EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of June 14,
2006, by and among American United Global, Inc., a Delaware corporation, with
headquarters located at 000 Xxxxxxx Xxxxxx #000, Xxxxxx, Xxx Xxxx 00000 (the
"Company"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and each Buyer is executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act.
B. The Company has authorized a new series of senior secured convertible
notes of the Company, in substantially the form attached hereto as Exhibit A
(the "Notes"), which Notes shall be convertible into the Company's common stock,
par value $0.01 per share (the "Common Stock"), in accordance with the terms of
the Notes.
C. Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) that aggregate principal
amount of the Notes set forth opposite such Buyer's name in column (3) on the
Schedule of Buyers attached hereto (which aggregate amount for all Buyers shall
be $6,000,000) (as converted, collectively, the "Conversion Shares"), (ii) that
aggregate number of shares of the Common Stock set forth opposite such Buyer's
name in column (4) on the Schedule of Buyers attached hereto (which aggregate
amount for all Buyers together shall be 4,800,000 shares of Common Stock and
shall be collectively referred to herein as the "Common Shares") (iii) (A)
Series A Warrants, in substantially the form attached hereto as Exhibit B-1 (the
"Series A Warrants"), to acquire up to that number of shares of Common Stock set
forth opposite such Buyer's name in column (2) of the Schedule of Warrants
attached hereto, (B) Series B Warrants, in substantially the form attached
hereto as Exhibit B-2 (the "Series B Warrants"), to acquire up to that number of
shares of Common Stock set forth opposite such Buyer's name in column (3) of the
Schedule of Warrants attached hereto following the exercise of the Series A
Warrants on a share by share basis, (C) Series C Warrants, in substantially the
form attached hereto as Exhibit B-3 (the "Series C Warrants"), to acquire up to
that number of shares of Common Stock set forth opposite such Buyer's name in
column (4) of the Schedule of Warrants attached hereto, and (D) Series D
Warrants, in substantially the form attached hereto as Exhibit B-4 (the "Series
D Warrants"), to acquire up to that number of shares of Common Stock set forth
opposite such Buyer's name in column (5) of the Schedule of Warrants attached
hereto following the exercise of the Series C Warrants on a share by share basis
(the Series A Warrants, the Series B Warrants, the Series C Warrants and the
Series D Warrants are collectively referred to as the "Warrants") (as exercised,
collectively, the "Warrant Shares").
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit C (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Conversion Shares, the Common Shares and
the Warrant Shares under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
E. The Notes, the Conversion Shares, the Common Shares, the Warrants and
the Warrant Shares collectively are referred to herein as the "Securities".
F. The Notes will rank senior to all outstanding and future indebtedness
of the Company other than the Senior Indebtedness (as defined in the Notes) and
will be secured by a first priority, perfected security interest, subject to the
Senior Indebtedness (as defined in the Notes) in all of the assets of the
Company and the stock and assets of each of the Company's subsidiaries
(collectively, the "Collateral"), as evidenced by (i) the security agreement
attached hereto as Exhibit D-1 (the "Security Agreement"), (ii) the pledge
agreement attached hereto as Exhibit E (the "Pledge Agreement"), (ii) the
guarantee attached hereto as Exhibit F (the "Guarantee", and together with the
Security Agreement, the Pledge Agreement and any ancillary documents related
thereto, collectively the "US Security Documents"), (iii) the Hungarian Security
Agreement attached hereto as Exhibit D-2 (the "Hungarian General Security
Agreement") and (iv) the Hungarian security agreement attached hereto as Exhibit
D-3 (the "Hungarian Other Security Agreement", and together with the Hungarian
General Security Agreement and any ancillary documents related thereto, the
"Hungarian Security Documents", and together with the US Security Documents, the
"Security Documents").
G. The Company has entered into a Securities Purchase Agreements (the
"Acquisition Agreement") with the stockholders of Xxxxx Xx., a Hungarian
corporation ("Kraft"), pursuant to which the Company shall acquire 95.5% of the
outstanding capital stock of Kraft (the "Acquisition") simultaneously with the
Closing (as defined below).
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
(a) Purchase of Securities.
(i) Subject to the satisfaction (or waiver) of the conditions
set forth in Sections 6 and 7 below, the Company shall issue and sell to each
Buyer, and each Buyer severally, but not jointly, agrees to purchase from the
Company on the Closing Date (as defined below), (A) a principal amount of Notes
as is set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers, (B) the number of Common Shares set forth opposite such Buyer's name in
column (4) on the Schedule of Buyers, (C) one or more Series A Warrants to
acquire up to that number of Warrant Shares as is set forth opposite such
Buyer's name in column (2) on the Schedule of Warrants, (D) one or more Series B
Warrants to acquire up to that number of Warrant Shares as is set forth opposite
such Buyer's name in column (3) on the Schedule of Warrants, (E) one or more
Series C Warrants to acquire up to that number of Warrant Shares as is set forth
opposite such Buyer's name in column (4) on the Schedule of Warrants and (F) one
or more Series D Warrants to acquire up to that number of Warrant Shares as is
set forth opposite such Buyer's name in column (5) on the Schedule of Warrants
(the "Closing").
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(ii) Closing. The date and time of the Closing (the "Closing
Date") shall be 10:00 a.m., New York City Time, on the date hereof (or such
later date as is mutually agreed to by the Company and each Buyer) after
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(iii) Purchase Price.
(1) The aggregate purchase price for the Notes, Common
Shares and the Warrants to be purchased by each Buyer at the Closing (the
"Purchase Price") shall be the amount set forth opposite such Buyer's name
in column (6) of the Schedule of Buyers. Each Buyer shall pay $1.00 for
each $1.00 of principal amount of Notes, related Common Shares and related
Warrants to be purchased by such Buyer at the Closing.
(2) The Buyers and the Company agree that the Notes, the
Common Shares and the Warrants constitute an "investment unit" for
purposes of Section 1273(c)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"). Not later than two days before the Closing Date, the
Buyers shall notify the Company of their determination of the allocation
of the issue price of such investment unit among the Notes, the Common
Shares and the Warrants in accordance with Section 1273(c)(2) of the Code
and Treasury Regulation Section 1.1273-2(h), and neither the Buyers nor
the Company shall take any position inconsistent with such allocation in
any tax return or in any judicial or administrative proceeding in respect
of taxes.
(b) Form of Payment. On the Closing Date, (i) each Buyer shall pay
its Purchase Price to the Company for the Notes, the Common Shares and the
Warrants to be issued and sold to such Buyer at the Closing by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions and (ii) the Company shall deliver to each Buyer (A) the Notes (in
the principal amounts as such Buyer shall request) which such Buyer is then
purchasing, (B) a stock certificate evidencing the number of Common Shares such
Buyer is purchasing and (C) the Warrants (in the amounts as such Buyer shall
request) which such Buyer is purchasing, in each case duly executed on behalf of
the Company and registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
(a) No Public Sale or Distribution. Such Buyer is (i) acquiring the
Notes, the Common Shares and the Warrants and (ii) upon conversion of the Notes
and exercise of the Warrants (other than pursuant to a Cashless Exercise (as
defined in the Warrants)) will acquire the Conversion Shares issuable upon
conversion of the Notes and Warrants and the Warrant Shares issuable upon
exercise of the Warrants, for its own account and not with a view towards, or
for resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, such Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business. Such
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
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(b) Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
herein. Such Buyer understands that its investment in the Securities involves a
high degree of risk. Such Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.
