PREFERRED STOCK PURCHASE AGREEMENT BETWEEN SPEEDEMISSIONS, INC. AND BARRON PARTNERS LP DATED June 30, 2005
BETWEEN
SPEEDEMISSIONS,
INC.
AND
XXXXXX
PARTNERS LP
DATED
June
30, 2005
This
PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement")
is
made and entered into as of the 30th
day of
June, 2005 between Speedemissions,
Inc., a
corporation organized and existing under the laws of the State of Florida
(the
“Company”)
and
XXXXXX
PARTNERS LP, a
Delaware limited partnership (the “Investor”).
PRELIMINARY
STATEMENT:
WHEREAS,
the
Investor wishes to purchase from the Company, upon the terms and subject
to the
conditions of this Agreement, Two Million Five Hundred Thousand (2,500,000)
shares of Series B convertible preferred stock of the Company, with such
preferred stock being as described in the Certificate of Designations, Rights
and Preferences (the “Certificate
of Designations”)
in
substantially the form attached hereto as Exhibit
A
(the
“Preferred
Stock”)
for the
Purchase Price set forth in Section 1.3.14 hereof. Subject to the limitations
set forth herein and in the Certificate of Designation, each share of Series
B
Preferred Stock shall be convertible into Forty Two and 80/100 shares of
common
stock of the Company at any time if all three acquisitions are completed
within
thirty days post Closing. If the Three Proposed Transactions, as defined
in
Exhibit E, are not completed thirty days post Closing the conversion price
will
be adjusted per Exhibit E. In addition, the Company will issue to the Investor
two Common Stock Purchase Warrants (the “Warrants”)
to
purchase up to an additional Forty Three Million Nine Hundred Thousand
(43,900,000) shares of common stock of the Company at exercise prices as
stated
in the Warrants; and
WHEREAS,
the
parties intend to memorialize the purchase and sale of such Preferred Stock
and
the Warrants.
NOW,
THEREFORE,
in
consideration of the mutual covenants and premises contained herein, and
for
other good and valuable consideration, the receipt and adequacy of which
are
hereby conclusively acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE
I
INCORPORATION
BY REFERENCE, SUPERSEDER AND DEFINITIONS
1.1 Incorporation
by Reference.
The
foregoing recitals and the Exhibits and Schedules attached hereto and referred
to herein, are hereby acknowledged to be true and accurate, and are incorporated
herein by this reference.
1.2 Superseder.
This
Agreement, to the extent that it is inconsistent with any other instrument
or
understanding among the parties governing the affairs of the Company, shall
supersede such instrument or understanding to the fullest extent permitted
by
law. A copy of this Agreement shall be filed at the Company’s principal
office.
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
1 OF 32
1.3 Certain
Definitions.
For
purposes of this Agreement, the following capitalized terms shall have the
following meanings (all capitalized terms used in this Agreement that are
not
defined in this Article 1 shall have the meanings set forth elsewhere in
this
Agreement):
1.3.1 “1933
Act”
means
the Securities Act of 1933, as amended.
1.3.2 “1934
Act”
means
the Securities Exchange Act of 1934, as amended.
1.3.3 “Affiliate”
means a
Person or Persons directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with the Person(s) in
question. The term “control,” as used in the immediately preceding sentence,
means, with respect to a Person that is a corporation, the right to the
exercise, directly or indirectly, more than 50 percent of the voting rights
attributable to the shares of such controlled corporation and, with respect
to a
Person that is not a corporation, the possession, directly or indirectly,
of the
power to direct or cause the direction of the management or policies of such
controlled Person.
1.3.4 “Articles”
means
the Certificate of Incorporation of the Company, as the same may be amended
from
time to time.
1.3.5 “Closing”shall
mean the Closing of the transactions contemplated by this Agreement on the
Closing Date.
1.3.6 “Closing
Date”
means
the date on which the payment of the Purchase Price (as defined herein) by
the
Investor to the company is completed pursuant to this Agreement to purchase
the
Preferred Stock and Warrants, which shall occur on or before June 30,
2005.
1.3.7 “Common
Stock”
means
shares of common stock of the Company, par value $0.001 per share.
1.3.8 "Escrow
Agent"
shall
mean The Lebrecht Group, APLC, in its capacity as Escrow Agent under the
Escrow
Agreement.
1.3.9 "Escrow
Agreement"
shall
mean the Escrow Agreement among the Company, the Investor and The Lebrecht
Group, APLC, as Escrow Agent, attached hereto as Exhibit
E.
1.3.10 "Exempt
Issuance"
means
the issuance of (a) shares of Common Stock or options to employees, officers,
or
directors of the Company pursuant to any stock or option plan duly adopted
by a
majority of the non-employee members of the Board of Directors of the Company
or
a majority of the members of a committee of non-employee directors established
for such purpose, (b) securities upon the exercise of or conversion of any
securities issued hereunder, and (c) securities issued pursuant to acquisitions
or strategic transactions, provided any such issuance shall only be to a
Person
which is, itself or through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company receives
benefits in addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily for the
purpose
of raising capital or to an entity whose primary business is investing in
securities.
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
2 OF 32
1.3.11 "Material
Adverse Effect"
shall
mean any adverse effect on the business, operations, properties or financial
condition of the Company that is material and adverse to the Company and
its
subsidiaries and affiliates, taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its material obligations
under
this Agreement or the Registration Rights Agreement or to perform its
obligations under any other material agreement.
