SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January
31, 2006, by and among CONNECTED MEDIA TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), and the Buyers listed on Schedule I attached hereto
(individually, a "Buyer" or collectively "Buyers").
WITNESSETH
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to One Million Six
Hundred Thousand Dollars ($1,600,000) of secured convertible debentures (the
"Convertible Debentures"), which shall be convertible into shares of the
Company's common stock, par value $0.0001 (the "Common Stock") (as converted,
the "Conversion Shares") of which the original principal amount of Six Hundred
Thousand Dollars ($600,000) was previously funded pursuant to the Promissory
Note dated April 14, 2005, Four Hundred Thousand Dollars ($400,000) shall be
funded on the fifth (5th) business day following the date hereof (the "First
Closing"), Three Hundred Thousand Dollars ($300,000) shall be funded Ninety (90)
days from the date hereof (the "Second Closing") and Three Hundred Thousand
Dollars ($300,000) shall be funded One Hundred Fifty (150) days from the date
hereof (the "Third Closing") (individually referred to as a "Closing"
collectively referred to as the "Closings"), for a total purchase price of up to
One Million Six Hundred Thousand Dollars ($1,600,000), (the "Purchase Price") in
the respective amounts set forth opposite each Buyer(s) name on Schedule I (the
"Subscription Amount");
WHEREAS, on the date hereof, the Company shall issue to the Buyer a
Convertible Debenture (the "Consolidated Convertible Debenture"), which shall
consolidate all outstanding principal of the Promissory Note dated April 14,
2005 (the "Note") in the original principal amount of Six Hundred Thousand
Dollars ($600,000) plus accrued and unpaid interest on the Note through the date
hereof in the amount of Fifty Eight Thousand Dollars ($58,000), along with a fee
in the amount of Sixty Thousand Dollars ($60,000) as and for restructuring and
waiving the default on the Note, for the total principal amount of Seven Hundred
Eighteen Thousand Dollars ($718,000);
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Investor
Registration Rights Agreement (the "Investor Registration Rights Agreement")
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated there under,
and applicable state securities laws; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Amended and
Restated Security Agreement (the "Security Agreement") pursuant to which the
Company has agreed to provide the Buyer a security interest in Pledged
Collateral (as this term is defined in the Security Agreement) to secure the
Company's obligations under this Agreement, the Transaction Documents, or any
other obligations of the Company to the Buyer;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Amended and
Restated Pledge and Escrow Agreement (the "Pledge and Escrow Agreement")
pursuant to which the Company has agreed to provide the Buyer a security
interest in the Pledged Shares (as this term is defined in the Pledge and Escrow
Agreement) to secure the Company's obligations under this Agreement, the
Transaction Documents, or any other obligations of the Company to the Buyer; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions (the "Irrevocable Transfer Agent Instructions").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
--------------------------------------------
(a) Purchase of Convertible Debentures. Subject to the satisfaction
(or waiver) of the terms and conditions of this Agreement, each Buyer
agrees, severally and not jointly, to purchase at each Closing and the
Company agrees to sell and issue to each Buyer, severally and not jointly,
at each Closing, Convertible Debentures in amounts corresponding with the
Subscription Amount set forth opposite each Buyer's name on Schedule I
hereto.
(b) Closing Date. The First Closing of the purchase and sale of the
Convertible Debentures shall take place at 10:00 a.m. Eastern Standard Time
on the fifth (5th) business day following the date hereof, subject to
notification of satisfaction of the conditions to the First Closing set
forth herein and in Sections 6 and 7 below (or such later date as is
mutually agreed to by the Company and the Buyer(s)) (the "First Closing
Date") and the Second Closing of the purchase and sale of the Convertible
Debentures shall take place at 10:00 a.m. Eastern Standard Time Ninety (90)
days from the date hereof, subject to notification of satisfaction of the
conditions to the Second Closing set forth herein and in Sections 6 and 7
below (or such later date as is mutually agreed to by the Company and the
Buyer(s)) (the "Second Closing Date") and the Third Closing of the purchase
and sale of the Convertible Debentures shall take place at 10:00 a.m.
Eastern Standard Time One Hundred Fifty (150) days from the date hereof,
subject to notification of satisfaction of the conditions to the Third
Closing set forth herein and in Sections 6 and 7 below (or such later date
as is mutually agreed to by the Company and the Buyer(s)) (the "Third
Closing Date") (collectively referred to a the "Closing Dates"). The
Closing shall occur on the respective Closing Dates at the offices of
Yorkville Advisors, LLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx
Xxxxxx 00000 (or such other place as is mutually agreed to by the Company
and the Buyer(s)).
