SECURITIES PURCHASE AGREEMENT BETWEEN TRICELL, INC. AND BARRON PARTNERS LP DATED August 24, 2006
BETWEEN
TRICELL,
INC.
AND
XXXXXX
PARTNERS LP
DATED
August
24, 2006
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”)
is
made and entered into as of the 24th
day of
August, 2006 between Tricell,
Inc., a
Nevada
corporation (the “Company”)
and
Xxxxxx
Partners LP, a
Delaware limited partnership (the “Investor”).
RECITALS
WHEREAS,
the
Investor wishes
to
purchase from the Company, upon the terms and subject to the conditions of
this
Agreement, for the Purchase Price, as hereinafter defined, (a) eight million
five hundred thousand (8,500,000)
shares of the Company’s Series A Convertible Preferred Stock, par value $.001
per share (“Series
A Preferred Stock”),
with
each share of Series A Preferred Stock being convertible into one (1) share
of
the
Company’s common stock, par value $.001 per shares (“Common
Stock”),
subject
to adjustment, and (b) Common Stock Purchase Warrants (the “Warrants”)
to
purchase
up to one hundred and twenty million (120,000,000) shares of Common Stock at
twenty cents ($0.20) per share, ten million (10,000,000) shares of Common Stock
at thirty-five cents ($0.35) per share, ten million (10,000,000) shares of
Common Stock at forty-five cents ($0.45) per share, twenty million (20,000,000)
shares of Common Stock at sixty-five cents ($0.65) per share, and twenty million
(20,000,000) shares of Common Stock at one dollar ($1.00) per share, all as
set
forth in Schedule A to this Agreement; and
WHEREAS,
the
Company is engaged in negotiations to acquire N2J Limited, a United Kingdom
limited liability company which is affiliated with the Company (“N2J”);
and
WHEREAS,
the
parties intend to memorialize the terms on which the Company will sell and
the
Investor will purchase the Securities.
NOW,
THEREFORE,
in
consideration of the mutual covenants and premises contained herein, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby conclusively acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE
I
INCORPORATION
BY REFERENCE AND DEFINITIONS
1.1.
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Incorporation
by Reference.
The foregoing recitals and the Exhibits and Schedules attached hereto
and
referred to herein, are hereby acknowledged to be true and accurate,
and
are incorporated herein by this
reference.
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1.2.
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Supersedes
Other Agreements.
This Agreement, to the extent that it is inconsistent with any other
instrument or understanding among the parties, shall supersede such
instrument or understanding to the fullest extent permitted by law.
A copy
of this Agreement shall be filed at the Company’s principal
office.
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1.3.
|
Certain
Definitions.
For purposes of this Agreement, the following capitalized terms shall
have
the following meanings (all capitalized terms used in this Agreement
that
are not defined in this Article 1 shall have the meanings set forth
elsewhere in this Agreement):
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1.3.1. “4.9%
Limitation”
has
the
meaning set forth in Section 2.1.2 of this Agreement.
1.3.2. “1933
Act”
means
the Securities Act of 1933, as amended.
1.3.3. “1934
Act”
means
the Securities Exchange Act of 1934, as amended.
1.3.4. “Affiliate”
means
a
Person or Persons directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with the Person(s) in
question. The term “control,” as used in the immediately preceding sentence,
means, with respect to a Person that is a corporation, the right to the
exercise, directly or indirectly, of more than 50% of the voting rights
attributable to the shares of such controlled corporation and, with respect
to a
Person that is not a corporation, the possession, directly or indirectly, of
the
power to direct or cause the direction of the management or policies of such
controlled Person.
1.3.5. “Articles”
means
the articles of incorporation of the Company, as the same may be amended from
time to time.
1.3.6. “Bylaws”
means
the
bylaws of the Company, as the same may be amended from time to
time.
1.3.7. “Certificate
of Designation”
means
the certificate of the rights, preferences and privileges, subject to the
limitations, with respect to the Series A Preferred Stock. The Certificate
of
Designation shall be in substantially the form of Exhibit
A
to this
Agreement.
1.3.8. “Closing” means
the
consummation of the transactions contemplated by this Agreement, all of which
transactions shall be consummated contemporaneously with the
Closing.
1.3.9. “Closing
Date”
means
the date on which the Closing occurs, which be not later than August 25,
2006.
1.3.10. “Common
Stock”
means
the Company’s common stock, which is presently designated as the common stock,
par value $.001 per share.
1.3.11. “Company’s
Governing Documents”
means
the Articles and Bylaws.
1.3.12. “EBITDA”
means
consolidated earnings before interest, taxes, depreciation and amortization,
determined in accordance with GAAP.
1.3.13. “Escrow
Agreement”
means
the Escrow Agreement among the Company, the Investor and Sichenzia Xxxx Xxxxxxxx
Xxxxxxx LLP, as Escrow Agent, attached hereto as Exhibit
B
it being
acknowledged that the Escrow Agent is counsel for the Company.
1.3.14. “Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers,
directors of and consultants (other than consultants whose services relate
to
the raising of funds) of the Company pursuant to any stock or option plan that
was or may be adopted by a majority of independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose, (b) securities upon the
exercise of or conversion of any securities issued hereunder and pursuant to
the
Registration Rights Agreement, the Warrants and the Certificate of Designation
and any other options, warrants or convertible securities which are outstanding
on after completion of the Closing, and (c) securities issued pursuant to
acquisitions, licensing agreements, or other strategic transactions, provided
any such issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business which the Company’s board of
directors believes is beneficial to the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities.
1.3.15. “GAAP”
means
United States generally accepted accounting principles consistently
applied.
1.3.16. “Material
Adverse Effect”
means
any adverse effect on the business, operations, properties or financial
condition of the Company that is material and adverse to the Company and its
subsidiaries, including N2J, taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company or any subsidiary to perform any of its material
obligations under this Agreement or the Registration Rights Agreement or to
perform its obligations under any other material agreement.
1.3.17. “N2J
Agreement”
shall
mean the agreement by which the Company shall acquire N2J in substantially
the
form previously provided to the Investor.
1.3.18. “Person”
means
an individual, partnership, firm, limited liability company, trust, joint
venture, association, corporation, or any other legal entity.
1.3.19. “Preferred
Stock”
means
the preferred stock, par value $.001 per share.
1.3.20. “Pre-Tax
Income”
means
income
before income taxes determined in accordance with GAAP plus (a) any charges
relating to the transaction contemplated by this Agreement and the Registration
Rights Agreement, and (b) any other non-recurring items.
1.3.21. “Purchase
Price”
means
the
one million seven hundred thousand dollars ($1,700,000)
to be
paid by the Investor to the Company for the Securities.
1.3.22. “Registration
Rights Agreement”
means
the registration rights agreement between the Investor and the Company in
substantially the form of Exhibit
C
to this
Agreement.
1.3.23. “Registration
Statement”
means
the registration statement under the 1933 Act to be filed with the SEC for
the
registration of the Shares pursuant to the Registration Rights
Agreement.
1.3.24. “Restricted
Stockholders”
shall
have the meaning set forth in Section 6.16 of this Agreement.
1.3.25. “Reverse
Split”
shall
mean a one-for-eight reverse split in the Common Stock.
1.3.26. “Securities”
means
the shares of Series A Preferred Stock, the Warrants and the
Shares.
1.3.27. “SEC”
means
the Securities and Exchange Commission.
1.3.28. “SEC
Documents”
means,
at any given time, the Company’s latest Form 10-K or Form 10-KSB and all Forms
10-Q or 10-QSB and 8-K and all proxy statements or information statements filed
between the date the Form 10-K or Form 10-KSB was filed and the date as to
which
a determination is being made until such time as the Company no longer has
an
obligation to maintain the effectiveness of a Registration Statement as set
forth in the Registration Rights Agreement.
1.3.29. “Series
A Preferred Stock”
means
the shares of Series A Preferred Stock having the rights, preferences and
privileges and subject to the limitations set forth in the Certificate of
Designation.
1.3.30. “Shares”
means,
collectively, the shares of Common Stock issued or issuable (i) upon conversion
of the Series A Preferred Stock and (ii) upon exercise of the
Warrants.
1.3.31. “Subsequent
Financing”
means
any offer and sale of shares of Preferred Stock or debt that is initially
convertible into shares of Common Stock or otherwise senior or superior to
the
Series A Preferred Stock.
1.3.32. “Transaction
Documents”
means
this Agreement, all Schedules and Exhibits attached hereto, the Certificate
of
Designation, the Warrants, the Registration Rights Agreement and all other
documents and instruments to be executed and delivered by the parties in order
to consummate the transactions contemplated hereby.
