SECURITIES PURCHASE AGREEMENT
Exhibit 10.1
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of October
31, 2005, among SmartVideo Technologies, Inc., a Delaware corporation, with headquarters located
at 0000 Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxx 00000 (the “Company”), and the investors listed
on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).
RECITALS
A. The Company and each Buyer is executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as
amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.
B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) shares of the Series A-1 Convertible Preferred Stock, par
value $0.001 per share (the “Preferred Stock”), of the Company, in the amount set forth opposite
such Buyer’s name on the Schedule of Buyers (which aggregate amount for all Buyers shall
collectively be referred to herein as the “Preferred Shares”), (ii) a warrant to acquire shares of
Common Stock, par value $.001 per share (the “Common Stock”) of the Company at a price of $1.75 per
share (the “$1.75 Warrants”), in substantially the form attached hereto as Exhibit A-1 (as
exercised, collectively, the “$1.75 Warrant Shares”), and (iii) a warrant to acquire shares of
Common Stock at a price of $2.00 per share (the “$2.00 Warrants” and, collectively with the $1.75
Warrants, the “Warrants”), in substantially the form attached hereto as Exhibit A-2 (as
exercised, collectively, the “$2.00 Warrant Shares” and, collectively with the $1.75 Warrant
Shares, the “Warrant Shares”).
C. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in the form attached hereto
as Exhibit B (the “Registration Rights Agreement”) pursuant to which the Company has agreed
to provide certain registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
D. The Preferred Shares, the Warrants, the Warrant Shares, the Strategic Investment Securities
(as defined herein) and the shares of the Common Stock into which the Preferred Shares and the
Strategic Investment Securities are convertible collectively are referred to hereinafter as the
"Securities”.
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
(a) Purchase of Preferred Shares and Warrants. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 herein:
(i) The Company shall issue and sell to each Buyer, and each Buyer severally, but not
jointly, agrees to purchase from the Company on the date two Business Days after
satisfaction or waiver of the conditions set forth in Sections 6 and 7 (the “First Closing
Date”), or such other date as the Company and the Buyers may otherwise agree, the number of
Preferred Shares as is set forth opposite such Buyer’s name in column (3) on the Schedule of
Buyers, along with the Warrants to acquire up to that number of $1.75 Warrant Shares as is
set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers and that number
of $2.00 Warrant Shares as is set forth opposite such Buyer’s name in column (5) on the
Schedule of Buyers (the “First Closing”). The purchase price for the Preferred Shares and
related Warrants to be purchased by each Buyer at the First Closing shall be the amount set
forth opposite such Buyer’s name in column (6) of the Schedule of Buyers (the “First Closing
Purchase Price”). The First Closing shall occur on the First Closing Date at the offices of
the Company.
(ii) In the event that a Strategic Investor shall have entered into a binding agreement
with the Company to make a Strategic Investment, or otherwise made a Strategic Investment,
on or prior to January 17, 2006, each Buyer shall have the right, but not the obligation, to
purchase securities identical to those being purchased through such Strategic Investment
(“Strategic Investment Securities”) on the same terms and conditions as such Strategic
Investor. The Buyers shall be entitled to purchase, in the aggregate, a dollar amount of
Strategic Investment Securities equal to the aggregate First Closing Purchase Price paid by
all Buyers. Each Buyer shall be entitled to purchase a portion of Strategic Investment
Securities in the same proportion that the First Closing Purchase Price paid by such Buyer
at the First Closing bears to the aggregate First Closing Purchase Price paid by all Buyers.
In the event that any Buyer elects to purchase none or less than its pro rata share of
Strategic Investment Securities, then the other Buyers may elect to purchase more than their
pro rata shares, with any such Strategic Investment Securities being divided among each
Buyer electing to purchase more than its pro rata share in the same proportion that the
First Closing Purchase Price paid by each such Buyer bears to the First Closing Purchase
Price paid by each other such Buyer. The Company shall promptly notify the Buyers of the
execution of a term sheet or any agreement or Strategic Investment (as applicable), and each
Buyer shall have five Business Days from the date of delivery of such notice to notify the
Company of its election to purchase Strategic Investment Securities. On the fifth Business
Day following a Strategic Investment (the “Strategic Closing Date”), the Company shall issue
and sell to each Buyer electing to purchase Strategic Investment Securities, and each Buyer
electing to purchase Strategic Investment Securities severally, but not jointly, agrees to
purchase from the Company, such Strategic Investment Securities (the “Strategic Closing”) at
an aggregate purchase price equal to the First Closing Purchase Price (the “Strategic
Closing Purchase Price”).
(iii) In the event that a Strategic Investor shall not have entered into a binding
agreement with the Company to make a Strategic Investment, or otherwise made a Strategic
Investment, on or prior to January 17, 2006, but the Secondary Closing Conditions shall have
been fulfilled on or prior to December 31, 2005 (or those of the Buyers who elect to waive
shall have waived in writing on or prior to January 17, 2006 the fulfillment of the
Secondary Closing Conditions), the Company shall issue and sell to each Buyer, and each
Buyer severally, but not jointly, shall purchase from the Company, the number of Preferred
Shares as is set forth opposite such Buyer’s name in column (9) on the Schedule of Buyers,
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along with the Warrants to acquire up to that number of $1.75 Warrant Shares as is set
forth opposite such Buyer’s name in column (10) on the Schedule of Buyers and that number of
$2.00 Warrant Shares as is set forth opposite such Buyer’s name in column (11) on the
Schedule of Buyers (the “Secondary Closing” and, with the First Closing and the Strategic
Closing, each a “Closing”). The purchase price for the Preferred Shares and related
Warrants to be purchased by each Buyer at the Secondary Closing shall be the amount set
forth opposite such Buyer’s name in column (12) of the Schedule of Buyers (the “Secondary
Closing Purchase Price” and, with the First Closing Date Purchase Price and the Strategic
Closing Date Purchase Price, each a “Purchase Price”). The Company shall promptly notify
the Buyers of the satisfaction of the Secondary Closing Conditions (or if the Secondary
Closing Conditions are not satisfied by December 31, 2005, those of the Buyers who elect to
waive shall have waived in writing on January 7, 2006 the fulfillment of the Secondary
Closing Conditions), and on the tenth day following the delivery of such notice (the
“Secondary Closing Date” and, with the First Closing Date and the Strategic Closing Date,
each a “Closing Date”), the Company shall issue and sell to each Buyer, and each Buyer
severally, but not jointly, agrees (to the extent the Secondary Closing Conditions are
fulfilled or are waived by such Buyer) to purchase from the Company, such Preferred Shares
and Warrants.
(b) Form of Payment; Delivery of Certificates. On each Closing Date, (i) each Buyer
shall pay the Purchase Price to the Company for the Securities to be issued and sold to such Buyer
at such Closing, by wire transfer of immediately available funds in accordance with the Company’s
written wire instructions, and (ii) the Company shall deliver within three Business Days to each
Buyer (A) one or more stock certificates evidencing the number of Preferred Shares and/or Strategic
Investment Securities such Buyer is purchasing, and/or (B) one or more Warrants pursuant to which
such Buyer shall have the right to acquire $1.75 Warrant Shares and/or $2.00 Warrant Shares, in all
cases duly executed on behalf of the Company and registered in the name of such Buyer.
2. BUYER’S REPRESENTATIONS AND WARRANTIES.
As of the date hereof, each Buyer represents and warrants to the Company with respect to only
itself that:
(a) No Public Sale or Distribution. Such Buyer is (i) acquiring the Preferred Shares
and the Warrants and (ii) upon exercise of the Warrants will acquire the Warrant Shares issuable
upon exercise thereof, in the ordinary course of business for its own account 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 1933 Act and such Buyer does not have a present
arrangement to effect any distribution of the Securities to or through any person or entity;
provided, however, that by making the representations herein, such Buyer does not
agree to hold any of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act. Such Buyer is acquiring the Securities hereunder in the
ordinary course of its business. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the Securities.
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(b) Investor Status. At the time such Buyer was offered the Securities, such Buyer
was, and at each Closing, and on each date on which such Buyer exercises the Warrants such Buyer
will be a sophisticated investor as described in Rule 506(b)(2)(ii) of Regulation D and an
“accredited investor” as defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such 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 such Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such Buyer. Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors,
if any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained herein. Such Buyer understands that its
investment in the Securities involves a high degree of risk and is able to afford a complete loss
of such investment. Such 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.
(e) No Governmental Review. Such 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. Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to
the Company an opinion of counsel, in a form reasonably acceptable to the Company, 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, or (C) such Buyer provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144
or Rule 144A promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, “Rule 144”); (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 (as defined in
Section 3(r)) through whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 0000 Xxx) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is
under any obligation to register the Securities under the 1933 Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder. Notwithstanding the
foregoing, the Securities may be pledged in connection with a bona fide margin account or other
loan secured by the Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment
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of the Securities hereunder, and no Buyer effecting a pledge of Securities shall be required
to provide the Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document, including, without limitation, this
Section 2(f); provided, that in order to make any sale, transfer or assignment of
Securities, such Buyer and its pledgee makes such disposition in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
(g) Legends. Such Buyer understands that the certificates or other instruments
representing the Preferred Shares, the Warrants and the stock certificates representing the Warrant
Shares and the Common Stock, except as set forth below, shall bear any legend as required by the
“blue sky” laws of any state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN][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 MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
(h) Validity; Enforcement. This Agreement and the Registration Rights Agreement have
been duly and validly authorized, executed and delivered on behalf of such Buyer and shall
constitute the legal, valid and binding obligations of such Buyer enforceable against such Buyer in
accordance with their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
(i) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the Registration Rights Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of such Buyer or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities laws) applicable to
such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or
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in the aggregate, reasonably be expected to have a material adverse effect on the ability of
such Buyer to perform its obligations hereunder.
