SECURITIES PURCHASE AGREEMENT
Exhibit
10(a)
SECURITIES
PURCHASE AGREEMENT
(the
"Agreement"),
dated
as of December 30, 2005, by and among Universal Food & Beverage
Company, a Nevada corporation, with headquarters located at 0000 Xxxxxxxx Xxxxx,
Xx. Xxxxxxx, Xxxxxxxx 00000 (the "Company"),
and
the investors listed on the Schedule of Buyers attached hereto (individually,
a
"Buyer"
and
collectively, the "Buyers").
WHEREAS:
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. The
Company has authorized a new series of senior secured exchangeable convertible
notes of the Company, which Notes shall be convertible into the Company's common
stock, $0.01 par value per share (the "Common
Stock"),
in
accordance with the terms of the Notes.
C. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate principal amount of
Notes, in substantially the form attached hereto as Exhibit
A
(the
"Notes"),
set
forth opposite such Buyer's name in column (3) on the Schedule of Buyers (which
aggregate amount for all Buyers shall be $3,250,000) (as converted,
collectively, the "Conversion
Shares"
and
(ii) Warrants in substantially the form attached hereto as Exhibit
B
(the
"Warrants"),
to
acquire that number of shares of Common Stock (as exercised, collectively,
the
"Warrant
Shares")
set
forth opposite such Buyer's name in column (4) on the Schedule of
Buyers.
D. 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
C
(the
"Registration
Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
with respect to the Conversion Shares and Warrant Shares under the 1933 Act
and
the rules and regulations promulgated thereunder, and applicable state
securities laws.
E. The
Notes, the Conversion Shares, the Warrants and the Warrant Shares are
collectively are referred to herein as the "Securities".
F. The
Company is contemplating an additional transaction as reflected in the Savannah
LOI (as defined below).
NOW,
THEREFORE,
the
Company and each Buyer hereby agree as follows:
PURCHASE
AND SALE OF NOTES AND WARRANTS.
Amount.
Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
7
below, the Company shall issue and sell to each Buyer, and each Buyer severally,
but not jointly, agrees to purchase from the Company on the Closing Date (as
defined below), a principal amount of Notes, as is set forth opposite such
Buyer's name in column (3) on the Schedule of Buyers, along
with Warrants to acquire that number of Warrant Shares as is set forth opposite
such Buyer's name in column (4) on the Schedule of Buyers.
Closing.
The
closing (the "Closing")
of the
purchase of the Notes and the Warrants by the Buyers shall occur at the offices
of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The
date and time of the Closing (the "Closing
Date")
shall
be 10:00 a.m., New York City Time, on the date hereof, subject to notification
of satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 6 and 7 below (or such later date as is mutually agreed to by the
Company and each Buyer).
Purchase
Price.
The
purchase price for each Buyer (the "Purchase
Price")
of the
Notes and related Warrants to be purchased by each Buyer at the Closing shall
be
equal to $1.00 for each $1.00 of principal amount of Notes being purchased
by
such Buyer at the Closing. The aggregate Purchase Price to be paid by each
Buyer
at the Closing is as set forth opposite such Buyer's name in column (3) on
the
Schedule of Buyers.
Form
of Payment.
On the
Closing Date, (A) each Buyer shall pay its aggregate Purchase Price to the
Company for the Notes and the Warrants to be issued and sold to such Buyer
at
the Closing, by wire transfer of immediately available funds in accordance
with
the Company's written wire instructions, and (B) the Company shall deliver
to each Buyer the Notes (in
such
principal amount
as
is set forth opposite such Buyer's name in column (3) on the Schedule
of
Buyers), along with the Warrants (exercisable for the number of shares of Common
Stock as is set forth opposite such Buyer's name in column (4) on the Schedule
of Buyers), each duly executed on behalf of the Company and registered in the
name of such Buyer or its designee.
BUYER'S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer represents and warrants with respect to only itself that:
Organization;
Authority.
Such
Buyer is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite power and
authority to enter into and to consummate the transactions contemplated by
the
Transaction Documents (as defined below) to which it is a party and otherwise
to
carry out its obligations hereunder and thereunder.
No
Public Sale or Distribution.
Such
Buyer is (i) acquiring the Notes and the Warrants (ii) upon conversion of the
Notes will acquire the Conversion Shares, and (iii) upon exercise of the
Warrants will acquire the Warrant Shares, in each case, 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; 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.
-2-
Accredited
Investor Status.
Such
Buyer is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D.
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.
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. 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.
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.
