PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 13th day
of January, 2006 by and among UTIX Group, Inc., a Delaware corporation (the
"Company"), and the Investors set forth on the signature pages affixed hereto
(each an "Investor" and collectively the "Investors").
RECITALS
A. The Company and the Investors are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions 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; and
B. The Investors wish to purchase from the Company, and the
Company wishes to sell and issue to the Investors, upon the terms and conditions
stated in this Agreement, (i) an aggregate of 1,093 shares of the Company's
Series A Convertible Preferred Stock, par value $0.001 per share (the "Preferred
Stock"), such shares of Preferred Stock to have the relative rights, preferences
and designations set forth in the Certificate of Designations set forth in
EXHIBIT A hereto (the "Certificate of Designations"), at a purchase price of
$5,000 per share (the "Per Share Purchase Price"), and (ii) warrants to purchase
an aggregate of 68,312,500 shares of Common Stock (subject to adjustment) at an
exercise price of $0.04 per share (subject to adjustment) in the form attached
hereto as EXHIBIT B; and
C. Contemporaneous with the sale of the Shares and the
Warrants, the parties hereto will execute and deliver a Registration Rights
Agreement, in the form attached hereto as EXHIBIT C (the "Registration Rights
Agreement"), pursuant to which the Company will agree to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder, and applicable state securities laws.
In consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the following
terms shall have the meanings set forth below:
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly through one or more intermediaries Controls, is
controlled by, or is under common control with, such Person.
"AMENDMENT" means an amendment to the Company's Amended and
Restated Certificate of Incorporation increasing the number of shares of Common
Stock the Company is authorized to issue to 375,000,000.
"BUSINESS DAY" means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction of business.
"COMMON STOCK" means the Company's common stock, par value $0.001
per share, and any securities into which the common stock may be reclassified.
"COMPANY'S KNOWLEDGE" means the actual knowledge of the executive
officers (as defined in Rule 405 under the 0000 Xxx) of the Company, after due
inquiry.
"CONFIDENTIAL INFORMATION" means trade secrets, confidential
information and know-how (including but not limited to ideas, formulae,
compositions, processes, procedures and techniques, research and development
information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).
"CONTROL" (including the terms "controlling", "controlled by" or
"under common control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"CONVERSION SHARES" means the shares of Common Stock issuable upon
the conversion of the Shares.
"EFFECTIVE DATE" means the date on which the initial Registration
Statement is declared effective by the SEC.
"EFFECTIVENESS DEADLINE" means the date on which the initial
Registration Statement is required to be declared effective by the SEC under the
terms of the Registration Rights Agreement.
"INTELLECTUAL PROPERTY" means all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i)
the assets, liabilities, results of operations, condition (financial or
otherwise), business, or prospects of the Company and its Subsidiaries taken as
a whole, or (ii) the ability of the Company to perform its obligations under the
Transaction Documents.
"PERSON" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship,
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unincorporated organization, governmental authority or any other form of entity
not specifically listed herein.
"PROPOSALS" has the meaning set forth in Section 7.9.
"PURCHASE PRICE" means Five Million Four Hundred Sixty-Five
Thousand Dollars ($5,465,000).
"RECAPITALIZATION" shall mean all of the following actions:
(i) the conversion or exchange of the Company's
$5,000,000 in aggregate principal amount of indebtedness ("Company Debt") into
(A) an aggregate of 145,000,000 shares of Common Stock and (B) five-year
warrants to acquire an aggregate of 31,250,000 shares of Common Stock at an
exercise price of $0.04 per share and containing terms no more favorable to the
holder than the Warrants:
(ii) the conversion or exchange of warrants issued to the
holders of the Company Debt and exercisable for an aggregate of 30,300,000
shares of Common Stock (the "Debt Warrants") into five-year warrants to acquire
an aggregate of 15,150,000 shares of Common Stock at an exercise price of $0.04
per share and containing terms no more favorable to the holder than the
Warrants; and
(iii) the creation (subject to stockholder approval) of an
option plan (the "Plan") for the benefit of the management of the Company which,
together with any options that may be granted under the Company's existing
option plans, shall cover an aggregate of 75,000,000 shares of Common Stock.
"REGISTRATION STATEMENT" has the meaning set forth in the
Registration Rights Agreement.
"REVERSE SPLIT" means a one-for-100 reverse split of the Common
Stock that does not alter the number of shares of Common Stock the Company is
authorized to issue.
"SEC FILINGS" has the meaning set forth in Section 4.6.
"SECURITIES" means the Shares, the Conversion Shares, the Warrants
and the Warrant Shares.
"SHARES" means the shares of Preferred Stock to be purchased
hereunder, including any Option Shares purchased pursuant to Section 2(b)
hereof.
"SUBSIDIARY" of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person.
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"TRANSACTION DOCUMENTS" means this Agreement, the Certificate of
Designations, the Warrants, the Registration Rights Agreement and the Voting
Agreement.
"VOTING AGREEMENTS" means the voting agreements among the Company,
the Investors and the stockholders listed in SCHEDULE 6.1(f) attached hereto, in
the form attached hereto as EXHIBIT D.
"WARRANTS" means the warrants to be purchased hereunder, including
any Option Warrants purchased pursuant to Section 3(b) hereof.
"WARRANT SHARES" means the shares of Common Stock issuable upon
the exercise of the Warrants.
"1933 ACT" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
"1934 ACT" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
2. PURCHASE AND SALE OF THE SHARES AND WARRANTS.
(a) Subject to the terms and conditions of this Agreement, on
the Closing Date, each of the Investors shall severally, and not jointly,
purchase, and the Company shall sell and issue to the Investors, the Shares and
the Warrants in the respective amounts set forth opposite the Investors' names
on the signature pages attached hereto in exchange for each Investor's pro rata
share of the Purchase Price as specified in Section 3(a) below.
(b) Subject to the terms and conditions of this Agreement,
Special Situations Fund III, L.P. ("SSF") and the other Investors affiliated
with SSF (the "SSF Investors") shall have the right, allocable among the SSF
Investors as they may determine in their sole discretion (the "SSF Option"),
exercisable at any time, and from time to time, in whole or in part, on or prior
to 5:00 p.m., New York time, on the first anniversary of the Closing Date (the
"Expiration Time") to acquire for the Per Share Purchase Price up to $2,000,000
in additional shares of Preferred Stock (the "Option Shares") and Warrants (the
"Option Warrants") having the same terms and conditions as the Shares and
Warrants issued on the Closing Date, subject to adjustment to give effect to the
Reverse Split in the event that the Reverse Split has occurred prior thereto. In
the event that SSF Investors wish to exercise the SSF Option, SSF, on behalf of
all participating SSF Investors, shall give written notice (the "Exercise
Notice") of such exercise to the Company at or prior to the Expiration Time.
