FORM OF SECURITIES PURCHASE AGREEMENT
Exhibit 4.1
FORM
OF
THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made
as of _________, 2010, by and among _______________, a ________ corporation (the
“Company”),
____________, an Illinois limited liability company (the “Investor”), and
_________, President and Chief Executive Officer of the Company, in his
individual capacity, (the “Affiliate”).
RECITALS
WHEREAS, the Company has
authorized the sale and issuance of an interest bearing debenture with a
____________ percent (___%) original issue discount and a rate of ___% per annum
that matures ________ (___) months from the date hereof in substantially the
form attached hereto as Exhibit A (the “Debenture”), a
warrant to exercise a number of shares equal to the $___________ or ________% of
the cash paid at Closing divided by the Market Price (as defined in the
Debenture) and with an initial exercise price of $_____, subject to adjustment,
and an expiration date five (5) years from the date hereof in substantially the
form attached hereto as Exhibit B (the “Warrant”), and common
stock issuable upon satisfaction of all or part of the Note or on exercise of
the warrant (collectively, the “Underlying Shares”)
(collectively, the Debenture, the Warrant and the Underlying Shares shall be
referred to as the “Securities”) as
provided herein in exchange for a loan by the Investor to the Company of
________________ Dollars ($___________) (the “Loan
Amount”);
WHEREAS, the Loan Amount shall
bear interest at the rate of ___% and shall have an original issue discount of
_____________ percent (____%);
WHEREAS, the Investor has
agreed to deliver to the Company at Closing (as defined herein) the total of:
(i) $__________ in cash; (ii) __________ secured notes in the amount of
$_________ each bearing interest at the rate of 5% per annum in substantially
the form attached hereto as Exhibit C-1 (each a
“Investor Note”
and collectively, the “Investor
Notes”);
WHEREAS, as an inducement to
enter into this Agreement and as collateral for the Debenture, the Affiliates
have agreed to pledge _________ shares of common stock of the Company (the
“Collateral
Shares”), which shall have been issued by the company more than ________
months prior to the date hereof;
WHEREAS, at the Closing, the
Company desires to sell, and the Investor desires to purchase, the Securities
upon the terms and conditions stated in this Agreement;
WHEREAS, this Agreement, the
Debenture, the Warrant, the Pledge Agreement (as defined herein), the Guaranty
Agreement (as defined herein), the Investor Notes and the Escrow Agreement (as
defined herein) are sometimes collectively referred to herein as the “Transaction
Documents.”
NOW, THEREFORE, in
consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1
ARTICLE
1
AUTHORIZATION
AND SALE OF SECURITIES
1.1 Authorization. The Company has authorized
the sale and issuance of the Debenture with a principal amount of $__________
and a maturity date __________ (___) months following the date hereof, and the
Warrant having an expiration date on the fifth (5th)
anniversary of the date hereof.
1.2 Closing Date. The closing of the
purchase and sale of the Securities hereunder (the “Closing”) shall be
held at the offices of ____________, at 10:00 a.m. New York time on or before
___________, 2010 or at such other time and place upon which the Company and the
Investor shall agree.
1.3 Closing Deliverables of the
Company, Affiliates and the Investor.
(a) Closing Deliverables of the
Company. At
the Closing, subject to the terms and conditions of this Agreement, the Company
agrees to issue and deliver to the Investor the instruments identified in (i)
through (v) below:
(i) all
executed Transaction Documents that the Company is a party to;
(ii) completed
Schedules to this Agreement;
(iii) a
certificate from a duly authorized officer of the Company certifying that the
representations made by the Company in Article 2 are true and correct as of the
Closing;
(iv) a
corporate resolution authorizing this financing transaction as contemplated in
the Transaction Documents and approving the entry into the Transaction
Documents; and
(v) an
opinion of Xxxxxx & Xxxxxx, LLP in the form annexed hereto.