1.3.33. “Warrants”
means
the Common Stock Purchase Warrants in substantially the form of Exhibit
X-0, X-0, X-0, X-0 and D-5
to this
Agreement.
1.3.34. All
references in this Agreement to “herein” or words of like effect, when referring
to preamble, recitals, article and section numbers, schedules and exhibits
shall
refer to this Agreement unless otherwise stated.
ARTICLE
II
SALE
AND PURCHASE OF SECURITIES
2.1.
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Sale
of Securities.
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2.1.1. Upon
the
terms and subject to the conditions set forth herein, and in accordance with
applicable law, the Company agrees
to
sell to the Investor, and the Investor agrees to purchase from the Company,
on
the Closing Date the Securities for the Purchase Price, as set forth after
the
Investor’s name on said Schedule A. The Purchase Price shall be paid by the
Investor to the Company on the Closing Date by a wire transfer
of the
Purchase Price into escrow to be held by the escrow agent pursuant to the terms
of the Escrow Agreement. The Company shall cause the Securities to be issued
to
the Investor upon the release of the Purchase Price to the Company by the escrow
agent pursuant to the terms of the Escrow Agreement.
2.1.2. Notwithstanding
any other provision of this Agreement, except as expressly provided in the
Certificate of Designation or the Warrants, no Investor shall be entitled to
convert the Series A Preferred Stock
into
shares of Common Stock or to exercise the Warrants to the extent that such
conversion or exercise would result in beneficial ownership by the Investor
and
its Affiliates of more than 4.9% of the then outstanding number of shares of
Common Stock on such date. For the purposes of this Agreement beneficial
ownership shall be determined in accordance with Section 13(d) of the 1934
Act,
and Regulation 13d-3 thereunder. The limitation set forth in this Section 2.1.2
is referred to as the “4.9%
Limitation.”
2.2.
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Purchase
Price.
The Purchase Price payable by The Investor shall be delivered by
the
Investor in the form of wire transfers in United States dollars from
the
Investor to the escrow agent pursuant to the Escrow Agreement on
the
Closing Date.
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2.3.
|
Acquisition
of
N2J.
The
Company
shall have acquired
all of the outstanding capital stock of N2J pursuant to the N2J
Agreement.
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ARTICLE
III
CLOSING
DATE AND DELIVERIES AT CLOSING
3.1. Closing
Date. The
Closing of the transactions contemplated by this Agreement shall be held at
the
offices of counsel for the Company, at 11:00 A.M. local time, on the Closing
Date or on such other date and time and at such other place as may be mutually
agreed by the parties, including Closing by facsimile with originals to
follow.
3.2.
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Deliveries
by the Company.
In
addition to and without limiting any other provision of this Agreement,
the Company agrees to deliver, or cause to be delivered, to the escrow
agent under the Escrow Agreement, the following:
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(a) At
or
prior to Closing, an executed Agreement with all exhibits and schedules attached
hereto.
(b) At
the
Closing, a stock certificate for the shares of Series A Preferred Stock in
the
name of the Investor.
(c) At
the
Closing, executed Warrants in the names of the Investor.
(d) The
executed Registration Rights Agreement.
(e) Certifications
in form and substance acceptable to the Company and the Investor from any and
all brokers or agents involved in the transactions contemplated hereby as to
the
amount of commission or compensation payable to such broker or agent as a result
of the consummation of the transactions contemplated hereby and from the Company
or Investor, as appropriate, to the effect that reasonable reserves for any
other commissions or compensation that may be claimed by any broker or agent
have been set aside.
(f) Evidence
of approval of the board of directors of the Company of (i) the Transaction
Documents and the transactions contemplated hereby and (ii) the amendment to
the
Articles pursuant to Section 6.19 of this Agreement, which shall be subject
to
stockholder approval.
(g) Evidence
that the Company has complied with the provisions of Sections 6.10 and 6.11
of
this Agreement on or prior to the Closing Date or that it has taken steps to
enable the Company to comply with such provisions within the time frames
provided therein.
(h) Evidence
that Xxxxx Xxxx and Xxxx Xxxxxxx have been elected and are serving as the
Company’s chief executive officer and chief financial officer,
respectively.
(i) Evidence
that the Certificate of Designation has been filed with the Secretary of State
of the State of Nevada.
(j) Evidence
that the Company’s board of directors has approved, subject to stockholder
approval, an amendment to the certificate of amendment to the certificate of
incorporation that (i) approves the Reverse Split, (ii) changes the authorized
capital stock of the Company to 120,000,000 shares, of which 10,000,000 shares
are shares of Preferred Stock and 110,000,000 shares are shares of Common Stock,
and (iii) includes the provision set forth in Section 6.19.
(k) Good
standing certificates of the Company issued by the Secretary of State of
Nevada.
(l) A
copy of
the Articles certified by the Secretary of State of the State of
Nevada.
(m) Evidence
that the acquisition of N2J has been completed in accordance with the N2J
Agreement contemporaneously with the Closing and that the shares of Common
Stock
to be held by the Company in escrow pursuant to the N2J Agreement have been
so
delivered.
(n) An
opinion from the Company’s
special
counsel
concerning the Transaction Documents
and the
transactions contemplated hereby in form and substance reasonably acceptable
to
Investor.
(o) The
executed Escrow Agreement.
(p) Copies
of
all executive employment agreements, all past and present financing
documentation or other documentation where stock could potentially be issued
or
issued as payment, all past and present litigation documents and historical
financials, not previously provided to Investor.
(q) Such
other documents or certificates as shall be reasonably requested by the
Investor.
3.3.
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Deliveries
by Investor.
In
addition to and without limiting any other provision of this Agreement,
the Investor agrees to deliver, or cause to be delivered, to the
escrow
agent under the Escrow Agreement, the following:
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(a) A
deposit
in the amount of the Purchase Price;
(b) The
executed Agreement with all Exhibits and Schedules attached hereto;
(c) The
executed Registration Rights Agreement;
(d) The
executed Escrow Agreement; and
(e) Such
other documents or certificates as shall be reasonably requested by the Company
or its counsel.
In
the event any document (other than the shares of Series A Preferred
Stock
and the Warrants) provided to the other party in Sections 3.2 and
3.3
herein are provided by facsimile, the party shall forward an original
document to the other party within seven (7) business
days.
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3.4.
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Further
Assurances.
The Company and the Investor shall, upon request, on or after the
Closing
Date, cooperate with each other (specifically, the Company shall
cooperate
with the Investor, and the Investor shall cooperate with the Company)
by
furnishing any additional information, executing and delivering any
additional documents and/or other instruments and doing any and all
such
things as may be reasonably required by the parties or their counsel
to
consummate or otherwise implement the transactions contemplated by
this
Agreement.
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3.5.
|
Waiver.
The Investor may waive any of the requirements of Section 3.2 of
this
Agreement or any of its rights under the Escrow Agreement, and the
Company
at its discretion may waive any of its rights of Section 3.3 of this
Agreement or any of its rights under the Escrow
Agreement.
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ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to the Investor as of the date hereof and as
of
Closing (which warranties and representations shall survive the Closing
regardless of what examinations, inspections, audits and other investigations
the Investor has heretofore made or may hereinafter make with respect to such
warranties and representations) as follows:
SECURITIES
PURCHASE AGREEMENT
PAGE
7
4.1.
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Organization
and Qualification.
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4.1.1. The
Company
is a corporation duly organized, validly existing and in good standing under
the
laws of the State
of
Nevada,
and the
Company has the requisite corporate power and authority to own, lease
and
operate
its properties and to carry on its business as it is now being conducted and
is
duly qualified to do business in any other jurisdiction by virtue of the nature
of the businesses conducted by it or the ownership or leasing of its properties,
except where the failure to be so qualified will not, when taken together with
all other such failures, have a Material Adverse Effect on the business,
operations, properties, assets, financial condition or results of operation
of
the Company and its subsidiaries taken as a whole.
4.1.2. N2J,
as
of the Closing, will be wholly-owned by the Company, and no person has any
right, title or interest in any equity, debt or other securities of any kind
of
N2J.
4.2.
|
Governing
Documents.
The complete and correct copies of the Company’s Governing Documents, as
in effect on the Closing Date, has been delivered to the
Investor.
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4.3.
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Capitalization.
