Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July
28, 2006, by and among TELEPLUS ENTERPRISES, INC., a Nevada corporation (the
"Company"), and the Buyers listed on Schedule I attached hereto (individually, a
"Buyer" or collectively "Buyers").
WITNESSETH
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to Three Million Dollars
($3,000,000) of secured convertible debentures (the "Convertible Debentures"),
which shall be convertible into shares of the Company's common stock, par value
$0.001 (the "Common Stock") (as converted, the "Conversion Shares"), which shall
be funded on the fifth (5th) business day following the date hereof (the
"Closing"), for a total purchase price of up to Three Million Dollars
($3,000,000), (the "Purchase Price") in the respective amounts set forth
opposite each Buyer(s) name on Schedule I (the "Subscription Amount");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Investor
Registration Rights Agreement substantially in the form attached hereto as
Exhibit A (the "Investor Registration Rights Agreement") pursuant to which the
Company has agreed to provide certain registration rights under the Securities
Act and the rules and regulations promulgated there under, and applicable state
securities laws;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Second Amended and
Restated Security Agreement substantially in the form attached hereto as Exhibit
B (the "Security Agreement") pursuant to which the Company has agreed to provide
the Buyer a security interest in Pledged Collateral (as this term is defined in
the Security Agreement) to secure the Company's obligations under this
Agreement, the Convertible Debenture, the Investor Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions, the Security Agreement,
the Pledge and Escrow Agreement or any other obligations of the Company to the
Buyer;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Second Amended and
Restated Pledge and Escrow Agreement substantially in the form attached hereto
as Exhibit C (the "Pledge and Escrow Agreement") pursuant to which the Company
has agreed to provide the Buyer a security interest in the Pledged Shares (as
this term is defined in the Pledge and Escrow Agreement) to secure the Company's
obligations under this Agreement, the Convertible Debenture, the Investor
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions, the
Security Agreement, the Pledge and Escrow Agreement or any other obligations of
the Company to the Buyer;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Irrevocable
Transfer Agent Instructions substantially in the form attached hereto as Exhibit
D (the "Irrevocable Transfer Agent Instructions"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Second Amended and
Restated Security Agreement by and among the Company, the Buyer and TelePlus
Connect Corp., an Ontario corporation and a wholly owned subsidiary of the
Company (a "Subsidiary"), a Second Amended and Restated Security Agreement by
and among the Company, the Buyer and TelePlus Retail Services, a Quebec
corporation and a wholly owned subsidiary of the Company (a "Subsidiary") and a
Second Amended and Restated Security Agreement by and among the Company, the
Buyer and TelePlus Wireless Corp., a Nevada corporation and a wholly owned
subsidiary of the Company (a "Subsidiary"), substantially in the form attached
hereto as Exhibit E (collectively, the "Subsidiary Security Agreements")
pursuant to which the Company and the Subsidiary have agreed to provide the
Buyer a security interest in Pledged Collateral (as this term is defined in the
Subsidiary Security Agreements) to secure the Company's obligations under this
Agreement, the Convertible Debenture, the Investor Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions, the Security Agreement,
the Subsidiary Security Agreements, the Pledge and Escrow Agreement or any other
obligations of the Company to the Buyer.
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
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Purchase of Convertible Debentures. Subject to the satisfaction (or waiver) of
the terms and conditions of this Agreement, each Buyer agrees, severally and not
jointly, to purchase at the Closing and the Company agrees to sell and issue to
each Buyer, severally and not jointly, at the Closing, Convertible Debentures in
amounts corresponding with the Subscription Amount set forth opposite each
Buyer's name on Schedule I hereto.
Closing Date. The Closing of the purchase and sale of the Convertible Debentures
shall take place at 10:00 a.m. Eastern Standard Time within two (2) business day
following the date hereof, subject to notification of satisfaction of the
conditions to the Closing set forth herein and in Sections 6 and 7 below (or
such later date as is mutually agreed to by the Company and the Buyer(s)) (the
"Closing Date"). The Closing shall occur on the Closing Date at the offices of
Yorkville Advisors, LLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx
00000 (or such other place as is mutually agreed to by the Company and the
Buyer(s)).
Form of Payment. Subject to the satisfaction of the terms and conditions of this
Agreement, on the Closing Date, (i) the Buyers shall deliver to the Company such
aggregate proceeds for the Convertible Debentures to be issued and sold to such
Buyer(s), minus the fees to be paid directly from the proceeds of the Closing as
set forth herein, and (ii) the Company shall deliver to each Buyer, Convertible
Debentures which such Buyer(s) is purchasing in amounts indicated opposite such
Buyer's name on Schedule I, duly executed on behalf of the Company.
BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants, severally and not jointly, that:
Investment Purpose. Each Buyer is acquiring the Convertible Debentures and, upon
conversion of Convertible Debentures, the Buyer will acquire the Conversion
Shares then issuable, for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the Securities
Act; provided, however, that by making the representations herein, such Buyer
reserves the right to dispose of the Conversion Shares at any time in accordance
with or pursuant to an effective Registration Statement (the "Registration
Statement") covering such Conversion Shares or an available exemption under the
Securities Act.
Accredited Investor Status. Each Buyer is an "Accredited Investor" as that term
is defined in Rule 501(a)(3) of Regulation D.
2
Reliance on Exemptions. Each Buyer understands that the Convertible Debentures
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
Information. Each Buyer and its advisors (and his or, its counsel), if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and information he deemed material to making an
informed investment decision regarding his purchase of the Convertible
Debentures and the Conversion Shares, which have been requested by such Buyer.
Each Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer's right to
rely on the Company's representations and warranties contained in Section 3
below. Each Buyer understands that its investment in the Convertible Debentures
and the Conversion Shares involves a high degree of risk. Each Buyer is in a
position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such Buyer to
obtain information from the Company in order to evaluate the merits and risks of
this investment. Each Buyer has sought such accounting, legal and tax advice, as
it has considered necessary to make an informed investment decision with respect
to its acquisition of the Convertible Debentures and the Conversion Shares.
No Governmental Review. Each Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Convertible Debentures or the
Conversion Shares, or the fairness or suitability of the investment in the
Convertible Debentures or the Conversion Shares, nor have such authorities
passed upon or endorsed the merits of the offering of the Convertible Debentures
or the Conversion Shares.
Transfer or Resale. Each Buyer understands that except as provided in the
Investor Registration Rights Agreement: (i) the Convertible Debentures have not
been and are not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, or (B) such Buyer shall have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration
requirements; (ii) any sale of such securities made in reliance on Rule 144
under the Securities Act (or a successor rule thereto) ("Rule 144") may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of 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 Securities Act) may require
compliance with some other exemption under the Securities 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 Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder. The Company reserves the right to place stop transfer
instructions against the shares and certificates for the Conversion Shares.
Legends. Each Buyer understands that the certificates or other instruments
representing the Convertible Debentures and or the Conversion Shares shall bear
a restrictive legend in substantially the following form (and a stop transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
3
The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the Securities Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the Securities Act.
Authorization, Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of such Buyer and is a valid and binding
agreement of such Buyer enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
Receipt of Documents. Each Buyer and his or its counsel has received and read in
their entirety: (i) this Agreement and each representation, warranty and
covenant set forth herein, the Security Agreement, the Investor Registration
Rights Agreement, the Irrevocable Transfer Agent Agreement, and the Pledge and
Escrow Agreement; (ii) all due diligence and other information necessary to
verify the accuracy and completeness of such representations, warranties and
covenants; (iii) the Company's Form 10-KSB for the fiscal year ended December
31, 2005; (iv) the Company's Form 10-QSB for the fiscal quarter ended March 31,
2006 and (v) answers to all questions each Buyer submitted to the Company
regarding an investment in the Company; and each Buyer has relied on the
information contained therein and has not been furnished any other documents,
literature, memorandum or prospectus.
Due Formation of Corporate and Other Buyers. If the Buyer(s) is a corporation,
trust, partnership or other entity that is not an individual person, it has been
formed and validly exists and has not been organized for the specific purpose of
purchasing the Convertible Debentures and is not prohibited from doing so.
No Legal Advice From the Company. Each Buyer acknowledges, that it had the
opportunity to review this Agreement and the transactions contemplated by this
Agreement with his or its own legal counsel and investment and tax advisors.
Each Buyer is relying solely on such counsel and advisors and not on any
statements or representations of the Company or any of its representatives or
agents for legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that, except as
set forth in the SEC Documents (as defined herein):
Organization and Qualification. The Company and its subsidiaries are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.
4
Authorization, Enforcement, Compliance with Other Instruments. (i) The Company
has the requisite corporate power and authority to enter into and perform this
Agreement, the Security Agreement, the Subsidiary Security Agreements, the
Investor Registration Rights Agreement, the Irrevocable Transfer Agent
Agreement, the Pledge and Escrow Agreement, and any related agreements
(collectively the "Transaction Documents") and to issue the Convertible
Debentures and the Conversion Shares in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Convertible
Debentures the Conversion Shares and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion or exercise thereof,
have been duly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of Directors or
its stockholders, (iii) the Transaction Documents have been duly executed and
delivered by the Company, (iv) the Transaction Documents constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies. The
authorized officer of the Company executing the Transaction Documents knows of
no reason why the Company cannot file the registration statement as required
under the Investor Registration Rights Agreement or perform any of the Company's
other obligations under such documents.
Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of 600,000,000 shares of Common Stock, par value $0.001 per
share and 10,000,000 shares of Preferred Stock, $0.001 par value per share
("Preferred Stock"), of which 88,276,901 shares of Common Stock and 2,000,000
shares of Preferred Stock were issued and outstanding. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. Except as
disclosed in the SEC Documents (as defined in Section 3(f)), no shares of Common
Stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company. Except as disclosed in the
SEC Documents, as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the Securities Act (except pursuant to the Registration
Rights Agreement) and (iv) there are no outstanding registration statements and
there are no outstanding comment letters from the SEC or any other regulatory
agency. There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Convertible
Debentures as described in this Agreement. The Company has furnished to the
Buyer true and correct copies of the Company's Articles of Incorporation, as
amended and as in effect on the date hereof (the "Articles of Incorporation"),
and 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 and
the material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants.
Issuance of Securities. The Convertible Debentures are duly authorized and, upon
issuance in accordance with the terms hereof, shall be duly issued, fully paid
and nonassessable, are free from all taxes, liens and charges with respect to
the issue thereof. The Conversion Shares issuable upon conversion of the
Convertible Debentures have been duly authorized and reserved for issuance. Upon
conversion or exercise in accordance with the Convertible Debentures the
Conversion Shares will be duly issued, fully paid and nonassessable.
No Conflicts. Except as disclosed in the SEC Documents, the execution, delivery
and performance of the Transaction Documents by the Company and the consummation
by the Company of the transactions contemplated hereby will not (i) result in a
material violation of the Certificate of Incorporation, any certificate of
designations of any outstanding series of preferred stock of the Company or the
By-laws or (ii) conflict with or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of The National Association of
Securities Dealers Inc.'s OTC Bulletin Board on which the Common Stock is
quoted) 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 as disclosed in the SEC Documents, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Articles of
Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted, and shall not be conducted
in violation of any material law, ordinance, or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the Securities 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 or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. Except as disclosed in the SEC Documents, 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. The Company and its subsidiaries are unaware of any
facts or circumstance, which might give rise to any of the foregoing.
5
SEC Documents: Financial Statements. Since January 1, 2003, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC under of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (all of the foregoing filed prior to the date
hereof or amended after the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to as the "SEC Documents"). The
Company has delivered to the Buyers or their representatives, or made available
through the SEC's website at xxxx://xxx.xxx.xxx., true and complete copies of
the SEC Documents. As of their respective dates, the financial statements of the
Company disclosed in the SEC Documents (the "Financial Statements") complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such Financial Statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
10(b)-5. The SEC Documents do not include any untrue statements of material
fact, nor do they omit to state any material fact required to be stated therein
necessary to make the statements made, in light of the circumstances under which
they were made, not misleading.
Absence of Litigation. Except as disclosed in the SEC Documents and the
Disclosure Schedule (the "Disclosure Schedule") attached hereto as Exhibit G,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a material adverse effect on the transactions contemplated hereby (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operations of the Company and its
subsidiaries taken as a whole.
Acknowledgment Regarding Buyer's Purchase of the Convertible Debentures. The
Company acknowledges and agrees that the Buyer(s) is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Buyer(s) is not 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 advice given by the Buyer(s) or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer's purchase
of the Convertible Debentures or the Conversion Shares. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
has been based solely on the independent evaluation by the Company and its
representatives.
6
No General Solicitation. Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of the Convertible
Debentures or the Conversion Shares.
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 of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Convertible
Debentures or the Conversion Shares under the Securities Act or cause this
offering of the Convertible Debentures or the Conversion Shares to be integrated
with prior offerings by the Company for purposes of the Securities Act.
Employee Relations. Neither the Company nor any of its subsidiaries is involved
in any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.
Intellectual Property Rights. The Company and its subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now conducted. The
Company and its subsidiaries do not have any knowledge of any infringement by
the Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, and, to the
knowledge of the Company there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.
Environmental Laws. The Company and its subsidiaries are (i) in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval.
Title. 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 are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
Insurance. The Company and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its subsidiaries are engaged. Neither the
Company nor any such subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.
Regulatory Permits. The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
7
Internal Accounting Controls. The Company and each of its subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, and (iii)
the recorded amounts for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
No Material Adverse Breaches, etc. Except as set forth in the SEC Documents,
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 on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries. Except as set forth in the SEC Documents, neither
the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or is
expected to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
Tax Status. Except as set forth in the SEC Documents, the Company and each of
its subsidiaries has made and filed all federal and state income and all other
tax returns, reports and declarations required by any jurisdiction to which it
is subject and (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) 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 provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
Certain Transactions. Except as set forth in the SEC Documents, and except for
arm's length transactions pursuant to which the Company makes payments in the
ordinary course of business upon terms no less favorable than the Company could
obtain from third parties and other than the grant of stock options disclosed in
the SEC Documents, none of the officers, directors, or employees of the Company
is presently a party to any transaction with the Company (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.
