SECURITIES PURCHASE AGREEMENT
Exhibit
4.1
THIS SECURITIES PURCHASE AGREEMENT
(this “Agreement”), dated as
of April 30, 2008, by and among DNC Multimedia Corporation a Georgia
corporation, with headquarters located at 000 Xxxxxxxx Xxxxxx, 0xx Xxxxx,
Xxxx Xxxx, XX 00000 (the “Company”), and the
Buyers listed on Schedule I attached hereto (individually, a “Buyer” or
collectively “Buyers”).
WITNESSETH:
WHEREAS, the Company and the
Buyer(s) are executing and delivering this Agreement in reliance upon an
exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation D”) as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the
Securities Act of 1933, as amended (the “1933 Act”);
and
WHEREAS,
the Company acknowledges that the Company is in default under the securities
purchase agreement entered into between it and the Buyer(s) on November 30, 2007
and the debentures issued to Buyer(s) thereunder (collectively with the
ancillary transaction documents entered on the same date, the “First Transaction
Documents”); and
WHEREAS,
the Company further acknowledges that the Buyer(s) have issued a default notice
under the First Transaction Documents, that the period for cure has passed and
that despite entering into this Agreement and the Transaction
Documents, the Buyer(s) are not waiving any rights under the First Transaction
Documents; and
WHEREAS,
the joint disbursement instructions which will be issued pursuant to this
Agreement and the Transaction Documents will provide that Company’s net proceeds
of the Purchase Price will only be disbursed to the Company’s attorneys and
auditors so that the Company’s outstanding SEC filings will be finished;
and
WHEREAS,
upon completion of the above referenced SEC filings, the Company’s current
officers and directors will sign and submit such filings to the SEC;
and
WHEREAS, based on the
foregoing, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Buyer(s), as provided
herein, and the Buyer(s) shall purchase Three Hundred Thousand Dollars
($300,000) of secured convertible debentures (the “Convertible
Debentures”), which shall be convertible into shares of the Company’s
common stock, par value $0.001 (the “Common Stock”) (as
converted, the “Conversion Shares”)
of which One Hundred Seventy-Five Thousand Dollars ($175,000) shall be funded on
the date hereof (the “First Closing”)
and One Hundred Twenty-Five Thousand Dollars ($125,000) shall be
funded on the earlier of: (i) one hundred and fifty (150) days from the date
hereof and (ii) the Company’s receipt of a second purchase order (the “Second Closing”)
(each individually referred to as a “Closing” collectively
referred to as the “Closings”) for a
total purchase price of Three Hundred Thousand Dollars ($300,000), (the “Purchase Price”) in
the respective amounts set forth opposite each Buyer(s) name on Schedule I (the
“Subscription
Amount”); and
WHEREAS, contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement substantially in the
form attached hereto as Exhibit A (the “Investor Registration Rights
Agreement”) pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
there under, and applicable state securities laws; and
WHEREAS, the proceeds of the
sale of the Convertible Debentures contemplated hereby shall be held in escrow
pursuant to the terms of an escrow agreement substantially in the form of the
Escrow Agreement attached hereto as Exhibit B (the “Escrow Agreement”);
and
WHEREAS, contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering Irrevocable Transfer Agent Instructions substantially
in the form attached hereto as Exhibit C (the “Irrevocable Transfer Agent
Instructions”); and
WHEREAS, contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Security Agreement substantially in the form attached
hereto as Exhibit
D (the “Security Agreement”)
pursuant to which the Company has agreed to provide the Buyer a security
interest in Pledged Collateral (as this term is defined in the Security
Agreement dated the date hereof) to secure Company’s obligations under this
Agreement, the Convertible Debenture, the Investor Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions and the Security
Agreement (collectively, the “Transaction Documents”) or any other obligations
of the Company to the Buyer; and
NOW, THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:
1. PURCHASE AND SALE OF
CONVERTIBLE DEBENTURES.
(a) Purchase of Convertible
Debentures. Subject to the satisfaction (or waiver) of the
terms and conditions of this Agreement, each Buyer agrees, severally and not
jointly, to purchase at Closing (as defined herein below) and the Company agrees
to sell and issue to each Buyer, severally and not jointly, at Closing,
Convertible Debentures in amounts corresponding with the Subscription Amount set
forth opposite each Buyer’s name on Schedule I hereto. Upon execution
hereof by a Buyer, the Buyer shall wire transfer the Subscription Amount set
forth opposite his name on Schedule I in same-day funds or a check payable to
”Xxxxx X. Xxxxxxx XX, P.A. as Escrow Agent for Planetlink/Trafalgar Capital
Investment Fund”, which Subscription Amount shall be held in escrow pursuant to
the terms of the Escrow Agreement (as hereinafter defined) and disbursed in
accordance therewith. Notwithstanding the foregoing, a Buyer may
withdraw his Subscription Amount and terminate this Agreement as to such Buyer
at any time after the execution hereof and prior to the Closing (as hereinafter
defined).
