Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
January 17, 2005 among United Network Marketing Services, Inc., a Delaware
corporation (the "Company"), and each purchaser identified on the signature
pages hereto (each, including its successors and assigns, a "Purchaser" and
collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and Rule 506 promulgated thereunder, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, shares of Series B Convertible
Preferred Stock of the Company and Common Stock Purchase Warrants of the Company
on the Closing Date, as more fully described in this Agreement.
WHEREAS, the Company intends to enter into an Agreement and Plan of
Merger among the Company, Knockout Acquisition Corp., a Delaware corporation and
a wholly owned subsidiary of the Company ("Merger Sub"), and The Knockout Group,
Inc., a Delaware corporation ("Knockout"), by which Knockout will merge with and
into Merger Sub and Knockout will be the surviving entity from the Merger.
WHEREAS, the Merger shall occur before the sale of the Securities by
the Company to the Purchasers and the Purchasers are accordingly purchasing
Securities of the post-Merger Company under this Agreement.
WHEREAS, subsequent to the Merger, the Company, through its wholly
owned subsidiary, Knockout, will be engaged in the business of selling household
and automobile cleaning products that are based on a proprietary encapsulation
technology.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in
Section 3.1(j).
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser
will be deemed to be an Affiliate of such Purchaser.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.2.
"Closing Date" means the date when all of the Transaction
Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) the Purchasers'
obligations to pay the Subscription Amount and (ii) the Company's
obligations to deliver the Securities have been satisfied or waived.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $.001
par value per share, and any securities into which such common stock
shall hereinafter have been reclassified into.
"Common Stock Equivalents" means any securities of the Company
or the Subsidiaries which would entitle the Stockholder thereof to
acquire at any time Common Stock, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exchangeable for, or otherwise
entitles the Stockholder thereof to receive, Common Stock.
"Company Counsel" means Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP.
"Conversion Price" shall have the meaning as set forth in
Section 2.7(b).
"Disclosure Schedules" means the Disclosure Schedules of the
Company delivered concurrently herewith.
"Effective Date" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exempt Issuance" means the issuance of (a) shares of Common
Stock or options to officers, directors, employees or consultants of
the Company pursuant to any stock or option plan duly adopted by a
majority of the members of the Board of Directors of the Company or a
majority of the members of a committee of directors established for
such purpose, (b) securities upon the conversion of any securities
issued hereunder, convertible securities, options or warrants issued
and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to
increase the number of such securities, and (c) securities issued
pursuant to acquisitions or strategic transactions, provided any such
issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business synergistic with the
business of the Company and in which the Company receives benefits in
addition to the investment of funds, but shall not include a
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transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business
is investing in securities.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h) hereof.
"Knockout Offering" shall mean a private placement by The
Knockout Group, Inc., a Delaware corporation and a wholly owned
subsidiary of the Company, of up to an aggregate of $2,500,000 of
Series C Convertible Preferred Stock of The Knockout Group, Inc., which
shall have completed prior to the Closing Date.
"Liens" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"Material Adverse Effect" shall have the meaning assigned to
such term in Section 3.1(b) hereof.
"Material Permits" shall have the meaning ascribed to such
term in Section 3.1(m).
"Merger" shall mean the merger of The Knockout Group, Inc., a
Delaware corporation, with and into a wholly owned subsidiary ofthe
Company. "Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"Preferred Stock" means, the Series B Convertible Preferred
Stock issued by the Company to the Purchasers hereunder, in the form of
Exhibit A.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers,
in the form of Exhibit B attached hereto.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale of the Underlying Shares by each Purchaser as
provided for in the Registration Rights Agreement.
"Required Approvals" shall have the meaning ascribed to such
term in Section 3.1(e).
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
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to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"Securities" means the Preferred Stock, the Warrants and the
Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Subscription Amount" means, as to each Purchaser, the
aggregate amount to be paid for the Preferred Stock purchased hereunder
as specified below such Purchaser's name on the signature page of this
Agreement and next to the heading "Subscription Amount," in United
States Dollars and in immediately available funds.
"Subsidiary" means any subsidiary of the Company as set forth
on Schedule 3.1(a).
"Trading Day" means a day on which the Common Stock is traded
on a Trading Market.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
"Transaction Documents" means this Agreement, the Warrants,
the Registration Rights Agreement, the Accredited Investor
Questionnaire and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"Underlying Shares" means the shares of Common Stock issuable
upon: (i) conversion of the Preferred Stock, and (ii) exercise of the
Warrants.
"Warrants" means the Common Stock Purchase Warrants, in the
form of Exhibit C, delivered to the Purchasers at the Closing in
accordance with Section 2.3(a)(iii) hereof, which warrants shall be
exercisable immediately upon issuance for a term of 5 years and have an
exercise price equal to $2.25, subject to adjustment as provided
therein.
ARTICLE II.
PURCHASE AND SALE
2.1 Purchase Price. The purchase price of the Preferred Stock shall be
$46.8933 per share (the "Purchase Price"). For each one share of Preferred Stock
purchased hereunder, each Purchaser will receive sixteen (16) Warrants. Each
Purchaser hereby agrees to purchase such number of shares of Preferred Stock and
Warrants for the aggregate Subscription Amount indicated on the signature page
hereto.
