NOTE PURCHASE AGREEMENT
NOTE
PURCHASE
AGREEMENT
THIS
NOTE
PURCHASE AGREEMENT (this “Agreement”)
is
made as of the ____ day of April, 2008, by and between Morlex, Inc. (the
“Company”),
a
corporation organized under the laws of the State of Colorado, and
______________ (the “Purchaser”).
IN
CONSIDERATION of the mutual covenants contained in this Agreement, the Company
and the Purchaser hereby agree as follows:
SECTION
1. Agreement
to Sell and Purchase Notes.
Subject
to the terms and conditions of this Agreement, and in reliance upon the
representations and warranties of each of the parties to each other, the Company
hereby agrees to sell and issue to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, Junior Convertible Unsecured Notes of
the
Company, substantially in the form attached hereto as Exhibit
A
(the
“Junior
Convertible Notes”),
in
the principal amount as set forth on the signature page to this Agreement (the
“Principal
Amount”).
SECTION
2. Payment
for and Delivery of Notes; Closing.
(a) The
purchase price for the Junior Convertible Notes (the “Purchase
Price”)
shall
be the Principal Amount thereof set forth on the signature page to this
Agreement. The Purchaser will pay the Purchase Price to the Company by cashier’s
check or wire transfer of immediately available funds, as directed by the
Company, at the Closing. Upon receipt by the Company of the Purchase Price,
the
Company shall deliver to the Purchaser the Junior Convertible Notes in the
Principal Amount.
(b)The
closing of the purchase and sale of the Junior Convertible Notes pursuant to
this Agreement (the “Closing”),
shall
occur on or before April [__], 2008, upon the satisfaction of the closing
conditions set forth in Article 5 below, at the offices of Xxxxx Xxxxxxx LLP,
000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 or at such other time and/or
location as the parties shall mutually agree.
SECTION
3. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchaser as follows:
3.1 Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado. The Company has the requisite corporate
power and authority to carry on its business as it is now being conducted and
is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease
or
the nature of its activities makes such qualification necessary, except for
any
failure to so license, qualify or be in such good standing, which, when taken
together with all other such failures, has not had and does not have a material
adverse effect on the Company.
3.2 Capitalization.
The
authorized capital stock of the Company consists of 1,000,000,000 shares of
common stock, par value $.001 per share (the “Company
Common Stock”).
As of
the date of this Agreement, the Company has 1,501,765 shares of Company Common
Stock issued and 1,280,160 shares of Company Common Stock outstanding, all
of
which have been duly authorized, validly issued, fully paid and non-assessable.
After giving effect to the Merger Transactions (as defined in
Section 5.1(d)), the Company will have 20,045,492 shares of Company Common
Stock issued and outstanding, all of which will have been duly authorized,
validly issued, fully paid and non-assessable. The Company Common Stock is
presently eligible for quotation and trading on the Over-the-Counter Bulletin
Board (the “OTCBB”)
in all
00 xxxxxx xx xxx Xxxxxx Xxxxxx and is not subject to any notice of suspension
or
delisting.
The
Company Common Stock is eligible for registration under the Securities Exchange
Act of 1934, as amended (the “Exchange
Act”).
All
of the issued and outstanding shares of Company Common Stock were issued in
compliance with all applicable laws including, without limitation, the
Securities Act of 1933, as amended (the “Securities
Act”),
the
Exchange Act and applicable “blue sky laws”. Except as set forth on Schedule
3.2
of the
Disclosure Schedule, there are no preemptive or other outstanding rights,
options, warrants, conversion rights (including pursuant to convertible
securities), stock appreciation rights, redemption rights, repurchase rights,
registration rights, agreements, arrangements, calls, commitments or rights
of
any kind relating to the issued or unissued capital stock of the Company or
obligating the Company to issue or sell any shares of capital stock of, or
other
equity interests in, the Company. As of the date of this Agreement, there are
no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or to provide
material funds to, or make any
material investment (in the form of a loan, capital contribution or otherwise)
in, any person.
3.3
Authority
Relative to this Agreement.