(b) Closing
Date. The First Closing of the purchase and sale of the
Convertible Debentures shall take place at 10:00 a.m. Eastern Standard Time on
the date hereof, subject to notification of satisfaction of the conditions to
the Closing set forth herein and in Sections 6 and 7 below (or such later date
as is mutually agreed to by the Company and the Buyer(s)) (the “First Closing Date”), and the Second Closing of the purchase
and sale of the Convertible Debentures shall take place at 10:00 a.m. Eastern
Standard Time on the earlier to occur of: (i) one hundred and fifty (150)
days from the date hereof and (ii) the Company’s receipt of a second purchase
order, subject to notification of
satisfaction of the conditions to the Second Closing set forth herein and in
Sections 6 and 7 below (or such later date as is mutually agreed to by the
Company and the Buyer(s)) (the “Second
Closing Date”)
(collectively referred to a the “Closing
Dates”). The Closings shall
occur on their respective Closing Date at the offices of Xxxxx X. Xxxxxxx XX,
P.A., 0000 Xxxxxxxx Xxx, Xxxx Xxxxx, XX 00000 (or such other place as
is mutually agreed to by the Company and the Buyer(s)).
2
(c) Escrow
Arrangements; Form of Payment. Upon execution hereof by Buyer(s)
the
full amount of the portion of the Purchase Price
for the Convertible Debentures to be purchased in the Closing shall be
deposited in an escrow account with Xxxxx X. Xxxxxxx XX, P.A., as escrow agent
(the “Escrow Agent”), pursuant to the terms of the Escrow
Agreement. Such portion of the Purchase Price for the Convertible
Debentures to be purchased in the other Closings shall be deposited into the
Escrow Account prior to such applicable Closing Date. Subject to the
satisfaction of the terms and conditions of this Agreement, on the Closing
Dates, (i) the Escrow Agent shall deliver to the Company in accordance with the
terms of the Escrow Agreement that
portion
of the Escrow Funds (as that term is defined in the Escrow Agreement) equal to
the gross amount of the Convertible Debentures being
purchased by such Buyer(s)
as set forth on Schedule I (minus the fees and expenses as set
forth herein which shall be paid directly from the Escrow
Funds at the Closing)
by wire transfer of immediately available funds and (ii) the Company shall
deliver to each Buyer, Convertible Debentures which such Buyer(s) is purchasing
in amounts indicated opposite such Buyer’s name on Schedule I, duly executed on
behalf of the Company.
(d) “Closing
Date Exchange Rate” means the Euro to US dollar spot exchange rate as converted
by the Investor's Custodian on the date funds are transferred into
escrow..
(e)
“Repayment
Exchange Rate” means in relation to
each date of a Conversion Notice or date of a Redemption Notice, the Euro to US dollar spot
exchange rate as quoted in Bloomberg or Proquote on such
date.
(f) If on the
date of any Conversion Notice or Redemption Notice, the Repayment Exchange Rate
is more than the Closing Date Exchange Rate then the number of Shares to be
issued shall be increased by the same percentage as results from dividing the
Repayment Exchange Rate by the relevant Closing Date Exchange
Rate. By way of example, if the number of Shares to be issued in
respect of a particular Conversion Notice or Redemption Notice would, but for
this Clause 1(f), be 1,000 and if the Closing Date Exchange Rate is 1.75 and the
relevant Repayment Exchange Rate is 1.80, then 1,029 Shares will be issued in
relation to that Conversion Notice or Redemption Notice, as the case may
be. For the avoidance of doubt, the formula for such calculation, by
way of example for this Section equals ((1.80/1.75)-1)*1000 = 29 additional
shares.
(g) If
on the Repayment Date or any Interest Repayment Date, the Cash Payment Date
Exchange Rate, as defined below is more than the Closing Date Exchange Rate then
the amount of cash required to satisfy the amounts due at such time shall be
increased by the same percentage as results from dividing the Repayment Exchange
Rate by the relevant Closing Date Exchange Rate. “Cash Payment Date Exchange
Rate” means in relation to each
Repayment Date or Interest Repayment Date the Euro to US dollar spot
exchange rate as quoted in Bloomberg or Proquote on such date. By way
of example, if the amount of cash required to repay all amounts due on such date
would, but for this Clause 1(g), be $1,000 and if the Closing Date Exchange Rate
is 1.75 and the relevant Repayment Date Exchange Rate is 1.80 then the amount of
cash from the Cash Payment required to repay all amounts due on such date will
be $1,028.57. For the avoidance of doubt, the formula for such calculation, by
way of example for this Section equals ((180/1.75)-1)*$1000 = $28.57 additional
dollars.