(e) No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under the 1933 Act, as amended, (or a successor rule thereto) (collectively,
"Rule 144"); (ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of the Securities under circumstances in which the
seller (or the Person (as defined in Section 3(s)) through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 0000
Xxx) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other Person is under any obligation to register the Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder.
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(g) Legends. Such Buyer understands that the certificates or other
instruments representing the Notes, the Common Shares and the Warrants and,
until such time as the resale of the Common Shares, the Conversion Shares and
the Warrant Shares have been registered under the 1933 Act as contemplated by
the Registration Rights Agreement, the stock certificates representing the
Common Shares, the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the "blue sky" laws of any state and
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) such holder provides
the Company with reasonable assurance that the Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A.
(h) Validity; Enforcement. This Agreement, the Registration Rights
Agreement and the Security Documents to which such Buyer is a party have been
duly and validly authorized, executed and delivered on behalf of such Buyer and
shall constitute the legal, valid and binding obligations of such Buyer
enforceable against such Buyer in accordance with their respective terms, except
as such enforceability may be limited by general principles of equity or to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
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(i) No Conflicts. The execution, delivery and performance by such
Buyer of this Agreement, the Registration Rights Agreement and the Security
Documents to which such Buyer is a party and the consummation by such Buyer of
the transactions contemplated hereby and thereby will not (i) result in a
violation of the organizational documents of such Buyer or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
(j) Residency. Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
(a) Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) are entities duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authorization to own their properties and to carry on
their business as now being conducted. Each of the Company and its Subsidiaries
is duly qualified as a foreign entity to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Documents or by the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). The Company has
no Subsidiaries except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement, the Notes, the Registration Rights Agreement, the Security
Documents, the Voting Agreements, the Irrevocable Transfer Agent Instructions
(as defined in Section 5(b)), the Warrants, the Acquisition Agreement and each
of the other agreements entered into by the parties hereto in connection with
the transactions contemplated hereby and thereby (collectively, the "Transaction
Documents") and to issue the Securities in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Notes, the Common
Shares and the Warrants, the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion of the Notes, the reservation for
issuance and issuance of Warrant Shares issuable upon exercise of the Warrants,
and the granting of a security interest in the Collateral (as defined in the
Security Documents) have been duly authorized by the Company's Board of
Directors and (other than (i) the filing of appropriate UCC financing statements
with the appropriate states and other authorities pursuant to the Pledge and
Security Agreement, and (ii) the filing with the SEC of one or more Registration
Statements in accordance with the requirements of the Registration Rights
Agreement) no further filing, consent, or authorization is required by the
Company, its Board of Directors or its stockholders. This Agreement and the
other Transaction Documents of even date herewith have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
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(c) Issuance of Securities. The Notes, the Common Shares and the
Warrants are duly authorized and, upon issuance in accordance with the terms
hereof, shall be validly issued and free from all taxes, liens and charges with
respect to the issue thereof and the Common Shares shall be fully paid and
nonassessable with the holders being entitled to all rights accorded to a holder
of Common Stock. As of the Closing, a number of shares of Common Stock shall
have been duly authorized and reserved for issuance which equals 130% of the
maximum number of shares Common Stock issuable upon conversion of the Notes and
upon exercise of the Warrants. Upon conversion in accordance with the Notes or
exercise in accordance with the Warrants, as the case may be, the Conversion
Shares and the Warrant Shares, respectively, will be validly issued, fully paid
and nonassessable and free from all preemptive or similar rights, taxes, liens
and charges with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock. The offer and issuance by
the Company of the Securities is exempt from registration under the 1933 Act.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Notes, the Common Shares and the Warrants, the granting of a
security interest in the Collateral and reservation for issuance and issuance of
the Conversion Shares and the Warrant Shares) will not (i) result in a violation
of the Certificate of Incorporation (as defined in Section 3(r)) of the Company
or any of its Subsidiaries, any capital stock of the Company or Bylaws (as
defined in Section 3(r)) of the Company or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of the Pink Sheets (the "Principal Market"))
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected.
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(e) Consents. The Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the Closing
Date, and the Company and its Subsidiaries are unaware of any facts or
circumstances which might prevent the Company from obtaining or effecting any of
the registration, application or filings pursuant to the preceding sentence. The
Company is not in violation of the listing requirements of the Principal Market
and has no knowledge of any facts which would reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future.
(f) Acknowledgment Regarding Buyer's Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company, (ii) an "affiliate" of the Company (as defined in
Rule 144) or (iii) to the knowledge of the Company, a "beneficial owner" of more
than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended (the "1934 Act")). The Company
further acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Buyer's purchase of the Securities. The Company
further represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim. The Company acknowledges that it has engaged Olympus
Securities, LLC as placement agent (the "Agent") in connection with the sale of
the Securities. Other than the Agent, the Company has not engaged any placement
agent or other agent in connection with the sale of the Securities.
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(h) No Integrated Offering. None of the Company, its Subsidiaries,
any of their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. None of the
Company, its Subsidiaries, their affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other offerings.
(i) Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Notes and the
Warrant Shares issuable upon exercise of the Warrants will increase in certain
circumstances. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Notes in accordance with this Agreement
and the Notes and its obligation to issue the Warrant Shares upon exercise of
the Warrants in accordance with this Agreement and the Warrants, in each case,
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company.
(j) Application of Takeover Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the jurisdiction of its formation which is or could become
applicable to any Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities and any Buyer's ownership of the Securities. Except as set forth on
Schedule 3(j), the Company has not adopted a stockholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock or
a change in control of the Company.