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, by counsel reasonably
acceptable to the Company and in form and substance reasonably satisfactory
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(s)) 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. The Securities may be pledged pursuant to an available
exemption from registration under the 1933 Act in connection with a bona fide
margin account or other loan or financing arrangement secured by the Securities
and such pledge of Securities shall not be deemed to be a transfer, sale or
assignment 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 (as defined in Section 3(b)), including, without
limitation, this Section 2(g).
-3-
Legends.
Such
Buyer understands that the certificates or other instruments representing the
Notes and the Warrants and, until such time as the resale of the Conversion
Shares, the Warrant Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares, the Warrant Shares, 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 [CONVERTIBLE]
[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, AND APPLICABLE STATE SECURITIES LAWS, OR (B)
AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT
REQUIRED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
(II)
UNLESS SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT IN CONNECTION WITH
A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE
SECURITIES.
|
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection
with
a sale, assignment or other transfer, such holder provides the Company with
an
opinion of counsel, by counsel reasonably acceptable to the Company and in
form
and substance reasonably satisfactory to the Company, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) such holder provides
the Company with reasonable assurance that the Securities can be sold, assigned
or transferred pursuant to Rule 144(k).
-4-
Validity;
Enforcement.
This
Agreement and the Registration Rights Agreement to which such Buyer is a party
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.
No
Conflicts.
The
execution, delivery and performance by such Buyer of this Agreement and the
Registration Rights Agreement to which such Buyer is a party 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 in the aggregate,
reasonably be expected to have a material adverse effect on the ability of
such
Buyer to perform its obligations hereunder.
Residency.
Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each of the Buyers that:
Organization
and Qualification.
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
entities duly organized and validly existing in good standing under the laws
of
the jurisdiction in which they are formed, and have the requisite 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 entity 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 by 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).
-5-
Authorization;
Enforcement; Validity.
The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Notes, the Warrants, the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions
(as
defined in Section 5(b)), 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 Notes, the reservation for
issuance and the issuance of the Conversion Shares issuable upon conversion
of
the Notes, the issuance of the Warrants and the reservation for issuance and
issuance of the Warrant Shares issuable upon exercise of the Warrants, have
been
duly authorized by the Company's Board of Directors and (other than the filing
with the SEC of one or more Registration Statements in accordance with the
requirements of the Registration Rights Agreement and any other filings as
may
be required by any state securities agencies) no further filing, consent, or
authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other Transaction Documents of even date
herewith have been duly executed and 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 and except as rights to indemnification and to contribution may be
limited by federal or state securities law.
Issuance
of Securities.
The
issuance of the Notes and the Warrants are duly authorized and upon issuance
in
accordance with the terms of the Transaction Documents shall be free from all
taxes, liens and charges with respect to the issue thereof. As of the Closing,
the Company shall have reserved from its duly authorized capital stock not
less
than the sum of (i) 110% of the maximum number of shares of Common Stock
issuable upon conversion of the Notes (assuming for purposes hereof, that the
Notes are convertible at the Conversion Price and without taking into account
any limitations on the conversion of the Notes set forth in the Notes) 110%
of
the maximum number of shares of Common Stock issuable upon exercise of the
Warrants (without taking into account any limitations on the exercise of the
Warrants set forth in the Warrants). Upon issuance or conversion in accordance
with the Notes or exercise in accordance with the Warrants, as the case may
be,
the Conversion Shares and the Warrant Shares, respectively, will be validly
issued, fully paid and nonassessable and free from all preemptive or similar
rights, taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock.
Subject to the representations and warranties of the Buyers in this Agreement,
the offer and issuance by the Company of the Securities is exempt from
registration under the 1933 Act.
No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby (including, without limitation, the issuance of the Notes, the Warrants,
and reservation for issuance of the Conversion Shares and the Warrant Shares)
will not (i) result in a violation of the Certificate of Incorporation (as
defined in Section 3(r)) of the Company or any of its Subsidiaries, any capital
stock of the Company or Bylaws (as defined in Section 3(r)) 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 agreement, indenture or instrument to which the Company
or
any of its Subsidiaries is a party, except to the extent such conflict, default
or termination right would not reasonably be expected to have a Material Adverse
Effect, 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 OTC Bulletin Board (the "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 except
to
the extent such violation would not reasonably be expected to have a Material
Adverse Effect.
-6-
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, except as to Xxxxxxx National Bank. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior
to
the Closing Date, and the Company and its Subsidiaries are unaware of any facts
or circumstances which 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 requirements of the Principal Market
and
has no knowledge of any facts which would reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future.
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 shares of 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.
