SECURITIES PURCHASE AGREEMENT
THIS SECURITIES
PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of March 13, 2008, by and among HOMELAND
SECURITY CAPITAL CORPORATION,
a
Delaware corporation (the “Company”),
and
YA GLOBAL INVESTMENTS, L.P. (the “Buyer”).
WHEREAS,
the
Company and the Buyer are executing and delivering this Agreement in reliance
upon an exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”).
WHEREAS,
the
Company has authorized the designation of that certain Series H Convertible
Preferred Stock, par value $.01 per share (the "Series
H Preferred Shares")
consisting of 10,000 Series H Preferred Shares, which are be convertible
into
shares of the Company’s Common Stock, par value $.001 per share (the
"Common
Stock"),
in
accordance with the terms of the Certificate of Designations of the Series
H
Convertible Preferred Stock of the Company attached hereto as Exhibit
A (the
"Certificate
of Designations").
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Buyer, as provided herein,
and
the Buyer shall purchase (i) up to $6,310,000 of secured notes in the form
attached hereto as “Exhibit
B-1”
(the
“New
Notes”)
for a
purchase price of $6,310,000, (ii) 6,190 Series H Preferred Shares (the
“New
Preferred Shares”)
for a
purchase price of $6,190,000, and (iii) a warrant (the “Warrant”)
substantially in the form attached as Exhibit
C
to this
Agreement with the to be initially exercisable to acquire 83,333,333 shares
of
Common Stock (the “Warrant
Shares”);
in
each case as set forth on Schedule I attached hereto.
WHEREAS,
the
Company and the Buyer are parties to that certain Securities Purchase Agreement,
dated as of February 6, 2006 the (“February
2006 Purchase Agreement”),
pursuant to which, among other things, the Buyer purchased from the Company
an
aggregate original principal amount of $4,000,000 of senior secured convertible
debentures (the “February
2006 Debentures”),
which
are convertible into shares of the Company's common stock, par value $0.001
per
share (the “Common
Stock”),
in
accordance with the terms thereof, and which as of the date hereof has an
outstanding principal balance of $3,810,000, plus accrued and unpaid interest
thereon.
WHEREAS,
the
Company and the Buyer are parties to that certain Securities Purchase Agreement,
dated as of August 21, 2006 the (“August
2006 Purchase Agreement”),
pursuant to which, among other things, the Buyer purchased from the Company
an
aggregate original principal amount of $4,000,000 of senior secured convertible
debentures (the “August
2007 Debentures”),
which
are convertible into Common Stock in accordance with the terms thereof, and
which as of the date hereof has an outstanding principal balance of $4,000,000,
plus accrued and unpaid interest thereon.
WHEREAS,
the
Company and the Buyer are parties to that certain Securities Purchase Agreement,
dated as of June 1, 2007 the (“2007
Purchase Agreement”),
pursuant to which, among other things, the Buyer purchased from the Company
an
aggregate original principal amount of $2,750,000 of senior secured convertible
debentures (the “2007
Debentures”),
which
are convertible into shares of Common Stock in accordance with the terms
thereof, and which as of the date hereof has an outstanding principal balance
of
$2,750,000, plus accrued and unpaid interest thereon.
WHEREAS,
pursuant
to the terms hereof, the Buyer desires to exchange February 2006 Debentures
(but
not accrued and unpaid interest thereon) for 3,810
Series H Preferred Shares (the “Exchanged
Preferred Shares”
and
collectively along with the New Preferred Share, the “Preferred
Shares”),
which
Exchanged Preferred Shares are being acquired for consideration consisting
solely of the February
2006 Debentures surrendered
for conversion.
WHEREAS,
pursuant
to the terms hereof, the Buyer desires to exchange the August 2006 Debentures
and the 2007 Debentures (but not accrued and unpaid interest thereon) for
an
aggregate original principal amount of $6,750,000 of senior secured notes
in the
form attached as Exhibit B-2 to this Agreement (the “Exchanged
Notes”
and
collectively along with the New Notes, the “Notes”),
which
Exchanged Notes are being acquired for consideration consisting solely of
the
August
2006 Debentures and the 2007 Debentures surrendered
for conversion.
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the
parties
hereto are executing and delivering a Registration Rights Agreement (the
“Registration
Rights Agreement”)
pursuant to which the Company has agreed to provide certain demand registration
rights under the Securities Act and the rules and regulations promulgated
there
under, and applicable state securities laws.
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, (i)
the
Buyer, the Company, and the following subsidiaries of the Company: Homeland
Security Advisory Services, Inc. (“Homeland
Advisory”)
and
Celerity Systems, Inc. (“Celerity”)
are
executing and delivering a Security Agreement (the “Security
Agreement”)
pursuant to which the Company, Homeland Advisory and Celerity shall provide
the
Buyer a security interest in Pledged Property (as this term is defined in
the
Security Agreement) to secure the Company’s obligations under this Agreement,
the Transaction Documents, or any other obligations of the Company to the
Buyer,
and (ii) Nexus Technologies Group, Inc. (“Nexus”),
Homeland Advisory and Celerity (collectively, the “Guarantors”)
are
executing and delivering a Guaranty dated the date hereof (the “Guaranty”
and
collectively with the Security Agreement, the “Security
Documents”)
in
favor of the Buyer, with respect to the Company’s obligations under the
Securities Purchase Agreement and the Transaction Documents;
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the
parties
hereto are executing and delivering Irrevocable Transfer Agent Instructions
(the
“Irrevocable
Transfer Agent Instructions”);
and
WHEREAS,
the
Notes, the Series H Preferred Shares, the Conversion Shares, the Warrants,
and
the Warrants Shares collectively are referred to herein as the “Securities”).
2
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:
(a) Purchase
of New Notes, New Preferred Shares, and Warrants.
Subject
to the satisfaction (or waiver) of the terms and conditions of this Agreement,
the Buyer agrees to purchase at the Closing (as defined below) and the Company
agrees to sell and issue to the Buyer at the Closing, (i) the New Notes in
the
amount set forth opposite the Buyer’s name on Schedule I, (ii) the New Preferred
Shares in the amount set forth opposite the Buyer’s name on Schedule I, and
(iii) the Warrants to acquire up that number of Warrant Shares as set forth
opposite the Buyer’s name on Schedule I. At the Closing, (i) the Buyer shall
deliver to the Company such aggregate proceeds for the New Notes, the New
Preferred Shares, the Warrants to be issued and sold to the Buyer at the
Closing
and (ii) the Company shall deliver to the Buyer, the New Notes, the New
Preferred Shares and Warrants which the Buyer is purchasing at the Closing
in
amounts indicated opposite such Buyer’s name on Schedule I, duly executed on
behalf of the Company.
(b) Exchange
of Existing Debentures for Series H Preferred Shares.
Pursuant to the terms and conditions of this Agreement, at the Closing, the
Buyer shall surrender the February
2006 Debentures (but not accrued and unpaid interest thereon) with
an
aggregate principal amount equal to $3,810,000 as set forth on Schedule II
to
the Company for conversion into 3,810 Series H Preferred Shares as set forth
opposite the Buyer’s name on Schedule II attached hereto. At the Closing, (i)
the Buyer shall deliver to the Company the February
2006 Debentures and
(ii) the Company shall deliver to the Buyer, the 3,810 Series H Preferred
Shares which the Buyer is acquiring in exchange for the surrender of the
February
2006 Debentures as
indicated opposite such Buyer’s name on Schedule II.
(c) Exchange
of Existing Debentures for Exchanged Notes.
Subject
to the satisfaction (or waiver) of the terms and conditions of this Agreement,
at the Closing, the Buyer agrees to surrender the
August 2006 Debentures and the 2007 Debentures (but not accrued and unpaid
interest thereon) in
principal amount of the $6,750,000 as set forth on Schedule II to the Company
for conversion into Exchanged Notes in the aggregate principal amount equal
to
$6,750,000 as set forth opposite the Buyer’s name on Schedule II attached
hereto. At the Closing, (i) the Buyer shall deliver to the Company the
August
2006 Debentures and the 2007 Debentures (but not accrued and unpaid interest
thereon) and
(ii) the Company shall deliver to the Buyer, the Exchanged Notes which the
Buyer is acquiring at the Closing in amounts indicated opposite such Buyer’s
name on Schedule II, duly executed on behalf of the Company.