3
(h) The Company
agrees that in the event Buyer(s) elect to convert any or all of the Convertible
Debentures, upon any such event, promptly, but in no event later than five (5)
days following receipt of a Conversion Notice, the Company shall cause the
delivery of the full amount of the Common Stock due to be issued to the
Holder. In the event that the shares are not delivered within ten
(10) days, the Company shall pay to the Holder a cash amount within three (3)
business days of the end of the month equal to two percent (2%) of the then
current outstanding face value of this Debenture as liquidated damages and not
as a penalty. The Company acknowledges that this failure to honor a
conversion notice is likely to cause material financial hardship to the
Holder. This failure to deliver shall constitute an event of default
under this Agreement, the Convertible Debentures and the Transaction Documents
which can only be cured at the option of the Holder.
2. BUYER’S REPRESENTATIONS AND
WARRANTIES.
Each
Buyer represents and warrants, severally and not jointly, that:
(a) Investment
Purpose. Each Buyer is acquiring the Convertible Debentures
and, upon conversion of Convertible Debentures, the Buyer will acquire the
Conversion Shares then issuable, for its own account for investment only 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 reserves the right to dispose of the Conversion Shares at any time in
accordance with or pursuant to an effective registration statement covering such
Conversion Shares or an available exemption under the 1933 Act.
(b) Accredited Investor
Status. Each Buyer is an “Accredited Investor”
as that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on
Exemptions. Each Buyer understands that the Convertible
Debentures 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 such securities.
(d) Information. Each
Buyer and its advisors and counsel, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
information deemed by such Buyer to be material to making an informed investment
decision regarding the purchase of the Convertible Debentures and the Conversion
Shares, which have been requested by such Buyer. Each Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management. 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 in Section 3
below. Each Buyer understands that its investment in the Convertible
Debentures and the Conversion Shares involves a high degree of
risk. Each Buyer is in a position regarding the Company, which, based
upon employment, family relationship or economic bargaining power, enabled and
enables such Buyer to obtain information from the Company in order to evaluate
the merits and risks of this investment. Each 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 Convertible
Debentures and the Conversion Shares.
4
(e) No Governmental
Review. Each 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 Convertible Debentures or the
Conversion Shares, or the fairness or suitability of the investment in the
Convertible Debentures or the Conversion Shares, nor have such authorities
passed upon or endorsed the merits of the offering of the Convertible Debentures
or the Conversion Shares.
(f) Transfer or
Resale. Each Buyer understands that except as provided in the
Investor Registration Rights Agreement: (i) the Convertible Debentures 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, or (B) such Buyer shall have delivered to
the Company an opinion of counsel selected by Buyer, in a generally acceptable
form, 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
requirements; (ii) any sale of such securities made in reliance on Rule 144
under the 1933 Act (or a successor rule thereto) (“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 such securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is 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 such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Company reserves the right to place stop
transfer instructions against the shares and certificates for the Conversion
Shares.
(g) Legends. Each
Buyer understands that the certificates or other instruments representing the
Convertible Debentures and or the Conversion Shares shall bear a restrictive
legend in substantially the following form (and a stop transfer order may
be placed against transfer of such stock certificates):
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 HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
5
The
legend set forth above shall be removed and the Company within two (2) business
days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the 1933 Act or (ii) in connection with a
sale transaction, after such holder provides the Company with an opinion of
counsel, which opinion shall be in form, substance and scope reasonably
acceptable to counsel for the Company, to the effect that a public sale,
assignment or transfer of the Conversion Shares may be made without registration
under the 1933 Act.
(h) Authorization,
Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
(i) Receipt of
Documents. Each Buyer and his or its counsel has received and
read in their entirety: (i) this Agreement and each representation,
warranty and covenant set forth herein, the Security Agreement, the Investor
Registration Rights Agreement, the Escrow Agreement, and the Irrevocable
transfer Agent Instructions; (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such representations,
warranties and covenants; and (iii) answers to all questions each Buyer
submitted to the Company regarding an investment in the Company; and each Buyer
has relied on the information contained therein and has not been furnished any
other documents, literature, memorandum or prospectus.
(j) Due Formation of Corporate
and Other Buyers. If the Buyer(s) is a corporation, trust,
partnership or other entity that is not an individual person, it has been formed
and validly exists and has not been organized for the specific purpose of
purchasing the Convertible Debentures and is not prohibited from doing
so.
