SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of October 12, 2007, among Organic To Go Food Corporation, a Delaware
corporation (the “Company”),
and
the investors listed on the Schedule of Buyers attached hereto as Annex
A
and
identified on the signature pages hereto (each, an “Investor”
and
collectively, the “Investors”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
thereunder, the Company desires to issue and sell to each Investor, and each
Investor, severally and not jointly, desires to purchase from the Company
certain securities of the Company, as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of
which
are hereby acknowledged, the Company and the Investors agree as
follows:
ARTICLE
1.
DEFINITIONS
1.1. Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes
of this Agreement, the following terms shall have the meanings indicated
in this
Section 1.1:
“Action”
means
any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or threatened
in writing against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local
or
foreign), stock market, stock exchange or trading facility.
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as
such
terms are used in and construed under Rule 144.
“Business
Day”
means
any day except Saturday, Sunday and any day which is a federal legal holiday
in
the United States or a day on which banking institutions in the State of
New
York or State of Washington are authorized or required by law or other
governmental action to close.
“Buy-In”
has
the
meaning set forth in Section 4.1(c).
“Closing”
means
the closing of the purchase and sale of the Securities pursuant to Article
II.
“Closing
Date”
means
the Business Day on which all of the conditions set forth in Sections 5.1
and
5.2 hereof are satisfied, or such other date as the parties may
agree.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any securities
into which such common stock may hereafter be reclassified.
“Common
Stock Equivalents”
means
any securities of the Company or any Subsidiary which entitle the holder
thereof
to acquire Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at
any
time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder
to
receive, directly or indirectly, Common Stock.
“Company
Counsel”
means
Loeb & Loeb LLP.
“Company
Deliverables”
has the
meaning set forth in Section 2.2(a).
“Disclosure
Materials”
has the
meaning set forth in Section 3.1(h).
“Effective
Date”
means
the date that the initial Registration Statement required by Section 2(a)
of the
Registration Rights Agreement is first declared effective by the
Commission.
"Escrow
Agreement"
means
the Escrow Agreement, dated as of the date hereof, between the Company and
the
escrow agent (the “Escrow
Agent”)
set
forth therein, in the form of Exhibit
C
hereto.
“Evaluation
Date”
has the
meaning set forth in Section 3.1(s).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“GAAP”
means
U.S. generally accepted accounting principles.
“Intellectual
Property Rights”
has the
meaning set forth in Section 3.1(p).
“Investment
Amount”
means,
with respect to each Investor, the Investment Amount indicated on such
Investor’s signature page to this Agreement.
“Investor
Deliverables”
has the
meaning set forth in Section 2.2(b).
“Investor
Party”
has the
meaning set forth in Section 4.7.
“Lien”
means
any lien, charge, encumbrance, security interest, right of first refusal
or
other restrictions of any kind.
“Losses”
has
the
meaning set forth in Section 4.7.
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“Material
Adverse Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a
whole,
or (iii) an adverse impairment to the Company’s ability to perform on a timely
basis its obligations under any Transaction Document.
“New
York Courts”
means
the state and federal courts sitting in the City of New York, Borough of
Manhattan.
“Outside
Date”
means
the thirtieth day following the date of this Agreement.
“Per
Unit Purchase Price”
equals
$1.75.
“Person”
means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Preferred
Investor”
has
the
meaning set forth in Section 4.11(a).
“Proceeding”
means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated as of the date of this Agreement,
among
the Company and the Investors, in the form of Exhibit
B
hereto.
“Registration
Statement”
means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Investors of the Shares and
the
Warrant Shares.
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
“SEC
Reports”
has the
meaning set forth in Section 3.1(h).
“Securities”
means
the Shares, the Warrants and the Warrant Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Share
Delivery Date”
has
the
meaning set forth in Section 4.1(c).
“Shares”
means
the shares of Common Stock issued or issuable to the Investors pursuant to
this
Agreement.
“Short
Sales”
include,
without limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect
stock
pledges, forward sale contracts, options, puts, calls, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated
brokers.
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“Subsidiary”
means
any “significant subsidiary” as defined in Rule 1-02(w) of the Regulation S-X
promulgated by the Commission under the Exchange Act.
“Trading
Day”
means
(i) a day on which the Common Stock is traded on a Trading Market (other
than
the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading
Market (other than the OTC Bulletin Board), a day on which the Common Stock
is
traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock
is
not quoted on any Trading Market, a day on which the Common Stock is quoted
in
the over-the-counter market as reported by the Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted
as set
forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business
Day.
“Trading
Market”
means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital
Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.
“Transaction
Documents”
means
this Agreement, the Warrants, the Registration Rights Agreement, the Escrow
Agreement and any other documents or agreements executed in connection with
the
transactions contemplated hereunder.
“Warrants”
means
the
Common Stock purchase warrants in the form of Exhibit
A,
which
are issuable to the Investors at the Closing.
“Warrant
Shares” means
the
shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE
2.
PURCHASE
AND SALE
2.1. Closing.
Subject to the terms and conditions set forth in this Agreement, at the Closing,
the Company shall issue and sell to each Investor, and each Investor shall,
severally and not jointly, purchase from the Company, the Shares and the
Warrants representing such Investor’s Investment Amount. The Closing shall take
place at the offices of Loeb & Loeb LLP, 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx
0000, Xxx Xxxxxxx, XX 00000 on the Closing Date or at such other location
or
time as the parties may agree.
