EXHIBIT 10.3
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement, dated as of ______ __, 2006 (this
"AGREEMENT") is entered into by and among Smoky Market Foods, Inc., a Nevada
corporation (the "COMPANY"), and the person or entity executing this document as
the investor ("INVESTOR").
RECITALS
A. On the terms and subject to the conditions set forth herein,
Investor is willing to purchase from the Company, and the Company is willing to
sell to Investor, a convertible promissory note in the principal amount set
forth opposite Investor's name on the signature page hereto, together with a
related warrant to acquire shares of the Company's capital stock.
B. As set forth on the signature page hereto, each dollar invested by
Investor under this Agreement shall be allocated to the purchase of a
convertible promissory note and associated warrant, with 0.1% of each dollar
that is allocated to the purchase of notes and warrants deemed to be separate
consideration for the purchase of each warrant, such that, e.g., for each
$100,000 invested hereunder, $99,900 would be applied to the purchase of a note
and $100 would be applied to the purchase of a warrant.
C. The Company intends to issue up to $250,000 of convertible
promissory notes and associated warrants to investors that will enter into
purchase agreements upon substantially similar terms as this Agreement ("SIMILAR
PURCHASE AGREEMENTS").
D. Capitalized terms not otherwise defined herein shall have the
meaning set forth in the form of Note (as defined below) attached hereto as
EXHIBIT A.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, and the
representations, warranties, and conditions set forth below, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. THE SECURITIES.
(a) ISSUANCE OF NOTES AND WARRANTS. At the Closing (as defined
below), the Company agrees to issue and sell to Investor, and, subject to all of
the terms and conditions hereof, Investor agrees to purchase a convertible
promissory note in the form of EXHIBIT A hereto (a "NOTE") in the principal
amount set forth opposite Investor's name on the signature page hereto.
(b) In consideration for the purchase by Investor of the Note,
the Company will issue to Investor a warrant in the form attached hereto as
EXHIBIT B (the "WARRANT"; together with the Note and any shares of common stock
issuable upon conversion of the Note or exercise of the Warrant, the
"SECURITIES") exercisable for a number of shares of Common Stock equal to the
principle amount of the Note multiplied by ten. For example, if the Investor
were to contribute $25,000 for a Note in the principal amount of $25,000, the
Warrants would be exercisable for 250,000 shares of Common Stock.
(c) DELIVERY. The sale and purchase of the Note and Warrant
shall take place at a closing (the "CLOSING") to be held at such place and time
as the Company and Investor may determine (the "CLOSING Date"), which shall
occur within fifteen days of the date hereof at the offices of the Company (or
via the exchange of documents and cash by regular mail, facsimile or express
courier). At the Closing, the Company will deliver to Investor the Note and
Warrant to be purchased by such Investor, against receipt by the Company of the
corresponding purchase price set forth on the signature page hereto (the
"PURCHASE PRICE") and which Purchase Price may be delivered by (a) check payable
to the Company, (b) wire transfer in accordance with the Company's instructions,
(c) cancellation of indebtedness or (d) any combination of the foregoing, with
evidence of such transfer or cancellation of indebtedness reasonably acceptable
to the Company and its counsel. The Note and the Warrant will be registered in
Investor's name in the Company's records.
(d) USE OF PROCEEDS. The proceeds of the sale and issuance of
the Securities shall be used for general corporate purposes, including costs
associated with a planned registration under the Securities Exchange Act of
1934, as amended, related auditing fees and related restructuring expenses.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Investor that:
(a) DUE INCORPORATION, QUALIFICATION, ETC. The Company (i) is
a corporation duly organized, validly existing and in good standing under the
laws of the state of Nevada; (ii) has the power and authority to own, lease and
operate its properties and carry on its business as now conducted; and (iii) is
duly qualified, licensed to do business and in good standing as a foreign
corporation in each jurisdiction where the failure to be so qualified or
licensed could reasonably be expected to have a Material Adverse Effect.
(b) AUTHORITY. The execution, delivery and performance by the
Company of each Transaction Document to be executed by the Company and the
consummation of the transactions contemplated thereby (i) are within the power
of the Company and (ii) have been duly authorized by all necessary actions on
the part of the Company.
(c) ENFORCEABILITY. Each Transaction Document executed, or to
be executed, by the Company has been, or will be, duly executed and delivered by
the Company and constitutes, or will constitute, a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and general principles of equity.