(c) Form of Payment. Subject to the satisfaction of the terms and
conditions of this Agreement, on the Closing Dates, (i) the Buyers shall
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deliver to the Company such aggregate proceeds for the Convertible
Debentures to be issued and sold to such Buyer(s), minus the fees to be
paid directly from the proceeds the Closings as set forth herein, and (ii)
the Company shall deliver to each Buyer, Convertible Debentures which such
Buyer(s) is purchasing in amounts indicated opposite such Buyer's name on
Schedule I, duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Each Buyer represents and warrants, severally and not jointly, that:
(a) Investment Purpose. Each Buyer is acquiring the Convertible
Debentures and, upon conversion of Convertible Debentures, the Buyer will
acquire the Conversion Shares then issuable, for its own account for
investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the Securities Act; provided, however, that by
making the representations herein, such Buyer reserves the right to dispose
of the Conversion Shares at any time in accordance with or pursuant to an
effective registration statement covering such Conversion Shares or an
available exemption under the Securities Act.
(b) Accredited Investor Status. Each Buyer is an "Accredited Investor"
as that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. Each Buyer understands that the
Convertible Debentures are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of such Buyer set forth herein in order to determine the availability of
such exemptions and the eligibility of such Buyer to acquire such
securities.
(d) Information. Each Buyer and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his purchase
of the Convertible Debentures and the Conversion Shares, which have been
requested by such Buyer. Each Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its
management. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on
the Company's representations and warranties contained in Section 3 below.
Each Buyer understands that its investment in the Convertible Debentures
and the Conversion Shares involves a high degree of risk. Each Buyer is in
a position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such Buyer
to obtain information from the Company in order to evaluate the merits and
risks of this investment. Each Buyer has sought such accounting, legal and
tax advice, as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Convertible Debentures and
the Conversion Shares.
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(e) No Governmental Review. Each Buyer understands that no United
States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Convertible Debentures or the Conversion Shares, or the fairness or
suitability of the investment in the Convertible Debentures or the
Conversion Shares, nor have such authorities passed upon or endorsed the
merits of the offering of the Convertible Debentures or the Conversion
Shares.
(f) Transfer or Resale. Each Buyer understands that except as provided
in the Investor Registration Rights Agreement: (i) the Convertible
Debentures have not been and are not being registered under the Securities
Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder, or
(B) such Buyer shall have delivered to the Company an opinion of counsel,
in a generally acceptable form, to the effect that such securities to be
sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration requirements; (ii) any sale of such
securities made in reliance on Rule 144 under the Securities Act (or a
successor rule thereto) ("Rule 144") may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of such securities under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the Securities Act) may require compliance with
some other exemption under the Securities Act or the rules and regulations
of the SEC thereunder; and (iii) neither the Company nor any other person
is under any obligation to register such securities under the Securities
Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder. The Company reserves the right to place stop
transfer instructions against the shares and certificates for the
Conversion Shares.
(g) Legends. Each Buyer understands that the certificates or other
instruments representing the Convertible Debentures and or the Conversion
Shares shall bear a restrictive legend in substantially the following form
(and a stop transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
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Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the Securities Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the Securities Act.
(h) Authorization, Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with
its terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
(i) Receipt of Documents. Each Buyer and his or its counsel has
received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein and the Transaction
Documents (as defined herein); (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such representations,
warranties and covenants; (iii) the Company's Form 10-KSB for the fiscal
year ended December 31, 2004; (iv) the Company's Form 10-QSB for the fiscal
quarter ended September 30, 2005 and (v) answers to all questions each
Buyer submitted to the Company regarding an investment in the Company; and
each Buyer has relied on the information contained therein and has not been
furnished any other documents, literature, memorandum or prospectus.
(j) Due Formation of Corporate and Other Buyers. If the Buyer(s) is a
corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized
for the specific purpose of purchasing the Convertible Debentures and is
not prohibited from doing so.
(k) No Legal Advice From the Company. Each Buyer acknowledges, that it
had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and
investment and tax advisors. Each Buyer is relying solely on such counsel
and advisors and not on any statements or representations of the Company or
any of its representatives or agents for legal, tax or investment advice
with respect to this investment, the transactions contemplated by this
Agreement or the securities laws of any jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
----------------------------------------------
The Company represents and warrants as of the date hereof to each of the
Buyers that, except as set forth in the SEC Documents (as defined herein) or in
the Disclosure Schedule attached hereto (the "Disclosure Schedule"):
(a) Organization and Qualification. The Company and its subsidiaries
are corporations duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are incorporated, and have the
requisite corporate power to own their properties and to carry on their
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business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent
that the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries taken as a
whole.
(b) Authorization, Enforcement, Compliance with Other Instruments. (i)
The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Security Agreement, the Investor
Registration Rights Agreement, the Irrevocable Transfer Agent Agreement,
the Pledge and Escrow Agreement, and any related agreements (collectively
the "Transaction Documents") and to issue the Convertible Debentures and
the Conversion Shares in accordance with the terms hereof and thereof, (ii)
the execution and delivery of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Convertible Debentures
the Conversion Shares and the reservation for issuance and the issuance of
the Conversion Shares issuable upon conversion or exercise thereof, have
been duly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors
or its stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents
constitute the valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies. The authorized officer of the Company executing the
Transaction Documents knows of no reason why the Company cannot file the
registration statement as required under the Investor Registration Rights
Agreement or perform any of the Company's other obligations under such
documents.