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4.3.1. The
authorized and outstanding capital stock of the Company is
set
forth in the Company’s quarterly report on Form 10-Q for the quarter ended June
30, 2006 with the SEC and updated on all subsequent SEC Documents. All shares
of
capital stock have been duly authorized and are validly issued, and are fully
paid and no assessable, and free of preemptive rights. As of Closing, following
the issuance by the Company of the Securities and the shares of Common Stock
issuable pursuant to the N2J Agreement, the outstanding Common Stock will be
as
set forth on Schedule 4.3.1 to this Agreement. Said Schedule 4.3.1 shall also
set forth all shares issuable pursuant to any agreements, including employment
agreements, outstanding options, plans providing for the grant of options,
stock
grants or other equity-based incentives, warrants, convertible securities,
notes
and other debt instruments. All outstanding shares of capital stock have been
duly authorized and are validly issued, and are fully paid and non-assessable
and free of preemptive rights. All shares of capital stock described above
to be
issued have been duly authorized and when issued, will be validly issued, fully
paid and non-assessable and free of preemptive rights.
4.3.2. All
shares of capital stock described above to be issued have been duly authorized
and when issued, will be validly issued, fully paid and non-assessable and
free
from preemptive rights.
4.3.3. Except
pursuant to this Agreement and as set forth in Schedule 4.3.1 hereto, and as
set
forth in the Company’s SEC Documents, filed with the SEC, as of the date hereof
and as of the Closing Date, there are no outstanding options, warrants, rights
to subscribe for, calls or commitments of any character whatsoever relating
to,
or securities or rights convertible into or exchangeable for, shares of any
class of capital stock of the Company, or agreements, understandings or
arrangements to which the Company is a party, or by which the Company is or
may
be bound, to issue additional shares of its capital stock or options, warrants,
scrip or rights to subscribe for, calls or commitment of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, any shares of any class of its capital stock. The Company agrees to inform
the Investor in writing of any additional warrants or convertible securities
granted or issued prior to the Closing Date.
SECURITIES
PURCHASE AGREEMENT
PAGE
8
4.3.4. The
Company on the Closing Date (i) will have full right, power, and authority
to
sell the Securities to the Investor, free and clear of all liens, charges,
claims, options, pledges, restrictions, and encumbrances whatsoever; and (ii)
upon conversion of the Series A Preferred Stock or exercise of the Warrants,
the
Investor will acquire title to the Shares issuable upon such conversion or
exercise, free and clear of all liens, charges, claims, options, pledges,
restrictions, and encumbrances whatsoever, except as otherwise provided in
this
Agreement and except for any of the foregoing which results from actions or
omissions on the part of the Investor.
4.4.
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Authority.
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4.4.1. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, the Series A Preferred Stock and the Warrants, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
by
the Company and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company is necessary to authorize this Agreement
or to consummate the transactions contemplated hereby except as disclosed in
this Agreement; provided, however, that stockholder approval is required for
the
Company to adopt the amendment to the Articles. This Agreement has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms;
provided, however, that no representation is made with respect to the ability
of
the Investor to convert the Series A Preferred Stock or to exercise the Warrant,
if and to the extent that the Conversion Price of the Series A Preferred Stock,
as defined in the Certificate of Designation, or the number of Shares issuable
upon exercise of the Warrants would result in the issuance of a number of shares
of Common Stock which is greater than the amount by which the authorized Common
Stock exceeds the sum of the outstanding Common Stock and the shares of Common
Stock reserved for issuance pursuant to outstanding agreements and outstanding
options, warrants, rights, convertible securities and other securities upon
the
exercise or conversion of which or pursuant to the terms of which additional
shares of Common Stock may be issuable (the foregoing proviso being referred
to
as the “Authorized
Stock Proviso”).
4.4.2. The
Shares will be, when issued upon the conversion of the Series A Preferred Stock
and upon exercise of the Warrants, duly and validly authorized and issued,
fully
paid and non-assessable and not issued in violation of any preemptive rights
or
rights of first refusal.
4.5.
|
No
Conflict; Required Filings and Consents.
The execution and delivery of this Agreement by the Company does
not, and
the performance by the Company of its obligations hereunder will
not: (i)
conflict with or violate the Company’s Governing Documents;
(ii)
conflict with, breach or violate any federal, state, foreign or local
law,
statute, ordinance, rule, regulation, order, judgment or decree
(collectively, “Laws”)
in effect as of the date of this Agreement and applicable to the
Company;
or (iii) result in any breach of, constitute a default (or an event
that
with notice or lapse of time or both would become a default) under,
give
to any other entity any right of termination, amendment, acceleration
or
cancellation of, require payment under, or result in the creation
of a
lien or encumbrance on any of the properties or assets of the Company
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation
to
which the Company is a party or by the Company or
any
of its properties or assets is bound other than violations, conflicts,
breaches, defaults, terminations, accelerations, creations of liens,
or
incumbency that would not, in the aggregate, have a Material Adverse
Effect
except to the extent that stockholder approval may be required as
a result
of the Authorized Stock Proviso, in which event, the Company will
seek
stockholder approval to an increase in the authorized Common Stock
sufficient to enable the Company to be in compliance with this Section
4.5.
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SECURITIES
PURCHASE AGREEMENT
PAGE
9
4.6. |
Report
and Financial Statements.
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4.6.1. The
Company has delivered to the Investor
its
audited balance sheet as of December 31, 2005 and the audited statements of
operations, stockholders equity and cash flows for the years ended December
31,
2005 and 2004, and the unaudited balance sheet as of June 30, 2006 and unaudited
statements of operations and cash flows for the six months ended June 30, 2006
and 2005 and stockholders’ equity for the six months ended June 30,
2006,
in each case including notes to the financial statements (collectively, the
“Financial Statements”). Each of the balance sheets contained in such Financial
Statements (including the related notes and schedules thereto) fairly presented
the financial position of the Company, as of its date, and each of the
statements of operations, stockholders’ equity and cash flows in such Financial
Statements (including any related notes and schedules thereto) fairly presents,
the results of operations, changes in stockholders’ equity and changes in cash
flows, as the case may be, of the Company, for the periods to which they relate,
in each case in accordance with GAAP, except in each case as may be noted
therein, subject to normal year-end audit adjustments in the case of unaudited
statements. The books and records of the Company have been, and are being,
maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transactions.
Whitley
Penn LLP,
who
audited the 2005 audited financial statements, is independent within the meaning
of the regulations of the SEC.
4.6.2. Whitley
Penn LLP
has not
issued any management letter in connection with its audit of the Company’s
audited Financial Statements for 2005.
4.7.
|
Compliance
with Applicable Laws.
The Company is not in violation of, or, to the knowledge of the Company,
is under investigation with respect to or has been given notice or
has
been charged with the violation of any Laws, except for violations
which
individually or in the aggregate do not have a Material Adverse Effect.
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4.8.
|
Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or Commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or
on
behalf of the Company except as provided in Schedule 4.8 to this
Agreement.
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SECURITIES
PURCHASE AGREEMENT
PAGE
10
4.9.
|
SEC
Documents.
The
Company is a publicly held company and it has made available to the
Investor true and complete copies of any requested SEC Documents.
The
Company has registered its Common Stock pursuant to Section 12(g)
of the
1934 Act. The
Common Stock is quoted and traded on the OTC Bulletin Board. The
Company
has received no notice, either oral or written, with respect to the
continued quotation or trading of the Common Stock on the OTC Bulletin
Board. The
Company has not provided to the Investor any information that, according
to applicable law, rule or regulation, should have been disclosed
publicly
prior to the date hereof by the Company, but which has not been so
disclosed. As
of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act, and rules and regulations
of the SEC promulgated thereunder and the SEC Documents did not contain
any untrue statement of a material fact or omit 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.
|
4.10.
|
Litigation.
To the knowledge of the Company, no litigation, claim, or other proceeding
before any court or governmental agency is pending or to the knowledge
of
the Company, threatened against the Company, the prosecution or outcome
of
which, if adversely determined, is likely to have a Material Adverse
Effect.
|
4.11.
|
Exemption
from Registration.
Subject to the accuracy of the Investor’s representations in Article V,
except as required pursuant to the Registration Rights Agreement,
the sale
of the Securities by the Company to the Investor will not require
registration under the 1933 Act. When validly converted in accordance
with
the terms of the Series A Preferred Stock, and upon exercise of the
Warrants in accordance with their terms, the Shares underlying the
Series
A Preferred Stock and the Warrants will be duly and validly issued,
fully
paid, and non-assessable. The Company is issuing the Series A Preferred
Stock and the Warrants in accordance with and in reliance upon the
exemption from securities registration afforded, inter alia, by Rule
506
under Regulation D as promulgated by the SEC under the 1933 Act,
and/or
Section 4(2) of the 1933 Act; provided, however, that certain filings
and
registrations may be required under state securities “blue sky” laws
depending upon the residency of the
Investor.
|
4.12.
|
No
General Solicitation or Advertising in Regard to this
Transaction.
