PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT ("Agreement") is made as of the 8th day of
July, 2005 by and among LocatePLUS Holdings Corporation, 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 1933 Act; 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 $8,000,000 in aggregate face
amount of the Company's 3% Senior Convertible Notes in the form attached hereto
as Exhibit A (the "Notes"), which Notes are convertible into shares of the
Company's Common Stock at a conversion price of $0.10 per share, and (ii)
warrants to purchase an aggregate of 32,000,000 shares of Common Stock (subject
to adjustment) at an exercise price of $0.15 per share (subject to adjustment)
in the form attached hereto as Exhibit B (the "Warrants"); and
C. Contemporaneous with the sale of the Notes 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 1933 Act 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
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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
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directly or indirectly through one or more intermediaries Controls, is
controlled by, or is under common control with, such Person.
"Business Day" means a day, other than a Saturday or Sunday, on which
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banks in New York City are open for the general transaction of business.
"Common Stock" shall mean (i) prior to the consummation of the
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Recapitalization, the Class A Voting Common Stock, par value $0.01 per share, of
the Company; provided, however, that if, upon conversion of the Notes or the
exercise of the Warrants, as the case may be, the authorized but unissued shares
of Class A Voting Common Stock are not sufficient to permit the full conversion
of the Notes and the full exercise of the Warrants, then the term "Common Stock"
shall mean such shares of Class A Voting Common Stock as are then available for
issuance plus such number of shares of Class B Nonvoting Common Stock as shall
permit the full conversion of the Notes and the full exercise of the Warrants
and (ii) from and after the effective time of the Recapitalization, the
Recapitalization Stock.
"Company's Knowledge" means the actual knowledge of the executive
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officers (as defined in Rule 405 under the 0000 Xxx) of the Company, after due
inquiry.
"Confidential Information" means trade secrets, confidential
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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
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"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
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conversion of the Notes.
"Effective Date" means the date on which the initial Registration
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Statement is declared effective by the SEC.
"Effectiveness Deadline" means the date on which the initial
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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,
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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
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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
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liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"Purchase Price" means Eight Million Dollars ($8,000,000).
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"Recapitalization" shall mean (i) the recapitalization of each
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outstanding share of the Company's Class A Voting Common Stock, par value $0.01
per share, and the Company's Class B Nonvoting Common Stock, par value $0.01 per
share, into one share of a single class of voting common stock and (ii) a
one-for-fifty reverse split of the Common Stock.
"Recapitalization Stock" shall mean the common stock, par value $0.01
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per share, of the Company after giving effect to the Recapitalization.
"Required Investors" shall mean the Investors purchasing at least a
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majority in aggregate principal amount of the Notes hereunder.
"SEC Filings" has the meaning set forth in Section 4.6.
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"Registration Statement" has the meaning set forth in the Registration
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Rights Agreement.
"Securities" means the Notes, the Warrants, the Conversion Shares and
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the Warrant Shares.
"Subsidiary" of any Person means another Person, an amount of the
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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.
"Transaction Documents" means this Agreement, the Notes, the Warrants,
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the Registration Rights Agreement and the Voting Agreement.
"Voting Agreement" means the voting agreement to be entered into
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between the Company, the Investors and Xxx X. Xxxxxxxxx, in the form attached
hereto as Exhibit D.
"Warrant Shares" means the shares of Common Stock issuable upon the
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exercise of the Warrants.
"1933 Act" means the Securities Act of 1933, as amended, or any
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successor statute, and the rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, or
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any successor statute, and the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Notes and Warrants. Subject to the terms
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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 Notes and Warrants in the respective amounts set forth
opposite the Investors' names on the signature pages attached hereto in exchange
for the Purchase Price as specified in Section 3 below.
3. Closing. Upon confirmation that the other conditions to closing
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specified herein have been satisfied or duly waived by the Investors, the
Company shall deliver to Xxxxxxxxxx Xxxxxxx PC, in trust, the Notes 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 Notes and
the Warrants, 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 Company receives the
Purchase Price (the "Closing Date"), the Notes and the Warrants shall be
released to the Investors (the "Closing"). The Closing of the purchase and sale
of the Notes and Warrants 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.
4. Representations and Warranties of the Company. The Company hereby
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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
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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 and could not reasonably be expected to
have a Material Adverse Effect. The Company's Subsidiaries are listed on
Schedule 4.1 hereto.