The
Company has all necessary power and authority to execute and deliver this
Agreement, the Junior Convertible Note and the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit
B
(the
“Registration
Rights Agreement”),
to
perform its obligations hereunder and to consummate the transactions
contemplated hereby to which it is a party. The execution and delivery of this
Agreement and the Junior Convertible Note by the Company, and the consummation
by the Company of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize
the
execution and delivery of this Agreement or the Junior Convertible Note or
to
consummate the transactions contemplated pursuant to this Agreement or the
Junior Convertible Note. This Agreement has been duly and validly executed
and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by the Purchaser, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms and, when executed by the Company at the closing, each of the Junior
Convertible Note and the Registration Rights Agreement will have been duly
and
validly executed and delivered by the Company, and will constitute a legal,
valid and binding obligation of the Company, enforceable against the Company
in
accordance with its terms, except, in each case, to the extent such
enforceability may be limited by (i) laws relating to specific performance,
injunctive relief or other equitable remedies and (ii) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors’ rights
generally.
3.4
No
Conflicts, Required Filings and Consents.
The
execution and delivery of this Agreement, the Junior Convertible Note and the
Registration Rights Agreement by the Company does not and will not, and the
performance of this Agreement, Junior Convertible Note and the Registration
Rights Agreement by the Company will not: (i) conflict with or violate the
articles of incorporation or by-laws of the Company, (ii) conflict with or
violate any laws applicable to the Company or by which any property or asset
of
the Company is bound or affected, or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become
a
default) under, or give to others any right of termination, amendment,
acceleration, or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company pursuant to, any contract
to
which the Company is a party or by which the Company or any property or asset
of
the Company is bound or affected.
3.5
SEC
Reports.
The
Company has filed with the Securities and Exchange Commission (the “SEC”)
all
forms, reports, schedules, registration statements and preliminary or definitive
proxy or information statements required to be filed by it with the SEC since
December 31, 2005 (such reports, the “Company
SEC Reports”).
As of
their respective dates, the Company SEC Reports complied as to form in all
material respects with the requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Company SEC Reports. As of their respective dates of filing,
all SEC Reports filed by the Company did 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, in light of the circumstances under
which they were made, not misleading. The Company has filed all material
contracts and agreements and other documents or instruments required to be
filed
as exhibits to the Company SEC Reports.
3.6
Compliance
with Laws.
Except
as
set forth in Schedule
3.6
of the
Disclosure Schedule: (a) the Company is in compliance in all material respects
with each law that is or was applicable to it or to the conduct or operation
of
its business or the ownership or use of any of its assets; and (b) the Company
has not received any notice or other communication (whether oral or written)
from any governmental entity or any other person regarding any actual, alleged,
possible, or potential violation of or failure on the part of the Company to
comply in all material respects with, any law. Except as set forth in
Schedule
3.6
of the
Disclosure Schedule, the Company holds and maintains in full force and effect
all material governmental authorizations required to conduct its business in
the
manner and in all such jurisdictions as it is currently conducted and to permit
it to own and use its properties and assets in the manner in which it currently
owns and uses such assets.
3.7
Litigation.
Except
as set forth on Schedule
3.7
of the
Disclosure Schedule, there is no suit, action or proceeding pending or, to
the
Company’s knowledge, threatened against the Company, nor is there any judgment,
decree, injunction or order of any governmental entity or arbitrator outstanding
against the Company.
3.8
Brokers.
No
agent, broker, finder, investment banker or other firm or person is or will
be
entitled to any broker’s or finder’s fee or other similar commission or fee in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company
3.9 Taxes.
The
Company has filed in a timely manner all federal, state and local tax returns
that it has been required to file, and has paid in a timely manner all taxes
shown thereon as owing. The Company has not incurred any tax liabilities except
in the ordinary course of business. The Company knows of no tax deficiency
or
claim for additional taxes asserted or threatened to be asserted against Company
by any taxing authority or any grounds for any such assessment.
3.10 Sole
Representations and Warranties.
Except
for the representations and warranties contained in this Section 3, the Company
makes no representation or warranty to the Purchaser, express or implied, in
connection with the transactions contemplated by this Agreement.
SECTION
4. Representations
and Warranties of the Purchaser.
The
Purchaser represents and warrants to the Company as follows:
4.1 Authority
Relative to this Agreement.
The
Purchaser has all necessary power and authority to execute and deliver this
Agreement to perform its obligations hereunder and to consummate the
transactions contemplated hereby to which it is a party. The execution and
delivery of this Agreement by the Purchaser, and the consummation by the
Purchaser of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Purchaser are necessary to authorize the execution and
delivery of this Agreement or to consummate the transactions contemplated by
this Agreement. This Agreement has been duly and validly executed and delivered
by the Purchaser and, assuming the due authorization, execution and delivery
hereof by the Company, constitutes a legal, valid and binding obligation of
the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except, in each case, to the extent such enforceability may be limited by (i)
laws relating to specific performance, injunctive relief or other equitable
remedies and (ii) applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting the enforcement
of
creditors’ rights generally.
