Exhibit 10.1
FORM OF SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of March 14, 2006, by
and among Juniper Group, Inc. a Nevada corporation, with headquarters located at
00000 Xxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000 (the "Company"), and each
of the purchasers set forth on the signature pages hereto (the "Buyers").
WHEREAS:
(a) The Company and the Buyers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the rules
and regulations as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
(b) Buyers desire to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement (i) 8% convertible
debentures of the Company, in the form attached hereto as Exhibit "A", in the
aggregate principal amount of Three Hundred Thousand Dollars ($300,000)
(together with any debenture(s) issued in replacement thereof or as a dividend
thereon or otherwise with respect thereto in accordance with the terms thereof,
the "Debentures"), convertible into shares of common stock, par value $.001 per
share, of the Company (the "Common Stock"), upon the terms and subject to the
limitations and conditions set forth in such Debentures and (ii) warrants, in
the form attached hereto as Exhibit "B", to purchase 7,000,000 shares of Common
Stock (the "Warrants").
(c) (C)Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amount of Debentures and number of Warrants as is
set forth immediately below its name on the signature pages hereto; and
(d) Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit "C" (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW THEREFORE, the Company and each of the Buyers severally (and not jointly)
hereby agree as follows:
(i) PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
(1) Purchase of Debentures and Warrants. On the Closing Date (as defined
below), the Company shall issue and sell to each Buyer and each Buyer
severally agrees to purchase from the Company such principal amount of
Debentures and number of Warrants as is set forth immediately below such
Buyer's name on the signature pages hereto.
(2) Form of Payment. On the Closing Date (as defined below), (i) each Buyer
shall pay the purchase price for the Debentures and the Warrants to be
issued and sold to it at the Closing (as defined below) (the "Purchase
Price") by wire transfer of immediately available funds to the Company, in
accordance with the Company's written wiring instructions, against delivery
of the Debentures in the principal amount equal to the Purchase Price and
the number of Warrants as is set forth immediately below such Buyer's name
on the signature pages hereto, and (ii) the Company shall deliver such
Debentures and Warrants duly executed on behalf of the Company, to such
Buyer, against delivery of such Purchase Price.
(3) Closing Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and
time of the issuance and sale of the Debentures and the Warrants pursuant
to this Agreement (the "Closing Date") shall be 12:00 noon, Eastern
Standard Time on March 14, 2006, or such other mutually agreed upon time.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall occur on the Closing Date at such location as may be
agreed to by the parties.
(ii) BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and
not jointly) represents and warrants to the Company solely as to such Buyer
that:
(1) Investment Purpose. As of the date hereof, the Buyer is purchasing the
Debentures and the shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Debentures (including, without limitation, such
additional shares of Common Stock, if any, as are issuable (i) on account
of interest on the Debentures, (ii) as a result of the events described in
Sections 1.3 and 1.4(g) of the Debentures and Section 2(C) of the
Registration Rights Agreement or (iii) in payment of the Standard
Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to
this Agreement, such shares of Common Stock being collectively referred to
herein as the "Conversion Shares") and the Warrants and the shares of
Common Stock issuable upon exercise thereof (the "Warrant Shares" and,
collectively with the Debentures, Warrants and Conversion Shares, the
"Securities") for its own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales registered or
exempted from registration under the 1933 Act; provided, however, that by
making the representations herein, the Buyer does not agree to hold any of
the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the 1933 Act.
(2) Accredited Investor Status. The Buyer is an "accredited investor" as that
term is defined in Rule 501(a) of Regulation D (an "Accredited Investor").
(3) Reliance on Exemptions. The Buyer understands that the Securities are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and
the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order
to determine the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
(4) Information. The Buyer and its advisors, if any, have been, and for so long
as the Debentures and Warrants remain outstanding will continue to be,
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The
Buyer and its advisors, if any, have been, and for so long as the
Debentures and Warrants remain outstanding will continue to be, afforded
the opportunity to ask questions of the Company. Notwithstanding the
foregoing, the Company has not disclosed to the Buyer any material
nonpublic information and will not disclose such information unless such
information is disclosed to the public prior to or promptly following such
disclosure to the Buyer. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives
shall modify, amend or affect Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a significant
degree of risk.
(5) Governmental Review. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the Securities.
