SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement") dated as of December
24, 2004 (the "Agreement Date"), between IDI GLOBAL, INC., a Nevada corporation
with principal executive offices at (the "Company"), and SBI BRIGHTLINE X LLC, a
Delaware limited liability company with its principal offices at 000 Xxxxxxx
Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the "Purchaser").
INTRODUCTION
Subject to the terms and conditions of this Agreement, the Company may
issue and sell to the Purchaser and the Purchaser shall purchase from the
Company the following: (i) up to 3,428,570 shares of the Common Stock (the
"Shares"), par value $0.0001 per share (the "Common Stock"); (ii) a warrant (the
"Initial Warrant"), in substantially the form attached hereto as Exhibit A,
exercisable for an aggregate of 571,429 shares of Common Stock at the exercise
price of $0.70 per share; and (iii) a warrant (the "Additional Warrant" and,
together with the Initial Warrant, the "Warrants"), in substantially the form
attached hereto as Exhibit B, exercisable for an aggregate of 571,429 shares of
Common Stock at the exercise price of $0.70 per share. This Agreement, together
with the Warrants, is collectively referred to as the "Transaction Agreements".
NOW THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and the Purchaser hereby agree as follows:
ARTICLE I
ACQUISITION OF SECURITIES
Section 1.01 Purchase and Sale.
(a) Schedule 1.01(a) attached hereto defines eighteen (18) tranches of Shares
that the Purchaser has agreed to purchase from the Company (each, a "Tranche")
and, with respect to each Tranche, sets forth the number of Shares constituting
such Tranche (the "Tranche Shares"), the purchase price per share for the
Tranche Shares in such Tranche (the "Tranche Purchase Price") and the aggregate
purchase price of the Tranche Shares in such Tranche (the "Aggregate Tranche
Purchase Price"). The number of shares in each Tranche, and the purchase price
for each share, shall be adjusted for any stock split, stock dividend or reverse
stock split occurring after the date hereof and prior to the closing of a
Tranche.
(b) Until the earlier of the termination of this Agreement and the Closing of
the purchase of the final Tranche Shares hereunder, the Company may, in its sole
discretion, elect to sell the Tranche Shares of any Tranche to the Purchaser at
any time commencing on the date (the "Effective Date") on which the Registration
Statement (as defined in Section 3.01(a)) of the Company covering the resale of
the Shares is declared effective under the Securities Act of 1933, as amended
(the "Securities Act"), provided, however, (i) the Company must elect to sell
all of the Tranche Shares included in a Tranche if it elects to sell any of the
Tranche Shares in such Tranche; (ii) the Company must elect to sell the Tranche
Shares in the order that the Tranches are listed on Schedule 1.01(a); (iii) if
the Purchaser has not assigned the right to purchase such Tranche Shares, the
Purchaser shall have the right to reject any election by the Company to sell
Tranche Shares hereunder and to not purchase such Tranche Shares if the
beneficial ownership (as defined under Rule 16a-1 under the Exchange Act) by the
Purchaser and its Affiliates of shares of Common Stock exceeds, or would exceed
after giving effect to the acquisition of the Tranche Shares in question, 9.8%
of the outstanding Common Stock of the Company; and (iv) if the Purchaser has
assigned the right to purchase such Tranche Shares to a person that was not at
the time of sale or is not then an Affiliate of Purchaser and who, and whose
Affiliates do not hold, any Common Stock or warrants to acquire Common Stock,
such assignee thereof shall have the right to reject any election by the Company
to sell Tranche Shares hereunder and to not purchase such Tranche Shares if the
beneficial ownership (as defined under Rule 16a-1 under the Exchange Act) by
such assignee and its Affiliates of shares of Common Stock exceeds, or would
exceed after giving effect to the acquisition of the Tranche Shares in question,
4.9% of the outstanding Common Stock of the Company. Subject to the immediately
preceding sentence, the Company may elect to sell Tranche Shares no more
frequently than one Tranche per each five (5) Business Day period, except in
respect of the first and second Tranches which may, notwithstanding Section
1.01(b)(iii) and (iv) hereof, be sold simultaneously to the Purchaser. To effect
its election to sell Shares, the Company must give written notice thereof (an
"Election Notice") to the Purchaser. The Election Notice shall specify the
Tranche or Tranches with respect to which the election is being made and the
date on which the closing of the sale and purchase of the Tranche Shares shall
occur; provided, such date shall be a Business Day (as hereinafter defined) and
shall not be earlier than five (5) Business Days after the date such Election
Notice is given to the Purchaser. An Election Notice shall be irrevocable except
as provided in Sections 1.02(c) and 1.02(d). Subject to the foregoing and
provided that all conditions to the obligation of the Purchaser set forth herein
have either been satisfied or waived, in the event that the Company gives an
Election Notice, the Purchaser shall be obligated to purchase the Tranche
Shares, covered by such notice on the Tranche Closing Date.
For purposes hereof, the term "Business Day" shall mean any day which is not (i)
a Saturday or a Sunday or (ii) a day on which banking institutions are generally
authorized or obligated to close in the City of Los Angeles, California.
For the purposes hereof, the term "Affiliate" shall mean, with respect to any
person or entity, (a) each person or entity that controls, is controlled by or
is under common control with that person or entity, (b) each of that person's or
entity's officers, directors, members, managers, in the case of a person that is
a contractual joint venture, the joint venturers of that joint venture, and, in
the case of a person that is a partnership, the partners of that partnership and
(c) solely for purposes of Section 2.01 hereof, in the case of the Company, the
immediate family members, spouses and lineal descendants of individuals who are
otherwise Affiliates of the Company. For purposes of this definition of
Affiliate, "control" of a person or entity means the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
(c) Simultaneous with the execution of this Agreement, the Company shall issue
and deliver to the Purchaser the Initial Warrant, which shall be fully
exercisable upon its issuance and delivery to the Purchaser hereunder, and the
Additional Warrant, which Additional Warrant shall only be exercisable from and
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after the earlier of (i) the date that is sixty (60) days after the Closing of
the purchase of Tranche Shares in the ninth (9th) Tranche hereunder or (ii) as
set forth in Section 2 of the Additional Warrant.
(d) Notwithstanding the foregoing, the Purchaser agrees to purchase the second
(2nd) through ninth (9th) Tranches hereunder within the first six (6) months
following the Closing of the sale of Tranche Shares in the first (1st) Tranche
hereunder; provided, however, that if any of the second (2nd) through ninth
(9th) Tranches have not been sold within the first three (3) months following
the Closing of the sale of Tranche Shares in the first (1st) Tranche hereunder,
then the Company shall promptly deliver to the Purchaser a written notice
detailing the Company's proposed schedule of sales of Tranche Shares in such
remaining unsold second (2nd) through ninth (9th) Tranches, and if the Company
fails to deliver such notice or to comply with the schedule of Tranche sales set
forth in such notice, then the Purchaser shall be relieved of its obligation
under this Section 1.01(d) to purchase such remaining unsold second (2nd)
through ninth (9th) Tranches within such six (6) month period. Furthermore, the
parties agree that the only conditions to Closing for the first (1st) Tranche
shall be that (i) the representations and warranties of the Company set forth in
Section 2.01 of this Agreement shall have been true and correct on the Agreement
Date, (ii) no Material Adverse Change shall have occurred since the Agreement
Date, and (iii) the conditions to Closing set forth in Sections 4.01(c), (d),
(f) and (g) shall have been satisfied or waived; provided that the Company shall
be required to certify pursuant to Section 4.01(c) only as to satisfaction of
the applicable closing conditions described in this Section 1.01(d). In
connection with the sale of the second (2nd) through ninth (9th) Tranches under
this Section 1.02(d) only, the parties agree that the only conditions to Closing
for such Tranches shall be that (i) the representations and warranties of the
Company set forth in Section 2.01 of this Agreement shall have been true and
correct on the Agreement Date, (ii) no Material Adverse Change shall have
occurred since the Agreement Date, and (iii) the conditions to Closing set forth
in Sections 4.01(c) and (d) shall have been satisfied or waived; provided that
the Company shall be required to certify pursuant to Section 4.01(c) only as to
satisfaction of the applicable closing conditions described in this Section
1.01(d).
Section 1.02 Closing Procedures; the Closings.
(a) Subject to the satisfaction or waiver of the conditions precedent set forth
in Article IV hereof, the closing of a purchase of Tranche Shares by the
Purchaser pursuant to this Agreement (each, a "Closing") shall occur at 10:00
a.m. on the date specified in the Election Notice delivered by the Company with
respect to such Tranche Shares unless the Company and the Purchaser have
mutually agreed on a different time or date with respect to such Closing (the
time and date of the Closing of a particular Tranche is referred to herein as
the "Tranche Closing Date"). Unless otherwise agreed by the Company and the
Purchaser, each Closing shall occur at the offices of Durham, Xxxxx & Xxxxxxx,
P.C., Salt Lake City, Utah, counsel to the Purchaser.