Fees and Rights of First Refusal. The Company is not obligated to offer the
securities offered hereunder on a right of first refusal basis or otherwise to
any third parties including, but not limited to, current or former shareholders
of the Company, underwriters, brokers, agents or other third parties.
COVENANTS.
Best Efforts. Each party shall use its best efforts to timely satisfy each of
the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.
Form D. The Company agrees to file a Form D with respect to the Conversion
Shares 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 Conversion Shares, or obtain an exemption for the Conversion Shares
for sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date.
Reporting Status. Until the earlier of (i) the date as of which the Buyer(s) may
sell all of the Conversion Shares without restriction pursuant to Rule 144(k)
promulgated under the Securities Act (or successor thereto), or (ii) the date on
which (A) the Buyer(s) shall have sold all the Conversion Shares and (B) none of
the Convertible Debentures are outstanding (the "Registration Period"), the
Company shall file in a timely manner all reports required to be filed with the
SEC pursuant to the Exchange Act and the regulations of the SEC thereunder, and
the Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination.
8
Use of Proceeds. The Company will use the proceeds from the sale of the
Convertible Debentures for general corporate and working capital purposes.
Reservation of Shares. The Company shall take all action reasonably necessary to
at all times have authorized, and reserved for the purpose of issuance, such
number of shares of Common Stock as shall be necessary to effect the issuance of
the Conversion Shares. If at any time the Company does not have available such
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Conversion Shares, the Company shall call and hold a
special meeting of the shareholders within thirty (30) days of such occurrence,
for the sole purpose of increasing the number of shares authorized. The
Company's management shall recommend to the shareholders to vote in favor of
increasing the number of shares of Common Stock authorized. Management shall
also vote all of its shares in favor of increasing the number of authorized
shares of Common Stock.
Listings or Quotation. The Company shall promptly secure the listing or
quotation of the Conversion Shares upon each national securities exchange,
automated quotation system or The National Association of Securities Dealers
Inc.'s Over-The-Counter Bulletin Board ("OTCBB") or other market, if any, upon
which shares of Common Stock are then listed or quoted (subject to official
notice of issuance) and shall use its best efforts to maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares from time to time issuable under the terms of this Agreement. The Company
shall maintain the Common Stock's authorization for quotation on the OTCBB.
Fees and Expenses.
------------------
Each of the Company and the Buyer(s) shall pay all costs and expenses incurred
by such party in connection with the negotiation, investigation, preparation,
execution and delivery of the Transaction Documents. The Company shall pay
Yorkville Advisors LLC a fee equal to Three Hundred Seventy Five Thousand
Dollars ($375,000) of the Purchase Price which shall be paid pro rata directly
from the gross proceeds of the Closing.
The Company shall pay a structuring fee to Yorkville Advisors Management, LLC of
Twenty Five Thousand Dollars ($25,000), which shall be paid directly from the
proceeds of the Closing.
Warrants. Upon the execution of this Agreement, the Company issue to the
Investor warrants (the "Warrants") to purchase in the aggregate Thirty Million
(30,000,000) shares of the Company's Common Stock as follows: (A) a warrant to
purchase Five Million (5,000,000) shares of the Company's Common Stock for a
period of four (4) years at an exercise price of $0.11 per share; (B) a warrant
to purchase Ten Million (10,000,000) shares of the Company's Common Stock for a
period of four (4) years at an exercise price of $0.15 per share; (C) a warrant
to purchase Ten Million (10,000,000) shares of the Company's Common Stock for a
period of four (4) years at an exercise price of $0.13 per share; and (D) a
warrant to purchase Five Million (5,000,000) shares of the Company's Common
Stock for a period of four (4) years at an exercise price of $0.18 per share
(the shares of Common Stock underlying the above Warrants shall collectively be
referred to as the "Warrant Shares"). The Warrant Shares shall have "piggy-back"
and demand registration rights.
Upon the execution of this Agreement, the Company shall issue to the Buyer Four
Hundred Thousand (400,000) shares of the Company's Common Stock (the "Commitment
Shares"). The Commitment Shares shall be deemed fully earned on the date hereof
and shall have "piggy-back" and demand registration rights.
Corporate Existence. So long as any of the Convertible Debentures remain
outstanding, the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, reverse stock split consolidation, sale of all or
substantially all of the Company's assets or any similar transaction or related
transactions (each such transaction, an "Organizational Change") unless, prior
to the consummation an Organizational Change, the Company obtains the written
consent of each Buyer. In any such case, the Company will make appropriate
provision with respect to such holders' rights and interests to insure that the
provisions of this Section 4(h) will thereafter be applicable to the Convertible
Debentures.