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. The Company acknowledges that it has engaged Illington
Capital as placement agent (the "Agent")
in
connection with the sale of the Securities. Other than the Agent, the Company
has not engaged any placement agent or other agent in connection with the sale
of the Securities.
-7-
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.
Dilutive
Effect.
The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Notes, and, the Warrant Shares issuable upon
exercise of the Warrants, will increase in certain circumstances. The Company
further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Notes in accordance with this Agreement and the Notes and
its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is, in each case, absolute
and
unconditional regardless of the dilutive effect that such issuance may have
on
the ownership interests of other stockholders of the Company.
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 poison pill (including any distribution under
a
rights agreement) or other similar anti-takeover provision 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. The Company has not
adopted a stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control
of
the Company.
SEC
Documents; Financial Statements.
During
the two (2) years prior to the date hereof, the Company has 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 and all exhibits included therein
and
financial statements, notes 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 each of the SEC Documents not available on the
XXXXX system that have been requested by each Buyer. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they
were filed with the SEC, contained any untrue statement of a material fact
or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in 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 as in effect
as
of the time of filing. 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).
-8-
Absence
of Certain Changes.
Except
as disclosed in Section 3(l), since the date of the Company's most recent
audited financial statements contained in a Form 10-QSB, there has been no
material adverse change and no material adverse development in the business,
assets, properties, operations, condition (financial or otherwise), results
of
operations or prospects of the Company. Except as disclosed in Schedule
3(l),
since
the date of the Company's most recent audited financials statements contained
in
a Form 10-QSB, the Company has not (i) declared or paid any dividends, (ii)
sold
any assets, individually or in the aggregate, in excess of $50,000 outside
of
the ordinary course of business or (iii) had capital expenditures, individually
or in the aggregate, in excess of $50,000. 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(l), "Insolvent"
means
(i) the present fair saleable value of the Company's assets is less than the
amount required to pay the Company's total Indebtedness (as defined in Section
3(s)), (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.
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, 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 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
-9-
Conduct
of Business; Regulatory Permits.
Neither
the Company nor its Subsidiaries is in violation of any term of or in default
under its Certificate of Incorporation or Bylaws or their organizational charter
or certificate of incorporation or bylaws, respectively. Neither the Company
nor
any of its Subsidiaries 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 in all cases 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. During the two (2) years prior
to
the date hereof, (i) the Common Stock has been designated for quotation 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. The Company and
its
Subsidiaries possess all certificates, authorizations and permits issued by
the
appropriate 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.
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 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.
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.
Transactions
With Affiliates.
Except
as set forth in the SEC Documents filed at least ten days prior to the date
hereof and other than the grant of stock options disclosed on Schedule
3(q),
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.
-10-
Equity
Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, of which as of the date hereof, 33,339,684
are issued and outstanding and 9,657,345 shares are reserved for issuance
pursuant to securities (other than the Notes and the Warrants) exercisable
or
exchangeable for, or convertible into, shares of Common Stock and (ii) no shares
of preferred stock. All of such outstanding shares have been, or upon issuance
will be, validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule
3(r):
(i)
none of the Company's share capital is subject to preemptive rights or any
other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
share capital 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 share capital 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
share capital of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) there
are
no 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 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 but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's
or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The Company
has
furnished to the Buyer true, correct and complete copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "Certificate
of Incorporation"),
and
the Company's Bylaws, as amended and as in effect on the date hereof (the
"Bylaws"),
and
the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof
in
respect thereto.
-11-
Indebtedness
and Other Contracts.
Neither
the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
(as
defined below), (ii) 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 (iii) 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. Schedule
3(s)
provides
a detailed description of the material terms of any such outstanding
Indebtedness. 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 (including, without limitation, "capital leases" in
accordance with generally accepted accounting principals) (other than trade
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 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.
Absence
of Litigation.
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 Common Stock or any of the Company's
Subsidiaries or any of the Company's or its Subsidiaries' officers or directors,
that could, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
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. Neither the Company
nor
any such Subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect.
-12-
Employee
Relations.
i.
Neither
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 or any of its Subsidiaries (as defined in Rule 501(f) of the
0000
Xxx) has notified the Company or any such Subsidiary that such officer intends
to leave the Company or any such Subsidiary or otherwise terminate such
officer's employment with the Company or any such Subsidiary, provided that
the
employment agreements with Xxxxx Xxxxxxx and Xxxxxxx Xxxxx will be modified
in
the near future such that Xxxxx Xxxxxxx will be receiving no salary and Xxxxxxx
Xxxxx'x compensation will remain unchanged. No executive officer of the Company
or any of its Subsidiaries, to the knowledge of the Company or any such
Subsidiary, 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, and the continued employment of each such executive
officer does not subject the Company or any such Subsidiary to any liability
with respect to any of the foregoing matters.