(j) Residency. Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.
(k) Broker-Dealer Status. Such Buyer is a not a registered broker-dealer or, if such
Buyer is an affiliate of a broker-dealer, such Buyer is acquiring the Securities hereunder in the
ordinary course of its business and such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the Securities.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
As of the date hereof, the Company represents and warrants to each of the Buyers that:
(a) Organization and Qualification. Each of the Company and its “Subsidiaries” (which
for purposes of this Agreement means any entity in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest) 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 and authorization 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 its
ownership of property or 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 a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any
material adverse effect on the business, properties, assets, operations, results of operations,
condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a
whole, or on the transactions contemplated hereby and the other Transaction Documents or by the
agreements and instruments to be entered into in connection herewith or therewith, or on the
authority or ability of the Company to perform its obligations under the Transaction Documents (as
defined below). The Company has no Subsidiaries except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. Except as set forth in Section 3(c) hereof,
the Company has the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Certificate of Designation in the form attached hereto as
Exhibit D, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions
(as defined in Section 5), the Warrants 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. The execution and delivery 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 Preferred Shares and the Warrants and the reservation for issuance
and the issuance of the Warrant Shares issuable upon exercise of the Warrants and the shares of
Common Stock issuable upon conversion of the Preferred 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, except as set forth in Section 3(c) hereof, its stockholders. This
Agreement and the other Transaction Documents have been duly executed and
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delivered by the Company, and constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective 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 applicable creditors’ rights and remedies.
(c) Issuance of Securities. The Preferred Shares and the Warrants are duly authorized
and, upon issuance in accordance with the terms hereof, shall be validly issued and free from all
taxes, liens and charges with respect to the issue thereof and the Preferred Shares shall be fully
paid and nonassessable with the holders being entitled to all rights accorded to a holder of
Preferred Stock. As of the Closing Date, the Company does not have a sufficient number of
authorized shares of Common Stock reserved to equal the number of shares of Common Stock underlying
the Warrants and the Preferred Shares. As soon as reasonably practicable, but in any case within
120 days, after the Closing Date, the Company shall use its best efforts to obtain stockholder
approval of an amendment to the Company’s Certificate of Incorporation in order to increase the
number of authorized shares of Common Stock to at least 100,000,000 shares. Subsequent to the
stockholders’ approval of such amendment to the Certificate of Incorporation, the Company shall, so
long as any of the Preferred Shares and the Warrants are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued capital stock, solely for the purpose
of effecting the conversion of the Preferred Stock and the exercise of the Warrants, 100% of the
number of shares of Common Stock issuable upon conversion of the Preferred Shares and the exercise
of the Warrants. Upon exercise in accordance with the Warrants, the Warrant Shares will be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a holder of Preferred
Stock. The issuance by the Company of the Securities is exempt from registration under the 1933
Act.
(d) No Conflicts. Except as set forth in Section 3(c) hereof, 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 Preferred Shares and Warrants and reservation for issuance and issuance of the Warrant Shares)
will not (i) result in a violation of the Certificate of Incorporation (as defined below) or Bylaws
(as defined below) 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) under, or
give to others any rights of termination, amendment, acceleration or cancellation of, any material
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
federal and state securities laws and regulations and the rules and regulations of the
over-the-counter market (the “Principal Market”)) or other principal market 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.
(e) Consents. The Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court, governmental agency or any regulatory
or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents, in each case 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
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obtained or effected on or prior to the Closing Date. The Company and its Subsidiaries are
unaware of any facts or circumstances that might prevent the Company from obtaining or effecting
any of the registration, application or filings pursuant to the preceding sentence. The Company is
not in violation of the listing requirements of the Principal Market and has no knowledge of any
facts that would reasonably lead to delisting or suspension of the Common Stock in the foreseeable
future.
(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges
and agrees that each Buyer is acting solely in the capacity of arm’s length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby and thereby and that no Buyer
is (i) an officer or director of the Company, (ii) an “affiliate” of the Company (as defined in
Rule 144) or (iii) to the knowledge of the Company, a “beneficial owner” of more than 10% of the
Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the “1934 Act”)). The Company further acknowledges that no Buyer is acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer or
any of its representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such Buyer’s purchase of the
Securities. The Company further represents to each Buyer that the Company’s decision to enter into
the Transaction Documents has been based solely on the independent evaluation by the Company and
its representatives.
(g) No General Solicitation; Placement Agent’s Fees. 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) in connection with the
offer or sale of the Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by
any Buyer or its investment advisor) relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Buyer harmless against, any liability, loss or
expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in
connection with any such claim. Except as set forth in Schedule 3(g), the Company has not
engaged any placement agent or other agent in connection with the sale of the Company’s debt or
equity securities for financing purposes.
(h) No Integrated Offering. None of the Company, its Subsidiaries, any of their
affiliates, and any Person acting on 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 any of the Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the securities of the
Company are listed or designated. None of the Company, its Subsidiaries, their affiliates and any
Person acting on their behalf will take any action or steps referred to in the preceding sentence
that would require registration of any of the Securities under the 1933 Act or cause the offering
of the Securities to be integrated with other offerings.
(i) Application of Takeover Protections; Rights Agreement. The Company and its board
of directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution under a
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rights agreement) or other similar anti-takeover provision under the Certificate of
Incorporation or the laws of the State of Delaware, including Section 203 of the Delaware General
Corporation Law, which is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities.
(j) SEC Documents; Financial Statements. Except as set forth in Schedule
3(j), during the two years prior to the date hereof, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof
or prior to the date of the Closing, 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”). The Company has delivered to the Buyers or their respective representatives
true, correct and complete copies of the SEC Documents not available on the XXXXX system. As of
their respective dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the
SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC filing (or
if amended or superseded by a filing prior to the date of this Agreement, then on the date of such
filing, 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 Buyers which is not included in
the SEC Documents, including, without limitation, information referred to in Section 2(d) 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, not misleading.
(k) Absence of Certain Changes. Since December 31, 2004, there has been no material
adverse change and no material adverse development in the business, properties, operations,
condition (financial or otherwise), results of operations or prospects of the Company or its
Subsidiaries. Since December 31, 2004, the Company has not (i) declared or paid any dividends,
(ii) sold any assets, individually or in the aggregate, in excess of $500,000 outside of the
ordinary course of business or (iii) had capital expenditures, individually or in the aggregate, in
excess of $1,000,000. The Company has not taken any steps to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. The Company is not as of the date hereof, and after
giving effect to the transactions contemplated hereby to occur at the Closing, will not be
Insolvent (as defined below). For purposes of this Section 3(k), “Insolvent” means (i) the present
fair saleable
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value of the Company’s assets is less than the amount required to pay the Company’s total
Indebtedness (as defined in Section 3(r)), (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute
and matured, (iii) the Company intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature or (iv) the Company has unreasonably small capital
with which to conduct the business in which it is engaged as such business is now conducted and is
proposed to be conducted.
(l) No Undisclosed Events, Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists, or is contemplated to occur, with
respect to the Company or its Subsidiaries or their respective business, properties, prospects,
operations or financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 or SB-2 filed with the SEC
relating to an issuance and sale by the Company of its Preferred Stock and which has not been
publicly announced.
(m) Conduct of Business; Regulatory Permits. Neither the Company nor its Subsidiaries
is in violation of any term of or in default under the Certificate of Incorporation or Bylaws or
their organizational charter or bylaws, respectively. Neither the Company nor any Subsidiary is in
violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable
to the Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries will
conduct its business in violation of any of the foregoing, except for possible violations which
would not, individually or in the aggregate, have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Company is not in violation of any of the rules, regulations or
requirements of the Principal Market and has no knowledge of any facts or circumstances that would
reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the
foreseeable future. Since December 31, 2004, (i) the Common Stock has been designated for
quotation or listed on the Principal Market, (ii) trading in the Common Stock has not been
suspended by the SEC or the Principal Market, and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the
Common Stock from the Principal Market, or any requests for information in connection with any
informal inquiry or formal investigation or proceedings regarding the Company or its officers and
directors and (iv) except as set forth in Schedule 3(j), the Company has not received any comment
letters from the staff of the SEC concerning any filings made by the Company which have not been
resolved to the satisfaction of the SEC staff. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, except where the failure
to possess such certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, 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.
(n) Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor
any director, officer, agent, employee or other Person acting on behalf of the Company or any of
its Subsidiaries has, in the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; (iii) violated or is in violation of
- 10 -
any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
(o) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any and all applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date hereof, and any
and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of
the date hereof, except where such noncompliance would not have, individually or in the aggregate,
a Material Adverse Effect.
(p) Transactions With Affiliates. Except as set forth in the Company’s Annual Report
on Form 10-KSB for the year ended December 31, 2004, the Company’s Registration Statement on Form
SB-2 filed with the SEC on June 30, 2005, the Company’s Form 8-K filed with the SEC on August 19,
2005 and the Company’s Quarterly Report on Form 10-QSB filed with the SEC on September 14, 2005,
none of the officers, directors or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for ordinary course services as employees,
officers or 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 such officer, director or employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director, trustee or partner.