(c) Capitalization. The authorized capital stock of the Company
consists of 750,000,000 shares of Common Stock, par value $0.0001 per
share, and 10,000,000 shares of Preferred Stock, par value $0.0001
("Preferred Stock") of which 300,507,663 shares of Common Stock and zero
shares of Preferred Stock are issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock are subject to preemptive rights
or any other similar rights or any liens or encumbrances suffered or
permitted by the Company. As of the date of this Agreement, except as
disclosed in the SEC Documents and as set forth in Schedule 3(c) attached
hereto, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of
the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii)
there are no outstanding debt securities and (iii) there are no agreements
or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of their securities under the
Securities Act (except pursuant to the Registration Rights Agreement) and
(iv) there is an outstanding registration statement which will be withdrawn
within ten (10) days from the date hereof and there is an outstanding
comment letter from the SEC dated January 26, 2006. There are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Convertible Debentures as described in
6
this Agreement. The Company has furnished to the Buyer true and correct
copies of the Company's Articles of Incorporation, as amended and as in
effect on the date hereof (the "Articles of Incorporation"), and the
Company's By-laws, as in effect on the date hereof (the "By-laws"), and the
terms of all securities convertible into or exercisable for Common Stock
and the material rights of the holders thereof in respect thereto other
than stock options issued to employees and consultants.
(d) Issuance of Securities. The Convertible Debentures are duly
authorized and, upon issuance in accordance with the terms hereof, shall be
duly issued, fully paid and nonassessable, are free from all taxes, liens
and charges with respect to the issue thereof. The Conversion Shares
issuable upon conversion of the Convertible Debentures will be duly
authorized and reserved for issuance upon the increase in the number of
authorized shares of the Company's Common Stock to a number satisfactory to
the Buyer within sixty (60) days from the date hereof. Upon conversion or
exercise in accordance with the Convertible Debentures the Conversion
Shares will be duly issued, fully paid and nonassessable.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby will not (i) result in a violation of
the Articles of Incorporation, any certificate of designations of any
outstanding series of preferred stock of the Company or the By-laws or (ii)
conflict with or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of The
National Association of Securities Dealers Inc.'s OTC Bulletin Board on
which the Common Stock is quoted) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected. Neither the Company nor its subsidiaries
is in violation of any term of or in default under its Articles of
Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of
the Company and its subsidiaries is not being conducted, and shall not be
conducted in violation of any material law, ordinance, or regulation of any
governmental entity. Except as specifically contemplated by this Agreement
and as required under the Securities Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform
any of its obligations under or contemplated by this Agreement or the
Registration Rights Agreement in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the date hereof. The Company
and its subsidiaries are unaware of any facts or circumstance, which might
give rise to any of the foregoing.
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(f) SEC Documents: Financial Statements. Since August 25, 2004 and to
the best of its knowledge since January 1, 2003, the Company has filed all
reports, schedules, forms, statements and other documents required to be
filed by it with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (all of the foregoing filed prior to the date
hereof or amended after the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents incorporated
by reference therein, being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Buyers or their
representatives, or made available through the SEC's website at
xxxx://xxx.xxx.xxx., true and complete copies of the SEC Documents. As of
their respective dates, the financial statements of the Company disclosed
in the SEC Documents (the "Financial Statements") complied as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such Financial
Statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and, fairly present in all material respects the
financial position of the Company as of the dates thereof and the results
of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). No
other information provided by or on behalf of the Company to the Buyer
which is not included in the SEC Documents, including, without limitation,
information referred to in this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(g) 10(b)-5. The SEC Documents do not include any untrue statements of
material fact, nor do they omit to state any material fact required to be
stated therein necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.
(h) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending against or affecting
the Company, the Common Stock or any of the Company's subsidiaries, wherein
an unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of
the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) have a material adverse effect on
the business, operations, properties, financial condition or results of
operations of the Company and its subsidiaries taken as a whole.
(i) Acknowledgment Regarding Buyer's Purchase of the Convertible
Debentures. The Company acknowledges and agrees that the Buyer(s) is acting
solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that the Buyer(s) is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by
the Buyer(s) or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Buyer's purchase of the Convertible Debentures or
the Conversion Shares. The Company further represents to the Buyer that the
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Company's decision to enter into this Agreement has been based solely on
the independent evaluation by the Company and its representatives.
(j) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning
of Regulation D under the Securities Act) in connection with the offer or
sale of the Convertible Debentures or the Conversion Shares.
(k) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that would require
registration of the Convertible Debentures or the Conversion Shares under
the Securities Act or cause this offering of the Convertible Debentures or
the Conversion Shares to be integrated with prior offerings by the Company
for purposes of the Securities Act.