2.2 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, at least
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$100,000 principal amount of the Preferred Stock and Warrants. Notwithstanding
the above, the Company may in its sole discretion accept purchases less than
$100,000 principal amount of the Preferred Stock and Warrants. Each Purchaser
shall deliver to an escrow account set up for the benefit of the Company via
wire transfer or a certified check immediately available funds equal to their
Subscription Amount and the Company shall deliver to each Purchaser their
respective Preferred Stock Certificates and Warrants as determined pursuant to
Section 2.3(a) and the other items set forth in Section 2.3(a) issuable at the
Closing. Upon satisfaction of the conditions set forth in Section 2.3, the
Closing shall occur at the offices of the Company, or such other location as the
parties shall mutually agree.
2.3 Deliveries.
a) On the Closing Date, the Company shall deliver to the counsel
for such Purchasers with respect to each Purchaser the
following:
(i) this Agreement duly executed by the Company;
(ii) a Preferred Stock Certificate representing the number
of shares of Preferred Stock so purchased, in the
name of such Purchaser;
(iii) within 3 Trading Days of the date hereof, a Warrant,
registered in the name of such Purchaser, pursuant to
which such Purchaser shall have the right to acquire
up to the number of shares of Common Stock equal to
____________________; and
(iv) the Registration Rights Agreement duly executed by
the Company.
b) On the Closing Date, each Purchaser shall deliver or cause to
be delivered to Company Counsel the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount by wire transfer
to an escrow account established for the benefit of
the Company and controlled by the Company;
(iii) the Registration Rights Agreement duly executed by
such Purchaser;
(iv) a completed Accredited Investor Questionnaire; and
(v) a completed Form W-9 or W-8, as applicable.
c) On the Closing Date, the Company shall notify the escrow agent
to release the funds being held to the Company.
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2.4 Closing Conditions.
a) The obligations of the Company hereunder in
connection with the Closing are subject to the
following conditions being met:
(i) the accuracy in all material respects when
made and on the Closing Date of the
representations and warranties of the
Purchasers contained herein;
(ii) all obligations, covenants and agreements of
the Purchasers required to be performed at
or prior to the Closing Date shall have been
performed;
(iii) the delivery by the Purchasers of the items
set forth in Section 2.3(b) of this
Agreement; and
(iv) the Company shall have completed the Merger.
b) The respective obligations of the Purchasers
hereunder in connection with the Closing are subject
to the following conditions being met:
(i) the accuracy in all material respects on the
Closing Date of the representations and
warranties of the Company contained herein;
(ii) all obligations, covenants and agreements of
the Company required to be performed at or
prior to the Closing Date shall have been
performed;
(iii) the Company shall have completed the Merger;
(iv) the delivery by the Company of the items set
forth in Section 2.3(a) of this Agreement;
and
(v) there shall have been no Material Adverse
Effect with respect to the Company since the
date hereof.
2.5 Dividends.
a) Payment of Dividend in Cash. The Company shall pay
dividends on the Preferred Stock at the rate of 10% per annum, payable
quarterly on January 1, April 1, July 1 and October 1, beginning April
1, 2005, in cash based on the stated value of all unconverted Preferred
Stock. The dividend rate shall be subject to an adjustment based on
Section 2.10, below. No dividends shall be paid on previously converted
Preferred Stock.
b) Dividend Calculations. Dividends shall be calculated on the
basis of a 360-day year and shall accrue daily commencing on the date
hereof.
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c) Late Fee. All overdue accrued and unpaid dividends to be
paid hereunder shall entail a late fee at the rate of 18% per annum of
such accrued and unpaid dividend, which will accrue daily from the date
such dividend is due hereunder through and including the date of
payment.
2.6 Investment Representations. The Preferred Stock has been issued
subject to certain investment representations set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement and applicable federal and state securities laws and
regulations.
2.7. Conversion.
a) Mandatory Conversion. Immediately after the Company amends
its Certificate of Incorporation to authorize an increase in the
Company's authorized number of shares of Common Stock to a sufficient
number of shares of Common Stock so that all shares of Preferred Stock
may be converted into Common Stock (the "Conversion Date"), the
Preferred Stock shall automatically convert into fully paid and
nonassessable shares of Common Stock (subject to the limitations on
conversion set forth in this Agreement). Immediately after the
Conversion Date, the Company shall cancel the Preferred Stock.
b) Conversion Price. Subject to Section 2.7, the conversion
price in effect on the Conversion Date shall equal $.2931 per share
(the "Conversion Price").
c) Mechanics of Conversion
i. Conversion Shares Issuable Upon Conversion of
Preferred Stock. The number of shares of Common Stock issuable
upon a conversion hereunder shall be determined by the
quotient obtained by dividing (x) the stated value of the
Preferred Stock and (y) the Conversion Price.
ii. Fractional Shares. Upon a conversion hereunder
the Company shall not be required to issue fractions of shares
of Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on
the stated value of the Preferred Stock. If the Company elects
not, or is unable, to make such a cash payment, the Purchaser
shall be entitled to receive, in lieu of the final fraction of
a share, one whole share of Common Stock.
2.8. Certain Adjustments.
a) Subsequent Equity Sales. Other than an Exempt Issuance, if
the Company or any Subsidiary thereof, as applicable, at any time while
the Preferred Stock is outstanding, shall issue any Common Stock or
Common Stock Equivalent for a per share or conversion or exercise price
per share which is less than the Conversion Price, then, and thereafter
successively upon each such issue, the Conversion Price shall be
reduced to such other lower per share price.
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b) Calculations. All calculations under this Section 2.8 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. The number of shares of Common Stock outstanding at any
given time shall not include shares of Common Stock owned or held by or
for the account of the Company, and the description of any such shares
of Common Stock shall be considered on issue or sale of Common Stock.
