SECURITIES PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT (this “Agreement”),
dated
as of March 21, 2006, by and among Clickable Enterprises, Inc. a Delaware
corporation, with headquarters located at 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx
Xxxxxx, Xxx Xxxx 00000 (the “Company”),
and
each of the purchasers set forth on the signature pages hereto (the
“Buyers”).
WHEREAS:
A. The
Company and the Buyers are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the rules and
regulations as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”);
B. Buyers
desire to purchase and the Company desires to issue and sell, upon the terms
and
conditions set forth in this Agreement (i) 6% convertible debentures of the
Company, in the form attached hereto as Exhibit
“A”,
in the
aggregate principal amount of One Million Dollars ($1,000,000) (together with
any debenture(s) issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms thereof, the
“Debentures”),
convertible into shares of common stock, par value $.001 per share, of the
Company (the “Common
Stock”),
upon
the terms and subject to the limitations and conditions set forth in such
Debentures and (ii) warrants, in the form attached hereto as Exhibit
“B”,
to
purchase 4,000,000 shares of Common Stock (the “Warrants”).
C. Each
Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, such principal amount of Debentures and number of Warrants as is
set
forth immediately below its name on the signature pages hereto; and
D. Contemporaneous
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the form attached
hereto as Exhibit
“C”
(the
“Registration
Rights Agreement”),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW
THEREFORE,
the
Company and each of the Buyers severally (and not jointly) hereby agree as
follows:
1. PURCHASE
AND SALE OF DEBENTURES AND WARRANTS.
a. Purchase
of Debentures and Warrants.
On the
Closing Date (as defined below), the Company shall issue and sell to each Buyer
and each Buyer severally agrees to purchase from the Company such principal
amount of Debentures and number of Warrants as is set forth immediately below
such Buyer’s name on the signature pages hereto.
b. Form
of Payment.
On the
Closing Date (as defined below), (i) each Buyer shall pay the purchase price
for
the Debentures and the Warrants to be issued and sold to it at the Closing
(as
defined below) (the “Purchase
Price”)
by
wire transfer of immediately available funds to the Company, in accordance
with
the Company’s written wiring instructions, against delivery of the Debentures in
the principal amount equal to the Purchase Price and the number of Warrants
as
is set forth immediately below such Buyer’s name on the signature pages hereto,
and (ii) the Company shall deliver such Debentures and Warrants duly executed
on
behalf of the Company, to such Buyer, against delivery of such Purchase Price.
c. Closing
Date.
Subject
to the satisfaction (or written waiver) of the conditions thereto set forth
in
Section 6 and Section 7 below, the date and time of the issuance and sale of
the
Debentures and the Warrants pursuant to this Agreement (the “Closing
Date”)
shall
be 12:00 noon, Eastern Standard Time on March 21, 2006, or such other mutually
agreed upon time. The closing of the transactions contemplated by this Agreement
(the “Closing”)
shall
occur on the Closing Date at such location as may be agreed to by the
parties.
2. BUYERS’
REPRESENTATIONS AND WARRANTIES.
Each
Buyer severally (and not jointly) represents and warrants to the Company solely
as to such Buyer that:
a. Investment
Purpose.
As of
the date hereof, the Buyer is purchasing the Debentures and the shares of Common
Stock issuable upon conversion of or otherwise pursuant to the Debentures
(including, without limitation, such additional shares of Common Stock, if
any,
as are issuable (i) on account of interest on the Debentures, (ii) as a result
of the events described in Sections 1.3 and 1.4(g) of the Debentures and Section
2(c) of the Registration Rights Agreement or (iii) in payment of the Standard
Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to this
Agreement, such shares of Common Stock being collectively referred to herein
as
the “Conversion
Shares”)
and
the Warrants and the shares of Common Stock issuable upon exercise thereof
(the
“Warrant
Shares”
and,
collectively with the Debentures, Warrants and Conversion Shares, the
“Securities”)
for
its own account and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or exempted from
registration under the 1933 Act; provided,
however,
that by
making the representations herein, the 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.
b. Accredited
Investor Status.
The
Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D (an “Accredited
Investor”).
c. Reliance
on Exemptions.
The
Buyer understands that the Securities are being offered and sold to it in
reliance upon specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and
the
eligibility of the Buyer to acquire the Securities.
d. Information.
The
Buyer and its advisors, if any, have been, and for so long as the Debentures
and
Warrants remain outstanding will continue to be, 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
the Buyer or its advisors. The Buyer and its advisors, if any, have been, and
for so long as the Debentures and Warrants remain outstanding will continue
to
be, afforded the opportunity to ask questions of the Company. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic
information and will not disclose such information unless such information
is
disclosed to the public prior to or promptly following such disclosure to the
Buyer. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify,
amend
or affect Buyer’s right to rely on the Company’s representations and warranties
contained in Section 3 below. The Buyer understands that its investment in
the
Securities involves a significant degree of risk.
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e. Governmental
Review.
The
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Securities.
f. Transfer
or Re-sale.
The
Buyer understands that (i) except as provided in the Registration Rights
Agreement, the sale or re-sale of the Securities has not been and is not being
registered under the 1933 Act or any applicable state securities laws, and
the
Securities may not be transferred unless (a) the Securities are sold pursuant
to
an effective registration statement under the 1933 Act, (b) the Buyer shall
have
delivered to the Company an opinion of counsel that shall be in form, substance
and scope customary for opinions of counsel in comparable transactions to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, which opinion shall be accepted
by the Company, provided such opinion is issued by Xxxxxxx Xxxxx Xxxxxxx &
Xxxxxxxxx, LLP or such other law firm as may be reasonably acceptable to the
Company (“Qualifying
Buyer Counsel”)
(c)
the Securities are sold or transferred to an “affiliate” (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) (“Rule
144”))
of
the Buyer who agrees to sell or otherwise transfer the Securities only in
accordance with this Section 2(f) and who is an Accredited Investor, (d) in
the
opinion of Qualifying Buyer Counsel, the Securities are sold pursuant to Rule
144, or (e) the Securities are sold pursuant to Regulation S under the 1933
Act
(or a successor rule) (“Regulation
S”),
and
the Buyer shall have delivered to the Company an opinion of counsel that shall
be in form, substance and scope customary for opinions of counsel in corporate
transactions, which opinion shall be accepted by the Company iprovided such
opinion is issued by Qualifying Buyer Counsel; (ii) any sale of such Securities
made in reliance on Rule 144 may be made only in accordance with the terms
of
said Rule and further, if said Rule is not applicable, any re-sale of such
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined
in
the 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 such Securities
under the 1933 Act or any state securities laws or to comply with the terms
and
conditions of any exemption thereunder (in each case, other than pursuant to
the
Registration Rights Agreement). Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as collateral
in
connection with a bona fide
margin
account or other lending arrangement. In the event that the Company does not
accept the opinion of counsel provided by the Buyer Qualifying Buyer Counsel
with respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, within three (3) business days
of delivery of the opinion to the Company, the Company shall pay to the Buyer
liquidated damages of three percent (3%) of the outstanding amount of the
Debentures per month plus accrued and unpaid interest on the Debentures,
prorated for partial months, in cash or shares at the option of the Company
(“Standard
Liquidated Damages Amount”).
If
the Company elects to pay the Standard Liquidated Damages Amount in shares
of
Common Stock, such shares shall be issued at the Conversion Price at the time
of
payment.
3
g. Legends.
The
Buyer understands that the Debentures and the Warrants and, until such time
as
the Conversion Shares and Warrant Shares have been registered under the 1933
Act
as contemplated by the Registration Rights Agreement or otherwise may be sold
pursuant to Rule 144 or Regulation S without any restriction as to the number
of
securities as of a particular date that can then be immediately sold, the
Conversion Shares and Warrant Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such Securities):
“The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended. The securities may not be sold, transferred
or assigned in the absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form, substance and
scope customary for opinions of counsel in comparable transactions, that
registration is not required under said Act or unless sold pursuant to Rule
144
or Regulation S under said Act.”
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it
is
stamped, if, unless otherwise required by applicable state securities laws,
(a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act (and the Company has received the opinion of Qualifying
Buyer Counsel that the legend may be removed prior to the sale of such security
pursuant to the Registration Statement) or otherwise may be sold pursuant to
Rule 144 or Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold or the type of
transaction in which they may be sold, or (b) such holder provides the Company
with an opinion of counsel from Qualifying buyer Counsel, in form, substance
and
scope customary for opinions of counsel in comparable transactions, to the
effect that a public sale or transfer of such Security may be made without
registration under the 1933 Act, which opinion shall be accepted by the Company
so that the sale or transfer is effected or (c) such holder provides the Company
with reasonable assurances that such Security can be sold pursuant to Rule
144
or Regulation S. The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if
any.
h. Authorization;
Enforcement.
This
Agreement and the Registration Rights Agreement have been duly and validly
authorized. This Agreement has been duly executed and delivered on behalf of
the
Buyer, and this Agreement constitutes, and upon execution and delivery by the
Buyer of the Registration Rights Agreement, such agreement will constitute,
valid and binding agreements of the Buyer enforceable in accordance with their
terms.
4
i. Residency.