(b) Closing Deliverables of the
Affiliate. In order to induce Investor to purchase the Debenture and
Warrant, at the Closing, the Affiliate shall execute and deliver to the Investor
the documents identified in (i) below:
(i) a pledge
agreement between the Affiliate and the Investor whereby the Affiliate shall
pledge ____________ (___________) shares (the “Pledge Shares”) to
the Company, which shall have been issued by the Company more than __________
months prior to the date hereof (the “Pledge Agreement”),
and a related Escrow Agreement in substantially the forms attached hereto as
Exhibit D and Exhibit
D-1; and
(c) Closing Deliverables of the
Investor. At
the Closing, subject to the terms and conditions of this Agreement, the Investor
agrees to issue and/or deliver to the Company, the following closing item
deliverables identified in (i) and (ii), below:
(i) $___________
in cash (the “Purchase
Price”) pursuant to the wire instruction set forth in Exhibit F attached
hereto; and
(ii) ___________
Investor Notes, each in the principal amount of $____________ bearing interest
at the rate of ___% per annum.
2
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to the Investor, as of the date hereof, as
follows:
2.1 Organization, Good Standing
and Power. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada and has the
requisite corporate power to own, lease and operate its properties and assets
and to conduct its business as it is now being conducted. The Company is not in
violation of any of the provisions of its Certificate of Incorporation or
Bylaws. Except as disclosed on Schedule 2.1, the
Company does not have any Subsidiaries (as defined below) or own securities of
any kind in any other entity. The Company is duly qualified to do business and
is in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except in
such jurisdictions in which the failure to so qualify would not have a material
adverse affect on the Company. “Subsidiary” shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries.
2.2 Corporate Power;
Authorization. The Company has all requisite legal and corporate
power and has taken all requisite corporate action to execute and deliver this
Agreement and the other Transaction Documents, to sell and issue the Securities,
to issue the shares underlying the Warrant upon exercise of the Warrant in
accordance with the terms of such Warrant, and to carry out and perform all of
its obligations under this Agreement and the other Transaction Documents. This
Agreement and the other Transactional Documents constitute, and will constitute,
legal, valid and binding obligations of the Company, enforceable in accordance
with their respective terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization or similar laws relating to or affecting
the enforcement of creditors’ rights generally and (b) as limited by
equitable principles generally. The execution and delivery of the Transaction
Documents do not, and the performance of the Transaction Documents and the
compliance with the provisions hereof and thereof, including the issuance, sale
and delivery of the Securities by the Company will not, conflict with, or result
in a breach or violation of the terms, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any lien
pursuant to the terms of, the certificate of incorporations (the “Certificate”)
or by-laws (the “Bylaws”) of the Company, each as amended to date, or any
statute, law, rule or regulation or any state or federal order, judgment or
decree or any indenture, mortgage, lease or other agreement or instrument to
which the Company or any of its properties is subject, except for any conflict,
breach, violation, default or imposition of a lien (other than pursuant to the
terms of the Certificate or Bylaws) that would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
assets, liabilities, financial condition, business or operations of the
Company.
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2.3 Issuance and Delivery of the
Securities.
The Securities are duly authorized and, when issued at the Closing, will
be validly issued. The shares underlying the Warrant and which may be
delivered in full or partial satisfaction of the Debenture are duly authorized
and, upon exercise of the Warrant or such satisfaction the Debenture in
accordance with the terms thereof, will be validly issued, fully paid and
nonassessable. The issuance and delivery of the Securities are not subject
to any right of first refusal, preemptive right, right of participation, or any
similar right existing in favor of any person or any liens or
encumbrances. When issued in compliance with the provisions of this
Agreement and the Debenture and the Warrant as the case may be, the issuance of
the Securities does not require the approval of the Company’s stockholders under
the provisions of the Certificate or Nevada law, or, any stock exchange or
self-regulatory organization.