(b) At each Closing, (i) each of the Company and the Purchaser shall deliver to
the other, as applicable, any documents required to be delivered by Sections
4.01 and 4.02 hereof which have not been delivered prior to such Closing, (ii)
the Purchaser shall deliver to the Company an acknowledgement of the applicable
Tranche Purchase Price for the Tranche Shares being purchased at the Closing and
state the date, not to exceed three (3) Business Days following the Tranche
Closing Date, on or prior to which the Tranche Purchase Price shall be delivered
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by the Purchaser to the Company by wire transfer of immediately available funds
to an account designated in writing by the Company at or prior to the Closing,
and (iii) the Company shall deliver to the Purchaser one (1) or more stock
certificates, determined in accordance with the instructions of the Purchaser,
representing the Tranche Shares being purchased or shall cause the Tranche
Shares being purchased to be electronically transferred to the Purchaser. The
payment of the Tranche Purchase Price referenced in clause (ii) shall be deemed
to have been delivered at the Closing for the purposes hereof and payment of
such amount on the specified date shall be the absolute and unconditional
obligation of Purchaser.
(c) If a Closing does not occur on a proposed Tranche Closing Date because the
condition specified in Section 4.01(g) was not satisfied at the time of the
applicable proposed Tranche Closing Date, the Election Notice with respect to
the Tranche or Tranches proposed to be sold on such proposed Tranche Closing
Date shall automatically be revoked; provided, however, such revocation shall
not impair the right of the Company to give another Election Notice with respect
to the Tranche or Tranches covered by the revoked Election Notice or to compel
the Purchaser to purchase any Tranche Shares included in such Tranche or
Tranches on a subsequent Tranche Closing Date on which the conditions specified
in such sections and Article hereof are satisfied.
(d) If a Closing does not occur on a proposed Tranche Closing Date because the
conditions specified in Section 1.02(b) and Article IV to be fulfilled by the
Company were not satisfied at the time of the applicable proposed Tranche
Closing Date, the Election Notice with respect to any Tranche or Tranches
proposed to be sold on such proposed Tranche Closing Date shall automatically be
revoked; provided, however, such revocation shall not impair the right of the
Company to give another Election Notice with respect to the Tranche or Tranches
covered by the revoked Election Notice. In the event the Company is unable to
satisfy the conditions specified in such sections within 30 days following the
automatic revocation of an Election Notice, the Company or the Purchaser may
elect to terminate this Agreement.
ARTICLE II
REPRESENATIONS AND WARRANTIES
Section 2.01 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser, except as described or referred to in
the Company's filings with the United States Securities and Exchange Commission
(the "Commission") made prior to the Agreement Date and as set out in Schedule
2.01, as follows:
(a) (i) The Common Stock has been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Company
is subject to the periodic reporting requirements of Section 13 of the Exchange
Act. The Company has heretofore provided to the Purchaser true, complete, and
correct copies of all forms, reports, schedules, statements, and other documents
required to be filed by it under the Exchange Act since at least December 31,
2002, as such documents have been amended since the time of the filing thereof
(collectively, including all forms, reports, schedules, statements, and other
documents filed by the Company therewith, the "SEC Documents"). The SEC
Documents, including, without limitation, any financial statements and schedules
included therein, at the time filed or, if subsequently amended, as so amended,
(i) did not contain any untrue statement of a material fact required to be
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stated therein or omit to state a material fact necessary in order to make the
statements made therein not misleading in the light of the circumstances under
which they were made and (ii) complied in all respects with the applicable
requirements of the Exchange Act and the applicable rules and regulations
thereunder.
(ii) The Company maintains disclosure controls and procedures
required by Rule 13a-15 or 15d-15 under the Exchange Act; such controls and
procedures are effective to ensure that all material information concerning the
Company and its subsidiaries is made known on a timely basis to the individuals
responsible for the preparation of the Company's filings with the Commission and
other public disclosure documents. The Company has delivered to the Purchaser
copies of, all written descriptions of, and all policies, manuals and other
documents promulgating, such disclosure controls and procedures. To the
Company's knowledge, each director and executive officer thereof has filed with
the Commission on a timely basis all statements required by Section 16(a) of the
Exchange Act and the rules and regulations thereunder since at least December
31, 2003. As used in this Section 2.01(a), the term "file" shall be broadly
construed to include any manner in which a document or information is furnished,
supplied or otherwise made available to the Commission.
(iii) Each of the Company, its directors and its senior
financial officers has consulted with the Company's independent auditors and
with the Company's outside counsel with respect to, and (to the extent
applicable to the Company) is familiar in all material respects with all of the
requirements of, the Xxxxxxxx-Xxxxx Act of 2002 ("Sarbanes Oxley") and the
regulations promulgated pursuant thereto. The Company is in compliance with the
provisions of such act applicable to it as of the date hereof and has
implemented such programs and has taken reasonable steps, upon the advice of the
Company's independent auditors and outside counsel, respectively, to ensure the
Company's future compliance (not later than the relevant statutory and
regulatory deadlines therefore) with all provisions of such act which shall
become applicable thereto after the date hereof.
(iv) The Chief Executive Officer and the Chief Financial
Officer of the Company have signed, and the Company has furnished to the
Commission, all certifications required by Sarbanes Oxley; such certifications
contain no qualifications or exceptions to the matters certified therein and
have not been modified or withdrawn; and neither the Company nor any of its
officers has received notice from any governmental entity questioning or
challenging the accuracy, completeness, form or manner of filing or submission
of such certifications. The Company has heretofore provided to the Purchaser
complete and correct copies of all such certifications and hereby represents and
warrants to the Purchaser that the statements made in such certifications were
true and correct on the dates made and that there have been no subsequent events
or circumstances (excluding subsequent failure or non-occurrence of statements
clearly denoted as forward-looking or prospective) which would cause the Company
to modify, amend or correct such certifications.
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(b) At the date hereof and at each Tranche Closing Date:
(i) the Common Stock is and shall be traded and quoted in the over-the-counter
Bulletin Board market (the "OTCBB") or on a national securities exchange or The
NASDAQ Small Cap Market;
(ii) the Company has and shall have performed or satisfied in all material
respects, all of its undertakings to, and of its obligations and requirements
with, the Commission; and
(iii) the Company has not, and shall not have taken any action that would
preclude, or otherwise jeopardize, the inclusion of the Common Stock for
quotation on the OTCBB.
(c) Other than, Internet Development, Inc., a Nevada corporation, Sports Media,
Inc., a Nevada corporation, Chief Financial, Inc., a Utah corporation and
Professional Consulting Services, Inc., a Utah Corporation (collectively, the
"Subsidiaries"), the Company has no direct or indirect subsidiaries. Other than
the Subsidiaries, the Company does not own any equity interest in any other
enterprise (whether or not such enterprise is a corporation). Each of the
Company and each of the Subsidiaries has been duly organized and is validly
existing as a corporation in good standing under the laws of the respective
jurisdiction of its incorporation with full power and authority (corporate and
other) to own, lease and operate its respective properties and conduct its
respective business as described in the SEC Documents; each of the Company and
each of the Subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership
or leasing of its respective properties or the conduct of its respective
business requires such qualification, except where the failure to be so
qualified or be in good standing would not have a material adverse effect on the
business, prospects, condition (financial or otherwise), and results of
operations of the Company and the Subsidiaries taken as a whole; no proceeding
has been instituted in any such jurisdiction, revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification; each of the Company and each of the Subsidiaries is in possession
of, and operating in compliance with, all authorizations, licenses,
certificates, consents, orders and permits from state, federal, foreign and
other regulatory authorities that are material to the conduct of its business
except such failures to be in compliance as would not have a material adverse
effect on the business, prospects, condition (financial or otherwise), and
results of operations of the Company and the Subsidiaries taken as a whole, all
of which are valid and in full force and effect; none of the Company or any of
the Subsidiaries is in violation of its charter or bylaws or in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
it is a party or by which it or its respective properties or assets may be
bound, which violation or default would have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
and the Subsidiaries taken as a whole; and none of the Company or any of the
Subsidiaries is in violation of any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or the
6
Subsidiaries or over any of their respective properties or assets, which
violation would have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and the Subsidiaries
taken as a whole.