(d) Closing
Dates.
The
Closing of the transactions contemplated herein shall take place at 10:00
a.m.
Eastern Standard Time within 3 business days following the date hereof, subject
to notification of satisfaction of the conditions to the Closing set forth
herein and in Sections 6 and 7 below (or such other date as is mutually agreed
to by the Company and the Buyer(s)) (the “Closing
Date”).
The
Closings shall occur on the respective Closing Dates at the offices of Yorkville
Advisors, LLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000
(or
such other place as is mutually agreed to by the Company and the Buyer).
3
(e) Holding
Period for Series H Preferred Stock Issued in Exchange for
Debentures.
The
Company represents, warrants and agrees that for the purposes of Rule 144,
the
holding period of the Exchanged Preferred Share issued hereunder in exchange
for
the February 2006 Debentures (including the corresponding Conversion Shares)
will include the holding period of such surrendered February 2006 Debentures,
and the Company agrees not to take a position contrary to this Section 2(e).
If
(A) there has been no change in facts and circumstances, (B) no contrary
law,
rule, regulation or instruction has been proposed, issued or adopted by the
Commission, and (C) the Buyer is not an “affiliate” of the Company as the term
is defined in Securities Act Rule 144(a)(1), then upon receipt of
representations made by Buyer, in a form reasonably acceptable to the Company
and its counsel, that it is not an affiliate of the Company and has not been
an
affiliate of the Company during the preceding 3 months, as well as other
representations customarily given in connection with the removal of restrictive
legends under Rule 144, the Company will, in connection with an applicable
transfer request by Buyer, take the position that the holding period for
the
Exchanged Preferred Shares issued to the Buyer in exchange for the Buyer’s
surrendered February 2006 Debentures include the holding period for such
surrendered February 2006 Debentures.
The
Buyer
represents and warrants that:
(a) Investment
Purpose.
The
Buyer is acquiring the Securities for its own account for investment only
and
not with a view towards, or for resale in connection with, the public sale
or
distribution thereof, except pursuant to sales registered or exempted under
the
Securities Act; provided, however, that by making the representations herein,
the Buyer reserves the right to dispose of the Securities at any time in
accordance with or pursuant to an effective registration statement covering
such
Securities or an available exemption under the Securities Act. The Buyer
does
not presently have any agreement or understanding, directly or indirectly,
with
any Person to distribute any of the Securities.
(b) Accredited
Investor Status.
The
Buyer is an “Accredited
Investor”
as
that
term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance
on Exemptions.
The
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying
in part
upon the truth and accuracy of, and 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.
(d) Information.
The
Buyer and its advisors (and its counsel), if any, have been furnished with
all
materials relating to the business, finances and operations of the Company
and
information he deemed material to making an informed investment decision
regarding his purchase of the Securities, which have been requested by the
Buyer. The Buyer and its advisors, if any, have been afforded the opportunity
to
ask questions of the Company and its management. Neither such inquiries nor
any
other due diligence investigations conducted by the Buyer or its advisors,
if
any, or its representatives shall modify, amend or affect the 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
high degree of risk. The Buyer is in a position regarding the Company, which,
based upon employment, family relationship or economic bargaining power,
enabled
and enables the Buyer to obtain information from the Company in order to
evaluate the merits and risks of this investment. The Buyer has sought such
accounting, legal and tax advice, as it has considered necessary to make
an
informed investment decision with respect to its acquisition of the
Securities.
4
(e) No
Governmental Review.
The
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities, or the fairness or suitability of the investment
in the Securities, nor have such authorities passed upon or endorsed the
merits
of the offering of the Securities.
(f) Transfer
or Resale.
The
Buyer understands that except as provided in the Registration Rights Agreement:
(i) the Securities have not been and are not being registered under the
Securities Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder,
(B)
the Buyer shall have delivered to the Company an opinion of counsel, in a
generally acceptable form, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to
an
exemption from such registration requirements, or (C) the Buyer provides
the
Company with reasonable assurances (in the form of seller and broker
representation letters) that such Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities
Act, as amended (or a successor rule thereto) (collectively, “Rule
144”),
in
each case following the applicable holding period set forth therein; (ii)
any
sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any
other
person is under any obligation to register the Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions
of
any exemption thereunder.
(g) Legends.
The
Buyer agrees to the imprinting, so long as is required by this Section 2(g),
of
a restrictive legend in substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
5
Certificates
evidencing the Conversion Shares or Warrant Shares shall not contain any
legend
(including the legend set forth above), (i) while a registration statement
(including the Registration Statement) covering the resale of such security
is
effective under the Securities Act, (ii) following any sale of such Conversion
Shares or Warrant Shares pursuant to Rule 144, (iii) if such Conversion Shares
or Warrant Shares are eligible for sale under Rule 144, or (iv) if such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the SEC).
The
Company shall cause its counsel to issue a legal opinion to the Company’s
transfer agent promptly after the effective date (the “Effective
Date”)
of a
Registration Statement if required by the Company’s transfer agent to effect the
removal of the legend hereunder. If all or any portion of the Convertible
Debentures or Warrants are exercised by a Buyer that is not an Affiliate
of the
Company (a “Non-Affiliated
Buyer”)
at a
time when there is an effective registration statement to cover the resale
of
the Conversion Shares or the Warrant Shares, such Conversion Shares or Warrant
Shares shall be issued free of all legends. The Company agrees that following
the Effective Date or at such time as such legend is no longer required under
this Section 2(g), it will, no later than three (3) Trading Days following
the
delivery by a Non-Affiliated Buyer to the Company or the Company’s transfer
agent of a certificate representing Conversion Shares or Warrant Shares,
as the
case may be, issued with a restrictive legend (such third Trading Day, the
“Legend
Removal Date”),
deliver or cause to be delivered to such Non-Affiliated Buyer a certificate
representing such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give instructions
to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section. The Buyer acknowledges that the Company’s agreement
hereunder to remove all legends from Conversion Shares or Warrant Shares
is not
an affirmative statement or representation that such Conversion Shares or
Warrant Shares are freely tradable. Each Buyer, severally and not jointly
with
the other Buyer, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 3(g) is
predicated upon the Company’s reliance that the buyer will sell any Securities
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a Registration Statement,
they will be sold in compliance with the plan of distribution set forth
therein.
(h) Authorization,
Enforcement.
This
Agreement has been duly and validly authorized, executed and delivered on
behalf
of the Buyer and is a valid and binding agreement of the Buyer enforceable
in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
(i) Receipt
of Documents.
The
Buyer and its counsel has received and read in their entirety: (i) this
Agreement and each representation, warranty and covenant set forth herein
and
the Transaction Documents (as defined herein); (ii) all due diligence and
other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company’s Form 10-KSB for
the fiscal year ended December 31, 2006; (iv) the Company’s Form 10-QSB for the
fiscal quarter ended September 30, 2007 and (v) answers to all questions
the
Buyer submitted to the Company regarding an investment in the Company; and
the
Buyer has relied on the information contained therein and has not been furnished
any other documents, literature, memorandum or prospectus.
6
(j) Due
Formation of Corporate and Other Buyer.
If the
Buyer(s) is a corporation, trust, partnership or other entity that is not
an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Securities and is not
prohibited from doing so.
(k) No
Legal Advice From the Company.
The
Buyer acknowledges, that it had the opportunity to review this Agreement
and the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. Each Buyer is relying solely on such counsel
and advisors and not on any statements or representations of the Company
or any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement
or
the securities laws of any jurisdiction.
