==============================================================================
XXXXXXXX CURHAN FORD GROUP, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
AUGUST 27, 2009
==============================================================================
XXXXXXXX CURHAN FORD GROUP, INC.
SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This Series D Preferred Stock Purchase Agreement (this "AGREEMENT")
is made as of August 27, 2009, by and among Xxxxxxxx Curhan Ford Group, Inc.,
a Delaware corporation (the "COMPANY"), and the persons and entities (each, an
"INVESTOR" and collectively, the "INVESTORS") listed on the Schedule of
Investors attached hereto as Exhibit A (the "SCHEDULE OF INVESTORS").
---------
SECTION 1
AUTHORIZATION, SALE AND ISSUANCE OF SERIES D CONVERTIBLE PREFERRED STOCK.
1.1 Authorization. The Company has, prior to the Closing (as defined
below), adopted and filed with the Secretary of State of Delaware the
Certificate of Designation of the Company, in substantially the form attached
hereto as Exhibit B (the "CERTIFICATE OF DESIGNATION") and authorized (a) the
---------
sale and issuance of up to 24,000,000 shares (the "SHARES") of the Company's
Series D Convertible Preferred Stock, par value $0.0001 per share (the "SERIES
D PREFERRED"), having the rights, privileges, preferences and restrictions set
forth in the Certificate of Designation; (b) the reservation of shares of
Common Stock for issuance upon conversion of the Shares (the "CONVERSION
SHARES"); (c) the issuance of the Warrants and the Contingent Warrants (as
defined below), (each as defined in the Investors Rights Agreement); and (d)
the reservation of shares of Common Stock for issuance upon exercise of the
Warrants, and Contingent Warrants (as defined below) (the "WARRANT SHARES").
1.2 Sale and Issuance of Shares. Subject to the terms and conditions
of this Agreement, each Investor agrees, severally and not jointly, to
purchase, and the Company agrees to sell and issue to each Investor, the
number of Shares set forth in the column designated "NUMBER OF SERIES D
SHARES" opposite such Investor's name on the Schedule of Investors, at a cash
purchase price of $0.43 per share (the "PURCHASE PRICE"). For each share of
Series D Preferred purchased, the Company shall issue a warrant to purchase
one additional share of Common Stock at a purchase price of $0.65 per share,
in the form attached hereto as Exhibit C (the "WARRANTS"). The Company's
---------
agreement with each Investor is a separate agreement, and the sale and
issuance of the Shares to each Investor is a separate sale and issuance.
SECTION 2
CLOSING DATES AND DELIVERY.
2.1 Closing. The purchase and sale of the Shares shall take place at
one closing (the "CLOSING"). No agreement binding upon the Company or any
Investor shall be created until the Closing. The Closing shall be deemed to
take place at the offices of Xxxxxxxx Curhan Ford Group,
Inc., 000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxxxxxxx, XX 00000, at 1:30 p.m.
local time on the date hereof.
2.2 Delivery. At the Closing, the Company and the Lead Investor shall
execute and deliver to the Escrow Agent provided for in the escrow agreement
attached hereto as Exhibit D (the "ESCROW AGREEMENT") a signed Escrow
---------
Agreement. Each Investor shall tender payment of the purchase price for the
number of Shares that such Investor is purchasing in the Closing as set forth
in the column designated "PURCHASE PRICE" opposite such Investor's name on the
Schedule of Investors by means of either: (i) a wire transfer to the Escrow
Agent, or (ii) evidence of cancellation of indebtedness satisfactory to the
Company, or (iii) any combination of the foregoing. Funds will be held by the
Escrow Agent until evidence is submitted to the Escrow Agent that (A) a
certificate in each Investor's name representing the number of Shares that
such Investor is purchasing in the Closing; and (B) a Warrant in each
Investor's name for the purchase of an equal number of shares of Common Stock;
have been dispatched to each Investor from whom payment was received, all as
provided in the Escrow Agreement. Each Investor who has any rights to
registration of any securities of the Company obtained in connection with
previously issued indebtedness of the Company or warrants of the Company,
agrees to the termination of all such rights, and the Company and all
Investors agrees that such securities will be Registrable Securities under the
Investor Rights Agreement.
2.3 Issuance. Promptly following the Closing, the Company shall cause
a notice of the transactions contemplated by this Agreement to be mailed to
the Company's stockholders in accordance with Nasdaq Listing Rule 5635(f). On
the tenth day following the mailing, upon evidence submitted to the Escrow
Agent that (i) a certificate in each Investor's name representing the number
of Shares that such Investor is purchasing in the Closing; and (ii) a Warrant
in each Investor's name for the purchase of an equal number of shares of
Common Stock; have been dispatched to each Investor from whom payment was
received and such Shares and Warrants are deemed issued, the Escrow Agent
shall (A) release funds to the parties set forth in the exhibit to the Escrow
Agreement as set forth therein; (B) release the remaining funds to the
Company; all as provided in the Escrow Agreement.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
A Schedule of Exceptions, attached hereto as Exhibit G (each, a
---------
"SCHEDULE OF EXCEPTIONS") shall be delivered to the Investors in connection
with the Closing. Except as set forth on the Schedule of Exceptions delivered
to the Investors at the Closing, the Company hereby represents and warrants to
each of the Investors as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has the corporate or other power
and any required certificates, authorizations or permits issued by any
regulatory body to own, manage, lease and hold its properties and to carry on
its business as described in the SEC Filings as and where such properties are
presently located and such business is presently conducted. The Company is
duly qualified to do
business and is in good standing as a foreign corporation in each of the
jurisdictions where the character of its properties or the nature of its
business requires it to be so qualified, except for those jurisdictions in
which failure to do so has not had, or could not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
business, assets, liabilities, condition (financial or otherwise), properties,
operations or prospects of the Company and its Subsidiaries, taken as a whole
(a "MATERIAL ADVERSE EFFECT").