Such Exercise Notice shall specify the aggregate number of Option Shares and
Option Warrants being purchased by each participating SSF Investor and the total
amount being invested (the "Option Purchase Price").
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3. CLOSING.
(a) Upon confirmation that the other conditions to closing
specified herein have been satisfied or duly waived by the Investors, the
Company shall file the Certificate of Designations with the Secretary of State
of Delaware. Unless and Investor has made alternative arrangements with the
Company, upon confirmation that the Certificate of Designations has been filed
and has become effective, the Company shall deliver to Xxxxxxxxxx Xxxxxxx PC, in
trust, a certificate or certificates, registered in such name or names as the
Investors may designate, representing the Shares and the Warrants, with
instructions that such certificates are to be held for release to the Investors
only upon payment in full of the Purchase Price to the Company by all the
Investors. Upon such receipt by Xxxxxxxxxx Xxxxxxx PC of the certificates, each
Investor shall promptly, but no more than one Business Day thereafter, cause a
wire transfer in same day funds to be sent to the account of the Company as
instructed in writing by the Company, in an amount representing such Investor's
pro rata portion of the Purchase Price as set forth on the signature pages to
this Agreement. On the date (the "Closing Date") the Company receives the
Purchase Price, the certificates evidencing the Shares and the Warrants shall be
released to the Investors (the "Closing"). The Closing shall take place at the
offices of Xxxxxxxxxx Xxxxxxx PC, 1251 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, or at such other location and on such other date as the
Company and the Investors shall mutually agree.
(b) Upon any exercise of the SSF Option, the Company shall
deliver to Xxxxxxxxxx Xxxxxxx PC, in trust, a certificate or certificates,
registered in such name or names as the participating SSF Investors may
designate, representing the Option Shares and the Option Warrants, with
instructions that such certificates are to be held for release to the
participating SSF Investors only upon payment in full of the Option Purchase
Price to the Company by all the participating SSF Investors. Upon such receipt
by Xxxxxxxxxx Xxxxxxx PC of the certificates, each participating SSF Investor
shall promptly, but no more than one Business Day thereafter, cause a wire
transfer in same day funds to be sent to the account of the Company as
instructed in writing by the Company, in an amount representing such Investor's
pro rata portion of the Option Purchase Price as set forth in the Exercise
Notice. On the date (the "Option Closing Date") the Company receives the Option
Purchase Price, the certificates evidencing the Option Shares and the Option
Warrants being purchased shall be released to the participating SSF Investors
(each, an "Option Closing"). Each Option Closing shall take place at the offices
of Xxxxxxxxxx Xxxxxxx PC, 1251 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or at such other location and on such other date as the Company and
the participating SSF Investors shall mutually agree.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedules"):
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as now
conducted and to own its properties. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not
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had and could not reasonably be expected to have a Material Adverse Effect. The
Company's Subsidiaries are listed on SCHEDULE 4.1 hereto.
4.2 AUTHORIZATION. The Company has full power and authority
and, except as described in SCHEDULE 4.2, has taken all requisite action on the
part of the Company, its officers, directors and stockholders necessary for (i)
the authorization, execution and delivery of the Transaction Documents, (ii) the
authorization of the performance of all obligations of the Company hereunder or
thereunder, (iii) the authorization, issuance (or reservation for issuance) and
delivery of the Securities, and (iv) the effectuation of the Recapitalization,
the Amendment and the Reverse Split. The Transaction Documents constitute the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors' rights generally.
4.3 CAPITALIZATION. SCHEDULE 4.3 sets forth (a) the authorized
capital stock of the Company on the date hereof; (b) the number of shares of
capital stock issued and outstanding; (c) the number of shares of capital stock
issuable pursuant to the Company's stock plans; and (d) the number of shares of
capital stock issuable and reserved for issuance pursuant to securities (other
than the Securities) exercisable for, or convertible into or exchangeable for
any shares of capital stock of the Company, in each case without giving effect
to the Amendment, the Reverse Split or the Recapitalization. All of the issued
and outstanding shares of the Company's capital stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of pre-emptive
rights and were issued in full compliance with applicable state and federal
securities law and any rights of third parties. Except as described on SCHEDULE
4.3, all of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully paid,
nonassessable and free of pre-emptive rights, were issued in full compliance
with applicable state and federal securities law and any rights of third parties
and are owned by the Company, beneficially and of record, subject to no lien,
encumbrance or other adverse claim. Except as described on SCHEDULE 4.3, no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Except as described on SCHEDULE
4.3, there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the Company or
any of its Subsidiaries is or may be obligated to issue any equity securities of
any kind and except as contemplated by this Agreement, neither the Company nor
any of its Subsidiaries is currently in negotiations for the issuance of any
equity securities of any kind. Except as described on SCHEDULE 4.3 and except
for the Voting Agreements and the Registration Rights Agreement, there are no
voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among the Company and any of the
securityholders of the Company relating to the securities of the Company held by
them. Except as described on SCHEDULE 4.3 and except as provided in the
Registration Rights Agreement, no Person has the right to require the Company to
register any securities of the Company under the 1933 Act, whether on a demand
basis or in connection with the registration of securities of the Company for
its own account or for the account of any other Person.
Except as described on SCHEDULE 4.3, the issuance and sale of the
Securities hereunder will not obligate the Company to issue shares of Common
Stock or other securities to
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any other Person (other than the Investors) and will not result in the
adjustment of the exercise, conversion, exchange or reset price of any
outstanding security.
Except as described on SCHEDULE 4.3, the Company does not have
outstanding stockholder purchase rights or "poison pill" or any similar
arrangement in effect giving any Person the right to purchase any equity
interest in the Company upon the occurrence of certain events.
4.4 VALID ISSUANCE. The Shares have been duly and validly
authorized and, when issued and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws and will have the relative rights, powers
and preferences set forth in the Certificate of Designations. The Warrants have
been duly and validly authorized. Upon the due conversion of the Shares in
accordance with the Certificate of Designations, the Conversion Shares will be
validly issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. Upon the due exercise of the Warrants,
the Warrant Shares will be validly issued, fully paid and non-assessable free
and clear of all encumbrances and restrictions, except for restrictions on
transfer set forth in the Transaction Documents or imposed by applicable
securities laws and except for those created by the Investors. The Company has
reserved a sufficient number of shares of Common Stock for issuance upon the
conversion of the Shares and the exercise of the Warrants, free and clear of all
encumbrances and restrictions, except for restrictions on transfer set forth in
the Transaction Documents or imposed by applicable securities laws and except
for those created by the Investors.