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4.2 Authorization. The Company has full power and authority and,
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except for approval of the Recapitalization by its stockholders as contemplated
in Section 7.9, 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, and
(iii) the authorization, issuance (or reservation for issuance) and delivery of
the Securities. 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.
The Board of Directors of the Company has (i) approved the specific terms of the
Recapitalization, (ii) determined that the Recapitalization is advisable and in
the best interests of the Company and its stockholders, (iii) recommended that
the stockholders approve the Recapitalization (the "Company Board
Recommendation") and (iv) resolved to submit the Recapitalization for approval
by the stockholders at the Stockholders Meeting (as defined in Section 7.9
below).
4.3 Capitalization. Schedule 4.3 sets forth (a) the authorized
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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 Notes and the Warrants) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company. 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 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 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 Conversion Shares and the Warrant Shares
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have been duly and validly authorized. Upon the due conversion of the Notes,
the Conversion Shares will be validly issued, fully paid and nonassessable,
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. The Warrants
have been duly and validly authorized. 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 Notes 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 for approval of the Recapitalization by its
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stockholders as contemplated in Section 7.9, the execution, delivery and
performance by the Company of the Transaction Documents and the offer, issuance
and sale of the Securities 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 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 due conversion of the Notes, (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 Certificate of Incorporation or By-laws 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 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
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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
December 31, 2004 (as amended as of the date hereof, 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"). 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 Notes
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and the Warrants hereunder shall be used by the Company to repay indebtedness
and for working capital and general corporate purposes.
4.8 No Material Adverse Change. Since December 31, 2004, except
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for the Recapitalization and except as identified and described in the SEC
Filings or as described on Schedule 4.8, there has not been:
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(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 March 31, 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 Certificate of
Incorporation or by-laws, or material change to any material contract or
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. At the time of filing thereof, the SEC Filings
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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.
4.10 No Conflict, Breach, Violation or Default. Subject to the
approval of the Recapitalization by its stockholders as contemplated in 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 Certificate of Incorporation or the
Company's Bylaws, both as in effect on the date hereof (copies of which are
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 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 which, in the case of this clause (ii) only would be reasonably likely
to have a Material Adverse Effect.
4.11 Tax Matters. Except as described in the SEC Filings or as
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described in Schedule 4.11, the Company and each Subsidiary has timely prepared
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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
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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
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or as described on Schedule 4.12, the Company and each Subsidiary has good and
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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
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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 onSchedule 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.
(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. 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
onSchedule 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 inSchedule 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.
4.15 Intellectual Property.
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(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 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, to the Company's Knowledge, 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.
(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 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 under confidentiality obligations, to
the Company's Knowledge, 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
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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 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 or any Subsidiary 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. Assuming the accuracy of the
------------------
representations and warranties set forth in Section 5 hereto, 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.
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 Companyand 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 307(b) of Regulation S-K) 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.
4.28 No Other Representations and Warranties. The Company shall
-----------------------------------------
not be deemed to have made to the Investors any representation or warranty other
than as expressly made by the Company in this Section 4.
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 duly
----------------------------
organized, validly existing corporation, limited partnership or limited
liability company in good standing under the laws of its jurisdiction of
organization 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 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.
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.
6. Conditions to Closing.
-----------------------
6.1 Conditions to the Investors' Obligations. The obligation of
-------------------------------------------
each Investor to purchase the Notes and the Warrants at the Closing is subject
to the fulfillment to such 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 from and after the date hereof through the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct as
of such earlier 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 from and after the date hereof
through the Closing Date, except to the extent any such representation or
warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects as
of such earlier date. The Company shall have performed in all material respects
all obligations and conditions herein required to be performed or observed by it
on or prior to the Closing Date.
(b) The Company shall have obtained any and all consents,
permits, approvals, registrations and waivers (excluding approval of the
Recapitalization by its stockholders)necessary or appropriate for consummation
of the purchase and sale of the Securities and the consummation of the other
transactions contemplated by the Transaction Documents, all of which shall be in
full force and effect.
(c) The Company shall have executed and delivered the
Registration Rights Agreement.
(d) 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 instituted by any
governmental authority, in each case enjoining or preventing the consummation of
the transactions contemplated hereby or in the other Transaction Documents.
(e) 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) and (i) of this Section 6.1.
(f) 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 issuance of the Securities and the Recapitalization,
certifying the current versions of the 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.