(k) SEC Documents; Financial Statements. Except as disclosed in
Schedule 3(k), during the two (2) years prior to the date hereof, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
1934 Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements, notes and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). The Company has delivered to the Buyers or their respective
representatives true, correct and complete copies of the SEC Documents not
available on the XXXXX system. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
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(l) Absence of Certain Changes. Except as disclosed in Schedule
3(l), since [December 31, 2005], there has been no material adverse change and
no material adverse development in the business, properties, operations,
condition (financial or otherwise), results of operations or prospects of the
Company or its Subsidiaries. Except as disclosed in Schedule 3(l), since
[December 31, 2005], the Company has not (i) declared or paid any dividends,
(ii) sold any assets, individually or in the aggregate, in excess of $50,000
outside of the ordinary course of business or (iii) had capital expenditures,
individually or in the aggregate, in excess of $50,000. The Company has not
taken any steps to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so. The Company is not as of the
date hereof, and after giving effect to the transactions contemplated hereby to
occur at the Closing, will not be Insolvent (as defined below). For purposes of
this Section 3(l), "Insolvent" means (i) the present fair saleable value of the
Company's assets is less than the amount required to pay the Company's total
Indebtedness (as defined in Section 3(s)), (ii) the Company is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
(m) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur with respect to the Company, its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits. Neither the Company nor
its Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation or Bylaws or their organizational charter or
certificate of incorporation or bylaws, respectively. Neither the Company nor
any of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Company is
not in violation of any of the rules, regulations or requirements of the
Principal Market and has no knowledge of any facts or circumstances which would
reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. Since December 31, 2004, (i) the Common Stock
has been designated for quotation on the Principal Market, (ii) trading in the
Common Stock has not been suspended by the SEC or the Principal Market and (iii)
the Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common Stock from
the Principal Market. The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct their respective businesses, except where the failure to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
- 10 -
(o) Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any and
all applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof,
except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.
(q) Transactions With Affiliates. Except as set forth in the SEC
Documents filed at least ten days prior to the date hereof and other than the
grant of stock options disclosed on Schedule 3(q), none of the officers,
directors or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or 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 such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
- 11 -
(r) Equity Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 40,000,000 shares of Common Stock,
of which as of the date hereof, 12,646,396 are issued and outstanding, no shares
are reserved for issuance pursuant to the Company's stock option and purchase
plans and 10,092,130 shares are reserved for issuance pursuant to securities
(other than the Notes and the Warrants) exercisable or exchangeable for, or
convertible into, shares of Common Stock and (ii) (w) 1,200,000 shares of 12.5%
cumulative preferred stock, par value $0.01 per share, of which as of the date
hereof, none are issued and outstanding, (x) 1,000,000 shares of Series B-1
Preferred Stock, par value $0.01 per share, of which as of the date hereof,
255,094 are issued and outstanding, (y) 232,500 shares of Series B-3 Preferred
Stock, par value $0.01 per share, of which as of the date hereof, 48,426 are
issued and outstanding, and (z) 100,000 shares of Series B-4 Preferred Stock,
par value $0.01 per share, of which as of the date hereof, 95,500 are issued and
outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(r): (i) none of the Company's capital stock is subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company; (ii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any capital stock of the Company or any of its Subsidiaries,
or contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to issue additional capital
stock of the Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any capital stock of the Company or any of its Subsidiaries;
(iii) there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
of the Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (vi) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The Company has
furnished to the Buyer true, correct and complete copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "Certificate of Incorporation"), and the Company's Bylaws, as amended and
as in effect on the date hereof (the "Bylaws"), and the terms of all securities
convertible into, or exercisable or exchangeable for, shares of Common Stock and
the material rights of the holders thereof in respect thereto.
- 12 -
(s) Indebtedness and Other Contracts. Except as disclosed in
Schedule 3(s), neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness (as defined below), (ii) is a party to any contract,
agreement or instrument, the violation of which, or default under which, by the
other party(ies) to such contract, agreement or instrument would result in a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. Schedule 3(s) provides a detailed description of the material
terms of any such outstanding Indebtedness. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by the Principal Market, any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or its
Subsidiaries' officers or directors in their capacities as such, except as set
forth in Schedule 3(t).
(u) Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
- 13 -
(v) Employee Relations. (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer of the Company or any of its
Subsidiaries (as defined in Rule 501(f) of the 0000 Xxx) has notified the
Company or any such Subsidiary that such officer intends to leave the Company or
otherwise terminate such officer's employment with the Company or any such
Subsidiary. No executive officer of the Company or any of its Subsidiaries, to
the knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters.
(ii) The Company and its Subsidiaries are in compliance with
all federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
(w) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and any of its Subsidiaries except to the extent that the property
is secured by the Senior Indebtedness (as defined in the Notes). Any real
property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(x) Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("Intellectual Property Rights") necessary to conduct their respective
businesses as now conducted. Except as set forth in Schedule 3(x), none of the
Company's Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate, within three years from the date of this
Agreement. The Company does not have any knowledge of any infringement by the
Company or its Subsidiaries of Intellectual Property Rights of others. There is
no claim, action or proceeding being made or brought, or to the knowledge of the
Company, being threatened, against the Company or its Subsidiaries regarding its
Intellectual Property Rights. The Company is unaware of any facts or
circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
- 14 -
(y) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "Environmental Laws" means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary Rights. Except as set forth in Schedule 3(z), the
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(aa) Tax Status. The Company and each of its Subsidiaries (i) has
made or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
(bb) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.
- 15 -
(cc) Ranking of Notes. Except as set forth on Schedule (cc), no
Indebtedness of the Company is senior to or ranks pari passu with the Notes in
right of payment, whether with respect of payment of redemptions, interest,
damages or upon liquidation or dissolution or otherwise.
(dd) Form SB-2 Eligibility. The Company is eligible to register the
Common Shares, Conversion Shares and the Warrant Shares for resale by the Buyers
using Form SB-2 promulgated under the 1933 Act.
(ee) Manipulation of Price. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) other than the Agent, sold, bid for, purchased, or
paid any compensation for soliciting purchases of, any of the Securities, or
(iii) other than the Agent, paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of the Company.
(ff) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that constitutes or could reasonably be expected to
constitute material, nonpublic information other than as set forth in the
following sentence. The Company understands and confirms that each of the Buyers
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Buyers regarding the
Company, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of the Company is true
and correct and does 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. Each press release issued by the Company during the twelve (12)
months preceding the date of this Agreement did not at the time of release
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
(gg) Stockholder Approval. The Company has received the approval of
its stockholders in accordance with applicable law and the Company's governing
documents of resolutions (the "Resolutions") in the form attached hereto as
Exhibit L authorizing the Company's filing with the Secretary of State of
Delaware of the amendment to the Certificate of Incorporation in the form
attached hereto as Exhibit M (the "Certificate of Incorporation Amendment") to
increase the authorized capital stock of the Company from 40,000,000 to
150,000,000 (such affirmative approval being referred to herein as the
"Stockholder Approval").
- 16 -
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date. The Company shall make all filings and reports relating to the offer and
sale of the Securities required under applicable securities or "Blue Sky" laws
of the states of the United States following the Closing Date.
(c) Reporting Status. Until the date on which the Investors (as
defined in the Registration Rights Agreement) shall have sold all the Common
Shares, the Conversion Shares and Warrant Shares and none of the Notes or
Warrants is outstanding (the "Reporting Period"), the Company shall file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale
of the Securities for the purchase of capital equipment and general corporate
purposes; provided, further, that the Company may not use the proceeds from the
sale of the Securities for (i) the repayment of any other outstanding
Indebtedness of the Company or any of its Subsidiaries or (ii) the redemption or
repurchase of any of its or its Subsidiaries' equity securities.