3.2 Corporate Existence and Qualification. Section 3.2 of the
Schedule of Exceptions sets forth a true and complete list of all of the
subsidiaries of the Company including its broker dealer subsidiary Xxxxxxxx
Curhan Ford & Co. Inc. (collectively, the "SUBSIDIARIES"), the place of
incorporation of each such subsidiary and its authorized capitalization, its
shares of capital stock outstanding, and the record and beneficial owner of
those shares. Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its place of incorporation;
has the corporate or other power and any required certificates, authorizations
or permits issued by any regulatory body to own, manage, lease and hold its
properties and to carry on its business as described in the SEC Filings as and
where such properties are presently located and such business is presently
conducted; and is duly qualified to do business and is in good standing as a
foreign corporation in each of the jurisdictions where the character of its
properties or the nature of its business requires it to be so qualified,
except for those jurisdictions in which failure to do so has not had, or could
not reasonably be expected to have, a Material Adverse Effect. There are no
outstanding (and neither the Company nor the Subsidiary has any plan to issue,
grant or enter into any) options, warrants, rights (including conversion or
preemptive rights), subscriptions or agreements for the purchase or
acquisition from or by the Company or the Subsidiaries of any shares of
capital stock of any Subsidiary. There are no voting agreements, voting trust
agreements, shareholder agreements or other similar agreements relating to the
capital stock of any of the Subsidiaries.
3.3 Authority, Approval and Enforceability. This Agreement and the
Transaction Agreements have been duly executed and delivered by the Company,
and the Company has all requisite corporate power and legal capacity to
execute and deliver this Agreement, the Warrants, the Investors' Rights
Agreement in substantially the form attached hereto as Exhibit E (the
---------
"INVESTORS RIGHTS AGREEMENT"), the Management Lock-Up Agreements in
substantially the form attached hereto as Exhibit F (each a "LOCK-UP
---------
AGREEMENT"), the Escrow Agreement (this Agreement, the Warrants the Investors
Rights Agreement, each Lock-Up Agreement and the Escrow Agreement
collectively, the "TRANSACTION Agreements"), to issue and sell the Shares, the
Conversion Shares and the Warrant Shares and to perform its obligations
pursuant to the Transaction Agreements (including if required, issuance of the
"Registration Warrants," "Key Man Warrants" and/or the "Xxxxxxxx Warrants" as
defined in the Investors Rights Agreement) (the "CONTINGENT WARRANTS") and the
shares of common stock pursuant to the exercise of such Contingent Warrants
(the "CONTINGENT SHARES")) and the Certificate of Designation. The Certificate
of Designation has been filed with the State of Delaware. The execution and
delivery of this Agreement and the Transaction Agreements and the performance
of the transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all corporate action necessary on the part of the
Company, any Subsidiary and their respective officers and directors on behalf
of the Company or Subsidiary and all stockholders on behalf of each
Subsidiary. No approval of the Company's stockholders is required with the
execution and delivery
of this Agreement and the Transaction Agreements and the performance of the
transactions contemplated hereby and thereby. This Agreement and each
Transaction Agreement to which the Company is a party constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with
its terms, except as such enforcement may be limited by general equitable
principles or by applicable bankruptcy, insolvency, moratorium, or similar
laws and judicial decisions from time to time in effect which affect
creditors' rights generally.
3.4 Issuance of Securities. The Company has full power and authority
to issue the Shares, Warrants, Conversion Shares, Warrant Shares Contingent
Warrants and Contingent Shares (collectively, the "SECURITIES"). The issuance
of the Securities has been duly authorized, and upon receipt and acceptance of
consideration from the Investor, the Shares and the Warrants when issued (and,
if issued, Contingent Warrants) will be legally and validly issued, fully paid
and non-assessable, free and clear of all liens, charges and encumbrances, and
the Shares will have the rights, preferences and privileges described in the
Certificate of Designation. The Warrant Shares and the Contingent Shares have
been duly reserved for issuance and sale pursuant to their terms and, when
paid for, issued and delivered by the Company pursuant to due exercise of the
Warrants or Contingent Warrants (as the case may be), will be validly issued,
fully paid and nonassessable; provided, however, that the Securities may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein or as otherwise required by such laws at the time a
transfer is proposed. The Company has taken all action required by its
Articles of Incorporation and Bylaws to approve the offer and sale of the
securities.
3.5 SEC Filings. The Company has filed all proxy statements, reports
and other documents required to be filed by it under the Securities Act of
1933, as amended (the "SECURITIES ACT") and the Securities Exchange Act of
1934 for the twelve months preceding the date hereof (the "SEC FILINGS") on a
timely basis or has received a valid extension of such time of filing and has
filed such SEC Filing before the expiration of any such extension. Each SEC
Filing was, at the time of its filing, in material compliance with the
requirements of its respective form and none of the SEC Filings, or the
financial statements (and the notes thereto) included in the SEC Filings, as
of their respective filing dates, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Filings, as of their respective filing dates, complied in
all material respects with applicable accounting requirements and the rules
and regulations of the SEC with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with 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 or the notes thereto and except that 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. The Company (i) has implemented and maintains disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are
reasonably designed to ensure that material information relating to the
Company, including its Subsidiaries, is made known to the individuals
responsible for the preparation of the Company's filings with the SEC and (ii)
has disclosed, based on its most recent evaluation prior to
the date of this Agreement, to the Company's outside auditors and the Board's
Audit Committee (A) any significant deficiencies and material weaknesses in
the design or operation of internal controls over financial reporting (as
defined in Rule 13a-15(f) under the Exchange Act) that are reasonably likely
to adversely affect the Company's ability to record, process, summarize and
report financial information and (B) any fraud, whether or not material, that
involves management or other employees who have a significant role in the
Company's internal controls over financial reporting. As of the date of this
Agreement, to the knowledge of the Company, there is no reason that its
outside auditors and its chief executive officer and chief financial officer
will not be able to give the certifications and attestations required pursuant
to the rules and regulations adopted pursuant to Section 404 of the
Xxxxxxxx-Xxxxx Act of 2002, without disclosure of material weaknesses, when
next due.