Except
as
set forth under the corresponding section of the Disclosure Schedules which
Disclosure Schedules shall be deemed a part hereof and to qualify any
representation or warranty otherwise made herein to the extent of such
disclosure, the Company hereby makes the representations and warranties set
forth below to the Buyer:
(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth on
Schedule
3(a).
Except
as set forth on Schedule 3(a), the Company owns, directly or indirectly,
all of
the capital stock or other equity interests of each subsidiary free and clear
of
any liens, and all the issued and outstanding shares of capital stock of
each
subsidiary are validly issued and are fully paid, non-assessable and free
of
preemptive and similar rights to subscribe for or purchase
securities.
(b) Organization
and Qualification.
The
Company and its subsidiaries are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they
are
incorporated, and have the requisite corporate power to own their properties
and
to carry on their business as now being conducted. Each of the Company and
its
subsidiaries is duly qualified as a foreign corporation to do business and
is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent
that
the failure to be so qualified or be in good standing would not have or
reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the subsidiaries, taken
as
a whole, or (iii) a material adverse effect on the Company’s ability to perform
in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”)
and no
proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification..
7
(c) Authorization,
Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter
into and perform its obligations under this Agreement, the Notes, the
Certificate of Designations, the Warrants, the Security Documents, the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions,
and
each of the other agreements entered into by the parties hereto in connection
with the transactions contemplated by this Agreement (collectively the
“Transaction
Documents”)
and to
issue the Securities in accordance with the terms hereof and thereof, (ii)
the
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Securities, the reservation
for issuance and the issuance of the Conversion Shares, and the reservation
for
issuance and the issuance of the Warrant Shares, have been duly authorized
by
the Company’s Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, (iii)
the
Transaction Documents have been duly executed and delivered by the Company,
(iv)
the Transaction Documents constitute the valid and binding obligations of
the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies. The authorized officer of the Company executing the
Transaction Documents knows of no reason why the Company cannot file the
Registration Statement as required under the Registration Rights Agreement
or
perform any of the Company’s other obligations under the Transaction Documents.
(d) Capitalization.
The
authorized capital stock of the Company consists of 200,000,000 shares of
Common
Stock and 3,000,000 shares of Preferred Stock, par value $0.01 (“Preferred
Stock”)
of
which 49,246,244 shares of Common Stock and 1,358,080 shares of Preferred
Stock
are issued and outstanding of which 1,000,000 shares are Series F Preferred
Stock and 358,080 shares are Series G Preferred Stock. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. Except as disclosed in Schedule
3(d):
(i)
none of the Company's capital stock is subject to preemptive rights or any
other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
subsidiaries is or may become bound to issue additional capital stock of
the
Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its subsidiaries; (iii) there are
no
outstanding debt securities, notes, credit agreements, credit facilities
or
other agreements, documents or instruments evidencing indebtedness of the
Company or any of its subsidiaries or by which the Company or any of its
subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its subsidiaries; (v) there
are
no outstanding securities or instruments of the Company or any of its
subsidiaries which contain any redemption or similar provisions, and there
are
no contracts, commitments, understandings or arrangements by which the Company
or any of its subsidiaries is or may become bound to redeem a security of
the
Company or any of its subsidiaries; (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by
the
issuance of the Securities; (vii) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar
plan
or agreement; and (viii) the Company and its subsidiaries have no liabilities
or
obligations required to be disclosed in the SEC Documents but not so disclosed
in the SEC Documents, other than those incurred in the ordinary course of
the
Company's or its subsidiaries' respective businesses and which, individually
or
in the aggregate, do not or would not have a Material Adverse Effect. The
Company has furnished to the Buyer true, correct and complete copies of the
Company's Certificate of Incorporation, as amended and as in effect on the
date
hereof (the “Certificate
of Incorporation”),
and
the Company's Bylaws, as amended and as in effect on the date hereof (the
“Bylaws”),
and
the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof
in
respect thereto. No further approval or authorization of any stockholder,
the
Board of Directors of the Company or others is required for the issuance
and
sale of the Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among
any
of the Company’s stockholders.
8
(e) Issuance
of Securities.
The
issuance of the Notes, Series H Preferred Share, and the Warrants are duly
authorized and free from all taxes, liens and charges with respect to the
issue
thereof. Upon exercise in accordance with the terms of the Series H Preferred
Shares or the Warrants, as the case may be, the Conversion Shares and Warrant
Shares, respectively, when issued will be validly issued, fully paid and
nonassessable, free from all taxes, liens and charges with respect to the
issue
thereof.
(f) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby (including, without limitation, the issuance of the Notes, Series
H
Preferred Share, and the Warrants, and reservation for issuance and issuance
of
the Conversion Shares and the Warrant Shares) will not (i) result in a violation
of any certificate of incorporation, certificate of formation, any certificate
of designations or other constituent documents of the Company or any of its
subsidiaries, any capital stock of the Company or any of its subsidiaries
or
bylaws of the Company or any of its subsidiaries or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) in any respect under, or give to others any rights
of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is
a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including foreign, federal and state securities laws
and
regulations and the rules and regulations of the National Association of
Securities Dealers Inc.’s OTC Bulletin Board) 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 in the case of each of clauses
(ii) and (iii), such as could not, individually or in the aggregate, have
or
reasonably be expected to result in a Material Adverse Effect. The business
of
the Company and its subsidiaries is not being conducted, and shall not be
conducted in violation of any material law, ordinance, or regulation of any
governmental entity. Except as specifically contemplated by this Agreement
and
as required under the Securities Act and any applicable state securities
laws,
the Company is not required to obtain any consent, authorization or order
of, or
make any filing or registration with, any court or governmental agency in
order
for it to execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior
to
the date hereof. The Company and its subsidiaries are unaware of any facts
or
circumstance, which might give rise to any of the foregoing.
9
(g) SEC
Documents; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under the Securities Exchange Act
of
1934, as amended (the “Exchange
Act”),
for
the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (all of the foregoing
filed prior to the date hereof or amended after the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the
“SEC
Documents”)
on
timely basis or has received a valid extension of such time of filing and
has
filed any such SEC Document prior to the expiration of any such extension.
The
Company has delivered to the Buyer or their representatives, or made available
through the SEC’s website at xxxx://xxx.xxx.xxx., true and complete copies of
the SEC Documents. As of their respective dates, the SEC Documents complied
in
all material respects with the requirements of the Exchange 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 the light of the circumstances under which they were
made, not misleading. 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 generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or
(ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company
to
the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(i) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made and not misleading.
(h) 10(b)-5.
The SEC
Documents do not include any untrue statements of material fact, nor do they
omit to state any material fact required to be stated therein necessary to
make
the statements made, in light of the circumstances under which they were
made,
not misleading.
10
(i) Absence
of Litigation.
There
is no action, suit, proceeding, inquiry or investigation before or by any
court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would (i)
have
a Material Adverse Effect.
(j) Acknowledgment
Regarding Buyer’s Purchase of the Securities.
The
Company acknowledges and agrees that the Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that each Buyer is
not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by each Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyer’s 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 by the Company and its representatives.
(k) No
General Solicitation.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection
with
the offer or sale of the Securities.
(l) No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security, under circumstances that would
require
registration of the Securities under the Securities Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the Securities Act.
(m) Employee
Relations.
Neither
the Company, the Guarantors, or each their subsidiaries are involved in any
labor dispute or, to the knowledge of the Company or any of its subsidiaries,
is
any such dispute threatened. None of the Company’s or its subsidiaries’
employees is a member of a union and the Company and its subsidiaries believe
that their relations with their employees are good.
(n) Intellectual
Property Rights.
The
Company, the Guarantors, and each of their subsidiaries own or possess adequate
rights or licenses to use all trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets
and
rights necessary to conduct their respective businesses as now conducted.
The
Company and its subsidiaries do not have any knowledge of any infringement
by
the Company or its subsidiaries of trademark, trade name rights, patents,
patent
rights, copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, and,
to the
knowledge of the Company there is no claim, action or proceeding being made
or
brought against, or to the Company’s knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement; and the Company and
its
subsidiaries are unaware of any facts or circumstances which might give rise
to
any of the foregoing.