(d) The Company has full legal right, power and authority to enter into each of
the Transaction Agreements and to perform the transactions contemplated hereby
and thereby. Each of the Transaction Agreements has been duly authorized by all
necessary action on the part of the Company, its Board of Directors and
shareholders, and has been executed and delivered by the Company and is a valid
and binding agreement on the part of the Company, enforceable in accordance with
its respective terms; except for the indemnification agreements of the Company
set forth in Section 3.03. The performance of each of the Transaction Agreements
and the consummation of the transactions herein or therein contemplated will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, (i) any bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which its respective
properties or assets may be bound, (ii) the charter or bylaws of the Company or
any of the Subsidiaries, or (iii) any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or any of the
Subsidiaries or over any of their respective properties or assets, which
violation or default would have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and the
Subsidiaries taken as a whole. No consent, approval, authorization or order of,
or qualification with, any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of the
Subsidiaries or over any of their respective properties or assets is required
for the execution and delivery of any Transaction Agreement and the consummation
by the Company of the transactions herein and therein contemplated, except such
as may be required under the Securities Act or under state or other securities
or blue sky laws, all of which requirements have been, or in accordance herewith
will be, satisfied in all material respects.
(e) There is not any pending or, to the best of the Company's knowledge,
threatened, action, suit, claim or proceeding against the Company or any of the
Subsidiaries, or any of their respective officers or any of its properties,
assets or rights, before any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of the
Subsidiaries or over any of their respective officers or properties or otherwise
that (i) is reasonably likely to result in any material adverse change in the
business, prospects, financial condition or results of operations of the Company
and the Subsidiaries taken as a whole or might reasonably be expected to
materially and adversely affect their properties, assets or rights taken as a
whole, (ii) might reasonably be expected to prevent consummation of the
transactions contemplated by the Transaction Agreements, (iii) will be required
to be disclosed in the Registration Statement, except to the extent heretofore
disclosed in the SEC Documents, or (iv) alleging violation of any Federal or
state securities laws.
(f) The authorized capital stock of the Company as of the date of this Agreement
consists of 50,000,000 shares of Common Stock, par value $0.0001 per share, of
which 16,442,810 shares of Common Stock are outstanding as of the Agreement
Date, and no shares of preferred stock. All outstanding capital stock of each of
7
the Subsidiaries is owned beneficially and of record by the Company. Each
outstanding shares of Common Stock and each outstanding share of capital stock
of each of the Subsidiaries, is duly and validly authorized, validly issued,
fully paid, and nonassessable, has not been issued and is not owned or held in
violation of any preemptive or similar right of stockholders. Except as
disclosed in the SEC Documents or as contemplated in connection with the
Approved Financing, the Approved Transaction or that certain Term Credit
Agreement (the "Credit Agreement") dated as of November 24, 2004, by and among
the Company, Hong Kong League Central Credit Union, in its capacity as a lender
thereunder (the "Lender"), and SBI Advisors, LLC ("SBI Advisors"), there is no
commitment, plan, or arrangement to issue, and no outstanding option, warrant,
or other right calling for the issuance of, any shares of capital stock of, or
any security or other instrument convertible into, exercisable for, or
exchangeable for capital stock of, the Company or any of the Subsidiaries,
except for (w) an aggregate of 6,500,000 options authorized, of which 5,428,845
are outstanding as of the date of this Agreement, under the Company's 2002
Equity Incentive Plan, (x) an aggregate of 1,178,450 warrants to acquire shares
of Common Stock outstanding as of the date of this Agreement, (y) up to no more
than an additional 3,500,000 shares of Common Stock and warrants to purchase up
to no more than 3,500,000 shares of Common Stock potentially to be issued after
the date of this Agreement, and (z) notes convertible into no more than
3,500,000 shares of Common Stock. The Shares and the Warrant Shares (as
hereinafter defined) have been duly authorized for issuance and sale to the
Purchaser pursuant hereto and the Shares and the Warrant Shares respectively
when issued and delivered by the Company against payment therefore in accordance
with the terms of this Agreement and the Warrants, respectively, will be duly
and validly issued and fully paid and nonassessable, and will be sold free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest of any kind; and no preemptive or similar right, co-sale right,
registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Shares or Warrant Shares or the
issuance and sale thereof other than those that have been expressly waived prior
to the date hereof and those that will automatically expire upon the execution
hereof and those granted in connection with the Approved Transaction. No further
approval or authorization of any stockholder, the Board of Directors of the
Company or others is required for the issuance and sale or transfer of the
Shares, the Warrants, or the Warrant Shares, except as may be required under the
Securities Act, the rules and regulations promulgated thereunder or under state
or other securities or blue sky laws. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted and exercised thereunder, set forth in the SEC Documents
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights under the Securities Act, the
Exchange Act, and the rules and regulations promulgated thereunder. The Company
has a sufficient number of authorized shares of its Common Stock to cover the
shares of Common Stock issuable upon the exercise of the Warrants (the "Warrant
Shares").
(g) Xxxxxxxx & Associates (the "Auditors"), which has examined the consolidated
financial statements of the Company, together with the related schedules and
notes, for the period from January 1, 2002 to December 31, 2003 and for the nine
month period ended September 30, 2004, respectively, filed with the Commission
as a part of the SEC Documents, and which, pursuant to the rules and regulations
of the Commission are to be included in the Registration Statement, are
independent accountants within the meaning of the Securities Act, the Exchange
8
Act, and the rules and regulations promulgated thereunder. The audited
consolidated financial statements of the Company, together with the related
schedules and notes, and the unaudited financial information, forming part of
the SEC Documents, when filed fairly presented the financial position and the
results of operations of the Company at the respective dates and for the
respective periods to which they apply in conformity with accounting principles
generally accepted in the United States. All audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, filed with the Commission as
part of the SEC Documents when filed, except as amended prior to the date of
this Agreement (x) complied as to form in all material respects with applicable
accounting requirements and with the rules and regulations of the Commission
with respect hereto, (y) were prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
except as may be otherwise stated therein (except as may be indicated in the
notes thereto or as permitted by the rules and regulations of the Commission)
and (z) fairly presented, subject in the case of the unaudited consolidated
financial statements, to customary year end audit adjustments, the financial
position of the Company as at the dates thereof and the results of its
operations and cash flows for the periods indicated. The procedures pursuant to
which the aforementioned consolidated financial statements have been audited are
compliant with generally accepted auditing standards. The selected and summary
consolidated financial and statistical data included in the SEC Documents
present fairly the information shown therein and have been compiled on a basis
consistent with the audited consolidated financial statements presented therein.
No other financial statements or schedules are required to be included in the
SEC Documents.
(h) Since December 31, 2003,
(i) There has not been a material adverse change in the financial condition,
results of operations, businesses, properties, assets, liabilities, or future
prospects of the Company and the Subsidiaries taken as a whole;
(ii) The Company has not authorized, declared, paid, or effected any dividend or
liquidating or other distribution in respect of its capital stock or, except in
connection with the Approved Transaction, any direct or indirect redemption,
purchase, or other acquisition of any stock of the Company or the Subsidiaries;
and
(iii) Except as set forth in the SEC Documents or as contemplated by the
Approved Transaction, the Approved Financing or the Credit Agreement, the
operations and businesses of the Company have been conducted in all respects
only in the ordinary course.
As of the Agreement Date, there is no fact known to the Company which materially
adversely affects or in the future (as far as the Company can reasonably
foresee) may reasonably be expected to materially adversely affect the financial
condition, results of operations, businesses, properties, assets or liabilities
of the Company, other than political and economic matters of general
applicability. The Company has made known, or caused to be made known, to the
accountants or auditors who have prepared, reviewed, or audited the financial
statements included in the SEC Documents all material facts and circumstances
which could reasonably be expected to affect the preparation, presentation,
accuracy, or completeness thereof.
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(i) Subsequent to the date of the Company's Form 10-KSB for the fiscal
year ending December 31, 2003, there has not been (i) any material adverse
change in the financial condition, results of operations, businesses,
properties, assets, liabilities, or future prospects of the Company and the
Subsidiaries taken as a whole; (ii) any transaction committed to or consummated
that is material to the Company and the Subsidiaries taken as a whole, except
for transactions entered into in the ordinary course of business and except for
transactions contemplated by the Approved Transaction, an Approved Financing and
the Credit Agreement; (iii) any obligation, direct or contingent, that is
material to the Company and the Subsidiaries taken as a whole incurred by the
Company or any of the Subsidiaries, except such obligations as have been
incurred in the ordinary course of business and except for transactions
contemplated by the Approved Transaction, an Approved Financing and the Credit
Agreement; or (iv) any change in the capital stock or outstanding indebtedness
of the Company or any of the Subsidiaries that is material to the Company and
the Subsidiaries taken as whole, except as contemplated by the arrangements
described in Section 2.01(f) hereof.