2.2. Closing
Deliveries. (a)
At the
Closing, the Company shall deliver or cause to be delivered to each Investor
the
following (the “Company
Deliverables”):
(i) a
certificate evidencing a number of Shares equal to such Investor’s Investment
Amount divided by the Per Unit Purchase Price, registered in the name of
such
Investor;
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(ii) a
Warrant, registered in the name of such Investor, pursuant to which such
Investor shall have the right to acquire the number of shares of Common Stock
equal to 45% of the number of Shares issuable to such Investor pursuant to
Section 2.2(a)(i);
(iii) the
legal
opinion of Company Counsel, in agreed form, addressed to the
Investors;
(iv) the
legal
opinion of Xxxx
XxXxxxxxx Xxxxxxxxx Xxxxxxxx & Xxxx Professional Law Corporation,
in
agreed form, addressed to the Investors;
(v) the
Escrow Agreement, duly executed by the Company and the Escrow Agent;
and
(vi) the
Registration Rights Agreement, duly executed by the Company.
(b) At
the
Closing, each Investor shall deliver or cause to be delivered (the “Investor
Deliverables”):
(i) to
the
Company the Registration Rights Agreement, duly executed by such Investor;
and
(ii) to
the
Escrow Agent, such Investor’s Investment Amount, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose in accordance with the terms of the
Escrow Agreement.
ARTICLE
3.
REPRESENTATIONS
AND WARRANTIES
3.1. Representations
and Warranties of the Company. The Company hereby makes the following
representations and warranties to each Investor:
(a) Subsidiaries.
The
Company has no direct or indirect Subsidiaries other than as specified in
the
SEC Reports. Except as disclosed in Schedule
3.1(a),
the
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued
and
are fully paid, non-assessable and free of preemptive and similar rights.
(b) Organization
and Qualification.
The
Company and each Subsidiary are duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction
of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. The Company
and each Subsidiary are duly qualified to conduct its respective businesses
and
are in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned
by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not, individually
or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
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(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and
to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the
Company
and, when delivered in accordance with the terms hereof, will constitute
the
valid and binding obligation of the Company enforceable against the Company
in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
(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 thereby
do
not and will not (i) conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute
a
default (or an event that 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 (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company
or
any Subsidiary is a party or by which any property or asset of the Company
or
any Subsidiary is bound or affected, or (iii) result in a violation of any
law,
rule, regulation, order, judgment, injunction, decree or other restriction
of
any court or governmental authority to which the Company or a Subsidiary
is
subject (including federal and state securities laws and regulations), or
by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect.
(e) Filings,
Consents and Approvals.
Neither
the Company nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than
(i) the filing with the Commission of one or more Registration Statements
in
accordance with the requirements of the Registration Rights Agreement, (ii)
filings required by state securities laws, (iii) the filing of a Notice of
Sale
of Securities on Form D with the Commission under Regulation D of the Securities
Act, (iv) the filings required in accordance with Section 4.5 and (v) those
that
have been made or obtained prior to the date of this Agreement.
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(f) Issuance
of the Securities.
The
Securities have been duly authorized and, when issued and paid for in accordance
with the Transaction Documents, will be duly and validly issued, fully paid
and
nonassessable, free and clear of all Liens. The Company has reserved from
its
duly authorized capital stock the shares of Common Stock issuable pursuant
to
this Agreement and the Warrants in order to issue the Shares and the Warrant
Shares.
(g) Capitalization.
The number of shares and type of all authorized, issued and outstanding capital
stock of the Company, and all shares of Common Stock reserved for issuance
under
the Company’s various option and incentive plans, is specified in the SEC
Reports. Except as specified in the SEC Reports, no securities of the Company
are entitled to preemptive or similar rights, and no Person has any right
of
first refusal, preemptive right, right of participation, or any similar right
to
participate in the transactions contemplated by the Transaction Documents.
Except as specified in the SEC Reports and except as set forth on Schedule
3.1(g), there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which
the
Company or any Subsidiary is or may become bound to issue additional shares
of
Common Stock, or securities or rights convertible or exchangeable into shares
of
Common Stock. Except with respect to 2,040,446 warrants to purchase Common
Stock, the issue and sale of the Securities will not, immediately or with
the
passage of time, obligate the Company or any Subsidiary to issue shares of
Common Stock or other securities to any Person (other than the Investors)
and
will not result in a right of any holder of Company or Subsidiary securities
to
adjust the exercise, conversion, exchange or reset price under such
securities.
(h) SEC
Reports; Financial Statements. Except as set forth on Schedule
3.1(h), the Company has filed all reports required to be filed by it under
the Securities Act and the Exchange Act, including pursuant to Section 13(a)
or
15(d) thereof, for the twelve months preceding the date hereof (or such shorter
period as the Company was required by law to file such reports) (the foregoing
materials being collectively referred to herein as the “SEC
Reports” and, together with the Schedules to this Agreement (if any),
the “Disclosure Materials”), on a timely basis or has timely
filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations
of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
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 light of the circumstances under which they were made, not
misleading. The financial statements of the Company and any Subsidiary included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects
the
financial position of the Company and its consolidated Subsidiaries as of
and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
7
(i) Press
Releases. The press releases disseminated by the Company since February 13,
2007 taken as a whole do not 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 light of the circumstances under
which
they were made and when made, not misleading.