The
Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s
name on the signature pages hereto.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each Buyer that:
a. Organization
and Qualification.
The
Company and each of its Subsidiaries (as defined below), if any, is a
corporation duly organized, validly existing and in good standing under the
laws
of the jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
carry
on its business as and where now owned, leased, used, operated and conducted.
Schedule
3(a)
sets
forth a list of all of the Subsidiaries of the Company and the jurisdiction
in
which each is incorporated. The Company and each of its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature
of
the business conducted by it makes such qualification necessary except where
the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. “Material
Adverse Effect”
means
any material adverse effect on the business, operations, assets, financial
condition or prospects of the Company or its Subsidiaries, if any, taken as
a
whole, or on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith. “Subsidiaries”
means
any corporation or other organization, whether incorporated or unincorporated,
in which the Company owns, directly or indirectly, any equity or other ownership
interest.
b. Authorization;
Enforcement.
(i) The
Company has all requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement, the Debentures and
the Warrants and to consummate the transactions contemplated hereby and thereby
and to issue the Securities, in accordance with the terms hereof and thereof,
(ii) the execution and delivery of this Agreement, the Registration Rights
Agreement, the Debentures and the Warrants by the Company and the consummation
by it of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Debentures and the Warrants and the issuance
and
reservation for issuance of the Conversion Shares and Warrant Shares issuable
upon conversion or exercise thereof) have been duly authorized by the Company’s
Board of Directors and no further consent or authorization of the Company,
its
Board of Directors, or its shareholders is required, (iii) this Agreement has
been duly executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and official
representative with authority to sign this Agreement and the other documents
executed in connection herewith and bind the Company accordingly, and (iv)
this
Agreement constitutes, and upon execution and delivery by the Company of the
Registration Rights Agreement, the Debentures and the Warrants, each of such
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms.
c. Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of (i)
50,000,000 shares of Common Stock, of which [ ] shares are issued and
outstanding, no___________ shares are reserved for issuance pursuant to the
Company’s stock option plans, [ ]no shares are reserved for issuance pursuant to
securities (other than the Debentures and the Warrants and debentures, warrants
and convertible preferred stock held by the Buyers or their affiliates)
exercisable for, or convertible into or exchangeable for shares of Common Stock
and, [ ] shares are reserved for issuance upon conversion of the Debentures
and
exercise of the Warrants; and (ii) 10,000,000 shares of preferred stock,
1,200 of which have been designated as Series A Convertible Preferred Stock
and
are issued and outstanding. All of such outstanding shares of capital stock
are,
or upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act
of
the Company. Except as disclosed in Schedule
3(c),
as of
the effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights of any
character whatsoever relating to, or securities or rights convertible into
or
exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries
is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries, (ii) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of its or their securities under the 1933 Act (except the Registration
Rights Agreement) and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any agreement
providing rights to security holders) that will be triggered by the issuance
of
the Debentures, the Warrants, the Conversion Shares or Warrant Shares. The
Company has furnished to the Buyer true and correct copies of the Company’s
Articles of Incorporation as in effect on the date hereof (“Articles
of Incorporation”),
the
Company’s By-laws, as in effect on the date hereof (the “By-laws”),
and
the terms of all securities convertible into or exercisable for Common Stock
of
the Company and the material rights of the holders thereof in respect thereto.
The Company shall provide the Buyer with a written update of this representation
signed by the Company’s Chief Executive or Chief Financial Officer on behalf of
the Company as of the Closing Date.
5
d. Issuance
of Shares.
The
Conversion Shares and Warrant Shares are duly authorized and reserved for
issuance and, upon conversion of the Debentures and exercise of the Warrants
in
accordance with their respective terms, will be validly issued, fully paid
and
non-assessable, and free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights
or
other similar rights of shareholders of the Company and will not impose personal
liability upon the holder thereof.
e. Acknowledgment
of Dilution.
The
Company understands and acknowledges the potentially dilutive effect to the
Common Stock upon the issuance of the Conversion Shares and Warrant Shares
upon
conversion of the Debenture or exercise of the Warrants. The Company further
acknowledges that its obligation to issue Conversion Shares and Warrant Shares
upon conversion of the Debentures or exercise of the Warrants in accordance
with
this Agreement, the Debentures and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
f. No
Conflicts.
The
execution, delivery and performance of this Agreement, the Registration Rights
Agreement, the Debentures and the Warrants by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares) will not (i) conflict with or result in a violation
of any provision of the Articles of Incorporation or By-laws or (ii) violate
or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or
its
securities are subject) 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 for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Neither
the
Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which
with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has
taken
any action or failed to take any action that would give to others any rights
of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is
a
party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries, if any, are not being conducted, and shall
not be conducted so long as a Buyer owns any of the Securities, in violation
of
any law, ordinance or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933
Act
and any applicable state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration
with,
any court, governmental agency, regulatory agency, self regulatory organization
or stock market or any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement, the Debentures or the Warrants in accordance with the terms hereof
or
thereof or to issue and sell the Debentures and Warrants in accordance with
the
terms hereof and to issue the Conversion Shares upon conversion of the
Debentures and the Warrant Shares upon exercise of the Warrants. Except as
disclosed in Schedule
3(f),
all
consents, authorizations, orders, filings and registrations which the Company
is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. Subject to the Listing (as defined
in
Section 4(n)), Tthe Company is not in violation of the listing requirements
of
the Over-the-Counter Bulletin Board (the “OTCBB”)
and
does not reasonably anticipate that the Common Stock will be delisted by the
OTCBB in the foreseeable future. The Company and its Subsidiaries are unaware
of
any facts or circumstances which might give rise to any of the foregoing.
6
g. SEC
Documents; Financial Statements.
Except
as disclosed in Schedule
3(g),
the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
“1934
Act”)
(all
of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other
than
exhibits to such documents) incorporated by reference therein, being hereinafter
referred to herein as the “SEC
Documents”).
The
Company has delivered to each Buyer true and complete copies of the SEC
Documents, except for such exhibits and incorporated documents. 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 light
of
the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have
been
amended or updated in subsequent filings prior the date hereof). As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with
respect thereto. Such financial statements have been prepared in accordance
with
United States 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 not include footnotes or may be
condensed or summary statements) and fairly present in all material respects
the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to March 31, 2004 and (ii)
obligations under contracts and commitments incurred in the ordinary course
of
business and not required under generally accepted accounting principles to
be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the
Company.
7
h. Absence
of Certain Changes.
Except
as set forth on Schedule
3(h),
since
March 31, 2004, there has been no material adverse change and no material
adverse development in the assets, liabilities, business, properties,
operations, financial condition, results of operations or prospects of the
Company or any of its Subsidiaries.
i. Absence
of Litigation.
There
is no action, suit, claim, proceeding, inquiry or investigation before or by
any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its Subsidiaries, or
their
officers or directors in their capacity as such, that could have a Material
Adverse Effect. Schedule
3(i)
contains
a complete list and summary description of any pending or threatened proceeding
against or affecting the Company or any of its Subsidiaries, without regard
to
whether it would have a Material Adverse Effect. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise
to
any of the foregoing.
j. Patents,
Copyrights, etc.
The
Company and each of its Subsidiaries owns or possesses the requisite licenses
or
rights to use all patents, patent applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights (“Intellectual
Property”)
necessary to enable it to conduct its business as now operated (and, except
as
set forth in Schedule
3(j)
hereof,
to the best of the Company’s knowledge, as presently contemplated to be operated
in the future); there is no claim or action by any person pertaining to, or
proceeding pending, or to the Company’s knowledge threatened, which challenges
the right of the Company or of a Subsidiary with respect to any Intellectual
Property necessary to enable it to conduct its business as now operated (and,
except as set forth in Schedule
3(j)
hereof,
to the best of the Company’s knowledge, as presently contemplated to be operated
in the future); to the best of the Company’s knowledge, the Company’s or its
Subsidiaries’ current and intended products, services and processes do not
infringe on any Intellectual Property or other rights held by any person; and
the Company is unaware of any facts or circumstances which might give rise
to
any of the foregoing. The Company and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property.
8
k. No
Materially Adverse Contracts, Etc.
Neither
the Company nor any of its Subsidiaries is subject to any charter, corporate
or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company’s officers has or is expected in the future
to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment
of
the Company’s officers has or is expected to have a Material Adverse
Effect.
l. Tax
Status.
Except
as set forth on Schedule
3(l),
the
Company and each of its Subsidiaries has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required
by
any jurisdiction to which it is subject (unless and only to the extent that
the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and
has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside
on
its books provisions 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. The Company has not executed a waiver with respect
to
the statute of limitations relating to the assessment or collection of any
foreign, federal, state or local tax. Except as set forth on Schedule
3(l),
none of
the Company’s tax returns is presently being audited by any taxing
authority.
m. Certain
Transactions.
Except
as set forth on Schedule
3(m)
and
except for arm’s length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties, 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 services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee
has a
substantial interest or is an officer, director, trustee or
partner.
9
n. Disclosure.
All
information relating to or concerning the Company or any of its Subsidiaries
set
forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby
is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein
or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or 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 (assuming for this purpose
that the Company’s reports filed under the 1934 Act are being incorporated into
an effective registration statement filed by the Company under the 1933
Act).
o. Acknowledgment
Regarding Buyers’ Purchase of Securities.