(g) The Investors shall have received an opinion from
Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP, special counsel to the Company,
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.
(h) The Company shall have delivered a counterpart of the
Voting Agreement executed on behalf of the Company and Xxx X. Xxxxxxxxx.
(i) 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 conditions
herein required to be performed or observed by them on or prior to the Closing
Date.
(b) The Investors shall have executed and delivered the
Registration Rights Agreement.
(c) The Investors shall have delivered the Purchase Price to
the Company.
6.3 Termination of Obligations to Effect Closing; Effects.
-----------------------------------------------------------
(a) The 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 such 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 July 15, 2005;
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 the Company or 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 the
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. 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 Notes and
the exercise of the Warrants, such number of shares of Common Stock as shall
from time to time equal the number of shares sufficient to permit the issuance
of the Conversion Shares and the Warrant Shares pursuant to the Transaction
Documents in accordance with their respective terms.
7.2 [Reserved]
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
principal 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. The Company will use
commercially reasonable efforts to continue the listing and trading of its
Common Stock on such principal stock 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 market or exchange, 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 and receipt by the Company
of the Investor's written confirmation that such Securities will not be disposed
of except in compliance with the prospectus delivery requirements of the 1933
Act or (ii) Rule 144(k) becoming available the Company shall, upon an Investor's
written request, 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
Notes 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 and Warrant Shares. 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
Company's transfer agent together with a representation letter in customary
form, 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 Proxy Statement; Stockholders Meeting. (a) Promptly
following the Closing Date the Company shall take all action necessary to call a
meeting of its stockholders
(the "Stockholders Meeting"), which shall occur not later than 120 days after
the Closing Date (the "Stockholders Meeting Deadline"), for the purpose of
seeking approval of the Company's stockholders for the Recapitalization (the
"Proposal"). In connection therewith, 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 Statement, in addition to the Company's obligations under the 1934 Act,
the Company will promptly inform the Investors thereof.
(b) The Company shall include the Company Board Recommendation in
the Proxy Statement 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
Proposal 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 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
Proposal and (ii) submit the Proposal at the Stockholders Meeting to the
stockholders of the Company for their approval.
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 Required
Investors, as applicable,
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 limit 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 permitted 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:
LocatePLUS Holdings Corporation
000 Xxxxxxxx Xxxxxx, Xxxxx 000X
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Financial Officer
Fax: (000) 000-0000
With a copy to:
Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
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 fees and
expenses of Xxxxxxxxxx Xxxxxxx PC not to exceed $35,000. 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 requested by the Company. 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 Required
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 third trading
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. 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 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 Disclosure
-----------------
Schedules and the Exhibits hereto) 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 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 pages follow]
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: LOCATEPLUS HOLDINGS CORPORATION
By:_________________________
Name:
Title:
- 0 -
XXX-000000 x00
XXXXXXXX AGREEMENT
(the "Agreement")
dated as of July 8, 2005
by and between
LOCATEPLUS HOLDINGS CORPORATION
(the "Company")
and
THE INVESTORS
set forth on the signature pages affixed thereto
(each an "Investor" and collectively the "Investors").
This Disclosure Schedule is furnished by the Company to the Investors as of the
date hereof pursuant to and as part of the Agreement. Capitalized terms not
defined herein shall have the meanings ascribed to them in the Agreement. This
Disclosure Schedule relates to certain matters concerning the disclosures
required and transactions contemplated by the Agreement. This Disclosure
Schedule is qualified in its entirety by the Agreement and shall not be
construed as indicating that such matter is required to be disclosed, nor shall
any disclosure be construed as an admission that such information is material
with respect to the Company, or any division, unit or Subsidiary of the Company,
except to the extent required by the Agreement. Any reference to a contract,
statement, plan, report or other document of any kind in this Disclosure
Schedule shall be deemed to be full disclosure of all the written terms of such
writing in the form delivered to the Investors (excluding any amendments,
modifications, waivers, variances or agreed upon courses of dealing not
specifically referenced herein for such writing), and, except to the extent
expressly required in the Agreement, it shall not be necessary to identify or
reference specific provisions of such documents in order to make full
disclosure. Headings are for reference only and shall not be construed to
affect the meaning or construction of the disclosure made in this Disclosure
Schedule.
SCHEDULE 4.1
ORGANIZATION, GOOD STANDING AND QUALIFICATION
---------------------------------------------
Subsidiaries of LocatePLUS Holdings Corporation.