3.6 Capitalization; Ownership of Shares. as of the date hereof, the
authorized capital stock of the Company consists of 300,000,000 authorized
shares of common stock, $ 0.0001 par value per share, of which 12,756,656 were
issued and outstanding, and 7,275,716 are reserved for issuance to employees,
officers, directors and consultants pursuant to the Company's stock option
plans (pursuant to which options to purchase or other outstanding unissued
grants for, in the aggregate, 4,961,174 shares are issued and outstanding). In
addition, the Company has authorized the following classes of preferred stock
as of the date hereof: 2,000,000 shares of Series A, $0.0001 par value per
share, of which none were issued and outstanding, 12,500,000 shares of Series
B, 0.0001 par value per share, of which none were issued and outstanding,
14,200,000 shares of Series C, $ 0.0001 par value per share, of which none
were issued and outstanding. The Company further has the ability, under its
Certificate of Incorporation, to create additional series of Preferred Stock,
or additional shares of any of the above classes of Preferred Stock, without
stockholder approval. Schedule 3.6(a) to the Schedule of Exceptions contains
an accurate list of any person holding options, warrants or other rights to
purchase any class of the Company's capital stock (other than the Shares,
Warrants, Conversion Shares, Warrant Shares, Contingent Warrants or Contingent
Shares) and the holdings of each such person, and there are no other
outstanding options, warrants, rights (including conversion or preemptive
rights or rights of first offer) or agreements, orally or in writing, for the
purchase, redemption or acquisition from the Company of any shares of its
capital stock. All of the issued and outstanding shares of the Company are
duly authorized, validly issued, fully paid and nonassessable and were issued
in compliance with state and federal securities laws. Except for the
Transaction Agreements and as set forth on Schedule 3.6(b) of the Schedule of
Exceptions, the Company is not a party or subject to any agreement or
understanding, and, to the best of the Company's knowledge, there is no
agreement or understanding between any person that affects or relates to the
voting or giving of written consents with respect to any security of the
Company (including any voting agreements, voting trust agreements, shareholder
agreements or similar agreements) or the voting by a director of the Company
or the sale, transfer, registration or other disposition with respect to any
security of the Company. The Company does not have outstanding shareholder
purchase rights or "poison pill" or any similar arrangement in effect giving
any person the right to purchase any equity interest in the Company upon the
occurrence of certain events.
3.7 Litigation. Except as disclosed on Schedule 3.7 of the Schedule
of Exceptions, there are no claims, actions, suits, investigations or
proceedings against the Company or any of its Subsidiaries pending or, to the
knowledge of the Company, threatened in any court or
before or by any governmental authority, or before any arbitrator, nor is
there any outstanding judgment, order or decree against, the Company or any of
its Subsidiaries before or by any court, governmental authority or arbitral
body that might have (in the aggregate or if decided adversely to the Company
or Subsidiary) a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is in default with respect to any judgment, order or decree of
any court or governmental authority in a materially adverse manner. The
Company is not a party or subject to, and none of its assets is bound by, the
provisions of any material order, writ, injunction, judgment, or decree of any
court or governmental authority.
3.8 Liabilities and Losses. Except as reflected in the balance sheet
contained in, or otherwise disclosed in, any SEC Document, there are no
outstanding liabilities of the Company other than liabilities incurred in the
ordinary course of business since the date of such SEC Document.
3.9 Compliance with Other Instruments. The execution, delivery and
performance of this Agreement and the consummation by the Company of the
transactions contemplated hereby (including the issuance of the Securities)
will not (i) result in a violation of any certificate of incorporation,
certificate of formation, any certificate of designations or other constituent
documents of the Company or any of its subsidiaries, any capital stock of the
Company or any of its subsidiaries or bylaws of the Company or any of its
subsidiaries or (ii) conflict with, or constitute a default or breach (or an
event which with notice or lapse of time or both would become a default or
breach) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including foreign, federal and state securities laws and regulations
and rules of self regulatory organizations) applicable to the Company or any
of its subsidiaries or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected (including the Shares), except in the
case of clauses (ii) and (iii) above, to the extent that such violations,
conflict, default or right would not reasonably be expected to have a Material
Adverse Effect. No representation or warranty is made with respect to the
Company's continued listing on the Nasdaq Capital Market.
3.10 Material Changes. Since the date of the latest audited financial
statements included within the SEC Filings, except as specifically disclosed
in a subsequent SEC Filing filed prior to the date hereof: (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 or disclosed in filings
made with the SEC, (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 (as defined in Rule 144 under the Securities Act), except pursuant
to existing Company stock option plans.
3.11 Brokers or Finders. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any of the transactions
contemplated hereby.
3.12 Private Placement. The offer and issuance of the Securities to
the Investor is being made pursuant to the exemptions from the registration
provisions of the Securities Act afforded by Section 4(2) of the Securities
Act and Rule 506 of Regulation D promulgated thereunder. Assuming the accuracy
of the Investors' representations and warranties set forth in Section 4
hereof, no registration under the Securities Act is required for the offer and
sale of the Shares, Conversion Shares, Warrants, Warrant Shares, Contingent
Warrants and Contingent Shares by the Company to the Investors as contemplated
hereby or pursuant to the Transaction Agreements. 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.
3.13 Governmental Consent. No consent, approval or authorization of,
or designation, declaration or filing with, any governmental authority or the
Financial Industry Regulatory Authority ("FINRA") on the part of the Company
is required in connection with the valid execution and delivery of these
Transaction Agreements, or the offer, sale or issuance of the Shares, the
Conversion Shares and the Warrant Shares or the consummation of any other
transaction contemplated by these Transaction Agreements, except (a) filing of
the Certificate of Designation with the office of the Secretary of State of
the State of Delaware, (b) the filing of such notices as may be required under
the Securities Act, and (c) such filings as may be required under applicable
state securities laws, which will be timely filed within the applicable
periods therefor.
3.14 Indebtedness. Neither the Company nor any of its Subsidiaries is
after giving effect to the Closing and the issuance of the Shares and
Warrants, in default in the payment of any material indebtedness or in default
under any material agreement relating to its material indebtedness. Neither
the Company nor any of its Subsidiaries has issued or incurred any debt
security or other indebtedness that by its terms is convertible into or
exchangeable for, or accompanied by warrants for or options to purchase, any
capital stock of the Company.