(d) NON-CONTRAVENTION. The execution and delivery by the
Company of the Transaction Documents executed by the Company and the performance
and consummation of the transactions contemplated thereby do not and will not
(i) violate the Company's Articles of Incorporation or Bylaws ) ("CHARTER
DOCUMENTS") or any material judgment, order, writ, decree, statute, rule or
regulation applicable to the Company; (ii) violate any provision of, or result
in the breach or the acceleration of, or entitle any other Person to accelerate
(whether after the giving of notice or lapse of time or both), any material
mortgage, indenture, agreement, instrument or contract to which the Company is a
party or by which it is bound; or (iii) result in the creation or imposition of
any Lien upon any property, asset or revenue of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization or approval applicable to the Company, its business or
operations, or any of its assets or properties.
(e) APPROVALS. No consent, approval, order or authorization
of, or registration, declaration or filing with, any governmental authority or
other Person (including, without limitation, the shareholders of any Person) is
required in connection with the execution and delivery of the Transaction
Documents executed by the Company and the performance and consummation of the
transactions contemplated thereby, except such consents and approvals as have
been obtained by the Company and such filings as may be necessary to claim
exemptions from registration or qualification under applicable securities laws,
which filings have been or will be made promptly by the Company.
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(f) LITIGATION. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending or, to the
knowledge of the Company, threatened against the Company or the Company's
Subsidiaries, if any, at law or in equity in any court or before any other
governmental authority that if adversely determined (i) would (alone or in the
aggregate) result in a material liability or (ii) seeks to enjoin, either
directly or indirectly, the execution, delivery or performance by the Company of
the Transaction Documents or the transactions contemplated thereby.
(g) EQUITY SECURITIES. The Company's total authorized capital
is 200,000,000 shares of capital stock, 200,000,000 of which are Common Stock,
$.001 par value, and 10,000,000 of which are preferred stock, $.001 par value.
The Company's total issued and outstanding shares are as set forth on the
capitalization schedule delivered to the Investor and attached hereto as
SCHEDULE 2(H). The equity securities ("EQUITY SECURITIES") of the Company have
the respective rights, preferences and privileges set forth in the Company's
Charter Documents in effect on the date hereof. All of the outstanding Equity
Securities of the Company have been duly authorized and are validly issued,
fully paid and nonassessable. Except for notes and warrants that may have been
issued pursuant to a Similar Purchase Agreement and the securities described on
Schedule 2(h), there are as of the date of Schedule 2(h) no options, warrants or
rights to purchase Equity Securities of the Company authorized, issued or
outstanding, and the Company is not obligated in any other manner to issue
shares of its Equity Securities. There are no restrictions on the transfer of
Equity Securities of the Company, other than those imposed by the Company's
Charter Documents as of the date hereof, or relevant state and federal
securities laws.
(h) LICENSE AGREEMENT WITH SOLE SHAREHOLDER. The Company is
the licensee under that certain License Agreement with Smoky Systems, LLC, a
Utah limited liability company and affiliate of the Company, a copy of which
agreement is attached hereto as EXHIBIT C.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR. Investor represents and
warrants to the Company upon the acquisition of the Securities as follows:
(a) BINDING OBLIGATION. Investor has full legal capacity,
power and authority to execute and deliver this Agreement and to perform
Investor's obligations hereunder. This Agreement is a valid and binding
obligation of Investor, enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity.
(b) REPRESENTATIONS NOT MADE BY THE COMPANY. Investor
represents and affirms that none of the following information has ever been
represented, guaranteed or warranted to Investor, expressly or by implication,
by any person: (i) the approximate or exact length of time that Investor will be
required to remain a security holder of the Company; (ii) the percentage of
profit and/or amount of or type of consideration, profit or loss to be realized,
if any, as a result of an investment in the Company; or (iii) the possibility
that the past performance or experience on the part of the Company or any
affiliate, or any officer, director, employee or agent of the foregoing, might
in any way indicate or predict the results of ownership of any Security or the
potential success of the Company's operations.
(c) PURCHASE FOR OWN ACCOUNT. Investor is the sole and true
party in interest, is acquiring the Securities for his/her/its own account for
investment, is not purchasing the Securities for hereby for the benefit of any
other person, and has no present intention of holding or managing the Securities
with others or of selling, distributing or otherwise disposing of any portion of
the Securities. Investor has his/her/its principal residence (if an individual)
or its principal place of business (if an entity) in the state set forth on the
signature page hereof.
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(d) DISCLOSURE AND REVIEW OF INFORMATION. Investor
acknowledges and represents that it has been given a reasonable opportunity to
review all documents, books and records of the Company pertaining to this
investment, and has been supplied with all additional information concerning the
Company and the Securities that has been requested by Investor, has had a
reasonable opportunity to ask questions of and receive answers from the Company
or its representatives concerning this investment, and that all such questions
have been answered to the full satisfaction of Investor. Investor has received,
and acknowledges that Investor is receiving, no representations, written or
oral, from the Company or its officers, directors, employees, attorneys or
agents other than those contained in this Agreement. In making his/her decision
to purchase the Securities, Investor has relied solely upon its review of this
Agreement, [THE BUSINESS PLAN PROVIDED BY THE COMPANY, INCLUDING RISK FACTORS
CONTAINED THEREIN,][DISCUSS] and independent investigations made by it or its
representatives without assistance of the Company.