The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, 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.
Title.
Except
with regard to the Mortgage, Equipment Line (each, as defined in the Note)
and
the IWG Loan, 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 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.
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 except where
the failure to so own or possess would not reasonably be expected to result
in a
Material Adverse Effect. 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
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 properties.
-13-
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.
Subsidiary
Rights.
The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
Investment
Company.
The
Company is not, and is not an affiliate of, an "investment company" within
the
meaning of the Investment Company Act of 1940, as amended.
Tax
Status.
The
Company and each of its Subsidiaries (i) has made or filed all foreign,
Canadian, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) 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 (iii) 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.
Internal
Accounting and Disclosure Controls.
The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
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. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-14 under the 0000
Xxx) that are designed to ensure 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. During the twelve months prior to the date hereof neither the
Company nor any of its Subsidiaries have received any notice or correspondence
from any accountant relating to any potential material weakness in any part
of
the system of internal accounting controls of the Company or any of its
Subsidiaries.
-14-
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 Exchange Act filings and is not so disclosed
or
that otherwise would be reasonably likely to have a Material Adverse
Effect.
Ranking
of Notes.
Other
than the Mortgage, the Equipment Line (each, as defined in the Note) and the
IWG
Loan, no Indebtedness of the Company is senior to or ranks pari
passu
with the
Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise.
Registration
Eligibility.
The
Company is eligible to register the Conversion Shares and the Warrant Shares
for
resale by the Buyers using Form SB-2 promulgated under the 1933
Act.
Manipulation
of Price.
The
Company has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) other than the
Agent, sold, bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) other than the Agent, paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.
Disclosure.
Except
for information that will be disclosed in a periodic report on Form 8-K to
be
filed no later than the earlier of the Effective Date and the Effectiveness
Deadline (as such terms are defined in the Registration Rights Agreement),
the
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Buyers or their agents or counsel with any information
that
constitutes or could reasonably be expected to constitute material, nonpublic
information other than as set forth in the following sentence. 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 is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of
the
circumstances under which they were made, not misleading. Each press release
issued by the Company during the twelve (12) months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company
or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.
-15-
Loans
Subordinated.
Each of
the Xxxxxx Loan (as defined below) and the Xxxxxxxx Loans (as defined below)
has
been expressly subordinated in right of payment, whether in respect of payment
of interest or upon liquidation or dissolution or otherwise, to the
Notes.
COVENANTS.
Best
Efforts.
Each
party shall use its best efforts timely to satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
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 shall, on or before the Closing Date, 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.
Reporting
Status.
Until
the date on which the Investors (as defined in the Registration Rights
Agreement) shall have sold all the Conversion Shares and Warrant Shares, and
none of the Notes or Warrants
is outstanding (the "Reporting
Period"),
the
Company shall 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.
Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Securities as set forth
on
Schedule
4(d),
and not
for, except as specifically set forth on Schedule
4(d),
(A)
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries or (B) redemption or repurchase of any of its or its Subsidiaries'
equity securities.
Financial
Information.
The
Company agrees to send the following to each Investor (as defined in the
Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through XXXXX and are available to the public
through the XXXXX system, within one (1) Business Day after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K or 10-KSB, any interim
reports or any consolidated balance sheets, income statements, stockholders'
equity statements and/or cash flow statements for any period other than annual,
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, (ii) on the same day
as
the release thereof, facsimile or e-mailed copies of all press releases issued
by the Company or any of its Subsidiaries, and (iii) 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.
-16-
Listing.
The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock
is
then listed (subject to official notice of issuance) and shall maintain such
listing of all Registrable Securities from time to time issuable under the
terms
of the Transaction Documents. The Company shall maintain the Common Stocks'
authorization for quotation 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).
Fees.
The
Company shall reimburse Magnetar Capital Master Fund, Ltd. (a Buyer) or its
designee(s) (in addition to any other expense amounts paid to any Buyer prior
to
the date of this Agreement) for all reasonable costs and expenses, not to exceed
$35,000, incurred in connection with the transactions contemplated by the
Transaction Documents (including all reasonable legal fees and disbursements
in
connection therewith, documentation and implementation of the transactions
contemplated by the Transaction Documents and due diligence in connection
therewith), which amount shall be non-accountable and withheld by such Buyer
from its Purchase Price at the Closing. The Company shall 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, including, without limitation,
any
fees payable to the Agent. 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.