For purposes of this Section 2.8, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the sum
of the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
c) Adjustment to Conversion Price. Whenever the Conversion
Price is adjusted pursuant to this Section, the Company shall promptly
mail to each Stockholder a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate
security, the Company shall be deemed to have issued Common Stock or
Common Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised.
2.9. Optional Redemption. At the option of the Company, at any time
after March 31, 2005, the Company may redeem all of the Preferred Stock at a
purchase price equal to the stated value of the Preferred Stock, plus all
accrued, but unpaid dividends. The Company shall give the Stockholders at least
10 days prior written notice of its intention to redeem the Preferred Stock.
2.10. Dividend Adjustment. In the event that the Preferred Stock has
not converted into Common Stock pursuant to Section 2.7(a) or has not been
redeemed by the Company as described in Section 2.9, above, within 180 days of
the Closing Date, the dividend rate shall increase to 20% per annum.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
in the Disclosure Schedules, which shall be deemed a part hereof, the Company
hereby makes the representations and warranties set forth below to each
Purchaser.
(a) Subsidiaries. All of the direct and indirect subsidiaries
of the Company are set forth in the Disclosure Schedules. The Company
owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all the
issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase securities.
If the Company has no subsidiaries, then references in the Transaction
Documents to the Subsidiaries will be disregarded.
(b) Organization and Qualification. Each of the Company and
the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the
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jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither the
Company nor any Subsidiary is in violation or default of any of the
provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and
is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be,
could not have or reasonably be expected to result in (i) a material
adverse effect on the legality, validity or enforceability of any
Transaction Documents, (ii) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the
Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company's ability to perform in any material
respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and
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.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and
no further action is required by the Company in connection therewith
other than in connection with the Required Approvals. Each Transaction
Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement
of creditors' rights generally and (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other
equitable remedies.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the
Company of the other transactions contemplated thereby do not and will
not: (i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any property
or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a
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violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to
which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or
asset of the Company or a Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than (i) the filing
with the Commission of the Registration Statement, (ii) the notice
and/or application(s) to each applicable Trading Market for the
issuance and sale of the Preferred Stock and the listing of the
Underlying Shares for trading thereon in the time and manner required
thereby and (iii) the filing of Form D with the Commission and such
filings as are required to be made under applicable state securities
laws (collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by
the Company other than restrictions on transfer provided for in the
Transaction Documents. The Underlying Shares, when issued in accordance
with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by
the Company. The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Underlying
Shares at least equal to the Common Stock that would result from full
conversion of all Preferred Stock on the date hereof. The Company has
not, and to the knowledge of the Company, no Affiliate of the Company
has sold, offered for sale or solicited offers to buy or otherwise
negotiated in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers, or that
would be integrated with the offer or sale of the Securities for
purposes of the rules and regulations of any Trading Market.
(g) Capitalization. The capitalization of the Company is as
set forth in the Disclosure Schedules. The Company has not issued any
capital stock other than pursuant to the exercise of employee stock
options under the Company's stock option plans, the issuance of shares
of Common Stock to employees pursuant to the Company's employee stock
purchase plan and pursuant to the conversion or exercise of outstanding
Common Stock Equivalents. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction
Documents. Except as set forth in the Disclosure Schedules, as a result
of the purchase and sale of the Securities, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person
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any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional
shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers) and
will not result in a right of any Stockholder of Company securities to
adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and
none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any Stockholder,
the Board of Directors of the Company or others is required for the
issuance and sale of the Securities.
(h) Financial Statements. The audited financial statements of
the Company as of and for the periods ended December 31, 2003 and 2002
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods
involved ("GAAP"), except as may be otherwise specified in such
financial statements and except that such unaudited financial
statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) Material Changes. Except as described in the Disclosure
Schedules, since the date of the latest fiscal year (i) there has been
no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its Stockholders
or purchased, redeemed or made any agreements to purchase or redeem any
shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.
(j) Litigation. Other than as set forth in the Disclosure
Schedules, there is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or
any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or
(ii) could, if there were an unfavorable decision, have or reasonably
be expected to result in a Material Adverse Effect. Neither the Company
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nor any Subsidiary, nor any director or officer thereof, is or has been
the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach
of fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or
officer of the Company.
(k) Labor Relations. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company which could reasonably be expected to result
in a Material Adverse Effect.
(l) Compliance. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has
not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has
the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not
such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is in
violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and
local laws applicable to its business except in each case as could not
have a Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses, except where the
failure to possess such permits could not have or reasonably be
expected to result in a Material Adverse Effect ("Material Permits"),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
(n) Title to Assets. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by
them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment
of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and
the Subsidiaries are in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights necessary or material for
12
use in connection with their respective businesses and which the
failure to so have could have a Material Adverse Effect (collectively,
the "Intellectual Property Rights"). Neither the Company nor any
Subsidiary has received a written notice that the Intellectual Property
Rights used by the Company or any Subsidiary violates or infringes upon
the rights of any Person. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights of others.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged,
including, but not limited to, directors and officers insurance. To the
best of Company's knowledge, such insurance contracts and policies are
accurate and complete. Neither the Company nor any 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 without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set
forth in the Disclosure Schedules, none of the officers or directors of
the Company and, to the knowledge of the Company, none of the employees
of the Company is presently a party to any transaction with the Company
or any Subsidiary (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 entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $50,000 other
than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) Intentionally Omitted.
(s) Certain Fees. Except for fees owed to Xxxxxx Capital LLC
and/or the Xxxxxx Group in relation to this Offering, no brokerage or
finder's fees or commissions are or will be payable by the Company to
any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions
contemplated by this Agreement.