4.5 CONSENTS. Except as described in SCHEDULE 4.5, (i) the
execution, delivery and performance by the Company of the Transaction Documents,
(ii) the offer, issuance and sale of the Securities and (iii) the effectuation
of the Recapitalization, the Amendment and the Reverse Split require no consent
of, action by or in respect of, or filing with, any Person, governmental body,
agency, or official other than filings that have been made pursuant to
applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws or any other notices required thereby, all of
which the Company undertakes to file within the applicable time periods. Subject
to the accuracy of the representations and warranties of each Investor set forth
in Section 5 hereof, the Company has taken all action necessary to exempt (i)
the issuance and sale of the Securities, (ii) the issuance of the Conversion
Shares upon the due conversion of the Shares, (iii) the issuance of the Warrant
Shares upon due exercise of the Warrants, and (iv) the other transactions
contemplated by the Transaction Documents from the provisions of any stockholder
rights plan or other "poison pill" arrangement, any anti-takeover, business
combination or control share law or statute binding on the Company or to which
the Company or any of its assets and properties may be subject and any provision
of the Company's Amended and Restated Certificate of Incorporation or Bylaws
that is or could reasonably be expected to become applicable to the Investors as
a result of the transactions contemplated hereby, including without limitation,
the issuance of the Securities and the
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ownership, disposition or voting of the Securities by the Investors or the
exercise of any right granted to the Investors pursuant to this Agreement or the
other Transaction Documents.
4.6 DELIVERY OF SEC FILINGS; BUSINESS. The Company has made
available to the Investors through the XXXXX system, true and complete copies of
the Company's most recent Annual Report on Form 10-KSB for the fiscal year ended
September 30, 2004 (the "10-KSB"), and all other reports filed by the Company
pursuant to the 1934 Act since the filing of the 10-KSB and prior to the date
hereof (collectively, the "SEC Filings"). Except as indicated in the SEC
Filings, the SEC Filings are the only filings required of the Company pursuant
to the 1934 Act for such period. The Company and its Subsidiaries are engaged in
all material respects only in the business described in the SEC Filings and the
SEC Filings contain a complete and accurate description in all material respects
of the business of the Company and its Subsidiaries, taken as a whole.
4.7 USE OF PROCEEDS. The net proceeds of the sale of the Shares
and the Warrants hereunder shall be used by the Company for working capital and
general corporate purposes.
4.8 NO MATERIAL ADVERSE CHANGE. Since September 30, 2004,
except for the Recapitalization, the Amendment and the Reverse Split and except
as identified and described in the SEC Filings or as described on SCHEDULE 4.8,
there has not been:
(i) any change in the consolidated assets, liabilities,
financial condition or operating results of the Company from that reflected in
the financial statements included in the Company's Quarterly Report on Form
10-QSB for the quarter ended June 30, 2005, except for changes in the ordinary
course of business which have not had and could not reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether or
not covered by insurance to any assets or properties of the Company or its
Subsidiaries;
(iv) any waiver, not in the ordinary course of business,
by the Company or any Subsidiary of a material right or of a material debt owed
to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or a Subsidiary, except
in the ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the Company
and its Subsidiaries taken as a whole (as such business is presently conducted
and as it is proposed to be conducted);
(vi) any change or amendment to the Company's Amended and
Restated Certificate of Incorporation or Bylaws, or material change to any
material contract or
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arrangement by which the Company or any Subsidiary is bound or to which any of
their respective assets or properties is subject;
(vii) any material labor difficulties or labor union
organizing activities with respect to employees of the Company or any
Subsidiary;
(viii) any material transaction entered into by the Company
or a Subsidiary other than in the ordinary course of business;
(ix) the loss of the services of any key employee, or
material change in the composition or duties of the senior management of the
Company or any Subsidiary;
(x) the loss or threatened loss of any customer which
has had or could reasonably be expected to have a Material Adverse Effect; or
(xi) any other event or condition of any character that
has had or could reasonably be expected to have a Material Adverse Effect.
4.9 SEC FILINGS.
(a) At the time of filing thereof, the SEC Filings
complied as to form in all material respects with the requirements of the 1934
Act and did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(b) Each registration statement and any amendment
thereto filed by the Company since January 1, 2002 pursuant to the 1933 Act and
the rules and regulations thereunder, as of the date such statement or amendment
became effective, complied as to form in all material respects with the 1933 Act
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein not misleading; and each prospectus filed pursuant to
Rule 424(b) under the 1933 Act, as of its issue date and as of the closing of
any sale of securities pursuant thereto did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
4.10 NO CONFLICT, BREACH, VIOLATION OR DEFAULT. Subject to the
preparation and delivery of the Information Statement contemplated by Section
7.9, the execution, delivery and performance of the Transaction Documents by the
Company and the issuance and sale of the Securities will not conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under (i) the Company's Amended and Restated Certificate of
Incorporation or the Company's Bylaws, both as in effect on the date hereof
(true and complete copies of which have been made available to the Investors
through the XXXXX system), or (ii)(a) any statute, rule, regulation or order of
any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company, any Subsidiary or any of
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their respective assets or properties, or (b) any agreement or instrument to
which the Company or any Subsidiary is a party or by which the Company or a
Subsidiary is bound or to which any of their respective assets or properties is
subject.
4.11 TAX MATTERS. The Company and each Subsidiary has timely
prepared and filed all tax returns required to have been filed by the Company or
such Subsidiary with all appropriate governmental agencies and timely paid all
taxes shown thereon or otherwise owed by it. The charges, accruals and reserves
on the books of the Company in respect of taxes for all fiscal periods are
adequate in all material respects, and there are no material unpaid assessments
against the Company or any Subsidiary nor, to the Company's Knowledge, any basis
for the assessment of any additional taxes, penalties or interest for any fiscal
period or audits by any federal, state or local taxing authority except for any
assessment which is not material to the Company and its Subsidiaries, taken as a
whole. All taxes and other assessments and levies that the Company or any
Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party
when due. There are no tax liens or claims pending or, to the Company's
Knowledge, threatened against the Company or any Subsidiary or any of their
respective assets or property. Except as described on SCHEDULE 4.11, there are
no outstanding tax sharing agreements or other such arrangements between the
Company and any Subsidiary or other corporation or entity.