2.4 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 do not and will not (i) violate any provision of the Company’s
Certificate or Bylaws, each as amended to date, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party or by which the Company’s respective properties
or assets are bound, or (iii) result in a violation of any federal, state or
local statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or by which
any property or asset of the Company is bound or affected.
2.5 SEC Documents; Financial
Statements. Each report delivered to
the Investors is a true and complete copy of such document as filed by
the Company with the Securities and Exchange Commission (the “SEC”). The Company
has filed in a timely manner all documents that the Company was required to file
with the SEC, such documents, together with the exhibits thereto (the “SEC Documents”),
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during
the twelve calendar months preceding the date hereof. As of their
respective filing dates, all SEC Documents complied in all material respects
with the requirements of the Exchange Act. None of the SEC Documents as of
their respective dates contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company
included in the SEC Documents (the “Financial
Statements”) comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto. The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present the consolidated financial position of the Company and its subsidiaries,
if any, at the dates thereof and the consolidated results of their operations
and consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring adjustments or to the extent that
such unaudited statements do not include footnotes).
2.6 Governmental
Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated
hereby except for compliance with the securities and blue sky laws in the states
in which the Debenture and Warrant are offered and/or sold, which offer and sale
will be effected in compliance with such laws.
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2.7 Capitalization. The
authorized capital stock of the Company consists of 196,000,000 shares of common
stock, par value $0.0001 per share (the “Common Stock”) and
80,000,000 shares of preferred stock, par value $0.0001 per share (the “Preferred Stock”). As
of the date hereof, 63,522,000 shares of Common Stock and no shares of Preferred
Stock are issued and outstanding. Except as disclosed on Schedule 2.7, there
are no outstanding warrants, options, convertible or exchangeable securities or
other rights, agreements or arrangements of any character under which the
Company is or may be obligated to issue any equity securities of any
kind.
2.8 Litigation. Except as
disclosed to the Investor in writing and except as disclosed in the SEC
Documents, there are no actions, suits, proceedings or investigations pending
or, to the best of the Company’s knowledge, threatened against the Company or
any of its properties before or by any court or arbitrator or any governmental
body, agency or official in which there is a reasonable likelihood (in the
reasonable judgment of the Company) of an adverse decision that (a) could
have a material adverse effect on the assets, liabilities, financial condition,
business or operations of the Company, or (b) could impair the ability of
the Company to perform in any material respect its obligations under this
Agreement, the Warrant, the Debenture, or any other Transaction
Document.
2.9 Company not an “Investment
Company”. The Company has been advised by competent counsel of
the rules and requirements under the Investment Company Act of 1940, as amended
(the “Investment
Company Act”). The Company is not, and immediately after receipt of
payment for the Securities will not be, an “investment company” or an entity
“controlled” by an “investment company” within the meaning of the Investment
Company Act and shall conduct its business in a manner so that it will not
become subject to the Investment Company Act.
2.10 Compliance. The
Company’s Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and is quoted on the Over the Counter Bulletin Board (the “OTCBB”), and the
Company has taken no action designed for the purpose of, or likely to have the
effect of, terminating the registration of its Common Stock under the Exchange
Act or de-listing the Common Stock from the OTCBB, nor has the Company received
any notification that the SEC or the Financial Industry Regulatory Authority
(“FINRA”) is
contemplating terminating such registration or quoting. The Company is in
material compliance with the listing and maintenance requirements for continued
quoting of the Common Stock.
2.11 Use of
Proceeds. The proceeds of the sale of the Securities shall be
used for working capital or general corporate purposes.
2.12 Brokers and
Finders. Except as disclosed on Schedule 2.12, no
person or entity will have, as a result of or in connection with the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or the Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding, written or
oral, entered into by or on behalf of the Company.
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2.13 Intellectual
Property.
(a) “Intellectual
Property” shall mean patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes disclosed on Schedule
2.13(a).