(t) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
13
sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market.
(u) Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the
Securities, will not be or be an Affiliate of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not
become subject to the Investment Company Act.
(v) Registration Rights. Except as set forth on the Disclosure
Schedules, and other than the Purchasers, no Person has any right to
cause the Company to effect the registration under the Securities Act
of any securities of the Company.
(w) Intentionally Omitted.
(x) Intentionally Omitted.
(y) Disclosure. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, furnished
by or on behalf of the Company with respect to the representations and
warranties made herein are true and correct with respect to such
representations and warranties and do not contain any untrue statement
of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section
3.2 hereof.
(z) No Integrated Offering. Assuming the accuracy of the
Purchasers' representations and warranties set forth in Section 3.2,
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 cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable Stockholder approval provisions,
including, without limitation, under the rules and regulations of any
exchange or automated quotation system on which any of the securities
of the Company are listed or designated.
(aa) Intentionally Omitted.
(bb) Tax Status. Except for matters that would not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, the Company and each Subsidiary
has filed all necessary federal, state and foreign income and franchise
tax returns and has paid or accrued all taxes shown as due thereon, and
the Company has no knowledge of a tax deficiency which has been
asserted or threatened against the Company or any Subsidiary.
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(cc) No General Solicitation. Neither the Company nor any
person acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general advertising.
The Company has offered the Securities for sale only to the Purchasers
and certain other "accredited investors" within the meaning of Rule 501
under the Securities Act.
(dd) Foreign Corrupt Practices. Neither the Company, nor to
the knowledge of the Company, any agent or other person acting on
behalf of the Company, has (i) directly or indirectly, used any corrupt
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity,
(ii) made any unlawful payment to foreign or domestic government
officials or employees or to any foreign or domestic political parties
or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law, or
(iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(ee) Accountants. Knockout is in the process of retaining BDO
Xxxxxxx, LLP as its accountants. Knockout expects that such accountants
will express their opinion with respect to the financial statements of
Knockout for the year ended December 31, 2003 and will provide a review
of the financial statements of Knockout for the period ended September
30, 2004.
(ff) Intentionally Omitted.
(gg) Intentionally Omitted.
(hh) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that each of the
Purchasers is acting solely in the capacity of an arm's length
purchaser with respect to the Transaction Documents and the
transactions contemplated hereby. The Company further acknowledges that
no Purchaser is 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 any
Purchaser or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby
is merely incidental to the Purchasers' purchase of the Securities. The
Company further represents to each Purchaser that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the
Company and its representatives. The Company further acknowledges that
in addition to purchasing Securities, the Purchasers or their
affiliates may directly or indirectly own Common Stock and Preferred
Stock in the Company and that such parties, exercising their rights
hereunder may adversely impact their other holdings as well as the
other equity Stockholders in the Company.
15
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an accredited
investor and in the case of an entity, as opposed to and individual,
such entity is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with full right,
corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution,
delivery and performance by such Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate or similar action on the part of such Purchaser.
Each Transaction Document to which it is a party has been duly executed
by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with
its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) Purchaser Representation. Such Purchaser understands that
the Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account and not with
a view to or for distributing or reselling such Securities or any part
thereof, has no present intention of distributing any of such
Securities and has no arrangement or understanding with any other
persons regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser's right to sell
the Securities pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws). Such
Purchaser is acquiring the Securities hereunder in the ordinary course
of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute
any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, and on each date
it converts any Preferred Stock or exercises any Warrants it will be
either: (i) an "accredited investor" as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
"qualified institutional buyer" as defined in Rule 144A(a) under the
Securities Act. Such Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone
or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks
of such investment. Such Purchaser is able to bear the economic risk of
16
an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(f) Registration Required. Each Purchaser hereby covenants
with the Company not to make any sale of the Securities without
complying with the provisions hereof and of the Registration Rights
Agreement, and without effectively causing the prospectus delivery
requirement under the Securities Act to be satisfied (unless such
Purchaser is selling such Securities in a transaction not subject to
the prospectus delivery requirement), and such Purchaser acknowledges
that the certificates evidencing the Underlying Shares will be
imprinted with a legend that prohibits their transfer except in
accordance therewith.
The Company acknowledges and agrees that each Purchaser does
not make or has not made any representations or warranties with respect
to the transactions contemplated hereby other than those specifically
set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement
or Rule 144, to the Company or to an affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company
may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall
have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of a legend on any of the Securities
in the following form:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
17
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS
AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of
the Securities to a financial institution that is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and who
agrees to be bound by the provisions of this Agreement and the
Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities
to the pledgees or secured parties. Such a pledge or transfer would not
be subject to approval of the Company and no legal opinion of legal
counsel of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser's expense, the Company will
execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including, if the Securities are
subject to registration pursuant to the Registration Rights Agreement,
the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) under the Securities Act or other applicable provision
of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
(c) Certificates evidencing the Underlying Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)
hereof): (i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Underlying Shares
pursuant to Rule 144, or (iii) if such Underlying Shares are eligible
for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Company's transfer agent promptly after the Effective
Date if required by the Company's transfer agent to effect the removal
of the legend hereunder. If all or any portion of the Preferred Stock
is converted or exercised (as applicable) at a time when there is an
effective registration statement to cover the resale of the Underlying
Shares, or if such Underlying Shares may be sold under Rule 144(k) or
if such legend is not otherwise required under applicable requirements
18
of the Securities Act (including judicial interpretations thereof) then
such Underlying Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as such legend
is no longer required under this Section 4.1(c), it will, no later than
five Trading Days following the delivery by a Purchaser to the Company
or the Company's transfer agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend
(such fifth Trading Day, the "Legend Removal Date"), deliver or cause
to be delivered to such Purchaser a certificate representing such
shares that is free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer
set forth in this Section.