1.3.12 “Florida
Act”
means
the Business Corporation Act of the State of Florida, as amended.
1.3.13 “Person”
means an
individual, partnership, firm, limited liability company, trust, joint venture,
association, corporation, or any other legal entity.
1.3.14 “Purchase
Price”
means
the Six Million Four Hundred and Twenty Thousand Dollars ($6,420,000.00)
paid by
the Investor to the Company for the Preferred Stock and the
Warrants.
1.3.15 “Registration
Rights Agreement"
shall
mean the registration rights agreement between the Investor and the Company
attached hereto as Exhibit
B.
1.3.16 "Registration
Statement"
shall
mean the registration statement under the 1933 Act to be filed with the
Securities and Exchange Commission for the registration of the Shares pursuant
to the Registration Rights Agreement attached hereto as Exhibit
B.
1.3.17
“SEC”
means
the Securities and Exchange Commission.
1.3.18
"SEC
Documents"
shall
mean the Company's latest Form 10-K or 10-KSB as of the time in question,
all
Forms 10-Q or 10-QSB and 8-K filed thereafter, and the Proxy Statement for
its
latest fiscal year as of the time in question until such time as the Company
no
longer has an obligation to maintain the effectiveness of a Registration
Statement as set forth in the Registration Rights Agreement.
1.3.19
"Shares"
shall
mean, collectively, the shares of Common Stock of the Company issued upon
conversion of the Preferred Stock subscribed for hereunder and those shares
of
Common Stock issuable to the Investor upon exercise of the
Warrants.
1.3.20
“Subsequent
Financing”
shall
mean any offer and sale of shares of Preferred Stock or debt that is convertible
into shares of Common Stock or otherwise senior or superior to the Preferred
Stock.
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
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1.3.21
“Transaction
Documents”
shall
mean this Agreement, all Schedules and Exhibits attached hereto and all other
documents and instruments to be executed and delivered by the parties in
order
to consummate the transactions contemplated hereby, including, but not limited
to the documents listed in Sections 3.2 and 3.3 hereof.
1.3.22
“Warrants”
shall
mean the Common Stock Purchase Warrants in the form attached hereto Exhibit
D.
ARTICLE
II
SALE
AND PURCHASE OF SPEEDEMISSIONS, INC. PREFERRED STOCK AND WARRANTS PURCHASE
PRICE
2.1 Sale
of Preferred Stock and Issuance of Warrants.
(a) Upon
the
terms and subject to the conditions set forth herein, and in accordance with
applicable law, the Company agrees to sell to the Investor, and the Investor
agrees to purchase from the Company, on the Closing Date Two Million Five
Hundred Thousand (2,500,000) shares of Preferred Stock and the Warrants for
(the
“Purchase
Price”)
of Six
Million Four Hundred and Twenty Thousand Dollars ($6,420,000.00). The Purchase
Price shall be paid by the Investor to the Company on the Closing Date by
a wire
transfer of the Purchase Price into escrow to be held by the escrow agent
pursuant to the terms of the Escrow Agreement. The Company shall cause the
Preferred Stock and the Warrants to be issued to the Investor upon the release
of the Purchase Price to the Company by the escrow agent pursuant to the
terms
of the Escrow Agreement. The Company shall register the shares of Common
Stock
into which the Preferred Stock is convertible pursuant to the terms and
conditions of a Registration Rights Agreement attached hereto as Exhibit
B.
(b) The
Preferred Stock shall be convertible by the Investor into an aggregate total
of
One Hundred and Seven Million (107,000,000) shares of Common Stock (the
“Conversion
Shares”);
provided, however, that the Investor shall not be entitled to convert the
Preferred Stock into shares of Common Stock that would result in beneficial
ownership by the Investor and its affiliates of more than 4.9% of the then
outstanding number of shares of Common Stock on such date. For the purposes
of
the immediately preceding sentence, beneficial ownership shall be determined
in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder.
(c) Upon
execution and delivery of this Agreement and the Company’s receipt of the
Purchase Price from the Escrow Agent pursuant to the terms of the Escrow
Agreement, the Company shall issue to the Investor the two Warrants to purchase
an aggregate of Forty Three Million Nine Hundred Thousand (43,900,000) shares
of
Common Stock at exercise prices as stated in the Warrants, all pursuant to
the
terms and conditions of the form of Warrants attached hereto as Exhibit
C;
provided, however, that the Investor shall not be entitled to exercise the
Warrants and receive shares of Common Stock that would result in beneficial
ownership by the Investor and its affiliates of more than 4.9% of the then
outstanding number of shares of Common Stock on such date. For the purposes
of
the immediately preceding sentence, beneficial ownership shall be determined
in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder.
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
4 OF 32
2.2 Purchase
Price.
The
Purchase Price shall be delivered by the Investor in the form of a check
or wire
transfer made payable to the Company in United States Dollars from the Investor
to the escrow agent pursuant to the Escrow Agreement on the Closing
Date.
ARTICLE
III
CLOSING
DATE AND DELIVERIES AT CLOSING
3.1
Closing
Date. The
closing of the transactions contemplated by this Agreement (the “Closing”),
unless expressly determined herein, shall be held at the offices of the Company,
at 5:00 P.M. local time, on the Closing Date or on such other date and at
such
other place as may be mutually agreed by the parties, including closing by
facsimile with originals to follow.