Pledge
of Securities.
The
Company acknowledges and agrees that the Securities may be pledged pursuant
to
an available exemption from registration under the 1933 Act 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(g) hereof;
provided that an Investor and its pledgee shall be required to comply with
the
provisions of Section 2(g) hereof 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.
-17-
Disclosure
of Transactions and Other Material Information.
On or
before 8:30 a.m., New York Time, on the
first
Business Day following the date of this Agreement, the Company shall file a
Current Report on Form 8-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the 1934 Act and attaching
the material Transaction Documents (including, without limitation, this
Agreement (and all schedules to this Agreement), the form of Notes, the form
of
Warrant and the Registration Rights Agreement) (including all attachments,
the
"8-K
Filing").
From
and after the filing of the 8-K Filing with the SEC, the Company shall have
disclosed any material nonpublic information delivered to the Buyers by the
Company or any of its Subsidiaries, or any of their respective officers,
directors, employees or agents. The Company shall not, and shall cause each
of
its Subsidiaries and its and each of their respective officers, directors,
employees and agents, not to, provide any Buyer with any material, nonpublic
information regarding the Company or any of its Subsidiaries from and after
the
filing of the 8-K Filing with the SEC without the express written consent of
such Buyer. In the event of a breach of the foregoing covenant by the Company,
or any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy provided herein
or in the Transaction Documents, a Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, nonpublic information without the prior approval by the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Buyer shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents, for any such disclosure. Subject
to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided,
however,
that
the Company shall be entitled, without the prior approval of any Buyer, to
make
any press release or other public disclosure with respect to such transactions
(i) in substantial conformity with the 8-K Filings and contemporaneously
therewith and (ii) as is required by applicable law and regulations (provided
that in the case of clause (i) each Buyer shall be consulted by the Company
in
connection with any such press release or other public disclosure prior to
its
release). Without the prior written consent of any applicable Buyer, the Company
shall not disclose the name of any Buyer in any filing, announcement, release
or
otherwise.
Restriction
on Redemption and Cash Dividends.
So long
as any Notes are outstanding, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, the Common
Stock
without the prior express written consent of the holders of Notes representing
not less than a majority of the aggregate principal amount of the then
outstanding Notes.
Additional
Notes; Variable Securities; Dilutive Issuances.
So long
as any Buyer beneficially owns any Securities, the Company will not, without
the
prior written consent of Buyers holding a majority of the principal amount
of
the Notes, issue any Notes (other than to the Buyers as contemplated hereby)
and
the Company shall not issue any other securities that would cause a breach
or
default under the Notes. For so long as any Notes or Warrants remain
outstanding, the Company shall not, in any manner, issue or sell any rights,
warrants or options to subscribe for or purchase Common Stock or directly or
indirectly convertible into or exchangeable or exercisable for Common Stock
at a
conversion, exchange or exercise price which varies or may vary after issuance
with the market price of the Common Stock, including by way of one or more
reset(s) to any fixed price unless the conversion, exchange or exercise price
of
any such security cannot be less than the then applicable Conversion Price
(as
defined in the Notes) with respect to the Common Stock into which any Note
is
convertible or the then applicable Exercise Price (as defined in the Warrants)
with respect to the Common Stock into which any Warrant is exercisable. For
purposes of clarification, this does not prohibit the issuance of securities
with customary "weighted average" or "full ratchet" anti-dilution adjustments
which adjust a fixed conversion or exercise price of securities sold by the
Company in the future. For so long as any Notes or Warrants remain outstanding,
the Company shall not, in any manner, enter into or affect any dilutive issuance
if the effect of such dilutive issuance is to cause the Company to be required
to issue upon conversion of any Note or exercise of any Warrant any shares
of
Common Stock in excess of that number of shares of Common Stock which the
Company may issue upon conversion of the Notes and exercise of the Warrants
without breaching the Company's obligations under the rules or regulations
of
the Principal Market.
-18-
Corporate
Existence.
So long
as any Buyer beneficially owns any Securities, the Company shall not be party
to
any Fundamental Transaction (as defined in the Notes) unless the Company is
in
compliance with the applicable provisions governing Fundamental Transactions
set
forth in the Notes and the Warrants.
Conduct
of Business.
The
business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate,
in a
Material Adverse Effect.
Additional
Issuances of Securities.
For
purposes of this Section 4(n), the following definitions
shall apply.
"Convertible
Securities"
means
any stock or securities (other than Options) convertible into or exercisable
or
exchangeable for shares of Common
Stock.