(k) No Legal Advice From the
Company. Each Buyer acknowledges, that it had the opportunity
to review this Agreement and the transactions contemplated by this Agreement
with his or its own legal counsel and investment and tax
advisors. Each Buyer is relying solely on such counsel and advisors
and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
6
3. REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.
The
Company represents and warrants as of the date hereof and as of the Closing Date
to each of the Buyers that:
(a) Organization and
Qualification. The Company and its subsidiaries are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power 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 corporation to do business and is in good standing in
every jurisdiction in which 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 have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(b) Authorization, Enforcement,
Compliance with Other Instruments. (i) The Company has
the requisite corporate power and authority to enter into and perform the
Transaction Documents, and any related agreements, and to issue the Convertible
Debentures and the Conversion Shares in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents and any
related agreements by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Convertible Debentures, the Conversion Shares and the reservation
for issuance and the issuance of the Conversion Shares issuable upon conversion
or exercise thereof, have been duly authorized by the Company’s Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, (iii) the Transaction Documents and
any related agreements have been duly executed and delivered by the Company,
(iv) the Transaction Documents and any related agreements constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and
remedies. The Company knows of no reason why the Company cannot file
the registration statement as required under the Investor Registration Rights
Agreement or perform any of the Company’s other obligations to the
Buyer.
(c) Capitalization. The
authorized capital stock of the Company consists of 4,850,000,000 shares of
Common Stock, par value $0.001 per share, 150,000,000 shares of Preferred Stock,
par value $1.00 per share, and 50,000,000 shares of Series A Preferred Stock,
par value $0.001 per share. As of the date hereof, the Company has
45,965,063 shares of Common Stock and 3,010,334 shares of Series A Preferred
Stock issued and outstanding. All of such outstanding shares have
been validly issued and are fully paid and nonassessable. No shares
of Common Stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company. As of
the date of this Agreement, (i) 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, any shares of 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 shares of 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, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) 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) and (iv) there are no outstanding registration statements and there
are no outstanding comment letters from the SEC or any other regulatory
agency. There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Convertible Debentures as described in this Agreement. The
Company has furnished to the Buyer true and correct 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 By-laws, as in effect on the date
hereof (the “By-laws”), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants. [please update]
7
(d) Issuance of
Securities. The Convertible Debentures are duly authorized
and, when issued and paid for in accordance with the terms hereof, shall be duly
issued, fully paid and nonassessable, are free from all taxes, liens and charges
with respect to the issue thereof. The Conversion Shares issuable
upon conversion of the Convertible Debentures have been duly authorized and
reserved for issuance. Upon conversion or exercise in accordance with
the Convertible Debentures the Conversion Shares will be duly issued, fully paid
and nonassessable.
(e) No
Conflicts. The execution, delivery and performance of this
Agreement and the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby will not (i) result in a
violation of the Articles of Incorporation or the By-laws or (ii), to
the knowledge of the Company, conflict with or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and the rules and regulations of The National
Association of Securities Dealers Inc.’s OTC Bulletin Board on which the Common
Shares may be quoted) 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. To the best knowledge of the Company, neither the
Company nor its subsidiaries is in violation of any term of or in default under
its Articles of Incorporation or By-laws or their organizational charter or
by-laws, respectively, or, any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not
being conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under or contemplated by this Agreement in accordance
with the terms hereof. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof, except for any required post-Closing notice filings under applicable
United States federal or state securities laws, if any.
8
(f) SEC Documents: Financial
Statements. With the exception of the 10KSB for the year
ending December 31, 2007, the Company has filed or furnished, as applicable, all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC under of the Securities Exchange Act of 1934, as amended (the
“1934 Act”)
(all of the foregoing filed prior to the date hereof or amended after the date
hereof and all exhibits and schedules included therein and financial statements
and schedules thereto and documents incorporated by reference therein, being
hereinafter referred to as the “SEC
Documents”). The Company has delivered to the Buyers or their
representatives, or made available through the SEC’s website at
xxxx://xxx.xxx.xxx, true and complete copies of the SEC Documents. As
of their respective dates, the financial statements of the Company included in
the SEC Documents (the “Financial
Statements”) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such Financial Statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and, fairly
present in all material respects the financial position of the Company as of the
dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
(g) No Material Misstatement or
Omission. None of the Company’s SEC Documents at the time of
filing and none of the representation and warranties made in this Agreement or
any of the other Transaction Documents include any untrue statements
of material fact, nor do the Company’s SEC Documents at the time of filing and
none of the representations and warranties made in this Agreement or any of the
other Transaction Documents omit to state any material fact required to be
stated therein necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.
(h) Absence of
Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable
decision, ruling or finding would (i) have a material adverse effect on the
transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein,
or (iii) except as expressly disclosed in the SEC Documents, have a material
adverse effect on the business, operations, properties, financial condition or
results of operations of the Company and its subsidiaries taken as a
whole.