3.2 Deliveries
by the Company.
In
addition to and without limiting any other provision of this Agreement, the
Company agrees to deliver, or cause to be delivered, to the escrow agent
under
the Escrow Agreement, the following:
|
(a)
|
At
or prior to Closing, an executed
Agreement;
|
|
(b)
|
At
or prior to Closing, two executed Warrants in the name of the Investor
in
the form attached hereto as Exhibit
C;
|
|
(c)
|
The
executed Registration Rights
Agreement;
|
|
(d)
|
Evidence
of a pre-vote by a majority of the shareholders to approve an increase
in
the authorized shares outstanding from 100,000,000 to 250,000,000.
|
|
(e)
|
Evidence
of approval of the Board of Directors of the Company of the Transaction
Documents and the transactions contemplated
hereby;
|
|
(f)
|
Certificate
of the President and the Secretary of the Company that the Certificate
of
Designation has been adopted;
|
|
(g)
|
Certificates
of Existence or Authority to Transact Business of the Company issued
by
each of the Secretaries of State for Florida and
Georgia;
|
|
(h)
|
An
opinion from the Company’s counsel concerning the Transaction Documents
and the transactions contemplated hereby in form and substance
reasonably
acceptable to Investor;
|
|
(i)
|
Stock
Certificate in the name of Investor evidencing the Preferred
Stock;
|
|
(j)
|
The
executed Escrow Agreement; and
|
|
(k)
|
Such
other documents or certificates as shall be reasonably requested
by
Investor or its counsel.
|
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
5 OF 32
3.3 Deliveries
by Investor.
In
addition to and without limiting any other provision of this Agreement, the
Investor agrees to deliver, or cause to be delivered, to the escrow agent
under
the Escrow Agreement, the following:
|
(a)
|
A
deposit in the amount of the Investor
Funds;
|
|
(b)
|
The
executed Agreement with all Exhibits and Schedules attached
hereto;
|
|
(c)
|
The
executed Registration Rights Agreement;
|
|
(d)
|
The
executed Escrow Agreement; and
|
|
(e)
|
Such
other documents or certificates as shall be reasonably requested
by the
Company or its counsel.
|
In
the
event any document provided to the other party in Paragraphs 3.2 and 3.3
herein
are provided by facsimile, the party shall forward an original document to
the
other party within seven (7) business days.
3.4 Further
Assurances.
The
Company and the Investor shall, upon request, on or after the Closing Date,
cooperate with each other (specifically, the Company shall cooperate with
the
Investor, and the Investor shall cooperate with the Company) by furnishing
any
additional information, executing and delivering any additional documents
and/or
other instruments and doing any and all such things as may be reasonably
required by the parties or their counsel to consummate or otherwise implement
the transactions contemplated by this Agreement.
3.5 Waiver.
The
Investor may waive any of the requirements of Section 3.2 of this Agreement,
and
the Company at its discretion may waive any of the provisions of Section
3.3 of
this Agreement. The Investor may also waive any of the requirements of the
Company under the Escrow Agreement.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF
THE
COMPANY
The
Company represents and warrants to the Investor as of the date hereof and
as of
Closing (which warranties and representations shall survive the Closing
regardless of what examinations, inspections, audits and other investigations
the Investor has heretofore made or may hereinafter make with respect to
such
warranties and representations) as follows:
4.1 Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida, and has the requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted and is duly qualified to do business
in
any other jurisdiction by virtue of the nature of the businesses conducted
by it
or the ownership or leasing of its properties, except where the failure to
be so
qualified will not, when taken together with all other such failures, have
a
Material Adverse Effect on the business, operations, properties, assets,
financial condition or results of operation of the Company and its subsidiaries
taken as a whole.
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
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4.2 Articles
of Incorporation and By-Laws.
The
complete and correct copies of the Company’s Articles and By-Laws, as amended or
restated to date which have been filed with the Securities and Exchange
Commission are a complete and correct copy of such document as in effect
on the
date hereof and as of the Closing Date.
4.3 Capitalization.
4.3.1
The
authorized and outstanding capital stock of the Company is set forth in the
Company’s Annual Report on Form 10-KSB, filed on April 15, 2005 with the
Securities and Exchange Commission and updated on all subsequent SEC Documents.
All shares of capital stock have been duly authorized and are validly issued,
and are fully paid and non assessable, and free of preemptive
rights.
4.3.2
As
of the date of this Agreement, the authorized capital stock of the Company
consists of 100,000,000 shares of common Stock ($0.001 par value) and 5,000,000
shares of preferred stock ($0.001 par value), of which approximately 25,291,594
shares of common Stock are issued and outstanding. As of Closing, following
the
issuance by the Company of the Preferred Stock to the Investor, the authorized
capital stock of the Company will consist of 100,000,000 shares of Common
Stock
($0.001 par value) and 5,000,000 shares of preferred stock ($0.001 par value),
of which approximately 25,291,594 shares of Common Stock and 5,000,000 shares
of
preferred stock shall be issued and outstanding. As of Closing, holders of
stock
options and warrants (excluding the Warrants) will hold options and warrants
to
purchase an aggregate of approximately 6,446,823 shares of Common Stock.