- LocatePLUS Corporation, is presently located in Beverly,
Massachusetts
- Worldwide Information, Inc., is presently located in Xxxxxxx,
Massachusetts
- Dataphant, Inc., is located in Austin, Texas
- Certifion Corporation, (which does business under the name
"Entersect"), is located in Santa Ana,California
- Metrigenics Corporation is located in Rochester, New York
SCHEDULE 4.3
CAPITALIZATION
--------------
Issued and Issuable Reserved
pursuant for
Security . . . Authorized Outstanding to stock plans issuance
----------- ----------------- -------------- ----------
Class A Voting
Common . . . . 150,000,000 106,762,681 27,041,304 15,650,989
-------------- ----------- ----------------- -------------- ----------
Class B Non-
Voting Common. 250,000,000 74,499,178 5,700,000 23,735,875
-------------- ----------- ----------------- -------------- ----------
Pursuant to an Investment Agreement with Dutchess Private Equities, L.P., dated
August 5, 2003, the Company reserved 20,000,000 shares of its Class A Voting
Common Stock for issuance under such agreement. As of the date hereof, there
remains 695,752 shares reserved pursuant to the agreement.
The Company has reserved 15,000,000 shares of its Class A Common Stock for
issuance pursuant to the its Amended and Restated Incentive and Non-qualified
Stock Option Plan, dated November 16, 1999 and approved by the Company's
stockholders on November 18, 1999. As of the date hereof, 7,041,304 shares
remain available for option grants under the plan.
The Company has reserved 25,000,000 shares of its Class A Common Stock and
25,000,000 shares of its Class B Common Stock are reserved for issuance pursuant
to its Incentive and Non-qualified Stock Option Plan, dated March 28, 2003 and
approved by the Company's stockholders May 29, 2003. As of the date hereof,
20,000,000 shares remain available for option grants under the plan.
WARRANTS AND REGISTRATION RIGHTS
WARRANTS - CL A NUMBER Exercise Right
--------- -------- --------------------------------------------------------
Xxxxx, Xxxxxx . . . . . . . . 50,000 .20 Piggy-Back - Subject to underwriter restriction
--------- -------- --------------------------------------------------------
Xxxxxxx, Xxxx . . . . . . . . 35,133 1.00 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxxxxx . . . . . . . 139,041 1.00 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxx, Xxxxxx. . . . . . . . 53,065 1.00 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxxxxx . . . . . . . 21,500 .27 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxx, Xxxxxx. . . . . . . . 13,000 .27 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxx, Xxxxxxx. . . . . . . . 472,500 .16 Demand & Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxx, Xxxxx . . . . . . . . 187,500 .16 Demand & Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxx, Xxxxx . . . . . . . . 531,750 .16 Demand & Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxx. . . . . . . . . 375,000 .16 Demand & Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Para, Xxxxxx. . . . . . . . . 270,000 .16 Demand & Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
WARRANTS - CL B
Xxxxxx, Xxxx. . . . . . . . . 500,000 .10 Piggy-Back - Subject to underwriter restriction
-----------------------------
Xxxxxxxxxx, Xxxxx . . . . . . 25,000 .20 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxxxxxx. . . . . . . 25,000 .20 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxxx, Xxxxxx X. . . . . . 26,346 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxx-Xxxxxxxxxx . . . . . . 26,207 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxxx, Xxxx X. . . . . . . 77,374 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Sappin, Xxxxxx X. . . . . . . 8,736 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxx, Xxxxxxx. . . . . . . . 12,500 .20 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxxxxxxxx. . . . . . 12,500 .20 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxxxxx . . . . . . . 324,581 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxx, Xxxxxx. . . . . . . . 42,553 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxx, Xxxx. . . . . . . . . 1,177,680 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxxxxx . . . . . . . 35,000 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxxx, Xxxx. . . . . . . . 35,000 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxxxxx . . . . . . . 27,089 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxx, Xxxxxx. . . . . . . . 16,889 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxxxxx . . . . . . . 35,000 .22 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxx, Xxxx . . . . . . . . . 35,000 .22 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxxxx Leasing Co. . . . . 57,184 .30 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
KFT . . . . . . . . . . . . . 250,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Volones . . . . . . . . . . . 250,000 .22 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxx. . . . . . . . . 12,500 .22 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxxx, Xxxx. . . . . . . . 1,111,110 .27 Demand & Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxxxxx, Xxxxx . . . . . . 10,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