(d) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1
is predicated upon the Company's reliance that the Purchaser will sell
any Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
4.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other Stockholders of the Company.
4.3 Intentionally Omitted.
4.4 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.5 Conversion and Exercise Procedures. No additional legal opinion or
other information or instructions shall be required of the Purchasers to convert
their Preferred Stock or exercise their Warrants. The Company shall honor
conversions of the Preferred Stock and exercise of the Warrants and shall
deliver Underlying Shares in accordance with the terms, conditions and time
periods set forth in the Transaction Documents.
4.6 Intentionally Omitted.
4.7 Stockholder Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any Stockholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
19
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.8 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.9 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder substantially in accordance with the
description in the Disclosure Schedules attached hereto.
4.10 Intentionally Omitted.
4.11 Indemnification of Purchasers. Subject to the provisions of this
Section 4.11, the Company will indemnify and hold the Purchasers and their
directors, officers, stockholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representation, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser
Party. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by a Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
20
damage or liability is attributable to any Purchaser Party's breach of any of
the representations, warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.
4.12 Reservation of Securities.
(a) The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents (the "Required
Minimum").
(b) If, on any date, the number of authorized but unissued
(and otherwise unreserved) shares of Common Stock is less than the
Required Minimum on such date, then the Board of Directors of the
Company shall use commercially reasonable efforts to amend the
Company's certificate or articles of incorporation to increase the
number of authorized but unissued shares of Common Stock to at least
the number of shares of Common Stock that would result from the full
conversion of the Preferred Stock and exercise of the Warrants at such
time, as soon as possible and in any event not later than the 75th day
after such date.
4.13 Intentionally Omitted.
4.14 Equal Treatment of Purchasers. No consideration shall be offered
or paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Preferred Stock Stockholders as a class
and shall not in any way be construed as the Purchasers acting in concert or as
a group with respect to the purchase, disposition or voting of Securities or
otherwise.
4.15 Most Favored Nation Provision. Other than an Exempt Issuance, if
at any time while the Preferred Stock is outstanding, the Company issues Common
Stock or Common Stock Equivalents to any Person at a per share or conversion or
exercise price per share which is less than the Conversion Price, then the
Company shall issue, for each such occasion, additional shares of Common Stock
to each Purchaser so that the Conversion Price is equal to such other lower
price per share.
4.16 Adjustment to Knockout Offering. The Purchasers hereby acknowledge
and agree that upon Closing, investors in the Knockout Offering will
automatically receive Warrants to purchase shares of Common Stock of the Company
in accordance with their respective subscription amount on the same terms of the
Warrants as set forth in this Agreement.
21
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before January 31, 2005; provided that no such termination will affect the
right of any party to xxx for any breach by the other party (or parties).
5.2 Legal Fees. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
issuance of any Securities.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.5 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.
5.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
22
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, stockholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The parties hereby waive all
rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
5.10 Survival. The representations and warranties contained herein
shall survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.
5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
23
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of a conversion of the Preferred Stock, the
Purchaser shall be required to return any shares of Common Stock subject to any
such rescinded conversion or exercise notice.
5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.16 Intentionally Omitted.
5.17 Intentionally Omitted.
5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
24
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through Xxxxxx Capital LLC. Xxxxxx
Capital LLC does not represent all of the Purchasers but only itself. The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.
5.19 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
UNITED NETWORK MARKETING SERVICES, INC. Address for Notice:
-------------------
/s/ Xxxx Xxxxxxx 000 X. Xxxxxxxxx Xxx.
------------------------------
Name: Xxxx Xxxxxxx Xxxxxxxxx, XX 00000
Title: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to (which shall not
constitute notice):
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
26
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Dr. Xxxxxx Xxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxxx X. Xxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $50,000
Shares of Preferred Stock: 1,066
Warrants: 17,056
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxxx Xxxxxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxxx Xxxxxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
000 X. Xxxxx Xxxx
Xxxx Xxxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $200,000
Shares of Preferred Stock: 4,264
Warrants: 68,224
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Christian Brunschweiler Xxxxx Brunschweiler
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity):
/s/ Christian Brunschweiler
----------------------------
/s/ Xxxxx Brunschweiler
----------------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $50,000
Shares of Preferred Stock: 1,066
Warrants: 17,056
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxxxx Xxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxxxx Xxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity: Xxxxxxx.xxx@xxxxx.xxx
--------------------------------------------
Address for Notice of Investor:
000 Xxxxxxxxx Xxxxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $25,000
Shares of Preferred Stock: 533
Warrants: 8,528
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: MSR Consultants, Inc.