9
Transactions With Affiliates. So long as any Convertible Debentures are
outstanding, the Company shall not, and shall cause each of its subsidiaries not
to, enter into, amend, modify or supplement, or permit any subsidiary to enter
into, amend, modify or supplement any agreement, transaction, commitment, or
arrangement with any of its or any subsidiary's officers, directors, person who
were officers or directors at any time during the previous two (2) years,
stockholders who beneficially own five percent (5%) or more of the Common Stock,
or Affiliates (as defined below) or with any individual related by blood,
marriage, or adoption to any such individual or with any entity in which any
such entity or individual owns a five percent (5%) or more beneficial interest
(each a "Related Party"), except for (a) customary employment arrangements and
benefit programs on reasonable terms, (b) any investment in an Affiliate of the
Company, (c) any agreement, transaction, commitment, or arrangement on an
arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, (d) any agreement,
transaction, commitment, or arrangement which is approved by a majority of the
disinterested directors of the Company; for purposes hereof, any director who is
also an officer of the Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a ten percent (10%) or more equity interest in that person or entity,
(ii) has ten percent (10%) or more common ownership with that person or entity,
(iii) controls that person or entity, or (iv) shares common control with that
person or entity. "Control" or "controls" for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
Transfer Agent. The Company covenants and agrees that, in the event that the
Company's agency relationship with the transfer agent should be terminated for
any reason prior to a date which is two (2) years after the Closing Date, the
Company shall immediately appoint a new transfer agent and shall require that
the new transfer agent execute and agree to be bound by the terms of the
Irrevocable Transfer Agent Instructions (as defined herein).
Restriction on Issuance of the Capital Stock. So long as any Convertible
Debentures are outstanding, the Company shall not, without the prior written
consent of the Buyer(s) which shall not be unreasonably withheld, (i) issue or
sell shares of Common Stock or Preferred Stock without or without consideration
(ii) issue any warrant, option, right, contract, call, or other security
instrument granting the holder thereof, the right to acquire Common Stock with
or without consideration, (iii) enter into any security instrument granting the
holder a security interest in any and all assets of the Company except as
otherwise provided in the Security Agreement of even date between the Company
and the Buyers, or (iv) file any registration statement on Form S-8, except for
a registration statement on Form S-8 registering up to Two Million (2,000,000)
shares of Common Stock under an Employee Stock Option Plan. The foregoing
restriction shall exclude options granted and outstanding before July 15, 2005
under the Company's bona fide Employee Stock Option Plan, and any options,
warrants or other securities convertible or exchangeable into shares of Common
Stock of the Company (as outlined in the Disclosure Schedule) that were granted
and outstanding prior to July 15, 2005. In addition, the foregoing restriction
shall exclude the issuance of restricted shares of Common Stock of the Company
in connection with an acquisition of another business or equity financing up to
Two Million (2,000,000) shares of Common Stock in the aggregate.
Neither the Buyer(s) nor any of its affiliates have an open short position in
the Common Stock of the Company, and the Buyer(s) agrees that it shall not, and
that it will cause its affiliates not to, engage in any short sales of or
hedging transactions with respect to the Common Stock as long as any Convertible
Debenture or warrants to purchase the Warrant Shares shall remain outstanding.
Rights of First Refusal. So long as any portion of Convertible Debentures are
outstanding, if the Company intends to raise additional capital by the issuance
or sale of capital stock of the Company, including without limitation shares of
any class of common stock, any class of preferred stock, options, warrants or
any other securities convertible or exercisable into shares of common stock
(whether the offering is conducted by the Company, underwriter, placement agent
or any third party) the Company shall be obligated to offer to the Buyers such
issuance or sale of capital stock, by providing in writing the principal amount
of capital it intends to raise and outline of the material terms of such capital
raise, prior to the offering such issuance or sale of capital stock to any third
parties including, but not limited to, current or former officers or directors,
current or former shareholders and/or investors of the obligor, underwriters,
brokers, agents or other third parties. The Buyers shall have ten (10) business
days from receipt of such notice of the sale or issuance of capital stock to
accept or reject such capital raising offer. The Buyer's acceptance shall be
made in writing and shall be on the same terms as the issuance or sale presented
by the Company to the Buyer.
10
TRANSFER AGENT INSTRUCTIONS.