11
(o) Environmental
Laws.
The
Company, the Guarantors, and each of their subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental
Laws”),
(ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii)
are in compliance with all terms and conditions of any such permit, license
or
approval.
(p) Title.
All
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use
made
and proposed to be made of such property and buildings by the Company and
its
subsidiaries.
(q) Insurance.
The
Company, the Guarantors, and each of their 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 been refused any insurance coverage sought
or applied for and neither the Company nor any such subsidiary has any reason
to
believe that it will not be able to renew its existing insurance coverage
as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(r) Regulatory
Permits.
The
Company, the Guarantors, and each of their subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received
any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(s) Internal
Accounting Controls.
The
Company, the Guarantors, and each of their subsidiaries maintains a system
of
internal accounting controls sufficient to provide reasonable assurance that
(i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, and (iii) the
recorded amounts for assets are compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(t) No
Material Adverse Breaches, etc.
Neither
the Company, the Guarantors, or each their subsidiaries are is subject to
any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company’s officers has or is
expected in the future to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Neither the Company, the Guarantors,
or any
of their subsidiaries are in breach of any contract or agreement which breach,
in the judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company, the Guarantors, and any
of
their subsidiaries.
12
(u) Tax
Status.
The
Company, the Guarantors, and each of their subsidiaries have made and filed
all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only
to the
extent that the Company, the Guarantors, and each of their subsidiaries are
has
set aside on its books provisions reasonably adequate for the payment of
all
unpaid and unreported taxes) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined
to be
due on such returns, reports and declarations, except those being contested
in
good faith and has set aside on its books provision reasonably adequate for
the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such
claim.
(v) Certain
Transactions.
Except
for arm’s length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors, or employees
of
the Company is presently a party to any transaction with the Company (other
than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or,
to the
knowledge of the Company, any corporation, partnership, trust or other entity
in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner.
(w) Fees
and Rights of First Refusal.
The
Company is not obligated to offer the securities offered hereunder on a right
of
first refusal basis or otherwise to any third parties including, but not
limited
to, current or former shareholders of the Company, underwriters, brokers,
agents
or other third parties.
(x) Investment
Company.
The
Company is not, and is not an affiliate of, and immediately after receipt
of
payment for the Securities, will not be or be an affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(y) Registration
Rights.
Other
than the Buyer and as set forth on Schedule 3(y),
no
Person has any right to cause the Company to effect the registration under
the
Securities Act of any securities of the Company. There are no outstanding
registration statements not yet declared effective and there are no outstanding
comment letters from the SEC or any other regulatory agency.
13
(z) Private
Placement.
Assuming the accuracy of the Buyer’s representations and warranties set forth in
Section 2, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Buyer as contemplated hereby.
The issuance and sale of the Securities hereunder does not contravene the
rules
and regulations of the Primary Market.
(aa) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to terminate,
or
which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration. The Company has not, in the twelve (12) months preceding the
date
hereof, received notice from any Primary Market on which the Common Stock
is or
has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Primary Market. The
Company
is, and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
(bb) Reporting
Status.
With a view to making available to the Buyer the benefits of Rule 144 or
any
similar rule or regulation of the SEC that may at any time permit the Buyer
to
sell securities of the Company to the public without registration, and as
a
material inducement to the Buyer’s purchase of the Securities, the Company
represents and warrants to the following: (i) the Company is, and has been
for a
period of at least 90 days immediately preceding the date hereof, subject
to the
reporting requirements of section 13 or 15(d) of the Exchange Act and has
filed
all required reports under section 13 or 15(d) of the Exchange, as applicable,
during the 12 months preceding the date hereof (or for such shorter period
that
the Company was required to file such reports), and (ii) the Company is not
and
for at least the last 12 months prior to the date hereof has not been a “shell
company,” as defined in paragraph (i)(1)(i) of Rule 144;
(cc) Manipulation
of Price.
The Company has not, and to its knowledge no one acting on its behalf has,
(i)
taken, directly or indirectly, any action designed to cause or to result
in the
stabilization or manipulation of the price of any security of the Company
to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any of
the
Securities, or (iii) paid or agreed to pay to any Person any compensation
for
soliciting another to purchase any other securities of the Company, other
than,
in the case of clauses (ii) and (iii), compensation paid to the Company’s
placement agent in connection with the placement of the Securities.
(dd) Dilutive
Effect.
The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Series H Preferred Shares and the Warrant
Shares
issuable upon exercise of the Warrants will increase in certain circumstances.
The Company further acknowledges that its obligation to issue Conversion
Shares
upon conversion of the Series H Preferred Shares in accordance with this
Agreement and the Series H Preferred Shares and its obligation to issue the
Warrant Shares upon exercise of the Warrants in accordance with this Agreement
and the Warrants, in each case, is absolute and unconditional regardless
of the
dilutive effect that such issuance may have on the ownership interests of
other
stockholders of the Company.
14
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts to timely satisfy each of the conditions
to be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form
D.
The
Company agrees to file a Form D with respect to the 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,
or obtain an exemption for the Securities for sale to the Buyer at the Closing
pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of any such action
so
taken to the Buyer on or prior to the Closing Date.
(c) Reporting
Status.
With a
view to making available to the Buyer the benefits of Rule 144 or any similar
rule or regulation of the SEC that may at any time permit the Buyer to sell
securities of the Company to the public without registration, and as a material
inducement to the Buyer’s purchase of the Securities, the Company represents,
warrants, and covenants to the following:
(i) The
Company is subject to the reporting requirements of section 13 or 15(d) of
the
Exchange Act and has filed all required reports under section 13 or 15(d)
of the
Exchange Act during the 12 months prior to the date hereof (or for such shorter
period that the issuer was required to file such reports), other than Form
8-K
reports;
(ii) from
the
date hereof until all the Securities either have been sold by the Buyer,
or may
permanently be sold by the Buyer without any restrictions pursuant to Rule
144,
(the “Registration
Period”)
the
Company shall file with the SEC in a timely manner all required reports under
section 13 or 15(d) of the Exchange Act and such reports shall conform to
the
requirement of the Exchange Act and the SEC for filing thereunder;
(iii) The
Company shall furnish to the Buyer so long as the Buyer owns Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, (ii) a copy of the
most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may
be
reasonably requested to permit the Buyer to sell such securities pursuant
to
Rule 144 without registration; and
(iv) During
the Registration Period the Company shall not terminate its status as an
issuer
required to file reports under the Exchange Act even if the Exchange Act
or the
rules and regulations thereunder would otherwise permit such
termination.
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the New Notes, Series H
Preferred Shares, and Warrants for general corporate and working capital
purposes and as the merger consideration in the acquisition of Safety &
Ecology Holdings Corporation (“Safety
& Ecology”)
through the Company’s wholly owned subsidiary, HSCC Acquisition
Corp.
15
(e) Reservation
of Shares.
On the
date hereof, the Company shall reserve for issuance to the Buyer 145,000,000
shares for issuance upon conversions of the Series H Preferred Shares and
exercise of the Warrants (collectively, the “Share
Reserve”).
The
Company represents that it has sufficient authorized and unissued shares
of
Common Stock available to create the Share Reserve after considering all
other
commitments that may require the issuance of Common Stock. The Company shall
take all action reasonably necessary to at all times have authorized, and
reserved for the purpose of issuance, such number of shares of Common Stock
as
shall be necessary to effect the full conversion of the Series H Preferred
Shares and the full exercise of the Warrants. If at any time the Share Reserve
is insufficient to effect the full conversion of the Series H Preferred Shares
or the full exercise of the Warrants, the Company shall increase the Share
Reserve accordingly. If the Company does not have sufficient authorized and
unissued shares of Common Stock available to increase the Share Reserve,
the
Company shall call and hold a special meeting of the shareholders within
thirty
(30) days of such occurrence, for the sole purpose of increasing the number
of
shares authorized. The Company’s management shall recommend to the shareholders
to vote in favor of increasing the number of shares of Common Stock authorized.