(b) Except as
disclosed on Schedule
2.13(b), the Company owns or has the valid right to use all of the
Intellectual Property that is necessary for the conduct of the Company’s
business as currently conducted or as currently proposed to be conducted free
and clear of all material liens and encumbrances.
(c) Except as
disclosed on Schedule
2.13(c), (i) the conduct of the Company’s business as currently conducted
does not infringe or otherwise conflict with (collectively, “Infringe”) any
Intellectual Property rights of any third party or any confidentiality
obligation owed by the Company to a third party and the Company has not received
any written notice of any such Infringement, and (ii) to the knowledge of the
Company, the Intellectual Property and confidential information of the Company
are not being Infringed by any third party.
2.14 Questionable
Payments. Neither the Company nor, to the best knowledge of
the Company, any of its current or former stockholders, directors, officers,
employees, agents or other persons acting on behalf of the Company, has on
behalf of the Company or in connection with its business: (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (b) made any direct or indirect
unlawful payments to any governmental officials or employees from corporate
funds; (c) established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company; or (e) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment of any
nature.
2.15 Transactions with
Affiliates. Except as disclosed on Schedule 2.15, none
of the officers, directors or shareholders of the Company and, to the best
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or to a presently contemplated
transaction (other than for services as employees, officers and directors) that
would be required to be disclosed pursuant to Item 404 of Regulation S-K
promulgated under the Securities Act of 1933., as amended (the “Securities
Act”).
2.16 Insurance. The
Company maintains and will continue to maintain insurance with financially sound
and reputable insurers in such amounts and covering such risks and in such
amounts as are reasonably adequate, prudent and consistent with industry
practice for the conduct of its business and the value of its property, all of
which insurance is in full force and effect. The Company has not
received notice from, and has no knowledge of any threat by, any insurer that
has issued any insurance policy to the Company that such insurer intends to deny
coverage under or cancel, discontinue or not renew any insurance policy in force
as of the date hereof.
2.17 No Additional
Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated
hereby other than as specified in this Agreement.
2.18 Absence of Undisclosed
Liabilities. The Company has no material liabilities of any nature
(whether absolute, accrued, contingent or otherwise), except (i) as and to the
extent reflected in the Financial Statements, and (ii) for liabilities that have
been incurred in the ordinary course of business consistent with past practice
and that would not, individually and in the aggregate, reasonably be expected to
have a material adverse effect on the assets, financial condition, business or
operations of the Company.
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2.19 Governmental
Authorizations. The Company has
all permits, licenses and other authorizations of governmental authorities that
are required for the conduct of its business and operations as currently
conducted or as currently proposed to be conducted, the lack of which could
materially and adversely affect the assets, financial condition, business or
operations of the Company. The Company is, and at all times has been, in
compliance with the provisions of its material permits, licenses and other
governmental authorizations.
2.20 No Material Adverse
Change. Except as disclosed on
Schedule 2.20,
since November 30, 2009, there have not been any changes in the assets,
liabilities, financial condition or operations of the Company that reflected in
the Financial Statements except changes in the ordinary course of business which
have not been, either individually or in the aggregate, materially
adverse. The Company does not have pending before the SEC any request
for confidential treatment of information.
2.21 Reservation. The
Company has duly reserved for issuance such number of shares of Common Stock as
may be issuable from time to time upon exercise, exchange or conversion, as the
case may be, of the Securities.
2.22 Internal Accounting
Controls. The Company 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 GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and
procedures (as defined in Exchange Rules 13a-15 and 15d-15) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company is made known to the certifying officers by
others within those entities, particularly during the period in which the
Company’s Form 10-K or 10-Q, as the case may be, is being prepared.
2.23 Title to
Assets. Except as set forth on Schedule 2.23, the Company has
good and marketable title in fee simple to all real property owned by it that is
material to the business of the Company and good and marketable title in all
tangible personal property owned by it that is material to the business of the
Company in each case free and clear of all liens, except for liens as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
liens for the payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company is held by it under valid, subsisting
and enforceable leases with which the Company is in material
compliance.