----------------------------
The Company shall issue the Irrevocable Transfer Agent Instructions to its
transfer agent irrevocably appointing Xxxxx Xxxxxxxx, Esq. as the Company's
agent for purpose of having certificates issued, registered in the name of the
Buyer(s) or its respective nominee(s), for the Conversion Shares representing
such amounts of Convertible Debentures as specified from time to time by the
Buyer(s) to the Company upon conversion of the Convertible Debentures, for
interest owed pursuant to the Convertible Debenture, and for any and all
Liquidated Damages (as this term is defined in the Investor Registration Rights
Agreement). Xxxxx Xxxxxxxx, Esq. shall be paid a cash fee of Fifty Dollars ($50)
for every occasion they act pursuant to the Irrevocable Transfer Agent
Instructions. The Company shall not change its transfer agent without the
express written consent of the Buyer(s), which may be withheld by the Buyer(s)
in its sole discretion. Prior to registration of the Conversion Shares under the
Securities Act, 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(g)
hereof (in the case of the Conversion Shares prior to registration of such
shares under the Securities Act) will be given by the Company to its transfer
agent and that the Conversion Shares shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement and the Investor Registration Rights Agreement. Nothing in this
Section 5 shall affect in any way the Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of Conversion Shares. If
the Buyer(s) provides the Company with an opinion of counsel, in form, scope and
substance customary for opinions of counsel in comparable transactions to the
effect that registration of a resale by the Buyer(s) of any of the Conversion
Shares is not required under the Securities Act, the Company shall within two
(2) business days instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by the Buyer. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyer 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 Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyer(s) shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
-----------------------------------------------
The obligation of the Company hereunder to issue and sell the Convertible
Debentures to the Buyer(s) at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
Each Buyer shall have executed the Transaction Documents and delivered them to
the Company.
The Buyer(s) shall have delivered to the Escrow Agent the Purchase Price for
Convertible Debentures in respective amounts as set forth next to each Buyer as
outlined on Schedule I attached hereto and the Escrow Agent shall have delivered
the net proceeds to the Company by wire transfer of immediately available U.S.
funds pursuant to the wire instructions provided by the Company.
The representations and warranties of the Buyer(s) 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 Buyer(s) 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
Buyer(s) at or prior to the Closing Date.
11
CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
The obligation of the Buyer(s) hereunder to Purchase the Convertible Debentures
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions:
The Company shall have executed the Transaction Documents and delivered the same
to the Buyer(s).
The Common Stock shall be authorized for quotation on the OTCBB, trading in the
Common Stock shall not have been suspended for any reason, and all the
Conversion Shares issuable upon the conversion of the Convertible Debentures
shall be approved by the OTCBB.
The representations and warranties of the Company shall be true and correct in
all material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all 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. If requested by the Buyer, the Buyer
shall have received a certificate, executed by the President 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 the Buyer including, without
limitation an update as of the Closing Date regarding the representation
contained in Section 3(c) above.
The Company shall have executed and delivered to the Buyer(s) the Convertible
Debentures in the respective amounts set forth opposite each Buyer(s) name on
Schedule I attached hereto.
The Buyer(s) shall have received an opinion of counsel from Xxxxxxxxxxx &
Xxxxxxxx Xxxxxxxxx Xxxxxx LLP in a form satisfactory to the Buyer(s).
The Company shall have provided to the Buyer(s) a certificate of good standing
from the secretary of state from the state in which the company is incorporated.
The Company shall have delivered to the Escrow Agent the Pledged Shares as well
executed and medallion guaranteed stock bond powers as required pursuant to the
Pledge and Escrow Agreement.
The Company shall have provided to the Buyer an acknowledgement, to the
satisfaction of the Buyer, from the Company's independent certified public
accountants as to its ability to provide all consents required in order to file
a registration statement in connection with this transaction.
The Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Convertible
Debentures, shares of Common Stock to effect the conversion of all of the
Conversion Shares then outstanding.
The Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to the Buyer, shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
INDEMNIFICATION.
----------------
In consideration of the Buyer's execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder, and in
addition to all of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and each
other holder of the Convertible Debentures and the Conversion Shares, and all of
their officers, directors, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Buyer Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Buyer Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"), incurred by the Buyer
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Convertible Debentures or the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, or the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the parties
hereto, any transaction financed or to be financed in whole or in part, directly
or indirectly, with the proceeds of the issuance of the Convertible Debentures
or the status of the Buyer or holder of the Convertible Debentures the
Conversion Shares, as a Buyer of Convertible Debentures in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
12
In consideration of the Company's execution and delivery of this Agreement, and
in addition to all of the Buyer's other obligations under this Agreement, the
Buyer shall defend, protect, indemnify and hold harmless the Company and all of
its officers, directors, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Company Indemnitees") from and against any and
all Indemnified Liabilities incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Buyer(s) in this Agreement,
instrument or document contemplated hereby or thereby executed by the Buyer, (b)
any breach of any covenant, agreement or obligation of the Buyer(s) contained in
this Agreement, the Investor Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby executed by
the Buyer, or (c) any cause of action, suit or claim brought or made against
such Company Indemnitee based on material misrepresentations or due to a
material breach and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement, the Investor Registration Rights
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the parties hereto. To the extent that the foregoing
undertaking by each Buyer may be unenforceable for any reason, each Buyer shall
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities, which is permissible under applicable law.