(j) Except as set forth in the SEC Documents, (i) each of the Company
and each of the Subsidiaries has good and marketable title to all properties and
assets described in the SEC Documents as owned by it, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest, other
than such as would not have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and the
Subsidiaries taken as a whole, (ii) other than such as would not have a material
adverse effect on the business, prospects, financial condition or results of
operations of the Company and the Subsidiaries taken as a whole, the agreements
to which the Company or each of the Subsidiaries is a party described in the SEC
Documents are legal, valid and binding agreements, enforceable by the Company or
such Subsidiary, as applicable, in accordance with their terms, and, to the best
of the Company's knowledge, the other contracting party or parties thereto are
not in breach or default under any of such agreements, and (iii) each of the
Company and each of the Subsidiaries has valid and enforceable leases for all
properties described in the SEC Documents as leased by it. Except as set forth
in the SEC Documents, each of the Company and each of the Subsidiaries owns or
leases all such real properties as are necessary to its respective operations as
now conducted and as described in the SEC Documents.
(k) Each of the Company and each of the Subsidiaries has timely filed
all respective federal, state, local and foreign tax returns required to be
filed by it and has paid all taxes shown thereon as due, and there is no tax
deficiency that has been or, to the best of the Company's knowledge, is likely
to be asserted against the Company or the Subsidiaries if it is audited, which
might reasonably be expected to have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and the
Subsidiaries taken as a whole, and all tax liabilities are adequately provided
for on the books of the Company and the Subsidiaries.
(l) Each of the Company and each of the Subsidiaries maintains
insurance with insurers of recognized financial responsibility of the types and
in the amounts generally deemed adequate for its business including, but not
limited to, insurance covering real and personal property owned or leased by the
Company or any of the Subsidiaries, as applicable, against theft, damage,
10
destruction, acts of vandalism, and all other risks customarily insured against,
all of which insurance is in full force and effect; none of the Company or any
of the Subsidiaries has been refused any insurance coverage sought or applied
for; and none of the Company or any of the Subsidiaries has 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 business, prospects, condition, or results of operations of
the Company and the Subsidiaries taken as a whole.
(m) No labor disturbance by the employees of the Company or any of the
Subsidiaries exists or, to the best of the Company's knowledge, is imminent. The
Company is not aware of any existing or imminent labor disturbance by the
employees of any of the principal suppliers or customers of the Company or any
of the Subsidiaries that might be expected to result in any material adverse
change in the business, prospects, financial condition, or results of operations
of the Company and the Subsidiaries taken as a whole. No collective bargaining
agreement exists with any employees of the Company or any of the Subsidiaries
and, to the best of the Company's knowledge, no such agreement is imminent.
(n) Each of the Company and each of the Subsidiaries owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names, logos, and copyrights
described or referred to in the SEC Documents as owned by or used by it or that
are necessary to conduct its respective businesses as described in the SEC
Documents other than such as the absence of which to own or have adequate right
to use would not have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and the Subsidiaries
taken as a whole. None of the Company or any of the Subsidiaries has received
any notice of, or has knowledge of, any infringement of or conflict with
asserted rights of the Company or the Subsidiaries by others with respect to any
patents, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names, logos, or copyrights described or referred to in the SEC
Documents as owned by or used by it; and none of the Company or any of the
Subsidiaries has received any notice of, or has knowledge of, any infringement
of, or conflict with, asserted rights of others with respect to any patents,
patent rights, inventions, trade secrets, know-how, trademarks, service marks,
trade names, logos, or copyrights described or referred to in the SEC Documents
as owned by or used by it or which, individually or in the aggregate, in the
event of an unfavorable decision, ruling or finding, would have a material
adverse effect on the business, prospects, financial condition or results of
operations of the Company and the Subsidiaries taken as a whole.
(o) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "Investment Company Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future, to conduct its affairs in such a manner as to ensure that it is not and
will not become an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act and such
rules and regulations.
(p) None of the Company or any of the Subsidiaries has, and no person
or entity acting on behalf or at the request of the Company or any of the
Subsidiaries has, at any time during the last five years (i) made any unlawful
11
contribution to any candidate for foreign office or failed to disclose fully any
contribution in violation of law, or (ii) made any payment to any federal or
state governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by the
laws of the United States or any other applicable jurisdiction.
(q) Neither the Company or the Subsidiaries, nor any person acting on
behalf thereof, has taken or will take, directly or indirectly, any action
designed to, or that might reasonably be expected to cause or result in,
stabilization in violation of law, or manipulation, of the price of the Common
Stock to facilitate the sale or resale of the Shares or the Warrant Shares.
(r) Except as set forth in the SEC Documents, (i) each of the Company
and each of the Subsidiaries is in compliance in all material respects with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") that are applicable to its business, (ii) none of the Company or any of
the Subsidiaries has received notice from any governmental authority or third
party of an asserted claim under Environmental Laws, which claim is required to
be disclosed in the SEC Documents, (iii) to the best knowledge of the Company,
none of the Company or any of the Subsidiaries is likely to be required to make
future material capital expenditures to comply with Environmental Laws (iv) no
property which is owned, leased or occupied by the Company or any of the
Subsidiaries has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. ss. 9601, et seq.), or otherwise designated as a contaminated site under
applicable state or local law, and (v) none of the Company or any of the
Subsidiaries is in violation of any federal or state law or regulation relating
to occupational safety or health.
(s) The books, records and accounts of each of the Company and each of
the Subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the results of
operations of, the Company and each of the Subsidiaries, as applicable, all to
the extent required by generally accepted accounting principles. Each of the
Company and each of the Subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurances 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 accordance with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(t) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or any of the Subsidiaries to, or for the benefit
of, any of the officers, directors, or director-nominees of the Company or any
of the Subsidiaries or any of the members of the families of any of them, except
as disclosed in the SEC Documents.
12
(u) Except for an advisory fee to SBI USA, LLC ("SBI USA"), none of the
Company or any of the Subsidiaries has incurred any liability, direct or
indirect, for finders' or similar fees on behalf of or payable by the Company or
the Subsidiaries or the Purchaser in connection with the Transaction Agreements.
(v) Except as contemplated in connection with the Approved Transaction,
no stockholder of the Company has any right (which has not been waived or has
not expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement) to request or require the Company to
register the sale of any shares owned by such stockholder under the Securities
Act on the Registration Statement.
(w) Neither the Company or the Subsidiaries, nor, to the best knowledge
of the Company, any director, officer, agent, employee, or other person
associated with, or acting on behalf of, the Company or the Subsidiaries, has,
directly or indirectly: used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political activity;
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; violated any provision of the Foreign Corrupt Practices Act of
1977, as amended; or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment. The Company's internal accounting controls
and procedures are sufficient to cause the Company and each of the Subsidiaries
to comply in all respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(x) Except as disclosed in the SEC Documents, neither any current or,
to the knowledge of the Company as of the Agreement Date, former director or
officer of the Company or the Subsidiaries nor any shareholder of the Company
who is the beneficial owner of 5% or more of the Common Stock (any such person,
an "Insider") has any interest, whether as an employee, officer, director,
shareholder, agent, independent contractor, security holder, creditor,
consultant, or otherwise (other than as less than 1% shareholder of a publicly
traded company), either directly or indirectly, in any person (whether a
corporation, partnership, limited partnership, limited liability company,
limited liability partnership, business trust, sole proprietorship, or
otherwise) that presently (i) provides any services or designs, produces and/or
sells any products or product lines, or engages in any activity which is the
same, similar to or competitive with any activity or business in which the
Company or any of the Subsidiaries is now engaged; (ii) is a supplier of,
customer of, creditor of, or has an existing contractual relationship with the
Company or any of the Subsidiaries other than arising out of or in connection
with such person's status as a director, officer or shareholder; or (iii) has
any direct or indirect interest in any asset or property used by the Company or
any of the Subsidiaries or any property, real or personal, tangible or
intangible, that is used in the conduct of the business of the Company or any of
the Subsidiaries.
(y) The Company is in compliance with, applicable federal, state, local
or foreign statutes, laws and regulations (including without limitation, any
applicable building, zoning or other law, ordinance or regulation) affecting its
properties or the operation of its business other than such failures to be in
compliance as would not have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and the
13
Subsidiaries taken as a whole. The Company is not as a named party subject to
any order, decree, judgment or other sanction of any court, administrative
agency or other tribunal.
Section 2.02 Representations, Warranties and Covenants of the Purchaser. The
Purchaser represents and warrants to the Company as of the Agreement Date and,
as to Subsections (a), (b), (d) and (e) only, as of each Tranche Closing Date,
as follows:
(a) The Purchaser is a limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of formation.