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxxxx Xxxxxxx
-------------------
Name of Authorized Signatory: Xxxxxxx Xxxxxxx
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $80,000
Shares of Preferred Stock: 1,706
Warrants: 27,296
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xx. Xxxx Xxxxxxxx & Xxxxxxxx Xxxxxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxx Xxxxxxxx
-------------------
/s/ Xxxxxxxx Xxxxxxxx
---------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $50,000
Shares of Preferred Stock: 1,066
Warrants: 17,056
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxxxx Xxxxxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity):
/s/ Xxxxxxx Xxxxxxxx
--------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity: xxxx@xxxxxxxxxxxxxx.xxx
--------------------------------------------
Address for Notice of Investor:
000 Xxxx 00xx Xxxxxx, Xxx 0X
Xxx Xxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $10,000
Shares of Preferred Stock: 213
Warrants: 3,408
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: TCMP3 Partners
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity):
/s/ Xxxxxx X. Xxxxxxx
---------------------
Name of Authorized Signatory: Xxxxxx X. Xxxxxxx
--------------------------------------------------
Title of Authorized Signatory: Principal
-------------------------------------------------
Email Address of Authorized Entity: xxxxxxxx@xxxxxxxx.xxx
--------------------------------------------
Address for Notice of Investor:
Titan Capital Management
0 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $150,000
Shares of Preferred Stock: 3,199
Warrants: 51,184
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxxx Xxxxxxx & Xxxxx Xxxxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxxx Xxxxxxx
-------------------
/s/ Xxxxx Xxxxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
--------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $20,000
Shares of Preferred Stock: 427
Warrants: 6,832
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxx Xxxxxxxxx & Xxxxxxx Xxxxxxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxx Xxxxxxxxx
-------------------
/s/ Xxxxxxx Xxxxxxxxx
---------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
---------------------------------------------
Address for Notice of Investor:
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $95,000
Shares of Preferred Stock: 2,026
Warrants: 32,416
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxx Xxxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxx Xxxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
Xxxx Xxxxxx
c/o Tobias Brothers
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $100,000
Shares of Preferred Stock: 2,133
Warrants: 34,128
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxxx Xxxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxxx Xxxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
000 Xxxxxxxx Xxxxxx
Xxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $15,000
Shares of Preferred Stock: 320
Warrants: 5,120
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxxxx Xxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxxxx Xxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $50,000
Shares of Preferred Stock: 1,066
Warrants: 17,056
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Cornell Capital Partners, LP
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxx Xxxxxx
-------------------
Name of Authorized Signatory: Xxxx Xxxxxx
--------------------------------------------------
Title of Authorized Signatory: Portfolio Manager of Yorkville Advisors, LLC, the
General Partner of the Investor
-------------------------------------------------
Email Address of Authorized Entity: xxxxxxx@xxxxxxxxxxxxxx.xxx
--------------------------------------------
Address for Notice of Investor:
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $300,000
Shares of Preferred Stock: 6,398
Warrants: 102,368
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Highgate House Funds, Ltd.
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxx Xxxxxx
-------------------
Name of Authorized Signatory: Xxxx Xxxxxx
--------------------------------------------------
Title of Authorized Signatory:
--------------------------------------------------
Email Address of Authorized Entity: xxxxxxx@xxxxxxxxxxxxxx.xxx
--------------------------------------------
Address for Notice of Investor:
Address for Delivery of Securities for Investor (if not same as above):
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Subscription Amount: $300,000
Shares of Preferred Stock: 6,398
Warrants: 102,368
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxx XxXxxxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxx XxXxxxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
000 Xxxxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $30,000
Shares of Preferred Stock: 640
Warrants: 10,240
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxx X. Xxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxx X. Xxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity:
--------------------------------------------
Address for Notice of Investor:
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $10,000
Shares of Preferred Stock: 213
Warrants: 3,408
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: SGN
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxx X. Xxxxxxx
-------------------
Name of Authorized Signatory: Xxxx X. Xxxxxxx
--------------------------------------------------
Title of Authorized Signatory: Vice-President
-------------------------------------------------
Email Address of Authorized Entity: xxxxxxxxxxx@xxx.xxx
--------------------------------------------
Address for Notice of Investor:
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $20,000
Shares of Preferred Stock: 427
Warrants: 6,832
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxxx X. XxxXxxxxxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity):
/s/ Xxxxxx X. XxxXxxxxxxxx
--------------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity: XXXXXXXXXXXXX@XXXXXXXXX.XXX
--------------------------------------------
Address for Notice of Investor:
000 Xxxxxx Xxx
Xxxx Xxxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $50,000
Shares of Preferred Stock: 1,066
Warrants: 17,056
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxx Xxxxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxx Xxxxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity: Xxxx Xxxxxxx@XXXX.xxx
--------------------------------------------
Address for Notice of Investor:
000 Xxxx Xxxxxxx Xxxxx 000
Xxxx Xxxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $50,000 USD
Shares of Preferred Stock: 1,066
Warrants: 17,056
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxxx X. Xxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxxx X. Xxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
------------------------------------------------
Email Address of Authorized Entity: xxxxxxx@xxxxxxxxx.xxx
--------------------------------------------
Address for Notice of Investor:
000 Xxxx Xxxxxxx Xxxxx 000
Xxxx Xxxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $500,000
Shares of Preferred Stock: 10,663
Warrants: 170,608
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
[PURCHASER SIGNATURE PAGES TO UNITED NETWORK MARKETING SERVICES, INC. SECURITIES
PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investor: Xxxxx Xxxxx
--------------------------------------------------------------
Signature of Authorized Signatory(if Investor is an Entity): /s/ Xxxxx Xxxxx
-------------------
Name of Authorized Signatory:
--------------------------------------------------
Title of Authorized Signatory:
-------------------------------------------------
Email Address of Authorized Entity: Xxxx Xxxxxxx@XXXX.xxx
--------------------------------------------
Address for Notice of Investor:
000 Xxxx Xxxxxxx Xxxxx 000
Xxxx Xxxxx, XX 00000
Address for Delivery of Securities for Investor (if not same as above):
Subscription Amount: $55,000
Shares of Preferred Stock: 1,173
Warrants: 18,768
Social Security Number (EIN Number if Investor is an Entity):
[SIGNATURE PAGES CONTINUE]
27
DISCLOSURE SCHEDULES
TO
SECURITIES PURCHASE AGREEMENT
(Prepared in connection with Series B Preferred Stock sold by the Company to the
Purchasers under the Securities Purchase Agreement dated January 17, 2005 (the
"2005 Securities Purchase Agreement"). Capitalized terms not defined herein
shall have the meaning given to such terms in the 2005 Securities Purchase
Agreement.)