Neither the Company nor any of its Affiliates nor, to the knowledge
of the
Company, any Person acting on its or their behalf (i) has conducted
or
will conduct any general solicitation (as that term is used in Rule
502(c)
of Regulation D as promulgated by the SEC under the 0000 Xxx) or
general
advertising with respect to the sale of the Series A Preferred Stock
or
Warrants, or (ii) made any offers or sales of any security or solicited
any offers to buy any security under any circumstances that would
require
registration of the Series A Preferred Stock or Warrants, under the
1933
Act, except as required herein.
|
4.13.
|
No
Material Adverse Effect.
Since March 31, 2006, no
event or circumstance resulting in a Material Adverse Effect has
occurred
or exists with respect to the Company. No material supplier or customer
has given notice, oral or written, that it intends to cease or reduce
the
volume of its business with the Company from historical levels. Since
March 31, 2006, no event or circumstance has occurred or exists with
respect to the Company or its businesses, properties, prospects,
operations or financial condition, that, under any applicable law,
rule or
regulation, requires public disclosure or announcement prior to the
date
hereof by the Company but which has not been so publicly announced
or
disclosed in writing to the
Investor.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
11
4.14.
|
Material
Non-Public Information.
The Company has not disclosed to the Investor any material non-public
information that (i) if disclosed, would reasonably be expected to
have a
material effect on the price of the Common Stock or (ii) according
to
applicable law, rule or regulation, should have been disclosed publicly
by
the Company prior to the date hereof but which has not been so disclosed;
provided, however, that the Company has disclosed to the Investor
matters
relating to the Company’s acquisition of N2J.
|
4.15.
|
Internal
Controls And Procedures.
To the knowledge
of the Company, the Company maintains books and records and internal
accounting controls which provide reasonable assurance that (a) all
transactions to which the Company is a party or by which its properties
are bound have been executed with management’s authorization; (ii) the
recorded accounting of the Company’s assets is compared with existing
assets at regular intervals; (iii) access to the Company’s assets is
permitted only in accordance with management’s authorization; and (iv) all
transactions to which the Company is a party or by which its properties
are bound are recorded as necessary to permit preparation of the
financial
statements of the Company in accordance with standards
of the Public Company Accounting Oversight Board; it being understood
that
the Company has
not conducted an internal controls audit and that no such audit has
been
required under applicable law.
|
4.16.
|
Full
Disclosure.
No representation or warranty made by the
Company in
this Agreement and no certificate or document furnished or to be
furnished
to the Investor pursuant to this Agreement contains or will contain
any
untrue statement of a material fact, or omits or will omit to state
a
material fact necessary to make the statements contained herein or
therein, taken as a whole, not
misleading.
|
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR
The
Investor represents and warrants to the Company that:
5.1.
|
Organization
and Standing of the Investor. The
Investor is a limited partnership duly formed, validly existing and
in
good standing under the laws of the State of Delaware. The
Investor was not formed for the purpose of investing solely in the
Securities. The execution, delivery and performance of this Agreement
by
the Investor and the consummation by the Investor of the transactions
contemplated hereby have been duly authorized by all necessary partnership
action where appropriate. The
state in which any offer to purchase the Securities was made or accepted
by the Investor is the state shown as the Investor’s address.
|
5.2.
|
Authorization
and Power.
The
Investor has the requisite power and authority to enter into and
perform
this Agreement and to purchase the Securities being sold to it hereunder.
This
Agreement and the Registration Rights Agreement have been duly executed
and delivered by the Investor and at the Closing shall constitute
valid
and binding obligations of the Investor enforceable against the Investor
in accordance with their terms, except as such enforceability may
be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating
to, or
affecting generally the enforcement of, creditors’ rights and remedies or
by other equitable principles of general
application.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
12
5.3.
|
No
Conflicts.
The execution, delivery and performance of this Agreement and the
consummation by the Investor of the transactions contemplated hereby
or
relating hereto do not and will not (i) result in a violation of
the
Investor’s charter documents or bylaws where appropriate or (ii) conflict
with, or constitute a default (or an event which with notice or lapse
of
time or both would become a default) under, or give to others any
rights
of termination, amendment, acceleration or cancellation of any agreement,
indenture or instrument to which the Investor is a party, or result
in a
violation of any law, rule, or regulation, or any order, judgment
or
decree of any court or governmental agency applicable to the Investor
or
its properties (except for such conflicts, defaults and violations
as
would not, individually or in the aggregate, have a Material Adverse
Effect on the Investor). The Investor is not required to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute,
deliver
or perform any of the Investor’s obligations under this Agreement or to
purchase the securities from the Company in accordance with the terms
hereof, provided that for purposes of the representation made in
this
sentence, the Investor is assuming and relying upon the accuracy
of the
relevant representations and agreements of the Company
herein.
|
5.4.
|
Financial
Risks.
The Investor acknowledges that the Investor is able to bear the financial
risks associated with an investment in the securities being purchased
by
the Investor from the Company and that it has been given full access to
such records of the Company and the subsidiaries and to the officers
of
the Company and the subsidiaries as it has deemed necessary or appropriate
to conduct its due diligence investigation. The Investor is capable
of
evaluating the risks and merits of an investment in the securities
being
purchased by the Investor from the Company by virtue of its experience
as
an investor and its knowledge, experience, and sophistication in
financial
and business matters and the Investor is capable of bearing the entire
loss of its investment in the securities being purchased by the Investor
from the Company.
|
5.5.
|
Accredited
Investor.
The Investor is (i) an “accredited investor” as that term is defined in
Rule 501 of Regulation D promulgated under the 1933 Act by reason
of Rule
501(a)(3) and (6), (ii) experienced in making investments of the
kind
described in this Agreement and the related documents, (iii) able,
by
reason of the business and financial experience of its officers (if
an
entity) and professional advisors (who are not affiliated with or
compensated in any way by the Company or any of its affiliates or
selling
agents), to protect its own interests in connection with the transactions
described in this Agreement, and the related documents, and (iv)
able to
afford the entire loss of its investment in the securities being
purchased
by the Investor from the Company. The Investor is acquiring the Securities
for investment and not with a view to the sale or distribution thereof
and
understands that such Securities are restricted securities, as defined
in
the 1933 Act, and may not be sold or otherwise distributed except
pursuant
to an effective registration statement or an exemption from the
registration requirements of the 1933 Act and that the certificates
for
such securities shares and Warrants will bear an investment
legend.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
13
5.6.
|
Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or
on
behalf of the Investor, except as set forth on Schedule 4.8, it being
understood that the compensation payable to the brokers listed on
such
Schedule 4.8 are payable by the
Company.
|
5.7.
|
Knowledge
of Company.
The Investor and its advisors, if any, have been, upon request, 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
being purchased by the Investor from the Company. The Investor and
its
advisors, if any, have been afforded the opportunity to ask questions
of
the Company and have received complete and satisfactory answers to
any
such inquiries.
|
5.8.
|
Risk
Factors.
The Investor understands that the investment by the Investor in the
Securities being purchased by the Investor from the Company involves
a
high degree of risk. The Investor understands that no United States
federal or state agency or any other government or governmental agency
has
passed on or made any recommendation or endorsement of the securities
being purchased by the Investor from the Company. The Investor warrants
that it is able to bear the complete loss of its investment in the
securities being purchased by it from the Company. In acquiring the
Securities, the Investor is not relying upon any projections of the
future
financial condition, results of operations or cash flows relating
to the
Company.
The Investor acknowledges and agrees that (a) it has had the opportunity
to obtain, and it has reviewed and discussed with the Company, to
the
extent that it deems necessary, information concerning the Company,
including risks relating to the Xxxxxxx, X0X and their respective
financial statements, and that (b) in entering into and performing
this
Agreement, the Investor has not relied on any oral representations
made by
the Company or any of its agents, representatives or
advisors.
|
5.9.
|
Full
Disclosure.
No representation or warranty made by the Investor in this Agreement
and
no certificate or document furnished or to be furnished to the Company
pursuant to this Agreement contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not
misleading. Except as set forth or referred to in this Agreement,
(a) the
Investor does not have any agreement or understanding with any person
relating to acquiring, holding, voting or disposing of any equity
securities of the Company, and (b) during the past five years there
has
not occurred any event listed in Item 401(f) of Regulation S-K or
any
investigation relating to any such event with respect to the Investor
or
any of its managing partners.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
14
ARTICLE
VI
COVENANTS
OF THE COMPANY
6.1.
|
Registration
Rights.