(e) SPECULATIVE INVESTMENT. Investor understands that (i)
Investor must bear the economic risk of the investment in the Securities for an
indefinite period of time because the Securities have not been registered under
the Securities Act or qualified under the Securities Act of 1933, as amended or
the securities laws of any other jurisdiction and (ii) Investor's investment in
the Company represented by the Securities is highly speculative in nature and is
subject to a high degree of risk of loss in whole or in part. Investor has
adequate means of providing for his/her/its current needs and possible
contingencies, and is able to bear the high degree of economic risk of this
investment, including, but not limited to, the possibility of the complete loss
of Investor's entire investment and the limited transferability of the
Securities, which may make the liquidation of this investment impossible for the
indefinite future.
(f) INVESTMENT EXPERIENCE. Investor has experience as an
investor in securities and acknowledges that it can bear the economic risk of
its investment in the Securities. By reason of Investor's business or financial
experience or the business or financial experience of its professional advisors
who are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly, Investor has
the capacity to protect Investor's own interests in connection with its purchase
of the Securities. Investor has the financial capacity to bear the risk of this
investment and has received from the Company all information it has requested
and considers necessary or appropriate for deciding whether to purchase the
Securities. Investor has not been organized solely for the purpose of acquiring
the Securities.
(g) Accredited Investor. Investor has completed the Investor
Questionnaire attached hereto as EXHIBIT D. All information in the Investor
Questionnaire is true, correct and accurate.
(h) RESTRICTED SECURITIES. Investor understands that the
Securities are and will be "restricted securities" under the Securities Act
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering, and that, under the Securities Act and applicable
regulations thereunder, such securities may be resold without registration under
the Securities Act only in certain limited circumstances. In this connection,
Investor represents that Investor is familiar with Rule 144 promulgated under
the Securities Act, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
(i) LEGENDS. Investor understands that the documents and
certificates evidencing the Securities will bear the legend set forth below,
together with any other legends required by the laws any other state with
jurisdiction:
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES
ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED UNLESS A REGISTRATION STAEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, IS IN EFFECT WITH RESPECT
TO SUCH SECURITIES OR THE COMPANY HAS RECEIVED AN OPINION IN
FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY PROVIDING THAT
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED, IS AVAILABLE.
The legend set forth above shall be removed by the Company from any certificate
evidencing any of the Securities only (i) upon receipt by the Company of an
opinion in form and substance satisfactory to the Company that such legend may
be removed pursuant to Rule 144 promulgated under the Securities Act, or (ii)
upon confirmation that a registration statement under the Securities Act is at
that time in effect with respect to the legended Securities and that such
transfer will not jeopardize the exemption or exemptions from registration
pursuant to which the legended Securities were issued.
4. REGISTRATION RIGHTS.
(a) AGREEMENT TO REGISTER. The Company hereby agrees to use
commercially reasonable efforts to prepare, file and cause to be effective a
Form 10-SB, Form 8-A or similar document effecting the registration of its
common stock under the Securities Exchange Act of 1934. Within the ninety (90)
days of the date the Company's Form 10-SB, Form 8-A or similar document is
declared effective by the SEC (the "FILING DEADLINE"), the Company shall prepare
and file with the SEC one Registration Statement registering the resale of the
Registrable Securities. The Company shall pay the reasonable out-of-pocket
expenses incident to performance of or compliance with this agreement by the
Company ("REGISTRATION EXPENSES") relating to the preparation and filing of such
registration statement.
(b) CERTAIN LIMITATIONS.
(i) FURNISH INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 4 with respect to the Registrable Securities of Investor that Investor
shall furnish to the Company such information regarding Investor, the
Registrable Securities held by Investor, and the intended method of disposition
of such securities as shall be reasonably required to effect the registration of
Investor's Registrable Securities.
(ii) NONTRANSFERABILITY OF RIGHTS; APPROVAL REQUIRED.
Notwithstanding anything in this Agreement to the contrary, the rights granted
to Investor in this Section 4 are nontransferable without the prior written
consent of the Company (which may be unreasonably withheld).
(iii) CONFIDENTIALITY REQUIREMENT. The Company's
obligations under Section 4(a) shall be subject to the Investor's prior
execution of a confidentiality agreement in form and substance reasonably
acceptable to the Company to keep confidential the fact of the proposed
registration, and not to enter into any agreements with respect to the purchase
or sale of securities of the Company, until the Company has publicly announced
the details related to such registration.