(6) Transfer or Re-sale. The Buyer understands that (i) except as provided in
the Registration Rights Agreement, the sale or re-sale of the Securities
has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the
Company an opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in comparable transactions to the effect
that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, which opinion shall be
accepted by the Company, (c) the Securities are sold or transferred to an
"affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a
successor rule) ("Rule 144")) of the Buyer who agrees to sell or otherwise
transfer the Securities only in accordance with this Section 2(f) and who
is an Accredited Investor, (d) the Securities are sold pursuant to Rule
144, or (e) the Securities are sold pursuant to Regulation S under the 1933
Act (or a successor rule) ("Regulation S"), and the Buyer shall have
delivered to the Company an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in corporate
transactions, which opinion shall be accepted by the Company; (ii) any sale
of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any
other person is under any obligation to register such Securities under the
1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant
to the Registration Rights Agreement). Notwithstanding the foregoing or
anything else contained herein to the contrary, the Securities may be
pledged as collateral in connection with a bona fide margin account or
other lending arrangement. In the event that the Company does not accept
the opinion of counsel provided by the Buyer with respect to the transfer
of Securities pursuant to an exemption from registration, such as Rule 144
or Regulation S, within three (3) business days of delivery of the opinion
to the Company, the Company shall pay to the Buyer liquidated damages of
three percent (3%) of the outstanding amount of the Debentures per month
plus accrued and unpaid interest on the Debentures, prorated for partial
months, in cash or shares at the option of the Company ("Standard
Liquidated Damages Amount"). If the Company elects to pay the Standard
Liquidated Damages Amount in shares of Common Stock, such shares shall be
issued at the Conversion Price at the time of payment. Notwithstanding
anything herein to the contrary, in the event the Company has to pay the
Standards Liquidated Damages Amount pursuant to any provision of this
Agreement, the Buyers shall first have to give the Company advance written
notice of such breach and in such event, the Company shall have 30 days
from the receipt of such notice to cure such breach before the Standard
Liquidated Damages Amount shall be due and payable to the Buyers.
(7) Legends. The Buyer understands that the Debentures and the Warrants and,
until such time as the Conversion Shares and Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 or Regulation S
without any restriction as to the number of securities as of a particular
date that can then be immediately sold, the Conversion Shares and Warrant
Shares may bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities may not be sold, transferred or assigned in the absence of
an effective registration statement for the securities under said Act,
or an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, that registration is
not required under said Act or unless sold pursuant to Rule 144 or
Regulation S under said Act."
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Security may be made without registration under the
1933 Act, which opinion shall be accepted by the Company so that the sale or
transfer is effected or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144 or Regulation S.
The Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable prospectus delivery requirements, if any.
(8) Authorization; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized. This Agreement has been
duly executed and delivered on behalf of the Buyer, and this Agreement
constitutes, and upon execution and delivery by the Buyer of the
Registration Rights Agreement, such agreement will constitute, valid and
binding agreements of the Buyer enforceable in accordance with their terms.
(9) Residency. The Buyer is a resident of the jurisdiction set forth
immediately below such Buyer's name on the signature pages hereto.
(iii) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
(1) Organization and Qualification. The Company and each of its Subsidiaries
(as defined below), if any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which
it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as
and where now owned, leased, used, operated and conducted. Schedule 3(a)
sets forth a list of all of the Subsidiaries of the Company and the
jurisdiction in which each is incorporated. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the business, operations,
assets, financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith. "Subsidiaries" means any corporation or other organization,
whether incorporated or unincorporated, in which the Company owns, directly
or indirectly, any equity or other ownership interest.
(2) Authorization; Enforcement. (i) The Company has all requisite corporate
power and authority to enter into and perform this Agreement, the
Registration Rights Agreement, the Debentures and the Warrants and to
consummate the transactions contemplated hereby and thereby and to issue
the Securities, in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration Rights
Agreement, the Debentures and the Warrants by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Debentures and the
Warrants and the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares issuable upon conversion or exercise thereof)
have been duly authorized by the Company's Board of Directors and no
further consent or authorization of the Company, its Board of Directors, or
its shareholders is required, (iii) this Agreement has been duly executed
and delivered by the Company by its authorized representative, and such
authorized representative is the true and official representative with
authority to sign this Agreement and the other documents executed in
connection herewith and bind the Company accordingly, and (iv) this
Agreement constitutes, and upon execution and delivery by the Company of
the Registration Rights Agreement, the Debentures and the Warrants, each of
such instruments will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms.
(3) Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of (i) 75,000,000 shares of Common Stock, of which
14,224,048 shares are issued and outstanding, no shares are reserved for
issuance pursuant to the Company's stock option plans, 4,190,000 shares are
reserved for issuance pursuant to securities (other than the Debentures and
the Warrants) exercisable for, or convertible into or exchangeable for
shares of Common Stock and, subject to obtaining Stockholder Approval (as
defined in Section 4(k)), 65,823,530 shares are reserved for issuance upon
conversion of the Debentures and the Additional Debentures (as defined in
Section 4(m)) and exercise of the Warrants and the Additional Warrants (as
defined in Section 4(m)); and (ii) 875,000 shares of preferred stock, of
which 460,357 shares are issued and outstanding. All of such outstanding
shares of capital stock are, or upon issuance will be, duly authorized,
validly issued, fully paid and nonassessable. No shares of capital stock of
the Company are subject to preemptive rights or any other similar rights of
the shareholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as disclosed
in Schedule 3(C), as of the effective date of this Agreement, (i) there are
no outstanding options, warrants, scrip, rights to subscribe for, puts,
calls, rights of first refusal, agreements, understandings, claims or other
commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of its
Subsidiaries, (ii) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act (except the Registration
Rights Agreement) and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by
the issuance of the Debentures, the Warrants, the Conversion Shares or
Warrant Shares. The Company has furnished to the Buyer true and correct
copies of the Company's Articles of Incorporation as in effect on the date
hereof ("Articles of Incorporation"), the Company's By-laws, as in effect
on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock of the Company and the
material rights of the holders thereof in respect thereto. The Company
shall provide the Buyer with a written update of this representation signed
by the Company's Chief Executive or Chief Financial Officer on behalf of
the Company as of the Closing Date.