J&J Xxxx Family Ltd . . . . . 50,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxxx & Xxxxx Xxxxx . . . . . 65,000 .10 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx Xxxx. . . . . . . . . 5,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx Xxxxx . . . . . . . . 250,000 .10 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxx Xxxxxxx. . . . . . . . 10,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxx Xxxxxxxx . . . . . . . . 10,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxxx & Xxxxxx Xxxxxxxx . . . 35,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
J&J Xxxx. . . . . . . . . . . 50,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
J&J Xxxx. . . . . . . . . . . 200,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
J&J Xxxx. . . . . . . . . . . 1,300,000 .10 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx, Xxxx . . . . . . . . 35,000 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxx, Xxx . . . . . . . . . . 35,000 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxxx, Xxxx. . . . . . . . 35,000 .15 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
vFinance Investments. . . . . 20,000 .1925 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxxx Xxxx . . . . . . . . 2,500 .1925 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx Xxxxxxxxx . . . . . . 2,500 .1925 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxx Xxxxxxxxx. . . . . . . 100,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx Xxxxxxx . . . . . . . 5,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxxx & Xxxxx Xxxxx . . . . . 25,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxxx Xxxxx . . . . . . . . . 55,000 .22 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Xxxxxxx Xxxx Family Trust . . 10,000 .10 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Deveraux, Inc.. . . . . . . . 300,000 .25 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
UpFront Consulting. . . . . . 150,000 .25 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxx Xxxxxx . . . . . . . . . 25,000 .25 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
X. Xxxxx Consulting . . . . . 25,000 .25 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Evergreen Investment Partners 700,000 .20 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Kenzy Investment Trust. . . . 300,000 .20 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Xxxxx Xxx . . . . . . . . . . 250,000 .22 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
J&J Xxxx. . . . . . . . . . . 1,000,000 .27 Demand if short form (S-3 or equivalent) is available
----------------------------- --------- -------- --------------------------------------------------------
Evergreen Investment Partners 300,000 .20 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Kenzy Investment Trust. . . . 400,000 .20 Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Para, Xxxxxx. . . . . . . . . 270,000 .16 Demand & Piggy-Back - Subject to underwriter restriction
----------------------------- --------- -------- --------------------------------------------------------
Pursuant to an Amended and Restated Secured Convertible Term Note, dated as
==========
ofNovember 30, 2004 (the "Note"), payable by the Company to Laurus Master Fund,
Ltd. ("Laurus"), the Company increased the aggregate principal amount of the
Secured Convertible Term Note, dated as of June 17, 2004, payable by the Company
to Laurus from $3,000,000 to $4,000,000. However, pursuant toa Payoff Letter
between the Company and Laurus, the Company has agreed to pay all amounts due
and owing under the Note and Laurus has agreed not to convert such Note.
In connection with the amendments described above, the Company issued to Laurus
a Common Stock Purchase Warrant to purchase up to 650,000 shares of the
Company's Class A Voting Common Stock.
On May 1, 2003, the Company issued to J&J Xxxx Family Limited Partnership a
Promissory Note in the principal amount of $1,300,000 with interest accruing at
10% per annum, payable monthly. On March 15, 2004, the term of the note was
extended to December 1, 2005. The Company has agreed to issue 5,000,000 shares
of the Company's Class A Common Stock in the event there is an event of default
on the note. In connection with the loan, the Company issued to J&J Xxxx Family
Limited Partnership warrants to purchase 1,300,000 shares of the Company's Class
B Common Stock at an exercise price of $0.10 per share.
On August 1, 2003, the Company issued to J&J Xxxx Family Limited Partnership a
Promissory Note in the principal amount of $200,000 with interest accruing at
18% per annum, payable monthly. On March 15, 2004, the term of the note was
extended to February 1, 2006. The Company has agreed to issue 5,000,000 shares
of the Company's Class A Common Stock in the event there is an event of default
on the note. In connection with the loan, the Company issued to J&J Xxxx Family
Limited Partnership warrants to purchase 1,000,000 shares of the Company's Class
B Common Stock at an exercise price of $0.027 per share.