2.24 Registration
Rights. Except as disclosed on
Schedule 2.24,
the Company has not granted or agreed to grant to any person any rights
(including “piggy back” registration rights) to have any securities of the
Company registered with the SEC or any other governmental
authority.
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2.25 Material Non-Public
Information. The Company confirms that it has not provided the
Investor or their agents or counsel with any information that constitutes or
might constitute material non-public information as of the
Closing. The Company understands and confirms that the Investors
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.
2.26 Dilution. The Company
acknowledges and agrees that the issuance of the Securities will have a
potential dilutive effect on the equity holdings of other holders of the
Company’s equity or rights to receive equity of the Company. The Board of
Directors of the Company has concluded, in its good faith business judgment that
the issuance of the Securities is in the best interests of the
Company. The Company specifically acknowledges that its obligation to
issue the Securities is absolute regardless of the dilution such issuance may
have on the ownership interests of other stockholders of the Company or parties
entitled to receive equity securities or equity-linked securities of the
Company.
2.27 Disclosure. Neither
this Agreement nor any other documents, certificates or instruments furnished to
the Investor by or on behalf of the Company in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
2.28 Xxxxxxxx-Xxxxx
Act. The Company is in compliance with the applicable provisions of
the Xxxxxxxx-Xxxxx Act of 2002 (the “Xxxxxxxx-Xxxxx Act”),
and the rules and regulations promulgated thereunder, that are effective and for
which compliance by the Company is required as of the date hereof.
2.29 Transfer of
Assets. The Company shall not transfer, convey or assign all
or substantially all of our assets of the Company, including but not limited to,
any of its subsidiaries or all or substantially all of its assets thereof, other
than at fair market value or with the prior written consent of the Investor,
except for a merger in which the Company is the surviving Corporation or in
which the surviving corporation assumes the Company’s obligations under the
Transaction Documents. In the event that such transfer does occur,
this shall constitute a default of the Transaction Documents and a Trigger Event
(as defined in the Debenture).
2.30 Absence of Certain Company
Control Person Actions or Events. To the Company’s knowledge, none of the
following has occurred during the past five (5) years with respect to a Company
Control Person:
(i) A petition
under the federal bankruptcy laws or any state insolvency law was filed by or
against, or a receiver, fiscal agent or similar officer was appointed by a court
for the business or property of such Company Control Person, or any partnership
in which he was a general partner at or within two years before the time of such
filing, or any corporation or business association of which he was an executive
officer at or within two years before the time of such filing;
(ii) Such Company
Control Person was convicted in a criminal proceeding or is a named subject of a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
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(iii) Such Company
Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting, the following activities:
(1)
acting, as an investment advisor, underwriter, broker or dealer in securities,
or as an affiliated person, director or employee of any investment company,
bank, savings and loan association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool
operator, floor broker, any other Person regulated by the Commodity Futures
Trading Commission (“CFTC”) or engaging in
or continuing any conduct or practice in connection with such
activity;
(2) engaging
in any type of business practice; or
(3)
engaging in any activity in connection with the purchase or sale of any security
or commodity or in connection with any violation of federal or state securities
laws or federal commodities laws;
(iv) Such Company
Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than sixty (60) days the
right of such Company Control Person to engage in any activity described in
paragraph (3) of this item, or to be associated with Persons engaged in any such
activity; or
(v) Such Company
Control Person was found by a court of competent jurisdiction in a civil action
or by the CFTC or SEC to have violated any federal or state securities law, and
the judgment in such civil action or finding by the CFTC or SEC has not been
subsequently reversed, suspended, or vacated.
ARTICLE
3
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE INVESTOR
The
Investor hereby severally represents and warrants to the Company:
3.1 Authorization. The execution, delivery
and performance by the Investor of the Transaction Documents to which such
Investor is a party have been duly authorized and will each constitute the valid
and legally binding obligation of such Investor, enforceable against such
Investor in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors’ rights
generally.