(j) Material
Changes. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in the SEC Reports
and
except as disclosed on Schedule 3.1(j), (i) there has been no event,
occurrence or development that has had or that could reasonably be expected
to
result in a Material Adverse Effect, (ii) neither the Company nor any Subsidiary
has incurred any liabilities (contingent or otherwise) other than (A) trade
payables, accrued expenses and other liabilities incurred in the ordinary
course
of business consistent with past practice and (B) liabilities not required
to be
reflected in the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (iii) neither the Company
nor
any Subsidiary has altered its method of accounting or the identity of its
auditors, (iv) neither the Company nor any Subsidiary has declared or made
any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares
of
its capital stock, and (v) neither the Company nor any Subsidiary has issued
any
equity securities to any officer, director or Affiliate, except pursuant
to
existing stock option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
(k) Litigation.
There
is no Action which (i) adversely affects or challenges the legality, validity
or
enforceability of any of the Transaction Documents or the Securities or (ii)
except as specifically disclosed in the SEC Reports, could, if there were
an
unfavorable decision, individually or in the aggregate, have or reasonably
be
expected to result in a Material Adverse Effect. Neither the Company nor
any
Subsidiary, nor any director or officer thereof (in his or her capacity as
such), is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach
of
fiduciary duty, except as specifically disclosed in the SEC Reports. There
has
not been, and to the knowledge of the Company, there is not pending any
investigation by the Commission involving the Company, any Subsidiary or
any
current or former director or officer of the Company (in his or her capacity
as
such). The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(l) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company or any
Subsidiary.
8
(m) Compliance.
Except
as set forth on Schedule
3.1(m),
neither
the Company nor any Subsidiary (i) is in default under or in violation of
(and
no event has occurred that has not been waived that, with notice or lapse
of
time or both, would result in a default by the Company or any Subsidiary
under),
nor has the Company or any Subsidiary received notice of a claim that it
is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or
by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of
any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality
and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect. The Company is in compliance with all effective
requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules
and
regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Material
Adverse Effect.
(n) Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described
in the
SEC Reports, except where the failure to possess such permits could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect, and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
such
permits.
(o) Title
to Assets.
Except
as set forth on Schedule
3.1(o),
the
Company and the Subsidiaries have good and marketable title in fee simple
to all
real property owned by them that is material to their respective businesses
and
good and marketable title in all personal property owned by them that is
material to their respective businesses, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made
of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held
by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(p) Patents
and Trademarks.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material
for
use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect
(collectively, the “Intellectual
Property Rights”).
Neither the Company nor any Subsidiary has received a written notice that
the
Intellectual Property Rights used by the Company or any Subsidiary violates
or
infringes upon the rights of any Person. Except as set forth in the SEC Reports,
to the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any
of
the Intellectual Property Rights.
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(q) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries
are
engaged. The Company has no reason to believe that it will not be able to
renew
its and the Subsidiaries’ 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 on terms consistent with market for the Company’s and
such Subsidiaries’ respective lines of business.
(r) Transactions
With Affiliates and Employees.
Except
as set forth in or otherwise not required to be disclosed in the SEC Reports,
none of the officers or directors of the Company and, to the knowledge of
the
Company, none of the employees of the Company or any Subsidiary is presently
a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or,
to the
knowledge of the Company, any entity in which any officer, director, or any
such
employee has a substantial interest or is an officer, director, trustee or
partner.
(s) Internal
Accounting Controls.
The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability,
(iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company’s Form 10-KSB or
10-QSB, as the case may be, is being prepared. The Company’s certifying officers
have evaluated the effectiveness of the Company’s controls and procedures in
accordance with Item 307 of Regulation S-B under the Exchange Act for the
Company’s most recently ended fiscal quarter or fiscal year-end (such date, the
“Evaluation
Date”).
The
Company presented in its most recently filed Form 10-KSB or Form 10-QSB the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 308(c) of
Regulation S-B under the Exchange Act) or, to the Company’s knowledge, in other
factors that could significantly affect the Company’s internal
controls.
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(t) Solvency.
Based
on the financial condition of the Company and each Subsidiary as of the Closing
Date (and assuming that the Closing shall have occurred), (i) the Company’s and
each Subsidiary’s fair saleable value of its assets exceeds the amount that will
be required to be paid on or in respect of the Company’s and each Subsidiary’s
existing debts and other liabilities (including known contingent liabilities)
as
they mature, (ii) the Company’s and each Subsidiary’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal
year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company and each Subsidiary, and projected capital requirements
and capital availability thereof, and (iii) the current cash flow of the
Company
and each Subsidiary, together with the proceeds the Company and each Subsidiary
would receive, were it to liquidate all of its assets, after taking into
account
all anticipated uses of the cash, would be sufficient to pay all amounts
on or
in respect of its debt when such amounts are required to be paid. The Company
and each Subsidiary does not intend to incur debts beyond its ability to
pay
such debts as they mature (taking into account the timing and amounts of
cash to
be payable on or in respect of its debt).
(u) Certain
Fees.
Except
as described in Schedule
3.1(u),
no
brokerage or finder’s fees or commissions are or will be payable by the Company
or any Subsidiary to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to
the
transactions contemplated by this Agreement. The Investors shall have no
obligation with respect to any fees or with respect to any claims (other
than
such fees or commissions owed by an Investor pursuant to written agreements
executed by such Investor which fees or commissions shall be the sole
responsibility of such Investor) made by or on behalf of other Persons for
fees
of a type contemplated in this Section that may be due in connection with
the
transactions contemplated by this Agreement.