"Options"
means
any rights, warrants or options to subscribe for or purchase shares of
Common
Stock or
Convertible Securities.
"Common
Stock Equivalents"
means,
collectively, Options and Convertible Securities.
Other
than in connection with a Subsequent Placement following which the Notes are
no
longer outstanding, from the date hereof until two hundred seventy (270) days
after the Effective Date (as defined in the Registration Rights Agreement)
the
Company will not, directly or indirectly, file any registration statement with
the SEC other than the Registration Statement (as defined in the Registration
Rights Agreement) or a registration statement on Form S-8 pursuant to the 1933
Act or issue any securities pursuant to any registration statement on Form
S-8
("S-8
Issuances").
From
the date hereof until the Effective Date, the Company will not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose
of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or its Subsidiaries' equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent
Placement").
-19-
The
Company will not, directly or indirectly, effect any Subsequent Placement unless
the Company shall have first complied with this Section 4(n)(iii).
The
Company shall deliver to each Buyer a written notice (the "Offer
Notice")
of any
proposed or intended issuance or sale or exchange (the "Offer")
of the
securities being offered (the "Offered
Securities")
in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they
are to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, and (y) identify the persons or
entities (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (z) offer to issue and sell to or
exchange with such Buyers at least 80% of the Offered Securities, allocated
among such Buyers (a) based on such Buyer's pro rata portion of the aggregate
principal amount of Notes purchased hereunder (the "Basic
Amount"),
and
(b) with respect to each Buyer that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Buyers as such Buyer shall indicate it will purchase or acquire should
the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription
Amount").
To
accept
an Offer, in whole or in part, such Buyer must deliver a written notice to
the
Company prior to the end of the fifth (5th)
Business Day after such Buyer's receipt of the Offer Notice (the "Offer
Period"),
setting forth the portion of such Buyer's Basic Amount that such Buyer elects
to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the "Notice
of Acceptance").
If
the Basic Amounts subscribed for by all Buyers are less than the total of all
of
the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount
in its Notice of Acceptance shall be entitled to purchase, in addition to the
Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; provided,
however,
that if
the Undersubscription Amounts subscribed for exceed the difference between
the
total of all the Basic Amounts and the Basic Amounts subscribed for (the
"Available
Undersubscription Amount"),
each
Buyer who has subscribed for any Undersubscription Amount shall be entitled
to
purchase only that portion of the Available Undersubscription Amount as the
Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
have subscribed for Undersubscription Amounts, subject to rounding by the
Company to the extent its deems reasonably necessary.
The
Company shall have five (5) Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the Buyers
(the "Refused
Securities"),
but
only to the offerees described in the Offer Notice (if so described therein)
and
only upon terms and conditions (including, without limitation, unit prices
and
interest rates) that are not more favorable to the acquiring person or persons
or less favorable to the Company than those set forth in the Offer
Notice.
-20-
In
the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(n)(iii)(3) above), then each Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified
in
its Notice of Acceptance to an amount that shall be not less than the number
or
amount of the Offered Securities that such Buyer elected to purchase pursuant
to
Section 4(n)(iii)(2) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 4(n)(iii)(3) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of
the
Offered Securities. In the event that any Buyer so elects to reduce the number
or amount of Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced number or amount
of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(n)(iii)(1)
above.
Upon
the
closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, the Buyers shall acquire from the Company, and the Company shall
issue to the Buyers, the number or amount of Offered Securities specified in
the
Notices of Acceptance, as reduced pursuant to Section 4(n)(iii)(3) above if
the
Buyers have so elected, upon the terms and conditions specified in the Offer.
The purchase by the Buyers of any Offered Securities is subject in all cases
to
the preparation, execution and delivery by the Company and the Buyers of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Buyers and their respective counsel.
Any
Offered Securities not acquired by the Buyers or other persons in accordance
with Section 4(n)(iii)(3) above may not be issued, sold or exchanged until
they
are again offered to the Buyers under the procedures specified in this
Agreement.
The
restrictions contained in subsections (ii) and (iii) of this Section 4(n) shall
not apply in connection with the issuance of any Excluded Securities (as defined
in the Notes), other than S-8 Issuances, or any Qualified Financing (as defined
in the Notes).
Security.
The
Company shall use its best efforts to enter into security documents (the
"Security
Documents")
reasonably satisfactory to the Buyers granting the Buyers a perfected, first
priority security interest in all assets of the Company; provided that the
priority will be secondary to the Company's current (i) $2,484,385 mortgage
and
a $500,000 equipment financing line with Xxxxxxx National Bank secured by the
Company's deed of trust to certain located in Virginia; and (ii) senior
subordinated promissory note with a principal amount of $550,000 issued to
IWG
on March 31, 2005 secured by the Company's land, building and equipment located
in Independence, Virginia (the "IWG
Loan").