(4) Issuance of Shares. Subject to obtaining Stockholder Approval (as defined
in Section 4(k)), the Conversion Shares and Warrant Shares are duly
authorized and reserved for issuance and, upon conversion of the Debentures
and exercise of the Warrants in accordance with their respective terms,
will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability upon the
holder thereof.
(5) Acknowledgment of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares and Warrant Shares upon conversion of the Debenture or
exercise of the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares and Warrant Shares upon conversion of
the Debentures or exercise of the Warrants in accordance with this
Agreement, the Debentures and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other shareholders of the Company.
(6) No Conflicts. Subject to obtaining Stockholder Approval (as defined in
Section 4(k)), the execution, delivery and performance of this Agreement,
the Registration Rights Agreement, the Debentures and the Warrants by the
Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance of the Conversion Shares and Warrant
Shares) will not (i) conflict with or result in a violation of any
provision of the Articles of Incorporation or By-laws or (ii) violate or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture,
patent, patent license or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) to the Company's knowledge, result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or
its securities are subject) 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 (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as
would not, individually or in the aggregate, have a Material Adverse
Effect). Neither the Company nor any of its Subsidiaries is in violation of
its Articles of Incorporation, By-laws or other organizational documents
and neither the Company nor any of its Subsidiaries is in default (and no
event has occurred which with notice or lapse of time or both could put the
Company or any of its Subsidiaries in default) under, and neither the
Company nor any of its Subsidiaries has taken any action or failed to take
any action that would 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 by which any
property or assets of the Company or any of its Subsidiaries is bound or
affected, except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the Company
and its Subsidiaries, if any, are not being conducted, and shall not be
conducted so long as a Buyer owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933
Act and any applicable state securities laws, the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party in order for it
to execute, deliver or perform any of its obligations under this Agreement,
the Registration Rights Agreement, the Debentures or the Warrants in
accordance with the terms hereof or thereof or to issue and sell the
Debentures and Warrants in accordance with the terms hereof and to issue
the Conversion Shares upon conversion of the Debentures and the Warrant
Shares upon exercise of the Warrants. Except as disclosed in Schedule 3(f),
all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company is not in
violation of the listing requirements of the Over-the-Counter Bulletin
Board (the "OTCBB") and does not reasonably anticipate that the Common
Stock will be delisted by the OTCBB in the foreseeable future. The Company
and its Subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
(7) SEC Documents; Financial Statements. Except as disclosed in Schedule 3(g),
the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended
(the "1934 Act") (all of the foregoing filed prior to the date hereof and
all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits to such documents) incorporated
by reference therein, being hereinafter referred to herein as the "SEC
Documents"). As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the 1934 Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. None of the statements made in any such SEC
Documents is, or has been, required to be amended or updated under
applicable law (except for such statements as have been amended or updated
in subsequent filings prior the date hereof). As of their respective dates,
the financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the
case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in
all material respects the consolidated financial position of the Company
and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to September 30, 2005 and
(ii) obligations under contracts and commitments incurred in the ordinary
course of business and not required under generally accepted accounting
principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial
condition or operating results of the Company.
(8) Absence of Certain Changes. Except as set forth on Schedule 3(h), since
September 30, 2005, there has been no material adverse change and no
material adverse development in the assets, liabilities, business,
properties, operations, financial condition, results of operations or
prospects of the Company or any of its Subsidiaries.
(9) Absence of Litigation. There is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the
Company or any of its Subsidiaries, or their officers or directors in their
capacity as such, that could have a Material Adverse Effect. Schedule 3(i)
contains a complete list and summary description of any pending or, to the
knowledge of the Company, threatened proceeding against or affecting the
Company or any of its Subsidiaries, without regard to whether it would have
a Material Adverse Effect. The Company and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing.
