HERETO.
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Section 12. Submission to Jurisdiction.
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Any legal action or proceeding with respect to this Agreement may be
brought in the courts of the State of New York and the United States of America
located in the City of New York, New York and, by execution and delivery of this
Agreement, the parties hereby accept for themselves and in respect of their
properties, generally and unconditionally, the jurisdiction of the aforesaid
courts. The parties hereby irrevocably waive, in connection with any such action
or proceeding, any objection, including, without limitation, any objection to
the venue or based on the grounds of forum non conveniens, which they may now or
hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions. The parties hereby irrevocably consent to the service
of process of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to them at the address set forth herein.
Section 13. Severability.
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It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 14. Counterparts.
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This Agreement may be executed in any number of counterparts, and each such
counterpart of this Agreement shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement. Facsimile
counterpart signatures to this Agreement shall be acceptable and binding.
Section 15. Headings.
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The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 16. Expenses.
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Each party hereto shall pay its own expenses incurred in the preparation,
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby and thereby, including without limitation
expenses for legal and accounting services; provided, however, Seller hereby
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agrees to reimburse Purchaser in the amount of $75,000 for its expenses
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incurred in connection with the purchase of the Note. Such amount may be
withheld from the Contingent Purchase Price.
Section 17. Survival.
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The warranties, representations, and covenants of Seller, IDC and Purchaser
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing and shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of
Purchaser or Seller.
Section 18. Further Assurances.
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From and after the date of this Agreement, the parties agree to execute and
deliver any additional documents, instrument and other writings as may be
reasonably necessary to effect the transfer of the Note from the Seller to the
Purchaser, including any documents required by the Company's counsel.
Section 19. Preparation of Agreement.
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Each party to this Agreement acknowledges that: (i) the party had the
advice of, or sufficient opportunity to obtain the advice of, legal counsel
separate and independent of legal counsel for any other party hereto; (ii) the
terms of the transactions contemplated by this Agreement are fair and reasonable
to such party; and (iii) such party has voluntarily entered into the
transactions contemplated by this Agreement without duress or coercion. Each
party further acknowledges that such party was not represented by the legal
counsel of any other party hereto in connection with the transactions
contemplated by this Agreement, nor was it under any belief or understanding
that such legal counsel was representing its interests. Each party agrees that
no conflict, omission or ambiguity in this Agreement, or the interpretation
thereof, shall be presumed, implied or otherwise construed against any other
party to this Agreement on the basis that such party was responsible for
drafting this Agreement.
* * * * *
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IN WITNESS WHEREOF, each of the undersigned has duly executed this Note
Purchase Agreement as of the date first written above.
INTEGRATED TECHNOLOGIES & SYSTEMS LTD.
By: /s/Xxxx Xxxxxxx
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Name: Xxxx Xxxxxxx
Title: President & CEO
SIGMA OPPORTUNITY FUND, LLC
By: Sigma Capital Advisors, LLC, managing member
By:/s/Xxxx Xxxx
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Name: Xxxx Xxxx
Title: Manager
INTEGRATED DATA CORP.
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President & CEO
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