(q) Equity Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of (x) 50,000,000 shares of Common Stock, of which as of the date hereof,
26,812,179 shares are issued and outstanding and 10,299,544 shares are reserved for issuance
pursuant to the Company’s employee incentive plan and other warrants, exercisable or exchangeable
for, or convertible into, shares of Common Stock, and (y) 50,000,000 shares of convertible
preferred stock, of which as of the date hereof, none are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 3(q): (i) no shares of the Company’s
capital stock are 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 shares of 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 shares of 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 shares of 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 (as defined in Section 3(r)) 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; (v) there are no agreements or arrangements under which the Company
or any of its Subsidiaries is obligated to register the sale of any of their securities under the
1933 Act (except the Registration Rights Agreement); (vi) there are no outstanding securities or
instruments of the Company or any of its
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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; (vii) there are no
securities or instruments containing anti-dilution or similar provisions that will be triggered by
the issuance of the Securities; (viii) the Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement; and (ix) the Company and its
Subsidiaries have no liabilities or obligations required to be disclosed in the SEC Documents (as
defined herein) but not so disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company’s or any Subsidiary’s respective businesses and which, individually
or in the aggregate, do not or would not have a Material Adverse Effect. The Company has furnished
or made available 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, Common Stock and the
material rights of the holders thereof in respect thereto.
(r) Indebtedness and Other Contracts. Neither the Company nor any of its Subsidiaries
(i) has any outstanding Indebtedness (as defined below), (ii) is a party to any contract, agreement
or instrument, the violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument would result in a Material Adverse Effect, (iii) is in violation
of any term of or in default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s
officers, has or is expected to have a Material Adverse Effect. No outstanding Indebtedness is
secured. For purposes of this Agreement: (x) “Indebtedness” of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade payables and
broadcast rights payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition of property, assets
or businesses, (E) all indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to any property or
assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied for the periods
covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or
other encumbrance upon or in any property or assets (including accounts and contract rights) owned
by any Person, even though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above;
(y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent
or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation
of another Person if the primary purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the
- 12 -
obligee of such liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z) “Person” means an
individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency thereof.
(s) Absence of Litigation. Except as set forth in the SEC Documents, there is no
action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge
of the Company, threatened against or affecting the Company, the Securities or any of its
Subsidiaries or any of the Company’s or the Company’s Subsidiary’s officers or directors, whether
of a civil or criminal nature or otherwise.
(t) Insurance. The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged, including directors’ and officers’ liability insurance with a policy
limit of at least $5,000,000. Neither the Company nor any Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any Subsidiary has any reason
to believe that it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.
(u) Employee Relations. (i) Neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or employs any member of a union. The Company and its
Subsidiaries believe that their relations with their employees are good. No executive officer of
the Company (as defined in Rule 501(f) of the 0000 Xxx) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer’s employment with the Company. No
current or former executive officer of the Company, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or any other contract
or agreement or any restrictive covenant. The continued employment of each such executive officer
does not subject the Company or any of its Subsidiaries to any liability with respect to any of the
foregoing matters.
(ii) The Company and its Subsidiaries are in compliance with all federal, state, local and
foreign laws and regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(v) Title. The Company and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each case free and clear
of all liens, encumbrances and defects except such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases
- 13 -
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.
(w) Intellectual Property Rights. The Company and its 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 other intellectual property rights (“Intellectual
Property Rights”) necessary to conduct their respective businesses as now conducted. None of the
Company’s Intellectual Property Rights have expired or terminated, or are expected to expire or
terminate within three years from the date of this Agreement. The Company does not have any
knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property Rights of
others. There is no claim, action or proceeding being made or brought, or to the knowledge of the
Company, being threatened, against the Company or any of its Subsidiaries regarding its
Intellectual Property Rights. The Company is unaware of any facts or circumstances which might
give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their Intellectual Property Rights.
(x) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with
any and all Environmental Laws (as hereinafter defined), (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 where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply
could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution
or protection of human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into
the environment, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or
approved thereunder.
(y) Tax Status. Except as indicated in the Side Letter, the Company and each of its
Subsidiaries (i) 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 (ii) 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.
(z) Internal Accounting and Disclosure Controls. The Company and each of its
Subsidiaries maintain 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
- 14 -
statements in conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only
in accordance with management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any difference, except where
the failure to satisfy any of clauses (i) through (iv) above, would not, individually or in the
aggregate, be reasonably expected to result in a Material Adverse Effect. The Company maintains
disclosure controls and procedures (as such term is defined in Rule 13a-14 under the 0000 Xxx) that
are effective in ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within
the time periods specified in the rules and forms of the SEC, including, without limitation,
controls and procedures designed in to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is accumulated and communicated
to the Company’s management, including its principal executive officer or officers and its
principal financial officer or officers, as appropriate, to allow timely decisions regarding
required disclosure. The Company’s independent public accountant has not informed the Company,
including the Company’s board of directors, pursuant to Section 10A of the 1934 Act or otherwise,
of any illegal act or fraud involving the Company, of any material weakness or significant
deficiency in the Company’s internal control over financial reporting, or of any disagreements it
has had with management of the Company.
(aa) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise would be reasonably likely to have a Material Adverse Effect.
(bb) Manipulation of Price. The Company has not, and to the actual knowledge of the
directors and officers of the Company, 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.
(cc) Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other
than income or similar taxes) which are required to be paid in connection with the sale and
transfer of the Securities to be sold to each Buyer hereunder will be, or will have been, fully
paid or provided for by the Company, and all laws imposing such taxes will be or will have been
complied with.
(dd) Disclosure. The Company confirms that neither it nor any other Person acting on
its behalf has provided any of the Buyers or their respective agents or counsel with any
information that constitutes or might constitute material, nonpublic information. The Company
understands and confirms that each of the Buyers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to the Buyers
regarding the Company, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of the Company are true and correct and do
not contain any untrue statement of a material fact or omit to state any material fact necessary in
order to make the
- 15 -
statements made therein, in the light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or information exists with respect to the
Company or any Subsidiary or either of its or their respective business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so publicly announced or
disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company under the 1933 Act).
The Company acknowledges and agrees that no Buyer makes or has made any representations or
warranties with respect to the transactions contemplated hereby other than those specifically set
forth in Section 2.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely to satisfy each of the
covenants and the conditions to be satisfied by it as provided in Sections 4, 5, 6 and 7 of this
Agreement.
(b) Form D and Blue Sky. 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, on or before the Closing Date, shall take such action as the
Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify
the Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to the Buyers on or
prior to the Closing Date. The Company shall make all filings and reports relating to the offer
and sale of the Securities required under applicable securities or “Blue Sky” laws of the states of
the United States following the Closing Date.
(c) Reporting Status. Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all the Preferred Stock, Warrant Shares and share of
Common Stock into which the Preferred Shares are converted and none of the Warrants is outstanding
(the “Reporting Period”), the Company shall timely file all reports required to be filed with the
SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale of the
Securities for general corporate purposes, prospectively and retrospectively, including general and
administrative expenses, and current accounts payable (a list of which has been provided to the
Buyers), but not for (i) the repayment of other outstanding Indebtedness of the Company or any of
its Subsidiaries in excess of $250,000 or (ii) the payment of bonuses or other compensation except
for salaries to officers, directors or other affiliates of the Company. The Company may repay in
full the loan in the principal amount of $225,000 (plus accrued interest thereon) made to the
Company by Xxxxxx X. Xxxxxxx as described in the Company’s Form 8-K filed with the SEC on August
19, 2005.
(e) Financial Information. The Company agrees to send to each Buyer during the
Reporting Period, unless the following are filed with the SEC through XXXXX and are available
- 16 -
to the public through the XXXXX system, within five (5) Business Days after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-KSB, its Quarterly Reports on Form 10-QSB,
any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act, and (ii) copies of any notices and other information
made available or given to the stockholders of the Company generally, contemporaneously with the
making available or giving thereof to the stockholders.
(f) Listing. The Company shall promptly (i) 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 shares of Common Stock are
then listed (subject to official notice of issuance) and (ii) secure the listing of all of the
Registrable Securities upon the NASDAQ SmallCap Market or the NASDAQ National Market if and when
the Company satisfies the applicable listing requirements. The Company shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all Registrable Securities
from time to time issuable under the terms of the Transaction Documents. The Company shall
maintain the Common Stock’s authorization for listing on the Principal Market. Neither the Company
nor any of its Subsidiaries shall take any action which would be reasonably expected to result in
the delisting or suspension of the Common Stock on the Principal Market. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this Section 4(f).
(g) Fees. Within three Business Days of each Closing, the Company shall pay all
reasonable attorney’s fees incurred by the Buyers relating to or arising out of the transactions
contemplated hereby. The Company shall also be responsible for the payment of any placement
agent’s fees, financial advisory fees, or broker’s commissions (other than for Persons engaged by
any Buyer) relating to or arising out of the transactions contemplated hereby. The Company shall
pay, and hold each Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any
claim relating to any such payment. Except as otherwise set forth in this Agreement or in the
Transaction Documents, each party to this Agreement shall bear its own expenses in connection with
the sale of the Securities to the Buyers.
(h) Pledge of Securities. The Company acknowledges and agrees that the Securities may
be pledged by an Investor (as defined in the Registration Rights Agreement) in connection with a
bona fide margin agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document, including, without limitation, Section 2(f) of
this Agreement; provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) of this Agreement in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver such documentation as
a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to
such pledgee by an Investor.
(i) Additional Registration Statements. Except as set forth on Schedule 4(i), so long
as any Warrant Shares or shares of Common Stock into which any Preferred Shares have been converted
are issued and outstanding but no Registration Statement (as defined in the Registration Rights
Agreement) has been filed with respect to such Warrant Shares or shares of Common Stock,
- 17 -
the Company will not file a registration statement under the 1933 Act relating to securities
that are not the Securities until the date that a Registration Statement with respect to such
Warrant Shares or shares of Common Stock is first declared effective by the SEC (the “Effective
Date”), provided that the Company may include in a Registration Statement the securities listed on
Schedule 4(i).