(e) Financial Information. The Company agrees to send the following
to each Investor during the Reporting Period (i) unless the following are filed
with the SEC through XXXXX and are available to the public through the XXXXX
system, within one (1) Business Day after the filing thereof with the SEC, a
copy of its Annual Reports on Form 10-K or 10-KSB, any interim reports or any
consolidated balance sheets, income statements, stockholders' equity statements
and/or cash flow statements for any period other than annual, any Current
Reports on Form 8-K and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act, (ii) on the same day as the release
thereof, facsimile or e-mailed copies of all press releases issued by the
Company or any of its Subsidiaries, and (iii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
(f) Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which the Common Stock is then listed (subject to official notice of
issuance) and shall maintain such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents. The Company
shall maintain the Common Stocks' authorization for quotation on the Principal
Market. Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Stock on the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).
- 17 -
(g) Fees. Subject to Section 8 below, at the Closing, the Company
shall pay up to $100,000 to Highbridge Capital Management, LLC or its
designee(s) (in addition to any other expense amounts paid to any Buyer prior to
the date of this Agreement) for legal expenses incurred and documented, which
amount shall be withheld by Smithfield Fiduciary LLC ("Smithfield") from its
Purchase Price at the Closing. The Company shall be responsible for the payment
of any placement agent's fees, financial advisory fees, or broker's commissions
(other than for Persons engaged by any Buyer) relating to or arising out of the
transactions contemplated hereby, including, without limitation, any fees or
commissions payable to the Agent. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyers.
(h) Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged by an Investor (as defined in the Registration
Rights Agreement) in connection with a bona fide margin agreement or other loan
or financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.
(i) Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York Time, on the first Business Day following the date of
this Agreement, the Company shall file a Current Report on Form 8-K describing
the terms of the transactions contemplated by the Transaction Documents in the
form required by the 1934 Act and attaching the material Transaction Documents
(including, without limitation, this Agreement (and all schedules to this
Agreement), the form of each of the Notes, the form of Warrant, the Registration
Rights Agreement, the Security Documents, the Acquisition Agreement and any
other material transaction documents relating thereto) as exhibits to such
filing (including all attachments, the "8-K Filing"). From and after the filing
of the 8-K Filing with the SEC, no Buyer shall be in possession of any material,
nonpublic information received from the Company, any of its Subsidiaries or any
of their respective officers, directors, employees or agents, that is not
disclosed in the 8-K Filing. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide any Buyer with any material, nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing of
the 8-K Filing with the SEC without the express written consent of such Buyer.
In the event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of their respective officers, directors, employees and
agents, in addition to any other remedy provided herein or in the Transaction
Documents, a Buyer shall have the right to make a public disclosure, in the form
of a press release, public advertisement or otherwise, of such material,
nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of their respective officers, directors, employees or
agents. No Buyer shall have any liability to the Company, its Subsidiaries, or
any of its or their respective officers, directors, employees, stockholders or
agents for any such disclosure. Subject to the foregoing, neither the Company,
its Subsidiaries nor any Buyer shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions (i) in substantial conformity with the 8-K Filing
and contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).
- 18 -
(j) Restriction on Redemption and Cash Dividends. So long as any
Notes are outstanding, the Company shall not, directly or indirectly, redeem, or
declare or pay any cash dividend or distribution on, the Common Stock without
the prior express written consent of the Required Holders (as defined in the
Notes).
(k) Additional Notes; Variable Securities; Dilutive Issuances. So
long as any Buyer beneficially owns any Securities, the Company shall not issue
any other securities that would cause a breach or default under the Notes. For
long as any Notes or Warrants remain outstanding, the Company shall not, in any
manner, issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the
market price of the Common Stock, including by way of one or more reset(s) to
any fixed price unless the conversion, exchange or exercise price of any such
security cannot be less than the then applicable Conversion Price (as defined in
the Notes) with respect to the Common Stock into which any Note is convertible
or the then applicable Exercise Price (as defined in the Warrants) with respect
to the Common Stock into which any Warrant is exercisable. For long as any Notes
or Warrants remain outstanding, the Company shall not, in any manner, enter into
or affect any Dilutive Issuance (as defined in the Notes) if the effect of such
Dilutive Issuance is to cause the Company to be required to issue upon
conversion of any Note or exercise of any Warrant any shares of Common Stock in
excess of that number of shares of Common Stock which the Company may issue upon
conversion of the Notes and exercise of the Warrants without breaching the
Company's obligations under the rules or regulations of the Eligible Market (as
defined in the Registration Rights Agreement). For long as any Notes or Warrants
remain outstanding, the Company shall not effect a reverse stock split of one or
more classes of the Company's Common Stock except for one reverse stock split of
the Common Stock of the Company at a rate of one (1) share of Common Stock for
each one and six tenths (1.6) shares of Common Stock outstanding.
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(l) Corporate Existence. So long as any Buyer beneficially owns any
Securities, the Company shall not be party to any Fundamental Transaction (as
defined in the Notes) unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the
Warrants.
(m) Reservation of Shares. So long as any Buyer owns any Securities,
the Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than 130% of the number of shares
of Common Stock issuable upon conversion of all of the Notes and issuable upon
exercise of the Warrants then outstanding (without taking into account any
limitations on the conversion of the Notes or exercise of the Warrants set forth
in the Notes and Warrants, respectively).
(n) Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(o) Additional Issuances of Securities.
(i) For purposes of this Section 4(o), the following
definitions shall apply.
(1) "Convertible Securities" means any stock or
securities (other than Options) convertible into or exercisable or
exchangeable for shares of Common Stock.
(2) "Options" means any rights, warrants or options to
subscribe for or purchase shares of Common Stock or Convertible
Securities.
(3) "Common Stock Equivalents" means, collectively,
Options and Convertible Securities.
(ii) From the date hereof until the date that is sixty (60)
Trading Days (as defined in the Notes) following the Effective Date (as defined
in the Registration Rights Agreement) (the "Trigger Date"), except for the
issuance Excluded Securities as defined in the Notes, the Company will not,
directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition of) any of its or its Subsidiaries' equity or equity
equivalent securities, including without limitation any debt, preferred stock or
other instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares of
Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent Placement").
(iii) From the Trigger Date until the later of (x) eighteen
(18) months following the Effective Date and (y) the date on which none of the
Notes is outstanding, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with this
Section 4(o)(iii).