All
outstanding shares of capital stock have been duly authorized and are validly
issued, and are fully paid and nonassessable and free of preemptive rights.
All
shares of capital stock described above to be issued have been duly authorized
and when issued, will be validly issued, fully paid and nonassessable and
free
of preemptive rights.
4.3.3
Except pursuant to this Agreement and as set forth in Schedule 4.3 hereto,
and
as set forth in the Company’s SEC Documents, filed with the SEC, as of the date
hereof and as of the Closing Date, there are not now outstanding options,
warrants, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any class of capital stock of the Company, or agreements,
understandings or arrangements to which the Company is a party, or by which
the
Company is or may be bound, to issue additional shares of its capital stock
or
options, warrants, scrip or rights to subscribe for, calls or commitment
of any
character whatsoever relating to, or securities or rights convertible into
or
exchangeable for, any shares of any class of its capital stock. The Company
agrees to inform the Investors in writing of any additional warrants granted
prior to the Closing Date.
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
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4.3.4
The
Company on the Closing Date (i) will have full right, power, and authority
to
sell, assign, transfer, and deliver, by reason of record and beneficial
ownership, to the Investor, the Preferred Stock and Warrants hereunder, free
and
clear of all liens, charges, claims, options, pledges, restrictions, and
encumbrances whatsoever, except as required by the Securities Act; and (ii)
upon
conversion of the Preferred Stock or exercise of the Warrants, the Investor
will
acquire good and marketable title to the Shares, free and clear of all liens,
charges, claims, options, pledges, restrictions, and encumbrances whatsoever,
except as otherwise provided by the Securities Act and in this Agreement
as to
the limitation on the voting rights of such Shares in certain
circumstances.
4.4 Authority.
The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, the Preferred Stock, and the Warrants, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
by
the Company and the consummation of the transactions contemplated hereby
have
been duly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company is necessary to authorize this Agreement
or to consummate the transactions contemplated hereby except as disclosed
in
this Agreement. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
4.5 No
Conflict; Required Filings and Consents. The
execution and delivery of this Agreement by the Company does not, and the
performance by the Company of its obligations hereunder will not, to the
best
knowledge of the Company: (i) conflict with or violate the Articles or By-Laws
of the Company; (ii) conflict with, breach or violate any federal, state,
foreign or local law, statute, ordinance, rule, regulation, order, judgment
or
decree (collectively, "Laws")
in
effect as of the date of this Agreement and applicable to the Company; or
(iii)
result in any breach of, constitute a default (or an event that with notice
or
lapse of time or both would become a default) under, give to any other entity
any right of termination, amendment, acceleration or cancellation of, require
payment under, or result in the creation of a lien or encumbrance on any
of the
properties or assets of the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by the Company
or
any of its properties or assets is bound. Excluding from the foregoing are
such
violations, conflicts, breaches, defaults, terminations, accelerations,
creations of liens, or incumbency that would not, in the aggregate, have
a
Material Adverse Effect.
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
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4.6 Report
and Financial Statements.
The
Company’s Annual Report on Form 10-KSB, filed on April 15, 2005 with the SEC
contains the audited financial statements of the Company as of December 31,
2004
and for the two years then ended (collectively, the “Financial
Statements”).
Each
of the balance sheets contained in or incorporated by reference into any
such
Financial Statements (including the related notes and schedules thereto)
fairly
presented the financial position of the Company, as of its date, and each
of the
statements of income and changes in stockholders’ equity and cash flows or
equivalent statements in such Financial Statements (including any related
notes
and schedules thereto) fairly presents, changes in stockholders’ equity and
changes in cash flows, as the case may be, of the Company, for the periods
to
which they relate, in each case in accordance with United States generally
accepted accounting principles (“U.S.
GAAP”)
consistently applied during the periods involved, except in each case as
may be
noted therein, subject to normal year-end audit adjustments in the case of
unaudited statements. The books and records of the Company have been, and
are
being, maintained in all material respects in accordance with U.S. GAAP and
any
other applicable legal and accounting requirements and reflect only actual
transaction.
4.7 Compliance
with Applicable Laws.
The
Company is not in violation of, or, to the knowledge of the Company is not
under
investigation with respect to or has not been given notice or has not been
charged with the violation of any Law of a governmental agency, except for
violations which individually or in the aggregate do not have a Material
Adverse
Effect.
4.8 Brokers. Except
as
set forth on Schedule 4.8, no broker, finder or investment banker is entitled
to
any brokerage, finder's or other fee or Commission in connection with the
transactions contemplated by this Agreement based upon arrangements made
by or
on behalf of the Company.
4.9 SEC
Documents.
The
Company acknowledges that it is a publicly held company and has made available
to the Investor after demand true and complete copies of any requested SEC
Documents. The Company has registered its Common Stock pursuant to Section
12(g)
of the 1934 Act, and the Common Stock is quoted and traded on the OTC Bulletin
Board of the National Association of Securities Dealers, Inc. The Company
has
received no notice, either oral or written, with respect to the continued
quotation or trading of the Common Stock on the OTC Bulletin Board. The Company
has not provided to the Investor any information that, according to applicable
law, rule or regulation, should have been disclosed publicly prior to the
date
hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the 1934 Act, and rules and regulations of the SEC promulgated
thereunder and the SEC Documents did 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, not misleading..