9
(i) Acknowledgment Regarding
Buyer’s Purchase of the Convertible Debentures. The Company
acknowledges and agrees that the Buyer(s) is acting solely in the capacity of an
arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the
Buyer(s) is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer(s) or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer’s purchase
of the Convertible Debentures or the Conversion Shares. The Company
further represents to the Buyer that the Company’s decision to enter into this
Agreement has been based solely on the independent evaluation by the Company and
its representatives.
(j) No General
Solicitation. Neither the Company, nor any of its affiliates,
nor 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 under
the 0000 Xxx) in connection with the offer or sale of the Convertible Debentures
or the Conversion Shares.
(k) No Integrated
Offering. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Convertible
Debentures or the Conversion Shares under the 1933 Act or cause this offering of
the Convertible Debentures or the Conversion Shares to be integrated with prior
offerings by the Company for purposes of the 1933 Act.
(l) Employee
Relations. Neither the Company nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened. None of the Company’s
or its subsidiaries’ employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are
good.
(m) Intellectual Property
Rights. The Company and its subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now
conducted. The Company and its subsidiaries do not have any knowledge
of any infringement by the Company or its subsidiaries of trademark, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service xxxx registrations, trade secret or other similar rights
of others, and, to the knowledge of the Company there is no claim, action or
proceeding being made or brought against, or to the Company’s knowledge, being
threatened against, the Company or its subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service xxxx registrations, trade secret or other infringement;
and the Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.
10
(n) Environmental
Laws. The Company and its subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”),
(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.
(o) Title. Any
real property and facilities held under lease by the Company and 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.
(p) 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 materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(q) Regulatory
Permits. The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, 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.
(r) Internal Accounting
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 accountability, and (iii)
the recorded amounts for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) No Material Adverse
Breaches, etc. Neither the Company nor any of its subsidiaries
is subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a material adverse
effect on the business, properties, operations, financial condition, results of
operations or prospects of the Company or its subsidiaries. Neither
the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company’s officers, has or is
expected to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
11
(t) Tax
Status. The Company and each of its subsidiaries has made and
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and (unless and
only to the extent that the Company and each of its subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) 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 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.
(u) Certain
Transactions. Except for arm’s length transactions pursuant to
which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties and other
than the grant of stock options disclosed in the SEC Documents, none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
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 officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(v) Fees and Rights of First
Refusal. The Company is not obligated to offer the securities
offered hereunder on a right of first refusal basis or otherwise to any third
parties including, but not limited to, current or former shareholders of the
Company, underwriters, brokers, agents or other third parties.
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. The Company agrees to file a Form D with respect to the
Conversion Shares 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 applicable Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Conversion Shares, or obtain an
exemption for the Conversion Shares 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, and shall provide evidence of any such action so
taken to the Buyers on or prior to the applicable Closing Date.
(c) Reporting
Status. Until the earlier of (i) the date as of which the
Buyer(s) may sell all of the Conversion Shares without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the
date on which (A) the Buyer(s) shall have sold all the Conversion Shares and (B)
none of the Convertible Debentures are outstanding (the “Registration
Period”), the Company shall file in a timely manner all reports required
to be filed with the SEC pursuant to the 1934 Act and the regulations of the SEC
thereunder, 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 otherwise permit such termination.
12
(d) Use of
Proceeds. The Company will use the net proceeds from the sale
of the Convertible Debentures for working capital purposes and the fulfillment
of its obligations under the Transaction Documents.
(e) Reservation of
Shares. The Company shall take all action reasonably necessary
to at all times have authorized, and reserved for the purpose of issuance, such
number of shares of Common Stock as shall be necessary to effect the issuance of
the Conversion Shares and the issuance of the shares upon exercise of the
Warrants (as defined below). If at any time the Company does not have
available such shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all of the Conversion Shares of the Company or the
issuance of all shares upon exercise of the Warrants, the Company shall file a
preliminary proxy statement with the Securities and Exchange Commission within
ten (10) business day and shall call and hold a special meeting of the
shareholders as soon as practicable after such occurrence, for the sole purpose
of increasing the number of shares authorized. The Company’s
management shall recommend to the shareholders to vote in favor of increasing
the number of shares of Common Stock authorized. Management shall
also vote all of its shares in favor of increasing the number of authorized
shares of Common Stock.
(f) Fees and
Expenses. Other than as set forth herein, each of the Company
and the Buyer(s) shall pay all costs and expenses incurred by such party in
connection with the negotiation, investigation, preparation, execution and
delivery of the Transaction Documents and any other documents relating to this
transaction.
(i) The
Company shall pay the Buyer a commitment fee of seven percent (7%) of the
Purchase Price paid, which shall be disbursed by the Escrow Agent from the
Escrow Funds and proportionally upon each Closing.