-21-
Good
Standing.
No
later than 10 Business Days after the Closing Date, the Company shall deliver
to
each Buyer a certificate evidencing the formation and good standing of the
Company and each of its Subsidiaires in such entity's jurisdiction of formation
issued by the Secretary of State (or comparable office) of such
jurisdiction.
REGISTER;
TRANSFER AGENT INSTRUCTIONS.
Register.
The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Notes and the Warrants in which the Company
shall record the name and address of the Person in whose name the Notes
and the
Warrants have been issued (including the name and address of each transferee),
the principal amount of Notes held by such Person, the number of Conversion
Shares issuable upon conversion of the Notes and Warrant Shares issuable upon
exercise of the Warrants held by such Person. The Company shall keep the
register open and available at all times during business hours for inspection
of
any Buyer or its legal representatives.
Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at The Depository Trust Company ("DTC"),
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares, and the Warrant Shares in
such
amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in the form of Exhibit
D
attached
hereto (the "Irrevocable
Transfer Agent Instructions").
The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions
to
give effect to Section 2(g) 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 applicable,
and
to the extent provided in this Agreement and the other Transaction Documents.
If
a Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(g), the Company shall permit the transfer and shall promptly
instruct its transfer agent to issue one or more certificates or credit shares
to the applicable balance accounts at DTC in such name and in such denominations
as specified by such Buyer to effect such sale, transfer or assignment. In
the
event that such sale, assignment or transfer involves Conversion Shares and
Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall issue
such Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend. 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(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Section 5(b),
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.
-22-
CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Notes and
the
related Warrants to each Buyer at the Closing is subject to the satisfaction,
at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the 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:
Such
Buyer shall have executed each of the Transaction Documents to which it is
a
party and delivered the same to the Company.
Such
Buyer and each other Buyer shall have delivered to the Company the Purchase
Price for the Notes and the related Warrants being
purchased by such Buyer at the Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
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 the 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 the Closing Date.
CONDITIONS
TO EACH BUYER'S OBLIGATION TO PURCHASE.
The
obligation of each Buyer hereunder to purchase the Notes and
the
related Warrants at the Closing is subject to the satisfaction, at or before
the
Closing Date, of each of the following conditions, provided that these
conditions are for 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:
The
Company shall have executed and delivered to such Buyer (A) each of the
Transaction Documents and (B) the Notes (in such principal amounts as is set
forth across from such Buyer's name in column (3) of the Schedule of
Buyers and
the
related Warrants (in such principal amounts as is set forth across from such
Buyer's name in column (4) of the Schedule of Buyers) being purchased by such
Buyer at the Closing pursuant to this Agreement.
Such
Buyer shall have received the opinion of Holland & Knight, LLP, the
Company's outside counsel, dated as of the Closing Date, in substantially the
form of Exhibit
E
attached
hereto.
The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit
D
attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
The
Company shall have delivered to such Buyer a written correspondence from the
Company's service company to the effect that the Company and each of its
Subsidiaries is in good standing as of a date within ten (10) days of the
Closing Date.
-23-
The
Company shall have delivered to such Buyer a certificate evidencing the
Company's qualification as a foreign corporation and good standing issued by
the
Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts business and is required to so qualify, as of a date within
10
days of the Closing Date.
The
Company shall have delivered to such Buyer a certified copy of the Certificate
of Incorporation as certified by the Secretary of State of the State of Nevada
within ten (10) days of the Closing Date.
The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company's Board
of
Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit
F.
The
representations and warranties of the Company shall be true and correct as
of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date)
and
the Company shall have performed, satisfied and complied in all 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 the
Closing Date. Such Buyer shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested
by
such Buyer in the form attached hereto as Exhibit
G.
The
Company shall have delivered to such Buyer a letter from the Company's transfer
agent certifying the number of shares of Common Stock outstanding as of a date
within five days of the Closing Date.
The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the 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 the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B)
by
falling below the minimum maintenance requirements of the Principal
Market.
The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.
Simultaneously
with the Closing, the Company shall have repaid $300,000 of its note issued
on
March 31, 2005 to Independence Water Group in the principal amount of
$850,000.
The
maturity date of each of the following will be extended to no earlier than
March
31, 2006 and each will be subordinated to the Securities to the reasonable
satisfaction of the Buyer:
-24-
A
loan to
the Company from Xxxxx Xxxxxx, CEO of the Company for $300,000 (the "Xxxxxx
Loan").