GOVERNING LAW: MISCELLANEOUS.
-----------------------------
Governing Law. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New Jersey without regard to the principles of
conflict of laws. The parties further agree that any action between them shall
be heard in Xxxxxx County, New Jersey, and expressly consent to the jurisdiction
and venue of the Superior Court of New Jersey, sitting in Xxxxxx County and the
United States District Court for the District of New Jersey sitting in Newark,
New Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.
Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
(4) additional original executed signature pages to be physically delivered to
the other party within five (5) days of the execution and delivery hereof.
Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
Entire Agreement, Amendments. This Agreement supersedes all other prior oral or
written agreements between the Buyer(s), the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
13
Notices. Any notices, consents, waivers, or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon confirmation of receipt, when sent by facsimile; (iii)
three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company, to: Teleplus Enterprises, Inc.
0000 XxxxxXxxxxx - Xxxxx 000
Xx-Xxxxxxx, Xxxxxx X0X 0X0
Attention: Marius Silvasan, CEO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
000 X. Xxxxxxxx Xxxx. - Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective 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 party hereto.
No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.
Survival. Unless this Agreement is terminated under Section 9(l), the
representations and warranties of the Company and the Buyer(s) contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive the
Closing for a period of two (2) years following the date on which the
Convertible Debentures are converted in full. The Buyer(s) shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
Publicity. The Company and the Buyer(s) shall have the right to approve, before
issuance any press release or any other public statement with respect to the
transactions contemplated hereby made by any party; provided, however, that the
Company shall be entitled, without the prior approval of the Buyer(s), to issue
any press release or other public disclosure with respect to such transactions
required under applicable securities or other laws or regulations (the Company
shall use its best efforts to consult the Buyer(s) in connection with any such
press release or other public disclosure prior to its release and Buyer(s) shall
be provided with a copy thereof upon release thereof).
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.
14
Termination. In the event that the Closing shall not have occurred with respect
to the Buyers on or before five (5) business days from the date hereof due to
the Company's or the Buyer's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the non-breaching party's failure to waive such
unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, that if this Agreement is terminated by the Company pursuant
to this Section 9(l), the Company shall remain obligated to reimburse the
Buyer(s) for the fees and expenses of Yorkville Advisors Management, LLC
described in Section 4(g) above.
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.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
TELEPLUS ENTERPRISES, INC.
By: /s/ Marius Silvasan
-------------------------------
Name: Marius Silvasan
Title: CEO
16
EXHIBIT A
FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT
----------------------------------------------
17
EXHIBIT B
SECURITY AGREEMENT
------------------
18
EXHIBIT C
PLEDGE AND ESCROW AGREEMENT
---------------------------
19
EXHIBIT D
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
---------------------------------------
20
EXHIBIT E
SUBSIDIARY SECURITY AGREEMENTS
------------------------------
21
EXHIBIT F
DISCLOSURE SCHEDULE
-------------------
(i) SECURITIES: The Company has the following securities outstanding or
convertible into securities of the Company:
XXXXX XXXXXXX: options to purchase: (i) 100,000 shares at an exercise
price of USD$0.21 that vest on September 29, 2005; (ii) 100,000 shares at
an exercise price of USD$0.22 that vest on April 1, 2007; (iii) 100,000
shares at an exercise price of USD$0.23 that vest on April 1, 2008; (iv)
100,000 shares at an exercise price of USD$0.24 that vest on April 1,
2009; and (v) 100,000 shares at an exercise price of USD$0.25 that vest on
April 1, 2010. 200,000 shares at an exercise price of USD$0.36 that vest
the 29 of September 2005; 200,000 shares at an exercise price of USD$0.38
that vest the 29 of September 2006; 200,000 shares at an exercise price of
USD$0.40 that vest the 29 September 2007; 200,000 shares at an exercise
price of USD$0.45 that vest 29 September 2008; 200,000 shares at an
exercise price of USD$0.50 that vest 29 September 2009
XXXXXX XXXXX: options to purchase: (i) 70,000 shares at an exercise price
of USD$0.21 that vest on September 1, 2005; (ii) 75,000 shares at an
exercise price of USD$0.22 that vest on June 1, 2006; and (iii) 100,000
shares at an exercise price of USD$0.23 that vest on December 1, 2007.