The Company shall cause the Registration Rights Agreement to remain
in
full force and effect and shall comply in all material respects with
the
terms thereof.
|
6.2.
|
Reservation
of Common Stock.
As of the date hereof, the Company has reserved and the Company shall
continue to reserve and keep available at all times, free of preemptive
rights, shares of Common Stock for the purpose of enabling the Company
to
issue the Shares underlying the Series A Preferred Stock, as the
case may
be, and the Warrants;
provided, however, that if, as a result of the Authorized Stock Proviso,
there are not sufficient shares reserved as required in this Section
6.2,
the Company shall, within thirty (30) days after the Company becomes
aware
of such deficiency, prepare and file with the Commission a proxy
statement
pursuant to which the Company will seek stockholder approval for
an
increase in the authorized Common Stock sufficient to enable the
Company
to be in compliance with this Section 6.2. The Investor agrees to
vote in
favor of such proposal.
|
6.3.
|
Compliance
with Laws.
The Company hereby agrees to comply in all material respects with
the
Company’s reporting, filing and other obligations under the federal
securities laws.
|
6.4.
|
1934
Act Registration and Compliance.
The Company will use its best efforts to comply in all respects with
its
reporting and filing obligations under the 1934 Act, and will not
take any
action or file any document (whether or not permitted by the 1934
Act or
the rules thereunder) to terminate or suspend any such registration
or to
terminate or suspend its reporting and filing obligations under the
1934
until the Investor has disposed of all of its Shares or to cause
the
trading of the Common Stock on the OTC Bulletin Board to be suspended
or
terminated other than as a result of a change in the standards or
requirements for such trading. In the event that the Common Stock
is
traded in a market which does not require the Company to be current
in its
reporting requirement under the 1934 Act, the Company shall, nonetheless,
continue to file all reports required to be filed by a reporting
company.
If for any reason, the Company’s common stock is not a reporting company
pursuant to the 1934 Act, the Company shall pay the Investor, as
liquidated damages, an amount at the rate of eighteen percent (18%)
per
annum, of the Purchase Price of the shares of Series A Preferred
Stock (or
shares of Common Stock issued upon conversion of the Series A Preferred
Stock) that are then owned by the Investor. Such payment shall be
made in
cash or in shares of Series A Preferred Stock, as the Investor shall
elect, with the payment of the Series A Preferred Stock being based
on the
Purchase Price. The liquidated damages shall be paid on a per diem
basis,
for each day during which the Company fails to be in compliance with
this
Section 6.4.
|
6.5.
|
Corporate
Existence; Conflicting Agreements.
The Company will take all steps necessary to preserve and continue
the
corporate existence of the Company. The Company shall not enter into
any
agreement, the terms of which agreement would restrict or impair
the right
or ability of the Company to perform any of its obligations under
this
Agreement or any of the other agreements attached as exhibits
hereto.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
15
6.6.
|
Series
A Preferred Stock.
Until the earliest of (a) three years from the Closing or (b) such
date as
the Investor shall have converted the Series A Preferred Stock into
not
less than 90% of the Shares and sold the Shares or (c) such date
as the
Investor shall have transferred the Series A Preferred Stock which
are
convertible into an aggregate of not less than 90% of the Shares
issuable
upon such conversion of all of the Series A Preferred Stock, the
Company
will not issue any preferred stock of with the exception of Series
A
Preferred Stock issued to the Investor as provided in this Agreement
and
the Registration Rights Agreement. As of the Closing Date, there
shall be
outstanding no shares of Preferred Stock other than the Series A
Preferred
Stock issuable pursuant to this Agreement.
|
6.7.
|
Convertible
Debt.
On or prior to the Closing Date, the Company will cause to be cancelled
all convertible debt in the Company. Until the earliest of (a) three
years
from the Closing or (b) such date as the Investor shall have converted
the
Series A Preferred Stock into not less than 90% of the Shares issuable
upon conversion of all of the Series A Preferred Stock and sold the
underlying Shares or (c) such date as the Investor shall have transferred
the Series A Preferred Stock which are convertible into an aggregate
of
not less than 90% of the Shares issuable upon such conversion of
all of
the shares of Series A Preferred Stock, the Company will not issue
any
convertible debt.
|
6.8.
|
Debt
Limitation.
The Company agrees that, for two years after Closing, neither it
nor its
consolidated subsidiaries, shall permit outstanding indebtedness,
based on
the principal amount outstanding at the end of a calendar quarter,
to be
more than two times the sum of the EBITDA from continuing operations
over
the four quarters ending on such date. Indebtedness shall include
any
liabilities or obligations which, under GAAP, are reflected as
indebtedness on the Company’s consolidated balance
sheet.
|
6.9.
|
Reset
Equity Deals.
On or prior to the Closing Date, the Company will cause to be cancelled
any and all reset features related to any shares outstanding that
could
result in additional shares being issued. Until the later of (a)
three
years from the Closing or (b) such date as the Investor shall have
converted the Series A Preferred Stock into not less than 95% of
the
Shares issuable upon conversion of all of the Series A Preferred
Stock and
sold the underlying Shares or (c) such date as the Investor shall
have
transferred the Series A Preferred Stock which are convertible into
an
aggregate of not less than 95% of the Shares issuable upon such conversion
of all of the shares of Series A Preferred Stock, the Company will
not
enter into any transactions that have any reset features that could
result
in additional shares being issued. For purposes of this Section 6.9,
a
reset provision for a convertible security or derivative security
shall
mean a provision (a) whereby the issuance of securities at a lower
price
or having a lower conversion or exercise price will result in the
conversion or exercise price of the security being reduced to the
lower
price or lower conversion or exercise price or more shares being
issued,
as the case may be, or (b) which provide that the conversion or exercise
price is based on the market price at the time of conversion or exercise
or (c) any other device which results in an adjustment to the exercise
price or conversion price of the securities other than stock dividends,
stock splits, stock distributions, combination of shares, reverse
splits,
and other recapitalizations, as long as they effect all stockholders
appropriately.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
16
6.10.
|
Independent
Directors.
|
6.10.1. The
Company shall have caused the appointment of the majority of the board of
directors to be independent directors, as defined by the rules
of
the Nasdaq Stock Market, not later than thirty (30) days after the Closing
Date.
6.10.2. If,
at
any time subsequent to the expiration of thirty (30) days after the Closing
Date
until the earlier of (a) three years from the Closing or (b) such date as the
Investor shall have converted not less than 90% of the Series A Preferred Stock
(based on the number of
Shares
issuable upon such conversion of all of the Series A Preferred
Stock)
and sold
the underlying Shares or (c) such date as the Investor shall have transferred
not less than 90% of the shares of Series A Preferred Stock (based on the number
of Shares
issuable upon such conversion of all of the shares of Series A Preferred
Stock),
the
board of directors shall not be composed of a majority of independent
directors:
6.10.2.1.
for a
reason other than for an Excused Reason, the Company shall have sixty (60)
days
to take such steps as are necessary so that a majority of the Company’s
directors are independent directors, and
6.10.2.2.
for an
Excused Reason, the Company shall have seventy five (75) days from the date
that
the Company becomes aware of the event (or the last event if there are more
than
one such event) giving rise to the Excused Reason, to take such steps as are
necessary so that a majority of the Company’s directors are independent
directors.
6.10.3. The
term
“Excused
Reason”
shall
mean the death or resignation of an independent director or the occurrence
of an
event whereby an independent director ceases to be independent.
6.10.4. If,
during the period referred to in Section 6.10.2 of this Agreement, the Company
shall have failed to have a board of directors composed of a majority of
independent directors after the date by which such situation was to have been
cured pursuant to Section 6.10.2.1 or Section 6.10.2.2 of this Agreement,
whichever shall apply, the Company shall pay to the Investor, as liquidated
damages and not as a penalty, an amount equal to fifteen percent (15%) per
annum
of the Purchase Price of the then outstanding shares of Series A Preferred
Stock, payable monthly in cash or Series A Preferred Stock at the option of
the
Investor, based on the number of days that such condition exists beyond the
applicable grace period. The parties agree that the only damages payable for
a
violation of such provisions shall be such liquidated damages. Nothing shall
preclude the Investor from pursuing or obtaining specific performance or other
equitable relief with respect to this Agreement. The parties hereto agree that
the liquidated damages provided for in this Section 6.10.4 constitute a
reasonable estimate of the damages that may be incurred by the Investor by
reason of the failure of the Company to have a majority of directors as
independent directors.