(l) Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of
the Company's or its subsidiaries' employees is a member of a union and the
Company and its subsidiaries believe that their relations with their
employees are good.
(m) Intellectual Property Rights. The Company and its subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. The Company and its subsidiaries do
not have any knowledge of any infringement by the Company or its
subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, and, to
the knowledge of the Company there is no claim, action or proceeding being
made or brought against, or to the Company's knowledge, being threatened
against, the Company or its subsidiaries regarding trademark, trade name,
patents, patent rights, invention, copyright, license, service names,
service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing.
(n) Environmental Laws. The Company and its subsidiaries are (i) in
compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance
with all terms and conditions of any such permit, license or approval.
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(o) Title. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.
(p) Insurance. The Company's officers and directors are insured by a
Director and Officer Insurance Policy; and the Company does not believe
that any other insurance policy is prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company
nor any such subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such subsidiary has any reason
to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business at a
cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the
Company and its subsidiaries, taken as a whole.
(q) Regulatory Permits. The Company and its subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
(r) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain asset accountability, and (iii) the recorded amounts for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(s) No Material Adverse Breaches, etc. Neither the Company nor any of
its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in
the judgment of the Company's officers has or is expected in the future to
have a material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company or
its subsidiaries. Neither the Company nor any of its subsidiaries is in
breach of any contract or agreement which breach, in the judgment of the
Company's officers, has or is expected to have a material adverse effect on
the business, properties, operations, financial condition, results of
operations or prospects of the Company or its subsidiaries.
(t) Tax Status. The Company and each of its subsidiaries has made and
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and
(unless and only to the extent that the Company and each of its
subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) has paid all taxes and
other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
10
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due
by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim, other than an unpaid
withholding tax liability in the amount of approximately $14,000.
(u) Certain Transactions. Except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of
business upon terms no less favorable than the Company could obtain from
third parties and other than the grant of stock options and employment
agreements disclosed in the SEC Documents, none of the officers, directors,
or employees of the Company is presently a party to any transaction with
the Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, except as disclosed in Schedule 3(u) attached
hereto.
(v) Fees and Rights of First Refusal. The Company is not obligated to
offer the securities offered hereunder on a right of first refusal basis or
otherwise to any third parties including, but not limited to, current or
former shareholders of the Company, underwriters, brokers, agents or other
third parties.
4. COVENANTS.
----------
(a) Best Efforts. Each party shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b) Form D. The Company agrees to file a Form D with respect to the
Conversion Shares as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Conversion Shares, or obtain an
exemption for the Conversion Shares for sale to the Buyers at the Closing
pursuant to this Agreement under applicable securities or "Blue Sky" laws
of the states of the United States, and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date.
(c) Reporting Status. Until the earlier of (i) the date as of which
the Buyer(s) may sell all of the Conversion Shares without restriction
pursuant to Rule 144(k) promulgated under the Securities Act (or successor
thereto), or (ii) the date on which (A) the Buyer(s) shall have sold all
the Conversion Shares and (B) none of the Convertible Debentures are
outstanding (the "Registration Period"), the Company shall file in a timely
manner all reports required to be filed with the SEC pursuant to the
Exchange Act and the regulations of the SEC thereunder, and the Company
shall not terminate its status as an issuer required to file reports under
the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination.
11
(d) Use of Proceeds. The Company will use the proceeds from the sale
of the Convertible Debentures for general corporate and working capital
purposes, as well as for the acquisition of Natcom Marketing International
("Natcom") pursuant to the terms of the Stock Purchase Agreement dated as
of the date hereof.
(e) Reservation of Shares. The Company shall take all action
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, such number of shares of Common Stock as shall be
necessary to effect the issuance of the Conversion Shares. If at any time
the Company does not have available such shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all of the
Conversion Shares, the Company shall call and hold a special meeting of the
shareholders within thirty (30) days of such occurrence, for the sole
purpose of increasing the number of shares authorized. The Company's
management shall recommend to the shareholders to vote in favor of
increasing the number of shares of Common Stock authorized. Management
shall also vote all of its shares in favor of increasing the number of
authorized shares of Common Stock.
(f) Listings or Quotation. The Company shall promptly secure the
listing or quotation of the Conversion Shares upon each national securities
exchange, automated quotation system or The National Association of
Securities Dealers Inc.'s Over-The-Counter Bulletin Board ("OTCBB") or
other market, if any, upon which shares of Common Stock are then listed or
quoted (subject to official notice of issuance) and shall use its best
efforts to maintain, so long as any other shares of Common Stock shall be
so listed, such listing of all Conversion Shares from time to time issuable
under the terms of this Agreement. The Company shall maintain the Common
Stock's authorization for quotation on the OTCBB.
(g) Fees and Expenses.