(ii) The
Company shall pay the Buyer a loan commitment fee of two percent (2%) of the
Purchase Price paid, which shall be disbursed by the Escrow Agent from the
Escrow Funds and proportionally upon each Closing.
(iii) The
Company has agreed to pay a legal and document review fee to Buyer of Fifteen
Thousand Dollars ($15,000), which shall be paid directly from the proceeds of
the Closing.
(iv) The Company shall issue to the Buyer a
warrant to purchase: Nine Million (9,000,000) shares of the Company’s
Common Stock for a period of five (2) years at an aggregate exercise price
equal to $0.001 (“Warrant”) The Warrants shall be issued in full at
the First Closing, shall have piggy back registration rights and customary
anti-dilution and anti-ratchet protection for two years from
issuance.
13
(g) Corporate
Existence. So long as any of the Convertible Debentures remain
outstanding, the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, reverse stock split consolidation, sale of all or
substantially all of the Company’s assets or any similar transaction or related
transactions (each such transaction, an “Organizational
Change”) unless, prior to the consummation an Organizational Change, the
Company obtains the written consent of each Buyer. In any such case,
the Company will make appropriate provision with respect to such holders’ rights
and interests to insure that the provisions of this Section 4(g) will thereafter
be applicable to the Convertible Debentures.
(h) Transactions With
Affiliates. So long as any Convertible Debentures are
outstanding, the Company shall not, and shall cause each of its subsidiaries not
to, enter into, amend, modify or supplement, or permit any subsidiary to enter
into, amend, modify or supplement any agreement, transaction, commitment, or
arrangement with any of its or any subsidiary’s officers or directors, or
persons who were officers or directors of the Company at any time
during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below) or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a five
percent (5%) or more beneficial interest (each a “Related Party”),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any investment in an Affiliate of the
Company, (c) any agreement, transaction, commitment, or arrangement
on an arms-length basis on terms no less favorable than terms which would have
been obtainable from a person other than such Related Party, or (d) any
agreement transaction, commitment, or arrangement which is approved by a
majority of the disinterested directors of the Company, for purposes hereof, any
director who is also an officer of the Company or any subsidiary of the Company
shall not be a disinterested director with respect to any such agreement,
transaction, commitment, or arrangement. “Affiliate” for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. “Control” or “controls” for
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity.
(i) Transfer
Agent. The Company covenants and agrees that, in the event
that the Company’s agency relationship with the transfer agent should be
terminated for any reason prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the new transfer agent execute and agree to be bound by the
terms of the Irrevocable Transfer Agent Instructions (as defined
herein).
(j) Restriction on Issuance of
the Capital Stock. So long as any Convertible Debentures are outstanding,
the Company shall not, without the prior written consent of the Buyer(s), (i)
issue or sell shares of Common Stock or Preferred Stock without consideration or
for a consideration per share less than the bid price of the Common Stock
determined immediately prior to its issuance, (ii) issue any preferred stock,
warrant, option, right, contract, call, or other security instrument granting
the holder thereof, the right to acquire Common Stock without consideration or
for a consideration less than such Common Stock’s bid price value determined
immediately prior to it’s issuance, (iii) enter into any security instrument
granting the holder a security interest in any and all assets of the Company
other than a security instrument that is subordinate to the interest of the
Buyer, or (iv) file any registration statement on Form S-8. In the
event that Buyer does provide its consent hereunder to issue any such securities
described under (i), (ii) or (iv) of this Section, the Fixed Price as defined in
the Convertible Debentures shall be equal to the lesser of: (a) the Fixed Price
as defined in the Convertible Debentures and (b) eighty-five percent (85%) of
the consideration paid per share for such security.
14
(k) Restriction on “Short”
Position. Neither the Buyer nor any of its affiliates have an
open short position in the Common Stock of the Company, and the Buyer agrees
that it shall not, and that it will cause its affiliates not to, engage in any
short sales with respect to the Common Stock as long as any Convertible
Debentures shall remain outstanding.
(l) Inventory
Purchase Order Receivable Financing. In the event the Company
requires Inventory Purchase Order Receivable Financing, upon mutual agreement of
the Company and the Buyer, the Buyer will provide such financing at then market
rates.
5. TRANSFER AGENT
INSTRUCTIONS.