3.15 Title. Each of the Company and its Subsidiaries has good and
marketable title to its property that is real property and good and valid
title to all of its other property (other than negligible assets not material
to the operations of the Company or any of its Subsidiaries), free and clear
of all liens except for liens that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
3.16 Tax Matters.
(a) As used herein: (x) the term "Tax" or "Taxes" shall mean
all taxes, charges, fees, duties, levies, penalties or other assessments
imposed by any federal, state, local or foreign governmental authority,
including income, gross receipts, excise, property, sales, gain, use, license,
custom duty, unemployment, capital stock, transfer, franchise, payroll,
withholding, social security, minimum estimated, profit, gift, severance,
value added, disability, premium, recapture, credit, occupation, service,
leasing, employment, stamp and other taxes, and shall include interest,
penalties
or additions attributable thereto or attributable to any failure to comply
with any requirement regarding Tax Returns; and (y) the term "Tax Return"
shall mean any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any such document prepared on
a consolidated, combined or unitary basis and also including any schedule or
attachment thereto, and including any amendment thereof.
(b) The Company and each of its Subsidiaries has timely filed
(or there have been filed on their behalf) in correct form with appropriate
taxing authorities all material Tax Returns required to be filed by them on or
prior to the date hereof. Such Tax Returns are true, accurate and complete in
all material respects. With respect to all amounts in respect of Taxes imposed
upon the Company or any subsidiary or for which the Company or any such
subsidiary of the Company is or could be liable, all applicable Tax laws have
been complied with in all material respects, and all such amounts in respect
of Taxes required to be paid by the Company or any of its subsidiaries to
taxing authorities or others, have been paid. The accrual for Taxes set forth
in the financial statements of the Company included in the SEC Filings is
adequate in all material respects to cover the Company's and its Subsidiaries'
obligations for Taxes as of the date hereof.
(c) The Company and its Subsidiaries have complied in all
material respects with all applicable laws relating to the withholding of
Taxes, and subject to the foregoing, have, within the time and manner
prescribed by law, withheld and paid over to the proper governmental
authorities all amounts required to be withheld and paid over under all
applicable laws.
(d) No federal, state, local or foreign audits or other
administrative proceedings have formally commenced or are presently pending
with regard to any Taxes due from or with respect to the Company or any of its
Subsidiaries. There are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries is a party
to any material Tax sharing, Tax indemnity or other similar agreement or
arrangement with any person or entity other than a Tax sharing, Tax indemnity
or other similar agreement to which the Company and/or one of its Subsidiaries
are the sole parties.
3.17 Compliance with Laws. Neither the Company nor any of its
Subsidiaries is in material violation of any applicable federal, state, local,
foreign or other law, statute, regulation, rule, ordinance, code, convention,
directive, order, judgment or other legal requirement (collectively, "LAWS")
of any governmental authority or self regulatory organization, except where
such violation would not, individually or in the aggregate, be expected to
have a Material Adverse Effect. To the knowledge of the Company, neither the
Company nor any of its Subsidiaries is being investigated with respect to, or
has been overtly threatened to be charged with or given notice of any
violation of, any applicable Law, except for such of the foregoing as would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
3.18 Registration Rights. Except as provided in the Investors Rights
Agreement, the Company has not granted or agreed to grant, and is not under
any obligation to provide, any
rights to register under the Securities Act any of its presently outstanding
securities or any of its securities that may be issued subsequently.
3.19 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an investment company within the meaning of the Investment
Company Act of 1940, or, directly or indirectly, controlled by or acting on
behalf of any person which is an investment company, within the meaning of
said Act.
3.20 Foreign Corrupt Practices. To the Company's knowledge, neither
the Company, nor any of its subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or any subsidiary
has, in the course of his actions for, or on behalf of, the Company, used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or domestic government official or employee.
3.21 Key Employees. Each of D. Xxxxxxxx Xxxxxxxx and Xxxxx X. Xxxxxxx
(each a "KEY EMPLOYEE") is currently serving the Company and each Subsidiary
in the capacities disclosed in Schedule 3.21 of the Schedule of Exceptions. No
Key Employee, to the knowledge of the Company is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each Key Employee does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters. No
Key Employee has, to the knowledge of the Company, any intention to terminate
or limit his employment with, or services to, the Company or any of its
subsidiaries, nor is any such Key Employee subject to any constraints (e.g.,
litigation) which would cause such employee to be unable to devote his full
time and attention to such employment or services in the capacities disclosed
in Schedule 3.21.
3.22 Employee Benefits. Neither the Company nor any affiliate of the
Company as determined under the Internal Revenue Code of 1986, as amended (the
"CODE") section 414(b), (c), (m) or (o) (an "ERISA AFFILIATE") maintains,
administers or contributes to, or maintained, administered or contributed to,
or has any liability with respect to, nor do the employees of the Company or
any ERISA Affiliate receive or expect to receive as a condition of employment,
benefits pursuant to:
(a) any employee benefit plan (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
("PLAN"), including any multiemployer plan as defined in Section 3(37) of
ERISA ("MULTIEMPLOYER PLAN"); or
(b) any bonus, deferred compensation, performance compensation,
stock purchase, stock option, stock appreciation, severance, salary
continuation, vacation, sick leave, holiday pay, fringe benefit, personnel
policy, reimbursement program, incentive, insurance, welfare or similar plan,
program, policy or arrangement ("EMPLOYEE BENEFIT PLAN");
other than those Plans and Employee Benefit Plans described in Schedule 3.22
of the Schedule of Exceptions. Except as required by section 4980B of the
Code, neither the Company nor any ERISA Affiliate has promised any former
employee or other individual not employed by the Company or any ERISA
Affiliate with medical or other benefit coverage. Except as required by
section 4980B of the Code, neither the Company nor any ERISA Affiliate
maintains or contributes to any plan, program, policy or arrangement providing
medical benefits, life insurance or other welfare benefits to former
employees, their spouses or dependents or any other individual not employed by
the Company or any ERISA Affiliate. All Plans and Employee Benefit Plans and
any related trust agreements or annuity contracts (or any related trust
instruments) comply with and are and have been operated in accordance with
each applicable provision of ERISA, the Code (including the requirements, of
Code section 401(a) to the extent any Plan is intended to conform to that
section), other Federal statutes, state law (including state insurance law)
and the regulations and rules promulgated pursuant thereto or in connection
therewith except when the failure to so comply would not have a Material
Adverse Effect. A favorable determination as to the qualification under the
Code of each of the Plans that is intended to be qualified under Section
401(a) of the Code and each amendment thereto has been made by the Internal
Revenue Service ("IRS"), each trust funding a Plan is and has been tax-exempt
and each Plan and related trust agreements remain qualified under the Code. No
Plan is a Multiemployer Plan subject to Title IV of ERISA.