(i) Each of the Company and the Buyer(s) shall pay all costs and
expenses incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of the Transaction
Documents. The Company shall pay Yorkville Advisors LLC a fee equal to
ten percent (10%) of the Purchase Price.
(ii) The Company shall pay a structuring fee to Yorkville
Advisors LLC of Ten Thousand Dollars ($10,000), which shall be paid
directly from the proceeds of the First Closing.
(iii) The Company shall issue to the Buyer a warrant to purchase
Eight Million (8,000,000) shares of the Company's Common Stock for a
period of three (3) years at an exercise price of $0.0001 per share
(the "Warrant"). The shares of Common Stock issuable under the Warrant
shall collectively be referred to as the "Warrant Shares."
(iv) The Warrant Shares shall have "piggy-back" and demand
registration rights.
(h) Corporate Existence. Except for the Stock Purchase Agreement
between the Company and Natcom and the transactions contemplated therein,
so long as any of the Convertible Debentures remain outstanding, the
Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, reverse stock split consolidation, sale of
12
all or substantially all of the Company's assets or any similar transaction
or related transactions (each such transaction, an "Organizational Change")
unless, prior to the consummation an Organizational Change, the Company
obtains the written consent of each Buyer. In any such case, the Company
will make appropriate provision with respect to such holders' rights and
interests to insure that the provisions of this Section 4(h) will
thereafter be applicable to the Convertible Debentures.
(i) Transactions With Affiliates. So long as any Convertible
Debentures are outstanding, the Company shall not, and shall cause each of
its subsidiaries not to, enter into, amend, modify or supplement, or permit
any subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any subsidiary's
officers, directors, person who were officers or directors at any time
during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below)
or with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a
five percent (5%) or more beneficial interest (each a "Related Party"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any investment in an Affiliate of the Company, (c)
any agreement, transaction, commitment, or arrangement on an arms-length
basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, (d) any agreement,
transaction, commitment, or arrangement which is approved by a majority of
the disinterested directors of the Company; for purposes hereof, any
director who is also an officer of the Company or any subsidiary of the
Company shall not be a disinterested director with respect to any such
agreement, transaction, commitment, or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity, another person
or entity that, directly or indirectly, (i) has a ten percent (10%) or more
equity interest in that person or entity, (ii) has ten percent (10%) or
more common ownership with that person or entity, (iii) controls that
person or entity, or (iv) shares common control with that person or entity.
"Control" or "controls" for purposes hereof means that a person or entity
has the power, direct or indirect, to conduct or govern the policies of
another person or entity.
(j) Transfer Agent. The Company covenants and agrees that, in the
event that the Company's agency relationship with the transfer agent should
be terminated for any reason prior to a date which is two (2) years after
the Closing Date, the Company shall immediately appoint a new transfer
agent and shall require that the new transfer agent execute and agree to be
bound by the terms of the Irrevocable Transfer Agent Instructions (as
defined herein).
(k) Restriction on Issuance of the Capital Stock. So long as any
Convertible Debentures are outstanding, the Company shall not, without the
prior written consent of the Buyer(s), (i) issue or sell shares of Common
Stock or Preferred Stock without consideration or for a consideration per
share less than the bid price of the Common Stock, as quoted by Bloomberg,
LP (the "Bid Price"), determined immediately prior to its issuance, (ii)
issue any preferred stock, warrant, option, right, contract, call, or other
security or instrument granting the holder thereof the right to acquire
Common Stock without consideration or for a consideration less than such
Common Stock's Bid Price determined immediately prior to it's issuance,
13
(iii) enter into any security instrument granting the holder a security
interest in any and all assets of the Company, or (iv) file any
registration statement on Form S-8.
(l) Neither the Buyer(s) nor any of its affiliates have an open short
position in the Common Stock of the Company, and the Buyer(s) agrees that
it shall not, and that it will cause its affiliates not to, engage in any
short sales of or hedging transactions with respect to the Common Stock as
long as any Convertible Debentures shall remain outstanding.
(m) Rights of First Refusal. So long as any portion of Convertible
Debentures are outstanding, if the Company intends to raise additional
capital by the issuance or sale of capital stock of the Company, including
without limitation shares of any class of common stock, any class of
preferred stock, options, warrants or any other securities convertible or
exercisable into shares of common stock (whether the offering is conducted
by the Company, underwriter, placement agent or any third party) the
Company shall be obligated to offer to the Buyers such issuance or sale of
capital stock, by providing in writing the principal amount of capital it
intends to raise and outline of the material terms of such capital raise,
prior to the offering such issuance or sale of capital stock to any third
parties including, but not limited to, current or former officers or
directors, current or former shareholders and/or investors of the obligor,
underwriters, brokers, agents or other third parties. The Buyers shall have
ten (10) business days from receipt of such notice of the sale or issuance
of capital stock to accept or reject all or a portion of such capital
raising offer.
(n) The Company shall increase its number of authorized shares of
Common Stock to a number satisfactory to the Buyer within sixty (60) days
from the date hereof.