(b) The Purchaser has full legal right, power and authority to enter into this
Agreement and to perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Purchaser. The
execution, delivery and performance of this Agreement by the Purchaser and the
consummation of the transactions herein contemplated will not violate any
provision of the organizational documents of the Purchaser and will not result
in the creation of any lien, charge, security interest or encumbrance upon any
assets or property of the Purchaser pursuant to the terms or provisions of, or
will not conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a default under
any agreement, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which the Purchaser is a party or by which the
Purchaser or any of its assets or properties may be bound or affected or any
statute or any authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other governmental body
applicable to the Purchaser or any of its properties. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution, delivery and
performance by the Purchaser of this Agreement or the consummation by the
Purchaser of the transactions contemplated hereby. Assuming the valid execution
hereof by the Company, this Agreement will constitute the legal, valid and
binding obligations of the Purchaser, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Purchaser
in Section 3.03 hereof may be legally unenforceable.
(c) There are no legal or governmental actions, suits or proceedings pending or,
to the Purchaser's knowledge, threatened to which the Purchaser is or may be a
party which seeks to prevent or restrain the transactions contemplated by this
Agreement or to recover damages as a result of the consummation of such
transactions. To the knowledge of the Purchaser, neither the Purchaser nor any
of its Affiliates has been and none of them currently is the subject of an
investigation or inquiry by the Commission, National Association of Securities
Dealers, Inc., NASD Regulation, Inc., or any state securities commission.
(d) The Purchaser and each of its members is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in shares representing an investment decision like that involved in
the purchase of the Shares, the Warrants, and the Warrant Shares, including
14
investments in securities issued by the Company. The Purchaser and each of its
members is an "accredited investor" within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act. The Purchaser is not a
"dealer" within the meaning of the Securities Act or a "broker" or "dealer"
within the meaning of the Exchange Act. The Purchaser and each of its members is
able to bear the economic risk of loss of the Purchaser's entire investment in
the Shares, the Warrants, and the Warrant Shares.
The Purchaser has requested, received, reviewed and considered all information
it deems relevant in making an informed decision to purchase the Shares and the
Warrants. The Purchaser has been afforded the opportunity to ask questions of
the Company and has received answers to any such inquiries. The Purchaser
understands that its investment in the Shares, Warrants and Warrant Shares
involves a high degree of risk.
(e) The Purchaser is acquiring the Shares, the Warrants and the Warrant Shares
in the ordinary course of its business and for its own account for investment
only and with no present intention of distributing any of such Shares, Warrant
Shares or Warrants in violation of the Securities Act or entering into any
arrangement or understanding with any other person regarding the distribution of
such Shares, Warrant Shares or Warrants in violation of the Securities Act (it
being understood that the foregoing does not limit the Purchaser's right to sell
Shares or Warrant Shares pursuant to the Registration Statement). The Purchaser
understands that the Shares and Warrant Shares and Warrants 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 upon the truth and accuracy of, and the Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of the Purchaser to acquire
the Shares, Warrant Shares and Warrants. The Purchaser 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 Shares,
Warrant Shares or the Warrants.
(f) Except for the representations and warranties contained in this Section
2.02, the Purchaser makes no representation or warranty to the Company, express
or implied, in connection with the transactions contemplated by this Agreement.
Section 2.03 Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in the certificates delivered pursuant hereto shall
survive the execution of this Agreement, the termination of Purchaser's
obligations to purchase the Shares, and the delivery to the Purchaser of the
Shares and the Warrants being purchased and the payment.
15
ARTICLE III
COVENANTS
Section 3.01 Covenants of the Company.
(a) The Company shall enter into and perform all of its obligations, including
its obligation to prepare and file a Registration Statement (as defined therein,
the "Registration Statement") with the Commission, pursuant to that certain
Registration Rights Agreement by and among the Company, SBI Advisors and the
Purchasers (the "Registration Rights Agreement") attached as Exhibit C to the
Credit Agreement.
(b) The Company may refuse to register (or permit its transfer agent to
register) any transfer of any Registrable Securities (as defined in the
Registration Rights Agreement) not made in compliance with the Securities Act
and for such purpose may place stop order instructions with its transfer agent
with respect to such Registrable Securities.
(c) So long as the Registration Statement is effective covering the resale of
Registrable Securities then still owned by the Purchaser, the Company shall
furnish to the Purchaser:
(i) as soon as practicable after available, one copy of (A) its Annual Report to
Stockholders (which Annual Report shall contain financial statements audited in
accordance with generally accepted accounting principles by a firm of certified
public accountants), (B) upon written request, its Annual Report on Form 10-KSB,
(C) upon written request, its Quarterly Reports on Form 10-QSB, (D) upon written
request, its Current Reports on Form 8-K, and (E) a full copy of the
Registration Statement (the foregoing, in each case, excluding exhibits); and
(ii) upon the written request of the Purchaser, all exhibits excluded by the
parenthetical to subparagraph (i)(E) of this Section 3.01(c).
(d) The Company will maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar (which may be the same
entity as the transfer agent) for its Common Stock, which transfer agent and
registration shall be reasonably satisfactory to the Purchaser.
(e) The Company shall comply with Sarbanes Oxley and the regulations promulgated
pursuant thereto.
(f) Until the earlier of the termination of this Agreement and the Closing of
the purchase of the final Tranche Shares hereunder (the earlier of such events,
the "Release Time"), no amendment will be made in the certificate of
incorporation or by-laws (or, in each case, the comparable charter documents, if
any, under applicable law) of the Company, provided, that the Company may enter
into such transactions if, simultaneously therewith, all amounts owing to the
Lender under the Credit Agreement are repaid in full.
(g) Until the Release Time, no share of capital stock of the Company, option or
warrant for any such share, right to subscribe to or purchase any such share, or
security convertible into, or exchangeable or exercisable for, any such share,
shall be issued or sold by the Company, otherwise than as contemplated by, or in
16
connection with, this Agreement and as contemplated by the arrangement described
in Section 2.01(f); provided, that the Company may enter into such transactions
if, simultaneously therewith, all amounts owing to the Lender under the Credit
Agreement are repaid in full.
(h) Until the Release Time, no dividend or liquidating or other distribution or
stock split shall be authorized, declared, paid, or effected by the Company in
respect of the outstanding shares of capital stock of the Company. Except in
connection with the Approved Transaction, until the Release Time, no direct or
indirect redemption, purchase, or other acquisition shall be made by the Company
or any Affiliate thereof of shares of capital stock of the Company.
(i) Until the Release Time, the Company will afford the officers, directors,
employees, counsel, agents, investment bankers, accountants, and other
representatives of the Purchaser free and full access to the plants, properties,
books, and records of the Company, will permit them to make extracts from and
copies of such books and records, and will from time to time furnish the
Purchaser with such additional financial and operating data and other
information as to the business, prospects, financial condition, and results of
operations of the Company as the Purchaser from time to time may request,
subject to execution of a reasonable confidentiality agreement; provided,
however, that any such inspection, audit or examination shall be conducted in a
reasonable manner intended to minimize the impact thereof on the operations of
the Company and in no event shall the Company be required to disclose any of its
or any third parties source code or other trade secrets. Until the Release Time,
the Company will use its reasonable efforts to cause the independent certified
public accountants thereof to make available to the Purchaser and its
independent certified public accountants the work papers relating to the audits
of the Company referenced in this Agreement.
(j) Until the Release Time, the Company will conduct its affairs so that at each
Closing (i) no representation or warranty of the Company will be inaccurate in
any material respect, (ii) no covenant or agreement of the Company will be
breached in any material respect, and (iii) no condition in this Agreement will
remain unfulfilled by reason of the actions or omissions of the Company, the
inaccuracy, breach or nonfulfillment of which would constitute a Material
Adverse Change. Except as otherwise consented to by the Purchaser in writing,
until the Release Time, the Company will use its best efforts to preserve the
business operations of the Company intact, to keep available the services of its
present personnel, to preserve in full force and effect the contracts,
agreements, instruments, leases, licenses, arrangements, and understandings of
the Company, and to preserve the good will of its suppliers, customers, and
others having business relations with any of them. Until the Release Time, the
Company will conduct its affairs in all respects only in the ordinary course,
other than in connection with the matters referenced herein.
(k) Before the Company releases any information concerning this Agreement or any
of the transactions contemplated by this Agreement which is intended for, or may
reasonably result in, public dissemination thereof, the Company shall cooperate
with the Purchaser, shall furnish drafts of all documents or proposed oral
statements to the Purchaser for comment, and shall not release any such
information without the written consent of Purchaser, which consent shall not be
unreasonably withheld or delayed. Nothing contained herein shall prevent the
Company from releasing any information if required to do so by law.
17
(l) The Company shall timely prepare and file any declaration or filing
necessary to comply with any transfer tax statutes that require any such filing
before the relevant Tranche Closing.
(m) The Company shall make such state securities law or "blue sky" filings and
obtain such state securities law or "blue sky" filings as shall be reasonably
requested by the Purchaser, provided, however, that the Company shall not be
required to qualify to do business or to become subject to general service of
process in any such jurisdiction.