The
Company shall issue the Irrevocable Transfer Agent Instructions to its transfer
agent irrevocably appointing Xxxxx X. Xxxxxxx XX, P.A. as its agent for purpose
of having certificates issued, registered in the name of the Buyer(s) or its
respective nominee(s), for the Conversion Shares representing such amounts of
Convertible Debentures as specified from time to time by the Buyer(s) to the
Company upon conversion of the Convertible Debentures, for interest owed
pursuant to the Convertible Debenture, and for any and all Liquidated Damages
(as this term is defined in the Investor Registration Rights
Agreement). Xxxxx X. Xxxxxxx XX, P.A. shall be paid a cash fee of One
Hundred Dollars ($100) for every occasion they act pursuant to the Irrevocable
Transfer Agent Instructions. The Company shall not change its
transfer agent without the express written consent of the Buyer(s), which may be
withheld by the Buyer(s) in its sole discretion. Prior to
registration of the Conversion Shares under the 1933 Act, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(g) hereof (in the case of the
Conversion Shares prior to registration of such shares under the 0000 Xxx) will
be given by the Company to its transfer agent and that the Conversion Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Investor Registration
Rights Agreement. Nothing in this Section 5 shall affect in any way
the Buyer’s obligations and agreement to comply with all applicable securities
laws upon resale of Conversion Shares. If the Buyer(s) provides the
Company with an opinion of counsel, in form, scope and substance customary for
opinions of counsel in comparable transactions and reasonably acceptable to the
Company’s counsel, to the effect that registration of a resale by the Buyer(s)
of any of the Conversion Shares is not required under the 1933 Act, the Company
shall within two (2) business days instruct its transfer agent to issue one or
more certificates in such name and in such denominations as specified by the
Buyer. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated
hereby. 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 the Buyer(s) shall be entitled, in
addition to all other available remedies, to an 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.
15
6. CONDITIONS TO THE COMPANY’S
OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Convertible Debentures
to the Buyer(s) at the Closings is subject to the satisfaction, at or before the
Closing Dates, 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:
(a) Each
Buyer shall have executed this Agreement and the Transaction Documents and
delivered the same to the Company.
(b) The
Buyer(s) shall have delivered to the Escrow Agent the Purchase Price for
Convertible Debentures in respective amounts as set forth next to each Buyer as
outlined on Schedule I attached hereto and the Escrow Agent shall have delivered
the net proceeds to the Company by wire transfer of immediately available U.S.
funds pursuant to the wire instructions provided by the Company.
(c) The
representations and warranties of the Buyer(s) shall be true and correct in all
material respects as of the date when made and as of the Closing Dates as though
made at that time (except for representations and warranties that speak as of a
specific date), and the Buyer(s) 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 the Buyer(s) at or
prior to the Closing Dates.
(d) The
Company shall have filed a form UCC-1 with regard to the Pledged Property and
Pledged Collateral as detailed in the Security Agreement dated the date hereof
and provided proof of such filing to the Buyer(s).
7. CONDITIONS TO THE BUYER’S
OBLIGATION TO PURCHASE.
The
obligation of the Buyer(s) hereunder to purchase the Convertible Debentures at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions:
(a) The
Company shall have executed this Agreement, the Convertible Debenture (in
such amounts as purchased by Buyer(s) hereunder) and the Transaction
Documents, and delivered the same to the Buyer(s).
16
(b) The
trading in the Common Shares on the OTCBB shall not have been suspended for any
reason.
(c) The
representations and warranties of the Company shall be true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Dates as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company 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 the
Company at or prior to the Closing Dates. If requested by the Buyer,
the Buyer shall have received a certificate, executed by the President of the
Company, dated as of the Closing Dates, to the foregoing effect and as to such
other matters as may be reasonably requested by the Buyer including, without
limitation an update as of the Closing Dates regarding the representation
contained in Section 3(c) above.
(d) The
Company shall have executed and delivered to the Buyer(s) the Convertible
Debentures in the respective amounts set forth opposite each Buyer(s) name on
Schedule I attached hereto.
(e) The
Buyer(s) shall have received an opinion of counsel from Xxxxxx
X. Emas, Attorney at Law as
counsel to the Company in a form satisfactory to the Buyer(s).
(f) The
Company shall have provided to the Buyer(s) a certificate of good standing from
the secretary of state from the state in which the Company is
incorporated.
(g) As
of the Closing Date, the Company shall have reserved out of its authorized and
unissued Common Stock, solely for the purpose of effecting the conversion of the
Convertible Debentures, shares of Common Stock to effect the conversion of all
of the Conversion Shares then outstanding.
(h) The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory to
the Buyer(s), shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(i) The
Company shall have provided to the Buyer(s) an acknowledgement, to the
satisfaction of the Buyer, from the Company’s independent certified
public accountants as to its ability to provide all consents required in
order to file a registration statement in connection with this
transaction.
(j) The
Company shall have filed a form UCC-1 or such other forms as may be required to
perfect the Buyer’(s’) interest in the Pledged Property and Pledged Collateral
as detailed in the Security Agreement dated the date hereof and provided proof
of such filing to the Buyer(s).