6.10.5. In
no
event shall the total payments made pursuant to this Section 6.10 and Section
6.11, whether in cash or Series A Preferred Stock exceed in the aggregate
fifteen percent (15%) of the Purchase Price of the shares of Series A Preferred
Stock that are outstanding as of the date on which a computation is being
made.
SECURITIES
PURCHASE AGREEMENT
PAGE
17
6.11.
|
Independent
Directors on Audit and Compensation Committees.
No later than thirty (30) days after the Closing Date, the Company
will
have an audit committee comprised solely of not less than three
independent directors and a compensation committee comprised of not
less
than three directors, a majority of whom are independent directors.
If at
any time subsequent to the expiration of such thirty (30) day period,
independent directors do not comprise all of the members of the audit
committee and a majority of the members of the compensation committee
within the grace periods provided in Section 6.10, the Company shall
pay
to the Investor, as liquidated damages and not as a penalty, an amount
equal to fifteen percent (15%) per annum of the Equity Purchase Price
of
the then outstanding Series A Preferred Stock payable monthly in
cash or
Series A Preferred Stock at the option of the Investor, such payment
shall
be based on the number of days that such condition exists. The parties
agree that the only damages payable for a violation of the terms
of this
Agreement with respect to which liquidated damages are expressly
provided
shall be such liquidated damages. Nothing shall preclude the Investor
from
pursuing other remedies or obtaining specific performance or other
equitable relief with respect to this Agreement. Notwithstanding
the
foregoing, no liquidated damages shall be payable pursuant to this
Section
6.11 during any period for which liquidated damages are payable pursuant
to Section 6.10.
|
6.12. |
Use
of Proceeds.
The Company will use the
net
proceeds
from the sale of the Securities (excluding amounts paid by the Company
for
legal and administrative fees and
other expenses of the transaction) for
provide funds for working capital and
acquisitions.
|
6.13. |
Right
of First Refusal
|
6.13.1. In
the
event that the Company seeks to raise additional funds through a private
placement of its securities (a “Proposed
Financing”),
other
than Exempt Issuances, The Investor shall have the right to participate in
any
subsequent funding by the Company of the offering price on a pro rata basis,
based on the percentage that (a) the number of the Investor’s Shares, without
regard to the 4.9% Limitation, bears to (b) the total number of shares of Common
Stock outstanding plus the number of Shares issuable upon conversion of the
Series A Preferred Stock, as the case may be, and any other series of
convertible preferred stock or debt securities, without regard to the 4.9%
Limitations any other limitations on exercise such other convertible preferred
stock or debt securities. This Section 6.13 shall apply to each such offering
based on the total purchase price of the securities being offered by the
Company.
6.13.2. The
terms
on which the Investor shall purchase securities pursuant to Proposed Financing
shall be the same as such securities are purchased by other investors. The
Company shall give the Investor the opportunity to participate in the offering
by giving the Investor not less than ten (10) days notice setting forth the
terms of the Proposed Financing. In the event that the terms of the Proposed
Financing are changed in a manner which is more favorable to the potential
investor, the Company shall provide the Investor, at the same time as the notice
is provided to the other potential investors, with a new ten (10) day notice
setting forth the revised terms that are provided to the other potential
investors.
SECURITIES
PURCHASE AGREEMENT
PAGE
18
6.13.3. In
the
event that the Investor does not exercise its right to participate in the
Proposed Financing within the time limits set forth in Section 6.13.2 of this
Agreement, the Company may sell the securities in the Proposed Financing at
a
price and on terms which are no more favorable to the investors than the terms
provided to the Investor. If the Company subsequently changes the price or
terms
so that the price is more favorable to the investors or so the terms are more
favorable to the investors, the Company shall provide the Investor with the
opportunity to purchase the securities on the revised terms in the manner set
forth in Section
6.13.2
of this
Agreement.
6.14. |
Price
Adjustment.
From the date hereof until such time as the Investor holds no Securities,
except for Exempt Issuances, as to which this Section
6.14
does not apply
or
for issuances for which an adjustment has already been made pursuant
to
this Section 6.14,
the Certificate of Designation shall provide that if the Company
sells or
issues Common Stock at a price, or warrants, options,
convertible
debt or equity securities with a exercise price per share or exercise
price per share which is less than the Conversion Price then in effect
(such lower sales price, conversion or exercise price, as the case
may be,
being referred to as the “Lower Price”), the Conversion Price in effect
from and after the date of such transaction shall be reduced to the
Lower
Price. For purpose of determining the exercise price of warrants
issued by
the Company, the price, if the purchaser of the warrants paid separate
consideration for the warrants, the price paid per share for the
warrants
shall be added to the exercise price per share of the warrants in
determining the consideration received by the Company with respect
to the
warrants. A similar provision shall be included in the Warrants;
provided,
however, that the adjustment for the Warrants with exercise prices
of
$0.65 per share and $1.00 per share shall have a formula
reduction.
|
6.15. |
Price
Adjustments Based on Pre-Tax Income
Per Share.
|
6.15.1. The
Certificate of Designation shall contain the following provisions, and similar
provisions shall be included in the Warrants.
6.15.2. In
the
event the Company’s consolidated Pre-Tax Income for the year ended December 31,
2006 is less than $.08
per
share on a fully-diluted basis, then the Conversion Price shall be reduced
by
the percentage shortfall, up to a maximum of 50%. Thus, if Pre-Tax Income for
the year ended December 31, 2006 is $.06
per
share, on a fully-diluted basis, representing a 25% shortfall, the Conversion
Price shall be reduced by 25%. Such reduction shall be made at the time the
Company files its Form 10-KSB for the year ended December 31, 2006, and shall
apply to all shares of the Series A Preferred Stock which are outstanding on
the
date the Form 10-KSB is filed, or, if not filed on time, on the date that filing
was required.
6.15.3. For
purpose of determining Pre-Tax Income Per Share on a fully-diluted basis, all
shares of Common Stock issuable upon conversion of convertible securities and
upon exercise of warrants and options shall be deemed to be outstanding,
regardless of whether (i) such shares are treated as outstanding for determining
diluted earnings per share under GAAP, (ii) such securities are “in the money,”
or (iii) such shares may be issued as a result of the 4.9% Limitation. The
per
share amounts set forth in Section 6.15.2 of this Agreement shall be adjusted
in
accordance with GAAP to reflect any stock dividend, split, distribution, reverse
split or combination of shares or other recapitalization.
SECURITIES
PURCHASE AGREEMENT
PAGE
19
6.16. |
Insider
Selling.
No Restricted Stockholder can sell any shares of Common Stock in
the
public market during the two (2) years following the Closing Date.
Restricted Stockholders shall include all persons who are officers
and
directors of the Company and all stockholders who received shares
of
Common Stock pursuant to the N2J Agreement. The restriction contained
in
this Section 6.16 shall apply to any transferee, including any legatee
or
distribute. Xxxxxx Xxxxxx Xxxxxx and the Investor shall not be considered
Restricted Stockholders. The restrictions in this Section 6.16 shall
not
apply to shares issued pursuant to a stock option or long-term incentive
plans which may be approved by the Compensation Committee provided
that
such committee is comprised of a majority of independent
directors.
|
6.17. |
Employment
and Consulting Contracts.
For three years after the Closing, the Company must have a unanimous
approval from the Compensation Committee of the Board of Directors
having
reached a conclusion that any awards other than salary are reasonable
for
any officer, director or consultants whose compensation is more than
$100,000 per annum. This Section 6.17 does not apply to attorneys,
accountants and other persons who provide professional services to
the
Company.
|
6.18. |
Subsequent
Equity Sales.
From the date hereof until such time as the Investor holds no more
than 5%
of the Shares (determined as if the Series A Preferred Stock were
fully
converted and the Warrants fully exercised), the Company shall be
prohibited from effecting or entering into an agreement to effect
any
Subsequent Financing involving a “Variable
Rate Transaction”
or an “MFN
Transaction”
(each as defined below). The term “Variable
Rate Transaction”
shall mean a transaction in which the Company issues or sells (i)
any debt
or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares
of
Common Stock either (A) at a conversion, exercise or exchange rate
or
other price that is based upon and/or varies with the trading prices
of or
quotations for the shares of Common Stock at any time after the initial
issuance of such debt or equity securities, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some
future
date after the initial issuance of such debt or equity security or
upon
the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common
Stock.