5. TRANSFER AGENT INSTRUCTIONS.
----------------------------
(a) The Company shall issue the Irrevocable Transfer Agent
Instructions to its transfer agent irrevocably appointing Xxxxx Xxxxxxxx,
Esq. as the Company's agent for purpose of having certificates issued,
registered in the name of the Buyer(s) or its respective nominee(s), for
the Conversion Shares representing such amounts of Convertible Debentures
as specified from time to time by the Buyer(s) to the Company upon
conversion of the Convertible Debentures, for interest owed pursuant to the
Convertible Debenture, and for any and all Liquidated Damages (as this term
is defined in the Investor Registration Rights Agreement). Xxxxx Xxxxxxxx,
Esq. shall be paid a cash fee of Fifty Dollars ($50) for every occasion
they act pursuant to the Irrevocable Transfer Agent Instructions. The
Company shall not change its transfer agent without the express written
consent of the Buyer(s), which may be withheld by the Buyer(s) in its sole
discretion. Prior to registration of the Conversion Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred
to in this Section 5, and stop transfer instructions to give effect to
Section 2(g) hereof (in the case of the Conversion Shares prior to
registration of such shares under the Securities Act) will be given by the
Company to its transfer agent and that the Conversion Shares shall
otherwise be freely transferable on the books and records of the Company as
and to the extent provided in this Agreement and the Investor Registration
Rights Agreement. Nothing in this Section 5 shall affect in any way the
Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of Conversion Shares. If the Buyer(s) provides the Company
14
with an opinion of counsel, in form, scope and substance customary for
opinions of counsel in comparable transactions to the effect that
registration of a resale by the Buyer(s) of any of the Conversion Shares is
not required under the Securities Act, the Company shall within two (2)
business days instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by the Buyer. The
Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this Section 5
will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 5, that the
Buyer(s) shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any
bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
-----------------------------------------------
The obligation of the Company hereunder to issue and sell the Convertible
Debentures to the Buyer(s) at the Closings is subject to the satisfaction, at or
before the Closing Dates, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
(a) Each Buyer shall have executed the Transaction Documents and
delivered them to the Company.
(b) The Buyer(s) shall have delivered to the Company the Purchase
Price for Convertible Debentures in respective amounts as set forth next to
each Buyer as outlined on Schedule I attached hereto, minus any fees to be
paid directly from the proceeds the Closings as set forth herein, by wire
transfer of immediately available U.S. funds pursuant to the wire
instructions provided by the Company.
(c) The representations and warranties of the Buyer(s) shall be true
and correct in all material respects as of the date when made and as of the
Closing Dates as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer(s) shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Buyer(s) at or prior to the
Closing Dates.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
(a) The obligation of the Buyer(s) hereunder to purchase the
Convertible Debentures at the First Closing is subject to the satisfaction,
at or before the First Closing Date, of each of the following conditions:
(i) The Company shall have executed the Transaction Documents and
delivered the same to the Buyer(s).
(ii) The Common Stock shall be authorized for quotation on the
OTCBB, trading in the Common Stock shall not have been suspended for
15
any reason, and all the Conversion Shares issuable upon the conversion
of the Convertible Debentures shall be approved by the OTCBB.
(iii) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations
and warranties shall be true and correct without further
qualification) as of the date when made and as of the First Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall
have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by the Company at or prior to
the First Closing Date. If requested by the Buyer, the Buyer shall
have received a certificate, executed by the President of the Company,
dated as of the First Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Buyer
including, without limitation an update as of the First Closing Date
regarding the representation contained in Section 3(c) above.
(iv) The Company shall have executed and delivered to the
Buyer(s) the Convertible Debentures in the respective amounts set
forth opposite each Buyer(s) name on Schedule I attached hereto.
(v) The Buyer(s) shall have received an opinion of counsel from
the Company's Counsel in a form satisfactory to the Buyer(s).
(vi) The Company shall have provided to the Buyer(s) a
certificate of good standing from the secretary of state from the
state in which the company is incorporated.
(vii) The Company shall have filed a form UCC-1 or such other
forms as may be required to perfect the Buyer's interest in the
Pledged Property as detailed in the Security Agreement dated the date
hereof and provided proof of such filing to the Buyer(s).
(viii) The Company shall have delivered the Pledged Shares as
well as executed and medallion guaranteed stock powers as required
pursuant to the Pledge and Escrow Agreement.
(ix) The Company shall have provided to the Buyer an
acknowledgement, to the satisfaction of the Buyer, from the Company's
independent certified public accountants as to its ability to provide
all consents required in order to file a registration statement in
connection with this transaction.
(x) The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(xi) The Company and Nat-Com Marketing International, Inc.
("Nat-Com") will move forward to complete the contemplated Merger
Transaction (the "Merger Closing"), subject to customary diligence and
accounting requirements. Upon the Merger Closing, the Company shall
16
adjust its capital structure such that Xxxxxx Xxxxxxxxx shall own a
minimum of 50% of the outstanding common shares of the company and
elect a majority of the board of directors.