Loans
to
the Company from Xxxxx Xxxxxxxx, a shareholder of the Company for $250,000
and
$200,000 (collectively, the "Xxxxxxxx
Loans").
The former loan is witnessed by a note issued to DNV LLC.
The
Company shall have executed a Letter of Intent to acquire the plant in Savannah,
Georgia (the "Savannah
LOI"),
which
Letter of Intent shall grant the Company exclusive negotiation rights through
the date which is 30 days after the Closing Date.
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.
TERMINATION.
In the event that the Closing shall not have occurred with respect to a Buyer
on
or before five (5) Business Days from the date hereof due to the Company's
or
such Buyer's failure to satisfy the conditions set forth in Sections 6 and
7
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; provided, however,
if
this Agreement is terminated pursuant to this Section 8, the Company shall
remain obligated to reimburse the non-breaching Buyers for the expenses
described in Section 4(g) above.
MISCELLANEOUS.
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 New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, 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.
-25-
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.
Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
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.
Entire
Agreement; Amendments.
This
Agreement and the other Transaction Documents supersede 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, the other Transaction Documents and the instruments referenced herein
and therein 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 a majority of the aggregate number
of
Registrable Securities issued and issuable hereunder, and any amendment to
this
Agreement made in conformity with the provisions of this Section 9(e) shall
be
binding on all Buyers and holders of Securities, as applicable. 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 applicable
Securities then outstanding. No consideration 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 Notes 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. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment
or
promise or has any other obligation to provide any financing to the Company
or
otherwise.
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:
-26-
If
to the
Company:
Universal
Food & Beverage Company
0000
Xxxxxxxx Xxxxx,
Xx.
Xxxxxxx, Xxxxxxxx 00000
Telephone:
(000)
000-0000
Facsimile:
(630)
[
]-[ ]
Attention:
Chief
Executive Officer
With
a
copy (for informational purposes only) to:
Holland
& Knight, LLP
Xxx
XxxXxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxx
Xxxxxxx, XX 00000
Telephone: (000)
000-0000
Facsimile:
(___)
[___]-[____]
Attention: [ ________________ ]
Esq.
If
to the
Transfer Agent:
[ _______________________ ]
[ _______________________ ]
[ _______________________ ]
Telephone: (___)
[___]-[____]
Facsimile:
(___)
[___]-[____]
Attention: [ ________________ ],
Esq.
If
to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer's representatives as set forth on the Schedule of
Buyers,
with
a
copy (for informational purposes only) to:
-27-
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
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 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.
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 Notes
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 a majority of the aggregate number of Registrable Securities issued and
issuable hereunder, including by way of a Fundamental Transaction (unless the
Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Notes and the Warrants). A Buyer may assign some
or all of its rights hereunder in connection with transfer of any of its
Securities 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.
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.
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 and the agreements
and covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each
Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
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.
-28-
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 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, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status
of
such Buyer or holder of the Securities as an investor in the Company pursuant
to
the transactions contemplated by the Transaction Documents. 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(l) shall be the
same
as those set forth in Section 6 of the Registration Rights
Agreement.
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.
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.
-29-
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, foreign, 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.
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.
[Signature
Page Follows]
-30-
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.
|
COMPANY:
|
||
|
UNIVERSAL
FOOD & BEVERAGE COMPANY
|
||
| |
|
|
| By: |
/s/ Xxxxx
X. Xxxxxx
|
|
|
Xxxxx X. Xxxxxx, Chairman and CEO |
||
-31-
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.
|
BUYERS:
|
||
|
MAGNETAR
CAPITAL MASTER FUND, LTD.
|
||
| |
|
|
| By: |
Magnetar
Financial LLC
|
|
| Its: |
Investment
Manager
|
|
| By: | /s/ Xxxx Xxxxx | |
|
Xxxx Xxxxx |
||
|
General
Counsel
|
||
-32-
SCHEDULE
OF BUYERS
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
||||
|
Buyer
|
Address
and Facsimile
Number
|
Aggregate
Principal
Amount
of Notes
|
Aggregate
Number
of
Warrants
|
Legal
Representative's
Address
and Facsimile
Number
|
||||
|
Magnetar
Capital Master Fund, Ltd.
|
0000
Xxxxxxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attn:
Xxxxxxx Xxxx and Xxxxxxx Xxx
Facsimile:
(000)
000-0000
Telephone:
(000) 000-0000
|
$3,000,000
|
6,923,077
|
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxxx Xxxxx, Esq.
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
|
-33-