3.23 Contracts. The SEC Documents contain a complete and accurate
list of all material undischarged written or oral contracts, agreements,
leases or other instruments to which the Company or any subsidiary is a party
or by which the Company or any subsidiary is bound or to which any of the
properties or assets of the Company or any subsidiary is subject which are
required to be listed in the SEC Documents except where the failure to so list
in the SEC Documents would not have a Material Adverse Effect (each a
"CONTRACT"). None of the Company, its subsidiaries or, to the of the Company,
any of the other parties thereto, is in breach or violation of any Contract,
which breach or violation relates to indebtedness for borrowed money or
otherwise would have a Material Adverse Effect. No event, occurrence or
condition exists which, with the lapse of time, the giving of notice, or both,
or the happening of any further event or condition, would become a breach or
default by the Company or its subsidiaries under any Contract which breach or
default would have a Material Adverse Effect. The Company has provided to the
counsel for the Lead Investor true and complete copies all fidelity bonds and
insurance policies of the Company now in force (including "key man,"
comprehensive general liability, personal and professional liability,
comprehensive general casualty and extended coverage, business interruption,
automobile, fire and lightning, endowment, life, and worker's compensation
insurance policies).
3.24 Use of Proceeds. The Company shall apply up to $4.3 million of
the net proceeds from the issuance and sale of the Securities for settlement
of litigation claims from the claimants provided for in the Escrow Agreement,
and the balance for general corporate purposes, including funding working
capital and the payment of fees and expenses in connection with the
transactions contemplated by this Agreement and the Transaction Agreements.
3.25 Disclosure. No information relating to or concerning the Company
set forth in this Agreement or provided to the Purchaser by or on behalf of
the Company in connection with the transactions contemplated hereby contains
an untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. Except for the execution and performance of this Agreement and the
other Transaction Agreements, no material fact (within the meaning of the
federal securities laws of the United States) which would be required to be
disclosed in the SEC Documents exists with respect to the Company or any of
its subsidiaries which has not been publicly disclosed, except where the
failure to disclose would not have Material Adverse Effect.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each Investor hereby, severally and not jointly, represents and
warrants to the Company as follows:
4.1 Public Information on Company. The Investor has had access at the
XXXXX Website of the SEC to the Company's Form 10-K/A, filed on April 30,
2009, for the year ended December 31, 2008 and the Company's Form 10-K, filed
on February 12, 2008, for the year ended December 31, 2007, as filed with the
SEC, together with all subsequently filed Forms 10-Q, 8-K, and other filings
made with the SEC available at the XXXXX website (any such document, an "SEC
DOCUMENT"). The Investor has reviewed the risk factors contained in the SEC
Documents. The Investor has considered the risk factors and other all factors
the Investor deems material in deciding on the advisability of investing in
the Securities. In furtherance and not in limitation of the preceding
sentences, Investor is aware that the opinion of the Company auditors
contained in its Form 10-K/A, filed on April 30, 2009 contained "going
concern" language.
4.2 Other Information. Such Investor has had an opportunity to ask
questions of, and receive answers from, the officers of the Company concerning
the Transaction Agreements, the exhibits and schedules attached hereto and
thereto and the transactions contemplated by the Transaction Agreements, as
well as the Company's business, management and financial affairs, which
questions were answered to its satisfaction. Such Investor believes that it
has received all the information such Investor considers necessary or
appropriate for deciding whether to purchase the Shares, the Conversion Shares
and the Warrant Shares. Each Investor acknowledges that any business plan or
projection provided to such Investor was prepared by the management of the
Company in a good faith effort to describe the Company's presently proposed
business and products and the markets therefor. Each Investor also
acknowledges that it is relying solely on its own counsel and not on any
statements or representations of the Company or its agents for legal advice
with respect to this investment or the transactions contemplated by the
Transaction Agreements. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 3 of this Agreement
or otherwise in the Transaction Agreements, or the right of Investor to rely
on such representations or warranties.
4.3 No Registration. Such Investor understands that the Shares and
the Conversion Shares, have not been, and will not be, registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon,
among other things, the bona fide nature of the investment intent and the
accuracy of such Investor's representations as expressed herein or otherwise
made pursuant hereto.
4.4 Investment Intent. Such Investor is acquiring the Shares and the
Conversion Shares for investment for its own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof, and that such Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same.
Such Investor further represents that it does not have any contract,
undertaking, agreement or arrangement with any person or entity to sell,
transfer or grant participation to such person or entity or to any third
person or entity with respect to any of the Shares or the Conversion Shares.
4.5 Investment Experience. Such Investor has substantial experience
in evaluating and investing in private placement transactions of securities in
companies similar to the Company and acknowledges that such Investor can
protect its own interests. Such Investor has such knowledge and experience in
financial and business matters so that such Investor is capable of evaluating
the merits and risks of its investment in the Company.
4.6 Speculative Nature of Investment. Such Investor understands and
acknowledges that the Company has a limited financial and operating history
and that an investment in the Company is highly speculative and involves
substantial risks. Such Investor can bear the economic risk of such Investor's
investment and is able, without impairing such Investor's financial condition,
to hold the Shares and the Conversion Shares for an indefinite period of time
and to suffer a complete loss of such Investor's investment.
4.7 Accredited Investor. Either:
(a) The Investor is an "accredited investor" within the meaning
of Regulation D, Rule 501(a), promulgated by the Securities and Exchange
Commission under the Securities Act and shall submit to the Company such
further assurances of such status as may be reasonably requested by the
Company; or
(b) The Investor is not an accredited investor but has executed
and returned to the Company an Investor Questionnaire establishing that the
Investor either alone or with his purchaser representative(s) has such
knowledge and experience in financial and business matters that he is capable
of evaluating the merits and risks of the prospective investment.
4.8 Residency. The residency of the Investor (or, in the case of a
partnership or corporation, such entity's principal place of business) is
correctly set forth on the Schedule of Investors.