4.12 TITLE TO PROPERTIES. Except as disclosed in the SEC
Filings, the Company and each Subsidiary has good and marketable title to all
real properties and all other properties and assets owned by it, in each case
free from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
and each Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
4.13 CERTIFICATES, AUTHORITIES AND PERMITS. The Company and each
Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
4.14 LABOR MATTERS.
(a) Except as set forth on SCHEDULE 4.14, the Company is not a
party to or bound by any collective bargaining agreements or other agreements
with labor organizations. The Company has not violated in any material respect
any laws, regulations, orders or contract terms, affecting the collective
bargaining rights of employees, labor organizations or any laws, regulations or
orders affecting employment discrimination, equal opportunity employment, or
employees' health, safety, welfare, wages and hours.
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(b) (i) There are no labor disputes existing, or to the
Company's Knowledge, threatened, involving strikes, slow-downs, work stoppages,
job actions, disputes, lockouts or any other disruptions of or by the Company's
employees, (ii) there are no unfair labor practices or petitions for election
pending or, to the Company's Knowledge, threatened before the National Labor
Relations Board or any other federal, state or local labor commission relating
to the Company's employees, (iii) no demand for recognition or certification
heretofore made by any labor organization or group of employees is pending with
respect to the Company and (iv) to the Company's Knowledge, the Company enjoys
good labor and employee relations with its employees and labor organizations.
(c) The Company is, and at all times has been, in compliance in
all material respects with all applicable laws respecting employment (including
laws relating to classification of employees and independent contractors) and
employment practices, terms and conditions of employment, wages and hours, and
immigration and naturalization. There are no claims pending against the Company
before the Equal Employment Opportunity Commission or any other administrative
body or in any court asserting any violation of Title VII of the Civil Rights
Act of 1964, the Age Discrimination Act of 1967, 42 U.S.C. xx.xx. 1981 or 1983
or any other federal, state or local Law, statute or ordinance barring
discrimination in employment.
(d) Except as disclosed in the SEC Filings or as described on
SCHEDULE 4.14, the Company is not a party to, or bound by, any employment or
other contract or agreement that contains any severance, termination pay or
change of control liability or obligation, including, without limitation, any
"excess parachute payment," as defined in Section 2806(b) of the Internal
Revenue Code.
(e) Except as specified in SCHEDULE 4.14, to the Company's
Knowledge, each of the Company's employees is a Person who is either a United
States citizen or a permanent resident entitled to work in the United States. To
the Company's Knowledge, the Company has no liability for the improper
classification by the Company of such employees as independent contractors or
leased employees prior to the Closing.
4.15 INTELLECTUAL PROPERTY.
(a) All Intellectual Property of the Company and its
Subsidiaries is currently in compliance with all legal requirements (including
timely filings, proofs and payments of fees) and is valid and enforceable. No
Intellectual Property of the Company or its Subsidiaries which is necessary for
the conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted has been or is now
involved in any cancellation, dispute or litigation, and, to the Company's
Knowledge, no such action is threatened. No patent of the Company or its
Subsidiaries has been or is now involved in any interference, reissue,
re-examination or opposition proceeding.
(b) All of the licenses and sublicenses and consent,
royalty or other agreements concerning Intellectual Property which are necessary
for the conduct of the Company's and each of its Subsidiaries' respective
businesses as currently conducted or as currently proposed to be conducted to
which the Company or any Subsidiary is a party or by
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which any of their assets are bound (other than generally commercially
available, non-custom, off-the-shelf software application programs having a
retail acquisition price of less than $10,000 per license) (collectively,
"License Agreements") are valid and binding obligations of the Company or its
Subsidiaries that are parties thereto and, to the Company's Knowledge, the other
parties thereto, enforceable in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors' rights generally, and there exists no
event or condition which will result in a material violation or breach of or
constitute (with or without due notice or lapse of time or both) a default by
the Company or any of its Subsidiaries under any such License Agreement.
(c) The Company and its Subsidiaries own or have the
valid right to use all of the Intellectual Property that is necessary for the
conduct of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted and for the
ownership, maintenance and operation of the Company's and its Subsidiaries'
properties and assets, free and clear of all liens, encumbrances, adverse claims
or obligations to license all such owned Intellectual Property and Confidential
Information, other than licenses entered into in the ordinary course of the
Company's and its Subsidiaries' businesses. The Company and its Subsidiaries
have a valid and enforceable right to use all third party Intellectual Property
and Confidential Information used or held for use in the respective businesses
of the Company and its Subsidiaries.
(d) To the Company's Knowledge, the conduct of the
Company's and its Subsidiaries' businesses as currently conducted does not
infringe or otherwise impair or conflict with (collectively, "Infringe") any
Intellectual Property rights of any third party or any confidentiality
obligation owed to a third party, and, to the Company's Knowledge, the
Intellectual Property and Confidential Information of the Company and its
Subsidiaries which are necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted are not being Infringed by any third party. There is no
litigation or order pending or outstanding or, to the Company's Knowledge,
threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or
Confidential Information of the Company and its Subsidiaries and the Company's
and its Subsidiaries' use of any Intellectual Property or Confidential
Information owned by a third party, and, to the Company's Knowledge, there is no
valid basis for the same.
(e) The consummation of the transactions contemplated
hereby and by the other Transaction Documents will not result in the alteration,
loss, impairment of or restriction on the Company's or any of its Subsidiaries'
ownership or right to use any of the Intellectual Property or Confidential
Information which is necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted.
(f) The Company and its Subsidiaries have taken
reasonable steps to protect the Company's and its Subsidiaries' rights in their
Intellectual Property and Confidential Information. Each employee, consultant
and contractor who has had access to Confidential
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Information which is necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted has executed an agreement to maintain the
confidentiality of such Confidential Information and has executed appropriate
agreements that are substantially consistent with the Company's standard forms
thereof, except where the failure to do so has not had and could not reasonably
be expected to have a Material Adverse Effect, individually or in the aggregate.
Except under confidentiality obligations, there has been no material disclosure
of any of the Company's or its Subsidiaries' Confidential Information to any
third party.
4.16 ENVIRONMENTAL MATTERS. To the Company's Knowledge, neither
the Company nor any Subsidiary (i) is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, "Environmental
Laws"), (ii) owns or operates any real property contaminated with any substance
that is subject to any Environmental Laws, (iii) is liable for any off-site
disposal or contamination pursuant to any Environmental Laws, or (iv) is subject
to any claim relating to any Environmental Laws, which violation, contamination,
liability or claim has had or could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate; and there is no pending or, to
the Company's Knowledge, threatened investigation that might lead to such a
claim.