(10) Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets,
trademarks, trademark applications, service marks, service names, trade
names and copyrights ("Intellectual Property") necessary to enable it to
conduct its business as now operated (and, except as set forth in Schedule
3(j) hereof, to the best of the Company's knowledge, as presently
contemplated to be operated in the future); there is no claim or action by
any person pertaining to, or proceeding pending, or to the Company's
knowledge threatened, which challenges the right of the Company or of a
Subsidiary with respect to any Intellectual Property necessary to enable it
to conduct its business as now operated (and, except as set forth in
Schedule 3(j) hereof, to the best of the Company's knowledge, as presently
contemplated to be operated in the future); to the best of the Company's
knowledge, the Company's or its Subsidiaries' current and intended
products, services and processes do not infringe on any Intellectual
Property or other rights held by any person; and the Company is unaware of
any facts or circumstances which might give rise to any of the foregoing.
The Company and each of its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their
Intellectual Property.
(11) No Materially Adverse Contracts, Etc. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in
the judgment of the Company's officers has or is expected in the future to
have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment
of the Company's officers has or is expected to have a Material Adverse
Effect.
(12) Tax Status. Except as set forth on Schedule 3(l), the Company and each of
its Subsidiaries has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and
has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal, state or
local tax. Except as set forth on Schedule 3(l), none of the Company's tax
returns is presently being audited by any taxing authority.
(13) Certain Transactions. Except as set forth on Schedule 3(m) and except for
arm's length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms
no less favorable than the Company or any of its Subsidiaries could obtain
from third parties, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or any of
its Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
(14) Disclosure. All information relating to or concerning the Company or any of
its Subsidiaries set forth in this Agreement and provided to the Buyers
pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material
respects and the Company has not omitted to state any 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. No event
or circumstance has occurred or exists with respect to the Company or any
of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this
purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company
under the 1933 Act).
(15) Acknowledgment Regarding Buyers' Purchase of Securities. The Company
acknowledges and agrees that the Buyers are acting solely in the capacity
of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Buyer 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 statement made by any Buyer or any of their
respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is not advice or a recommendation and
is merely incidental to the Buyers' purchase of the Securities. The Company
further represents to each Buyer that the Company's decision to enter into
this Agreement has been based solely on the independent evaluation of the
Company and its representatives.
(16) No Integrated Offering. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made
any offers or sales in any security or solicited any offers to buy any
security under circumstances that would require registration under the 1933
Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance of
the Company's securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its
securities.
(17) No Brokers. The Company has taken no action which would give rise to any
claim by any person for brokerage commissions, transaction fees or similar
payments relating to this Agreement or the transactions contemplated
hereby.
(18) Permits; Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and
orders necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of the
Company, threatened regarding suspension or cancellation of any of the
Company Permits. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits,
except for any such conflicts, defaults or violations which, individually
or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect. Since September 30, 2005, neither the Company nor any of
its Subsidiaries has received any notification with respect to possible
conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect.
(19) Environmental Matters.
a. Except as set forth in Schedule 3(s), there are, to the Company's
knowledge, with respect to the Company or any of its Subsidiaries or any
predecessor of the Company, no past or present violations of Environmental
Laws (as defined below), releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents, or
contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and neither the Company nor any of its Subsidiaries has
received any notice with respect to any of the foregoing, nor is any action
pending or, to the Company's knowledge, threatened in connection with any
of the foregoing. The term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands
or demand letters, injunctions, judgments, licenses, notices or notice
letters, orders, permits, plans or regulations issued, entered, promulgated
or approved thereunder.
b. Other than those that are or were stored, used or disposed of in compliance
with applicable law, no Hazardous Materials are contained on or about any
real property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by
the Company or any of its Subsidiaries, except in the normal course of the
Company's or any of its Subsidiaries' business.
c. Except as set forth in Schedule 3(s), there are no underground storage
tanks on or under any real property owned, leased or used by the Company or
any of its Subsidiaries that are not in compliance with applicable law.
(20) Title to Property. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear
of all liens, encumbrances and defects except such as are described in
Schedule 3(t) or such as would not have a Material Adverse Effect. Any real
property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as would not have a Material Adverse Effect.
(21) Insurance. Except as set forth in Schedule 3(u), the Company and each of
its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither
the Company nor any such Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have a
Material Adverse Effect. The Company has provided to Buyer true and correct
copies of all policies relating to directors' and officers' liability
coverage, errors and omissions coverage, and commercial general liability
coverage.
(22) Internal Accounting Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the
judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(23) Foreign Corrupt Practices. 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.
(24) Solvency. Except as provided on Schedule 3(x), the Company (after giving
effect to the transactions contemplated by this Agreement) is solvent
(i.e., its assets have a fair market value in excess of the amount required
to pay its probable liabilities on its existing debts as they become
absolute and matured) and currently the Company has no information that
would lead it to reasonably conclude that the Company would not, after
giving effect to the transaction contemplated by this Agreement, have the
ability to, nor does it intend to take any action that would impair its
ability to, pay its debts from time to time incurred in connection
therewith as such debts mature. Except as provided on Schedule 3(x), the
Company did not receive a qualified opinion from its auditors with respect
to its most recent fiscal year end and, after giving effect to the
transactions contemplated by this Agreement, does not anticipate or know of
any basis upon which its auditors might issue a qualified opinion in
respect of its current fiscal year.