Management shall also vote all of its shares in favor of increasing the number
of authorized shares of Common Stock. Without limiting the forgoing, the
Company
agrees that, upon the obtaining the Share Increase (as defined below) the
Company shall increase the Share Reserve to 1,300,000,000 shares of Common
Stock.
(f) Listings
or Quotation.
The
Common Stock shall be listed or quoted for trading on any of (a) the American
Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq Global Select
Market, (d) the Nasdaq Global Market (e) the Nasdaq Capital Market, or (f)
the
Nasdaq OTC Bulletin Board (which does not include the Pink Sheets LLC)
(“OTCBB”)
(each,
a “Primary
Market”).
The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock
is
then listed (subject to official notice of issuance) and shall maintain such
listing of all Registrable Securities from time to time issuable under the
terms
of the Transaction Documents.
(g) Fees
and Expenses.
(i) The
Company shall pay all of its costs and expenses incurred by it connection
with
the negotiation, investigation, preparation, execution and delivery of the
Transaction Documents.
(ii) The
Company shall place into escrow $800,000 upon the Closing directly from the
proceeds of the Closing (collectively, the “Monitoring
Fees,”
and
as
deposited into escrow, the “Escrow
Funds”)
which
shall be used to compensate Yorkville Advisors LLC (“Investment
Manager”)
for
monitoring and managing the purchase and investment made by YA Global
Investments, L.P. (“YA
Global”)
described herein, pursuant to the Investment Manager’s existing advisory
obligations to YA Global. The Company, Investment Manager, and YA Global
shall
enter into an Escrow Agreement of even date herewith in the form attached
hereto
as Exhibit
D
(the
“Escrow
Agreement”)
appointing an escrow agent (the “Escrow
Agent”)
to
hold the Escrow Funds and to periodically disburse portions of such Escrow
Funds
to the Investment Manager from escrow in accordance with the terms of the
Escrow
Agreement. The Investment Manager shall periodically receive portions of
the
Escrow Funds in accordance with the Escrow Agreement until either: (1) the
Escrow Funds shall have been fully disbursed pursuant the Escrow Agreement
or
(2) the Securities shall have been Fully Retired. “Fully
Retired”
shall
mean that the Buyer shall have fully disposed of all the Securities issued
or
issuable hereunder, shall no longer have any investment in, or ownership
of, any
of the Securities, all amounts owed to YA Global under the Transaction Documents
shall have been paid, and the Transaction Documents shall have been terminated.
When the Securities are Fully Retired, the remaining Escrow Funds shall be
returned to the Company or otherwise disbursed in accordance with the Escrow
Agreement.
16
(iii) The
Company shall pay a structuring and due diligence fee to Yorkville of $50,000
which shall be paid directly from the proceeds of the Closing. The structuring
and due diligence fee shall be nonrefundable and payable whether or not any
Closing occurs.
(h) Transfer
Agent.
The
Company covenants and agrees that, in the event that the Company’s agency
relationship with the transfer agent should be terminated for any reason
while
any Notes or any Series H Preferred Shares remain outstanding, the Company
shall
immediately appoint a new transfer agent and shall require that the new transfer
agent execute and agree to be bound by the terms of the Irrevocable Transfer
Agent Instructions (as defined herein).
(i) Short
Sales.
Neither
the Buyer(s) nor any of its affiliates have an open short position in the
Common
Stock of the Company, and the Buyer(s) agrees that it shall not, and that
it
will cause its affiliates not to, engage in any short sales of or hedging
transactions with respect to the Common Stock as long as any Convertible
Debentures shall remain outstanding.
(j) Lockup
Agreements.
Within
ten (10) calendar days following the date hereof, the Company shall obtain
from
each officer and director a lockup agreement in the form attached hereto
as
Exhibit
E
and upon
receipt of all such executed lockup agreements, all other lockup agreements
of
C. Xxxxxx XxXxxxxx entered into in connection with prior transactions with
the Buyer with regard to Company securities shall be cancelled.
(k) Review
of Public Disclosures.
All SEC
filings (including, without limitation, all filings required under the Exchange
Act, which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and
other
public disclosures made by the Company, including, without limitation, all
press
releases, investor relations materials, and scripts of analysts meetings
and
calls, shall be reviewed and approved for release by the Company’s attorneys
and, if containing financial information, the Company’s independent certified
public accountants.
(l) Disclosure
of Transaction.
Within
four Business Day following the date of this Agreement, the Company shall
file a
Current Report on Form 8-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the Exchange Act and
attaching the material Transaction Documents (including, without limitation,
this Agreement, the form of the Convertible Debenture, the form of Warrant
and
the form of the Registration Rights Agreement) as exhibits to such
filing.
17
(m) Subsidiaries.
In the
event that any entity becomes a subsidiary of the Company or any Guarantor,
the
Company or such Guarantor shall concurrently with such entity becoming a
subsidiary cause such subsidiary to become a guarantor under the Guaranty
Agreement and a Grantor under the Security Agreement (other than a subsidiary
of
Nexus), with respect to each such subsidiary, the Company or Guarantor shall
promptly send to the Buyer written notice setting forth with respect to such
entity the date on which such entity became a subsidiary of the
Company.
(n) Further
Assurances.
At any
time or from time to time upon the request of the Buyer, the Company or any
Guarantor will, at its expense, promptly execute, acknowledge and deliver
such
further documents and do such other acts and things as Buyer may reasonably
request in order to effect fully the purposes of the Transaction Documents,
including providing Buyer with any information reasonably requested pursuant
of
it. In furtherance and not in limitation of the foregoing, each of the Company
or any Guarantor shall take such actions as Buyer may reasonably request
from
time to time to ensure that the obligations are guaranteed by the Guarantors
and
are secured by substantially all of the assets of Company, and its subsidiaries
and all of the outstanding capital stock of Company and its subsidiaries
(subject to limitations contained in the Transaction Documents).
(o) Amendment
to Certificate of Incorporation.
On or
before May 15, 2008, the Company shall call and hold a special meeting of
its
stockholders for the sole purpose of increasing the number of authorized
shares
of Common Stock from 200,000,000 to at least 2,000,000,000 (the “Share
Increase”)
or
obtain the necessary written consent from its stockholders for such actions.
The
Company’s management shall recommend to the stockholders to vote in favor of
increasing the number of shares of Common Stock authorized. Management shall
also vote all of its shares in favor of increasing the number of authorized
shares of Common Stock.
(p) Acknowledgment.
The
Company hereby acknowledges, confirms and agrees that as of the date hereof,
the
Company is indebted to YA Global under the February 2006 Debentures, August
2006
Debentures, and the 2007 Debentures and in the outstanding principal amount
set
forth above plus accrued and unpaid interest thereon and such amounts are
unconditionally owing by the Company to YA Global, without offset, defense
or
counterclaim of any kind, nature or description whatsoever. The Company further
acknowledges, confirms and agrees that: (a) each of the February 2006
Debentures, the August 2006 Debentures, the 2007 Debentures, the February
2006
Purchase Agreement, the August 2006 Purchase Agreement, the 2007 Purchase
Agreement, and all the related documents to which it is a party have been
duly
executed and delivered to YA Global by the Company, and each is in full force
and effect as of the date hereof, (b) the agreements and obligations of the
Company contained in such documents constitute the legal, valid and binding
obligations of the Company, enforceable against each in accordance with their
respective terms, and the Company has no valid defense to the enforcement
of
such obligations.
18
5. NEGATIVE
COVENANTS. Each of the Company and the Guarantors, Safety & Ecology
(provided, however, that the obligations of Safety & Ecology shall not arise
until after the SEC Closing (as defined in Section 8(a)(xiii)) and
Polimatrix, Inc. (collectively, the “HSCC
Subsidiaries”)
covenant and agree that, so long as either any portion of the Notes remain
outstanding or any Series H Preferred Shares remain outstanding, such party
shall perform, and shall cause each of its subsidiaries to perform, all
covenants in this Section 5.