(j) Corporate Existence. So long as any Buyer beneficially owns any Warrants, the
Company shall maintain its corporate existence and shall not sell all or substantially all of the
Company’s assets, except in the event of a merger or consolidation or, except in compliance with
the Warrant, sale of all or substantially all of the Company’s assets, where the surviving or
successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose common stock is quoted on or listed for trading on the Principal Market, the New
York Stock Exchange or the American Stock Exchange.
(k) Reservation of Shares. As soon as reasonably practicable after the Closing Date,
the Company shall use its best efforts to obtain stockholder approval of an amendment (the
"Amendment”) to the Company’s Certification of Incorporation in order to increase the number of
authorized shares of Common Stock to at least 100,000,000 shares. Subsequent to the stockholders’
approval of such amendment to the Certificate of Incorporation, the Company shall, so long as any
of the Preferred Stock and Warrants are outstanding, take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, the number of shares of Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants being issued at the Closing in
conformity with Section 3(c).
(l) Buyers’ Agreement to Vote for Amendment. Each of the Buyers shall vote, by proxy,
consent solicitation or otherwise, to approve the Amendment within the time period required for the
Amendment to be approved in accordance with the Delaware General Corporation Law.
5. TRANSFER RESTRICTIONS; TRANSFER AGENT INSTRUCTIONS.
(a) Transfer Restrictions. The legend set forth in Section 2(g) shall be removed and
the Company shall issue a certificate without such legend or any other legend to the holder of the
applicable Securities upon which it is stamped, if (i) in connection with any sale of such
Securities made pursuant to a Registration Statement and in accordance with the prospectus delivery
requirements under the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such
holder provides the Company with an opinion of counsel, in a generally acceptable form, to the
effect that such sale, assignment or transfer of such Securities may be made without registration
under the applicable requirements of the 1933 Act and the legend may be removed from such
certificate in connection with such sale, assignment or other transfer, or (iii) such holder
provides the Company with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144. The Company shall cause its legal counsel to issue the legal
opinion included in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent on
the Effective Date. Following the Effective Date or at such earlier time as a legend is no longer
required for any or all of the Securities, the Company will no later than three Business Days
following the delivery by a Buyer to the Company or the Company’s transfer agent of a legended
certificate representing such Securities, deliver or cause to be delivered to such Buyer a
certificate representing such Securities that is free from all restrictive and other legends.
Following the Effective Date and upon
- 18 -
the delivery to any Buyer of any certificate representing Securities that is free from all
restrictive and other legends, such Buyer agrees that any sale of such Securities shall be made
pursuant to a Registration Statement and in accordance with the plan of distribution described
therein or pursuant to an available exemption from the registration requirements of the 0000 Xxx.
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 Section 2(g). The Company will
not effect or publicly announce its intention to effect any exchange, recapitalization or other
transaction that effectively requires or rewards physical delivery of certificates evidencing the
Common Stock or the Preferred Stock. In order for the Buyers to effect sales under a Registration
Statement in accordance with the legal opinion included in the Irrevocable Transfer Agent
Instructions, the Company agrees to give notice, at any time and from time to time upon written
request of any Buyer, to the Company’s transfer agent that (a) the Company has filed all required
reports under the 1934 Act, (b) there is no stop order suspending the effectiveness of the
Registration Statement, and (c) there has been no event that would cause the Registration Statement
to include any untrue statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The notice in the
foregoing sentence shall be given by the Company on the same business day as the request is made if
the request is made at or prior to 11:00 A.M., EST, on any business day, and within one business
day if the request is made after 11:00 A.M., EST.
(b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to
its transfer agent, and any subsequent transfer agent, to issue certificates, registered in the
name of each Buyer or its respective nominee(s), for the Warrant Shares in such amounts as
specified from time to time by each Buyer to the Company upon exercise of the Warrants in the form
of Exhibit C attached hereto (the “Irrevocable Transfer Agent Instructions”). The Company
represents and warrants that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof, will be given by the Company to its transfer agent with respect to the Securities, 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.
(c) Breach. The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to a Buyer. 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 a
Buyer shall be entitled, in addition to all other available remedies, to an order and/or 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.
(d) Additional Relief. If the Company shall fail for any reason or for no reason to
issue to such holder unlegended certificates within three (3) Business Days of receipt of documents
necessary for the removal of legend set forth above (the “Deadline Date”), then, in addition to all
other remedies available to the holder, if on or after the Business Day immediately following such
three (3) Business Day period, the holder purchases (in an open market transaction or otherwise)
Securities to deliver in satisfaction of a sale by the holder of Securities that the holder
anticipated receiving from the Company (a “Buy-In"), then the Company shall, within five (5)
Business Days after the holder’s request and in the holder’s discretion, either (i) pay cash to the
holder in an amount equal to the holder’s total purchase price (including brokerage commissions, if
- 19 -
any) for the Securities so purchased (the “Buy-In Price"), at which point the Company’s
obligation to deliver such certificate (and to issue such Securities) shall terminate, or (ii) if
applicable, promptly honor its obligation to deliver to the holder a certificate or certificates
representing such Securities and pay cash to the holder in an amount equal to the excess (if any)
of the Buy-In Price over the product of (A) such number of Securities, times (B) the Closing Bid
Price (as defined in the Warrants) on the Deadline Date.
6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
(a) The obligation of the Company hereunder to issue and sell Securities to each Buyer at any
Closing is subject to the satisfaction, at or before the corresponding Closing Date, 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 by providing each Buyer with prior written
notice thereof:
(i) Such Buyer shall have executed each of the Transaction Documents to which it is a party
and delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company the Purchase Price for the Securities
being purchased by such Buyer and each other Buyer at such Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of such Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date), and such 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 such Buyer at
or prior to such Closing Date.
(iv) At any time that the Buyer or any other Person shall have a beneficial ownership interest
(within the meaning of Rule 13d-3 under the 1934 Act), or a direct or indirect pecuniary interest
(within the meaning of Rule 16a-1(a)(2) under the 0000 Xxx) in the Securities, the Buyer and each
such Person shall not, directly or indirectly, make any short sale or maintain any short position,
establish or maintain a “put equivalent position” (within the meaning of Rule 16a- 1(h) under the
1934 Act), enter into any swap, derivative transaction or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of the Common Stock
(whether any such transaction is to be settled by delivery of Common Stock, other securities, cash
or other consideration) or any securities convertible into, exercisable for or exchangeable for
Common Stock of the Company.
(b) Without limiting the provisions of Section 6(a) above, the obligation of the Company
hereunder to issue and sell Securities to each Buyer at the First Closing is subject to the receipt
by the Company, at or before the First Closing Date, of (i) a final dispositive non-appealable
order, judgment or decree of the Delaware Chancery Court dismissing the plaintiff’s claims in the
Proxy Litigation with prejudice or (ii) a voluntary dismissal with prejudice that has been duly
filed by the plaintiffs of all of their claims with the Delaware Chancery Court with respect to the
Proxy Litigation, and (iii) in addition to (i) or (ii), an order of the Delaware Chancery Court
vacating, modifying or amending its Status Quo Order or entering a superceding Order which makes it
clear,
- 20 -
to the reasonable satisfaction of the Company, that the transactions contemplated by this
Agreement can proceed without violation of the Status Quo Order; provided, however, that each of
the conditions set forth in this Section 6(b) are for the Company’s sole benefit and may be waived
by the Company at any time in its sole discretion by providing each Buyer with prior written notice
thereof.
7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.
(a) The obligation of each Buyer hereunder to purchase Securities at any Closing is subject to
the satisfaction, at or before the corresponding Closing Date, of each of the following conditions,
provided that these conditions are for each Buyer’s sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written notice thereof:
(i) The Company shall have executed and delivered to such Buyer (i) each of the Transaction
Documents and (ii) the Securities being purchased by such Buyer at such Closing pursuant to this
Agreement.
(ii) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form of Exhibit C attached hereto, which instructions shall have been
delivered to and acknowledged in writing by the Company’s transfer agent.
(iii) The Common Stock (i) shall be listed on the Principal Market and (ii) shall not have
been suspended, as of such Closing Date, by the SEC or the Principal Market from trading on the
Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as
of such Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling
below the minimum listing maintenance requirements of the Principal Market.
(iv) The representations and warranties of the Company shall be true and correct as of the
date when made and as of such 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 respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company at or prior to
such Closing Date.
(v) The Company shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the sale of the Securities.
(vi) The Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.
(vii) The Board of Directors of the Company shall have taken all necessary and proper
corporate action to appoint Xxxxxxx Xxxxxx and Xxxx Xxxxxx as members of the Board of Directors of
the Company.
(viii) The Company shall have filed the Certificate of Designation substantially in the form
attached hereto as Exhibit D with the Secretary of State of Delaware.
- 21 -
(b) Without limiting the provisions of Section 7(a) above, the obligation of each Buyer
hereunder to purchase Securities at the First Closing is subject to the receipt by such Buyer, at
or before the First Closing Date, of (i) a final dispositive non-appealable order, judgment or
decree of the Delaware Chancery Court dismissing the plaintiff’s claims in the Proxy Litigation (as
defined herein) with prejudice or (ii) a voluntary dismissal with prejudice that has been duly
filed by the plaintiffs of all of their claims with the Delaware Chancery Court with respect to the
Proxy Litigation, and (iii) in addition to (i) or (ii), an order of the Delaware Chancery Court
vacating, modifying or amending its Status Quo Order (as defined herein) or entering a superceding
Order which makes it clear, to the reasonable satisfaction of such Buyer, that the transactions
contemplated by this Agreement can proceed without violation of the Status Quo Order; provided,
however, that each of the conditions set forth in this Section 7(b) are for sole benefit of the
Buyers and may be waived by any Buyer at any time in its sole discretion by providing the Company
with prior written notice thereof.