(25) No Investment Company. The Company is not, and upon the issuance and sale
of the Securities as contemplated by this Agreement will not be an
"investment company" required to be registered under the Investment Company
Act of 1940 (an "Investment Company"). The Company is not controlled by an
Investment Company.
(26) Breach of Representations and Warranties by the Company. If the Company
breaches any of the representations or warranties set forth in this Section
3, and in addition to any other remedies available to the Buyers pursuant
to this Agreement, the Company shall pay to the Buyer the Standard
Liquidated Damages Amount in cash or in shares of Common Stock at the
option of the Company, until such breach is cured. If the Company elects to
pay the Standard Liquidated Damages Amounts in shares of Common Stock, such
shares shall be issued at the Conversion Price at the time of payment.
(iv) COVENANTS.
(1) Best Efforts. The parties shall use their best efforts to satisfy timely
each of the conditions described in Section 6 and 7 of this Agreement.
(2) Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof
to each Buyer promptly after such filing. The Company shall, on or before
the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers at
the applicable closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to
obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to each Buyer on or prior to the Closing Date.
(3) Reporting Status; Eligibility to Use Form S-3, SB-2 or Form S-1. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act.
The Company represents and warrants that it meets the requirements for the
use of Form S-3 (or if the Company is not eligible for the use of Form S-3
as of the Filing Date (as defined in the Registration Rights Agreement),
the Company may use the form of registration for which it is eligible at
that time) for registration of the sale by the Buyer of the Registrable
Securities (as defined in the Registration Rights Agreement). So long as
the Buyer beneficially owns any of the Securities, the Company shall timely
file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company further
agrees to file all reports required to be filed by the Company with the SEC
in a timely manner so as to become eligible, and thereafter to maintain its
eligibility, for the use of Form S-3. The Company shall issue a press
release describing the material terms of the transaction contemplated
hereby as soon as practicable following the Closing Date but in no event
more than two (2) business days of the Closing Date, which press release
shall be subject to prior review by the Buyers. The Company agrees that
such press release shall not disclose the name of the Buyers unless
expressly consented to in writing by the Buyers or unless required by
applicable law or regulation, and then only to the extent of such
requirement.
(4) Use of Proceeds. The Company shall use the proceeds from the sale of the
Debentures and the Warrants in the manner set forth in Schedule 4(d)
attached hereto and made a part hereof and shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership, enterprise or other person (except in connection
with its currently existing direct or indirect Subsidiaries)
(5) Future Offerings. Subject to the exceptions described below, the Company
will not, without the prior written consent of a majority-in-interest of
the Buyers, not to be unreasonably withheld, (A) negotiate or contract with
any party to obtain additional equity financing (including debt financing
with an equity component) that involves the issuance of convertible
securities that are convertible into an indeterminate number of shares of
Common Stock or (B) grant any registration rights in connection with any
issuance of Common Stock or warrants during the period (the "Lock-up
Period") beginning on the Closing Date and ending on the later of (i) two
hundred seventy (270) days from the Closing Date or (ii) one hundred eighty
(180) days from the date the Registration Statement (as defined in the
Registration Rights Agreement) is declared effective (plus any days in
which sales cannot be made thereunder). Notwithstanding the foregoing, the
Company shall be permitted to obtain additional equity financing (including
debt financing with an equity component) that does not involve the issuance
of convertible securities that are convertible into an indeterminate number
of shares of Common Stock and which involves the grant of registration
rights, so long as such registration rights do not become effective or may
not be invoked by the holder thereof for a period of at least 320 days from
the Closing Date. In addition, subject to the exceptions described below,
the Company will not conduct any equity financing (including debt with an
equity component) ("Future Offerings") during the period beginning on the
Closing Date and ending two (2) years after the end of the Lock-up Period
unless it shall have first delivered to each Buyer, at least twenty (20)
business days prior to the closing of such Future Offering, written notice
describing the proposed Future Offering, including the terms and conditions
thereof and proposed definitive documentation to be entered into in
connection therewith, and providing each Buyer an option during the fifteen
(15) day period following delivery of such notice to purchase its pro rata
share (based on the ratio that the aggregate principal amount of Debentures
purchased by it hereunder bears to the aggregate principal amount of
Debentures purchased hereunder) of the securities being offered in the
Future Offering on the same terms as contemplated by such Future Offering
(the limitations referred to in this sentence and the preceding sentence
are collectively referred to as the "Capital Raising Limitations"). In the
event the terms and conditions of a proposed Future Offering are amended in
any respect after delivery of the notice to the Buyers concerning the
proposed Future Offering, the Company shall deliver a new notice to each
Buyer describing the amended terms and conditions of the proposed Future
Offering and each Buyer thereafter shall have an option during the fifteen
(15) day period following delivery of such new notice to purchase its pro
rata share of the securities being offered on the same terms as
contemplated by such proposed Future Offering, as amended. The foregoing
sentence shall apply to successive amendments to the terms and conditions
of any proposed Future Offering. The Capital Raising Limitations shall not
apply to any transaction involving (i) issuances of securities in a firm
commitment underwritten public offering (excluding a continuous offering
pursuant to Rule 415 under the 0000 Xxx) or (ii) issuances of securities as
consideration for a merger, consolidation or purchase of assets, or in
connection with any strategic partnership or joint venture (the primary
purpose of which is not to raise equity capital), or in connection with the
disposition or acquisition of a business, product or license by the
Company. The Capital Raising Limitations also shall not apply to the
issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the
date hereof or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or
restricted stock plan approved by the shareholders of the Company.