JANUARY 17, 2005
SCHEDULE 3.1(A)
SUBSIDIARIES
The Knockout Group, Inc., a Delaware corporation ("Knockout")
SCHEDULE 3.1(G)
CAPITALIZATION
The Company's authorized capital consists of 20,000,000 shares of
common stock, par value $.001 per share, and 1,000,000 shares of preferred
stock, par value $.001 per share, of which 865,000 shares have been designated
as Series A Convertible Preferred Stock and 135,000 shares have been designated
as Series B Convertible Preferred Stock. As of the date of the Agreement, the
Company has 8,165,752 shares of common stock outstanding, 855,980 shares of
Series A Convertible Preferred Stock outstanding and zero shares of Series B
Convertible Preferred Stock outstanding.
After the Company amends its Certificate of Incorporation to authorize
the issuance of a sufficient number of shares of common stock so that all shares
of Series A Convertible Preferred Stock may be fully converted, the Series A
Convertible Preferred Stock will immediately convert into fully paid and
nonassessable shares of common stock of the Company in an amount equal to the
stated value of such Series A Convertible Preferred Stock, which equals
$46.8933, divided by $.2931, subject to adjustment.
SCHEDULE 3.1(I)
MATERIAL CHANGES
In September 2004, Knockout issued a $600,000 principal amount 10%
promissory note (the "$600K Note") to Galt Ventures. The $600K Note bears
interest at 10% per annum from the date the principal amount of the $600K Note
is advanced to Knockout until Knockout pays the $600K Note in full. All unpaid
principal and interest on the $600K Note is due and payable on the earlier of
(i) December 23, 2004 or (ii) the date that Knockout has raised $2,500,000 from
the sale of securities.
In September 2004, Knockout issued a $1,000,000 principal amount 10%
promissory note (the "$1M Note") to Galt Ventures. The $1M Note bears interest
at 10% per annum from the date the principal amount of the $1M Note is advanced
to Knockout until Knockout pays the $1M Note in full. All unpaid principal and
interest on the $1M Note is due and payable on the earlier of April 1, 2005 or
the date of exercise of the Warrants.
In November 2004, Knockout sold a $500,000 principal amount convertible
note (the "500K Note") to the Xxxxxx Group. The term of the $500K Note is nine
months. The principal of the $500K Note is convertible into 83,463 shares of
common stock of Knockout. In connection with the sale of the $500K Note,
Knockout issued the Xxxxxx Group warrants to purchase 43,546 shares of
Knockout's common stock at an exercise price of $0.01 per share.
Seven of Knockout's employees and one consultant have family
relationships with Xxxx Xxxxxxx, Knockout's Chief Executive Officer and a
Director.
In recognition of the service and assistance provided by Knockout's
Board members, key management personnel, and key consultants, Knockout's Board
of Directors authorized and approved the following transactions:
Re-priced the exercise price of options to purchase 134,000 shares of
Knockout's common stock to $0.01 per share issued to Xx. Xxxxx Xxxxxx. Xx.
Xxxxxx is a member of Knockout's Board of Directors and a Consultant to
Knockout.
Re-priced the exercise price of options to purchase 84,875 shares of
Knockout's common stock to $0.01 per share issued to Xxxx Xxxxx. Xx. Xxxxx is a
member of the Knockout's Board of Directors.
Re-priced the exercise price of options to purchase 71,598 shares of
Knockout's common stock to $0.01 per share issued to Xxxx Xxxxxxxx. Xx. Xxxxxxxx
is a member of Knockout's Board of Directors.
Re-priced the exercise price of warrants to purchase 390,100 shares of
Knockout's common stock to $0.01 per share issued to Xxxxx Xxxxxxx in
consideration for agreeing to certain amendments to terms of Knockout's Series A
Preferred Stock in favor of investors in Knockout's Series C Preferred Stock.
Xx. Xxxxxxx is the holder of Knockout's outstanding Series A Preferred Stock and
is also a member of Knockout's Board of Directors.
Re-priced the exercise price of warrants to purchase 37,500 shares of
Knockout's common stock to $0.01 per share issued to Xxxxx Rights in
consideration for agreeing to certain amendments to the terms of Knockout's
Series B Preferred Stock in favor of investors in Knockout's Series C Preferred
Stock. Mr. Rights is a holder of Knockout's outstanding Series B Preferred Stock
and is also a member of Knockout's Board of Directors.
Re-priced the exercise price of options to purchase 108,620 shares of
Knockout's common stock to $0.01 per share issued to Xxxxx Xxxxxx. Xx. Xxxxxx is
Knockout's Chief Financial Officer and a member of Knockout's Board of
Directors.
Re-priced the exercise price of options to purchase 67,888 shares of
Knockout's common stock to $0.01 per share issued to Xxxxx Xxxxxx. Xx. Xxxxxx is
Knockout's Chief Operating Officer.
SCHEDULE 3.1(J)
LITIGATION
None.
SCHEDULE 3.1(Q)
TRANSACTIONS WITH AFFILIATES AND EMPLOYEES
Knockout has retained Artistic Communication Center ("ACC"), a
multi-media video and audio production company, to produce Knockout's household
and automotive infomercials for television broadcast. Knockout's current
contract with ACC provides that ACC will be compensated at "cost, plus 10%."