(v) Certain
Registration Matters.
Assuming the accuracy of the Investors’ representations and warranties set forth
in Section 3.2(b)-(e), no registration under the Securities Act is required
for
the offer and sale of the Shares and Warrants, and the offer of the Warrant
Shares, by the Company to the Investors under the Transaction Documents.
The
Company is eligible to register its Common Stock for resale by the Investors
under Form SB-2 promulgated under the Securities Act. Except as specified
in the
SEC Reports and except as set forth on Schedule
3.1(v),
neither
the Company nor any Subsidiary has granted or agreed to grant to any Person
any
rights (including “piggy-back” registration rights) to have any securities of
the Company registered with the Commission or any other governmental authority
that have not been satisfied.
(w) Listing
and Maintenance Requirements.
Except
as specified in the SEC Reports, the Company has not, since February 13,
2007,
received notice from any Trading Market to the effect that the Company is
not in
compliance with the listing, quoting or maintenance requirements thereof.
The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with the listing, quoting or maintenance
requirements for continued listing or quoting of the Common Stock on the
Trading
Market on which the Common Stock is currently listed or quoted. The issuance
and
sale of the Securities under the Transaction Documents does not contravene
the
rules and regulations of the Trading Market on which the Common Stock is
currently listed or quoted, and no approval of the shareholders of the Company
thereunder is required for the Company to issue and deliver to the Investors
the
Securities contemplated by Transaction Documents.
11
(x) Investment
Company.
The
Company and each Subsidiary is not, and is not an Affiliate of, and immediately
following the Closing will not have become, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
(y) Application
of Takeover Protections.
The
Company has 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 Company’s Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable
to
the Investors as a result of the Investors and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company’s issuance of the Securities and the
Investors’ ownership of the Securities.
(z) No
Additional Agreements.
The
Company does not have any agreement or understanding with any Investor with
respect to the transactions contemplated by the Transaction Documents other
than
as specified in the Transaction Documents.
(aa) Consultation
with Auditors.
The
Company and each Subsidiary has consulted its independent auditors concerning
the accounting treatment of the transactions contemplated by the Transaction
Documents, and in connection therewith has furnished such auditors complete
copies of the Transaction Documents.
(bb) Foreign
Corrupt Practices Act.
Neither
the Company nor any Subsidiary, nor to the knowledge of the Company, any
agent
or other person acting on behalf of any of the Company or any Subsidiary,
has,
directly or indirectly, (i) used any funds, or will use any proceeds from
the
sale of the Securities, for unlawful contributions, gifts, entertainment
or
other unlawful expenses related to foreign or domestic political activity,
(ii)
made any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or campaigns from
corporate funds, (iii) failed to disclose fully any contribution made by
the
Company or any Subsidiary (or made by any Person acting on their behalf of
which
the Company is aware) which is in violation of law, or (iv) has violated
in any
material respect any provision of the Foreign Corrupt Practices Act of 1977,
as
amended, and the rules and regulations thereunder.
(cc) PFIC.
Neither
the Company nor any Subsidiary is or intends to become a “passive foreign
investment company” within the meaning of Section 1297 of the U.S. Internal
Revenue Code of 1986, as amended.
(dd) OFAC.
Neither
the Company nor any Subsidiary nor, to the knowledge of the Company, any
director, officer, agent, employee, Affiliate or Person acting on behalf
of the
Company or any Subsidiary is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”);
and
the Company will not directly or indirectly use the proceeds of the sale
of the
Securities, or lend, contribute or otherwise make available such proceeds
to any
Subsidiary, joint venture partner or other Person or entity, towards any
sales
or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country
sanctioned by OFAC or for the purpose of financing the activities of any
Person
currently subject to any U.S. sanctions administered by OFAC.
12
(ee) Money
Laundering Laws.
The
operations of each of the Company and any Subsidiary are and have been conducted
at all times in compliance with the money laundering statutes of applicable
jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any
applicable governmental agency (collectively, the “Money
Laundering Laws”)
and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company and/or any Subsidiary
with respect to the Money Laundering Laws is pending or, to the best knowledge
of the Company, threatened.
(ff) Disclosure.
The
Company (on behalf of each Subsidiary) confirms that neither it nor any Person
acting on its behalf has provided any Investor or its respective agents or
counsel with any information that the Company believes constitutes material,
non-public information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information. The Company understands
and confirms that the Investors will rely on the foregoing representations
and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Investors regarding the Company (including each Subsidiary),
its
and any Subsidiary’s business and the transactions contemplated hereby,
furnished by or on behalf of the Company (including the Company’s
representations and warranties set forth in this Agreement) are true and
correct
and do 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
light
of the circumstances under which they were made, not misleading.
3.2. Representations
and Warranties of the Investors. Each Investor hereby, for itself and for no
other Investor, represents and warrants to the Company as follows:
(a) Organization;
Authority. Such Investor is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with
the
requisite corporate or partnership power and authority to enter into and
to
consummate the transactions contemplated by the applicable Transaction Documents
and otherwise to carry out its obligations thereunder. The execution, delivery
and performance by such Investor of the transactions contemplated by this
Agreement has been duly authorized by all necessary corporate or, if such
Investor is not a corporation, such partnership, limited liability company
or
other applicable like action, on the part of such Investor. Each of this
Agreement and the Registration Rights Agreement has been duly executed by
such
Investor, and when delivered by such Investor in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Investor, enforceable against it in accordance with its terms, except as
such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
(b) Investment
Intent.