4.2 No
Conflicts, Required Filings and Consents.
The
execution and delivery of this Agreement by the Purchaser does not and will
not,
and the performance of this Agreement by the Purchaser will not: (i) conflict
with or violate the articles of incorporation or by-laws of the Purchaser,
(ii)
conflict with or violate any laws applicable to the Purchaser or by which any
property or asset of the Purchaser is bound or affected, or (iii) result in
any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration, or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the
Purchaser pursuant to, any contract to which the Purchaser is a party or by
which the Purchaser or any property or asset of the Purchaser is bound or
affected.
4.3 No
Actions.
There
are no legal or governmental actions, suits or proceedings pending or, to the
Purchaser’s knowledge, threatened to which the Purchaser is or may be a party
which seeks to prevent or restrain the transactions contemplated hereby or
to
recover damages as a result of the consummation of such transactions. The
Purchaser has not been and is not currently the subject of an investigation
or
inquiry by the SEC, the Financial Industry Regulatory Authority or any state
securities commission.
4.4 Qualifications
of Purchaser.
The
Purchaser is knowledgeable, sophisticated and experienced in making, and is
qualified to make, decisions with respect to investments in securities
representing an investment decision like that involved in the purchase of the
Junior Convertible Notes and has the capacity to protect its own interests.
The
Purchaser is aware that an investment in the Junior Convertible Notes is highly
speculative and that there can be no assurance as to what return, if any, there
may be in such investment. At
the time the Purchaser was offered the Junior Convertible Notes, the Purchaser
was, and at the date hereof is, and on the date of the Closing will be, an
“accredited investor,” as defined in Regulation D under the Securities
Act.
4.5 Access
to Information.
The
Purchaser has requested, received, reviewed and considered all information
it
deems relevant in making an informed decision to invest in the Junior
Convertible Notes, including without limitation, all information with respect
to
the Merger Transactions. The Purchaser understands that the Company is still
in
the development stage and does not have operating revenues.
4.6 Investment
Intent.
The
Purchaser is acquiring the Junior Convertible Notes in the ordinary course
of
its business and for its own account for investment only and with no present
intention of reselling or distributing any of the Junior Convertible Notes,
any
interest in any of the Junior Convertible Notes or any shares of Company Common
Stock issuable upon conversion thereof, or entering into any arrangement or
understanding with any other person regarding such a resale or distribution.
The
Purchaser is able to bear the economic risks associated with the Purchaser’s
investment in the Junior Convertible Notes, including the potential loss of
the
Purchaser’s entire investment.
4.7 General
Solicitation.
The
Purchaser is not purchasing the Junior Convertible Notes as a result of any
advertisement, article, notice or other communication regarding the Junior
Convertible Notes published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
4.8 Sole
Representations and Warranties.
Except
for the representations and warranties contained in this Section 4, the
Purchaser makes no representation or warranty to the Company, express or
implied, in connection with the transactions contemplated by this
Agreement.
SECTION
5. Closing
Conditions.
5.1 Conditions
to the Obligations of the Company.
The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
(a)
the
accuracy in all material respects when made and on the Closing of the
representations
and
warranties of the Purchaser contained herein;
(b)
all
obligations, covenants and agreements of the Purchaser required to be performed
at or prior to the Closing shall have been performed;
(c)
the
simultaneous issuance and sale by the Company of junior convertible unsecured
notes in the principal amount, together with the Principal Amount of the Junior
Convertible Notes sold pursuant to this Agreement, of at least $1,000,000;
(d)
the
conditions to the consummation of the transactions contemplated pursuant to
that
certain (i) Agreement and Plan of Merger among the Company, RHI Merger Sub,
Inc., and Rightside Holdings, Inc., dated as of February 7, 2007, and (ii)
Agreement and Plan of Merger among the Company, DMG Merger Sub, Inc., and Xxxxxx
Media Group, Inc., dated as of February 7, 2007 (collectively, the “Merger
Transactions”),
shall
have been satisfied or waived, and the Merger Transactions shall have been
consummated immediately following the Closing; and
(e)
the
Purchaser shall have delivered the Purchase Price to the Company.