17
(k) Buyer’s
due diligence of the Company’s projected cash flow shall have been completed to
Buyer’s satisfaction.
(l) The
Company shall have hired an approved IR firm.
The
parties agree that the net proceeds of the purchase price shall be held in
escrowand shall only be disbursed upon approval from the
Buyer(s).
8. INDEMNIFICATION.
(a) In
consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder, and in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and each
other holder of the Convertible Debentures and the Conversion Shares, and all of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Buyer 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 Buyer 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 the Buyer Indemnitees or any of them 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 this Agreement, the
Convertible Debentures or the Investor Registration Rights Agreement 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
this Agreement, or the Investor Registration Rights Agreement 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 and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Indemnities, any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Convertible Debentures or the status of the
Buyer or holder of the Convertible Debentures the Conversion
Shares, as a Buyer of Convertible Debentures in the
Company. 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, which is permissible under applicable law.
(b) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Buyer’s other obligations under this Agreement, the Buyer
shall defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company Indemnitees”)
from and against any and all Indemnified Liabilities incurred by the Indemnitees
or any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, the Convertible Debentures or the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer, (b) any breach of any
covenant, agreement or obligation of the Buyer(s) contained in this Agreement,
the Convertible Debentures, the Investor Registration Rights Agreement or any
other certificate, instrument or document contemplated hereby or thereby
executed by the Buyer, or (c) any cause of action, suit or claim brought or made
against such Company Indemnitee based on material misrepresentations or due to a
material breach and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement, the Convertible Debentures, the
Investor Registration Rights Agreement or any other certificate instrument,
document or agreement executed pursuant hereto by any of the Company
Indemnities. To the extent that the foregoing undertaking by each
Buyer may be unenforceable for any reason, each Buyer shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
18
9. GOVERNING LAW:
MISCELLANEOUS.
(a) Governing
Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Florida without regard to the
principles of conflict of laws. The parties further agree that any
action between them shall be heard in Broward County, Florida and expressly
consent to the jurisdiction and venue of the State Court sitting in Broward
County, Florida and the United States District Court for the Southern District
of Florida for the adjudication of any civil action asserted pursuant to this
Paragraph.
(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. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause four (4)
additional original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery
hereof.
(c) Recitals and
Headings. The recitals of this Agreement are an
integral part of this Agreement and shall be incorporated herein as if made a
part of this Agreement. The headings of
this Agreement are for convenience of reference and shall not form part of, or
affect the interpretation of, this Agreement.
(d) Severability. If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire Agreement,
Amendments. This Agreement supersedes all other prior oral or
written agreements between the Buyer(s), the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein 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 waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
19
(f) Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and
assigns. Neither the Company nor any Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other party hereto.
(g) 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.
(h) Survival. Unless
this Agreement is terminated under Section 9(l), the representations and
warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing for
a period of two (2) years following the date on which the Convertible Debentures
are converted in full. The Buyer(s) shall be responsible only for its
own representations, warranties, agreements and covenants
hereunder.
(i) Publicity. The
Company and the Buyer(s) shall have the right to approve, before issuance any
press release or any other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that the Company shall
be entitled, without the prior approval of the Buyer(s), to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company shall use
its best efforts to consult the Buyer(s) in connection with any such press
release or other public disclosure prior to its release and Buyer(s) shall be
provided with a copy thereof upon release thereof).
(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
the 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) Termination. In
the event that the Closing shall not have occurred with respect to the Buyers on
or before five (5) business days from the date hereof due to the Company’s or
the Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
above (and the non-breaching party’s failure to waive such unsatisfied
condition(s)), the non-breaching 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; provided, however, that
if this Agreement is terminated by the Company pursuant to this Section 9(l),
the Company shall remain obligated to pay the Buyer(s) for the structuring fee
described in Section 4(g) above.
20
(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.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
21
IN WITNESS WHEREOF, the Buyers and the Company
have caused this Securities Purchase Agreement to be duly executed as of the
date first written above.
|
COMPANY:
|
||
|
DNC
MULTIMEDIA CORPORATION
|
||
|
By:
|
||
|
Name:
Xxxxxx Xxxx
|
||
|
Title: Chief
Executive Officer
|
||
|
BUYER:
|
||
|
By:
|
||
|
Its:
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
22
EXHIBIT
A
FORM OF INVESTOR
REGISTRATION RIGHTS AGREEMENT
EXHIBIT
B
FORM OF ESCROW
AGREEMENT
EXHIBIT
C
TRANSFER AGENT
INSTRUCTIONS
EXHIBIT
D
FORM OF SECURITY
AGREEMENT
SCHEDULE
I
SCHEDULE OF
BUYERS
|
Name
|
Signature
|
Address/Facsimile
Number of Buyer
|
Amount
of Subscription
|