(a) Corporate
Existence.
Neither
the Company or any HSCC Subsidiary shall directly or indirectly consummate
any
merger, reorganization, restructuring, reverse stock split consolidation,
sale
of all or substantially all of the Company’s assets or any similar transaction
or related transactions (each such transaction, an “Organizational
Change”)
unless, prior to the consummation an Organizational Change, the Company obtains
the written consent of the Buyer.
(b) Transactions
With Affiliates.
The
Company and each HSCC Subsidiary shall not, and shall cause each of its
subsidiaries not to, enter into, amend, modify or supplement, or permit any
subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any subsidiary’s
officers, directors, person who were officers or directors at any time during
the previous two (2) years, stockholders who beneficially own five percent
(5%)
or more of the Common Stock, or Affiliates (as defined below) or with any
individual related by blood, marriage, or adoption to any such individual
or
with any entity in which any such entity or individual owns a five percent
(5%)
or more beneficial interest (each a “Related
Party”),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any investment in Homeland Advisory or Celerity or
any
other subsidiary that has granted the Buyer a lien in all its assets pursuant
to
the Security Agreement, (c) any agreement, transaction, commitment, or
arrangement on an arms-length basis on terms no less favorable than terms
which
would have been obtainable from a person other than such Related Party, (d)
any
agreement, transaction, commitment, or arrangement which is approved by a
majority of the disinterested directors of the Company; for purposes hereof,
any
director who is also an officer of the Company or any subsidiary of the Company
shall not be a disinterested director with respect to any such agreement,
transaction, commitment, or arrangement. “Affiliate”
for
purposes hereof means, with respect to any person or entity, another person
or
entity that, directly or indirectly, (i) has a ten percent (10%) or more
equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity,
or
(iv) shares common control with that person or entity. “Control”
or
“controls”
for
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity.
(c) Subsequent
Offerings.
(i) Without
the written consent of the Buyer, the Company shall not (a) grant, issue
or sell
any Common Stock or other equity securities, any securities convertible into
or
exchangeable for any Common Stock or other equity securities or take any
other
action that may result in the issuance of any of the foregoing, or (b) file
any
registration statements on Form S-8 or issue any Common Stock that is registered
on Form S-8.
19
(ii) Without
the written consent of the Buyer, the Company shall not consummate any merger,
reorganization, restructuring, reverse stock split consolidation, sale of
all or
substantially all of the Company’s assets or any similar transaction or related
transactions, or take any other action that may result in any of the foregoing,
except that any wholly-owned subsidiary of the Company may merge with the
Company, provided that, the Company shall be the continuing or surviving
entity.
(d) Notwithstanding
the restrictions set forth in Section 5(c) above, the Company may issue (i)
shares of Common Stock or options to employees, consultants, officers or
directors of the Company pursuant to any stock or option plan duly adopted
by a
majority of the independent directors of the Board of Directors of the Company
or a majority of the members of a committee of independent directors established
for such purpose; provided
that the
number of shares directly or upon exercise of such options shall not exceed
75,000,000 in the aggregate; (c) securities upon the exercise or exchange
of or
conversion of any Securities issued hereunder and/or securities exercisable
or
exchangeable for or convertible into shares of Common Stock issued and
outstanding on the Closing Date provided the terms of such securities have
not
been changed; (d) securities issued pursuant to acquisitions of other companies;
provided, that any such issuance (1) shall only be to a person or entity
that
is, itself or through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company receives
substantial 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, (2) shall only be to a person or entity that is
not an
Affiliate of the Company, the HSCC Subsidiaries, or any of their subsidiaries
and (3) has been approved by a majority of the independent directors of the
Company; (e) securities issued in connection with strategic license agreements
or other partnering arrangements so long as such issuances are not for the
purpose of raising capital.
(e) Indebtedness.
The
Company and the HSCC Subsidiaries shall not, nor shall they permit any of
their
subsidiaries to, directly or indirectly, create, incur, assume or guaranty,
or
otherwise become or remain directly or indirectly liable with respect to
any
Indebtedness, except for Permitted Indebtedness. “Permitted
Indebtedness”
means:
(i) indebtedness evidenced by Notes; (ii) indebtedness described on the
Disclosure Schedule; (iii) indebtedness incurred solely for the purpose of
financing the acquisition or lease of any equipment by a Credit Party, including
capital lease obligations with no recourse other than to such equipment;
(iv)
renewals, extensions and refinancing of any indebtedness described in clauses
(i) or (iii) of this subsection, or (iv) indebtedness of up to $8,000,000
incurred by Safety & Ecology pursuant to that Loan and Security Agreement
dated March 14, 2008, by and among Safety & Ecology, its subsidiaries
and Suntrust Bank, provided that the Buyer (within thirty (30) days following
the Closing Date and at all times thereafter) has the right to purchase the
Safety & Ecology Debt from the creditor at par (the “Safety
& Ecology Debt”).
20
(f) Liens.
The
Company and the HSCC Subsidiaries shall not, nor shall they permit any of
their
subsidiaries to directly or indirectly, create, incur, assume or permit to
exist
any lien, security interest, option or other charge or encumbrance (each,
a
“Lien”)
on or
with respect to any property or asset of any kind (including any document
or
instrument in respect of goods or accounts receivable) of Company, the HSCC
Subsidiaries, or any of their subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, or file or permit the filing
of,
or permit to remain in effect, any financing statement or other similar notice
of any Lien with respect to any such property, asset, income or profits under
the UCC of any State or under any similar recording or notice statute, except
for Permitted Liens. “Permitted
Liens”
means:
(1) the security interests created by the Security Documents, (2) any prior
security interest granted to the Buyer, (3) existing Liens which have been
disclosed by the Company on Schedule 5(f) attached hereto; (4) inchoate
Liens for taxes, assessments or governmental charges or levies not yet due,
as
to which the grace period, if any, related thereto has not yet expired, or
being
contested in good faith and by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP; (5) Liens of carriers,
materialmen, warehousemen, mechanics and landlords and other similar Liens
which
secure amounts which are not yet overdue or which are being contested in
good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP; (6) licenses, sublicenses, leases or
subleases granted to other person or entity not materially interfering with
the
conduct of the business of the Company or its subsidiaries; (7) Liens securing
capitalized lease obligations and purchase money indebtedness incurred solely
for the purpose of financing an acquisition or lease; (8) easements,
rights-of-way, restrictions, encroachments, municipal zoning ordinances and
other similar charges or encumbrances, and minor title deficiencies, in each
case not securing debt and not materially interfering with the conduct of
the
business of the Company or its subsidiaries and not materially detracting
from
the value of the property subject thereto; (9) Liens arising out of the
existence of judgments or awards which judgments or awards do not constitute
an
Event of Default; (10) Liens incurred in the ordinary course of business
in
connection with workers compensation claims, unemployment insurance, pension
liabilities and social security benefits and Liens securing the performance
of
bids, tenders, leases and contracts in the ordinary course of business,
statutory obligations, surety bonds, performance bonds and other obligations
of
a like nature (other than appeal bonds) incurred in the ordinary course of
business (exclusive of obligations in respect of the payment for borrowed
money); (11) Liens in favor of a banking institution arising by operation
of law
encumbering deposits (including the right of set-off) and contractual set-off
rights held by such banking institution and which are within the general
parameters customary in the banking industry and only burdening deposit accounts
or other funds maintained with a creditor depository institution; (12) usual
and
customary set-off rights in leases and other contracts; (13) escrows in
connection with acquisitions and dispositions and (14) a Lien granted by
Safety
& Ecology in connection with the Safety & Ecology Debt.
(g) Fundamental
Changes; Disposition of Assets; Acquisitions.