140,000 shares at an exercise price of USD$0.36 that vest the 1of December
2004; 150,000 shares at an exercise price of USD$0.38 that vest the 1 of
December 2005; 200,000 shares at an exercise price of USD$0.40 that vest 1
June 2007
MARIUS SILVASAN: options to purchase: (i) 750,000 shares at an exercise
price of USD $0.21 that vest on September 1, 2005; (ii) 1,000,000 shares
at an exercise price of USD $0.22 that vest on December 1, 2005; and (iii)
1,250,000 shares at an exercise price of USD $0.23 that vest on December
1, 2006. 1,500,000 shares at an exercise price of $0.36 that vest the 3 of
December 2004; 2,000,000 shares at an exercise price of $0.38 that vest
the 3 of June 2005; 2,500,000 shares at an exercise price of $0.40 that
vest the 3 of June 2006
XXXXXXX XXXXXXXXX: an option to purchase 50,000 shares at an exercise
price of USD$0.21 that vest on December 1, 2005.
XXXXX XXXXXXXX: an option to purchase 50,000 shares at an exercise price
of USD$0.21 that vest on December 1, 2005; and
XXX XXXXX: options to purchase: (i) 150,000 shares at an exercise price of
USD$0.21 that vest on May 1st, 2006; (ii) 150,000 shares at an exercise
price of USD$0.22 that vest on November 1, 2006; (iii) 150,000 shares at
an exercise price of USD$0.23 that vest on May 1, 2007; and (iv) 150,000
shares at an exercise price of USD$0.24 that vest on November 1, 2007.
XXXXXX XXXXXXXX: options to purchase: (a) 62,500 shares at an exercise
price of USD$0.20 that vest on January 1st, 2007; (b) 62,500 shares at an
exercise price of USD$0.21 that vest on July 1, 2007; (c) 62,500 shares at
an exercise price of USD$0.22 that vest on January 1, 2008; and (d) 62,500
shares at an exercise price of USD$0.23 that vest on July 1, 2008.
22
XXXX XXXXXX: options to purchase: 3,000,000 shares at an exercise price of
USD$0.225 that vest on May 18th, 2006
XXXXX XXXXX: options to purchase: (i) 30,000 shares at an exercise price
of USD$0.20 that vest on January 1st, 2007; (ii) 30,000 shares at an
exercise price of USD$0.21 that vest on July 1, 2007; (iii) 30,000 shares
at an exercise price of USD$0.22 that vest on January 1, 2008; and (iv)
30,000 shares at an exercise price of USD$0.23 that vest on July 1, 2008.
- Options expire three years after vesting date.
(ii) LITIGATION: The Company has the following pending litigation:
This action was brought by Xxxxxx Xxxxxxx d/b/a "Salamon Brothers",
seeking the sum of $200,000 as a finder's fee for introducing TelePlus
Enterprises, Inc. (TelePlus) to a source of capital. Xxxxxxx claims 10% of the
total amount of financing received from Cornell Capital Partners, LP. TelePlus
has answered the Complaint and alleged several affirmative defenses including
the illegality of the alleged "finder's fee agreement" on the grounds that
Xxxxxxx is not a registered broker/dealer with either the NASD or SEC and under
well settled law cannot therefore enforce the finder's fee agreement. Cornell
has moved to intervene in the action and opposes Xxxxxxx'x claim asserting
tortuous interference with a contract as well as seeking a declaratory judgment.
Xxxxxxx has made a motion for an attachment of Cornell's funds which has been
opposed by both Cornell and TelePlus and is on for a hearing before Judge Walls
in Newark Federal District Court on July 25, 2005.
TelePlus entered into a consulting agreement with Business Consulting
Group Unlimited ("BCGU") pursuant to which BCGU was to provide certain
consulting services to TelePlus. TelePlus filed a lawsuit in federal District
Court in Las Vegas, Nevada against BCGU alleging that BCGU was in default under
the consulting agreement for failing to perform the services required of it
under the agreement. In response, BCGU filed a separate lawsuit in state court
in San Diego California against TelePlus for payment of amounts allegedly due to
BCGU under the agreement. It is TelePlus' position that no payments are owed to
BCGU due to BCGU's default under the agreement.
23
SCHEDULE I
----------
SCHEDULE OF BUYERS
------------------
ADDRESS/FACSIMILE AMOUNT OF
NAME SIGNATURE NUMBER OF BUYER SUBSCRIPTION
---------------------------- ---------------------------- ------------------------------ ------------
Cornell Capital Partners, LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000 $ 3,000,000
Its: General Partner Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
By:
------------------------
Name: Xxxx Xxxxxx
Its: Portfolio Manager
With a copy to: Xxxxx Xxxxxxxx, Esq. 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
24