8. TERMINATION.
(a) In the event that the First Closing shall not have occurred with respect to a Buyer on or
before ten (10) days from the date hereof due to the Company’s or such Buyer’s failure to satisfy
the conditions set forth in Sections 6(a) or 7(a) above (and the nonbreaching party’s failure to
waive such unsatisfied condition(s)), the nonbreaching 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.
(b) In the event that the First Closing shall not have occurred with respect to a Buyer on or
before December 9, 2005 due to the failure of the conditions set forth in Sections 6(b) or 7(b)
above to be satisfied or waived, any party hereto shall have the option to terminate this Agreement
at the close of business on such date without liability of any party to any other party.
9. MISCELLANEOUS.
(a) Definitions. The following definitions shall for all purposes, unless otherwise
clearly indicated to the contrary, apply to terms used in this Agreement.
"Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in
The City of New York are authorized or required by law to remain closed.
"Proxy Litigation” means the current proxy contest and related litigation involving the Company in
the case styled Forte Capital Partners, LLC v. Xxxxxxx X. Xxxxxxx, Xx. and SmartVideo
Technologies, Inc., C.A. No. 1495-N pending before the Delaware Chancery Court.
"Secondary Closing Conditions” means the following conditions precedent: (1) a Strategic Investor
shall have entered into a binding agreement with the Company to make a Small Strategic Investment,
or otherwise have made a Small Strategic Investment; and (2) four or more of the Secondary Funding
Conditions shall have been fulfilled; and (3) the Amendment shall have been adopted by the
Company’s stockholders and shall be in full force and effect; and (4) the Registration Statement
required to be filed within 30 days after the First Closing Date pursuant to the
- 22 -
Registration Rights Agreement shall have been declared effective by the SEC and shall be in full
force and effect.
"Secondary Funding Conditions” means the following conditions precedent: (1) an entertainment
provider identified in the Side Letter shall be capable of offering its content to mobile viewers
utilizing the Company’s services by no later than December 31, 2005; and (2) either an entity
identified in the Side Letter or one of such entity’s customers shall have entered into an
agreement with the Company to distribute video content to its customers by no later than December
31, 2005; and (3) a prominent entertainment provider identified in the Side Letter shall be capable
of offering its content to mobile viewers utilizing the Company’s services by no later than
December 31, 2005; and (4) a prominent computer company identified in the Side Letter shall be
actively promoting Company’s service as part of its promotion for applicable products no later than
December 31, 2005; and (5) a prominent media company identified in the Side Letter and the Company
shall have entered into, at a minimum, a memorandum of understanding relating to such company
becoming a purchaser of the Company’s products or services, or a reseller of the Company’s products
or services, no later than December 31, 2005.
"Side Letter” means that certain letter, dated October 17, 2005, from the Company to the Buyers
identifying a Strategic Investor and certain other parties with which the Company is contemplating
business arrangements.
"Small Strategic Investment” means (1) with respect to the Strategic Investor identified in the
Side Letter, a purchase by such Strategic Investor from the Company of Common Stock and/or shares
of preferred stock of the Company with an aggregate purchase price of less than $5,000,000, or (2)
with respect to any other Strategic Investor, a purchase by such Strategic Investor from the
Company of Common Stock and/or shares of preferred stock of the Company with an aggregate purchase
price of less than $10,000,000.
"Status Quo Order” means the Status Quo Order issued by the Delaware Chancery Court on November 3,
2005 in connection with the Proxy Litigation.
"Strategic Investment” means (1) with respect to the Strategic Investor identified in the Side
Letter, a purchase by such Strategic Investor from the Company of Common Stock and/or shares of
preferred stock of the Company with an aggregate purchase price of at least $5,000,000, or (2) with
respect to any other Strategic Investor, a purchase by such Strategic Investor from the Company of
Common Stock and/or shares of preferred stock of the Company with an aggregate purchase price of at
least $10,000,000.
"Strategic Investor” means (1) the potential strategic investor in the Company identified in the
Side Letter, or (2) any other party that makes an investment in the Company and also becomes a
significant business partner of the Company in connection with its investment, that is, a major
purchaser of the Company’s products and services, or a major reseller of the Company’s products and
services.
(b) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of Delaware, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of Delaware or any other jurisdictions) that would
cause the
- 23 -
application of the laws of any jurisdictions other than the State of Delaware. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in
Miami-Dade County, Florida and Broward County, Florida, or any federal court sitting in the
Southern District of Florida for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.
Each party hereby irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(c) 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;
provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.
(d) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
(e) Pronouns. As used herein, all pronouns shall include the masculine, feminine,
neuter, singular and plural whenever the context and facts require such construction.
(f) 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.
(g) Entire Agreement; Amendments. This Agreement supersedes all other prior oral or
written agreements between the Buyers, 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 amended other than by an instrument in writing
signed by the Company and the holders of at least seventy-five percent of the aggregate amount of
the Preferred Shares and the shares of Common Stock into which the Preferred Shares are converted.
No provision hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. No such amendment shall be effective to the extent that it
applies to less than all of the holders of the Preferred Shares then outstanding. No consideration
- 24 -
shall be offered or paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration also is offered to all
of the parties to the Transaction Documents, holders of Preferred Shares or holders of the
Warrants, as the case may be. The Company has not, directly or indirectly, made any agreements
with any Buyers relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents.
(h) 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 receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with an overnight
courier 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:
SmartVideo Technologies, Inc.
0000 Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
0000 Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
with a copy to:
Xxxxxxx & Xxxxxx, LLP
000 Xxxx Xxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, P.A.
000 Xxxx Xxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, P.A.
If to the Transfer Agent:
Continental Stock Transfer and Trust Company
00 Xxxxxxx Xxxxx Xxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
00 Xxxxxxx Xxxxx Xxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a Buyer, to his address and facsimile number set forth on the Schedule of Buyers, with copies
to Akerman Senterfitt, Xxx X.X. Xxxxx Xxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx 00000, telephone: (000)
000-0000, facsimile: (000) 000-0000, Attention: Xxxxxxxx X. Xxxxx, Esq., or to such other address
and/or facsimile number and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to the effectiveness of
such
- 25 -
change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver
or other communication, (B) mechanically or electronically generated by the sender’s facsimile
machine containing the time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
(i) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including any purchasers of the
Preferred Shares or the Warrants. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at least seventy-five
percent of the aggregate amount of the Preferred Shares and shares of Common Stock into which the
Preferred Shares are converted, including by merger or consolidation. A Buyer may assign some or
all of its rights hereunder without the consent of the Company, in which event such assignee shall
be deemed to be a Buyer hereunder with respect to such assigned rights.
(j) 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.
(k) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing and the
delivery and exercise of Securities, as applicable. Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.
(l) 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 any 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.
(m) Indemnification. In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or indirect investors
and any of the foregoing Persons’ agents or other representatives (including, without limitation,
those retained in connection with the transactions contemplated by this Agreement) (collectively,
the “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 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 any Indemnitee 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 the
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 the
Transaction Documents or any other certificate, instrument or document contemplated hereby or
- 26 -
thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf of the Company) and
arising out of or resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby, (ii) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (iii) the status of such Buyer
or holder of the Securities as an investor 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. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(m) shall be the same as
those set forth in Section 6 of the Registration Rights Agreement.
(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.
(o) Remedies. Each Buyer and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the event that it fails
to perform, observe, or discharge any or all of its obligations under the Transaction Documents,
any remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees
that the Buyers shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond or other security.
(p) Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Buyer exercises a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods therein provided, then
such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to
the Company, any relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.
(q) Payment Set Aside. To the extent that the Company makes a payment or payments to
the Buyers hereunder or pursuant to any of the other Transaction Documents or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or setoff had not occurred.
- 27 -
(r) Independent Nature of Buyers’ Obligations and Rights. The obligations of each
Buyer under any Transaction Document are several and not joint with the obligations of any other
Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any
other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction Documents and the
Company acknowledges that the Buyers are not acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction contemplated hereby
with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights arising out of this
Agreement or out of any other Transaction Documents, and it shall not be necessary for any other
Buyer to be joined as an additional party in any proceeding for such purpose. No Buyer of the
Securities or third party has acted as agent for any Buyer in connection with the Purchaser making
its investment hereunder, and no Buyer or any other third party will be acting as agent of any
Buyer in connection with monitoring its investment in the Securities or in enforcing its rights
under this Agreement.
[Signature Page Follows]
- 28 -
IN WITNESS WHEREOF, each Buyer and the Company have caused its respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written above.
| COMPANY: | ||||||
| SMARTVIDEO TECHNOLOGIES, INC. | ||||||
| By: | /s/ Xxxxxxx X. Xxxxxxx, Xx. | |||||
| Title: Chief Executive Officer | ||||||
- 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.
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
GHS Holdings
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
By: /s/ Xxxxx Xxxxxx
SME Children LLP
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
By: /s/ Xxxxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
/s/ Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
Xxxx and Xxxxxxx Xxxxxxxx
/s/ Xxxx Xxxxxxxx
Xxxx Xxxxxxxx
/s/ Xxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxx X. Xxxxxxx Partners Ltd.
By: /s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
By: /s/ Xxxx Xxxxxxx
Xxxxx Xxxxxx/Xxxxx Frywald
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxxx
Xxxxx Xxxxxxx
/s/ Xxxxxxx Xxxx
Xxxxxxx Xxxx
/s/ Xxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx
Bradcliff Investments, Inc.