4.17 LITIGATION. Except as described on SCHEDULE 4.17, there are
no pending actions, suits or proceedings against or affecting the Company, its
Subsidiaries or any of its or their properties; and to the Company's Knowledge,
no such actions, suits or proceedings are threatened or contemplated.
4.18 FINANCIAL STATEMENTS. The financial statements included in
each SEC Filing present fairly, in all material respects, the consolidated
financial position of the Company as of the dates shown and its consolidated
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with United States generally
accepted accounting principles applied on a consistent basis ("GAAP") (except as
may be disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-QSB under the 1934 Act). Except as
set forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof or as described on SCHEDULE 4.18, neither the
Company nor any of its Subsidiaries has incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business, consistent
(as to amount and nature) with past practices since the date of such financial
statements, none of which, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect.
4.19 INSURANCE COVERAGE. The Company and each Subsidiary
maintains in full force and effect insurance coverage that is customary for
comparably situated companies for the business being conducted and properties
owned or leased by the Company and each Subsidiary, and the Company reasonably
believes such insurance coverage to be adequate against all
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liabilities, claims and risks against which it is customary for comparably
situated companies to insure.
4.20 BROKERS AND FINDERS. No Person will have, as a result of
the transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company, other than as
described in SCHEDULE 4.20.
4.21 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION.
Neither the Company nor any Person acting on its behalf has conducted any
general solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offer or sale of any of the Securities.
4.22 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 Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.
4.23 PRIVATE PLACEMENT. The offer and sale of the Securities to
the Investors as contemplated hereby is exempt from the registration
requirements of the 1933 Act.
4.24 QUESTIONABLE PAYMENTS. Neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former stockholders, directors, officers, employees, agents or other Persons
acting on behalf of the Company or any Subsidiary, has on behalf of the Company
or any Subsidiary or in connection with their respective businesses: (a) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; or (e) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment of
any nature.
4.25 TRANSACTIONS WITH AFFILIATES. Except as disclosed in the
SEC Filings or as disclosed on SCHEDULE 4.25, none of the officers or directors
of the Company and, to the Company's Knowledge, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than as holders of stock options and/or warrants, and 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
Company's Knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
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4.26 INTERNAL CONTROLS. The Company is in material compliance
with the provisions of the Xxxxxxxx-Xxxxx Act of 2002 currently applicable to
the Company. The Company and the 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 GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in 1934
Act Rules 13a-14 and 15d-14) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including the Subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which the
Company's most recently filed period report under the 1934 Act, as the case may
be, is being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of the end of the
period covered by the most recently filed periodic report under the 1934 Act
(such date, the "Evaluation Date"). The Company presented in its most recently
filed periodic report under the 1934 Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal controls (as such
term is defined in Item 308 of Regulation S-B) or, to the Company's Knowledge,
in other factors that could significantly affect the Company's internal
controls. The Company maintains and will continue to maintain a standard system
of accounting established and administered in accordance with GAAP and the
applicable requirements of the 0000 Xxx.
4.27 DISCLOSURES. Neither the Company nor any Person acting on
its behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public
information. The written materials delivered to the Investors in connection with
the transactions contemplated by the Transaction Documents do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:
5.1 ORGANIZATION AND EXISTENCE. Such Investor is a validly
existing corporation, limited partnership or limited liability company and has
all requisite corporate, partnership or limited liability company power and
authority to invest in the Securities pursuant to this Agreement.
5.2 AUTHORIZATION. The execution, delivery and performance by
such Investor of the Transaction Documents to which such Investor is a party
have been duly authorized and will each constitute the valid and legally binding
obligation of such Investor, enforceable against
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such Investor in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors' rights generally.
5.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be
received by such Investor hereunder will be acquired for such Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the 1933 Act, and such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without prejudice, however,
to such Investor's right at all times to sell or otherwise dispose of all or any
part of such Securities in compliance with applicable federal and state
securities laws. Nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the Securities for any period of time. Such
Investor is not a broker-dealer registered with the SEC under the 1934 Act or an
entity engaged in a business that would require it to be so registered.
5.4 INVESTMENT EXPERIENCE. Such Investor acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 DISCLOSURE OF INFORMATION. Such Investor has had an
opportunity to receive all information related to the Company requested by it
and to ask questions of and receive answers from the Company regarding the
Company, its business and the terms and conditions of the offering of the
Securities. Such Investor acknowledges receipt of copies of the SEC Filings.
Neither such inquiries nor any other due diligence investigation conducted by
such Investor shall modify, amend or affect such Investor's right to rely on the
Company's representations and warranties contained in this Agreement.
5.6 RESTRICTED SECURITIES. Such Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 LEGENDS. It is understood that, except as provided below,
certificates evidencing the Securities may bear the following or any similar
legend:
(a) "The securities represented hereby may not be
transferred unless (i) such securities have been registered for sale pursuant to
the Securities Act of 1933, as amended, (ii) such securities may be sold
pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel
reasonably satisfactory to it that such transfer may lawfully be made without
registration under the Securities Act of 1933 or qualification under applicable
state securities laws."
(b) If required by the authorities of any state in
connection with the issuance of sale of the Securities, the legend required by
such state authority.
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5.8 ACCREDITED INVESTOR. Such Investor is an accredited
investor as defined in Rule 501(a) of Regulation D, as amended, under the 0000
Xxx.
5.9 NO GENERAL SOLICITATION. Such Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
5.10 BROKERS AND FINDERS. No Person will have, as a result of
the transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of such Investor.
5.11 PROHIBITED TRANSACTIONS. During the last thirty (30) days
prior to the date hereof, neither such Investor nor any Affiliate of such
Investor which (x) had knowledge of the transactions contemplated hereby, (y)
has or shares discretion relating to such Investor's investments or trading or
information concerning such Investor's investments, including in respect of the
Securities, or (z) is subject to such Investor's review or input concerning such
Affiliate's investments or trading (collectively, "Trading Affiliates") has,
directly or indirectly, effected or agreed to effect any short sale, whether or
not against the box, established any "put equivalent position" (as defined in
Rule 16a-1(h) under the 0000 Xxx) with respect to the Common Stock, granted any
other right (including, without limitation, any put or call option) with respect
to the Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each, a "Prohibited
Transaction"). Prior to the earliest to occur of (i) the termination of this
Agreement, (ii) the Effective Date or (iii) the Effectiveness Deadline, such
Investor shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in a Prohibited Transaction. Such Investor acknowledges
that the representations, warranties and covenants contained in this Section
5.11 are being made for the benefit of the Investors as well as the Company and
that each of the other Investors shall have an independent right to assert any
claims against such Investor arising out of any breach or violation of the
provisions of this Section 5.11.