The
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm’s length purchasers with respect to this Agreement and the
transactions contemplated hereby. 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 this Agreement and the transactions contemplated
hereby and any statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyers’ purchase of the Securities. The Company further represents to
each Buyer that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.
p. No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales in any security
or
solicited any offers to buy any security under circumstances that would require
registration under the 1933 Act of the issuance of the Securities to the Buyers.
The issuance of the Securities to the Buyers will not be integrated with any
other issuance of the Company’s securities (past, current or future) for
purposes of any shareholder approval provisions applicable to the Company or
its
securities.
q. No
Brokers.
The
Company has taken no action which would give rise to any claim by any person
for
brokerage commissions, transaction fees or similar payments relating to this
Agreement or the transactions contemplated hereby.
r. Permits;
Compliance.
The
Company and each of its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted
(collectively, the “Company
Permits”),
and
there is no action pending or, to the knowledge of the Company, threatened
regarding suspension or cancellation of any of the Company Permits. Neither
the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since March 31, 2004,
neither the Company nor any of its Subsidiaries has received any notification
with respect to possible conflicts, defaults or violations of applicable laws,
except for notices relating to possible conflicts, defaults or violations,
which
conflicts, defaults or violations would not have a Material Adverse
Effect.
10
s. Environmental
Matters.
(i) Except
as
set forth in Schedule
3(s),
there
are, to the Company’s knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations
of
Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and neither the Company nor any of its Subsidiaries has received
any notice with respect to any of the foregoing, nor is any action pending
or,
to the Company’s knowledge, threatened in connection with any of the foregoing.
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.
(ii) Other
than those that are or were stored, used or disposed of in compliance with
applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company’s
or any of its Subsidiaries’ business.
(iii) Except
as
set forth in Schedule
3(s),
there
are no underground storage tanks on or under any real property owned, leased
or
used by the Company or any of its Subsidiaries that are not in compliance with
applicable law.
t. Title
to Property.
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
are described in Schedule
3(t)
or such
as would not have a Material Adverse Effect. Any real property and facilities
held under lease by the Company and its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as would not
have
a Material Adverse Effect.
11
u. Insurance.
Except
as set forth in Schedule
3(u),
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 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. The Company
has provided to Buyer true and correct copies of all policies relating to
directors’ and officers’ liability coverage, errors and omissions coverage, and
commercial general liability coverage.
v. Internal
Accounting Controls.
The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient, in the judgment of the Company’s board of directors, to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
w. 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 Subsidiary
has,
in the course of his actions for, or on behalf of, the Company, used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or
domestic government official or employee.
x. Solvency.
Except
as provided on Schedule 3(x), the Company (after giving effect to the
transactions contemplated by this Agreement) is solvent (i.e.,
its
assets have a fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and matured)
and currently the Company has no information that would lead it to reasonably
conclude that the Company would not, after giving effect to the transaction
contemplated by this Agreement, have the ability to, nor does it intend to
take
any action that would impair its ability to, pay its debts from time to time
incurred in connection therewith as such debts mature. Except as provided on
Schedule 3(x), the Company did not receive a qualified opinion from its auditors
with respect to its most recent fiscal year end and, after giving effect to
the
transactions contemplated by this Agreement, does not anticipate or know of
any
basis upon which its auditors might issue a qualified opinion in respect of
its
current fiscal year.
12
y. No
Investment Company.
The
Company is not, and upon the issuance and sale of the Securities as contemplated
by this Agreement will not be an “investment company” required to be registered
under the Investment Company Act of 1940 (an “Investment
Company”).
The
Company is not controlled by an Investment Company.
z. Breach
of Representations and Warranties by the Company.
If the
Company breaches any of the representations or warranties set forth in this
Section 3, and in addition to any other remedies available to the Buyers
pursuant to this Agreement, the Company shall pay to the Buyer the Standard
Liquidated Damages Amount in cash or in shares of Common Stock at the option
of
the Company, until such breach is cured. If the Company elects to pay the
Standard Liquidated Damages Amounts in shares of Common Stock, such shares
shall
be issued at the Conversion Price at the time of payment.
4. COVENANTS.
a. Best
Efforts.
The
parties shall use their best efforts to satisfy timely each of the conditions
described in Section 6 and 7 of this Agreement.
b. Form
D; Blue Sky Laws.
The
Company agrees to file a Form D with respect to the Securities as required
under
Regulation D and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, take such action
as
the Company shall reasonably determine is necessary to qualify the Securities
for sale to the Buyers at the applicable 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 each Buyer on or prior to the Closing
Date.
c. Reporting
Status; Eligibility to Use Form S-3, SB-2 or Form S-1. The
Company’s Common Stock is registered under Section 12(g) of the 1934 Act. The
Company represents and warrants that it meets the requirements for the use
of
Form S-3, (or if the Company is not eligible for the use of Form S-3 as of
the
Filing Date (as defined in the Registration Rights Agreement), the Company
may
use the form of registration for which it is eligible at that time,) for
registration of the sale by the Buyer of the Registrable Securities (as defined
in the Registration Rights Agreement). So long as the Buyer beneficially owns
any of the Securities, the Company shall timely file all reports required to
be
filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if
the
1934 Act or the rules and regulations thereunder would permit such termination.
The Company further agrees to file all reports required to be filed by the
Company with the SEC in a timely manner so as to become eligible, and thereafter
to maintain its eligibility, for the use of Form S-3. The Company shall issue
a
press release describing the materials terms of the transaction contemplated
hereby as soon as practicable following the Closing Date but in no event more
than two (2) business days of the Closing Date, which press release shall be
subject to prior review by the Buyers. The Company agrees that such press
release shall not disclose the name of the Buyers unless expressly consented
to
in writing by the Buyers or unless required by applicable law or regulation,
and
then only to the extent of such requirement.
13
d. Use
of Proceeds.
The
Company shall use the proceeds from the sale of the Debentures and the Warrants
in the manner set forth in Schedule
4(d)
attached
hereto and made a part hereof and shall not, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation, partnership,
enterprise or other person (except in connection with its currently existing
direct or indirect Subsidiaries)
e. Future
Offerings.
Subject
to the exceptions described below, the Company will not, without the prior
written consent of a majority-in-interest of the Buyers, not to be unreasonably
withheld, (A) negotiate or contract with any party to obtain additional equity
financing (including debt financing with an equity component) that involves
the
issuance of convertible securities that are convertible into an indeterminate
number of shares of Common Stock or (B) grant any registration rights in
connection with any issuance of Common Stock or warrants during the period
(the
“Lock-up
Period”)
beginning on the Closing Date and ending on the later of (i) two hundred seventy
(270) days from the Closing Date and (ii) one hundred eighty (180) days from
the
date the Registration Statement (as defined in the Registration Rights
Agreement) is declared effective (plus any days in which sales cannot be made
thereunder). Notwithstanding the foregoing, the Company shall be permitted
to
obtain additional equity financing (including debt financing with an equity
component) that does not involve the issuance of convertible securities that
are
convertible into an indeterminate number of shares of Common Stock and which
involves the grant of registration rights, so long as such registration rights
do not become effective or may not be invoked by the holder thereof for a period
of at least 320 days from the Closing Date. In addition, subject to the
exceptions described below, the Company will not conduct any equity financing
(including debt with an equity component) (“Future
Offerings”)
during
the period beginning on the Closing Date and ending two (2) years after the
end
of the Lock-up Period unless it shall have first delivered to each Buyer, at
least twenty (20) business days prior to the closing of such Future Offering,
written notice describing the proposed Future Offering, including the terms
and
conditions thereof and proposed definitive documentation to be entered into
in
connection therewith, and providing each Buyer an option during the fifteen
(15)
day period following delivery of such notice to purchase its pro rata share
(based on the ratio that the aggregate principal amount of Debentures purchased
by it hereunder bears to the aggregate principal amount of Debentures purchased
hereunder) of the securities being offered in the Future Offering on the same
terms as contemplated by such Future Offering (the limitations referred to
in
this sentence and the preceding sentence are collectively referred to as the
“Capital
Raising Limitations”).
In the
event the terms and conditions of a proposed Future Offering are amended in
any
respect after delivery of the notice to the Buyers concerning the proposed
Future Offering, the Company shall deliver a new notice to each Buyer describing
the amended terms and conditions of the proposed Future Offering and each Buyer
thereafter shall have an option during the fifteen (15) day period following
delivery of such new notice to purchase its pro rata share of the securities
being offered on the same terms as contemplated by such proposed Future
Offering, as amended. The foregoing sentence shall apply to successive
amendments to the terms and conditions of any proposed Future Offering. The
Capital Raising Limitations shall not apply to any transaction involving (i)
issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 0000 Xxx) or
(ii) issuances of securities as consideration for a merger, consolidation or
purchase of assets, or in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital), or in
connection with the disposition or acquisition of a business, product or license
by the Company. The Capital Raising Limitations also shall not apply to the
issuance of securities upon exercise or conversion of the Company’s options,
warrants or other convertible securities outstanding as of the date hereof
or to
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option or restricted stock plan approved
by
the shareholders of the Company.