5.2
Conditions
to the Obligations of the Purchaser.
The
obligations of the Purchaser hereunder in connection with the Closing are
subject to the following conditions being met:
(a)
the
accuracy in all material respects on the Closing of the representations and
warranties of the Company contained herein;
(b)
all
obligations, covenants and agreements of the Company required to be performed
at
or prior to the Closing shall have been performed;
(c)
the
conditions to the consummation of the Merger Transactions shall have been
satisfied or waived, and the Merger Transactions shall have been consummated
immediately following the Closing;
(d)
the
Company and the Purchaser shall have entered into a Registration Rights
Agreement; and
(e)the
Company shall have executed and delivered Junior Convertible Notes in the
Principal Amount to the Purchaser.
SECTION
6. Covenants.
6.1 Resale
Restrictions. The
Purchaser acknowledges and understands that the Junior Convertible Notes and
the
shares of Company Common Stock issuable upon conversion of the Junior
Convertible Notes (the “Shares”
and,
together with the Junior Convertible Notes, the “Securities”)
are
"restricted securities" as defined in Rule 144 under the Securities Act and
that
a legend to such effect will be placed on the certificates representing any
of
the Securities. The Purchaser hereby agrees not to offer or sell (as such terms
are defined in the Securities Act and the rules and regulations promulgated
thereunder) any of the Securities unless such offer or sale is made (i) pursuant
to an effective registration under the Securities Act, or (ii) pursuant to
an
available exemption from the registration requirements of the Securities Act.
The Purchaser agrees that it will not engage in hedging transactions with regard
to the Security other than in compliance with the Securities Act. A proposed
transfer shall be deemed to comply with this Section 6.1 if the Purchaser
delivers to the Company a legal opinion in form and substance satisfactory
to
the Purchaser from counsel satisfactory to the Purchaser to the effect that
such
transfer complies with this Section 6.1.
6.3 Drag
Along Rights.
The
Purchaser agrees to be bound by drag-along rights whereby if a majority of
the
holders of the Company Common Stock agree to a merger, consolidation, sale
of a
majority of the shares of Company Common Stock or of all or substantially all
of
its assets, or liquidation of the Company, the Purchaser shall consent to and
raise no objections to any such transaction; provided that all shareholders
of
each class of the Company’s capital stock receive the same consideration per
share.
SECTION
7. Notices.
All
notices, requests, consents and other communications hereunder shall be in
writing, shall be mailed by first-class registered or certified mail, confirmed
facsimile or nationally recognized overnight express courier postage prepaid,
and shall be deemed given when so mailed and shall be delivered as addressed
as
follows:
| (a) |
if
to the Company, to:
|
Morlex,
Inc.
000
Xxxxxxxxx Xxxxxx
Xxxxx
000
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxx Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
with
a
copy to:
Xxxxx
Peabody LLP
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxx Xxxxx, Esq..
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
|
or
to such other person at such other place as the Company shall designate
to
the Purchaser in writing; and
|
|
(b)
|
if
to the Purchaser, to the address of the Purchaser set forth on the
signature page of this Agreement or to such other person at such
other
place as the Purchaser shall designate to the Company in
writing.
|
SECTION
8. Assignment.
Neither
party hereto may assign or delegate any of such party’s rights or obligations
under or in connection with this Agreement, and any attempted assignment or
delegation of such rights or obligations shall be void. No person, including
without limitation any person who purchases or otherwise acquires or receives
any Shares from the Purchaser, is an intended third party beneficiary of this
Agreement, and no party to this Agreement shall have any obligation arising
under this Agreement to any person other than the other party
hereto.
SECTION
9. Changes.
This
Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Purchaser.
SECTION
10 . Headings.
The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
SECTION
11. Severability.
In case
any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
SECTION
12. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York applicable to contracts executed within such state.
SECTION
13. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more counterparts
have been signed by each party hereto and delivered to the other
parties.
[Remainder
of Page Intentionally Blank]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
their duly authorized representatives as of the day and year first above
written.
|
Morlex,
Inc.
|
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|
By:
|
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|
Name:
|
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Title:
|
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Purchaser:
|
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|
By:
|
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Name:
|
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Title:
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Purchaser Address:
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Exhibit
A
Form
of
Junior Convertible Note
Exhibit
B
Form
of
Registration Rights Agreement