SCHEDULE 4.5
===
CONSENTS
--------
Pursuant to a Securities Purchase Agreement, dated June 17, 2004, betweenLaurus
and the Company, the Company must obtain consent from Laurus prior to incurring
any indebtedness and Laurus has a right of first negotiation with respect to
transactions of the nature contemplated by the Transaction Documents. However,
pursuant toa Payoff Letter between the Company and Laurus, Laurus has agreed to
waive these rights and obligations.
SCHEDULE4.8
========
NO MATERIAL ADVERSE CHANGE
--------------------------
As required by the certain agreements with Laurus, certain post effective
amendments to the Company's registrations on form SB2 necessary to keep such
statement current have not been filed. Failure to maintain an effective
registration statement covering the registrable securities constitutes a breach
under the agreement and triggers certain cross-default provisions in the
Company's other agreements with Laurus. However, pursuant to a Payoff Letter
between the Company and Laurus, Laurus has agreed to waive its rights against
the Company in connection with this breach and granted the Company additional
time to complete the necessary registrations. In consideration therefore, the
Company has agreed to pay in full the amounts due and owing under a Note payable
to Laurus, which amount includes all principal, interest, fees, costs,
redemption costs, expenses and liquidated damages due and owing by the Company
under its agreements with Laurus.
Pursuant to an Investment Agreement and a Registration Rights Agreement, each
dated August 5, 2003, between the Company and Dutchess Private Equities Fund
L.P., the Company is required to maintain a current registration covering
certain shares of its Common Stock issued or issuable to Dutchess pursuant to
the Investment Agreement. The Investment Agreement also granted to Dutchess a
right of first refusal with respect to certain issuances of the Company's Common
Stock during a period ending around October 1, 2004. Certain post effective
amendments to the registration statement necessary to keep the registration
statement current have not been filed. In addition, the Company may have
entered into certain transactions prior to October 1, 2004 that would have been
subject to the right of first refusal provision of the Investment Agreement.
Dutchess has waived all its rights under both the Registration Rights Agreement
and the Investment Agreement with respect to any violation of the aforementioned
provisions up to and including July 8, 2005. Dutchess has also granted the
Company additional time to complete the necessary registrations.
SCHEDULE 4.10
NO CONFLICT, BREACH, VIOLATION OR DEFAULT
-----------------------------------------
See disclosure regarding agreements between the Company and Laurus and between
the Company and Dutchess.
SCHEDULE 4.11
TAX MATTERS
-----------
None.
SCHEDULE 4.12
TITLE TO PROPERTIES
-------------------
Laurus Master Fund, Ltd. has a continuing security interest in all of the assets
of LocatePLUS Holdings Corporation and its subsidiaries until such time as the
balance of its note is paid in full. Pursuant toa Payoff Letter between the
==========
Company and Laurus, the Company has agreed to pay all amounts due and owing
under the Note promptly following the Closing.
Pursuant to a Lease Agreement with Xxxxxxxx Properties Management, Inc.
("Xxxxxxxx"), dated July 11, 1997, as amended, Xxxxxxxx has a security interest
in all property of the Company located in the leased premises to secure the
payment of rent, the cost of leasehold improvements, and the performance of any
other obligations of the Company under this lease.
The Company has purchased equipment under various leasing arrangements. Title to
the leased equipment still resides with the leasing companies. It is
anticipated that the majority of leased equipment will be purchased at the end
of the lease term. Until the end of lease purchase has taken place, title to the
equipment is still held by the leasing companies. The following leasing
companies have a security interest in equipment that has been leased to the
company.
- Xxxxxxxxx Leasing Company
- Boston Financial and Equity Corporation
- NEXL Financial Services, Inc.
- Dell Financial Services
SCHEDULE 4.14
LABOR MATTERS
-------------
None.
SCHEDULE 4.17
LITIGATION
----------
None.
SCHEDULE 4.18
FINANCIAL STATEMENTS
--------------------
None.
=====
SCHEDULE 4.20
BROKERS AND FINDERS
-------------------
Pursuant to an agreement between the Company and Xxxxxxx & Co. (UK), Ltd.
("Xxxxxxx"), Xxxxxxx will be entitled to the following:
- a financing fee equal to nine (9%) percent of the total consideration paid
or payable in connection with the transactions contemplated by this Agreement;
- 6% warrant coverage on any equity or debt securities issued pursuant to
the Agreement; and
- Payment by the Company of fees and expenses of legal counsel not to exceed
$30,000.
SCHEDULE 4.25
TRANSACTIONS WITH AFFILIATES
----------------------------
None.
=====