14
f. Expenses.
At the
Closing, the Company shall reimburse Buyers for expenses incurred by them in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the other agreements to be executed in
connection herewith (“Documents”), including, without limitation, attorneys’ and
consultants’ fees and expenses, transfer agent fees, fees for stock quotation
services, fees relating to any amendments or modifications of the Documents
or
any consents or waivers of provisions in the Documents, fees for the preparation
of opinions of counsel, escrow fees, and costs of restructuring the transactions
contemplated by the Documents. When possible, the Company must pay these fees
directly, otherwise the Company must make immediate payment for reimbursement
to
the Buyers for all fees and expenses immediately upon written notice by the
Buyer or the submission of an invoice by the Buyer If the Company fails to
reimburse the Buyer in full within three (3) business days of the written notice
or submission of invoice by the Buyer, the Company shall pay interest on the
total amount of fees to be reimbursed at a rate of 15% per annum.
g. Financial
Information.
The
Company agrees to send the following reports to each Buyer until such Buyer
transfers, assigns, or sells all of the Securities: (i) within ten (10) days
after the filing with the SEC, a copy of its Annual Report on Form 10-KSB
its Quarterly Reports on Form 10-QSB and any Current Reports on Form 8-K; (ii)
within one (1) day after release, copies of all press releases issued by the
Company or any of its Subsidiaries; and (iii) contemporaneously with the making
available or giving to the shareholders of the Company, copies of any notices
or
other information the Company makes available or gives to such
shareholders.
h. Authorization
and Reservation of Shares.
The
Company shall at all times have authorized, and reserved for the purpose of
issuance, a sufficient number of shares of Common Stock to provide for the
full
conversion or exercise of the outstanding Debentures and Warrants and issuance
of the Conversion Shares and Warrant Shares in connection therewith (based
on
the Conversion Price of the Debentures or Exercise Price of the Warrants in
effect from time to time) and as otherwise required by the Debentures. The
Company shall not reduce the number of shares of Common Stock reserved for
issuance upon conversion of Debentures and exercise of the Warrants without
the
consent of each Buyer. The Company shall at all times maintain the number of
shares of Common Stock so reserved for issuance at an amount (“Reserved
Amount”)
equal
to no less than two (2) times the number that is then actually issuable upon
full conversion of the Debentures and Additional Debentures and upon exercise
of
the Warrants and the Additional Warrants (based on the Conversion Price of
the
Debentures or the Exercise Price of the Warrants in effect from time to time).
If at any time the number of shares of Common Stock authorized and reserved
for
issuance (“Authorized
and Reserved Shares”)
is
below the Reserved Amount, the Company will promptly take all corporate action
necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of shareholders to authorize
additional shares to meet the Company’s obligations under this Section 4(h), in
the case of an insufficient number of authorized shares, obtain shareholder
approval of an increase in such authorized number of shares, and voting the
management shares of the Company in favor of an increase in the authorized
shares of the Company to ensure that the number of authorized shares is
sufficient to meet the Reserved Amount. If the Company fails to obtain such
shareholder approval within thirty (30) days following the date on which the
number of Authorized and Reserved Shares exceeds the Reserved Amount, the
Company shall pay to the Borrower the Standard Liquidated Damages Amount, in
cash or in shares of Common Stock at the option of the Buyer. If the Buyer
elects to be paid the Standard Liquidated Damages Amount in shares of Common
Stock, such shares shall be issued at the Conversion Price at the time of
payment. In order to ensure that the Company has authorized a sufficient amount
of shares to meet the Reserved Amount at all times, the Company must deliver
to
the Buyer at the end of every month a list detailing (1) the current amount
of
shares authorized by the Company and reserved for the Buyer; and (2) amount
of
shares issuable upon conversion of the Debentures and upon exercise of the
Warrants and as payment of interest accrued on the Debentures for one year.
If
the Company fails to provide such list within five (5) business days of the
end
of each month, the Company shall pay the Standard Liquidated Damages Amount,
in
cash or in shares of Common Stock at the option of the Buyer, until the list
is
delivered. If the Buyer elects to be paid the Standard Liquidated Damages Amount
in shares of Common Stock, such shares shall be issued at the Conversion Price
at the time of payment.
15
i. Listing.
The
Company shall promptly secure the listing of the Conversion Shares and Warrant
Shares upon each national securities exchange or automated quotation system,
if
any, upon which shares of Common Stock are then listed (subject to official
notice of issuance) and, so long as any Buyer owns any of the Securities, shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares and Warrant Shares from time to time issuable
upon conversion of the Debentures or exercise of the Warrants. Subject to the
Listing (as defined in Section 4(n)), Tthe Company will obtain and, so long
as
any Buyer owns any of the Securities, maintain the listing and trading of its
Common Stock on the OTCBB or any equivalent replacement exchange, the Nasdaq
National Market (“Nasdaq”),
the
Nasdaq SmallCap Market (“Nasdaq
SmallCap”),
the
New York Stock Exchange (“NYSE”),
or
the American Stock Exchange (“AMEX”)
and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers (“NASD”)
and
such exchanges, as applicable. The Company shall promptly provide to each Buyer
copies of any notices it receives from the OTCBB and any other exchanges or
quotation systems on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such exchanges and
quotation systems.
j. Corporate
Existence.
So long
as a Buyer beneficially owns any Debentures or Warrants, the Company shall
maintain its corporate existence and shall not sell all or substantially all
of
the Company’s assets, except in the event of a merger or consolidation or sale
of all or substantially all of the Company’s assets, where the surviving or
successor entity in such transaction (i) assumes the Company’s obligations
hereunder and under the agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation whose Common Stock is listed
for trading on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or
AMEX.
16
k. No
Integration.
The
Company shall not make any offers or sales of any security (other than the
Securities) under circumstances that would require registration of the
Securities being offered or sold hereunder under the 1933 Act or cause the
offering of the Securities to be integrated with any other offering of
securities by the Company for the purpose of any stockholder approval provision
applicable to the Company or its securities.
l. Breach
of Covenants.
If the
Company breaches any of the covenants set forth in this Section 4, and in
addition to any other remedies available to the Buyers pursuant to this
Agreement, the Company shall pay to the Buyers the Standard Liquidated Damages
Amount, in cash or in shares of Common Stock at the option of the Company,
until
such breach is cured. If the Company elects to pay the Standard Liquidated
Damages Amount in shares, such shares shall be issued at the Conversion Price
at
the time of payment.
5. TRANSFER
AGENT INSTRUCTIONS.
The
Company shall issue irrevocable instructions to its transfer agent to issue
certificates, registered in the name of each Buyer or its nominee, for the
Conversion Shares and Warrant Shares in such amounts as specified from time
to
time by each Buyer to the Company upon conversion of the Debentures or exercise
of the Warrants in accordance with the terms thereof (the “Irrevocable
Transfer Agent Instructions”).
Prior
to registration of the Conversion Shares and Warrant Shares under the 1933
Act
or the date on which the Conversion Shares and Warrant Shares may be sold
pursuant to Rule 144 without any restriction as to the number of Securities
as
of a particular date that can then be immediately sold, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5, and stop transfer instructions
to give effect to Section 2(f) hereof (in the case of the Conversion Shares
and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as
and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer’s obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the Securities. If
a
Buyer provides the Company with (i) an opinion of Qualifying BuyerCcounsel
in
form, substance and scope customary for opinions in comparable transactions,
to
the effect that a public sale or transfer of such Securities may be made without
registration under the 1933 Act and such sale or transfer is effected or (ii)
the Buyer provides reasonable assurancean opinion of Qualifying Buyer Counsel
s
that the Securities can be sold pursuant to Rule 144, the Company shall permit
the transfer, and, in the case of the Conversion Shares and Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates, free
from restrictive legend, in such name and in such denominations as specified
by
such Buyer. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyers, by vitiating the intent
and
purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5 may be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section, that the Buyers shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate transfer, without the necessity
of showing economic loss and without any bond or other security being
required.
17
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Debentures and
Warrants to a Buyer at the Closing is subject to the satisfaction, at or before
the Closing Date of each of the following conditions thereto, provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion:
a. The
applicable Buyer shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Company.
b. The
applicable Buyer shall have delivered the Purchase Price in accordance with
Section 1(b) above.
c. The
representations and warranties of the applicable Buyer shall be true and correct
in all material respects as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date), and the applicable Buyer shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Buyer at or prior to the Closing Date.
d. No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or
in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
7. CONDITIONS
TO EACH BUYER’S OBLIGATION TO PURCHASE.
The
obligation of each Buyer hereunder to purchase the Debentures and 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 such
Buyer’s sole benefit and may be waived by such Buyer at any time in its sole
discretion:
a. The
Company shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Buyer.
b. The
Company shall have delivered to such Buyer duly executed Debentures (in such
denominations as the Buyer shall request) and Warrants in accordance with
Section 1(b) above.
c. The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to a
majority-in-interest of the Buyers, shall have been delivered to and
acknowledged in writing by the Company’s Transfer Agent.
d. The
representations and warranties of the Company 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 such time (except for representations and warranties that speak as
of a
specific date) and the Company shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Company at
or
prior to the Closing Date. The Buyer shall have received a certificate or
certificates, 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 including, but not limited to certificates
with respect to the Company’s Articles of Incorporation, By-laws and Board of
Directors’ resolutions relating to the transactions contemplated
hereby.