(n) In connection with each sale of Tranche Shares hereunder, the Company shall
pay to SBI USA an advisory fee equal to 10% of the first $1,750,000 of Aggregate
Tranche Purchase Price and thereafter an advisory fee equal to 5% of each
Aggregate Tranche Purchase Price, which fee shall be paid out of the proceeds of
such Tranche by wire transfer of immediately available funds to an account
designated in writing by SBI USA upon actual receipt of payment for such Tranche
Shares.
(o) The Company shall use 100% of the Aggregate Tranche Purchase Price received
by the Company from the sale of the first and second Tranches and thereafter at
least one-half (1/2) of the Aggregate Tranche Purchase Price received by the
Company in each sale of Tranche Shares and at least one-half (1/2) of the
proceeds of each exercise of the Warrants to repay amounts then outstanding
under the Credit Agreement.
(p) From the date hereof until the later to occur of (i) the date that the
Purchaser is no longer obligated to purchase Tranche Shares hereunder or (ii)
the date that all amounts outstanding under the Credit Agreement have been
repaid in full (such later date, the "Obligation Termination Date"), the Company
will permit the Purchaser to have one representative attend each meeting of the
Company's Board of Directors and any committee thereof in a non-voting observer
capacity, whether by telephone or otherwise. The Company will provide such
representative with notice of the time and place of each such meeting of the
Company's Board of Directors and any committee thereof in the same manner and at
the same time as it shall be sent to the directors, and shall be provided with
copies of all notices, reports, minutes and consents at the time and in the
manner as the same are provided to the directors. The Purchaser may change its
designated representative at any time or from time to time by written notice to
the Company. The rights granted to the Purchaser pursuant to this Section shall
be in addition to any rights they may have with respect to the designation of
directors of the Company. The Purchaser agrees that the person designated to
observe any meeting of the Company's Board of Directors or any committee thereof
shall hold any information received in connection with any such meeting in
confidence and trust and not use any information so received in connection with
such meetings in a manner contrary to the Company's interests and shall cause
such person to enter into such confidentiality agreement as may reasonably be
requested by the Company. The Company agrees to pay the expenses in accordance
with the Company's travel policies incurred by the Purchaser's representative in
attending or otherwise participating in any meeting of the Company's Board of
Directors and any committee thereof.
(q) Promptly following the execution hereof, the Company shall take all
necessary actions to cause the Purchaser's nominee, if any, to be appointed to
18
the Board of Directors of the Company and at all times thereafter until the
Obligation Termination Date, the Company shall use its reasonable best efforts
to cause such nominee to be nominated for and elected to the Board of Directors
of the Company. The Company agrees to pay the expenses in accordance with the
Company's travel policies incurred by the Purchaser's nominee in attending or
otherwise participating in any meeting of the Company's Board of Directors and
any committee thereof.
(r) Promptly, and in any event within five (5) days thereof, the Company shall
provide to the Purchaser written notice of the exercise or conversion of any
Stock Equivalents (as defined in Section 5.01(f)) with an exercise or conversion
price less than the highest of the Tranche Purchase Prices.
Section 3.02 Covenants of the Purchaser.
(a) The Purchaser agrees to comply in all material respects with all federal and
state securities laws and the rules and regulations promulgated thereunder in
connection with any sale by it of the Shares, the Warrants and the Warrant
Shares, whether or not such sale is pursuant to the Registration Statement. In
connection with the sale of any Shares pursuant to the Registration Statement,
but without limiting the generality of the foregoing sentence, the Purchaser
shall (i) comply with the provisions of Regulation M promulgated under the
Exchange Act, and (ii) deliver to the purchaser of Shares the prospectus forming
a part of the Registration Statement and all relevant supplements thereto which
have been provided by the Company to the Purchaser on or prior to the applicable
delivery date.
(b) The Purchaser will cooperate with the Company in all material respects in
connection with the performance by the Company of its obligations under the
Registration Rights Agreement, including timely supplying all information
reasonably requested by the Company (which shall include all information
regarding the Purchaser, and any person who beneficially owns Shares held by the
Purchaser within the meaning of Rule 13d-3 promulgated under the Exchange Act,
and the proposed manner of sale of the Shares required to be disclosed in the
Registration Statement) and executing and returning all documents reasonably
requested in connection with the registration and sale of the Shares. The
Purchaser hereby consents to be named as an underwriter in the Registration
Statement, if applicable, in accordance with current Commission policy and, if
necessary, to join in the request of the Company for the acceleration of the
effectiveness of the Registration Statement.
(c) Neither the Purchaser nor any entity controlling it, under its control or
under common control with it has, prior to the execution of this Agreement, and
will not, for a period of 18 months following the execution of this Agreement,
carry a net short position in the Common Stock of the Company, participate in
any short selling activities, recommendations, or collusion, directly or
indirectly, as such activities relate to the Common Stock. A net short position
will include any derivative instruments such as a put option, collar, swap or
any other instrument which would result in a net short position.
(d) In connection with the sale of any Shares pursuant to the Registration
Statement, the Purchaser shall deliver to the purchaser thereof the prospectus
forming a part of the Registration Statement and all relevant supplements
19
thereto which have been provided by the Company to the Purchaser on or prior to
the applicable delivery date, all in accordance with the requirements of the
Securities Act and the rules and regulations promulgated thereunder and any
applicable blue sky laws. Unless such untrue statement or omission relates to a
Blackout Event (as defined in the Registration Rights Agreement), the Company
shall file a post-effective amendment or prospectus supplement as promptly as
practicable, but in no event later than five (5) Business Days following the
discovery of such untrue statement or omission.
(e) If at any time or from time to time after the Effective Date, the Company
notifies the Purchaser in writing that the Registration Statement or the
prospectus forming a part thereof (taking into account any prior amendments or
supplements thereto) contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading, the Purchaser shall
not offer or sell any Shares or engage in any other transaction involving or
relating to the Shares (other than purchases of Shares pursuant to this
Agreement), from the time of the giving of notice with respect to such untrue
statement or omission until the Purchaser receives written notice from the
Company that such untrue statement or omission no longer exists or has been
corrected or disclosed in an effective post-effective amendment to the
Registration Statement or a valid prospectus supplement to the prospectus
forming a part thereof.
(f) The Purchaser acknowledges and understands that the Shares, the Warrants,
and the Warrant Shares are (or upon the issuance thereof will be) "restricted
securities" as defined in Rule 144. The Purchaser hereby agrees not to offer or
sell (as such terms are defined in the Securities Act and the rules and
regulations promulgated thereunder) any Shares, Warrants, or Warrant Shares
unless such offer or sale is made (a) pursuant to an effective registration of
such securities under the Securities Act, or (b) pursuant to an available
exemption from the registration requirements of the Securities Act. A proposed
transfer shall be deemed to comply with this Section 3.02(f) if the Purchaser
delivers to the Company a legal opinion in form and substance reasonably
satisfactory to the Company from counsel reasonably satisfactory to the Company
to the effect that such transfer complies with this Section 3.02(f).
Section 3.03 Indemnification.
(a) For the purpose of this Section 3.03: (i) the term "Purchaser Affiliate"
shall mean any person who controls the Purchaser within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act; and (ii) the term
"Registration Statement" shall include any final prospectus, exhibit, supplement
or amendment included in or relating to the Registration Statement referred to
in Section 3.01(a).
(i) The Company agrees to indemnify and hold harmless the Purchaser and each
Purchaser Affiliate, against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Purchaser or such Purchaser Affiliate
may become subject, under the Securities Act, the Exchange Act, or any other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Company, which consent shall not be unreasonably
withheld), insofar as such losses, claims, damages, liabilities or expenses (or
20
actions in respect thereof as contemplated below) arise out of or are based upon
any material inaccuracy in the representations and warranties of the Company
contained in this Agreement, or any failure of the Company to perform its
obligations hereunder, and will reimburse the Purchaser and each such Purchaser
Affiliate for any legal and other expenses as such expenses which are reasonably
incurred by the Purchaser or such Purchaser Affiliate in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon the inaccuracy of any
representations made by the Purchaser herein.
(ii) The Purchaser agrees to indemnify and hold harmless the Company, each of
its directors, each of its officers and each person, if any, who controls the
Company within the meaning of the Securities Act and the Exchange Act, against
any losses, claims, damages, liabilities or expenses to which the Company, each
of its directors, each of its officers or controlling person may become subject,
under the Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon (A) any failure to comply with the covenants and agreements
contained in Section 3.02 hereof, or (B) the inaccuracy of any representation or
warranty made by the Purchaser herein.