(xii) Upon signing of the Stock Purchase Agreement, the Company
shall transfer all intellectual property rights and title to the
existing issued patents and the pending patents to the entity known as
Rothschild Trust Holdings, LLC. (the "Trust") Concurrent with the
transfer of all patent titles to the Trust, the Buyer will file, and
the Trust shall grant to Buyer, a senior (first) lien against all of
the patent titles and the Buyer's senior lien shall remain intact
until such time as the Buyer has been paid a minimum of $690,000 of
the Convertible Debenture plus all accrued interest, pursuant to the
terms of an Escrow Agreement among the parties.
(xiii) Concurrent with the transference of the patent and pending
patent titles, the Trust and Company shall enter into a royalty
bearing license agreement. It is understood by the Company that any
royalties due to the Trust under such license agreement shall be held
in escrow until the Buyer has been repaid $690,000 of the Convertible
Debentures plus any and all accrued interest. In the event the Company
defaults on such payment to the Buyer, the Royalties in Escrow may be
applied toward the payment of the $690,000.
(b) The obligation of the Buyer(s) hereunder to accept the Convertible
Debentures at the Second Closing is subject to the satisfaction, at or
before the Second Closing Date, of each of the following conditions:
(i) The Common Stock shall be authorized for quotation on the
OTCBB, trading in the Common Stock shall not have been suspended for
any reason, and all the Conversion Shares issuable upon the conversion
of the Convertible Debentures shall be approved by the OTCBB.
(ii) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations
and warranties shall be true and correct without further
qualification) as of the date when made and as of the Second Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall
have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by the Company at or prior to
the Second Closing Date. If requested by the Buyer, the Buyer shall
have received a certificate, executed by two officers of the Company,
dated as of the Second Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Buyer
including, without limitation an update as of the Second Closing Date
regarding the representation contained in Section 3(c) above.
(iii) The Company shall have executed and delivered to the
Buyer(s) the Convertible Debentures in the respective amounts set
forth opposite each Buyer(s) name on Schedule I attached hereto.
17
(iv) The Company shall enter into definitive acquisition
agreements with Nat-Com, and the shares or membership interests of
Nat-Com shall be pledged as collateral against the loan.
(v) Nat-Com shall have entered into an LOI agreement for majority
interest in Newspronet on terms acceptable to the Buyer and
simultaneous with this Closing shall close on said acquisition.
(vi) The Company shall have certified that all conditions to the
Second Closing have been satisfied. If requested by the Buyer, the
Buyer shall have received a certificate, executed by the two officers
of the Company, dated as of the Second Closing Date, to the foregoing
effect.
(vii) No Events of Default shall have occurred under any of the
Transaction Documents.
(c) The obligation of the Buyer(s) hereunder to accept the Convertible
Debentures at the Third Closing is subject to the satisfaction, at or
before the Third Closing Date, of each of the following conditions:
(i) The Common Stock shall be authorized for quotation on the
OTCBB, trading in the Common Stock shall not have been suspended for
any reason, and all the Conversion Shares issuable upon the conversion
of the Convertible Debentures shall be approved by the OTCBB.
(ii) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations
and warranties shall be true and correct without further
qualification) as of the date when made and as of the Third Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall
have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by the Company at or prior to
the Third Closing Date. If requested by the Buyer, the Buyer shall
have received a certificate, executed by two officers of the Company,
dated as of the Third Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Buyer
including, without limitation an update as of the Third Closing Date
regarding the representation contained in Section 3(c) above.
(iii) The Company shall have executed and delivered to the
Buyer(s) the Convertible Debentures in the respective amounts set
forth opposite each Buyer(s) name on Schedule I attached hereto.
(iv) No Events of Default shall have occurred under any of the
Transaction Documents.