18
e. No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or
in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
f. No
event
shall have occurred which could reasonably be expected to have a Material
Adverse Effect on the Company.
g. The
Conversion Shares and Warrant Shares shall have been authorized for quotation
on
the OTCBB and trading in the Common Stock on the OTCBB shall not have been
suspended by the SEC or the OTCBB.
h. The
Buyer
shall have received an opinion of the Company’s counsel, dated as of the Closing
Date, in form, scope and substance reasonably satisfactory to the Buyer and
in
substantially the same form as Exhibit
“D”
attached
hereto.
i. The
Buyer
shall have received an officer’s certificate described in Section 3(c) above,
dated as of the Closing Date.
8. GOVERNING
LAW; MISCELLANEOUS.
a. Governing
Law.
THIS
AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO
ANY
DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
UPON
A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH
SUIT
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
BY
SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT
PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR
ALL
FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY
IN CONNECTION WITH SUCH DISPUTE.
19
b. Counterparts;
Signatures by Facsimile.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party
and
delivered to the other party. This Agreement, once executed by a party, may
be
delivered to the other party hereto by facsimile transmission of a copy of
this
Agreement bearing the signature of the party so delivering this
Agreement.
c. Headings.
The
headings of this Agreement are for convenience of reference only and shall
not
form part of, or affect the interpretation of, this Agreement.
d. Severability.
In the
event that any provision of this Agreement is invalid or unenforceable under
any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
e. Entire
Agreement; Amendments.
This
Agreement and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor
the
Buyer makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
f. Notices.
Any
notices required or permitted to be given under the terms of this Agreement
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed
in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If
to the
Company:
Clickable
Enterprises, Inc.
000
Xxxxx
Xxxxxxxx Xxxxxx
Xxxxx
Xxxxxx, Xxx Xxxx 00000
Attention:
President
Facsimile:
000-000-0000
Email:
xxxx.xxxxxxx@xxxxxxxxxxxx.xxx
20
With
copies
to: Xxxxxx
Xxxxxxx Xxxxxx & Xxxxxxx, LLC
0000
Xxxxxx Xxxxxx, 0xx
Xxxxx
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000
Attention:
Xxxx X.
Xxxxxx,
Esq.
Telephone:
000-000-0000
Facsimile:
215-851-8383
Email:
xxxxxxx@xxxxxxxxxxxxx.xxx
If
to a
Buyer: To the address set forth immediately below such Buyer’s name on the
signature pages hereto.
With
copy
to: Xxxxxxx
Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000
Xxxxxx Xxxxxx
00xx
Xxxxx
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000
Attention:
Xxxxxx X. Xxxxxxxx, Esq.
Telephone:
000-000-0000
Facsimile:
000-000-0000
Email:
xxxxxxxx@xxxxxxxxxxxx.xxx
Each
party shall provide notice to the other party of any change in
address.
g. Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. Neither the Company nor any Buyer shall assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the other; provided,
however,
that
subject to Section 2(f), any Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from a Buyer or to
any
of its “affiliates,” as that term is defined under the 1934 Act, without the
consent of the Company; and provided further, that the Buyers shall not assign
this Agreement or any rights or obligations hereunder until the Registration
Debentures and Registration Warrants are purchased by the Buyers.
h. Third
Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
i. Survival.
The
representations and warranties of the Company and the agreements and covenants
set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of
the
Buyers. The Company agrees to indemnify and hold harmless each of the Buyers
and
all their officers, directors, employees and agents for loss or damage arising
as a result of or related to any breach or alleged breach by the Company of
any
of its representations, warranties and covenants set forth in Sections 3 and
4
hereof or any of its covenants and obligations under this Agreement or the
Registration Rights Agreement, including advancement of expenses as they are
incurred.
21
j. Publicity.
The
Company and each of the Buyers shall have the right to review a reasonable
period of time before issuance of any press releases, SEC, OTCBB or NASD
filings, 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 each of the Buyers,
to make any press release or SEC, OTCBB (or other applicable trading market)
or
NASD filings with respect to such transactions as is required by applicable
law
and regulations (although each of the Buyers shall be consulted by the Company
in connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment
thereon).
k. Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
l. 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.
m. Remedies.
The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for a breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Buyers shall be entitled,
in addition to all other available remedies at law or in equity, and in addition
to the penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce specifically
the terms and provisions hereof, without the necessity of showing economic
loss
and without any bond or other security being required.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
22
IN
WITNESS WHEREOF,
the
undersigned Buyers and the Company have caused this Agreement to be duly
executed as of the date first above written.
| CLICKABLE ENTERPRISES, INC. | |||
|
Xxxxxxxx
Xxxxxxx
President
|
| AJW PARTNERS, LLC | |||
|
By:
SMS Group, LLC
|
|
Xxxxx
X. Xxxxxxxx
Manager
|
RESIDENCE:
Delaware
ADDRESS:
0000
Xxxxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxx,
Xxx Xxxx 00000
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
AGGREGATE
SUBSCRIPTION AMOUNT:
|
Aggregate
Principal Amount of Debentures:
|
$
|
________
|
|
|
|
Number
of Warrants:
|
________
|
|||
|
Aggregate
Purchase Price:
|
$
|
________
|
23
AJW
OFFSHORE, LTD.
By:
First
Street Manager II, LLC
|
Xxxxx
X. Xxxxxxxx
Manager
|
RESIDENCE:
Cayman
Islands
ADDRESS:
AJW
Offshore, Ltd.
X.X.
Xxx
00000 XXX
Xxxxx
Xxxxxx, Xxxxxx Xxxxxx, B.W.I.
AGGREGATE
SUBSCRIPTION AMOUNT:
|
Aggregate
Principal Amount of Debentures:
|
$
|
_______
|
||
|
Number
of Warrants:
|
_______
|
|||
|
Aggregate
Purchase Price:
|
$
|
_______
|
AJW
QUALIFIED PARTNERS, LLC
By:
AJW
Manager, LLC
|
Xxxxx
X. Xxxxxxxx
Manager
|
RESIDENCE: New
York
ADDRESS:
0000
Xxxxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxx,
Xxx Xxxx 00000
Facsimile: (000)
000-0000
Telephone: (000)
000-0000
AGGREGATE
SUBSCRIPTION AMOUNT:
|
Aggregate
Principal Amount of Debentures:
|
$
|
________
|
||
|
Number
of Warrants:
|
________
|
|||
|
Aggregate
Purchase Price:
|
$
|
________
|
REGISTRATION
RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT (this “Agreement”),
dated
as of March 21, 2006, by and among Clickable Enterprises, Inc., a Delaware
corporation with its headquarters located at 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx
Xxxxxx, Xxx Xxxx 00000 (the “Company”),
and
each of the undersigned (together with their respective affiliates and any
assignee or transferee of all of their respective rights hereunder, the
“Initial
Investors”).
WHEREAS:
A. In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “Securities Purchase Agreement”), the Company
has agreed, upon the terms and subject to the conditions contained therein,
to
issue and sell to the Initial Investors (i) secured
convertible notes in the aggregate principal amount of up to One Million
Dollars
($1,000,000) (the “Notes”) that are convertible into shares of the Company’s
common stock (the “Common Stock”), upon the terms and subject to the limitations
and conditions set forth in such Notes and (ii) warrants
(the “Warrants”) to acquire an aggregate of 4,000,000 shares of Common Stock,
upon the terms and conditions and subject to the limitations and conditions
set
forth in the Warrants; and
B. To
induce
the Initial Investors to execute and deliver the Securities Purchase Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder,
or
any similar successor statute (collectively, the “1933
Act”),
and
applicable state securities laws;
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and each of the Initial Investors hereby
agree
as follows:
1. DEFINITIONS.
a.
As
used
in this Agreement, the following terms shall have the following
meanings:
(i)
“Investors”
means
the Initial Investors and any transferee or assignee who agrees to become
bound
by the provisions of this Agreement in accordance with Section 9
hereof.
(ii) “register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing a Registration Statement
or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under
the
1933 Act or any successor rule providing for offering securities on a continuous
basis (“Rule
415”),
and
the declaration or ordering of effectiveness of such Registration Statement
by
the United States Securities and Exchange Commission (the “SEC”).
(iii) “Registrable
Securities”
means
the Conversion Shares issued or issuable upon conversion or otherwise pursuant
to the including, without limitation, Damages Shares (as defined in the Notes)
issued or issuable pursuant to the Notes, shares of Common Stock issued or
issuable in payment of the Standard Liquidated Damages Amount (as defined
in the
Securities Purchase Agreement), shares issued or issuable in respect of interest
or in redemption of the Notes in accordance with the terms thereof) and Warrant
Shares issuable, upon exercise or otherwise pursuant to the Warrants, and
any
shares of capital stock issued or issuable as a dividend on or in exchange
for
or otherwise with respect to any of the foregoing.
(iv) “Registration
Statement”
means
a
registration statement of the Company under the 0000 Xxx.
b. Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement or the Convertible
Note.