Such
Investor is acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to such
Investor’s right at all times to sell or otherwise dispose of all or any part of
such Securities in compliance with applicable federal and state securities
laws.
Subject to the immediately preceding sentence, nothing contained herein shall
be
deemed a representation or warranty by such Investor to hold the Securities
for
any period of time. Such Investor is acquiring the Securities hereunder in
the
ordinary course of its business. Such Investor does not have any agreement
or
understanding, directly or indirectly, with any Person to distribute any
of the
Securities.
13
(c) Investor
Status.
At the
time such Investor was offered the Securities, it was, and at the date hereof
it
is, and on each date on which it exercises Warrants it will be, an “accredited
investor” as defined in Rule 501(a) under the Securities Act. Such Investor is
not a registered broker-dealer under Section 15 of the Exchange
Act.
(d) General
Solicitation.
Such
Investor is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published
in any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(e) Access
to Information.
Such
Investor acknowledges that it has reviewed the Disclosure Materials and has
been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning
the
terms and conditions of the offering of the Shares and the merits and risks
of
investing in the Securities; (ii) access to information about the Company
and
the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to
enable
it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Investor or its representatives
or counsel shall modify, amend or affect such Investor’s right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction
Documents.
(f) Certain
Trading Activities.
Such
Investor has not directly or indirectly, nor has any Person acting on behalf
of
or pursuant to any understanding with such Investor, engaged in any transactions
in the securities of the Company (including, without limitations, any Short
Sales involving the Company’s securities) since the earlier to occur of (1) the
time that such Investor was first contacted by the Company or a finder for
the
Company regarding the transactions contemplated by this Agreement and (2)
the
30th
day
prior to the date of this Agreement. Such Investor covenants that neither
it nor
any Person acting on its behalf or pursuant to any understanding with it
will
engage in any transactions in the securities of the Company (including Short
Sales) prior to the time that the transactions contemplated by this Agreement
are publicly disclosed.
(g) Independent
Investment Decision.
Such
Investor has independently evaluated the merits of its decision to purchase
the
Securities pursuant to the Transaction Documents, and such Investor confirms
that it has not relied on the advice of any other Investor’s business and/or
legal counsel in making such decision. Such Investor has not relied on the
business or legal advice of any finder for the Company or any of its agents,
counsel or Affiliates in making its investment decision hereunder, and confirms
that none of such Persons has made any representations or warranties to such
Investor in connection with the transactions contemplated by the Transaction
Documents.
14
The
Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE
4.
OTHER
AGREEMENTS OF THE PARTIES
4.1. (a) Securities
may only be disposed of in compliance with state and federal securities laws.
In
connection with any transfer of the Securities other than pursuant to an
effective registration statement, to the Company, to an Affiliate of an Investor
or in connection with a pledge as contemplated in Section 4.1(b), the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under
the
Securities Act.
(b) Certificates
evidencing the Securities will contain the following legend, until such time
as
they are not required under Section 4.1(c):
[NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. [THESE SECURITIES AND THE SECURITIES ISSUABLE
UPON
EXERCISE OF THESE SECURITIES] [THESE SECURITIES] MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
15
The
Company acknowledges and agrees that an Investor may from time to time pledge,
and/or grant a security interest in some or all of the Securities pursuant
to a
bona fide margin agreement in connection with a bona fide margin account
and, if
required under the terms of such agreement or account, such Investor may
transfer pledged or secured Securities to the pledgees or secured parties.
Such
a pledge or transfer would not be subject to approval or consent of the Company
and no legal opinion of legal counsel to the pledgee, secured party or pledgor
shall be required in connection with the pledge, but such legal opinion may
be
required in connection with a subsequent transfer following default by the
Investor transferee of the pledge. No notice shall be required of such pledge.
At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities
including the preparation and filing of any required prospectus supplement
under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder. Except as otherwise provided in Section 4.1(c), any Shares subject
to a pledge or security interest as contemplated by this Section 4.1(b) shall
continue to bear the legend set forth in this Section 4.1(b) and be subject
to
the restrictions on transfer set forth in Section 4.1(a).
(c) Certificates
evidencing Shares shall not contain any legend (including the legend set
forth
in Section 4.1(b)): (i) following a sale or transfer of such Shares pursuant
to
an effective registration statement (including a Registration Statement),
or
(ii) following a sale or transfer of such Shares pursuant to Rule 144 (assuming
the transferee is not an Affiliate of the Company), or (iii) while such Shares
are eligible for sale under Rule 144(k). If
an
Investor shall make a sale or transfer of Shares either (x) pursuant to Rule
144
or (y) pursuant to a registration statement and in each case shall have
delivered to the Company or the Company’s transfer agent the certificate
representing Shares containing a restrictive legend which are the subject
of
such sale or transfer
and a representation letter in customary form (the
date of
such sale or transfer and Share delivery being the “Share
Delivery Date”)
and (1)
the Company shall fail to deliver or cause to be delivered to such Investor
a
certificate representing such Shares that is free from all restrictive or
other
legends by the third Trading Day following the Share Delivery Date and (2)
following such third Trading Day after the Share Delivery Date and prior
to the
time such Shares are received free from restrictive legends, the Investor,
or
any third party on behalf of such Investor, purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a
sale by the Investor of such Shares (a "Buy-In"),
then
the Company shall pay in cash to the Investor (for costs incurred either
directly by such Investor or on behalf of a third party) the amount by which
the
total purchase price paid for Common Stock as a result of the Buy-In (including
brokerage commissions, if any) exceed the proceeds received by such Investor
as
a result of the sale to which such Buy-In relates. The Investor shall provide
the Company written notice indicating the amounts payable to the Investor
in
respect of the Buy-In.