3.2 Purchase Entirely for Own
Account. The Securities to be received by such Investor hereunder will be
acquired for such Investor’s own account, not as nominee or agent, and not with
a view to the resale or distribution of any part thereof in violation of the
1933 Act, and such Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same in violation of the 1933
Act without prejudice, however, to such Investor’s right at all times to sell or
otherwise dispose of all or any part of such Securities in compliance with
applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by such Investor to hold the
Securities for any period of time. Such Investor is not a broker-dealer
registered with the SEC under the 1934 Act or an entity engaged in a business
that would require it to be so registered.
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3.3 Investment
Experience. Such Investor acknowledges that it can bear the economic risk
and complete loss of its investment in the Securities and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment contemplated hereby.
3.4 Accredited Investor.
The Investor is an “accredited investor” (as defined in Rule 501 of Regulation
D), and the Investor has such experience in business and financial matters that
it is capable of evaluating the merits and risks of an investment in the
Securities. The Investor is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer.
The Investors acknowledges that an investment in the Securities is speculative
and involves a high degree of risk.
3.5 Restricted
Securities. Such Investor understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances.
ARTICLE
4
INDEMNIFICATION
4.1 Indemnification.
(a) The
Company will indemnify and hold the Investor and their directors, officers,
shareholders, partners, employees and agents (each, an “Investor Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation (collectively, “Losses”) that the
Investor may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any of the Transaction
Documents. In addition to the indemnity contained herein, the Company
will reimburse each Investor for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are
incurred.
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(b) Conduct of Indemnification
Proceedings. Promptly
after receipt by any Person (the “Indemnified Person”)
of notice of any demand, claim or circumstances which would or might give rise
to a claim or the commencement of any action, proceeding or investigation in
respect of which indemnity may be sought, such Indemnified Person shall promptly
notify the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses. In any
such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any
settlement of any proceeding effected without its written consent, which consent
shall not be unreasonably withheld, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Company shall indemnify and
hold harmless such Indemnified Person from and against any loss or liability (to
the extent stated above) by reason of such settlement or
judgment. Without the prior written consent of the Indemnified
Person, which consent shall not be unreasonably withheld, the Company shall not
effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Person from all liability
arising out of such proceeding.
ARTICLE
5
COVENANTS
AND ADDITIONAL AGREEMENTS OF THE COMPANY
5.1 Reservation of Common
Stock. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of providing for the exercise of the Warrant or the delivery of
shares in full or partial satisfaction of the Debenture, fifty million
(50,000,000) shares of Common Stock in the event the Investor exercises the
Warrant and/or requests the Debenture be satisfied by the issuance and delivery
of Common Stock.
5.2 Reports. If
the information is not already publicly disclosed in the Company’s public
filings available on the SEC’s website, the Company will furnish to the
Investors and/or their assignees such information relating to the Company and
its Subsidiaries as from time to time may reasonably be requested by the
Investors and/or their assignees; provided, however, that the Company shall not
disclose material nonpublic information to the Investors, or to advisors to or
representatives of the Investors, unless prior to disclosure of such information
the Company identifies such information as being material nonpublic information
and provides the Investors, such advisors and representatives with the
opportunity to accept or refuse to accept such material nonpublic information
for review and any Investor wishing to obtain such information enters into an
appropriate confidentiality agreement with the Company with respect
thereto.
5.3 No Conflicting
Agreements. The Company will not take any action, enter into
any agreement or make any commitment that would conflict or interfere in any
material respect with the Company’s obligations to the Investors under the
Transaction Documents.
5.4 Compliance with
Laws. The Company will comply in all material respects with
all applicable laws, rules, regulations, orders and decrees of all governmental
authorities.