Through September 30, 2004, Knockout has paid a total of $894,000 to ACC for two
infomercials. Knockout's Chief Executive Officer, Xxxx Xxxxxxx, has the
principal ownership position of ACC.
In consideration for the assignment of pending trademarks and pending
patents to Knockout, Knockout has agreed to pay Xx. Xxxxx Xxxxxx a total of
$400,000 as follows: $200,000 by December 31, 2004 and the remaining $200,000
over the following twelve months. Knockout also issued Xx. Xxxxxx 354,608 shares
of common stock as partial consideration for the assignment of the pending
trademarks and pending patents. In addition, Xx. Xxxxxx acts as a consultant to
Knockout's executive officers, advising Knockout on fundraising, quality
control, product development, business strategy, licensing, patent development,
and personnel matters. As part of his agreement with Knockout, Xx. Xxxxxx has
agreed not to develop or contribute any intellectual property to any other
company, either now or in the future, that competes in the "cleaning" products
segment. Xx. Xxxxxx'x consulting services are billed to Knockout at an hourly
rate of $350.00 per hour. Notwithstanding this hourly rate, Knockout has agreed
to pay Xx. Xxxxxx a minimum amount of $2,500 per month. Xx. Xxxxxx is also a
member of Knockout's Board of Directors.
In recognition of the service and assistance provided by Knockout's
Board members, key management personnel, and key consultants, Knockout's Board
of Directors authorized and approved the following transactions:
Re-priced the exercise price of options to purchase 134,000 shares of
Knockout's common stock to $0.01 per share issued to Xx. Xxxxx Xxxxxx. Xx.
Xxxxxx is a member of Knockout's Board of Directors and a Consultant to
Knockout.
Re-priced the exercise price of options to purchase 84,875 shares of
Knockout's common stock to $0.01 per share issued to Xxxx Xxxxx. Xx. Xxxxx is a
member of the Knockout's Board of Directors.
Re-priced the exercise price of options to purchase 71,598 shares of
Knockout's common stock to $0.01 per share issued to Xxxx Xxxxxxxx. Xx. Xxxxxxxx
is a member of Knockout's Board of Directors.
Re-priced the exercise price of warrants to purchase 390,100 shares of
Knockout's common stock to $0.01 per share issued to Xxxxx Xxxxxxx in
consideration for agreeing to certain amendments to terms of Knockout's Series A
Preferred Stock in favor of investors in Knockout's Series C Preferred Stock.
Xx. Xxxxxxx is the holder of Knockout's outstanding Series A Preferred Stock and
is also a member of Knockout's Board of Directors.
Re-priced the exercise price of warrants to purchase 37,500 shares of
Knockout's common stock to $0.01 per share issued to Xxxxx Rights in
consideration for agreeing to certain amendments to the terms of Knockout's
Series B Preferred Stock in favor of investors in Knockout's Series C Preferred
Stock. Mr. Rights is a holder of Knockout's outstanding Series B Preferred Stock
and is also a member of Knockout's Board of Directors.
Re-priced the exercise price of options to purchase 108,620 shares of
Knockout's common stock to $0.01 per share issued to Xxxxx Xxxxxx. Xx. Xxxxxx is
Knockout's Chief Financial Officer and a member of Knockout's Board of
Directors.
Re-priced the exercise price of options to purchase 67,888 shares of
Knockout's common stock to $0.01 per share issued to Xxxxx Xxxxxx. Xx. Xxxxxx is
Knockout's Chief Operating Officer.
SCHEDULE 3.1(V)
REGISTRATION RIGHTS
The following Persons have the right to cause the Company to effect the
registration under the Securities Act of securities of the Company:
Pursuant to an Investor Rights Agreement dated June 30, 2004, any
holder or holders who, in the aggregate hold not less than 25% of Knockout's (i)
Series A Preferred Stock (or Common Stock into which Series A Preferred Stock
has been converted), (ii) Series B Preferred Stock (or Common Stock into which
Series B Preferred Stock has been converted) and (iii) Common Stock held by Xxxx
Xxxxxxx, upon written request, may require the Company to effect the
registration of such securities on a "best efforts" basis.
Pursuant to a Registration Rights Agreement entered into in December
2004, the Company must register with the Securities and Exchange Commission the
common stock that was issued upon conversion of Knockout's Series C Convertible
Preferred Stock. Immediately before the Merger, all of the outstanding shares of
Knockout's Series C Convertible Preferred Stock were converted into common stock
of Knockout. Upon effectiveness of the Merger, this common stock was exchanged
for Series A Preferred Stock of the Company. The Company must file a
registration statement to register the common stock of the Company that is
beneficially owned by the prior owners of Knockout's Series C Convertible
Preferred Stock and which was acquired as a result of the conversion of such
Series C Convertible Preferred Stock.
The Company has agreed to include 250,000 shares of common stock owned
by Xxxxxxx Xxxx in the next registration statement that the Company files on
Form SB-2.
SCHEDULE 4.9
USE OF PROCEEDS
The following use of proceeds table assumes receipt by the Company of
gross proceeds of $6,000,000.
Use of Proceeds Amount
--------------- ----------
Placement Agent Fees $ 300,000
Repayment of Debt $ 600,000
Legal and Accounting Fees $ 100,000
Other Transaction Costs $ 32,600
Marketing $2,500,000
Inventory $2,000,000
Operations $ 467,400
TOTAL $6,000,000