(6) Expenses. At the Closing, the Company shall reimburse Buyers for expenses
incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other
agreements to be executed in connection herewith ("Documents"), including,
without limitation, attorneys' and consultants' fees and expenses, transfer
agent fees, fees for stock quotation services, fees relating to any
amendments or modifications of the Documents or any consents or waivers of
provisions in the Documents, fees for the preparation of opinions of
counsel, escrow fees, and costs of restructuring the transactions
contemplated by the Documents. When possible, the Company must pay these
fees directly, otherwise the Company must make immediate payment for
reimbursement to the Buyers for all fees and expenses immediately upon
written notice by the Buyer or the submission of an invoice by the Buyer If
the Company fails to reimburse the Buyer in full within three (3) business
days of the written notice or submission of invoice by the Buyer, the
Company shall pay interest on the total amount of fees to be reimbursed at
a rate of 15% per annum.
(7) Financial Information. The Company agrees to send the following reports to
each Buyer until such Buyer transfers, assigns, or sells all of the
Securities: (i) within ten (10) days after the filing with the SEC, a copy
of its Annual Report on Form 10-KSB its Quarterly Reports on Form 10-QSB
and any Current Reports on Form 8-K; (ii) within one (1) day after release,
copies of all press releases issued by the Company or any of its
Subsidiaries; and (iii) contemporaneously with the making available or
giving to the shareholders of the Company, copies of any notices or other
information the Company makes available or gives to such shareholders.
(8) Authorization and Reservation of Shares. Subject to obtaining Stockholder
Approval (as defined in Section 4(k)), the Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number
of shares of Common Stock to provide for the full conversion or exercise of
the outstanding Debentures and Warrants and issuance of the Conversion
Shares and Warrant Shares in connection therewith (based on the Conversion
Price of the Debentures or Exercise Price of the Warrants in effect from
time to time) and as otherwise required by the Debentures. The Company
shall not reduce the number of shares of Common Stock reserved for issuance
upon conversion of Debentures and exercise of the Warrants without the
consent of each Buyer. The Company shall at all times maintain the number
of shares of Common Stock so reserved for issuance at an amount ("Reserved
Amount") equal to no less than two (2) times the number that is then
actually issuable upon full conversion of the Debentures and Additional
Debentures and upon exercise of the Warrants and the Additional Warrants
(based on the Conversion Price of the Debentures or the Exercise Price of
the Warrants in effect from time to time). If at any time the number of
shares of Common Stock authorized and reserved for issuance ("Authorized
and Reserved Shares") is below the Reserved Amount, the Company will
promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a
special meeting of shareholders to authorize additional shares to meet the
Company's obligations under this Section 4(h), in the case of an
insufficient number of authorized shares, obtain shareholder approval of an
increase in such authorized number of shares, and voting the management
shares of the Company in favor of an increase in the authorized shares of
the Company to ensure that the number of authorized shares is sufficient to
meet the Reserved Amount. If the Company fails to obtain such shareholder
approval within thirty (30) days following the date on which the number of
Reserved Amount exceeds the Authorized and Reserved Shares, the Company
shall pay to the Borrower the Standard Liquidated Damages Amount, in cash
or in shares of Common Stock at the option of the Buyer. If the Buyer
elects to be paid the Standard Liquidated Damages Amount in shares of
Common Stock, such shares shall be issued at the Conversion Price at the
time of payment. In order to ensure that the Company has authorized a
sufficient amount of shares to meet the Reserved Amount at all times, the
Company must deliver to the Buyer at the end of every month a list
detailing (1) the current amount of shares authorized by the Company and
reserved for the Buyer; and (2) amount of shares issuable upon conversion
of the Debentures and upon exercise of the Warrants and as payment of
interest accrued on the Debentures for one year. If the Company fails to
provide such list within five (5) business days of the end of each month,
the Company shall pay the Standard Liquidated Damages Amount, in cash or in
shares of Common Stock at the option of the Buyer, until the list is
delivered. If the Buyer elects to be paid the Standard Liquidated Damages
Amount in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.