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5.5 Securities Laws Disclosure;
Publicity. The Company shall, by
8:30 a.m. Eastern time on the fourth business day following the date of this
Agreement, issue a press release or file a Current Report on Form 8-K, in each
case reasonably acceptable to the Investor, disclosing the transactions
contemplated hereby. The Company and the Investor shall consult with
each other in issuing any press releases with respect to the transactions
contemplated hereby, and neither the Company nor the Investor shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of the Investor, or
without the prior consent of the Investor, with respect to any press release of
the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with notice of such public statement or communication
and consult with each other with respect thereto prior to such public
disclosure. Notwithstanding the foregoing, other than as set forth
above, the Company shall not publicly disclose the name of any Investor, or
include the name of any Investor in any filing with the SEC or any regulatory
agency or stock exchange, except to the extent such disclosure is required by
law or stock exchange regulation, in which case the Company shall provide the
Investor with prior notice of such disclosure.
5.6 Listing of Common
Stock. The
Company hereby agrees to maintain the listing on the Bulletin Board of the
Common Stock sold hereunder or issuable upon exercise of the Warrant or exchange
of the Debenture. The Company further agrees, if the Company
applies to have its Common Stock traded on any other stock exchange or quotation
system, it will include in such application the Common Stock issuable upon
exercise of the Warrants and the Common Stock issuable upon exchange of the
Debenture, and will take such other action as is necessary or desirable in the
opinion of the Investors to cause the Common Stock issuable upon exercise of the
Warrant and the Common Stock issuable upon exchange of the Debenture to be
listed on such other stock exchange or quotation system as promptly as possible.
Additionally, the Company shall maintain its eligibility for issuance of shares
under the DWAC system of the Depository Trust Company (“DWAC Eligibility”)
for a period ending six (6) months after the payment in full of the __________
Note or during which _________ holds any Repayment Shares or any Warrants or
Warrant Shares.
5.7 Reporting. The
Company will remain as a Reporting Issuer and with respect to all filings of
period quarterly and annual filings and any other filing required to be Rule 144
compliant due to be filed on or after the Closing Date, the Company will commit
to make each such filing in a timely manner (after taking into account any
extensions properly requested) for a period ending six (6) months after the
payment in full of the __________ Note or __________ holds any Repayment Shares
or any Warrants or Warrant Shares. Until such time as the Investor
may sell the Common Stock without limitation under Rule 144 the Company agrees
that, if the Company fails to file in a timely manner, beyond any applicable
extension period, on the SEC’s XXXXX system any information required to be filed
by it, whether on a Form 10-K, Form 10-Q, Form 8-K, Proxy Statement or
otherwise, the Company shall be liable to pay to the Subscriber an amount equal
to 2% of the sum of the Total Price for each thirty (30) day period after which
the filing is late. As used in this Agreement, “Total Price” means the aggregate
of (i) the Principal amount of the Debenture and (ii) the sum of the Exercise
Price actually paid for exercised Warrant Shares. The Company shall
pay any payments incurred under this Section in immediately available funds upon
demand by the Investor; provided, however, that the Investor making
the demand may specify that the payment shall be made in shares of Common Stock
at the Repayment Price applicable to the date of such demand.
5.8 Change in Transfer Agent;
Removal of Legends. (a) Prior to payment in full of the Debenture and
exercise of the Warrants, the Company covenants not to terminate, dismiss or
otherwise remove the Transfer Agent without the written consent of the Investor;
and (b) Upon the earlier of: (i) registration for resale pursuant to a
registration statement; or (ii) Rule 144 becoming available, upon written
request of the Lender, the Company shall (A) deliver to the transfer agent for
the Common Stock irrevocable instructions that the Transfer Agent shall issue a
certificate representing shares of Common Stock without legends upon receipt by
such Transfer Agent of a notice of exercise of the Warrant, exchange of the
Debenture or transfer of the Collateral Shares, and (B) cause its counsel to
deliver to the Transfer Agent one or more blanket opinions to the effect that
the removal of such legends in such circumstances may be effected under the 1933
Act. From and after the earlier of such dates, upon the Investor’s written
request, the Company shall promptly cause certificates evidencing the Securities
to be replaced with certificates which do not bear such restrictive
legends. When the Company is required to cause unlegended certificates to
replace previously issued legended certificates, if unlegended certificates are
not delivered to an Investor within five (5) Business Days of submission by that
Investor of legended certificate(s) or the notice to issue shares of Common
Stock without legend to the Transfer Agent as provided above, the Company shall
be liable to the Investor for liquidated damages in an amount equal to 0.5% of
the aggregate purchase price of the Securities evidenced by such certificate(s)
for each thirty (30) day period (or portion thereof) beyond such five (5)
Business Day that the unlegended certificates have not been so delivered.