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(1) The Company shall deliver to each Buyer an
irrevocable written notice (the "Offer Notice") of any proposed or
intended issuance or sale or exchange (the "Offer") of the securities
being offered (the "Offered Securities") in a Subsequent Placement, which
Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other terms upon which they are to be issued, sold
or exchanged, and the number or amount of the Offered Securities to be
issued, sold or exchanged, (y) identify the persons or entities (if known)
to which or with which the Offered Securities are to be offered, issued,
sold or exchanged and (z) offer to issue and sell to or exchange with such
Buyers all of the Offered Securities, allocated among such Buyers (a)
based on such Buyer's pro rata portion of the aggregate principal amount
of Notes purchased hereunder (the "Basic Amount"), and (b) with respect to
each Buyer that elects to purchase its Basic Amount, any additional
portion of the Offered Securities attributable to the Basic Amounts of
other Buyers as such Buyer shall indicate it will purchase or acquire
should the other Buyers subscribe for less than their Basic Amounts (the
"Undersubscription Amount").
(2) To accept an Offer, in whole or in part, such Buyer
must deliver a written notice to the Company prior to the end of the fifth
(5th) Business Day after such Buyer's receipt of the Offer Notice (the
"Offer Period"), setting forth the portion of such Buyer's Basic Amount
that such Buyer elects to purchase and, if such Buyer shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any,
that such Buyer elects to purchase (in either case, the "Notice of
Acceptance"). If the Basic Amounts subscribed for by all Buyers are less
than the total of all of the Basic Amounts, then each Buyer who has set
forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if
the Undersubscription Amounts subscribed for exceed the difference between
the total of all the Basic Amounts and the Basic Amounts subscribed for
(the "Available Undersubscription Amount"), each Buyer who has subscribed
for any Undersubscription Amount shall be entitled to purchase only that
portion of the Available Undersubscription Amount as the Basic Amount of
such Buyer bears to the total Basic Amounts of all Buyers that have
subscribed for Undersubscription Amounts, subject to rounding by the
Company to the extent its deems reasonably necessary, which process shall
be repeated until the Buyers shall have an opportunity to subscribe for
any remaining Undersubscription Amount.
(3) The Company shall have twenty (20) Business Days
from the expiration of the Offer Period above to offer, issue, sell or
exchange all or any part of such Offered Securities as to which a Notice
of Acceptance has not been given by the Buyers (the "Refused Securities"),
but only to the offerees described in the Offer Notice (if so described
therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to
the acquiring person or persons or less favorable to the Company than
those set forth in the Offer Notice.
- 21 -
(4) In the event the Company shall propose to sell less
than all the Refused Securities (any such sale to be in the manner and on
the terms specified in Section 4(o)(iii)(3) above), then each Buyer may,
at its sole option and in its sole discretion, reduce the number or amount
of the Offered Securities specified in its Notice of Acceptance to an
amount that shall be not less than the number or amount of the Offered
Securities that such Buyer elected to purchase pursuant to Section
4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be
issued or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to
such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities. In the event that any Buyer so elects to
reduce the number or amount of Offered Securities specified in its Notice
of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Buyers in accordance with
Section 4(o)(iii)(1) above.
(5) Upon the closing of the issuance, sale or exchange
of all or less than all of the Refused Securities, the Buyers shall
acquire from the Company, and the Company shall issue to the Buyers, the
number or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 4(o)(iii)(4) above if the
Buyers have so elected, upon the terms and conditions specified in the
Offer. The purchase by the Buyers of any Offered Securities is subject in
all cases to the preparation, execution and delivery by the Company and
the Buyers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Buyers and their
respective counsel. Notwithstanding anything to the contrary contained in
this Agreement, if the Company does not consummate the closing of the
issuance, sale or exchange of all or less than all of the Refused
Securities, within ten (10) Business Days of the expiration of the Offer
Period, the Company shall issue to the Buyers, the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 4(o)(iii)(4) above if the Buyers have so elected, upon
the terms and conditions specified in the Offer.
(6) Any Offered Securities not acquired by the Buyers or
other persons in accordance with Section 4(o)(iii)(3) above may not be
issued, sold or exchanged until they are again offered to the Buyers under
the procedures specified in this Agreement.
(iv) The restrictions contained in subsections (ii) and (iii)
of this Section 4(o) shall not apply in connection with the issuance of any
Excluded Securities (as defined in the Notes).
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(p) Stockholder Approval. The Company shall file with the SEC and
provide each stockholder of the Company with an information statement complying
with the requirements of the Exchange Act and substantially in the form that has
been previously reviewed and approved by Smithfield and Xxxxxxx Xxxx & Xxxxx LLP
at the expense of the Company informing such stockholders of the actions taken
in accordance with the Resolutions and of the Stockholder Approval. On or prior
to the first Business Day following the effective date of the Stockholder
Approval, the Company shall file the Certificate of Incorporation Amendment with
the Secretary of State of Delaware (the date such filing has been accepted by
the Secretary of State of Delaware, the "Amendment Date"). In addition to the
foregoing, if required by any governmental or regulatory agency, the Company
shall provide each stockholder entitled to vote at a special or annual meeting
of stockholders of the Company (the "Stockholder Meeting"), which initially
shall be promptly called and held not later than (x) in the event the applicable
proxy statement is not reviewed by the SEC, June 15, 2006 and (y) otherwise,
July 15, 2006 (the "Stockholder Meeting Deadline" and the actual date of such
meeting, the "Stockholder Meeting Date"), a proxy statement, substantially in
the form which has been previously reviewed and approved by the Buyers and one
counsel of their choice at the expense of the Company, soliciting each such
stockholder's affirmative vote at the Stockholder Meeting for Stockholder
Approval of the Resolutions (the date such approval is obtained, the
"Stockholder Approval Date"), and the Company shall use its reasonable best
efforts to solicit its stockholders' approval of the Resolutions and to cause
the Board to recommend to the stockholders that they approve the Resolutions.
The Company shall be obligated to seek to obtain such Stockholder Approval by
the Stockholder Meeting Deadline. If, despite the Company's best efforts the
Stockholder Approval is not obtained on or prior to the Stockholder Meeting
Deadline, the Company shall cause an additional Stockholder Meeting to be held
each calendar quarter thereafter (or such longer period as is necessary to the
extent of SEC comments on any proxy statement) until such Stockholder Approval
is obtained.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to each holder of Securities), a register for the Notes and the Warrants
in which the Company shall record the name and address of the Person in whose
name the Notes and the Warrants have been issued (including the name and address
of each transferee), the principal amount of Notes held by such Person, the
number of Conversion Shares issuable upon conversion of the Notes, and the
Warrant Shares issuable upon exercise of the Warrants, held by such Person. The
Company shall keep the register open and available at all times during business
hours for inspection of any Buyer or its legal representatives.
(b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company ("DTC"), registered in the name of each Buyer or its
respective nominee(s), for the Common Shares issued at the Closing and the
Conversion Shares and the Warrant Shares issued upon conversion of the Notes or
exercise of the Warrants in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the Notes or exercise of the Warrants in
the form of Exhibit G attached hereto (the "Irrevocable Transfer Agent
Instructions"). The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and
stop transfer instructions to give effect to Section 2(g) hereof, will be given
by the Company to its transfer agent, and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Section 2(f), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. In the
event that such sale, assignment or transfer involves Common Shares, Conversion
Shares or Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall issue
such Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend.