5.12 RELIANCE ON EXEMPTIONS. Such Investor understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and such
Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of such
Investor to acquire the Securities.
6. CONDITIONS TO CLOSING.
6.1 CONDITIONS TO THE INVESTORS' OBLIGATIONS. The obligation of
each Investor to purchase the Shares and the Warrants at the Closing is subject
to the fulfillment to such
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Investor's satisfaction, on or prior to the Closing Date, of the following
conditions, any of which may be waived by such Investor (as to itself only):
(a) The representations and warranties made by the Company in
Section 4 hereof qualified as to materiality shall be true and correct at all
times prior to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of a specific date, in which case
such representation or warranty shall be true and correct as of such date, and,
the representations and warranties made by the Company in Section 4 hereof not
qualified as to materiality shall be true and correct in all material respects
at all times prior to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of a specific date, in which case
such representation or warranty shall be true and correct in all material
respects as of such specific date. The Company shall have performed in all
material respects all obligations and covenants herein required to be performed
by it on or prior to the Closing Date.
(b) The Company shall have obtained any and all consents,
permits, approvals, registrations and waivers, other than stockholder approval
of the Proposals, necessary or appropriate for consummation of the purchase and
sale of the Shares and the Warrants and the consummation of the other
transactions contemplated by the Transaction Documents to be consummated on or
prior to the Closing Date, all of which shall be in full force and effect.
(c) The Company shall have executed and delivered the
Registration Rights Agreement.
(d) The Certificate of Designations shall have been filed with
the Secretary of State of Delaware and shall be effective.
(e) The Company shall have (x) entered into one or more
agreements with the holders of the Company Debt and the Debt Warrants
(collectively, the "Prior Holders") pursuant to which (i) the Company and the
Prior Holders irrevocably agree to effect the Recapitalization, subject only to
the receipt of the consideration to be paid to the Prior Holders in the
Recapitalization, (ii) the Prior Holders shall have delivered into escrow any
instruments representing the Company Debt and the Debt Warrants with irrevocable
instructions that such instruments are to be released to the Company upon the
receipt of the consideration to be paid to the Prior Holders in the
Recapitalization and (iii) the Prior Holders shall have irrevocably waived any
event of default or event which, with the giving of notice, the lapse of time,
or both, would constitute an event of default under the Company Debt and (y)
adopted the Plan, subject to stockholder approval.
(f) The Company shall have delivered to the Investors executed
counterparts of Voting Agreements with each of the Investors listed in SCHEDULE
6.1(f).
(g) No judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding shall have been
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instituted by any governmental authority, enjoining or preventing the
consummation of the transactions contemplated hereby or in the other Transaction
Documents.
(h) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in subsections (a), (b), (d), (e), (g) and (k) of this
Section 6.1.
(i) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the Closing Date, certifying
the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents,
the Information Statement (as defined below), the Recapitalization, the
Amendment, the Reverse Split and the issuance of the Securities, certifying the
current versions of the Amended and Restated Certificate of Incorporation and
Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company.
(j) The Investors shall have received an opinion from Xxxxxxx
Xxxx LLP, the Company's counsel, dated as of the Closing Date, in form and
substance reasonably acceptable to the Investors and addressing such legal
matters as the Investors may reasonably request.
(k) No stop order or suspension of trading shall have been
imposed by the SEC or any other governmental or regulatory body with respect to
public trading in the Common Stock.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to sell and issue the Shares and the Warrants at the Closing is
subject to the fulfillment to the satisfaction of the Company on or prior to the
Closing Date of the following conditions, any of which may be waived by the
Company:
(a) The representations and warranties made by the Investors in
Section 5 hereof, other than the representations and warranties contained in
Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date. The
Investment Representations shall be true and correct in all respects when made,
and shall be true and correct in all respects on the Closing Date with the same
force and effect as if they had been made on and as of said date. The Investors
shall have performed in all material respects all obligations and covenants
herein required to be performed by them on or prior to the Closing Date.
(b) The Investors shall have executed and delivered the
Registration Rights Agreement and the Voting Agreements.
(c) No judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding shall have been
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instituted by any governmental authority, enjoining or preventing the
consummation of the transactions contemplated hereby or in the other Transaction
Documents.
(d) The Investors shall have delivered the Purchase Price to
the Company.
6.3 TERMINATION OF OBLIGATIONS TO EFFECT CLOSING; EFFECTS.
(a) The outstanding obligations of the Company, on the one
hand, and the Investors, on the other hand, to effect the Closing shall
terminate as follows:
(i) Upon the mutual written consent of the Company and
the Investors;
(ii) By the Company if any of the conditions set forth in
Section 6.2 shall have become incapable of fulfillment, and shall not have been
waived by the Company;
(iii) By an Investor (with respect to itself only) if any
of the conditions set forth in Section 6.1 shall have become incapable of
fulfillment, and shall not have been waived by the Investor; or
(iv) By either the Company or any Investor (with respect
to itself only) if the Closing has not occurred on or prior to January 20, 2006;
provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party's seeking to
terminate its obligation to effect the Closing.
(b) In the event of termination by any Investor of its
obligations to effect the Closing pursuant to this Section 6.3, written notice
thereof shall forthwith be given to the other Investors and the other Investors
shall have the right to terminate their obligations to effect such Closing upon
written notice to the Company and the other Investors. Nothing in this Section
6.3 shall be deemed to release any party from any liability for any breach by
such party of the terms and provisions of this Agreement or the other
Transaction Documents or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement or the
other Transaction Documents.
7. COVENANTS AND AGREEMENTS OF THE COMPANY.
7.1 RESERVATION OF COMMON STOCK. From and after the
effectiveness of the Amendment and the Reverse Split, the Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of providing for the conversion of the
Shares and the exercise of the Warrants, such number of shares of Common Stock
as shall from time to time equal the Conversion Shares and the Warrant Shares
issuable from time to time.
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7.2 REPORTS. The Company will furnish to the Investors and/or
their assignees such information relating to the Company and its Subsidiaries as
from time to time may reasonably be requested by the Investors and/or their
assignees; provided, however, that the Company shall not disclose material
nonpublic information to the Investors, or to advisors to or representatives of
the Investors, unless prior to disclosure of such information the Company
identifies such information as being material nonpublic information and provides
the Investors, such advisors and representatives with the opportunity to accept
or refuse to accept such material nonpublic information for review and any
Investor wishing to obtain such information enters into an appropriate
confidentiality agreement with the Company with respect thereto.