In the event that the Company or its counsel fails to deliver the appropriate
instructions to the transfer agent to remove any restrictive legend from Common
Stock from either the exercise of the Warrant, the exchange of the __________
Shares or transfer of the Collateral Shares, then the Company hereby
acknowledges that it authorizes the transfer agent to accept a legal opinion
issued by an attorney reasonably acceptable to the Investor, including but not
limited to Xxxxxxx & Prager, LLP.
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ARTICLE
6
MISCELLANEOUS
6.1 Waivers and
Amendments.
The terms of this Agreement may be waived or amended only upon the written
consent of the Company and the Investor.
6.2 Governing Law. This Agreement
shall be governed in all respects by and construed in accordance with the laws
of the State of Illinois without any regard to conflicts of laws
principles.
6.3 Survival. The
representations, warranties, covenants and agreements made in this Agreement
shall survive for a period of one (1) year and any investigation made by the
Company or the Investor and the Closing.
6.4 Successors and
Assigns. This Agreement and
any of the Transaction Documents can be freely assigned, pledged as collateral
or otherwise transferred by the Investor and any of its successors or
assigns.
6.5 Entire
Agreement. This Agreement and
the other Transaction Documents constitute the full and entire understanding and
agreement between the parties with regard to the subjects thereof.
6.6 Notices, etc. All notices and
other communications required or permitted under this Agreement shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or each
of the Investors, as the case may be, at their respective addresses set forth as
follows:
If to the Company:
With a copy to (which shall not
constitute notice):
If to the Investor:
With a copy (which shall not constitute
a notice) to:
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All notices and other communications
shall be effective upon the earlier of actual receipt thereof by the person to
whom notice is directed or (a) in the case of notices and communications
sent by personal delivery or telecopy, one business day after such notice or
communication arrives at the applicable address or was successfully sent to the
applicable telecopy number, (b) in the case of notices and communications
sent by overnight delivery service, at noon (local time) on the second business
day following the day such notice or communication was sent, and (c) in the
case of notices and communications sent by United States mail, seven days after
such notice or communication shall have been deposited in the United States
mail.
6.7 Severability of this
Agreement. If any provision
of this Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
6.8 Counterparts; Signatures by
Facsimile. This Agreement may
be executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument. This Agreement,
once executed by a party, may be delivered to the other parties hereto by
facsimile transmission of a copy of this Agreement bearing the signature of the
party so delivering this Agreement.
6.9 Further
Assurances.
Each party to this Agreement 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 hereto 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.
6.10 Expenses. Each party shall bear
their own expenses, except that the Company shall pay Investor’s legal fees in
the aggregate of $15,000 and any fees incurred with respect to such legal
services for closing this transaction. The Company has already paid
$5,000 and the remainder shall be paid from the proceeds of the
financing.
6.11 Replacement of
Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefore, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities.
14
[SIGNATURE
PAGE TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, this
Agreement is hereby executed as of the date first above written.
|
INVESTOR:
By:
____________________________
Name:
Its:
Dated:
THE
COMPANY:
By: ____________________________
Name:
Its:
Dated:
|
THE
AFFILIATE:
By:
____________________________
Name:
Dated:
|
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