2. REGISTRATION.
a. Mandatory
Registration.
The
Company shall prepare, and, on or prior to thirty (30) days from the date
of
receipt of written demand of the Investors (the “Filing
Date”),
file
with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not
then
available, on such form of Registration Statement as is then available to
effect
a registration of the Registrable Securities, subject to the consent of the
Initial Investors, which consent will not be unreasonably withheld) covering
the
resale of the Registrable Securities underlying the Notes and Warrants issued
or
issuable pursuant to the Securities Purchase Agreement, which Registration
Statement, to the extent allowable under the 1933 Act and the rules and
regulations promulgated thereunder (including Rule 416), shall state that
such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of or otherwise
pursuant to the Notes and exercise of the Warrants to prevent dilution resulting
from stock splits, stock dividends or similar transactions. The number of
shares
of Common Stock initially included in such Registration Statement shall be
no
less than an amount equal to two (2) times the sum of the number of Conversion
Shares that are then issuable upon conversion of the Notes (based on the
Variable Conversion Price as would then be in effect and assuming the Variable
Conversion Price is the Conversion Price at such time), and the number of
Warrant Shares that are then issuable upon exercise of the Warrants, without
regard to any limitation on the Investor’s ability to convert the Notes or
exercise the Warrants. The Company acknowledges that the number of shares
initially included in the Registration Statement represents a good faith
estimate of the maximum number of shares issuable upon conversion of the
Notes
and upon exercise of the Warrants.
b. Underwritten
Offering.
If any
offering pursuant to a Registration Statement pursuant to Section 2(a) hereof
involves an underwritten offering, the Investors who hold a majority in interest
of the Registrable Securities subject to such underwritten offering, with
the
consent of a majority-in-interest of the Initial Investors, shall have the
right
to select one legal counsel and an investment banker or bankers and manager
or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the
Company.
2
c. Payments
by the Company.
The
Company shall use its best efforts to obtain effectiveness of the Registration
Statement as soon as practicable. If (i) the
Registration Statement(s) covering the Registrable Securities required to
be
filed by the Company pursuant to Section 2(a) hereof is not filed by the
Filing
Date or declared effective by the SEC on or prior to one hundred and thirty-five
(135) days from the date of Closing (as defined in the Securities Purchase
Agreement), or (ii) after
the Registration Statement has been declared effective by the SEC, sales
of all
of the Registrable Securities cannot be made pursuant to the Registration
Statement, or (iii) the
Common Stock is not listed or included for quotation on the Nasdaq National
Market (“Nasdaq”),
the
Nasdaq SmallCap Market (“Nasdaq
SmallCap”),
the
New York Stock Exchange (the “NYSE”)
or the
American Stock Exchange (the “AMEX”)
after
being so listed or included for quotation, or (iv) the
Common Stock ceases to be traded on the Over-the-Counter Bulletin Board (the
“OTCBB”)
or any
equivalent replacement exchange prior to being listed or included for quotation
on one of the aforementioned markets, then the Company will make payments
to the
Investors in such amounts and at such times as shall be determined pursuant
to
this Section 2(c) as partial relief for the damages to the Investors by reason
of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity). The Company shall pay to each holder of the Notes or
Registrable Securities an amount equal to the then outstanding principal
amount
of the Notes (and, in the case of holders of Registrable Securities, the
principal amount of Notes from which such Registrable Securities were converted)
(“Outstanding
Principal Amount”),
multiplied by the Applicable Percentage (as defined below) times the sum
of: (i)
the number of months (prorated for partial months) after the Filing Date
or the
end of the aforementioned ninety (90) day period and prior to the date the
Registration Statement is declared effective by the SEC, provided, however,
that
there shall be excluded from such period any delays which are solely
attributable to changes required by the Investors in the Registration Statement
with respect to information relating to the Investors, including, without
limitation, changes to the plan of distribution, or to the failure of the
Investors to conduct their review of the Registration Statement pursuant
to
Section 3(h) below in a reasonably prompt manner; (ii) the number of months
(prorated for partial months) that sales of all of the Registrable Securities
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (including, without limitation, when
sales
cannot be made by reason of the Company’s failure to properly supplement or
amend the prospectus included therein in accordance with the terms of this
Agreement, but excluding any days during an Allowed Delay (as defined in
Section
3(f)); and (iii) the number of months (prorated for partial months) that
the
Common Stock is not listed or included for quotation on the OTCBB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. The term “Applicable
Percentage”
means
two hundredths (.02). (For example, if the Registration Statement becomes
effective one (1) month after the end of such ninety (90) day period, the
Company would pay $5,000 for each $250,000 of Outstanding Principal Amount.
If
thereafter, sales could not be made pursuant to the Registration Statement
for
an additional period of one (1) month, the Company would pay an additional
$5,000 for each $250,000 of Outstanding Principal Amount.) Such amounts shall
be
paid in cash or, at the Company’s option, in shares of Common Stock priced at
the Conversion Price (as defined in the Notes) on such payment date.
d. Piggy-Back
Registrations.
Subject
to the last sentence of this Section 2(d), if at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company
shall
determine to file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the 1933 Act of any of
its
equity securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other bona fide,
employee benefit plans), the Company shall send to each Investor who is entitled
to registration rights under this Section 2(d) written notice of such
determination and, if within fifteen (15) days after the effective date of
such
notice, such Investor shall so request in writing, the Company shall include
in
such Registration Statement all or any part of the Registrable Securities
such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares
of
Common Stock which may be included in the Registration Statement because,
in
such underwriter(s)’ judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor
has
requested inclusion hereunder as the underwriter shall permit. Any exclusion
of
Registrable Securities shall be made pro rata among the Investors seeking
to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Investors; provided,
however,
that
the Company shall not exclude any Registrable Securities unless the Company
has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided,
further,
however,
that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement
other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right
to
registration of Registrable Securities under this Section 2(d) shall be
construed to limit any registration required under Section 2(a) hereof. If
an
offering in connection with which an Investor is entitled to registration
under
this Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall,
unless
otherwise agreed by the Company, offer and sell such Registrable Securities
in
an underwritten offering using the same underwriter or underwriters and,
subject
to the provisions of this Agreement, on the same terms and conditions as
other
shares of Common Stock included in such underwritten offering. Notwithstanding
anything to the contrary set forth herein, the registration rights of the
Investors pursuant to this Section 2(d) shall only be available in the event
the
Company fails to timely file, obtain effectiveness or maintain effectiveness
of
any Registration Statement to be filed pursuant to Section 2(a) in accordance
with the terms of this Agreement.
3
e.
Eligibility
for Form X-0, XX-0 or S-1; Conversion to Form S-3.
The
Company represents and warrants that it meets the requirements for the use
of
Form X-0, XX-0 or S-1 for registration of the sale by the Initial Investors
and
any other Investors of the Registrable Securities. The Company agrees to
file
all reports required to be filed by the Company with the SEC in a timely
manner
so as to remain eligible or become eligible, as the case may be, and thereafter
to maintain its eligibility, for the use of Form S-3. If the Company is not
currently eligible to use Form S-3, not later than five (5) business days
after
the Company first meets the registration eligibility and transaction
requirements for the use of Form S-3 (or any successor form) for registration
of
the offer and sale by the Initial Investors and any other Investors of
Registrable Securities, the Company shall file a Registration Statement on
Form
S-3 (or such successor form) with respect to the Registrable Securities covered
by the Registration Statement on Form SB-2 or Form S-1, whichever is applicable,
filed pursuant to Section 2(a) (and include in such Registration Statement
on
Form S-3 the information required by Rule 429 under the 0000 Xxx) or convert
the
Registration Statement on Form SB-2 or Form S-1, whichever is applicable,
filed
pursuant to Section 2(a) to a Form S-3 pursuant to Rule 429 under the 1933
Act
and cause such Registration Statement (or such amendment) to be declared
effective no later than forty-five (45) days after filing. In the event of
a
breach by the Company of the provisions of this Section 2(e), the Company
will
be required to make payments pursuant to Section 2(c) hereof.
4
3.
OBLIGATIONS
OF THE COMPANY.
In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:
a. The
Company shall prepare promptly, and file with the SEC not later than the
Filing
Date, a Registration Statement with respect to the number of Registrable
Securities provided in Section 2(a), and thereafter use its best efforts
to
cause such Registration Statement relating to Registrable Securities to become
effective as soon as possible after such filing but in no event later than
ninety (90) days from the date of Closing), and keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier
of
(i) the date on which all of the Registrable Securities have been sold and
(ii)
the date on which the Registrable Securities (in the opinion of counsel to
the
Initial Investors) may be immediately sold to the public without registration
or
restriction (including, without limitation, as to volume by each holder thereof)
under the 1933 Act (the “Registration
Period”),
which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of
a
material fact or omit to state a material fact required to be stated therein,
or
necessary to make the statements therein not misleading.
b.