7.3 NO CONFLICTING AGREEMENTS. The Company will not take any
action, enter into any agreement or make any commitment that would conflict or
interfere in any material respect with the Company's obligations to the
Investors under the Transaction Documents.
7.4 INSURANCE. The Company shall not materially reduce the
insurance coverages described in Section 4.19.
7.5 COMPLIANCE WITH LAWS. The Company will comply in all
material respects with all applicable laws, rules, regulations, orders and
decrees of all governmental authorities.
7.6 LISTING OF UNDERLYING SHARES AND RELATED MATTERS. If the
Company applies to have its Common Stock or other securities traded on any stock
exchange or market, it shall include in such application the Conversion Shares
and the Warrant Shares and will take such other action as is necessary to cause
such Common Stock to be so listed. Thereafter, the Company will use commercially
reasonable efforts to continue the listing and trading of its Common Stock on
such exchange or market and, in accordance, therewith, will use commercially
reasonable efforts to comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of such exchange or
market, as applicable.
7.7 TERMINATION OF COVENANTS. The provisions of Sections 7.2
through 7.5 shall terminate and be of no further force and effect on the date on
which the Company's obligations under the Registration Rights Agreement to
register or maintain the effectiveness of any registration covering the
Registrable Securities (as such term is defined in the Registration Rights
Agreement) shall terminate.
7.8 REMOVAL OF LEGENDS. Upon the earlier of (i) registration
for resale pursuant to the Registration Rights Agreement or (ii) Rule 144(k)
becoming available the Company shall (A) deliver to the transfer agent for the
Common Stock (the "Transfer Agent") irrevocable instructions that the Transfer
Agent shall reissue a certificate representing shares of Common Stock without
legends upon receipt by such Transfer Agent of the legended certificates for
such shares, together with either (1) a customary representation by the Investor
that Rule 144(k) applies to the shares of Common Stock represented thereby or
(2) a statement by the Investor that such Investor has sold the shares of Common
Stock represented thereby in accordance with the Plan of Distribution contained
in the Registration Statement, and (B) cause
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its counsel to deliver to the Transfer Agent one or more blanket opinions to the
effect that the removal of such legends in such circumstances may be effected
under the 1933 Act. From and after the earlier of such dates, upon an Investor's
written request, the Company shall promptly cause certificates evidencing the
Investor's Securities to be replaced with certificates which do not bear such
restrictive legends, and Conversion Shares subsequently issued upon due
conversion of the Shares and Warrant Shares subsequently issued upon due
exercise of the Warrants shall not bear such restrictive legends provided the
provisions of either clause (i) or clause (ii) above, as applicable, are
satisfied with respect to such Conversion Shares or Warrant Shares, as
applicable. When the Company is required to cause unlegended certificates to
replace previously issued legended certificates, if unlegended certificates are
not delivered to an Investor within three (3) Business Days of submission by
that Investor of legended certificate(s) to the Transfer Agent as provided above
(or to the Company, in the case of the Warrants), the Company shall be liable to
the Investor for liquidated damages in an amount equal to 1.5% of the aggregate
purchase price of the Securities evidenced by such certificate(s) for each
thirty (30) day period (or portion thereof) beyond such three (3) Business Day
that the unlegended certificates have not been so delivered.
7.9 STOCKHOLDER APPROVAL. (a) The Company shall take all action
necessary to effectuate the Recapitalization, the Amendment and the Reverse
Split as promptly as practicable. In connection therewith, the Company will
promptly take all action necessary to obtain stockholder approval for (i)
Amendment and (ii) the Reverse Split (the "Proposals"). If necessary to obtain
such approval, the Company shall take all action necessary to call a meeting of
its stockholders (the "Stockholders Meeting"), which shall occur not later than
March 20, 2006 (the "Stockholders Meeting Deadline"), for the purpose of seeking
approval of the Proposals. Alternatively, the Company may obtain stockholder
approval by the consent of the holders of a majority of the outstanding Common
Stock.
(b) If the Company calls a Stockholder Meeting to seek approval
of the Proposals, the Company will promptly prepare and file with the SEC proxy
materials (including a proxy statement and form of proxy) for use at the
Stockholders Meeting and, after receiving and promptly responding to any
comments of the SEC thereon, shall promptly mail such proxy materials to the
stockholders of the Company. Each Investor shall promptly furnish in writing to
the Company such information relating to such Investor and its investment in the
Company as the Company may reasonably request for inclusion in the Proxy
Statement. The Company will comply with Section 14(a) of the 1934 Act and the
rules promulgated thereunder in relation to any proxy statement (as amended or
supplemented, the "Proxy Statement") and any form of proxy to be sent to the
stockholders of the Company in connection with the Stockholders Meeting, and the
Proxy Statement shall not, on the date that the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to stockholders or at
the time of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein not false or misleading, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies or the Stockholders Meeting which has
become false or misleading. If the Company should discover at any time prior to
the Stockholders Meeting, any event relating to the Company or any of its
Subsidiaries or any of their respective affiliates, officers or directors that
is required to be set forth in a supplement or amendment to the Proxy
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Statement, in addition to the Company's obligations under the 1934 Act, the
Company will promptly inform the Investors thereof.
(c) Subject to their fiduciary obligations under applicable law
(as determined in good faith by the Company's Board of Directors after
consultation with the Company's outside counsel), the Company's Board of
Directors shall recommend to the Company's stockholders that the stockholders
vote in favor of the Proposals (the "Company Board Recommendation") and take all
commercially reasonable action (including, without limitation, the hiring of a
proxy solicitation firm of nationally recognized standing) to solicit the
approval of the stockholders for the Proposals unless the Board of Directors
shall have modified, amended or withdrawn the Company Board Recommendation
pursuant to the provisions of the immediately succeeding sentence. The Company
covenants that the Board of Directors of the Company shall not modify, amend or
withdraw the Company Board Recommendation unless the Board of Directors (after
consultation with the Company's outside counsel) shall determine in the good
faith exercise of its business judgment that maintaining the Company Board
Recommendation would violate its fiduciary duty to the Company's stockholders.
Whether or not the Company's Board of Directors modifies, amends or withdraws
the Company Board Recommendation pursuant to the immediately preceding sentence,
the Company shall in accordance with Section 146 of the Delaware General
Corporation Law and the provisions of its Amended and Restated Certificate of
Incorporation and Bylaws, (i) take all action necessary to convene the
Stockholders Meeting as promptly as practicable, but no later than the
Stockholders Meeting Deadline, to consider and vote upon the approval of the
Proposals and (ii) submit the Proposals at the Stockholders Meeting to the
stockholders of the Company for their approval.