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
By: /s/ Xxxx Xxxxxx
/s/ Xxxx Xxxx
Xxxx Xxxx
Apex Capital
By: /s/ Xxxxxx Xxxxx,
Name: Xxxxxx Xxxxx,
By: /s/ Xxxxxx Xxxxx,
/s/ Xxxx Xxxxx
Xxxx Xxxxx
/s/ Art Criden
Art Criden
MSG Properties LLC
By: /s/ Xxxx X. Gold
Name: Xxxx X. Gold
By: /s/ Xxxx X. Gold
Xxxx Xxxxx Family Trust
By: /s/ Xxxx Xxxxx
Name: Xxxx Xxxxx
By: /s/ Xxxx Xxxxx
/s/ Xxxxx Xxxx
Xxxxx Xxxx
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
/s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx
/s/ Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx
/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
/s/ Xxxxxxxx Wish
Xxxxxxxx Wish
/s/ Xxxx Xxxxxxx
Xxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx
Xxxxx Xxxxxxx
/s/ Xxxx Xxxxxxx
Xxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
SCB LLC
By: /s/ Xxxx X. Schwichte (Xxxxxxx)
Name: Xxxx X. Schwichte (Xxxxxxx)
By: /s/ Xxxx X. Schwichte (Xxxxxxx)
Xxxx R, Inc.
By: /s/ Andy Roddeck
Name: Andy Roddeck
By: /s/ Andy Roddeck
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
/s/ Xxx Xxxxxxxx
Xxx Xxxxxxxx
/s/ Xxxxx Xxxxxxx
Xxxxx Xxxxxxx
/s/ Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx
Xxxxxxx and Xxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
/s/ Xxx Xxxxxxx
Xxx Xxxxxxx
/s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
Xxxxx Xxxx Trust
/s/ Xxxx Xxxxxxxxx, Trustee
Xxxx Xxxxxxxxx, Trustee
/s/ Xxxx Xxxxxxxxx, Trustee
/s/ Xxxx X. Xxxxxxxx
Xxxx X. Xxxxxxxx
Xxxxxxx And Xxxxxxx Xxxxxxxx, Joint Tenants
/s/ Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxxx LP I
/s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
/s/ Xxxxxxx Xxxx
Xxxxxxx Xxxx
/s/ Xxxx Xxxx
Xxxx Xxxx
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
/s/ Xxx Xxxxxxx
Xxx Xxxxxxx
/s/ Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
/s/ Xxxxx Xxxx
Xxxxx Xxxx
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
Xxxxxx Family Partnership
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxx
/s/ Xxxx Xxxxxxxx
Xxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx
/s/ Xxxxx Xxxx
Xxxxx Xxxx
Xxxxx & Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
[Signature Page to Securities Purchase Agreement]
- 30 -
SCHEDULE OF BUYERS
First Closing
| (1) | (2) | (3) | (4) | (5) | (6) | |||||||||||||
| Address and | Number of | Number of $1.75 | Number of $2.00 | Purchase | ||||||||||||||
| Buyer | Facsimile Number | Preferred Shares | Warrant Shares | Warrant Shares | Price | |||||||||||||
| $ | ||||||||||||||||||
Xxxxxxx X. Xxxxxx
|
00000 Xxxxx Xxxxxx, Xxxxx Xxxxxx, XX 00000 |
483,333 | 483,333 | 120,833 | 362,500 | |||||||||||||
Xxxxx Xxxxxx/GHS Holdings |
000 X. Xxxxxx Xxxxx, Xxxxxx Xxxxx, XX 00000 |
600,000 | 600,000 | 150,000 | 450,000 | |||||||||||||
Xxxxxxx Xxxxxx/SME Children LLP |
00000 Xxx Xxxxx Xxxxx Xxxx, Xxxxx, XX 00000 |
133,333 | 133,333 | 33,333 | 100,000 | |||||||||||||
Xxxxx Xxxxxx
|
0000 Xxxxxxx Xxxxx, Xxxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxxxx Xxxxx
|
0000 Xxxxxxxxx Xxx, Xxxx Xxxxx, XX 00000 |
133,333 | 133,333 | 33,333 | 100,000 | |||||||||||||
Xxxxxxx Xxxxx
|
000 Xxxxx Xxx Xxxxxx, Xxxxxxxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxxxx Xxxxxxxxx
|
000 X.X. 00xx Xxxxxx,
Xxxx Xxxxxxxxxx, XX 00000 |
100,000 | 100,000 | 25,000 | 75,000 | |||||||||||||
Xxxxxx Xxxxxxx
|
0000 Xxxxxxx Xxxx, Xxxxx Xxxxx, XX 00000 |
100,000 | 100,000 | 25,000 | 75,000 | |||||||||||||
Xxxx and Xxxxxxx
Xxxxxxxx
|
00000 X.X. 00xx Xxxxx,
Xxxxxxxx, XX 00000 |
33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxx Xxxxxxx Xxxx X. Xxxxxxx Partners Ltd. |
000 Xxx Xxx Xxxxx, Xxx Xxxxxxx, XX 00000 |
166,666 | 166,666 | 41,666 | 125,000 | |||||||||||||
Xxxxx Xxxxxx/Xxxxx Xxxxxxx |
000 X. Xxxxx Xxxxxx,
Xxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxxxx Xxxx
|
0000 Xxxxx Xxxx, Xxxxxx, XX 00000 |
133,333 | 133,333 | 33,333 | 100,000 | |||||||||||||
Xxxxx Xxxxxxxxx
|
00 Xxxxxxx Xxxx, Xxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxx Xxxxxx,
BradCliff
Investments, Inc.
|
00 Xxxxx Xxxx, Xxxxxxxxx, Xxxxxx, Xxxxxx X0X 0X0 |
33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxx Xxxx
|
000 Xxxxxxx Xxxxx, Xxxxxxxxxxxx XX 00000 |
200,000 | 200,000 | 50,000 | 150,000 | |||||||||||||
Xxxxxx Xxxxx, Apex Capital |
00000 Xxx Xxxxxx Xxxx, Xxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxx Xxxxx
|
00000 Xxx Xxxxxx Xxxx, Xxxxx, Xxxxxxx 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Art Criden
|
0000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxx, XX 00000 |
33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
MSG Properties
LLC/Xxxx X. Gold |
0000 X. Xxxxxxxx Xxxxxx,
Xxxxxxxxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxx Xxxxx Family Trust |
0000 Xxxxx Xxxxx Xxxxxxx, #000, Xxxxx Xxxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxx Xxxx
|
0000 X.X. 000 Xxxxxx,
Xxxxx, Xxxxxxx 00000 |
16,666 | 16,666 | 4,166 | 12,500 | |||||||||||||
Xxxxxx Xxxxxxx
|
X.X. Xxx 0000, Xxxxxx Xxxxx, XX 00000 | 66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxxx Xxxxx
|
0000 Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, XX 00000 |
200,000 | 200,000 | 50,000 | 150,000 | |||||||||||||
Xxxxxxxx Xxxxx
|
0000 Xxxxxxxx Xxxxxxx, Xxxxx, XX 00000 |
133,333 | 133,333 | 33,333 | 100,000 | |||||||||||||
Xxxxxxx Xxxxxxx
|
0000 Xxxxxxxxxxx Xxxx, Xxxxx Xxxxxx, XX 00000 |
200,000 | 200,000 | 50,000 | 150,000 | |||||||||||||
| (1) | (2) | (3) | (4) | (5) | (6) | |||||||||||||
| Address and | Number of | Number of $1.75 | Number of $2.00 | Purchase | ||||||||||||||
| Buyer | Facsimile Number | Preferred Shares | Warrant Shares | Warrant Shares | Price | |||||||||||||
| $ | ||||||||||||||||||
Xxxxxxxx Wish
|
10 Venetian Way, Penthouse 2504, Xxxxx Xxxxx, XX 00000 |
16,666 | 16,666 | 4,166 | 12,500 | |||||||||||||
Xxxx Xxxxxxx
|
000 Xxxxxx Xxxxxx, Xxxxxxxx, XX 00000 |
50,000 | 50,000 | 12,500 | 37,500 | |||||||||||||
Xxxxx Xxxxxxx
|
0000 X. Xxxxxxxxx Xxxxx, Xxxxxxxxx, XX 00000 | 100,000 | 100,000 | 25,000 | 75,000 | |||||||||||||
Xxxx Xxxxxxx
|
0000 Xxxxxxxxx Xxxxxx, Xxxxx, XX |
16,666 | 16,666 | 4,166 | 12,500 | |||||||||||||
Xxxxxx Xxxxxxx
|
0000 X.X. 000xx Xxxxxx, Xxxxx, XX 00000 | 50,000 | 50,000 | 12,500 | 37,500 | |||||||||||||
Xxxxxxx Xxxxxxx
|
0000 X. Xxxxxxxx Xxxxx, #000, Xxxx Xxxxx, XX 00000 | 33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
SCB LLC/Xxxx X. Schwichte (Xxxxxxx) |
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxx 00000 |
86,666 | 86,666 | 21,666 | 65,000 | |||||||||||||
Andy Roddeck/Andy
R, Inc.