- 23 -
(c) Breach. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that a
Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.
(d) Additional Relief. If the Company shall fail for any reason (or
for no reason) to issue to a holder unlegended certificates or credit such
holder's balance account with DTC for the number of shares of unrestricted
Common Stock to which such holder is entitled within five (5) Trading Days (as
defined in the Notes) (the "Share Delivery Date") of receipt of documents
necessary for the removal of legend set forth above (a "Share Delivery
Failure"), then the Company shall pay damages to such holder for each date of
such Share Delivery Failure in an amount equal to 2.0% of the product of (I) the
sum of the number of shares of Common Stock requested by such holder to have
legends removed and not issued without legends to such holder or credited to
such holder's balance account with DTC on or prior to the Share Delivery Date
and to which such holder is entitled, and (II) the Closing Sale Price (as
defined in the Notes) of the Common Stock on the Share Delivery Date. If the
Company shall fail for any reason (or for no reason) to issue to such holder
unlegended certificates or credit the Holder's balance account with DTC for the
number of shares of Common Stock to which the Holder is entitled within three
(3) Trading Days of receipt of documents necessary for the removal of legend set
forth above (the "Deadline Date"), then, in addition to all other remedies
available to the holder, if on or after such Trading Day, the holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the holder of shares of Common Stock that the
holder anticipated receiving from the Company (a "Buy-In"), then the Company
shall, within three (3) Trading Days after the holder's request and in the
holder's discretion, either (i) pay cash to the holder in an amount equal to the
holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased (the "Buy-In Price"), at which point the
Company's obligation to deliver such certificate (and to issue such shares of
Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to the holder a certificate or certificates representing such shares of Common
Stock and pay cash to the holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Bid Price on the Deadline Date.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Notes,
the Common Shares and the related Warrants to each Buyer at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:
- 24 -
(i) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(ii) Such Buyer and each other Buyer shall have delivered to
the Company the Purchase Price (less, in the case of Smithfield, the amounts
withheld pursuant to Section 4(g)) for the Notes, the Common Shares and the
related Warrants being purchased by such Buyer at the Closing by wire transfer
of immediately available funds pursuant to the wire instructions provided by the
Company.
(iii) The representations and warranties of such Buyer shall
be true and correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Notes, the
related Common Shares and the related Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:
(i) The Company shall have executed and delivered to such
Buyer (A) each of the Transaction Documents applicable to it, (B) the Notes (in
such principal amounts as such Buyer shall request) being purchased by such
Buyer at the Closing pursuant to this Agreement, (C) the Common Shares (in such
amounts as such Buyer shall request) being purchased by such Buyer at the
Closing pursuant to this Agreement and (C) the Warrants (in such amounts as such
Buyer shall request) being purchased by such Buyer at the Closing pursuant to
this Agreement.
(ii) Such Buyer shall have received the opinions of Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP, the Company's outside counsel, dated as of the
Closing Date, in substantially the form of Exhibit H-1 attached hereto.
(iii) Such Buyer shall have received the opinions of Xx.
Xxxxxx Xxxxxxxxxxx, the Company's outside Hungarian counsel, dated as of the
Closing Date, in substantially the form of Exhibit H-2 attached hereto.
(iv) The Company shall have delivered to such Buyer a copy of
the Irrevocable Transfer Agent Instructions, in the form of Exhibit G attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
- 25 -
(v) The Company shall have delivered to such Buyer a
certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in such entity's jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction, as of a date
within 10 days of the Closing Date.
(vi) The Company shall have delivered to such Buyer a
certificate evidencing the Company's qualification as a foreign corporation and
good standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company conducts business, as of a date within 10 days
of the Closing Date.
(vii) The Company shall have delivered to such Buyer a
certified copy of the Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within ten (10) days of the Closing Date.
(viii) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted
by the Company's Board of Directors in a form reasonably acceptable to such
Buyer, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in
effect at the Closing, in the form attached hereto as Exhibit I.
(ix) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit J.
(x) The Company shall have delivered to such Buyer duly
executed Voting Agreements from The Xxxxx Family Irrevocable Trust, Xxxxxx
Xxxxxx, Nagyezsda Kiss, Zoltan Kiss, Xxxxxx Xxxxxxx Kiss and Xxxxx Xxxxxxxxx
Xxxx, in the form attached hereto as Exhibit K (the "Voting Agreements").
(xi) The Company shall have delivered to such Buyer executed
Resolutions in the form attached hereto as Exhibit L authorizing the Company's
filing with the Secretary of State of Delaware of the amendment to the
Certificate of Incorporation in the form attached hereto as Exhibit M.
(xii) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Closing Date.
(xiii) The Common Stock (I) shall be designated for quotation
or listed on the Principal Market and (II) shall not have been suspended, as of
the Closing Date, by the SEC or the Principal Market from trading on the
Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened, as of the Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.
- 26 -
(xiv) The Company shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.
(xv) In accordance with the terms of the Security Documents,
the Company shall have delivered to the Collateral Agent (as defined in the
Pledge and Security Agreement) certificates representing the Subsidiaries'
shares of capital stock, along with duly executed blank stock powers.
(xvi) Within six (6) Business Days prior to the Closing, the
Company shall have delivered or caused to be delivered to each Buyer (A)
certified copies of UCC search results, listing all effective financing
statements which name as debtor the Company or any of its Subsidiaries filed in
the prior five years to perfect an interest in any assets thereof, together with
copies of such financing statements, none of which, except as otherwise agreed
in writing by the Buyers, shall cover any of the Collateral (as defined in the
Security Documents) and the results of searches for any tax lien and judgment
lien filed against such Person or its property, which results, except as
otherwise agreed to in writing by the Buyers shall not show any such Liens (as
defined in the Security Documents); and (B) a perfection certificate, duly
completed and executed by the Company and each of its Subsidiaries, in form and
substance satisfactory to the Buyers.
(xvii) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.
(xviii) The Acquisitioin shall have been consummated in
accordance with the terms of the Acquisition Agreement.
8. TERMINATION. In the event that the Closing shall not have occurred
with respect to a Buyer on or before five (5) Business Days from the date hereof
due to the Company's or such Buyer's failure to satisfy the conditions set forth
in Sections 6 and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, this if this Agreement is terminated pursuant to this Section
8, the Company shall remain obligated to reimburse the non-breaching Buyers for
the expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
- 27 -
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the other
Transaction Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement, the
other Transaction Documents and the instruments referenced herein and therein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable hereunder; provided, however that any
such holders of Registrable Securities must include the Collateral Agent, and
any amendment to this Agreement made in conformity with the provisions of this
Section 9(e) shall be binding on all Buyers and holders of Securities, as
applicable. No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the applicable Securities then outstanding. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the
same consideration also is offered to all of the parties to the Transaction
Documents, holders of Notes, holders of Common Shares or holders of the
Warrants, as the case may be. The Company has not, directly or indirectly, made
any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
- 28 -
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
American United Global, Inc.