The term “MFN
Transaction”
shall mean a transaction in which the Company issues or sells any
securities in a capital raising transaction or series of related
transactions which grants to an investor the right to receive additional
shares based upon future transactions of the Company on terms which
are
more favorable to the Investor than the terms initially provided
to the
investor in its initial securities purchase agreement with the Company.
The Investor shall be entitled to obtain injunctive relief against
the
Company to preclude any such issuance, which remedy shall be in addition
to any right to collect damages. Notwithstanding the foregoing, this
Section 6.18 shall not apply in respect of an Exempt Issuance, except
that
no Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
20
6.19. |
Amendment
of Articles.
At
or before the next annual meeting of the stockholders of the Company,
the
Board of Directors shall propose and submit to the holders of the
Common
Stock for approval, an amendment to the Certificate of Incorporation
that
provides substantially as follows:
|
“The
terms and conditions of any rights, options and warrants approved by the Board
of Directors may provide that any or all of such terms and conditions may not
be
waived or amended or may be waived or amended only with the consent of the
holders of a designated percentage of a designated class or classes of capital
stock of the Corporation (or a designated group or groups of holders within
such
class or classes, including but not limited to disinterested holders), and
the
applicable terms and conditions of any such rights, options or warrants so
conditioned may not be waived or amended or may not be waived or amended absent
such consent.”
6.20. |
Stock
Splits.
All forward and reverse stock splits shall affect all equity and
derivative holders proportionately.
|
6.21. |
No
Disclosure of Material Non-Public Information.
The Company will not disclose to the Investor any material non-public
information concerning the Company except (a) with the consent of
Investor
and (b) if such consent is given, pursuant to a non-disclosure agreement
which provides, among other things, that the Investor will not disclose
the material non-public information to any person and the Investor
will
not engage in any transactions involving the Company’s securities while in
possession of material non-public
information.
|
6.22. |
Payment
of Due Diligence Expenses.
At Closing the Escrow Agent shall disperse to the Xxxxxx eighty five
thousand dollars ($85,000.00) for due diligence, legal and any other
expenses which the Investor may incur in connection with this
Agreement.
|
ARTICLE
VII
COVENANTS
OF THE INVESTOR
7.1.
|
Compliance
with Law.
The Investor covenants that its trading activities with respect to
shares
of the Company’s Common Stock will be in compliance with all applicable
state and federal securities laws, rules and regulations and rules
and
regulations of any public market on which the Company’s Common Stock is
listed.
|
7.2.
|
Transfer
Restrictions.
The Investor acknowledges that (a) the Series A Preferred Stock,
the
Warrants and the Shares have not been registered under the 1933 Act,
and
may not be transferred unless (i) they are subject to a current and
effective registration statement under the 1933 Act, or (ii) the
Investor
shall have delivered to the Company an opinion of counsel, which
counsel
and opinion shall be reasonably satisfactory to the Company, to the
effect
that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; and (b) any sale
of the
Securities made in reliance on Rule 144 promulgated under the 1933
Act may
be made only in accordance with the terms of said Rule, to the extent
that
such Rule is applicable.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
21
7.3.
|
Restrictive
Legend.
The Investor acknowledges and agrees that the Securities and the
Shares
shall bear a restrictive legend and a stop-transfer order may be
placed
against transfer of any such Securities except that the requirement
for a
restrictive legend shall not apply to Shares sold pursuant to a current
and effective registration statement or a sale pursuant Rule 144
or any
successor rule.
|
ARTICLE
VIII
CONDITIONS
PRECEDENT TO THE COMPANY’S OBLIGATIONS
The
obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:
8.1.
|
No
Termination.
This Agreement shall not have been terminated pursuant to Article
X
hereof.
|
8.2.
|
Representations
True and Correct.
The representations and warranties of the Investor contained in this
Agreement shall be true and correct in all material respects on and
as of
the Closing Date with the same force and effect as if made on as
of the
Closing Date.
|
8.3.
|
Compliance
with Covenants.
The Investor shall have performed and complied in all material respects
with all covenants, agreements, and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing
Date.
|
8.4.
|
No
Adverse Proceedings.
On the Closing Date, no action or proceeding shall be pending by
any
public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the
consummation of this Agreement or the transactions contemplated hereby
or
to recover any damages or obtain other relief as a result of the
transactions proposed hereby.
|
ARTICLE
IX
CONDITIONS
PRECEDENT TO INVESTOR’S OBLIGATIONS
The
obligation of the Investor to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:
9.1.
|
No
Termination.
This Agreement shall not have been terminated pursuant to Article
X
hereof.
|
9.2.
|
Representations
True and Correct.
The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects on and
as of
the Closing Date with the same force and effect as if made on as
of the
Closing Date.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
22
9.3.
|
Compliance
with Covenants.
The Company shall have performed and complied in all material respects
with all covenants, agreements, and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing
Date.
|
9.4.
|
No
Adverse Proceedings.
On the Closing Date, no action or proceeding shall be pending by
any
public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the
consummation of this Agreement or the transactions contemplated hereby
or
to recover any damages or obtain other relief as a result of the
transactions proposed hereby.
|
9.5.
|
Implementation
of Cash Controls.
The Company shall have implemented cash controls for its operations
which
are subject to the supervision of the Company’s chief financial officer
and are consistent with the cash controls used by N2J as disclosed
to the
Investor.
|
9.6.
|
Acquisition
of N2J Completed.
The acquisition of N2J shall have been completed on or prior to the
Closing Date pursuant to the N2J
Agreement.
|
ARTICLE
X
TERMINATION,
AMENDMENT AND WAIVER
10.1.
|
Termination.
This Agreement may be terminated at any time prior to the Closing
Date
|
10.1.1. by
mutual
written consent of the Investor and the Company;
10.1.2. by
the
Company upon a material breach of any representation, warranty, covenant or
agreement on the part of the Investor set forth in this Agreement, or by the
Investor upon a material breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or by either
party if (a) the representations or warranties of the other party, taken
together, shall fail to be true and correct in all material respects or (b)
if
the conditions to closing set forth in Article VIII or Article IX of this
Agreement shall not be satisfied, and such breach or failure shall, if capable
of cure, not have been cured within five (5) business days after receipt by
the
party in breach of a notice from the non-breaching party setting forth in detail
the nature of such breach.
10.2.
|
Effect
of Termination.
Except as otherwise provided herein, in the event of the termination
of
this Agreement pursuant to Section 10.1 hereof, there shall be no
liability on the part of the Company or the Investor or any of its
officers, directors, agents or other representatives and all rights
and
obligations of any party hereto shall cease; provided, that if this
Agreement shall be terminated pursuant to Section 10.1.2 of this
Agreement, the breaching party shall be liable to the non-breaching
party
for all of the costs and expenses of the non-breaching party not
to exceed
$50,000. The breaching party shall be the party who shall have breached
the representations, warranties, covenants and agreements under this
Agreement or who shall have failed to satisfy the closing
conditions.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
23
10.3.
|
Amendment.
This Agreement may be amended by the parties hereto any time prior
to the
Closing Date by an instrument in writing signed by the parties
hereto;
provided, however that the 4.9% Limitation may not be amended or
waived.
|
10.4.
|
Waiver.
At any time prior to the Closing Date, the Company or the Investor,
as
appropriate, may: (a) extend the time for the performance of any
of the
obligations or other acts of other party or; (b) waive any inaccuracies
in
the representations and warranties contained herein or in any document
delivered pursuant hereto which have been made to it or them; or
(c) waive
compliance with any of the agreements or conditions contained herein
for
its or their benefit other than the 4.9% Limitation which may not
be
waived. Any such extension or waiver shall be valid only if set forth
in
an instrument in writing signed by the party or parties to be bound
hereby.
|
ARTICLE
XI
GENERAL
PROVISIONS
11.1.
|
Transaction
Costs.
Except as otherwise provided herein, each of the parties shall pay
all of
his or its costs and expenses (including attorney fees and other
legal
costs and expenses and accountants’ fees and other accounting costs and
expenses) incurred by that party in connection
with this Agreement; provided, the Company shall pay the Investor
for its
expenses as provided in Section 6.22.
|
11.2.
|
Indemnification.