(d) If the Company obtains stockholder approval of the
Proposals through the consent of the holders of a majority of the outstanding
Common Stock, the Company prepare and file with the SEC an information statement
and, after receiving and promptly responding to any comments of the SEC thereon,
shall promptly mail such information statement to the stockholders of the
Company, but in no event later than February 20, 2006 (as so mailed, the
"Information Statement"). Each Investor shall promptly furnish in writing to the
Company such information relating to such Investor and its investment in the
Company as the Company may reasonably request for inclusion in the Information
Statement. The Company will comply with Section 14(c) of the 1934 Act and the
rules promulgated thereunder in relation to the Information Statement, and the
Information Statement shall not, on the date that the Information Statement (or
any amendment thereof or supplement thereto) is first mailed to stockholders, or
at the time that the Reverse Split is effectuated, contain any statement which,
at the time and in light of the circumstances under which it was made, is false
or misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to same subject matter which has become false or misleading. If the
Company should discover at any time prior to the effectuation of the Reverse
Split, any event relating to the Company or any of its Subsidiaries or any of
their respective affiliates, officers or directors that is required to be set
forth in a supplement or amendment to the Information Statement, in addition to
the Company's obligations under the 1934 Act, the Company will promptly inform
the Investors thereof.
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8. SURVIVAL AND INDEMNIFICATION.
8.1 SURVIVAL. The representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing of the
transactions contemplated by this Agreement.
8.2 INDEMNIFICATION. The Company agrees to indemnify and hold
harmless each Investor and its Affiliates and their respective directors,
officers, employees and agents from and against any and all losses, claims,
damages, liabilities and expenses (including without limitation reasonable
attorney fees and disbursements and other expenses incurred in connection with
investigating, preparing or defending any action, claim or proceeding, pending
or threatened and the costs of enforcement thereof) (collectively, "Losses") to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be performed on
the part of the Company under the Transaction Documents, and will reimburse any
such Person for all such amounts as they are incurred by such Person.
8.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after
receipt by any Person (the "Indemnified Person") of notice of any demand, claim
or circumstances which would or might give rise to a claim or the commencement
of any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; PROVIDED,
HOWEVER, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.
9. MISCELLANEOUS.
9.1 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned
by a party hereto without the prior written consent of the Company or the
Investors, as applicable,
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provided, however, that an Investor may assign its rights and delegate its
duties hereunder in whole or in part to an Affiliate or to a third party
acquiring some or all of its Securities in a private transaction without the
prior written consent of the Company or the other Investors, after notice duly
given by such Investor to the Company provided, that no such assignment or
obligation shall affect the obligations of such Investor hereunder. The
provisions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
9.2 COUNTERPARTS; FAXES. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement may
also be executed via facsimile, which shall be deemed an original.
9.3 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.4 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier. All notices shall be addressed to the party to be
notified at the address as follows, or at such other address as such party may
designate by ten days' advance written notice to the other party:
If to the Company:
UTIX Group, Inc.
7 New England Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention:
Fax:
With a copy to:
Xxxxxxx Xxxx LLP
00 X. 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
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If to the Investors:
to the addresses set forth on the signature pages hereto.
9.5 EXPENSES. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of Xxxxxxxxxx Xxxxxxx PC in connection with the
negotiation and execution of the Transaction Documents in an aggregate amount
not to exceed $40,000. Such expenses shall be paid not later than the Closing.
The Company shall reimburse the Investors upon demand for all reasonable
out-of-pocket expenses incurred by the Investors, including without limitation
reimbursement of attorneys' fees and disbursements, in connection with any
amendment, modification or waiver of this Agreement or the other Transaction
Documents. In the event that legal proceedings are commenced by any party to
this Agreement against another party to this Agreement in connection with this
Agreement or the other Transaction Documents, the party or parties which do not
prevail in such proceedings shall severally, but not jointly, pay their pro rata
share of the reasonable attorneys' fees and other reasonable out-of-pocket costs
and expenses incurred by the prevailing party in such proceedings.
9.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement at the
time outstanding, each future holder of all such Securities, and the Company.
9.7 PUBLICITY. Except as set forth below, no public release or
announcement concerning the transactions contemplated hereby shall be issued by
the Company or the Investors without the prior consent of the Company (in the
case of a release or announcement by the Investors) or the Investors (in the
case of a release or announcement by the Company) (which consents shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the applicable rules or regulations of any securities exchange or
securities market, in which case the Company or the Investors, as the case may
be, shall allow the Investors or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance. By 8:30 a.m. (New York City
time) on the trading day immediately following the Closing Date, the Company
shall issue a press release disclosing the consummation of the transactions
contemplated by this Agreement. No later than the fourth Business Day following
the Closing Date, the Company will file a Current Report on Form 8-K attaching
the press release described in the foregoing sentence as well as copies of the
Transaction Documents, to the extent not already filed with the SEC. In
addition, the Company will make such other filings and notices in the manner and
time required by the SEC. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Investor, or include the name of any Investor
in any filing with the SEC (other than the Registration Statement and any
exhibits to filings made in respect
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of this transaction in accordance with periodic filing requirements under the
0000 Xxx) or any regulatory agency, without the prior written consent of such
Investor, except to the extent such disclosure is required by law or trading
market regulations, in which case the Company shall provide the Investors with
prior notice of such disclosure.
9.8 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
9.9 ENTIRE AGREEMENT. This Agreement, including the Exhibits
and the Disclosure Schedules, and the other Transaction Documents constitute the
entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof.
9.10 FURTHER ASSURANCES. The parties shall execute and deliver
all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby and
to evidence the fulfillment of the agreements herein contained.
9.11 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York without regard to the choice of law
principles thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
9.12 INDEPENDENT NATURE OF INVESTORS' OBLIGATIONS AND RIGHTS.
The obligations of each Investor under any Transaction Document are several and
not joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the
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obligations of any other Investor under any Transaction Document. The decision
of each Investor to purchase Securities pursuant to the Transaction Documents
has been made by such Investor independently of any other Investor. Nothing
contained herein or in any Transaction Document, and no action taken by any
Investor pursuant thereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Investor acknowledges that no other Investor has
acted as agent for such Investor in connection with making its investment
hereunder and that no Investor will be acting as agent of such Investor in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents. Each Investor shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose. The Company acknowledges
that each of the Investors has been provided with the same Transaction Documents
for the purpose of closing a transaction with multiple Investors and not because
it was required or requested to do so by any Investor.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement or
caused their duly authorized officers to execute this Agreement as of the date
first above written.
The Company: UTIX GROUP, INC.
By:_________________________
Name:
Title:
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