000 Xxxxxxx Xxxxxx #000
Xxxxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx Xxxxx, CEO
Copy to:
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
1065 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-930-9725
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
If to the Transfer Agent:
Corporate Stock Transfer
0000 Xxxxxx Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 303-282-5800
Attention: Xxxxxxx X. Xxxx, President
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,
- 29 -
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes, Common Shares or the Warrants. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the holders of at least a majority of the
aggregate number of Registrable Securities issued and issuable hereunder,
including by way of a Fundamental Transaction (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Notes, the Common Shares and the Warrants); provided, however that
any such holders of Registrable Securities must include the Collateral Agent. A
Buyer may assign some or all of its rights hereunder without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8,
the representations and warranties of the Company and the Buyers contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
9 shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
- 30 -
(k) Indemnification. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company or Kraft in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company or Kraft contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, (iii) any disclosure made by such Buyer pursuant to Section
4(i), or (iv) the status of such Buyer or holder of the Securities as an
investor in the Company pursuant to the transactions contemplated by the
Transaction Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(k) shall be the same as those set forth in
Section 6 of the Registration Rights Agreement.
(l) No Strict Construction. The language used in the Transaction
Documents will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
(m) Remedies. Each Buyer and each holder of the Securities shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.
- 31 -
(n) Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
(o) Independent Nature of Buyers' Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers 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 Buyer confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer,
other than Smithfield, acknowledges that (i) Xxxxxxx Xxxx & Xxxxx LLP solely
represented Smithfield in connection with the transaction contemplated hereby
and (ii) Smithfield did not provide any advice in connection herewith and such
Buyer's determination to participate herein was based solely on its own
evaluation of the risks and merits of the investment contemplated hereby. Each
Buyer shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of any other Transaction Documents, and it shall not be necessary for any other
Buyer to be joined as an additional party in any proceeding for such purpose.
[Signature Page Follows]
- 32 -
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
COMPANY:
AMERICAN UNITED GLOBAL, INC.
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
BUYERS:
SMITHFIELD FIDUCIARY LLC
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
IROQUOIS MASTER FUND, LTD.
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
LILAC VENTURES MASTER FUND, LIMITED
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
CRANSHIRE CAPITAL, L.P
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
XXXXX XXXXXXXX, LTD.
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
RAQ, LLC
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
PARAGON CAPITAL, LP
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
NITE CAPITAL L.P.
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
ALPHA CAPITAL AKTIENGESELLSCHAFT
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
BN VENTURES LLC
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
BRISTOL INVESTMENT FUND, LTD.
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
GLOBAL HUNTER HOLDINGS, L.P
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
XXXXXX BAY FUND LP
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
XXXXXX XXXX
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
KUEKENHOF EQUITY FUND, L.P.
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
XXXXX XXXXXXXX
By: ________________________________
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OTHER BUYERS:
XXXXX XXXXXXXX & XXXXXX XXXXXXXX JOINT TRUST
By: ________________________________________
Name:
Title:
SCHEDULE OF BUYERS
(1) (2) (3) (4)
Aggregate
Principal Aggregate
Address and Amount of Number of
Buyer Facsimile Number Notes Common Shares
-----------------------------------------------------------------------------------------------------------
Smithfield Fiduciary LLC c/o Highbridge Capital Management, LLC $1,000,000 800,000
0 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxx
Xxxx X. Chill
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
Iroquois Master Fund, Ltd. $600,000 480,000
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
Lilac Ventures Master 000 Xxxxx Xxxxxx $500,000 400,000
Fund, Limited 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Bermnstein
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Bermuda
(1) (5) (6) (7)
Legal
Aggregate Representative's
Number of Address and
Buyer Warrant Shares Purchase Price Facsimile Number
-------------------------------------------------------------------------------------------------
Smithfield Fiduciary LLC 2,000,000 $1,000,000 Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Iroquois Master Fund, Ltd. 1,200,000 $600,000 Malhotra & Associates
00 Xxxx Xxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Lilac Ventures Master 1,000,000 $500,000 Malhotra & Associates
Fund, Limited 00 Xxxx Xxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(1) (2) (3) (4)
Aggregate
Principal Aggregate
Address and Amount of Number of
Buyer Facsimile Number Notes Common Shares
------------------------------------------------------------------------------------------------------------
Cranshire Capital, L.P $500,000 400,000
0000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Illinois
Xxxxx Xxxxxxxx, Ltd., 0000 Xxxxxxx Xxx $1,250,000 1,000,000
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Illinois
RAQ, LLC $250,000 200,000
000 0xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: J. Xxx Xxxxxx
Xxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: New York
Paragon Capital, LP $350,000 280,000
000 Xxxx 00xx Xx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Delaware
Nite Capital L.P. $250,000 200,000
000 X Xxxx Xxxxxx
#000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Delaware
Alpha Capital $300,000 240,000
Aktiengesellschaft x/x Xxxxx Xxxxxxx, XX
000 Xxxxxxx Xxxx Xxxxx
#2701
New York, New York 10019
Attention: Xxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Xxxxxxxxxxxx
(1) (5) (6) (7)
Legal
Aggregate Representative's
Number of Address and
Buyer Warrant Shares Purchase Price Facsimile Number
----------------------------------------------------------------------------------------------------
Cranshire Capital, L.P 1,000,000 $500,000 Malhotra & Associates
00 Xxxx Xxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Xxxxx Xxxxxxxx, Ltd., 2,500,000 $1,250,000 Xxxxxxxx & Xxxxxx, Ltd
00 Xxxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
RAQ, LLC 500,000 $250,000 N/A
Paragon Capital, LP 700,000 $350,000 N/A
Nite Capital L.P. 500,000 $250,000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxx Xxxxxxxxxxx Xxxxxx
000 X. XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Alpha Capital 600,000 $300,000 Xx Xxxxxxx
Aktiengesellschaft Grushko & Xxxxxxx
000 Xxxxx Xxxxxx, Xxx 0000
XX, XX 00000
Facsimile: 697-3575
Telephone: 000-000-0000
(1) (2) (3) (4)
Aggregate
Principal Aggregate
Address and Amount of Number of
Buyer Facsimile Number Notes Common Shares
---------------------------------------------------------------------------------------------------------------
Bristol Investment Fund, $250,000 200,000
Ltd. c/o Bristol Investment Fund, Ltd.
00000 Xxxxxxxx Xxxx
#0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Xxx Xxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
Global Hunter Holdings, L.P $250,000 200,000
0000 Xxxxx xx Xxx
Xxxxx 0000
Xx. Xxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Delaware
Xxxxxx Bay Fund LP $250,000 200,000
000 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Delaware
Xxxxxx Xxxx $50,000 40,000
0000 Xxxxxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxx Xxxx
Telephone: (000) 000-0000
Kuekenhof Equity Fund, $100,000 80,000
L.P. c/o Kuekenhof Capital Management, LLC
00 Xxxxxx Xx
Xxxxx #0
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Delaware
(1) (5) (6) (7)
Legal
Aggregate Representative's
Number of Address and
Buyer Warrant Shares Purchase Price Facsimile Number
-----------------------------------------------------------------------------------------------------
Bristol Investment Fund, 500,000 $250,000 N/A
Ltd.