|
000 Xxxxxxx Xxxxx Xxxxx, Xxxxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxx Xxxxx
|
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxx, XX 00000 | 50,000 | 50,000 | 12,500 | 37,500 | |||||||||||||
Xxx Xxxxxxxx
|
000 Xxxxxxx Xxxxx, Xxxxx Xxxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxx Xxxxxxx
|
00000 Xxxx Xxxxxxx Xxxx Xxxxx, XX-0, Xxxxxxxx, XX 00000 |
133,333 | 133,333 | 33,333 | 100,000 | |||||||||||||
Xxxxxxxx Xxxxx
|
0000 Xxxxxxx Xxxxx, Xxxxxx, XX 00000 |
33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxxxxx and Xxxxxx
Xxxxxxx
|
00000 Xxxxxxxxx Xxxxxx, Xxxxx, Xx. Xxxxx Xxxx, XX 00000 | 33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxxxxx Xxxxxxx
|
0000 X.X. 000xx Xxxxxx, Xxxxx, XX 00000 | 66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxxx Xxxxxxx
|
0000 Xxxxxx Xxxxxxxxx, #0000, Xxxxxxxx, XX 00000 |
33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxx Xxxxxxx
|
00000 X.X. 00xx Xxxxx, Xxxxxxxxx, Xxxxxxx 00000 | 66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxx; X. Xxxxxxx
|
000 Xxx Xxx Xxxxx, Xxx Xxxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxx Xxxx Trust/Xxxx Xxxxxxxxx, Trustee |
00000 X.X. 00xx Xxxxxx, Xxxxxxxx, XX 00000 | 100,000 | 100,000 | 25,000 | 75,000 | |||||||||||||
Xxxx X. Xxxxxxxx
|
000 Xxxxxx Xxxx, Xxxx Xxxx, XX 00000 |
33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxxxxx and Xxxxxxx
Xxxxxxxx, Joint
Tenants
|
0000 X.X. 000 Xxxxxx, Xxxxx Xxxxxx, XX 00000 | 66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxxx Xxxxxxxxx
|
0000 X.X. 00xx Xxxxxx, Xxxxxxxxxx Xxxxx, XX 00000 | 33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxxxx Xxxxxx LP I
|
000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xx. Xxxxxxxxxx, XX 00000 | 133,333 | 133,333 | 33,333 | 100,000 | |||||||||||||
Xxxxxxx Xxxx
|
000 Xxxxxxxxx Xxxxx Xxxx, Xxxxxxxxx, XX 00000 |
33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxx Xxxx
|
0000 Xxxxxx Xxxxxxx Xxxxx, Xxxxxxxx, XX 00000 |
33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxxx Xxxxxx
|
000 Xxxxxx Xxxxxx, Xxxxx Xxxxxx, XX 00000 |
83,333 | 83,333 | 20,833 | 62,500 | |||||||||||||
- 2 -
| (1) | (2) | (3) | (4) | (5) | (6) | |||||||||||||
| Address and | Number of | Number of $1.75 | Number of $2.00 | Purchase | ||||||||||||||
| Buyer | Facsimile Number | Preferred Shares | Warrant Shares | Warrant Shares | Price | |||||||||||||
| $ | ||||||||||||||||||
Xxx Xxxxxxx
|
0000 Xxxxxx Xxxxxxx Xxxxx, Xxxxxxxx, XX 00000 |
33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxxxx Xxxxxxxx
|
0 Xxxxxxx Xxxxx, Xxxxxx Xxxx, XX 00000 |
43,333 | 43,333 | 10,833 | 32,500 | |||||||||||||
Xxxxx Xxxx
|
00000 Xxxxxxxx Xxx Xxxxx, Xxxxx Xxxxx, XX 00000 |
60,000 | 60,000 | 15,000 | 45,000 | |||||||||||||
Xxxxxx Xxxxxxx
|
00000 X.X. 00xx Xxxxxx, Xxxxx Xxxxx Xxxxx, XX 00000 | 33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxxxx Xxxxxxxx
|
00000 X.X. 00xx Xxxxx, Xxxxx Xxxxx Xxxxx, XX 00000 | 33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Xxxxxx Family Partnership |
000 Xxxxxx Xxxxxxx Xxxx, 0xx Xxxxx, Xxxxx Xxxxx, XX 00000 | 83,333 | 83,333 | 20,833 | 62,500 | |||||||||||||
Xxxx Xxxxxxxx
|
000 Xxxx Xxxxxxx Xxxx, Xxxxxxxxxx, XX 00000 |
66,666 | 66,666 | 16,666 | 50,000 | |||||||||||||
Xxxxxxx Xxxxxxxxx
|
000 Xxxxxx Xxxxx Xxxxx, Xxxxxx Xxxxx, XX 00000 |
26,666 | 26,666 | 6,666 | 20,000 | |||||||||||||
Xxxxx Xxxx
|
C/o Ross Realty Investments, Inc., 0000 X. Xxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx, XX 00000 | 133,333 | 133,333 | 33,333 | 100,000 | |||||||||||||
Xxxxx & Xxxxx Xxxxxx
|
000 Xxxxxxx Xxxxx Xxxxxx, XX 00000 |
33,333 | 33,333 | 8,333 | 25,000 | |||||||||||||
Second Closing
| (7) | (8) | (9) | (10) | (11) | (12) | |||||||||||||
| Address and | Number of | Number of $1.75 | Number of $2.00 | Purchase | ||||||||||||||
| Buyer | Facsimile Number | Preferred Shares | Warrant Shares | Warrant Shares | Price | |||||||||||||
| $ | ||||||||||||||||||
Xxxxxxx X. Xxxxxx
|
00000 Xxxxx Xxxxxx, Xxxxx Xxxxxx, XX 00000 |
483,334 | 483,334 | 120,834 | 362,500 | |||||||||||||
Xxxxx Xxxxxx/GHS Holdings |
000 X. Xxxxxx Xxxxx, Xxxxxx Xxxxx, XX 00000 | 600,000 | 600,000 | 150,000 | 450,000 | |||||||||||||
Xxxxxxx Xxxxxx/SME Children LLP |
00000 Xxx Xxxxx Xxxxx Xxxx, Xxxxx, XX 00000 |
133,334 | 133,334 | 33,334 | 100,000 | |||||||||||||
Xxxxx Xxxxxx
|
0000 Xxxxxxx Xxxxx, Xxxxxx, XX 00000 |
66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxxxx Xxxxx
|
0000 Xxxxxxxxx Xxx, Xxxx Xxxxx, XX 00000 |
133,334 | 133,334 | 33,334 | 100,000 | |||||||||||||
Xxxxxxx Xxxxx
|
000 Xxxxx Xxx Xxxxxx, Xxxxxxxxxx, XX 00000 |
66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxxxx Xxxxxxxxx
|
000 X.X. 00xx Xxxxxx, Xxxx Xxxxxxxxxx, XX 00000 | 100,000 | 100,000 | 25,000 | 75,000 | |||||||||||||
Xxxxxx Xxxxxxx
|
0000 Xxxxxxx Xxxx, Xxxxx Xxxxx, XX 00000 |
100,000 | 100,000 | 25,000 | 75,000 | |||||||||||||
Xxxx and Xxxxxxx
Xxxxxxxx
|
00000 X.X. 00xx Xxxxx, Xxxxxxxx, XX 00000 | 33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxxx Xxxxxxx Xxxx
X. Xxxxxxx Partners
Ltd.
|
000 Xxx Xxx Xxxxx, Xxx Xxxxxxx, XX 00000 |
166,667 | 166,667 | 41,667 | 125,000 | |||||||||||||
- 3 -
| (7) | (8) | (9) | (10) | (11) | (12) | |||||||||||||
| Address and | Number of | Number of $1.75 | Number of $2.00 | Purchase | ||||||||||||||
| Buyer | Facsimile Number | Preferred Shares | Warrant Shares | Warrant Shares | Price | |||||||||||||
| $ | ||||||||||||||||||
Xxxxx Xxxxxx/Xxxxx Xxxxxxx |
000 X. Xxxxx Xxxxxx, Xxxxx, XX 00000 | 66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxxxx Xxxx
|
0000 Xxxxx Xxxx, Xxxxxx, XX 00000 |
133,334 | 133,334 | 33,334 | 100,000 | |||||||||||||
Xxxxx Xxxxxxxxx
|
00 Xxxxxxx Xxxx, Xxxxx, XX 00000 |
66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxx Xxxxxx,
BradCliff
Investments, Inc.
|
00 Xxxxx Xxxx, Xxxxxxxxx, Xxxxxx, Xxxxxx X0X 0X0 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxxx Xxxx
|
000 Xxxxxxx Xxxxx, Xxxxxxxxxxxx XX 00000 |
200,000 | 200,000 | 50,000 | 150,000 | |||||||||||||
Xxxxxx Xxxxx, Apex Capital |
00000 Xxx Xxxxxx Xxxx, Xxxxx, XX 00000 |
66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxx Xxxxx
|
00000 Xxx Xxxxxx Xxxx, Xxxxx, Xxxxxxx 00000 |
66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Art Criden
|
0000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxx, XX 00000 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
MSG Properties
LLC/Xxxx X. Gold
|
0000 X. Xxxxxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000 | 66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxx Xxxxx Family Trust |
0000 Xxxxx Xxxxx Xxxxxxx, #000, Xxxxx Xxxxxx, XX 00000 |
66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxx Xxxx
|
0000 X.X. 000 Xxxxxx, Xxxxx, Xxxxxxx 00000 | 16,667 | 16,667 | 4,167 | 12,500 | |||||||||||||
Xxxxxx Xxxxxxx
|
X.X. Xxx 0000, Xxxxxx Xxxxx, XX 00000 | 66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxxx Xxxxx
|
0000 Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, XX 00000 |
200,000 | 200,000 | 50,000 | 150,000 | |||||||||||||
Xxxxxxxx Xxxxx
|
0000 Xxxxxxxx Xxxxxxx, Xxxxx, XX 00000 |
133,334 | 133,334 | 33,334 | 100,000 | |||||||||||||
Xxxxxxx Xxxxxxx
|
0000 Xxxxxxxxxxx Xxxx, Xxxxx Xxxxxx, XX 00000 |
200,000 | 200,000 | 50,000 | 150,000 | |||||||||||||
Xxxxxxxx Wish
|
10 Venetian Way, Penthouse 2504, Xxxxx Xxxxx, XX 00000 |
16,667 | 16,667 | 4,167 | 12,500 | |||||||||||||
Xxxx Xxxxxxx
|
000 Xxxxxx Xxxxxx, Xxxxxxxx, XX 00000 |
50,000 | 50,000 | 12,500 | 37,500 | |||||||||||||
Xxxxx Xxxxxxx
|
0000 X. Xxxxxxxxx Xxxxx, Xxxxxxxxx, XX 00000 | 100,000 | 100,000 | 25,000 | 75,000 | |||||||||||||
Xxxx Xxxxxxx
|
0000 Xxxxxxxxx Xxxxxx, Xxxxx, XX |
16,667 | 16,667 | 4,167 | 12,500 | |||||||||||||
Xxxxxx Xxxxxxx
|
0000 X.X. 000xx Xxxxxx, Xxxxx, XX 00000 | 50,000 | 50,000 | 12,500 | 37,500 | |||||||||||||
Xxxxxxx Xxxxxxx
|
0000 X. Xxxxxxxx Xxxxx, #000, Xxxx Xxxxx, XX 00000 | 33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
SCB LLC/Xxxx X.