4.2. Furnishing
of Information. As long as any Investor owns the Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as any
Investor owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Investors and make
publicly available in accordance with Rule 144(c) such information as is
required for the Investors to sell the Shares and Warrant Shares under Rule
144.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell the Shares and Warrant Shares
without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
16
4.3. Integration.
The Company shall not, and shall use its best efforts to ensure that no
Affiliate of the Company shall, sell, offer for sale or solicit offers to
buy or
otherwise negotiate in respect of any security (as defined in Section 2 of
the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Investors, or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market in a manner that would require stockholder
approval of the sale of the securities to the Investors.
4.4. Subsequent
Registrations. Other than pursuant to the Registration Statement, prior to
the Effective Date, the Company may not file any registration statement (other
than on Form S-8) with the Commission with respect to any securities of the
Company.
4.5. Securities
Laws Disclosure; Publicity. By 9:00 a.m. (New York time) four (4) Trading
Days following the execution of this Agreement, and by 9:00 a.m. (New York
time)
four (4) Trading Days following the Closing Date, the Company shall issue
press
releases disclosing the transactions contemplated hereby and the Closing.
Within
four (4) Trading Days following the execution of this Agreement the Company
will
file a Current Report on Form 8-K disclosing the material terms of the
Transaction Documents (and attach as exhibits thereto the Transaction
Documents), and within four (4) Trading Days following the Closing Date the
Company will file an additional Current Report on Form 8-K to disclose the
Closing (unless this Agreement is executed on the same date as the Closing
Date,
in which case only one Form 8-K disclosing the execution of this Agreement
and
the Closing need be filed). In addition, the Company will make such other
filings and notices in the manner and time required by the Commission and
the
Trading Market on which the Common Stock is quoted or listed. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any Investor,
or include the name of any Investor in any filing with the Commission (other
than the Registration Statement and any exhibits to filings made in respect
of
this transaction in accordance with filing requirements under the Exchange
Act)
or any regulatory agency or Trading Market, without the prior written consent
of
such Investor, except to the extent such disclosure is required by law or
Trading Market regulations.
4.6. Limitation
on Issuance of Future Priced Securities. During the six months following the
Closing Date, the Company shall not issue any “Future Priced Securities” as such
term is described by NASD IM-4350-1.
17
4.7. Indemnification
of Investors. In addition to the indemnity provided in the Registration
Rights Agreement, the Company will indemnify and hold the Investors and
their
directors, officers, shareholders, partners, employees and agents (each,
an
“Investor
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation (collectively, “Losses”)
that
any such Investor Party may suffer or incur as a result of or relating
to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document.
In
addition to the indemnity contained herein, the Company will reimburse
each
Investor Party for its reasonable legal and other expenses (including the
cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred. Except as otherwise
set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 4.7 shall be the same as those set forth
in
Section 5 of the Registration Rights Agreement.
4.8. Non-Public
Information. The Company covenants and agrees that neither it nor any other
Person acting on its behalf will provide any Investor or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto such Investor shall have executed a written
agreement regarding the confidentiality and use of such information. The
Company
understands and confirms that each Investor shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.
4.9. Listing
of Securities. The Company agrees, (i) if the Company applies to have the
Common Stock listed or quoted on any Trading Market, other than the Trading
Market on which the Common Stock is currently listed or quoted, it will include
in such application the Shares and Warrant Shares, and will take such other
action as is necessary or desirable to cause the Shares and Warrant Shares
to be
listed or quoted on such other Trading Market as promptly as possible, and
(ii)
it will take all action reasonably necessary to continue the listing or quoting
of its Common Stock on a Trading Market and will comply in all material respects
with the Company’s reporting, filing and other obligations under the bylaws or
rules of the Trading Market.
4.10. Use
of
Proceeds. The Company will use the net proceeds from the sale of the
Securities hereunder for working capital purposes and not for the satisfaction
of any portion of the Company’s debt (other than payment of trade payables and
accrued expenses in the ordinary course of the Company’s business and consistent
with prior practices),
or to
redeem any Common Stock or Common Stock Equivalents.
4.11. Right
of First Refusal. (a) Any Investor whose aggregate Investment Amount, when
combined with the aggregate investment amount, if any, set forth on such
Investor’s signature page to that certain Securities Purchase Agreement dated as
of June 26, 2007, among the Company and the investors identified on the
signature pages thereto, is equal to or greater than Five Million Dollars
($5,000,000.00) (“Preferred
Investor”)
shall
have the following right of first refusal. During the twelve (12) month period
immediately following the Closing, each Preferred Investor shall be given
not
less than ten (10) Business Days prior written notice of any proposed sale
by
the Company of its Common Stock, except in connection with any Excepted
Issuances (as defined below). Any Preferred Investor who exercises its rights
pursuant to this Section 4.11 shall have the right during the ten (10) Business
Days following the aforesaid notice to purchase all (not a portion) of the
offered Common Stock upon the same terms and conditions set forth in the
notice.