4.9 Rule 144. Such Investor acknowledges that the Shares, the
Conversion Shares or the Warrant Shares must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available. Such Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including among other things, the
existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring not less
than six months after a party has purchased and paid for the security to be
sold, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker" and the number of shares being
sold during any three-month period not exceeding specified limitations. Such
Investor acknowledges and understands that, notwithstanding any obligation
under the Investors Rights Agreement, the Company may not be satisfying the
current public information requirement of Rule 144 at the time the Investor
wishes to sell the Shares, the Conversion Shares or the Warrant Shares, and
that, in such event, the Investor may be precluded from selling such
securities under Rule 144, even if the other requirements of Rule 144 have
been satisfied. Such Investor acknowledges that, in the event all of the
requirements of Rule 144 are not met, registration under the Securities Act or
an exemption from registration will be required for any disposition of the
Shares or the underlying Common Stock. Such Investor understands that,
although Rule 144 is not exclusive, the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell restricted securities
received in a private offering other than in a registered offering or pursuant
to Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales and that
such persons and the brokers who participate in the transactions do so at
their own risk.
4.10 Authorization.
(a) Such Investor has all requisite power and authority to
execute and deliver the Transaction Agreements, to purchase the Shares
hereunder and to carry out and perform its obligations under the terms of the
Transaction Agreements. All action on the part of the Investor necessary for
the authorization, execution, delivery and performance of the Transaction
Agreements, and the performance of all of the Investor's obligations under the
Transaction Agreements, has been taken or will be taken prior to the Closing.
(b) The Transaction Agreements, when executed and delivered by
the Investor, will constitute valid and legally binding obligations of the
Investor, enforceable in accordance with their terms except: (i) to the extent
that the indemnification provisions contained in the Investors Rights
Agreement may be limited by applicable law and principles of public policy,
(ii) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (iii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies or by general principles of equity.
(c) No consent, approval, authorization, order, filing,
registration or qualification of or with any court, governmental authority or
third person is required to be obtained by the Investor in connection with the
execution and delivery of the Transaction Agreements by the Investor or the
performance of the Investor's obligations hereunder or thereunder.
4.11 Brokers or Finders. Such Investor has not engaged any brokers,
finders or agents in connection with the transactions contemplated herein, and
neither the Company nor any
other Investor has, nor will, incur, directly or indirectly, as a result of
any action taken by the Investor, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with the
Transaction Agreements.
4.12 Tax Advisors. Such Investor has reviewed with its own tax
advisors the U.S. federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by the Transaction Agreements.
With respect to such matters, such Investor relies solely on such advisors and
not on any statements or representations of the Company or any of its agents,
written or oral. The Investor understands that it (and not the Company) shall
be responsible for its own tax liability that may arise as a result of this
investment or the transactions contemplated by the Transaction Agreements. The
foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 3 of this Agreement or otherwise in the
Transaction Agreements, or the right of Investor to rely on such
representations or warranties.
4.13 Legends. Such Investor understands and agrees that the
certificates evidencing the Shares or the Conversion Shares, or any other
securities issued in respect of the Shares or the Conversion Shares upon any
stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall bear the following legend (in addition to any legend
required by the Investors Rights Agreement or under applicable state
securities laws):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED
UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH
THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS."
SECTION 5
THE COMPANY'S ACTIONS.
The following have occurred:
5.1 Representations and Warranties. The representations and
warranties made by the Company in Section 3 (as modified by the disclosures on
the Schedule of Exceptions) are true and correct in all respects as of the
date hereof.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing shall
have been performed or complied with.
5.3 Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Shares pursuant to this Agreement are duly obtained and effective, except
any notices of sale required to be filed with applicable federal and state
agencies that may be filed following Closing, which will be timely filed
within the applicable periods therefor.
5.4 Certificate of Designation. The Certificate of Designation has
been duly authorized, executed and filed with and accepted by the Secretary of
State of the State of Delaware.
5.5 Investors Rights Agreement. The Company and the Investors (as
defined in the Investors Rights Agreement) shall have executed and delivered
the Investors Rights Agreement.
5.6 Management Lock-Up Agreement. The Company, and each of D.
Xxxxxxxx Xxxxxxxx, Xxxxxx Xxxx, Xxxxx Xxxxxxx, Xxxxx Xxxxxxx have executed and
delivered the Management Lock-Up Agreement.
5.7 Opinion. The Company shall have delivered to counsel to Xxxxxx X.
Chez (the "LEAD INVESTOR") an opinion addressed to each Investor from Xxxxxxx
X. Xxxxx, Esq., counsel to the Company, dated as of the date hereof, in
substantially the form attached hereto as Exhibit H.
---------
5.8 Escrow Agreement. The Escrow Agreement has been executed and
delivered by the Company, the Lead Investor, and the Escrow Agent.
5.9 Settlement Agreement. The Settlement Agreement in the form
attached hereto as Exhibit J has been executed by the Company and "Settling
Claimants" representing in the aggregate at least $34.6 million in "Value of
Original Claim" as shown on Schedule A of the Settlement Agreement.
5.10 Payment of Investor Expenses. The Escrow Agreement contains
irrevocable instructions for the payment of $35,000 as described in Section
7.5.
5.11 Life Insurance Policy. The Company has purchased the insurance
policy on the life of D. Xxxxxxxx Xxxxxxxx in the form attached hereto as
Exhibit I (the "LIFE INSURANCE POLICY").
---------
5.12 Warrant Returns. D. Xxxxxxxx Xxxxxxxx and Xxxxx X. Xxxxxxx have
returned 50% of the warrants originally issued to them by the Company in
connection with their guarantees of the Secured Promissory Note issued by the
Company in favor of Xxxxxx X. Chez dated July 31, 2009.
SECTION 6
INVESTORS' ACTIONS.
The following have occurred:
6.1 Representations and Warranties. The representations and
warranties made by each Investor in Section 4 is true and correct in all
respects as of the date hereof.
6.2 Covenants. All covenants, agreements and conditions contained in
the Transaction Agreements to be performed by Investors on or prior to the
date of the Closing shall have been performed or complied with.