Schwichte (Xxxxxxx)
|
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxx 00000 |
86,667 | 86,667 | 21,667 | 65,000 | |||||||||||||
Andy Roddeck/Andy
R, Inc.
|
000 Xxxxxxx Xxxxx Xxxxx, Xxxxxxx, XX 00000 |
66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxx Xxxxx
|
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxx, XX 00000 | 50,000 | 50,000 | 12,500 | 37,500 | |||||||||||||
Xxx Xxxxxxxx
|
000 Xxxxxxx Xxxxx, Xxxxx Xxxxxx, XX 00000 |
66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxx Xxxxxxx
|
00000 Xxxx Xxxxxxx Xxxx Xxxxx, XX-0, Xxxxxxxx, XX 00000 |
133,334 | 133,334 | 33,334 | 100,000 | |||||||||||||
Xxxxxxxx Xxxxx
|
0000 Xxxxxxx Xxxxx, Xxxxxx, XX 00000 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxxxxxx and Xxxxxx
Xxxxxxx
|
00000 Xxxxxxxxx Xxxxxx, Xxxxx, Xx. Xxxxx Xxxx, XX 00000 | 33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
- 4 -
| (7) | (8) | (9) | (10) | (11) | (12) | |||||||||||||
| Address and | Number of | Number of $1.75 | Number of $2.00 | Purchase | ||||||||||||||
| Buyer | Facsimile Number | Preferred Shares | Warrant Shares | Warrant Shares | Price | |||||||||||||
| $ | ||||||||||||||||||
Xxxxxxx Xxxxxxx
|
0000 X.X. 000xx Xxxxxx, Xxxxx, XX 00000 | 66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxxx Xxxxxxx
|
0000 Xxxxxx Xxxxxxxxx, #0000, Xxxxxxxx, XX 00000 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxx Xxxxxxx
|
00000 X.X. 00xx Xxxxx, Xxxxxxxxx, Xxxxxxx 00000 | 66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxx X. Xxxxxxx
|
000 Xxx Xxx Xxxxx, Xxx Xxxxxx, XX 00000 | 66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxx Xxxx
Trust/Xxxx
Xxxxxxxxx, Trustee
|
00000 X.X. 00xx Xxxxxx, Xxxxxxxx, XX 00000 | 100,000 | 100,000 | 25,000 | 75,000 | |||||||||||||
Xxxx X. Xxxxxxxx
|
000 Xxxxxx Xxxx, Xxxx Xxxx, XX 00000 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxxxxxx and Xxxxxxx
Xxxxxxxx, Joint
Tenants
|
0000 X.X. 000 Xxxxxx, Xxxxx Xxxxxx, XX 00000 | 66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxxx Xxxxxxxxx
|
0000 X.X. 00xx Xxxxxx, Xxxxxxxxxx Xxxxx, XX 00000 | 33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxxxxx Xxxxxx LP I
|
000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xx. Xxxxxxxxxx, XX 00000 | 133,334 | 133,334 | 33,334 | 100,000 | |||||||||||||
Xxxxxxx Xxxx
|
000 Xxxxxxxxx Xxxxx Xxxx, Xxxxxxxxx, XX 00000 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxxx Xxxx
|
0000 Xxxxxx Xxxxxxx Xxxxx, Xxxxxxxx, XX 00000 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxxxx Xxxxxx
|
000 Xxxxxx Xxxxxx, Xxxxx Xxxxxx, XX 00000 |
83,334 | 83,334 | 20,834 | 62,500 | |||||||||||||
Xxx Xxxxxxx
|
0000 Xxxxxx Xxxxxxx Xxxxx, Xxxxxxxx, XX 00000 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxxxxx Xxxxxxxx
|
0 Xxxxxxx Xxxxx, Xxxxxx Xxxx, XX 00000 |
43,334 | 43,334 | 10,834 | 32,500 | |||||||||||||
Xxxxx Xxxx
|
00000 Xxxxxxxx Xxx Xxxxx, Xxxxx Xxxxx, XX 00000 |
60,000 | 60,000 | 15,000 | 45,000 | |||||||||||||
Xxxxxx Xxxxxxx
|
00000 X.X. 00xx Xxxxxx, Xxxxx Xxxxx Xxxxx, XX 00000 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxxxxx Xxxxxxxx
|
00000 X.X. 00xx Xxxxx, Xxxxx Xxxxx Xxxxx, XX 00000 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
Xxxxxx Family Partnership |
000 Xxxxxx Xxxxxxx Xxxx, 0xx Xxxxx, Xxxxx Xxxxx, XX 00000 | 83,334 | 83,334 | 20,834 | 62,500 | |||||||||||||
Xxxx Xxxxxxxx
|
000 Xxxx Xxxxxxx Xxxx, Xxxxxxxxxx, XX 00000 |
66,667 | 66,667 | 16,667 | 50,000 | |||||||||||||
Xxxxxxx Xxxxxxxxx
|
000 Xxxxxx Xxxxx Xxxxx, Xxxxxx Xxxxx, XX 00000 |
26,667 | 26,667 | 6,667 | 20,000 | |||||||||||||
Xxxxx Xxxx
|
C/o Ross Realty Investments, Inc., 0000 X. Xxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx, XX 00000 |
133,334 | 133,334 | 33,334 | 100,000 | |||||||||||||
Xxxxx & Xxxxx Xxxxxx
|
000 Xxxxxxx Xxxxx Xxxxxx, XX 00000 |
33,334 | 33,334 | 8,334 | 25,000 | |||||||||||||
- 5 -
EXHIBITS
Exhibit A
|
Form of Warrants | |
Exhibit B
|
Form of Registration Rights Agreement | |
Exhibit C
|
Form of Irrevocable Transfer Agent Instructions | |
Exhibit D
|
Certificate of Designation |
- 32 -
Schedule 3(a)
Subsidiaries
OVT, Inc., a Georgia corporation
Ownership: 100%
Ownership: 100%
- 33 -
Schedule 3(g)
No General Solicitation; Placement Agent’s Fees
On June 29, 2005, the Company entered into an agreement (the “June 2005 Agreement”) with Ascendiant
Securities, LLC (“Ascendiant”), pursuant to which Ascendiant agreed to use its best efforts as a
financial advisor and exclusive placement agent to assist the Company in the sale of its debt
and/or equity securities for financing purposes. The Company does not believe that Ascendiant is
entitled to compensation under the June 2005 Agreement as a result of the closing of the
transaction contemplated by this Agreement.
- 34 -
Schedule 3(j)
SEC Documents; Financial Statements
As of the date hereof, the Company has timely filed all SEC Reports, schedules, forms, statements
and other documents required to be filed by it under the Securities Act and the Exchange Act in the
last two years other than: (i) Annual Report on Form 10-KSB for the Year Ended December 31, 2004,
which was filed on April 29, 2005; (ii) Current Report on From 8-K, which was filed on July 27,
2005; and (iii) Quarterly Report on Form 10-QSB for the Quarterly Period Ended June 30, 2005 which
was filed on September 14, 2005.
On August 24, 2005, the staff of the SEC’s Division of Corporation Finance provided the Company
with a comment letter on the Company’s Form 10-KSB for the fiscal year ended December 31, 2004 and
the Company’s Form 10-QSB for the quarterly period ended March 31, 2005. The Company has provided
this letter to the Buyers.
Schedule 3(q)
Equity Capitalization
In connection with the Company’s March 2005 equity financing, warrants to purchase 880,620 shares
of Common Stock at a purchase price of $3.50 per share were issued. As a result of the
anti-dilution provisions contained in such warrants, new warrants to purchase 4,109,560 shares of
Common Stock at a purchase price of $0.75 per share will be issued to the investors in the March
2005 equity financing in exchange for their existing warrants.
- 35 -
Schedule 4(i)
Additional Registration Statements
As a result of the Closing, the Company will be required to file a post-effective amendment to its
Registration Statement on Form SB-2 filed with the SEC on June 30, 2005 (SEC File No. 333-124918).
As of the date hereof, Ascendiant Capital Group LLC has piggy-back registration rights for 750,000
shares of Common Stock, Interim CFO Solutions LLC has piggy-back registration rights for 2,608,696
shares of Common Stock underlying common stock purchase warrants, ACI Solutions has piggy-back
registration rights for 127,981 shares of Common Stock, XX Xxxxxx has piggy-back registration
rights for 52,000 shares of Common Stock and The Xxxxxx Group has piggy-back registration rights
for 11,000 shares of Common Stock.
- 36 -