4.10 Litigation.
Except
as set forth in Schedule 4.10, to the knowledge of the Company, no litigation,
claim, or other proceeding before any court or governmental agency is pending
or
to the knowledge of the Company, threatened against the Company, the prosecution
or outcome of which may have a Material Adverse Effect.
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
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4.11 Exemption
from Registration.
Subject
to the accuracy of the Investor’s representations in Article V, except as
required pursuant to the Registration Rights Agreement, the sale of the
Preferred Stock and Warrants by the Company to the Investor will not require
registration under the 1933 Act, but may require registration under New York
state securities law if applicable to the Investor. When validly converted
in
accordance with the terms of the Preferred Stock, and upon exercise of the
Warrants in accordance with their terms, the Shares underlying the Preferred
Stock and the Warrants will be duly and validly issued, fully paid, and
non-assessable. The Company is issuing the Preferred Stock and the Warrants
in
accordance with and in reliance upon the exemption from securities registration
afforded, inter alia, by Rule 506 under Regulation D as promulgated by the
SEC
under the 1933 Act, and/or Section 4(2) of the 1933 Act; provided, however,
that
certain filings and registrations may be required under state securities
“blue
sky” laws depending upon the residency of the Investor.
4.12 No
General Solicitation or Advertising in Regard to this
Transaction.
Neither
the Company nor any of its Affiliates nor, to the knowledge of the Company,
any
Person acting on its or their behalf (i) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation
D as
promulgated by the SEC under the 0000 Xxx) or general advertising with respect
to the sale of the Preferred Stock or Warrants, or (ii) made any offers or
sales
of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Preferred Stock or
Warrants, under the 1933 Act, except as required herein.
4.13 No
Material Adverse Effect.
Except
as set forth in Schedule 4.13 attached hereto, since March 31, 2005, no event
or
circumstance resulting in a Material Adverse Effect has occurred or exists
with
respect to the Company. No material supplier has given notice, oral or written,
that it intends to cease or reduce the volume of its business with the Company
from historical levels. Since March 31, 2005, no event or circumstance has
occurred or exists with respect to the Company or its businesses, properties,
prospects, operations or financial condition, that, under any applicable
law,
rule or regulation, requires public disclosure or announcement prior to the
date
hereof by the Company but which has not been so publicly announced or disclosed
in writing to the Investor.
4.14 Internal
Controls And Procedures.
The
Company maintains books and records and internal accounting controls which
provide reasonable assurance that (i) all transactions to which the Company
or
any subsidiary is a party or by which its properties are bound are executed
with
management's authorization; (ii) the recorded accounting of the Company's
consolidated assets is compared with existing assets at regular intervals;
(iii)
access to the Company's consolidated assets is permitted only in accordance
with
management's authorization; and (iv) all transactions to which the Company
or
any subsidiary is a party or by which its properties are bound are recorded
as
necessary to permit preparation of the financial statements of the Company
in
accordance with U.S. generally accepted accounting principles.
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4.15 Full
Disclosure.
No
representation or warranty made by the Company in this Agreement and no
certificate or document furnished or to be furnished to the Investor pursuant
to
this Agreement contains or will contain any untrue statement of a material
fact,
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
4.16 Employee
Stock Option Plan.
Within
60 days the Company and the Shareholders will vote to approve an employee
stock
option plan representing 10% of the outstanding common stock resetting every
six
months to be vested over 5 years or as reasonably determined by the compensation
committee of the board of directors.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF THE INVESTORS
The
Investor represents and warrants to the Company that:
5.1 Organization
and Standing of the Investor.
The
Investor is a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware. The state in which any
offer
to purchase shares hereunder was made or accepted by such Investor is the
state
shown as such Investor’s address. The Investor was not formed for the purpose of
investing solely in the Preferred Stock, the Warrants or the shares of Common
Stock which are the subject of this Agreement.
5.2 Authorization
and Power.
The
Investor has the requisite power and authority to enter into and perform
this
Agreement and to purchase the securities being sold to it hereunder. The
execution, delivery and performance of this Agreement by the Investor and
the
consummation by the Investor of the transactions contemplated hereby have
been
duly authorized by all necessary partnership action where appropriate. This
Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Investor and at the Closing shall constitute valid and binding
obligations of the Investor enforceable against the Investor in accordance
with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
5.3
No
Conflicts.
The
execution, delivery and performance of this Agreement and the consummation
by
the Investor of the transactions contemplated hereby or relating hereto do
not
and will not (i) result in a violation of such Investor's charter documents
or
bylaws where appropriate or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default)
under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which the Investor
is
a party, or result in a violation of any law, rule, or regulation, or any
order,
judgment or decree of any court or governmental agency applicable to the
Investor or its properties (except for such conflicts, defaults and violations
as would not, individually or in the aggregate, have a Material Adverse Effect
on such Investor). The Investor is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of
such
Investor’s obligations under this Agreement or to purchase the securities from
the Company in accordance with the terms hereof, provided that for purposes
of
the representation made in this sentence, the Investor is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
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5.4 Financial
Risks.