6.3 Compliance with Securities Laws. The Company is satisfied that
the offer and sale of the Shares and the Conversion Shares and the Warrants
are be qualified or exempt from registration or qualification under all
applicable federal and state securities laws (including receipt by the Company
of all necessary blue sky law permits and qualifications required by any
state, if any).
SECTION 7
MISCELLANEOUS
7.1 Amendment. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
referencing this Agreement and signed by the Company and the Investors holding
[at least a majority] of the Shares or the Conversion Shares and the Warrants
(calculated by assuming all Shares have been converted to Conversion Shares
and the Warrants converted to Warrant Shares as of the date of such amendment,
waiver, discharge or termination, and excluding any of such shares or warrants
that have been sold to the public or pursuant to Rule 144). Any such
amendment, waiver, discharge or termination affected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities have been converted or exchanged or for which such securities have
been exercised) and each future holder of all such securities. Each Investor
acknowledges that by the operation of this paragraph, the holders of at least
a majority of the Shares or the Conversion Shares (excluding any of such
shares that have been sold to the public or pursuant to Rule 144) will have
the right and power to diminish or eliminate all rights of such Investor under
this Agreement.
7.2 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by facsimile or electronic mail or
otherwise delivered by hand or by messenger addressed:
(a) if to an Investor, at the Investor's address, facsimile
number or electronic mail address as shown in the Company's records, as may be
updated in accordance with the provisions hereof;
(b) if to any other holder of any Shares or Conversion Shares,
at such address, facsimile number, or electronic mail address as shown in the
Company's records, or, until any such holder so furnishes an address,
facsimile number or electronic mail address to the Company, then at the
address of the last holder of such Shares or Conversion Shares for which the
Company has contact information in its records; or
(c) if to the Company, one copy should be sent to 000
Xxxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxxxxxxx, XX 00000, Attn: Chief Executive
Officer, or at such other address as the Company shall have furnished to the
Investors, with a copy to 000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxxxxxxx, XX
00000, Attn: Chief Compliance Officer.
With respect to any notice given by the Company under any provision
of the Delaware General Corporation Law, the Certificate of Designation or the
Company's Bylaws, each Investor agrees that such notice may be given by
facsimile or by electronic mail (with confirmed delivery).
Each such notice or other communication shall for all purposes of
this Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 3
business days after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid or, if sent by facsimile, the business day following confirmation of
facsimile transfer or, if sent by electronic mail, the business day following
confirmation of delivery when directed to the electronic mail address provided
pursuant hereto, or, if sent by nationally recognized overnight delivery
service, on the date when delivered.
7.3 Governing Law. This Agreement shall be governed in all respects
by the internal laws of the State of Delaware, without regard to principles of
conflicts of law.
7.4 Brokers or Finders. The Company shall indemnify and hold harmless
each Investor from any liability for any commission or compensation in the
nature of a brokerage or finder's fee or agent's commission (and the costs and
expenses of defending against such liability or asserted liability) for which
such Investor or any of its constituent partners, members, agents, officers,
directors, employees or representatives is responsible to the extent such
liability is attributable to any inaccuracy or breach of the representations
and warranties contained in Section 3.11, and each Investor agrees to
indemnify and hold harmless the Company and each other Investor from any
liability for any commission or compensation in the nature of a brokerage or
finder's fee or agent's commission (and the costs and expenses of defending
against such liability or asserted liability) for which the Company, any other
Investor or any of their constituent partners, members, agents, officers,
directors, employees or representatives is responsible to the extent such
liability is attributable to any inaccuracy or breach of the representations
and warranties of such Investor contained in SECTION 4.11.
7.5 Expenses. The Company and the Investors shall each pay their own
expenses in connection with the transactions contemplated by this Agreement;
provided, however, that if the Closing is effected, the Company at the Closing
shall reimburse the reasonable documented fees of Xxxxxxxx Xxxxxx LLP, counsel
for the Lead Investor, and other fees and
expenses involved for due diligence and other transaction related expenses, an
amount not to exceed $35,000.
7.6 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any Shares sold hereunder or any Conversion Shares or
Warrants). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided in this
Agreement. This provision shall not limit an Investor right to transfer any
securities pursuant to the terms of this Agreement or any of the Transaction
Agreements.
7.7 Entire Agreement. This Agreement and the other Transaction
Agreements, including the exhibits attached hereto and thereto, constitute the
full and entire understanding and agreement among the parties with regard to
the subjects hereof and thereof. No party shall be liable or bound to any
other party in any manner with regard to the subjects hereof or thereof by any
warranties, representations or covenants except as specifically set forth
herein or therein.
7.8 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any party
to this Agreement upon any breach or default of any other party under this
Agreement shall impair any such right, power or remedy of such non-defaulting
party, nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default
thereafter occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party of any breach or default under this Agreement, or any
waiver on the part of any party of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party to this Agreement,
shall be cumulative and not alternative.
7.9 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE
IS SO EXEMPT.
7.10 Severability. If any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, portions of such provision, or such provision in its entirety, to the
extent necessary, shall be severed from this Agreement, and such court will
replace such illegal, void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
same economic, business
and other purposes of the illegal, void or unenforceable provision. The
balance of this Agreement shall be enforceable in accordance with its terms.
7.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
7.12 Telecopy Execution and Delivery. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties hereto
and delivered by such party by facsimile or any similar electronic
transmission device pursuant to which the signature of or on behalf of such
party can be seen. Such execution and delivery shall be considered valid,
binding and effective for all purposes. At the request of any party hereto,
all parties hereto agree to execute and deliver an original of this Agreement
as well as any facsimile, telecopy or other reproduction hereof.
7.13 Jurisdiction; Venue. With respect to any disputes arising out of
or related to this Agreement, the parties consent to the exclusive
jurisdiction of, and venue in, the state courts in the city of Chicago, and
county of Xxxx, Illinois (or in the event of exclusive federal jurisdiction,
the courts of the Northern District of Illinois). EACH OF THE PARTIES
KNOWINGLY, INTENTIONALLY AND VOLUNTAIRILY WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PORCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY. The Company agrees and acknowledges that
any violation or breach of its covenants, agreements and undertakings
contained in this Agreement or in the other Investment Agreements shall cause
Investors irreversible injury and, in addition to any other right or remedy
available to a party at law or in equity, an Investor shall be entitled to
enforcement by court injunction for specific performance of the obligations of
the other party hereunder (without the requirement of posting a bond).