8. INDEMNIFICATION.
----------------
18
(a) In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Convertible Debentures and the Conversion
Shares hereunder, and in addition to all of the Company's other obligations
under this Agreement, the Company shall defend, protect, indemnify and hold
harmless the Buyer(s) and each other holder of the Convertible Debentures
and the Conversion Shares, and all of their officers, directors, employees
and agents (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Buyer Indemnitees") from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any
such Buyer Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and
disbursements (the "Indemnified Liabilities"), incurred by the Buyer
Indemnitees or any of them as a result of, or arising out of, or relating
to (a) any misrepresentation or breach of any representation or warranty
made by the Company in this Agreement, the Convertible Debentures or the
Investor Registration Rights Agreement or any other certificate, instrument
or document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement, or the
Investor Registration Rights Agreement or any other certificate, instrument
or document contemplated hereby or thereby, or (c) any cause of action,
suit or claim brought or made against such Indemnitee and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the parties hereto, any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Convertible Debentures or the status of the Buyer or
holder of the Convertible Debentures the Conversion Shares, as a Buyer of
Convertible Debentures in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities, which is permissible under applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Buyer's other obligations under
this Agreement, the Buyer shall defend, protect, indemnify and hold
harmless the Company and all of its officers, directors, employees and
agents (including, without limitation, those retained in connection with
the transactions contemplated by this Agreement) (collectively, the
"Company Indemnitees") from and against any and all Indemnified Liabilities
incurred by the Indemnitees or any of them as a result of, or arising out
of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Buyer(s) in this Agreement,
instrument or document contemplated hereby or thereby executed by the
Buyer, (b) any breach of any covenant, agreement or obligation of the
Buyer(s) contained in this Agreement, the Investor Registration Rights
Agreement or any other certificate, instrument or document contemplated
hereby or thereby executed by the Buyer, or (c) any cause of action, suit
or claim brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement, the Investor Registration Rights Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the
parties hereto. To the extent that the foregoing undertaking by each Buyer
may be unenforceable for any reason, each Buyer shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
19
9. GOVERNING LAW: MISCELLANEOUS.
-----------------------------
(a) Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New Jersey without regard to
the principles of conflict of laws. The parties further agree that any
action between them shall be heard in Xxxxxx County, New Jersey, and
expressly consent to the jurisdiction and venue of the Superior Court of
New Jersey, sitting in Xxxxxx County and the United States District Court
for the District of New Jersey sitting in Newark, New Jersey for the
adjudication of any civil action asserted pursuant to this Paragraph.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. In the event any signature
page is delivered by facsimile transmission, the party using such means of
delivery shall cause four (4) additional original executed signature pages
to be physically delivered to the other party within five (5) days of the
execution and delivery hereof.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
(e) Entire Agreement, Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyer(s), the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the party to be charged with enforcement.
(f) Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon confirmation of receipt, when sent by
facsimile; (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
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If to the Company, to: Connected Media Technologies, Inc.
000 Xxxxx Xxxx Xxxxxx Xxxx, Xxxxx X000-0000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxx & Jaclin, LLP
000 Xxxxx 0 Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer(s), to its address and facsimile number on Schedule I, with
copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement or
any rights or obligations hereunder without the prior written consent of
the other party hereto.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
(i) Survival. Unless this Agreement is terminated under Section 9(l),
the representations and warranties of the Company and the Buyer(s)
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in
Section 8, shall survive the Closing for a period of two (2) years
following the date on which the Convertible Debentures are converted in
full. The Buyer(s) shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
(j) Publicity. The Company and the Buyer(s) shall have the right to
approve, before issuance any press release or any other public statement
with respect to the transactions contemplated hereby made by any party;
provided, however, that the Company shall be entitled, without the prior
approval of the Buyer(s), to issue any press release or other public
disclosure with respect to such transactions required under applicable
securities or other laws or regulations (the Company shall use its best
efforts to consult the Buyer(s) in connection with any such press release
or other public disclosure prior to its release and Buyer(s) shall be
provided with a copy thereof upon release thereof).
(k) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out
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the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(l) Termination. In the event that the Closing shall not have occurred
with respect to the Buyers on or before five (5) business days from the
date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching
party's failure to waive such unsatisfied condition(s)), the non-breaching
party shall have the option to terminate this Agreement with respect to
such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated by the Company pursuant to this Section 9(l), the
Company shall remain obligated to reimburse the Buyer(s) for the fees and
expenses of Yorkville Advisors LLC described in Section 4(g) above.
(m) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
CONNECTED MEDIA TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxx
--------------------------------
Name: Xxxxxxx X. Xxxx
Title: CEO
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SCHEDULE I
----------
SCHEDULE OF BUYERS
------------------
Address/Facsimile Amount of
Name Signature Number of Buyer Subscription
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxx Equity Partners, Ltd. By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000 $1,600,000
Its: General Partner Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
By: /s/ Xxxx Xxxxxx
-----------------------
Name: Xxxx Xxxxxx
Its: Portfolio Manager
With a copy to: Xxxxx Xxxxxxxx, Esq. 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
DISCLOSURE SCHEDULE
-------------------
Schedule 3(c): Outstanding Share Obligations
As of the date hereof, the Company has entered into a Stock Purchase Agreement
with Natcom Marketing International which shall close upon the completion of
certain conditions, as set forth therein. Pursuant to the terms of the Stock
Purchase Agreement, on the Closing Date the Company is obligated to issue
300,507,663 shares of its common stock to the Natcom shareholders, representing
50% of the Company's outstanding common stock.
Schedule 3(u): Related Party Transactions
As of the date hereof, the Company has entered into a Purchase and Sale
Agreement and Royalty Bearing License Agreement with Rothschild Trust Holdings,
LLC (the "Trust") for the sale of certain Intellectual Property to the Trust.
Xxxxx Xxxxxxxxxx, a director of the Company is the primary beneficiary of the
Trust.
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