The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statements
and
the prospectus used in connection with the Registration Statements as may
be
necessary to keep the Registration Statements effective at all times during
the
Registration Period, and, during such period, comply with the provisions
of the
1933 Act with respect to the disposition of all Registrable Securities of
the
Company covered by the Registration Statements until such time as all of
such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statements. In the event the number of shares available under
a
Registration Statement filed pursuant to this Agreement is insufficient to
cover
all of the Registrable Securities issued or issuable upon conversion of the
Notes and exercise of the Warrants, the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within
fifteen (15) days after the necessity therefor arises (based on the market
price
of the Common Stock and other relevant factors on which the Company reasonably
elects to rely). The Company shall use its best efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof, but in any event within thirty (30) days after
the
date on which the Company reasonably first determines (or reasonably should
have
determined) the need therefor. The provisions of Section 2(c) above shall
be
applicable with respect to such obligation, with the ninety (90) days running
from the day the Company reasonably first determines (or reasonably should
have
determined) the need therefor.
5
c. The
Company shall furnish to each Investor whose Registrable Securities are included
in a Registration Statement and its legal counsel (i) promptly
(but in no event more than two (2) business days) after the same is prepared
and
publicly distributed, filed with the SEC, or received by the Company, one
copy
of each Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto, and,
in the
case of the Registration Statement referred to in Section 2(a), each letter
written by or on behalf of the Company to the SEC or the staff of the SEC,
and
each item of correspondence from the SEC or the staff of the SEC, in each
case
relating to such Registration Statement (other than any portion of any thereof
which contains information for which the Company has sought confidential
treatment), and (ii) promptly
(but in no event more than two (2) business days) after the Registration
Statement is declared effective by the SEC, such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor. The Company will immediately notify each Investor
by
facsimile of the effectiveness of each Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC (which comments shall promptly be made available
to the Investors upon request), with a view towards causing each Registration
Statement or any amendment thereto to be declared effective by the SEC as
soon
as practicable, shall promptly file an acceleration request as soon as
practicable (but in no event more than two (2) business days) following the
resolution or clearance of all SEC comments or, if applicable, following
notification by the SEC that any such Registration Statement or any amendment
thereto will not be subject to review and shall promptly file with the SEC
a
final prospectus as soon as practicable (but in no event more than two (2)
business days) following receipt by the Company from the SEC of an order
declaring the Registration Statement effective. In the event of a breach
by the
Company of the provisions of this Section 3(c), the Company will be required
to
make payments pursuant to Section 2(c) hereof.
d. The
Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statements
under such other securities or “blue sky” laws of such jurisdictions in the
United States as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare
and file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may
be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and
(iv) take
all other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided,
however,
that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify
to do business in any jurisdiction where it would not otherwise be required
to
qualify but for this Section 3(d), (b) subject
itself to general taxation in any such jurisdiction, (c) file
a general consent to service of process in any such jurisdiction, (d) provide
any undertakings that cause the Company undue expense or burden, or (e) make
any change in its charter or bylaws, which in each case the Board of Directors
of the Company determines to be contrary to the best interests of the Company
and its shareholders.
6
e. In
the
event Investors who hold a majority-in-interest of the Registrable Securities
being offered in the offering (with the approval of a majority-in-interest
of
the Initial Investors) select underwriters for the offering, the Company
shall
enter into and perform its obligations under an underwriting agreement, in
usual
and customary form, including, without limitation, customary indemnification
and
contribution obligations, with the underwriters of such offering.
f. As
promptly as practicable after becoming aware of such event, the Company shall
notify each Investor of the happening of any event, of which the Company
has
knowledge, as a result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a material
fact or
omission to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading, and use its best efforts promptly
to
prepare a supplement or amendment to any Registration Statement to correct
such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request; provided that, for not more than ten (10) consecutive trading days
(or
a total of not more than twenty (20) trading days in any twelve (12) month
period), the Company may delay the disclosure of material non-public information
concerning the Company (as well as prospectus or Registration Statement
updating) the disclosure of which at the time is not, in the good faith opinion
of the Company, in the best interests of the Company (an “Allowed
Delay”);
provided, further, that the Company shall promptly (i) notify
the Investors in writing of the existence of (but in no event, without the
prior
written consent of an Investor, shall the Company disclose to such investor
any
of the facts or circumstances regarding) material non-public information
giving
rise to an Allowed Delay and (ii) advise
the Investors in writing to cease all sales under such Registration Statement
until the end of the Allowed Delay. Upon expiration of the Allowed Delay,
the
Company shall again be bound by the first sentence of this Section 3(f) with
respect to the information giving rise thereto.
g.
The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of any Registration Statement, and, if
such an
order is issued, to obtain the withdrawal of such order at the earliest possible
moment and to notify each Investor who holds Registrable Securities being
sold
(or, in the event of an underwritten offering, the managing underwriters)
of the
issuance of such order and the resolution thereof.
h.
The
Company shall permit a single firm of counsel designated by the Initial
Investors to review such Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC,
and not
file any document in a form to which such counsel reasonably objects and
will
not request acceleration of such Registration Statement without prior notice
to
such counsel. The sections of such Registration Statement covering information
with respect to the Investors, the Investor’s beneficial ownership of securities
of the Company or the Investors intended method of disposition of Registrable
Securities shall conform to the information provided to the Company by each
of
the Investors.
7
i. The
Company shall make generally available to its security holders as soon as
practicable, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of
Rule 158 under the 0000 Xxx) covering a twelve-month period beginning not
later
than the first day of the Company’s fiscal quarter next following the effective
date of the Registration Statement.
j. At
the
request of any Investor, the Company shall furnish, on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection
with
any Registration Statement or, if such securities are not being sold by an
underwriter, on the date of effectiveness thereof (i) an
opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as
is
customarily given in an underwritten public offering, addressed to the
underwriters, if any, and the Investors and (ii) a
letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and the Investors.
k. The
Company shall make available for inspection by (i) any
Investor, (ii) any
underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one
firm of attorneys and one firm of accountants or other agents retained by
the
Initial Investors, (iv) one
firm of attorneys and one firm of accountants or other agents retained by
all
other Investors, and (v) one
firm of attorneys retained by all such underwriters (collectively, the
“Inspectors”) all pertinent financial and other records, and
pertinent corporate documents and properties of the Company, including without
limitation, records of conversions by other holders of convertible securities
issued by the Company and the issuance of stock to such holders pursuant
to the
conversions (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company’s officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however,
that
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the
disclosure of such Records is necessary to avoid or correct a misstatement
or
omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a subpoena or other order
from a
court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in
such
Records to any Inspector until and unless such Inspector shall have entered
into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this
Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of
such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investor’s ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
8
l. The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the
disclosure of such information is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees
that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor
prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m.
The
Company shall (i) cause
all the Registrable Securities covered by the Registration Statement to be
listed on each national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing
of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) to
the extent the securities of the same class or series are not then listed
on a
national securities exchange, secure the designation and quotation, of all
the
Registrable Securities covered by the Registration Statement on Nasdaq or,
if
not eligible for Nasdaq, on Nasdaq SmallCap or, if not eligible for Nasdaq
or
Nasdaq SmallCap, on the OTCBB and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. (“NASD”) as
such with respect to such Registrable Securities.
n. The
Company shall provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date
of the
Registration Statement.
o. The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and the managing underwriter or underwriters, if any, to facilitate
the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the managing underwriter or underwriters,
if
any, or the Investors may reasonably request and registered in such names
as the
managing underwriter or underwriters, if any, or the Investors may request,
and,
within three (3) business days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel selected by the Company to deliver,
to
the transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
an
instruction in the form attached hereto as Exhibit 1 and an
opinion of such counsel in the form attached hereto as
Exhibit 2.
9
p. At
the
request of the holders of a majority-in-interest of the Registrable Securities,
the Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
any
prospectus used in connection with the Registration Statement as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.
q. From
and
after the date of this Agreement, the Company shall not, and shall not agree
to,
allow the holders of any securities of the Company to include any of their
securities in any Registration Statement under Section 2(a) hereof or any
amendment or supplement thereto under Section 3(b) hereof without the consent
of
the holders of a majority-in-interest of the Registrable
Securities.
r. The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of Registrable Securities pursuant
to a
Registration Statement.
4. OBLIGATIONS
OF THE INVESTORS.
In
connection with the registration of the Registrable Securities, the Investors
shall have the following obligations:
a.
It
shall
be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held
by it
and the intended method of disposition of the Registrable Securities held
by it
as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. At least three (3) business days prior
to
the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
such Investor.
b. Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Registration Statements hereunder,
unless
such Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from the Registration
Statements.
c.
In
the
event Investors holding a majority-in-interest of the Registrable Securities
being registered (with the approval of the Initial Investors) determine to
engage the services of an underwriter, each Investor agrees to enter into
and
perform such Investor’s obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification
and
contribution obligations, with the managing underwriter of such offering
and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless such Investor
has notified the Company in writing of such Investor’s election to exclude all
of such Investor’s Registrable Securities from such Registration
Statement.
10
d. Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or 3(g), such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor’s possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
e. No
Investor may participate in any underwritten registration hereunder unless
such
Investor (i) agrees
to sell such Investor’s Registrable Securities on the basis provided in any
underwriting arrangements in usual and customary form entered into by the
Company, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees
to pay its pro rata share of all underwriting discounts and commissions and
any
expenses in excess of those payable by the Company pursuant to Section 5
below.