The
Company and the HSCC Subsidiaries shall not enter into any transaction of
merger
or consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor
or
sublessor), exchange, transfer or otherwise dispose of, in one transaction
or a
series of transactions, all or any part of its business, assets or property
of
any kind whatsoever, whether real, personal or mixed and whether tangible
or
intangible, whether now owned or hereafter acquired, or acquire by purchase
or
otherwise (other than purchases or other acquisitions of inventory, materials
and equipment and capital expenditures in the ordinary course of business)
the
business, property or fixed assets of, or stock or other evidence of beneficial
ownership of, any entity or any division or line of business or other business
unit of any entity, except: (a) asset sales, the proceeds of which (i) are
less
than $50,000 with respect to any single asset sale or series of related asset
sales, and (ii) when aggregated with the proceeds of all other asset sales
made
within the same fiscal year, are less than $100,000; provided
(1) the
consideration received for such assets shall be in an amount at least equal
to
the fair market value thereof (determined in good faith by the board of
directors of the Company (or similar governing body)), (2) no less than 75%
thereof shall be paid in Cash, (b) disposals of obsolete or worn out property
or
(c) the sale by SEC of its assets in the ordinary course of business following
the completion of a project.
21
(h) Disposal
of Subsidiary Interests.
The
Company and the HSCC Subsidiaries shall not (a) directly or indirectly sell,
assign, pledge or otherwise encumber or dispose of any capital stock of any
of
its subsidiaries, except to qualify directors if required by applicable law;
or
(b) permit any of its subsidiaries directly or indirectly to sell, assign,
pledge or otherwise encumber or dispose of any capital stock of any of its
subsidiaries, except to the Company or any subsidiaries (subject to the
restrictions on such disposition otherwise imposed hereunder), or to qualify
directors if required by applicable law.
(i) The
Company shall not (a) create a new series of preferred stock, or amend any
terms, preferences or rights of any series of preferred stock now existing
or
hereinafter created, (b) authorize or issue shares of any class of stock
having
preferences or priority as to dividends or assets superior to or on a parity
with any such preference or priority of the Series H Preferred Shares, (c)
make
any amendment to its Certificate of Incorporation or Bylaws adversely affecting
(directly or indirectly) the rights of the holders of the Series H Preferred
Shares, or (d) reclassify any shares of any class of stock into shares having
preference or priority as to dividends or assets superior to or on a parity
with
any such preference or priority of the Series H Preferred Shares.
Notwithstanding the forgoing, the Company shall be permitted to create a
class
of Series I Convertible Preferred Stock (the “Series I Stock) with the terms,
conditions, and preferences specifically set forth on Exhibit E attached
hereto
and the Company may issue up to 550,000 shares of Series I Stock to the former
shareholders of Safety & Ecology upon the SEC Closing.
(a) The
Company shall issue the Irrevocable Transfer Agent Instructions to its transfer
agent, and any subsequent transfer agent, irrevocably appointing Xxxxx Xxxxxxxx,
Esq. as the Company’s agent for purpose instructing its transfer agent to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company (“DTC”),
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares issued upon conversion of the Series
H
Preferred Shares or exercise of the Warrants as specified from time to time
by
each Buyer to the Company upon conversion of the Series H Preferred Shares
or
exercise of the Warrants. The Company shall not change its transfer agent
without the express written consent of the Buyer, which may be withheld by
the
Buyer in their sole discretion. The Company warrants that no instruction
other
than the Irrevocable Transfer Agent Instructions referred to in this Section
5,
and stop transfer instructions to give effect to Section 2(g) hereof (in
the
case of the Conversion Shares or Warrant Shares prior to registration of
such
shares under the Securities Act) 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 other Transaction Documents. If a Buyer effects a sale, assignment
or
transfer of the Securities in accordance with Section 2(f), the Company shall
promptly instruct its transfer agent to issue one or more certificates or
credit
shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by the Buyer to effect such sale, transfer or
assignment and, with respect to any transfer, shall permit the transfer.
In the
event that such sale, assignment or transfer involves Conversion Shares or
Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall
issue
such Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend. Nothing in this Section 5 shall affect in
any
way the Buyer’s obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares. The Company acknowledges
that
a breach by it of its obligations hereunder will cause irreparable harm to
the
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for
a
breach of its obligations under this Section 5 will be inadequate and agrees,
in
the event of a breach or threatened breach by the Company of the provisions
of
this Section 5, that the Buyer(s) shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss
and without any bond or other security being required.
22
The
obligation of the Company hereunder to issue and sell the Series H Preferred
Shares, the Notes, and the Warrants to the Buyer at the Closing is subject
to
the satisfaction, at or before the Closing Dates, of each of the following
conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole
discretion:
(a) The
Buyer
shall have executed the Transaction Documents and delivered them to the
Company.
(b) The
Buyer
shall have delivered to the Company the Purchase Price for the Series H
Preferred Shares, the Notes, and the Warrants in the respective amounts as
set
forth next to the Buyer as set forth on Schedule I attached hereto, minus
any
fees to be paid directly from the proceeds the Closing as set forth herein,
by
wire transfer of immediately available U.S. funds pursuant to the wire
instructions provided by the Company.
(c) The
representations and warranties of the Buyer 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 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 Buyer at
or
prior to the Closing Dates.
(a) The
obligation of the Buyer hereunder to purchase the Series H Preferred Shares,
the
Notes, and the 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 the Buyer’s sole benefit and may be waived by the Buyer
at any time in its sole discretion:
23
(i) The
Company shall have executed the Transaction Documents and delivered the same
to
the Buyer; provided, however, that the Deposit Control Agreement may be
delivered within five (5) business days following the Closing Date.
(ii) The
Common Stock shall be authorized for quotation or trading on the Primary
Market,
trading in the Common Stock shall not have been suspended for any reason,
and
all the Conversion Shares issuable upon the conversion of the Convertible
Debentures shall be approved for listing or trading on the Primary Market.
(iii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations
and
warranties is already qualified as to materiality in Section 3 above, in
which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that
speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by
the
Company at or prior to the Closing Date
(iv) The
Company shall have delivered to the Buyer(s) the Series H Preferred Shares,
the
Notes, and the Warrants in the respective amounts set forth opposite the
Buyer’s
name on Schedule I and II attached hereto.
(v) The
Buyer
shall have received an opinion of counsel from counsel to the Company in
a form
satisfactory to the Buyer.
(vi) The
Company shall have provided to the Buyer a true copy of a certificate of good
standing evidencing the formation and good standing of the Company from the
secretary of state (or comparable office) from the jurisdiction in which
the
Company is incorporated, as of a date within 10 days of the Closing
Date.
(vii) The
Company shall have delivered to the Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(c) as adopted by the Company's Board
of
Directors in a form reasonably acceptable to the Buyer, (ii) the Certificate
of
Incorporation and (iii) the Bylaws, each as in effect at the
Closing.
(viii) The
Company or the Buyer shall have filed a form UCC-1 or such other forms as
may be
required to perfect the Buyer’s interest in the Pledged Property as detailed in
the Security Agreement dated the date hereof and provided proof of such filing
to the Buyer(s).
(ix) All
subsidiary stock held by the Company as well as executed and medallion
guaranteed stock powers as required pursuant to the Security Documents shall
have been delivered to the Buyer.
(x) The
Company shall have provided to the Buyer an acknowledgement, to the satisfaction
of the Buyer, from the Company’s independent certified public accountants as to
its ability to provide all consents required in order to file a registration
statement in connection with this transaction.
24
(xi) The
Company shall have created the Share Reserve.
(xii) The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to
the Buyer, shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(xiii) All
conditions to the consummation of the transactions contemplated by the Agreement
and Plan of Merger and Stock Purchase Agreement entered into as of March
13,
2008 among the Company, Safety & Ecology, HSCC Acquisition Corp. and the
shareholders of Safety & Ecology named therein shall have been satisfied or
waived (except for delivery by the Company of the cash portion of the merger
consideration, which shall be satisfied simultaneously with the Closing)
and
such transactions shall close simultaneously with the Closing hereunder (the
“SEC
Closing”).