Global Hunter Holdings, L.P 500,000 $250,000 N/A
Xxxxxx Bay Fund LP 500,000 $250,000 N/A
Xxxxxx Xxxx 100,000 $50,000 Xxxxx Larkaowski
000 Xxxxx Xxxxxxxxx, Xxxxxx Xxxx
Xxxxxxxx, 00000. Phone,
000-000-0000, fax, 000-000-0000.
Kuekenhof Equity Fund, 200,000 $100,000 N/A
L.P.
(1) (2) (3) (4)
Aggregate
Principal Aggregate
Address and Amount of Number of
Buyer Facsimile Number Notes Common Shares
-------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxx $50,000 40,000
0 Xxxxxxxx Xxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Xxxxx Xxxxxxxx & Xxxxxx $50,000 40,000
Halegoua Joint Trust 0 Xxxxxxxx Xxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Attention:
Telephone: (000) 000-0000
Residence: New York
-------------------------------------------------------------------------------------------------------------
TOTAL $6,000,000.00 4,800,000
(1) (5) (6) (7)
Legal
Aggregate Representative's
Number of Address and
Buyer Warrant Shares Purchase Price Facsimile Number
---------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxx 100,000 $50,000 N/A
Xxxxx Xxxxxxxx & Xxxxxx 100,000 $50,000 N/A
Halegoua Joint Trust
-------------------------------------------------------------------------------------------------
TOTAL 12,000,000 $6,000,000.00
SCHEDULE OF WARRANTS
(1) (2) (3) (4) (5)
Number of Number of Number of Number of
Series A Series B Series C Series D
Buyer Warrant Shares Warrant Shares Warrant Shares Warrant Shares
-------------------------------------------------------------------------------------------------------
Smithfield Fiduciary LLC 500,000 500,000 500,000 500,000
Iroquois Master Fund, Ltd. 300,000 300,000 300,000 300,000
Xxxxxxxx Investment Master 250,000 250,000 250,000 250,000
Fund, Limited
Cranshire Capital, L.P 250,000 250,000 250,000 250,000
Xxxxx Xxxxxxxx, Ltd., 625,000 625,000 625,000 625,000
RAQ, LLC 125,000 125,000 125,000 125,000
Paragon Capital, LP 175,000 175,000 175,000 175,000
Nite Capital L.P. 125,000 125,000 125,000 125,000
Alpha Capital 150,000 150,000 150,000 150,000
Aktiengesellschaft
Bristol Investment Fund, Ltd. 125,000 125,000 125,000 125,000
Global Hunter Holdings, L.P 125,000 125,000 125,000 125,000
Xxxxxx Bay Fund LP 125,000 125,000 125,000 125,000
(1) (6) (7)
Aggregate Aggregate
Number of Number of Aggregate
Initial Additional Number of
Buyer Warrant Shares Warrant Shares Warrant Shares
-------------------------------------------------------------------------------------
Smithfield Fiduciary LLC 1,000,000 1,000,000 2,000,000
Iroquois Master Fund, Ltd. 600,000 600,000 1,200,000
Xxxxxxxx Investment Master 500,000 500,000 1,000,000
Fund, Limited
Cranshire Capital, L.P 500,000 500,000 1,000,000
Xxxxx Xxxxxxxx, Ltd., 1,250,000 1,250,000 2,500,000
RAQ, LLC 250,000 250,000 500,000
Paragon Capital, LP 350,000 350,000 700,000
Nite Capital L.P. 250,000 250,000 500,000
Alpha Capital 300,000 300,000 600,000
Aktiengesellschaft
Bristol Investment Fund, Ltd. 250,000 250,000 500,000
Global Hunter Holdings, L.P 250,000 250,000 500,000
Xxxxxx Bay Fund LP 250,000 250,000 500,000
(1) (2) (3) (4) (5)
Number of Number of Number of Number of
Series A Series B Series C Series D
Buyer Warrant Shares Warrant Shares Warrant Shares Warrant Shares
--------------------------------------------------------------------------------------------------------
Xxxxxx Xxxx 25,000 25,000 25,000 25,000
Kuekenhof Equity Fund, L.P. 50,000 50,000 50,000 50,000
Xxxxx Xxxxxxxx 25,000 25,000 25,000 25,000
Xxxxx Xxxxxxxx & Xxxxxx 25,000 25,000 25,000 25,000
Halegoua Joint Trust
--------------------------------------------------------------------------------------------------------
TOTAL 3,000,000 3,000,000 3,000,000 3,000,000
(1) (6) (7)
Aggregate Aggregate
Number of Number of Aggregate
Initial Additional Number of
Buyer Warrant Shares Warrant Shares Warrant Shares
-------------------------------------------------------------------------------------
Xxxxxx Xxxx 50,000 50,000 100,000
Kuekenhof Equity Fund, L.P. 100,000 100,000 200,000
Xxxxx Xxxxxxxx 50,000 50,000 100,000
Xxxxx Xxxxxxxx & Xxxxxx 50,000 50,000 100,000
Halegoua Joint Trust
-------------------------------------------------------------------------------------
TOTAL 6,000,000 6,000,000 12,000,000
EXHIBITS
Exhibit A Form of Notes
Exhibit B-1 Form of Series A Additional Investment Rights Warrants
Exhibit B-2 Form of Series B Warrants
Exhibit B-3 Form of Series C Additional Investment Rights Warrants
Exhibit B-4 Form of Series D Warrants
Exhibit C Registration Rights Agreement
Exhibit D-1 Form of US Security Agreement
Exhibit D-2 Form of Hungarian General Security Agreement
Exhibit D-3 Form of Hungarian Other Security Agreement
Exhibit E Form of Pledge Agreement
Exhibit F Form of Guarantee
Exhibit G Irrevocable Transfer Agent Instructions
Exhibit H-1 Form of Outside Company Counsel Opinion
Exhibit H-2 Form of Outside Hungarian Company Counsel Opinion
Exhibit I Form of Secretary's Certificate
Exhibit J Form of Officer's Certificate
Exhibit K Form of Voting Agreement
Exhibit L Form of Resolutions
Exhibit M Form of Amendment to Certificate of Incorporation
SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(j) Rights Plan
Schedule 3(k) SEC Documents; Financial Statements
Schedule 3(l) Absence of Certain Changes
Schedule 3(q) Transactions with Affiliates
Schedule 3(r) Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(t) Litigation
Schedule 3(x) Intellectual Property
Schedule 3(z) Subsidiary Rights
Schedule 3(cc) Ranking of Notes