5. EXPENSES
OF REGISTRATION.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the fees and disbursements
of
counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by the Initial Investors pursuant to Sections 2(b) and 3(h)
hereof shall be borne by the Company.
6. INDEMNIFICATION.
In
the
event any Registrable Securities are included in a Registration Statement
under
this Agreement:
a. To
the
extent permitted by law, the Company will indemnify, hold harmless and defend
(i) each
Investor who holds such Registrable Securities, (ii) the
directors, officers, partners, employees, agents and each person who controls
any Investor within the meaning of the 1933 Act or the Securities Exchange
Act
of 1934, as amended (the “1934 Act”), if any, (iii) any
underwriter (as defined in the 0000 Xxx) for the Investors, and (iv) the
directors, officers, partners, employees and each person who controls any
such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each,
an
“Indemnified Person”), against any joint or several losses,
claims, damages, liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, “Claims”)
to which any of them may become subject insofar as such Claims arise out
of or
are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or the omission or alleged omission
to
state therein a material fact required to be stated or necessary to make
the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained
in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein
were
made, not misleading; or (iii) any violation or alleged violation by the
Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation,
any
state securities law, or any rule or regulation thereunder relating to the
offer
or sale of the Registrable Securities (the matters in the foregoing clauses
(i)
through (iii) being, collectively, “Violations”). Subject to
the restrictions set forth in Section 6(c) with respect to the number of
legal
counsel, the Company shall reimburse the Indemnified Person, promptly as
such
expenses are incurred and are due and payable, for any reasonable legal fees
or
other reasonable expenses incurred by them in connection with investigating
or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i)
shall
not apply to a Claim arising out of or based upon a Violation which occurs
in
reliance upon and in conformity with information furnished in writing to
the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of such Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) shall not apply to amounts paid in settlement of any Claim if
such
settlement is effected without the prior written consent of the Company,
which
consent shall not be unreasonably withheld; and (iii) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified
Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus,
as
then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus
prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full
force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
11
b.
In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees severally and not jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner set forth
in
Section 6(a), the Company, each of its directors, each of its officers who
signs
the Registration Statement, each person, if any, who controls the Company
within
the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
shareholder selling securities pursuant to the Registration Statement or
any of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
and
together with an Indemnified Person, an “Indemnified Party”),
against any Claim to which any of them may become subject, under the 1933
Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based
upon
any Violation by such Investor, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for
use
in connection with such Registration Statement; and subject to Section 6(c)
such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds to such Investor as a result of the sale
of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made
by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus
shall
not inure to the benefit of any Indemnified Party if the untrue statement
or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or
supplemented.
12
c.
Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to
the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person
or
the Indemnified Party, as the case may be; provided, however, that
an Indemnified Person or Indemnified Party shall have the right to retain
its
own counsel with the fees and expenses to be paid by the indemnifying party,
if,
in the reasonable opinion of counsel retained by the indemnifying party,
the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party
and any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such legal counsel shall be
selected by Investors holding a majority-in-interest of the Registrable
Securities included in the Registration Statement to which the Claim relates
(with the approval of a majority-in-interest of the Initial Investors), if
the
Investors are entitled to indemnification hereunder, or the Company, if the
Company is entitled to indemnification hereunder, as applicable. The failure
to
deliver written notice to the indemnifying party within a reasonable time
of the
commencement of any such action shall not relieve such indemnifying party
of any
liability to the Indemnified Person or Indemnified Party under this Section
6,
except to the extent that the indemnifying party is actually prejudiced in
its
ability to defend such action. The indemnification required by this Section
6
shall be made by periodic payments of the amount thereof during the course
of
the investigation or defense, as such expense, loss, damage or liability
is
incurred and is due and payable.
13
7. CONTRIBUTION.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with
respect
to any amounts for which it would otherwise be liable under Section 6 to
the
fullest extent permitted by law; provided,
however,
that
(i) no
contribution shall be made under circumstances where the maker would not
have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no
seller of Registrable Securities guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii)contribution
(together with any indemnification or other obligations under this Agreement)
by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS
UNDER THE 1934 ACT.
With
a
view to making available to the Investors the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that
may
at any time permit the investors to sell securities of the Company to the
public
without registration (“Rule
144”),
the
Company agrees to:
a. make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
b.
file
with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements (it being understood that nothing herein shall
limit the Company’s obligations under Section 4(c) of the Securities Purchase
Agreement) and the filing of such reports and other documents is required
for
the applicable provisions of Rule 144; and
c.
furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a
copy of the most recent annual or quarterly report of the Company and such
other
reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Investors
to sell
such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT
OF REGISTRATION RIGHTS.
The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii) the Company is, within
a reasonable time after such transfer or assignment, furnished with written
notice of (a) the
name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is restricted
under
the 1933 Act and applicable state securities laws, (iv) at or before the
time
the Company receives the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing with the Company to
be
bound by all of the provisions contained herein, (v) such transfer shall
have
been made in accordance with the applicable requirements of the Securities
Purchase Agreement, and (vi) such transferee shall be an “accredited
investor”
as
that
term defined in Rule 501 of Regulation D promulgated under the 1933
Act.
14
10. AMENDMENT
OF REGISTRATION RIGHTS.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company, each of the Initial
Investors (to the extent such Initial Investor still owns Registrable
Securities) and Investors who hold a majority interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section
10
shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A
person
or entity is deemed to be a holder of Registrable Securities whenever such
person or entity owns of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two or more
persons
or entities with respect to the same Registrable Securities, the Company
shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
b. Any
notices required or permitted to be given under the terms hereof shall be
sent
by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile and shall be effective five days after being placed in the mail,
if
mailed by regular United States mail, or upon receipt, if delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If
to the
Company:
Clickable
Enterprises, Inc.
000
Xxxxx
Xxxxxxxx Xxxxxx
Xxxxx
Xxxxxx, Xxx Xxxx 00000
Attention:
President
Telephone:
(000) 000-0000
Email:
xxxx.xxxxxxx@xxxxxxxxxxxx.xxx
15
With
a
copy to:
Xxxxxx
Xxxxxxx Xxxxxx & Xxxxxxx, LLC
0000
Xxxxxx Xxxxxx, 0xx
Xxxxx
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000
Attention:
Xxxx X.
Xxxxxx,
Esq.
Telephone:
000-000-0000
Facsimile:
215-851-8383
Email:
xxxxxxx@xxxxxxxxxxxxx.xxx
If
to an
Investor: to the address set forth immediately below such Investor’s name on the
signature pages to the Securities Purchase Agreement.
With
a
copy to:
Xxxxxxx
Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000
Xxxxxx Xxxxxx
00xx
Xxxxx
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000
Attention:
Xxxxxx X. Xxxxxxxx, Esq.
Telephone:
000-000-0000
Facsimile:
000-000-0000
c. Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate
as a
waiver thereof.
d. THIS
AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT
OF
LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK WITH RESPECT TO ANY
DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
OF
SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
UPON
A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING
HEREIN
SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH
SUIT
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
BY
SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES
NOT
PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE
FOR ALL
FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY
IN CONNECTION WITH SUCH DISPUTE.
16
e. In
the
event that any provision of this Agreement is invalid or unenforceable under
any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
f. This
Agreement, the Notes, the Warrants and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and
thereof.
g. Subject
to the requirements of Section 9 hereof, this Agreement shall be binding
upon
and inure to the benefit of the parties and their successors and
assigns.
h.
The
headings in this Agreement are for convenience of reference only and shall
not
form part of, or affect the interpretation of, this Agreement.
i. This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party
and
delivered to the other party. This Agreement, once executed by a party, may
be
delivered to the other party hereto by facsimile transmission of a copy of
this
Agreement bearing the signature of the party so delivering this
Agreement.
j. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
k. Except
as
otherwise provided herein, all consents and other determinations to be made
by
the Investors pursuant to this Agreement shall be made by Investors holding
a
majority of the Registrable Securities, determined as if the all of the Notes
then outstanding have been converted into for Registrable
Securities.
l.
The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to each Investor by vitiating the intent and purpose of
the
transactions contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions under this Agreement, that each Investor
shall
be entitled, in addition to all other available remedies in law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement
and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being
required.
17
m. The
language used in this Agreement will be deemed to be the language chosen
by the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
18
IN
WITNESS WHEREOF,
the
Company and the undersigned Initial Investors have caused this Agreement
to be
duly executed as of the date first above written.
| CLICKABLE ENTERPRISES, INC. | |||
|
Xxxxxxxx
Xxxxxxx
President
|
AJW
PARTNERS, LLC
By:
SMS
Group, LLC
|
Xxxxx
X. Xxxxxxxx
Manager
|
AJW
OFFSHORE, LTD.
By:
First
Street Manager II, LLC
|
Xxxxx
X. Xxxxxxxx
Manager
|
AJW
QUALIFIED PARTNERS, LLC
By:
AJW
Manager, LLC
|
Xxxxx
X. Xxxxxxxx
Manager
|
NEW
MILLENNIUM CAPITAL PARTNERS, II, LLC
By:
First
Street Manager II, LLC
|
Xxxxx
X. Xxxxxxxx
Manager
|
19