9. INDEMNIFICATION.
(a) In
consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder,
and in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
each
other holder of the Convertible Debentures and the Conversion Shares, and
all of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Buyer
Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses,
costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action
for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified
Liabilities”),
incurred by the Buyer Indemnitees or any of them as a result of, or arising
out
of, or relating to (a) any misrepresentation or breach of any representation
or
warranty made by the Company in this Agreement, the Convertible Debentures
or
the other Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement
or
obligation of the Company contained in this Agreement, or the other Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Buyer Indemnitee and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the parties hereto,
any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Convertible Debentures
or
the status of the Buyer or holder of the Convertible Debentures the Conversion
Shares, as a Buyer of Convertible Debentures in the Company. To the extent
that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities, which is permissible under applicable
law.
25
(b) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Buyer’s other obligations under this Agreement, the Buyer
shall defend, protect, indemnify and hold harmless the Company and all of
its
officers, directors, employees and agents (including, without limitation,
those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company
Indemnitees”)
from
and against any and all Indemnified Liabilities incurred by the Indemnitees
or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, instrument or document contemplated hereby or
thereby executed by the Buyer, (b) any breach of any covenant, agreement
or
obligation of the Buyer(s) contained in this Agreement, the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby executed by the Buyer, or (c) any cause of action, suit or claim
brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement,
the
Transaction Documents or any other instrument, document or agreement executed
pursuant hereto by any of the parties hereto. To the extent that the foregoing
undertaking by each Buyer may be unenforceable for any reason, each Buyer
shall
make the maximum contribution to the payment and satisfaction of each of
the
Indemnified Liabilities, which is permissible under applicable law.
(a) Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New Jersey without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in
Xxxxxx
County, New Jersey, and expressly consent to the jurisdiction and venue of
the
Superior Court of New Jersey, sitting in Xxxxxx County and the United States
District Court for the District of New Jersey sitting in Newark, New Jersey
for
the adjudication of any civil action asserted pursuant to this
Paragraph.
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective
when
counterparts have been signed by each party and delivered to the other party.
In
the event any signature page is delivered by facsimile transmission, the
party
using such means of delivery shall cause four (4) additional original executed
signature pages to be physically delivered to the other party within five
(5)
days of the execution and delivery hereof.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not
form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction
or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement, Amendments.
This
Agreement supersedes all other prior oral or written agreements between the
Buyer(s), the Company, their affiliates and persons acting on their behalf
with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set
forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
26
(f) Notices.
Any
notices, consents, waivers, or other communications required or permitted
to be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one
(1) day
after deposit with a nationally recognized overnight delivery service, in
each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If
to the Company, to:
|
Mr.
C. Xxxxxx XxXxxxxx
|
Chief
Executive Officer
|
|
0000
X. Xxxxx Xxxx, Xxx. 000
|
|
Xxxxxxxxx,
XX 00000
|
|
Facsimile:
(000) 000-0000
|
|
With
a copy to:
|
Xxxxxx
X. Xxxxxxx, Esq.
|
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP
|
|
000
X. Xxxxxxxx Xxxx., Xxxxx 0000
|
|
Xxxxx,
XX 00000
|
|
Facsimile:
(000) 000-0000
|
If
to the
Buyer(s), to its address and facsimile number on Schedule I, with copies
to the
Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5)
days’ prior written notice to the other party of any change in address or
facsimile number.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. Neither the Company nor any Buyer
shall
assign this Agreement or any rights or obligations hereunder without the
prior
written consent of the other party hereto.
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may
any
provision hereof be enforced by, any other person.
(i) Survival.
Unless
this Agreement is terminated under Section 9(l), all agreements, representations
and warranties contained in this Agreement or made in writing by or on behalf
of
any party in connection with the transactions contemplated by this Agreement
shall survive the execution and delivery of this Agreement and the Closing.
27
(j) Publicity.
The
Company and the Buyer(s) shall have the right to approve, before issuance
any
press release or any other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that the Company
shall
be entitled, without the prior approval of the Buyer(s), to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company shall
use
its best efforts to consult the Buyer(s) in connection with any such press
release or other public disclosure prior to its release and Buyer(s) shall
be
provided with a copy thereof upon release thereof).
(k) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(l) Termination.
In the
event that the Closing shall not have occurred with respect to the Buyer
on or
before five (5) business days from the date hereof due to the Company’s or the
Buyer’s failure to satisfy the conditions set forth in Sections 7 and 8 above
(and the non-breaching party’s failure to waive such unsatisfied condition(s)),
the non-breaching party shall have the option to terminate this Agreement
with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated by the Company pursuant to this Section 10(l), the
Company shall remain obligated to reimburse the Buyer(s) for the fees and
expenses of Yorkville Advisors LLC described in Section 4(g) above (other
than
the amounts set forth in Section 4(g)(ii)).
(m) Brokerage.
The
Company represents that no broker, agent, finder or other party has been
retained by it in connection with the transactions contemplated hereby and
that
no other fee or commission has been agreed by the Company to be paid for
or on
account of the transactions contemplated hereby.
(n) No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen
by the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
28
IN
WITNESS WHEREOF,
the
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
|
|||||
HOMELAND SECURITY CAPITAL CORPORATION | |||||
By:
|
|||||
Name:
|
|||||
Title:
|
SUBSIDIARIES
(solely with respect to Section 5):
|
|||||
POLIMATRIX,
INC.
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
HOMELAND
SECURITY ADVISORY SERVICES, INC.,
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
CELERITY
SYSTEMS, INC.
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
SAFETY
& ECOLOGY HOLDINGS CORPORATION
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
NEXUS
TECHNOLOGIES GROUP, INC
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
29
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
BUYER:
|
|||
YA
GLOBAL INVESTMENTS, L.P.
|
|||
By:
|
Yorkville
Advisors, LLC
|
||
Its:
|
Investment
Manager
|
||
By:
|
|
||
Name:
|
Xxxx
Xxxxxx
|
||
Its:
|
Portfolio
Manager
|
30
SCHEDULE
I
SCHEDULE
OF BUYER
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
Buyer
|
Principal
Amount of New Notes to be Purchased at the
Closing
|
Number
of New Preferred Shares to be Purchased at the
Closing
|
Warrant
to Acquire Such Number of Warrant Shares to be Purchased at the
Closing
|
Purchase
Price to be Paid by Buyer
|
Legal
Representative’s Address and Facsimile Number
|
YA
Global Investments, L.P.
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx
Xxxx, XX 00000
Attention:
Xxxx Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
Cayman Islands
|
$6,310,000
|
6,190
Shares
|
83,333,333
|
$12,500,000
|
Xxxxx
Xxxxxxxx, Esq.
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx
Xxxx, Xxx Xxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
|
SCHEDULE
II
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
(7)
|
Buyer
|
Principal
Amount of February 2006 Debenture Surrendered at
Closing
|
Number
of Series H Preferred Shares to be Issued in Exchange for February
2006
Debenture at Closing
|
Principal
Amount of August 2006 Debenture Surrendered at
Closing
|
Principal
Amount of 2007 Debenture Surrendered at Closing
|
Principal
Amount Exchanged Notes to be Issued in Exchange for the August
2006
Debenture and the 2007 Debenture at Closing
|
Legal
Representative’s Address and Facsimile Number
|
YA
Global Investments, L.P.
000
Xxxxxx Xxxxxx
Xxxxx
0000
Xxxxxx
Xxxx, XX 00000
Attention:
Xxxx Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
Cayman Islands
|
$3,810,000
|
3,810
Shares
|
$4,000,000
|
$2,750,000
|
$6,750,000
|
Xxxxx
Xxxxxxxx, Esq.
000
Xxxxxx Xxxxxx,
Xxxxx
0000
Xxxxxx
Xxxx, Xxx Xxxxxx 00000
T:
(000) 000-0000
F:
(000) 000-0000
|
2
Disclosure
Schedule
Exhibit
A
– Form
of
Certificate of Designations of Series H Preferred Shares
Exhibit
B
– Form of Note
Exhibit
C
– Form of Warrant
Exhibit
D
– Form of Escrow Agreement
Exhibit
E
– Form of Series I Preferred Stock