(iii) Promptly after receipt by an indemnified party under this Section 3.03 of
notice of the threat or commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party under
this Section 3.03, promptly notify the indemnifying party in writing thereof;
provided, that the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party for
indemnification and contribution (except as provided in paragraph (iv)) or
otherwise than under the indemnity agreement contained in this Section 3.03 or
to the extent it is not materially prejudiced as a result of such failure. In
case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying party,
the indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party. Upon receipt of notice from the indemnifying party to
such indemnified party of its election so to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party will
not be liable to such indemnified party under this Section 3.03 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of
action, in which case the reasonable fees and expenses of counsel shall be at
the expense of the indemnifying party or both the Company and Purchaser, in the
reasonable opinion of counsel to the Purchaser, have defenses distinct from, or
contradictory to, the defenses available to the other.
21
ARTICLE IV
CONDITIONS TO CLOSING
Section 4.01 Conditions to the Obligations of the Purchaser. Subject to the
provisions of Section 1.01(d) with respect to the Tranches referred to therein,
the obligation of the Purchaser to purchase Tranche Shares at a Closing shall be
subject to the satisfaction of the following conditions, or the waiver of such
conditions by the Purchaser, at or prior to the applicable Tranche Closing Date:
(a) the representations and warranties of the Company set forth in Section 2.01
of this Agreement shall be true and correct in all material respects on the
applicable Tranche Closing Date with the same force and effect as though
expressly made on the Tranche Closing Date, except for representations or
warranties made as of a particular date which representations and warranties
shall be true and correct in all material respects as of such date;
(b) the Company shall have complied in all material respects with all the
agreements hereunder and satisfied all the conditions on its part to be
performed or satisfied hereunder at or prior to such Tranche Closing Date;
(c) the Company shall have delivered to the Purchaser a certificate executed by
the Chairman of the Board or President and the chief financial or accounting
officer of the Company, dated the applicable Tranche Closing Date, to the effect
that the conditions in clauses (a), (b), (f) and (g) of this Section 4.01 have
been satisfied;
(d) the Registration Statement shall have been declared by the Commission to be
effective under the Securities Act on or prior to April 1, 2005 and shall not
have been withdrawn, no stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for the suspension
of the effectiveness of the Registration Statement shall have been instituted or
threatened by the Commission;
(e) there shall not have been (i) any domestic or international event, act, or
occurrence, including, without limitation, event, act, or occurrence of
terrorism, that shall have materially and adversely disrupted, or, in the
reasonable opinion of the Purchaser, will in the immediate future materially and
adversely disrupt, the securities markets in the United States; or (ii) a
general suspension of, or a general limitation on prices for, trading in
securities on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market; or (iii) an outbreak or material increase in the
level of major hostilities or other national or international calamity; or (iv)
a banking moratorium declared by any state or federal authority in the United
States; or (v) a moratorium in foreign exchange trading by major international
banks declared; or (vi) a material interruption in the mail service or other
means of communication within the United States; or (vii) a material loss
suffered by the Company by fire, flood, accident, hurricane, earthquake, theft,
sabotage, or other calamity or malicious act, whether or not such loss shall
have been insured, or from any labor dispute or court or government action,
order, or decree, which will, in the reasonable opinion of the Purchaser, make
it inadvisable to proceed with any portion of the transactions contemplated
hereby; or (viii) any material adverse change in the business, prospects,
financial condition, or results of operations of the Company; or (ix) any
material United States governmental restrictions shall have been imposed on
trading in securities in general, which restrictions are not in effect on the
22
date hereof; or (x) come into effect under the federal laws of the United
States, the laws of any state of the United States, or adoption by any
governmental body or authoritative accounting institute or board, or any
governmental executive any orders, laws, rules, or regulations, which the
Purchaser believes likely to have a material adverse effect on the business,
financial condition or financial statements of the Company or any of the
Subsidiaries or the market for the Common Stock; or (xi) such material and
adverse change in the market for the Company's securities or securities in
general or in political, financial, or economic conditions generally as in the
judgment of the Purchaser makes it inadvisable to proceed with the transactions
contemplated hereby (each, a "Material Adverse Change");
(f) the Company shall have received state securities law or "blue sky" clearance
for the sale of the Shares in states specified in writing by the Purchaser,
other than states in which such clearance shall have required the Company to
qualify to do business or consent to service of process in any jurisdiction in
which it is not now so qualified or has not so consented; and
(g) a Blackout Event shall not have occurred and be continuing at either the
date of the Tranche Election Notice or the Tranche Closing Date.
Section 4.02 Conditions to the Obligations of the Company. The obligation of the
Company to sell Tranche Shares at any Closing shall be subject to the
satisfaction of the following conditions, or the waiver of such conditions by
the Company, at or prior to the applicable Tranche Closing Date:
(a) the representations and warranties of the Purchaser set forth in Section
2.02 of this Agreement shall be true and correct with the same force and effect
as though expressly made on and as of such Tranche Closing Date, except for
representations or warranties made as of a particular date which representations
and warranties shall be true and correct as of such date;
(b) the Purchaser shall have complied with all the agreements hereunder and
satisfied all the conditions on its part to be performed or satisfied hereunder
at or prior to such Tranche Closing Date;
(c) the Purchaser shall have delivered to the Company a certificate executed by
a duly authorized officer of the Purchaser, dated the applicable Tranche Closing
Date, to the effect that the conditions in clauses (a) and (b) of this Section
4.02 have been satisfied; and
(d) no stop order suspending the effectiveness of the Registration Statement
shall be in effect, and no proceedings for the suspension of the effectiveness
of the Registration Statement shall have been instituted or threatened by the
Commission and a Blackout Period shall not be in effect on the Tranche Closing
Date.
Section 4.03 Additional Delivery. On the Agreement Date, Xxxxxxx, Xxxxx &
Xxxxxxx, counsel to the Company, shall deliver its legal opinion to the
Purchaser dated as of the Agreement Date in form and substance satisfactory to
the Purchaser.
23
ARTICLE V
TERMINATION
Section 5.01 Termination by Purchaser. The Purchaser may terminate its
obligations under Article I of this Agreement by written notice to the Company
following the occurrence of one or more of the following:
(a) the Company shall default in any material respect in the performance of any
covenant or agreement under this Agreement, which default shall continue for
more than ten (10) Business Days following written notice thereof from the
Purchaser; provided that, so long as the representations and warranties of the
Company set forth in Section 2.01 of this Agreement shall have been true and
correct on the Agreement Date and no Material Adverse Change shall have occurred
since the Agreement Date, Purchaser shall not have the right to terminate its
obligations under Article I of this Agreement until the ninth (9th) sale of
Tranche Shares;
(b) repayment of amounts due under the Credit Agreement shall have been
accelerated following an Event of Default;
(c) the representations and warranties of the Company set forth in Section 2.01
of this Agreement shall not be true and correct in all material respects as of
the Agreement Date or on any Tranche Closing Date, except for the
representations and warranties made as of a particular date which
representations and warranties need be true and correct in all material respects
only as of such date, which failure to be true and correct shall not have been
cured within ten (10) Business Days following written notice thereof from the
Purchaser; provided that, so long as the representations and warranties of the
Company set forth in Section 2.01 of this Agreement shall have been true and
correct on the Agreement Date and no Material Adverse Change shall have occurred
since the Agreement Date, Purchaser shall not have the right to terminate its
obligations under Article I of this Agreement until the ninth (9th) sale of
Tranche Shares;
(d) the Company shall merge or consolidate with any Person, or shall sell or
substantially all of its assets, or shall enter into any definitive agreement
contemplating the same;
(e) the Closing of the purchase and sale of the final Tranche Shares shall not
have been completed by May 24, 2006;
(f) except pursuant to Stock Equivalents (as hereinafter defined) outstanding on
the date of this Agreement and disclosed in the SEC Documents or pursuant to the
Company's 2002 Equity Incentive Plan or pursuant to the Approved Transaction or
in connection with the Approved Financing, the Company issues, or agrees to
issue: (i) shares of Common Stock at a purchase price less than the highest of
the Tranche Purchase Prices; (ii) shares of capital stock convertible into
Common Stock; or (iii) Stock Equivalents with an exercise or conversion price
less than the highest of the Tranche Purchase Prices (For purposes hereof "Stock
Equivalents" shall mean options, warrants, calls, rights, commitments,
convertible securities and other securities pursuant to which the holder,
directly or indirectly, has the right to acquire (with or without additional
consideration) capital stock or equity of the Company, and "Approved
Transaction" and "Approved Financing" shall have the meanings set out in
Schedule 5.01(f);
24
(g) the Company declares or pays any dividend or distribution to its
shareholders, or purchases or redeems any Common Stock other than pursuant to
the Approved Transaction; or
(h) in the event that the Company completes any financing or other capital
raising transaction, the gross proceeds of which equal or exceed the sum of the
Aggregate Tranche Purchase Prices for the Tranches that as of the date such
financing or other capital raising transaction is completed have not been
purchased by the Purchaser hereunder.