The
Investor acknowledges that such Investor is able to bear the financial risks
associated with an investment in the securities being purchased by the Investor
from the Company and that it has been given full access to such records of
the
Company and the subsidiaries and to the officers of the Company and the
subsidiaries as it has deemed necessary or appropriate to conduct its due
diligence investigation. The Investor is capable of evaluating the risks
and
merits of an investment in the securities being purchased by the Investor
from
the Company by virtue of its experience as an investor and its knowledge,
experience, and sophistication in financial and business matters and the
Investor is capable of bearing the entire loss of its investment in the
securities being purchased by the Investor from the Company.
5.5 Accredited
Investor.
The
Investor is (i) an “accredited investor” as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act by reason of Rule 501(a)(3) and
(6),
(ii) experienced in making investments of the kind described in this Agreement
and the related documents, (iii) able, by reason of the business and financial
experience of its officers (if an entity) and professional advisors (who
are not
affiliated with or compensated in any way by the Company or any of its
affiliates or selling agents), to protect its own interests in connection
with
the transactions described in this Agreement, and the related documents,
and
(iv) able to afford the entire loss of its investment in the securities being
purchased by the Investor from the Company.
5.6 Brokers.
Except
as set forth in Schedule 4.8, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or Commission in connection with
the
transactions contemplated by this Agreement based upon arrangements made
by or
on behalf of the Investor.
5.7 Knowledge
of Company.
The
Investor and such Investor’s advisors, if any, have been, upon request,
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the securities
being purchased by the Investor from the Company. The Investor and such
Investor’s advisors, if any, have been afforded the opportunity to ask questions
of the Company and have received complete and satisfactory answers to any
such
inquiries.
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5.8 Risk
Factors.
The
Investor understands that such Investor’s investment in the securities being
purchased by the Investor from the Company involves a high degree of risk.
The
Investor understands that no United States federal or state agency or any
other
government or governmental agency has passed on or made any recommendation
or
endorsement of the securities being purchased by the Investor from the Company.
The Investor warrants that such Investor is able to bear the complete loss
of
such Investor’s investment in the securities being purchased by the Investor
from the Company.
5.9 Full
Disclosure.
No
representation or warranty made by the Investor in this Agreement and no
certificate or document furnished or to be furnished to the Company pursuant
to
this Agreement contains or will contain any untrue statement of a material
fact,
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading. Except as set forth or referred
to
in this Agreement, Investor does not have any agreement or understanding
with
any person relating to acquiring, holding, voting or disposing of any equity
securities of the Company.
5.10 Payment
of Due Diligence Expenses.
The
Company shall pay Investor $35,000 for due diligence expenses.
ARTICLE
VI
COVENANTS
OF THE COMPANY
6.1. Registration
Rights.
The
Company shall cause the Registration Rights Agreement to remain in full force
and effect according to the provisions of the Registration Rights Agreement
and
the Company shall comply in all material respects with the terms
thereof.
6.2.
Reservation
Of Common Stock.
As of
the date hereof, the Company does not have sufficient authorized but unissued
Common Stock to issue the shares of Common Stock underlying the Preferred
Stock
and Warrants. However, within Sixty (60) days of the Closing, the Company
will
amend its Articles of Incorporation to increase the authorized common stock
to
Two Hundred and Fifty Million (250,000,000) Shares and thereafter will reserve
and shall continue to reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to issue the shares of Common Stock underlying the Preferred Stock
and
Warrants.
6.3. Compliance
with Laws.
The
Company hereby agrees to comply in all respects with the Company's reporting,
filing and other obligations under the Laws.
6.4.
Exchange
Act Registration.
The
Company will continue its obligation to report to the SEC under Section 12(g)
of
the 1934 Act and
will
use its best efforts to comply in all respects with its reporting and filing
obligations under the 1934 Act, and will not take any action or file any
document (whether or not permitted by the 1934 Act or the rules thereunder)
to
terminate or suspend any such registration or to terminate or suspend its
reporting and filing obligations under the 1934 until the Investors have
disposed of all of their Preferred Stock, Warrants, and, if applicable, Shares.
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6.5.
Corporate
Existence; Conflicting Agreements.
The
Company will take all steps necessary to preserve and continue the corporate
existence of the Company. The Company shall not enter into any agreement,
the
terms of which agreement would restrict or impair the right or ability of
the
Company to perform any of its obligations under this Agreement or any of
the
other agreements attached as exhibits hereto.
6.6 Preferred
Stock. As
long
as any of the Preferred Stock remains outstanding, the Company will not issue
any Preferred Stock of the Company.
6.7 Convertible
Debt. As
long
as any of the Preferred Stock remains outstanding, the Company will not issue
any convertible debt and will cancel all reset convertible debt that is
currently outstanding, if any securities outstanding. The Convertible Shares
outstanding to GCA Strategic Investment Fund Limited is excluded from this
Section 6.7 and shall remain outstanding post Closing. The Company represents
that these shares are only convertible at a fixed price per share at
$1.00.
6.8Reset
Equity Deals. On
or
prior to the Closing Date, the Company will cause to be cancelled any and
all
reset features related to any shares outstanding that could result in additional
shares being issued. For as long as any of the Preferred Shares are outstanding
the Company will not enter into any transactions that have any reset features
that could result in additional shares being issued.
6.9
6.10 Independent
Directors.