Notwithstanding the foregoing sentence, nothing herein shall be construed as
prohibiting a party from also pursuing any other rights, remedies or defenses,
for such breach or threatened breach, including receiving damages and
attorneys' fees. The election of any remedy shall not be construed as a waiver
on the part of any party of any rights such party might otherwise have at law
or in equity. Said rights and remedies shall be cumulative.
7.14 Further Assurances. Each party hereto agrees to execute and
deliver, by the proper exercise of its corporate, limited liability company,
partnership or other powers, all such other and additional instruments and
documents and do all such other acts and things as may be necessary to more
fully effectuate this Agreement.
7.15 Attorney's Fees. In the event that any suit or action is
instituted to enforce any provisions in this Agreement, the prevailing party
in such dispute shall be entitled to recover from the losing party such
reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
7.16 Survival of Warranties. The warranties, representations and
covenants of the Company and each Investor contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing. The representations, warranties,
covenants and obligations of the Company, and the rights and remedies that may
be exercised by the Investors, shall not be limited or otherwise affected by
or as a result of any information furnished to, or any investigation made by
or knowledge of, any of the Investors or any of their representatives.
7.17 Company Indemnification. The Company agrees to indemnify and
hold harmless the Investors and each of their officers, directors,
shareholders, members, employees, partners, agents and affiliates and any
direct or indirect investors, shareholders, officers, directors, agents,
partners, employees, members, agents or affiliates of any of the foregoing for
loss or damage arising as a result of or related to (a) any breach by the
Company of any of its representations or covenants set forth herein or the
unenforceability or invalidity of any provision of any of the Transaction
Agreements other than the Investor Rights Agreement and Warrants, or (b) any
cause of action, suit or claim brought or made against such indemnitee (other
than directly by the Company solely for breach of this Agreement, or any
Transaction Agreement other than the Investor Rights Agreement and Warrants by
the indemnitee or by governmental or regulatory authorities), and arising out
of or resulting from (whether in whole or in part) the execution, delivery,
performance or enforcement of this Agreement or any other Transaction
Agreement other than the Investor Rights Agreement and Warrants or any other
instrument, document or agreement executed pursuant hereto or thereto or
contemplated hereby or thereby (including the acquisition of the Securities,
the Warrants, the Warrant Shares, the Contingent Warrants or the Contingent
Shares), any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities or
the status of the Investor as an investor in the Company, except to the extent
that such actual loss or damage results from a breach by such indemnitee of
this Agreement, or other Transaction Agreement or any other instrument,
document or agreement executed pursuant hereto or thereto or contemplated
hereby or thereby. If any action shall be brought against any Investor in
respect of which indemnity may be sought pursuant to this Agreement, such
Investor shall promptly notify the Company in writing, (provided that the
failure of an Investor to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations, to the extent such failure is not
materially prejudicial) and the and the Company shall have the right to assume
the defense thereof with counsel of its own choosing reasonably acceptable to
the Investor. Any Investor 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 Investor unless
representation of such Investor by the counsel retained by the Company would
be inappropriate due to actual or potential conflicting interests between such
Investor and any other party represented by such counsel in such proceeding or
should the Company failed promptly to assume the defense of such proceeding.
The Company will not be liable to any Investor under this Agreement for any
settlement by an Investor effected without the Company's prior written
consent, which shall not be unreasonably withheld or delayed. The right to
indemnification shall include the right to repayment of legal fees only if the
indemnitee has prevailed on the merits in a final judgment of a court from
which no further appeal is possible.
7.18 Investor Indemnification. Each Investor, severally and not
jointly, agrees to indemnify and hold harmless the Company and each of its
officers, directors, shareholders, members, employees, partners, agents and
affiliates and any direct or indirect investors, shareholders, officers,
directors, agents, partners, employees, members, agents or affiliates of any
of the foregoing for loss or damage arising as a result of or related to (a)
any breach by the Investor of any of its representations or covenants set
forth herein. If any action shall be brought against the Company in respect of
which indemnity may be sought pursuant to this Agreement, the
Company shall promptly notify the Investor in writing, and the Investor shall
have the right to assume the defense thereof with counsel of its own choosing
reasonably acceptable to the Company. The Company 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
the Company. Each Investor will not be liable to the Company under this
Agreement for any settlement by the Company effected without the Investor's
prior written consent, which shall not be unreasonably withheld or delayed.
The right to indemnification shall include the right to repayment of legal
fees only if the indemnitee has prevailed on the merits in a final judgment of
a court from which no further appeal is possible.
7.19 Public Filings; Publicity. Immediately following execution of
this Agreement, the Company shall issue a press release with respect to the
transactions contemplated hereby, and the notice to investors required
pursuant to Section 5635(f) of the NASDAQ Listing rules. The Company and the
Lead Investor shall have the right to approve before issuance any press
releases or notices (including the foregoing press release and notice), SEC or
other filings, or any other public statements, with respect to the
transactions contemplated hereby; provided, however, that either the Lead
Investor, on the one hand, or the Company, on the other hand, shall be
entitled, without the prior approval of the other party, to make any press
release or SEC or exchange filings with respect to such transactions as is
required by applicable law and regulations (although such party making such
release or filing shall (to the extent time permits) consult with the other
party in connection with any such press release or filing prior to its release
and shall be provided with a copy thereof).
7.20 Construction. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement. When used in this Agreement, the word "including" means "including,
without limitation", and the word "person" means any natural person,
corporation, limited liability company, trust, joint venture, association,
company, governmental authority, or other entity.
[Signatures set forth on the following page]
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
"COMPANY"
XXXXXXXX CURHAN FORD GROUP, INC.
a Delaware corporation
/s/ D. Xxxxxxxx Xxxxxxxx
------------------------
D. Xxxxxxxx Xxxxxxxx,
Chief Executive Officer
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
INVESTORS:
By: /s/ Xxxxxxx Xxxxxxxx
--------------------
Xxxxxxx Xxxxxxxx
President, DGB Investments, Inc.
[Remaining Signature Pages Omitted]