Section 5.02 Termination by the Company.
The Company may terminate its obligations under Article I of this
Agreement by written notice to the Purchaser following the occurrence of one or
more of the following:
(a) the Purchaser shall default in any material respect in the performance of
any covenant or agreement under this Agreement, which default shall continue for
more than thirty (30) Business Days following written notice thereof from the
Company;
(b) the representations and warranties of the Purchaser set forth in Section
2.02 of this Agreement shall not be true and correct in all material respects as
of the Agreement Date or on any Tranche Closing Date which failure to be true
and correct shall not have been cured within thirty (30) Business Days following
written notice thereof from the Purchaser; or
(c) at any time after the date on which all amounts outstanding and owing under
the Credit Agreement of the note issued thereunder shall have been repaid and
satisfied by the Company in whole.
Section 5.03 Liability. The termination by the Purchaser of its obligations
under Article I of this Agreement shall not terminate any liability for any
breach or default by any party in any representation, warranty, covenant or
agreement occurring prior to the date of such termination. The termination by
the Company of its obligations under this Agreement shall not terminate any
liability for any breach or default by any party in any representation,
warranty, covenant or agreement occurring prior to the date of such termination.
In addition, any termination shall not terminate any of the obligations or
agreements of either party under Section 3.03 of this Agreement. The parties
further agree that the termination of obligations under this Agreement shall not
affect or limit the Company's obligations to file and to cause to be declared
effective, and to thereafter remain effective, the Registration Statement
pursuant to the terms of the Registration Rights Agreement.
ARTICLE VI
DEFINITIONS
Section 6.01 Defined Terms. The following terms shall have the meanings
given to them in the Sections of this Agreement set forth below:
Term Section
---- -------
Additional Warrant ..................................Introduction
Affiliate.........................................Section 1.01(b)
00
Xxxxxxxxx Xxxxxxx Purchase Price..................Section 1.01(a)
Agreement................................................Preamble
Agreement Date...........................................Preamble
Auditors..........................................Section 2.01(g)
Blackout Event....................................Section 3.02(d)
Business Day......................................Section 1.01(b)
Closing...........................................Section 1.02(a)
Commission...........................................Section 2.01
Common Stock ........................................Introduction
Company..................................................Preamble
Credit Agreement..................................Section 2.01(f)
Difference....................................Section 3.03(a)(iv)
Effective Date....................................Section 1.01(b)
Election Notice...................................Section 1.01(b)
Environmental Laws................................Section 2.01(r)
Exchange Act......................................Section 2.01(a)
Initial Warrant .....................................Introduction
Investment Company Act............................Section 2.01(o)
Lender............................................Section 2.01(f)
Material Adverse Change...........................Section 4.01(e)
OTCBB..........................................Section 2.01(b)(i)
Obligation Termination Date.......................Section 3.01(p)
Purchaser................................................Preamble
Purchaser Affiliate...............................Section 3.03(a)
Registration Statement............................Section 3.01(a)
Registration Rights Agreement.....................Section 3.01(a)
Release Time......................................Section 3.01(f)
Xxxxxxxx-Xxxxx............................................2.01(a)
SBI Advisors......................................Section 2.01(f)
SBI USA...........................................Section 2.01(u)
SEC Documents.....................................Section 2.01(a)
Securities Act....................................Section 1.01(b)
Shares...............................................Introduction
Stock Equivalents.................................Section 5.01(f)
Subsidiaries..............................................2.01(c)
Tranche...........................................Section 1.01(a)
Tranche Closing Date..............................Section 1.02(a)
Tranche Purchase Price............................Section 1.01(a)
Tranche Shares....................................Section 1.01(a)
Transaction Agreements ..............................Introduction
Underlying Shares............................Section 3.01(a)(iii)
Warrants ............................................Introduction
Warrant Shares....................................Section 2.01(f)
26
ARTICLE VII
MISCELLANEOUS
Section 7.01 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, confirmed facsimile or nationally recognized overnight
express courier postage prepaid, and shall be deemed given when so mailed and
shall be delivered as addressed as follows:
(a)......if to the Company, to:
IDI Global, Inc.
000 Xxxx 000 Xxxxx
Xxxx, Xxxx 00000
Attention: President
Phone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxx & Xxxxxxx
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxx III, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
(b) if to the Purchaser, to:
SBI Brightline X LLC
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Durham, Xxxxx & Xxxxxxx, P.C.
000 X. Xxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
27
Section 7.02 Assignment. Neither party hereto may assign or delegate any of such
party's rights or obligations under or in connection with this Agreement, and
any attempted assignment or delegation of such rights or obligations shall be
void. Except as expressly provided in Section 3.03 with respect to Purchaser
Affiliates, directors and controlling persons of the Company and officers of the
Company who signed the Registration Statement, no person, including without
limitation any person who purchases or otherwise acquires or receives any Shares
from the Purchaser, is an intended third party beneficiary of this Agreement,
and no party to this Agreement shall have any obligation arising under this
Agreement to any person other than the other party hereto and, to the extent
expressly provided in Section 3.03, Purchaser Affiliates, directors and
controlling persons of the Company and officers of the Company who signed the
Registration Statement.
Section 7.03 Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Purchaser.
Section 7.04 Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
Section 7.05 Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
Section 7.06 Governing Law; Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah, without regard to
its conflicts of law principles, and the federal law of the United States of
America. The Company irrevocably consents to the jurisdiction of the courts of
the State of California and of any federal court, in each case located in Los
Angeles or Orange County, California in connection with any action or proceeding
arising out of, or relating to, this Agreement, any document or instrument
delivered pursuant to, in connection with, or simultaneously with this
Agreement, or a breach of this Agreement or any such document or instrument. In
any such action or proceeding, the Company waives personal service of any
summons, complaint, or other process and agrees that service thereof may be made
in accordance with Section 7.02. Within thirty (30) days after such service, or
such other time as may be mutually agreed upon in writing by the attorneys for
the parties to such action or proceeding, the Company shall appear or answer
such summons, complaint, or other process. Should the Company fail to appear or
answer within such thirty (30)-day period or such extended period, as the case
may be, the Company shall be deemed in default and judgment may be entered
against the Company for the amount as demanded in any summons, complaint, or
other process so served. The Company hereby waives all rights to a trial by
jury.
Section 7.07 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
28
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first above
written.
IDI GLOBAL, INC.,
a Nevada corporation
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------------------------------
Its: CEO
-----------------------------------------------
SBI BRIGHTLINE X, LLC,
a Delaware limited liability company
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------------------
Name: Xxxxxx Xxxxxxx
Its: Manager
Schedule 1.01(a)
Tranches
SCHEDULE 1.01(a)
TRANCHES
------------- ---------------- ------------------ -------------------
Number of Tranche Purchase Aggregate Tranche
Tranche No. Tranche Shares Price Per Share Purchase Price
------------- ---------------- ------------------ -------------------
1 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
2 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
3 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
4 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
5 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
6 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
7 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
8 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
9 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
10 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
11 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
12 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
13 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
14 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
15 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
16 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
17 200,000 $0.70 $140,000
------------- ---------------- ------------------ -------------------
18 28,570 $0.70 $19,999
------------- ---------------- ------------------ -------------------
TABLE OF CONTENTS
PAGE
ARTICLE I ACQUISITION OF SECURITIES 1
Section 1.01 Purchase and Sale. 1
Section 1.02 Closing Procedures; the Closings. 3
ARTICLE II REPRESENATIONS AND WARRANTIES 4
Section 2.01 Representations and Warranties of the Company 4
Section 2.02 Representations, Warranties and Covenants of the Purchaser 14
Section 2.03 Survival of Representations, Warranties and Agreements 15
ARTICLE III COVENANTS 16
Section 3.01 Covenants of the Company. 16
Section 3.02 Covenants of the Purchaser. 19
Section 3.03 Indemnification. 20
ARTICLE IV CONDITIONS TO CLOSING 22
Section 4.01 Conditions to the Obligations of the Purchaser 22
Section 4.02 Conditions to the Obligations of the Company 23
ARTICLE V TERMINATION 24
Section 5.01 Termination by Purchaser 24
Section 5.02 Termination by the Company. 25
Section 5.03 Liability 25
ARTICLE VI DEFINITIONS 26
Section 6.01 Defined Terms 26
ARTICLE VII MISCELLANEOUS 27
Section 7.01 Notices 27
Section 7.02 Assignment 28
Section 7.03 Changes 28
Section 7.04 Headings 28
Section 7.05 Severability 28
Section 7.06 Governing Law; Venue 28
Section 7.07 Counterparts 29