Within
45 days post closing, the Company shall have caused the appointment of the
majority of the board of directors to be independent directors per NASDAQ
requirements.. In the event that the Company fails to meet the requirements
of
this Section 6.9 as a result of the death, retirement, disability or resignation
of an independent director, the Company shall have sixty (60) days to elect
a
replacement director. If at any time after 45 day post Closing the board
shall
not be composed in the majority of qualified independent directors, the Company
shall pay to the Investors, pro rata, as liquidated damages and not as a
penalty, an amount equal to twenty four percent (24%) of the Purchase Price
per
annum, payable monthly. The parties agree that the only damages payable for
a
violation of the terms of this Agreement with respect to which liquidated
damages are expressly provided shall be such liquidated damages. Nothing
shall
preclude the Investor from pursuing or obtaining specific performance or
other
equitable relief with respect to this Agreement. The parties hereto agree
that
the liquidated damages provided for in this Section 6.9 constitute a reasonable
estimate of the damages that may be incurred by the Investor by reason of
the
failure of the Company to appoint at least two independent directors in
accordance with the provision hereof.
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6.11 Independent
Directors Become Majority of Audit and Compensation
Committees.
The
Company will cause the appointment of a majority of outside directors to
the
audit and compensation committees of the board of directors before 45 days
post
Closing. In the event that the Company fails to meet the requirements of
this
Section 6.9 as a result of the death, retirement, disability or resignation
of
an independent director, the Company shall have sixty (60) days to elect
a
replacement director. If at any time after 45 days post Closing such independent
directors do not compose the majority of the audit and compensation committees,
the Company shall pay to the Investors, pro rata, as liquidated damages and
not
as a penalty, an amount equal to twenty four percent (24%) of the Purchase
Price
per annum, payable monthly. The parties agree that the only damages payable
for
a violation of the terms of this Agreement with respect to which liquidated
damages are expressly provided shall be such liquidated damages. Nothing
shall
preclude the Investor from pursuing other remedies or obtaining specific
performance or other equitable relief with respect to this Agreement. The
parties hereto agree that the liquidated damages provided for in this Section
6.10 constitute a reasonable estimate of the damages that may be incurred
by the
Investor by reason of the failure of the Company to appoint at least two
independent directors in accordance with the provision hereof
6.11 Use
of Proceeds.
The
Company will use the proceeds from the sale of the Preferred Stock and the
Warrants (excluding amounts paid by the Company for commissions, legal and
administrative fees in connection with the sale of such securities) for working
capital and acquisitions.
6.12
Right
of First Refusal.
As long
as any of the Preferred Stock remains outstanding, each Investor shall have
the
right to participate in any subsequent funding by the Company on a pro rata
basis.
6.13
Price
Adjustment. If,
within the 24 months following the Closing Date, the Company closes on the
sale
of a note or notes, shares of Common Stock, or shares of any class of Preferred
Stock at a price per share of Common Stock, or with a conversion right to
acquire Common Stock at a price per share of Common Stock, that is less than
the
Conversion Price (as adjusted to the capitalization per share as of the Closing
Date, following any stock splits, stock dividends, or the like) (collectively,
the “Subsequent Conversion Price”), the Company shall make a post-Closing
adjustment in the Conversion Price (as provided in the Certificate of
Designations) so that the effective price per share paid by the Investor
is
reduced to being equivalent to such lower conversion price after taking into
account any prior conversions of the Preferred Stock and/or exercises of
the
Warrant.
6.14 Insider
Selling.
The
earliest any “Insiders” can start selling their shares shall be twenty four
months from Closing. Insiders shall include only all officers and directors
of
the Company. Xxxxxx Xxxxxx Xxxxxx and the Investor shall not be considered
“Insiders”.
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6.15 Employment
and Consulting Contracts.
Employment and consulting contracts with officers and directors shall at
time of
Closing and for two years thereafter shall not contain: any bonuses not related
directly to increases in earnings per share; any car allowances not approved
by
the vote of the board of directors; any anti-dilution or reverse split
protection provisions for shares, options or warrants; any deferred
compensation; any unreasonable compensation or benefit clauses as determined
by
an independent compensation committee; or any termination clauses of over
one
year of salary.
6.16 Sale
or Merger of Company.
In the
event of a sale of substantially all of the assets of the Company or a merger
or
consolidation of the Company in a transaction in which the Company is not
the
surviving entity, then, subject to and in accordance with the terms of the
Preferred Stock and Warrants, the 4.9% restriction in the Preferred Stock
and in
the Warrants will immediately be terminated and the Investors will have the
right to convert the Preferred Stock and exercise the Warrants concurrent
with
the sale, subject to the conversion by the Investor of the Preferred Stock
and
the payment by the Investor to the Company of the aggregate exercise price
of
the Warrant.
6.17 Debt
Limitation.
For the
first year post Closing the Company will not enter into any new borrowings
resulting in total debt outstanding being more than four times as much as
the
sum of the adjusted EBITDA from recurring operations over the past four quarters
and going forward after the twelve months post Closing the Company will not
enter into any new borrowings resulting in total debt outstanding being more
than twice as much as the sum of the adjusted EBITDA from recurring operations
over the past four quarters after year one as long as the Preferred Stock
remains outstanding, The Company is required to use 50% of the proceeds from
the
exercise of Warrant A to pay down debt to two times or below the adjusted
EBITDA
from recurring operations.
6.18 Subsequent
Equity Sales.