(9) Listing. The Company shall promptly secure the listing of the Conversion
Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and, so long as any
Buyer owns any of the Securities, shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all Conversion
Shares and Warrant Shares from time to time issuable upon conversion of the
Debentures or exercise of the Warrants. The Company will obtain and, so
long as any Buyer owns any of the Securities, maintain the listing and
trading of its Common Stock on the OTCBB or any equivalent replacement
exchange, the NASDAQ National Market ("NASDAQ"), the NASDAQ SMALLCAP Market
("NASDAQ SmallCap"), the New York Stock Exchange ("NYSE"), or the American
Stock Exchange ("AMEX") and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers ("NASD") and such exchanges, as
applicable. The Company shall promptly provide to each Buyer copies of any
notices it receives from the OTCBB and any other exchanges or quotation
systems on which the Common Stock is then listed regarding the continued
eligibility of the Common Stock for listing on such exchanges and quotation
systems.
(10) Corporate Existence. So long as a Buyer beneficially owns any Debentures or
Warrants, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company's assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is
a publicly traded corporation whose Common Stock is listed for trading on
the OTCBB, NASDAQ, NASDAQ SmallCap, NYSE or AMEX.
(11) Stockholder Approval. The Company shall file a proxy or information
statement with the SEC no later than March 31, 2006 and use its best
efforts to obtain, on or before April 30, 2006, such approvals of the
Company's stockholders as may be required to issue all of the shares of
Common Stock issuable upon conversion or exercise of, or otherwise with
respect to, the Debentures and the Warrants in accordance with Nevada law
and any applicable rules or regulations of the OTCBB and/or NASDAQ, either
through a reverse stock split of the Common Stock or an increase in
authorized capital (the "Stockholder Approval"). The Company shall furnish
to each Buyer and its legal counsel promptly (but in no event less than two
(2) business days) before the same is filed with the SEC, one copy of the
proxy or information statement and any amendment thereto, and shall deliver
to each Buyer promptly each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each item of correspondence from
the SEC or the staff of the SEC, in each case relating to such proxy or
information statement (other than any portion thereof which contains
information for which the Company has sought confidential treatment). The
Company will promptly (but in no event more than three (3) business days)
respond to any and all comments received from the SEC (which comments shall
promptly be made available to each Buyer). The Company shall comply with
the filing and disclosure requirements of Section 14 under the 1934 Act in
connection with the Stockholder Approval.
(12) No Integration. The Company shall not make any offers or sales of any
security (other than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of the Securities to be integrated with any
other offering of securities by the Company for the purpose of any
stockholder approval provision applicable to the Company or its securities.
(13) Restriction on Short Sales. The Buyers agree that, so long as any of the
Notes remain outstanding, but in no event less than two (2) years from the
date hereof, the Buyers will not enter into or effect any "short sales" (as
such term is defined in Rule 3b-3 of the 0000 Xxx) of the Common Stock or
hedging transaction which establishes a net short position with respect to
the Common Stock.
(14) Breach of Covenants. If the Company breaches any of the covenants set forth
in this Section 4, and in addition to any other remedies available to the
Buyers pursuant to this Agreement, the Company shall pay to the Buyers the
Standard Liquidated Damages Amount, in cash or in shares of Common Stock at
the option of the Company, until such breach is cured. If the Company
elects to pay the Standard Liquidated Damages Amount in shares, such shares
shall be issued at the Conversion Price at the time of payment.
(v) TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the
name of each Buyer or its nominee, for the Conversion Shares and Warrant
Shares in such amounts as specified from time to time by each Buyer to the
Company upon conversion of the Debentures or exercise of the Warrants in
accordance with the terms thereof (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and
Warrant Shares may be sold pursuant to Rule 144 without any restriction as
to the number of Securities as of a particular date that can then be
immediately sold, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred
to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof (in the case of the Conversion Shares and Warrant
Shares, prior to registration of the Conversion Shares and Warrant Shares
under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the
number of Securities as of a particular date that can then be immediately
sold), will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any
way the Buyer's obligations and agreement set forth in Section 2(g) hereof
to comply with all applicable prospectus delivery requirements, if any,
upon re-sale of the Securities. If a Buyer provides the Company with (i) an
opinion of counsel in form, substance and scope customary for opinions in
comparable transactions, to the effect that a public sale or transfer of
such Securities may be made without registration under the 1933 Act and
such sale or transfer is effected or (ii) the Buyer provides reasonable
assurances that the Securities can be sold pursuant to Rule 144, the
Company shall permit the transfer, and, in the case of the Conversion
Shares and Warrant Shares, promptly instruct its transfer agent to issue
one or more certificates, free from restrictive legend, in such name and in
such denominations as specified by such Buyer. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable
harm to the Buyers, by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, the Company acknowledges that the remedy
at law for a breach of its obligations under this Section 5 may be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyers shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate transfer, without the
necessity of showing economic loss and without any bond or other security
being required.