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5. MISCELLANEOUS.
(a) WAIVERS AND AMENDMENTS. Any provision of this Agreement
may be amended, waived or modified only upon the written consent of the Company
and Investors holding a Seventy-five Percent (75%) Majority in Interest. As long
as it applies to all parties to Similar Purchase Agreement, an amendment, waiver
or modification approved as provided herein shall be binding up Investor and the
Company.
(b) GOVERNING LAW. This Agreement and all actions arising out
of or in connection with this Agreement shall be governed by and construed in
accordance with the laws of the State of Iowa without regard to the conflicts of
law provisions of the State of Iowa or of any other state.
(c) SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive the execution and delivery of this
Agreement; provided that all covenants and agreements set forth herein shall
terminate upon full payment or conversion of the Note.
(d) SUCCESSORS AND ASSIGNS. Subject to the restrictions on
transfer described in Sections 5(e) and 6(F) below and in the Note and Warrant,
the rights and obligations of the Company and Investor shall be binding upon and
benefit the successors, assigns, heirs, administrators and transferees of the
parties.
(e) ASSIGNMENT BY THE COMPANY. The rights, interests or
obligations hereunder may not be assigned, by operation of law or otherwise, in
whole or in part, by the Company without the prior written consent of Investors
holding a Seventy-five Percent (75%) Majority in Interest (which consent shall
not be unreasonably withheld with respect to a transfer by operation of law or
by any Investor without the prior written consent of the Company).
(f) ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents constitute and contain the entire agreement among the Company and
Investor and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the parties, whether
written or oral, respecting the subject matter hereof.
(g) NOTICES. All notices, requests, demands, consents,
instructions or other communications required or permitted hereunder shall in
writing and faxed, mailed or delivered to each party as follows: (i) if to
Investor, at Investor's address or facsimile number set forth on the signature
page hereto, or at such other address as such Investor shall have furnished the
Company in writing, or (ii) if to the Company, at 000 Xxxxxxx Xx., Xxxxx 000,
Xxxxx, Xxxxxxxxxx, Attn: Xxxx Xxxxx; Facsimile __________, or at such other
address or facsimile number as the Company shall have furnished to Investor in
writing. All such notices and communications will be deemed effectively given
the earlier of (i) when received, (ii) when delivered personally, (iii) one
business day after being delivered by facsimile (with receipt of appropriate
confirmation), (iv) one business day after being deposited with an overnight
courier service of recognized standing or (v) four days after being deposited in
the U.S. mail, first class with postage prepaid.
(h) EXPENSES. The parties shall be responsible for their costs
and fees associated or incurred in connection with the negotiation and execution
of this Agreement.
(i) SEVERABILITY OF THIS AGREEMENT. If any provision of this
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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(j) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement. Facsimile copies of signed
signature pages will be deemed binding originals.
[SIGNATURE PAGE FOLLOWS]
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The parties have caused this Agreement to be duly executed and
delivered by their proper and duly authorized officers as of the date and year
first written above.
COMPANY:
SMOKY MARKET FOODS, INC.
a Nevada corporation
By: ________________________________
Name: ______________________________
Title: _____________________________
[Signature page for Securities Purchase Agreement]
INVESTOR:
____________________________________
By: ________________________________
Name: ______________________________
Title*: ____________________________
(*If signing on behalf of an entity)
------------------------- ------------- ----------------- ----------------------
NAME; ADDRESS FAX NUMBER NOTE AMOUNT WARRANT PRICE TOTAL PURCHASE PRICE
------------------------- ------------- ----------------- ----------------------
(equal to 1% of
the Total
Purchase Price)
------------------------- ------------- ----------------- ----------------------
[Signature page for Securities Purchase Agreement]
EXHIBIT A
FORM OF NOTE
[SEE ATTACHED]
EXHIBIT B
FORM OF WARRANT
[SEE ATTACHED]
EXHIBIT C
LICENSE AGREEMENT WITH SMOKY SYSTEMS
[SEE ATTACHED]
EXHIBIT D
INVESTOR QUESTIONAIRE
[SEE ATTACHED]
SCHEDULE 2.2(H)
CAPITALIZATION
The number of outstanding shares of common stock, options to purchase common
stock and other securities exercisable for or convertible into common stock as
of June 27, 2006 is as follows (which number excludes any securities offered or
sold under Similar Purchase Agreements):
Common Stock: 40,250,000
Preferred Stock: None
Outstanding* Options to
Purchase Common Stock: 1,137,500
Additional Shares of Common
Stock Reserved for Stock Incentive
Plan*: 5,362,500
* Documentation in process.