If there is more than one (1) Preferred Investor who wishes to exercise such
right, then the total investment shall be allocated among them in proportion
to
their aggregate Investment Amounts as indicated on each such Investor’s
signature page to this Agreement.
18
(b) For
purposes of this Section 4.11, Excepted Issuances shall mean (i) issuance
of
securities as full or partial consideration in connection with a merger,
acquisition, consolidation or purchase of substantially all of the securities
or
assets of a corporation or other entity, (ii) the Company’s issuance of
securities in connection with strategic license agreements and other partnering
arrangements and financial institutions in connection with credit or financing
transactions, (iii) the Company’s issuance of securities or the issuances or
grants of options to purchase securities to the Company’s employees, officers,
directors or consultants, (iv) issuances as a result of the exercise of and/or
conversion of any and all of the Company’s convertible securities presently
outstanding, those issued in connection with the transactions contemplated
by
this Agreement (including any warrants issued to any finder as compensation
in
connection with the financing that is the subject of this Agreement) and
those
issued in the future, and (v) securities issued in connection with stock
splits,
dividends and combinations.
ARTICLE
5.
CONDITIONS
PRECEDENT TO CLOSING
5.1. Conditions
Precedent to the Obligations of the Investors to Purchase Securities. The
obligation of each Investor to acquire Securities at the Closing is subject
to
the satisfaction or waiver by such Investor, at or before the Closing, of
each
of the following conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Company contained herein shall be true
and
correct in all material respects as of the date when made and as of the Closing
as though made on and as of such date;
(b) Performance.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to
the
Closing;
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction
shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents;
(d) Adverse
Changes.
Since
the date of execution of this Agreement, no event or series of events shall
have
occurred that reasonably could have or result in a Material Adverse
Effect;
(e) No
Suspensions of Trading in Common Stock; Listing.
Trading
in the Common Stock shall not have been suspended by the Commission or any
Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding
the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed or quoted
for
trading on a Trading Market;
19
(f) Company
Deliverables.
The
Company shall have delivered the Company Deliverables in accordance with
Section
2.2(a); and
(g) Termination.
This
Agreement shall not have been terminated as to such Investor in accordance
with
Section 6.5.
5.2. Conditions
Precedent to the Obligations of the Company to sell Securities. The
obligation of the Company to sell Securities at the Closing is subject to
the
satisfaction or waiver by the Company, at or before the Closing, of each
of the
following conditions:
(a) Representations
and Warranties.
The
representations and warranties of each Investor contained herein shall be
true
and correct in all material respects as of the date when made and as of the
Closing Date as though made on and as of such date;
(b) Performance.
Each
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at
or
prior to the Closing;
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction
shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents;
(d) Investors
Deliverables.
Each
Investor shall have delivered its Investors Deliverables in accordance with
Section 2.2(b); and
(e) Termination.
This
Agreement shall not have been terminated as to such Investor in accordance
with
Section 6.5.
ARTICLE
6.
MISCELLANEOUS
6.1. Fees
and Expenses. Each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery
and
performance of the Transaction Documents. The Company shall pay all stamp
and
other taxes and duties levied in connection with the issuance of the
Securities.
6.2. Entire
Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements, understandings,
discussions and representations, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits
and
schedules.
20
6.3. Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given
and
effective on the earliest of (a) the date of transmission, if such notice
or
communication is delivered via facsimile (provided the sender receives
a
machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time)
on a
Trading Day, (b) the next Trading Day after the date of transmission, if
such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than
6:30
p.m. (New York City time) on any Trading Day, (c) the Trading Day following
the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is
required
to be given. The address for such notices and communications shall be as
follows:
If
to the Company:
|
Organic To Go Food Corporation |
0000 Xxxxx Xxxxxx Xxxxx | |
Xxxxxxx, Xxxxxxxxxx 00000 | |
Attn: Chief Executive Officer | |
Facsimile: (000) 000-0000 | |
With
a copy to:
|
Loeb & Loeb LLP |
00000 Xxxxx Xxxxxx Xxxxxxxxx | |
Xxxxx 0000 | |
Xxx Xxxxxxx, Xxxxxxxxxx 00000 | |
Attention: Xxxxxx X. Xxxxxxxx, Esq. | |
Facsimile: (000) 000-0000 | |
If
to an Investor:
|
To the address set forth under such Investor’s name on the signature pages hereof; |
or
such
other address as may be designated in writing hereafter, in the same manner,
by
such Person.
6.4. Amendments;
Waivers; No Additional Consideration. No provision of this Agreement may be
waived or amended except in a written instrument signed by the Company and
the
Investors holding a majority of the Shares. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall
be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor
shall any delay or omission of either party to exercise any right hereunder
in
any manner impair the exercise of any such right. No consideration shall
be
offered or paid to any Investor to amend or consent to a waiver or modification
of any provision of any Transaction Document unless the same consideration
is
also offered to all Investors who then hold Shares. Without the written consent
or the affirmative vote of each Investor affected thereby, an amendment or
waiver under this Section 6.4 may not waive or amend any Transaction Document
the effect of which would be to permit the Company to (1) name any Investor
as
an underwriter in a Registration Statement without such Investor’s specific
written consent thereto, or (2) not include any Registrable Securities (as
defined in the Registration Rights Agreement) of an Investor in a Registration
Statement due to their refusal to be named as an underwriter
therein.