(vi) CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Debentures and Warrants to a
Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date of each of the following conditions thereto, provided that
these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion:
(1) The applicable Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.
(2) The applicable Buyer shall have delivered the Purchase Price in accordance
with Section 1(b) above.
(3) The representations and warranties of the applicable Buyer shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the applicable Buyer
shall have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the applicable Buyer at or prior
to the Closing Date.
(4) No litigation, statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by
or in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(vii) CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Debentures and
Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date of each of the following conditions, provided that these
conditions are for such Buyer's sole benefit and may be waived by such
Buyer at any time in its sole discretion:
(1) The Company shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Buyer.
(2) The Company shall have delivered to such Buyer duly executed Debentures (in
such denominations as the Buyer shall request) and Warrants in accordance
with Section 1(b) above.
(3) The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.
(4) The representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Closing
Date as though made at such time (except for representations and warranties
that speak as of a specific date) and the Company shall have performed,
satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the Closing Date.
The Buyer shall have received a certificate or certificates, executed by
the chief executive officer of the Company, dated as of the Closing Date,
to the foregoing effect and as to such other matters as may be reasonably
requested by such Buyer including, but not limited to certificates with
respect to the Company's Articles of Incorporation, By-laws and Board of
Directors' resolutions relating to the transactions contemplated hereby.
(5) No litigation, statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by
or in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(6) No event shall have occurred which could reasonably be expected to have a
Material Adverse Effect on the Company.
(7) The Conversion Shares and Warrant Shares shall have been authorized for
quotation on the OTCBB and trading in the Common Stock on the OTCBB shall
not have been suspended by the SEC or the OTCBB.
(8) The Buyer shall have received an opinion of the Company's counsel, dated as
of the Closing Date, in form, scope and substance reasonably satisfactory
to the Buyer and in substantially the same form as Exhibit "D" attached
hereto.
(9) The Buyer shall have received an officer's certificate described in Section
3(C) above, dated as of the Closing Date.
(viii) GOVERNING LAW; MISCELLANEOUS.
(1) Governing Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS
LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER
THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY
MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING
HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE
JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING
UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES,
INCLUDING ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION
WITH SUCH DISPUTE.
(2) Counterparts; Signatures by Facsimile. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the other party. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
(3) Headings. The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of, this
Agreement.
(4) Severability. In the event that any provision of this Agreement is invalid
or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule
of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other
provision hereof.
(5) Entire Agreement; Amendments. This Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any
representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than
by an instrument in writing signed by the party to be charged with
enforcement.
(6) Notices. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be
effective five days after being placed in the mail, if mailed by regular
United States mail, or upon receipt, if delivered personally or by courier
(including a recognized overnight delivery service) or by facsimile, in
each case addressed to a party. The addresses for such communications shall
be:
If to the Company: Juniper Group, Inc.
Mission Bay Office Plaza
00000 Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copies to: Schenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a Buyer: To the address set forth immediately below such Buyer's name on
the signature pages hereto.
With copy to: Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxx.xxx
Each party shall provide notice to the other party of any change in address.
(7) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns. Neither the
Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other;
provided, however, that subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is
defined under the 1934 Act, without the consent of the Company; and
provided further, that the Buyers shall not assign this Agreement or any
rights or obligations hereunder until the Registration Debentures and
Registration Warrants are purchased by the Buyers.
(8) Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns,
and is not for the benefit of, nor may any provision hereof be enforced by,
any other person. (9) Survival. The representations and warranties of the
Company and the agreements and covenants set forth in Sections 3, 4, 5 and
8 shall survive the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyers. The Company agrees
to indemnify and hold harmless each of the Buyers and all their officers,
directors, employees and agents for loss or damage arising as a result of
or related to any breach or alleged breach by the Company of any of its
representations, warranties and covenants set forth in Sections 3 and 4
hereof or any of its covenants and obligations under this Agreement or the
Registration Rights Agreement, including advancement of expenses as they
are incurred.
(10) Publicity. The Company and each of the Buyers shall have the right to
review a reasonable period of time before issuance of any press releases,
SEC, OTCBB or NASD filings, or any other public statements with respect to
the transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, OTCBB (or other applicable trading market)
or NASD filings with respect to such transactions as is required by
applicable law and regulations (although each of the Buyers shall be
consulted by the Company in connection with any such press release prior to
its release and shall be provided with a copy thereof and be given an
opportunity to comment thereon).
(11) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(12) No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(13) Remedies. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyers by vitiating the intent
and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this
Agreement, that the Buyers shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Agreement and to enforce specifically the
terms and provisions hereof, without the necessity of showing economic loss
and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Agreement to be duly executed as of the date first above written.
JUNIPER GROUP, INC.
By: /s/ Xxxxx X.Xxxxxxxxxxx
-----------------------------
Xxxxx X. Xxxxxxxxxxx
Chief Executive Officer