The Investor agrees to indemnify, defend and hold the Company (following
the Closing Date) and its officers and directors harmless against
and in
respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities or damages, including interest, penalties
and
reasonable attorney’s fees, that it shall incur or suffer, which arise out
of or result from any breach of this Agreement by the Investor or
failure
by the Investor to perform with respect to the representations, warranties
or covenants contained in this Agreement or in any exhibit or other
instrument furnished or to be furnished under this Agreement. The
Company
agrees to indemnify, defend and hold the Investor (following the
Closing
Date) harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities or damages, including
interest, penalties and reasonable attorney’s fees, that it shall incur or
suffer, which arise out of, result from or relate to any breach of
this
Agreement or failure by the Company to perform with respect to the
representations, warranties or covenants contained in this Agreement
or in
any exhibit or other instrument furnished or to be furnished under
this
Agreement. In no event shall the Company or the Investor be entitled
to
recover consequential or punitive damages resulting from a breach
or
violation of this Agreement nor shall any party have any liability
hereunder in the event of gross negligence or willful misconduct
of the
indemnified party. In the event of the failure of the Company to
issue the
Securities in violation of the provisions of this Agreement and the
Registration Rights Agreement, the Investor, as its sole remedy,
shall be
entitled to pursue a remedy of specific performance upon tender into
the
Court an amount equal to the Purchase Price hereunder. The indemnification
by the Investor shall be limited to $50,000.00. This Section 11.2
shall
not relate to indemnification under the Registration Rights
Agreement.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
24
11.3.
|
Headings.
The headings contained in this Agreement are for reference purposes
only
and shall not affect in any way the meaning or interpretation of
this
Agreement.
|
11.4.
|
Entire
Agreement.
This Agreement (together with the Schedule, Exhibits and documents
referred to herein) constitute the entire agreement of the parties
and
supersede all prior agreements and undertakings, both written and
oral,
between the parties, or any of them, with respect to the subject
matter
hereof.
|
11.5.
|
Notices.
All notices and other communications hereunder shall be in writing
and
shall be deemed to have been given (i) on the date they are delivered
if
delivered in person; (ii) on the date initially received if delivered
by
facsimile transmission or e-mail provided that any notice by facsimile
or
e-mail shall only be effective if receipt is acknowledged by the
recipient; or (iv) on the on the date of delivery as shown on the
return
receipt, if mailed by registered or certified mail, return receipt
requested with postage and other fees prepaid as
follows:
|
If
to
the Company:
Tricell,
Inc.
0
Xxxxxx
Xxxxx
Xxxxxxx
Xxxxxx-xx-Xxxxx
Xxxxxxxxxxxxx
XX0 0XX
Xxxxxx
Xxxxxxx
Attention:
Xxxxx Xxxx, President
Facsimile:
00(0) 0000 000000
e-mail:
xxxxx.xxxx@xxxxxxxxxx.xxx
With
a
copy to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxxxxx P.C.
Facsimile
No.: (000) 000-0000
e-mail:
xxxxxxxxx@xxxx.xxx
If
to
the Investor:
at
its
address set forth in Schedule A
11.6.
|
Severability.
If any term or other provision of this Agreement is invalid, illegal
or
incapable of being enforced by any rule of law or public policy,
all other
conditions and provisions of this Agreement shall nevertheless remain
in
full force and effect so long as the economic or legal substance
of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any such term
or other
provision is invalid, illegal or incapable of being enforced, the
parties
hereto shall negotiate in good faith to modify this Agreement so
as to
effect the original intent of the parties as closely as possible
in an
acceptable manner to the end that the transactions contemplated hereby
are
fulfilled to the extent possible.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
25
11.7.
|
Binding
Effect.
All the terms and provisions of this Agreement whether so expressed
or
not, shall be binding upon, inure to the benefit of, and be enforceable
by
the parties and their respective administrators, executors, legal
representatives, heirs, successors and assignees.
|
11.8.
|
Preparation
of Agreement.
This Agreement shall not be construed more strongly against any party
regardless of who is responsible for its preparation. The parties
acknowledge each contributed and is equally responsible for its
preparation. In
resolving any dispute regarding, or construing any provision in,
this
Agreement, there shall be no presumption made or inference drawn because
of the drafting history of the Agreement, or because of the inclusion
of a
provision not contained in a prior draft or the deletion or modification
of a provision contained in a prior
draft.
|
11.9.
|
Governing
Law.
This Agreement shall be governed by, and construed in accordance
with, the
laws of the State of New York, without giving effect to applicable
principles of conflicts of law.
|
11.10.
|
Jurisdiction.
If any action is brought among the parties with respect to this Agreement
or otherwise, by way of a claim or counterclaim, the parties agree
that in
any such action, and on all issues, the parties irrevocably waive
their
right to a trial by jury. Exclusive jurisdiction and venue for any
such
action shall be the federal and state courts situated in the City,
County
and State of New York. In the event suit or action is brought by
any party
under this Agreement to enforce any of its terms, or in any appeal
therefrom, it is agreed that the prevailing party shall be entitled
to
reasonable attorneys fees to be fixed by the arbitrator, trial court,
and/or appellate court if such party prevails on substantially all
issues
in dispute.
|
11.11.
|
Preparation
and Filing of SEC filings.
The Investor shall reasonably assist and cooperate with the Company
in the
preparation of all filings with the SEC after the Closing Date due
after
the Closing Date.
|
11.12.
|
Further
Assurances, Cooperation.
Each party shall, upon reasonable request by the other party, execute
and
deliver any additional documents necessary or desirable to complete
the
transactions herein pursuant to and in the manner contemplated by
this
Agreement. The parties hereto agree to cooperate and use their respective
best efforts to consummate the transactions contemplated by this
Agreement.
|
11.13.
|
Survival.
The representations, warranties, covenants and agreements made herein
shall survive the Closing of the transaction contemplated hereby.
|
11.14.
|
Third
Parties.
Except as disclosed in this Agreement, nothing in this Agreement,
whether
express or implied, is intended to confer any rights or remedies
under or
by reason of this Agreement on any persons other than the parties
hereto
and their respective administrators, executors, legal representatives,
heirs, successors and assignees. Nothing in this Agreement is intended
to
relieve or discharge the obligation or liability of any third persons
to
any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any party
to
this Agreement.
|
SECURITIES
PURCHASE AGREEMENT
PAGE
26
11.15.
|
Failure
or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of any party hereto in the exercise
of any
right hereunder shall impair such right or be construed to be a waiver
of,
or acquiescence in, any breach of any representation, warranty, covenant
or agreement herein, nor shall any single or partial exercise of
any such
right preclude other or further exercise thereof or of any other
right.
All rights and remedies existing under this Agreement are cumulative
to,
and not exclusive of, any rights or remedies otherwise
available.
|
11.16.
|
Counterparts.
This Agreement may be executed in one or more counterparts, and by
the
different parties hereto in separate counterparts, each of which
when
executed shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement. A facsimile
transmission of this signed Agreement shall be legal and binding
on the
party who delivered the Agreement by facsimile transmission.
|
[SIGNATURES
ON FOLLOWING PAGE]
SECURITIES
PURCHASE AGREEMENT
PAGE
27
IN
WITNESS WHEREOF,
the
Investor and the Company have as of the date first written above executed this
Agreement.
THE
COMPANY:
TRICELL,
INC.
By: | /s/ Xxxxx Xxxx | |||
Name:
Title:
|
INVESTOR:
XXXXXX
PARTNERS LP
By:
Xxxxxx Capital Advisors, LLC, its General Partner
By: | /s/ Xxxxxx Xxxxxx Xxxxxx | |||
Xxxxxx
Xxxxxx Xxxxxx
President
000
Xxxxx Xxxxxx, 0xx Xxxxx
Xxx
Xxxx XX 00000
|
SECURITIES
PURCHASE AGREEMENT
SIGNATURE
PAGE
Schedule
A
NAME
AND ADDRESS
|
AMOUNT
OF PURCHASE
PRICE
|
SHARES
OF SERIES A PREFERRED
STOCK
|
NUMBER
OF SHARES UNDERLYING “A,”
“B,”
“C,” “D,” AND “E”
WARRANTS
|
|||||||
Xxxxxx
Partners LP
000
Xxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attn:
Xxxxxx Xxxxxx Xxxxxx
e-mail:
xxx@xxxxxxxxxxxxxx.xxx
xxx@xxxxxxxxxxxxxx.xxx
|
$
|
1,700,000
|
8,500,000
|
120,000,000/
10,000,000/
10,000,000/
20,000,000/
20,000,000
|
Schedule
4.3.1
Capitalization
Schedule
4.8
Brokers
Exhibit
A
Form
of Certificate of Designation
Exhibit
B
Escrow
Agreement
Exhibit
C
Registration
Rights Agreement
Exhibit
D-1
$.20
Warrants
Exhibit
D-2
$.35
Warrant
Exhibit
D-3
$.45
Warrants
Exhibit
D-4
$.65
Warrants
Exhibit
D-5
$1.00
Warrants