21
6.5. Termination.
This Agreement may be terminated prior to Closing:
(a) by
written agreement of the Investors and the Company, a copy of which shall
be
provided to the Escrow Agent; and
(b) by
the
Company or an Investor (as to itself but no other Investor) upon written
notice
to the other and to the Escrow Agent, if the Closing shall not have taken
place
by 6:30 p.m. Eastern time on the Outside Date; provided,
that
the right to terminate this Agreement under this Section 6.5(b) shall not
be available to any Person whose failure to comply with its obligations under
this Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such time.
In
the
event of a termination pursuant to this Section, the Company shall promptly
notify all non-terminating Investors. Upon a termination in accordance with
this
Section 6.5, the Company and the terminating Investor(s) shall not have any
further obligation or liability (including as arising from such termination)
to
the other and no Investor will have any liability to any other Investor under
the Transaction Documents as a result therefrom.
6.6. Construction.
The headings herein are for convenience only, do not constitute a part of
this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden
of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction
Documents.
6.7. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns. The Company may
not
assign this Agreement or any rights or obligations hereunder without the
prior
written consent of the Investors. Any Investor may assign any or all of its
rights under this Agreement to any Person to whom such Investor assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof
that
apply to the “Investors.”
6.8. No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and
is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.7 (as to each Investor
Party).
22
6.9. Governing
Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard
to
the principles of conflicts of law thereof. Each party agrees that all
Proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective Affiliates, employees
or agents) shall be commenced exclusively in the New York Courts. Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the New
York
Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including
with
respect to the enforcement of the any of the Transaction Documents), and
hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim
that
it is not personally subject to the jurisdiction of any such New York Court,
or
that such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence
of
delivery) to such party at the address in effect for 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 hereto hereby irrevocably waives, to the fullest extent permitted
by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence a Proceeding to enforce any provisions
of
a Transaction Document, then the prevailing party in such Proceeding shall
be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution
of
such Proceeding.
6.10. Survival.
The representations, warranties, agreements and covenants contained herein
shall
survive the Closing and the delivery of the Securities.
6.11. Execution.
This Agreement may be executed in two or more counterparts, all of which
when
taken together 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, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile or
electronic mail transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or electronic
mail
signature page were an original thereof.
6.12. Severability.
If any provision of this Agreement is held to be invalid or unenforceable
in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that
is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
6.13. Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Investor exercises a right, election, demand or option under
a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Investor may rescind
or withdraw, in its sole discretion from time to time upon written notice
to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
23
6.14. Replacement
of Securities. If any certificate or instrument evidencing any Securities is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to
be
issued in exchange and substitution for and upon cancellation thereof, or
in
lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable indemnity, if requested.
The
applicants for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs associated with the issuance of
such
replacement Securities. If a replacement certificate or instrument evidencing
any Securities is requested due to a mutilation thereof, the Company may
require
delivery of such mutilated certificate or instrument as a condition precedent
to
any issuance of a replacement.
6.15. Remedies.
In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Investors and the Company
will be entitled to specific performance under the Transaction Documents.
The
parties agree that monetary damages may not be adequate compensation for
any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be
adequate.
6.16. Payment
Set Aside. To the extent that the Company makes a payment or payments to any
Investor pursuant to any Transaction Document or an Investor enforces or
exercises its rights 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, 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.
6.17. Independent
Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in
any
way for the performance of the obligations of any other Investor under any
Transaction Document. The decision of each Investor to purchase Securities
pursuant to the Transaction Documents has been made by such Investor
independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to
such
obligations or the transactions contemplated by the Transaction Documents.
Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of
closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
24
6.18. Limitation
of Liability. Notwithstanding anything herein to the contrary, the Company
acknowledges and agrees that the liability of an Investor arising directly
or
indirectly, under any Transaction Document of any and every nature whatsoever
shall be satisfied solely out of the assets of such Investor, and that no
trustee, officer, other investment vehicle or any other Affiliate of such
Investor or any investor, shareholder or holder of shares of beneficial interest
of such a Investor shall be personally liable for any liabilities of such
Investor.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOLLOW]
25
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories
as of
the date first indicated above.
ORGANIC TO GO FOOD CORPORATION | ||
|
|
|
By: | ||
Name: Xxxxx Xxxxx | ||
Title: Chairman and Chief Executive Officer |
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOR INVESTORS FOLLOW]
Signature
Page to Securities Purchase Agreement
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories
as of
the date first indicated above.
NAME OF INVESTOR | ||
By: | ||
Name: | ||
Title: |
Investment Amount: $
|
|||||||
Tax
ID No.:
|
|||||||
ADDRESS
FOR NOTICE
|
|||||||
c/o:
|
|||||||
Street:
|
|||||||
City/State/Zip:
|
|||||||
Attention:
|
|||||||
Tel:
|
|||||||
Fax:
|
|||||||
DELIVERY
INSTRUCTIONS
|
|||||||
(if
different from above)
|
|||||||
c/o:
|
|||||||
Street:
|
|||||||
City/State/Zip:
|
|||||||
Attention:
|
|||||||
Tel:
|
Signature
Page to Securities Purchase Agreement
Annex
A
SCHEDULE
OF BUYERS
(1)
|
(2)
|
|
Buyer
|
Address
and
Facsimile
Number
|
|
EXHIBIT
A
Form
of Warrant
EXHIBIT
B
Registration
Rights Agreement
EXHIBIT
C
Escrow
Agreement