As long
as the Preferred Stock remains outstanding, the Company shall be prohibited
from
effecting or entering into an agreement to effect any Subsequent Financing
involving a “Variable
Rate Transaction”
or an
“MFN
Transaction”
(each
as defined below). The term “Variable
Rate Transaction”
shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A)
at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common
Stock
at any time after the initial issuance of such debt or equity securities,
or (B)
with a conversion, exercise or exchange price that is subject to being reset
at
some future date after the initial issuance of such debt or equity security
or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock.
The
term “MFN
Transaction”
shall
mean a transaction in which the Company issues or sells any securities in
a
capital raising transaction or series of related transactions which grants
to an
investor the right to receive additional shares based upon future transactions
of the Company on terms more favorable than those granted to such investor
in
such offering. Any Purchaser shall be entitled to obtain injunctive relief
against the Company to preclude any such issuance, which remedy shall be
in
addition to any right to collect damages. Notwithstanding the foregoing,
this
Section 6.18 shall not apply in respect of an Exempt Issuance, except that
no
Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance.
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ARTICLE
VII
COVENANTS
OF THE INVESTOR
7.1 Compliance
with Law.
The
Investor's trading activities with respect to shares of the Company's Common
Stock will be in compliance with all applicable state and federal securities
laws, rules and regulations and rules and regulations of any public market
on
which the Company's Common Stock is listed.
7.2 Transfer
Restrictions.
The
Investor’s acknowledge that (1) the Preferred Stock, Warrants and shares
underlying the Preferred Stock and Warrants have not been registered under
the
provisions of the 1933 Act, and may not be transferred unless (A) subsequently
registered thereunder or (B) the Investor shall have delivered to the Company
an
opinion of counsel, reasonably satisfactory in form, scope and substance
to the
Company, to the effect that the Preferred Stock, Warrants and shares underlying
the Notes and Warrants to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; and (2) any sale of the
Preferred Stock, Warrants and shares underlying the Preferred Stock and Warrants
made in reliance on Rule 144 promulgated under the 1933 Act may be made only
in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be
an
underwriter, as that term is used in the 1933 Act, may require compliance
with
some other exemption under the 1933 Act or the rules and regulations of the
SEC
thereunder.
7.3 Restrictive
Legend. The
Investor acknowledges and agrees that the Preferred Stock, the Warrants and
the
Shares underlying the Preferred Stock and Warrants, and, until such time
as the
Shares underlying the Preferred Stock and Warrants have been registered under
the 1933 Act and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Shares, shall
bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such securities):
"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND
ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) IN ACCORDANCE WITH THE PROVISIONS
OF
REGULATION S, OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT."
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ARTICLE
VIII
CONDITIONS
PRECEDENT TO THE COMPANY’S OBLIGATIONS
The
obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:
8.1 No
Termination.
This
Agreement shall not have been terminated pursuant to Article X
hereof.
8.2 Representations
True and Correct.
The
representations and warranties of the Investor contained in this Agreement
shall
be true and correct in all material respects on and as of the Closing Date
with
the same force and effect as if made on as of the Closing Date.
8.3 Compliance
with Covenants.
The
Investor shall have performed and complied in all material respects with
all
covenants, agreements, and conditions required by this Agreement to be performed
or complied by it prior to or at the Closing Date.
8.4 No
Adverse Proceedings.
On the
Closing Date, no action or proceeding shall be pending by any public authority
or individual or entity before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
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ARTICLE
IX
CONDITIONS
PRECEDENT TO INVESTOR’S OBLIGATIONS
The
obligation of the Investors to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:
9.1 No
Termination.
This
Agreement shall not have been terminated pursuant to Article X
hereof.
9.2 Representations
True and Correct.
The
representations and warranties of the Company contained in this Agreement
shall
be true and correct in all material respects on and as of the Closing Date
with
the same force and effect as if made on as of the Closing Date.
9.3 Compliance
with Covenants.
The
Company shall have performed and complied in all material respects with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied by it prior to or at the Closing Date, including arranging for
payment of commissions as set forth in Schedule 4.8.
9.4 No
Adverse Proceedings. On
the
Closing Date, no action or proceeding shall be pending by any public authority
or individual or entity before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
ARTICLE
X
TERMINATION,
AMENDMENT AND WAIVER
10.1 Termination.
This
Agreement may be terminated at any time prior to the Effective
Time:
10.1.1 by
mutual
written consent of the Investor and the Company;
10.1.2 by
the
Company upon a material breach of any representation, warranty, covenant
or
agreement on the part of the Investor set forth in this Agreement, or the
Investor upon a material breach of any representation, warranty, covenant
or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company or the Investor, respectively,
shall
have become untrue, in either case such that any of the conditions set forth
in
Article VIII or Article IX hereof would not be satisfied (a "Terminating
Breach"),
and
such breach shall, if capable of cure, not have been cured within five (5)
business days after receipt by the party in breach of a notice from the
non-breaching party setting forth in detail the nature of such
breach.
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10.2 Effect
of Termination.
Except
as otherwise provided herein, in the event of the termination of this Agreement
pursuant to Section 10.1 hereof, there shall be no liability on the part
of the
Company or the Investor or any of their respective officers, directors, agents
or other representatives and all rights and obligations of any party hereto
shall cease; provided that in the event of a Terminating Breach, the breaching
party shall be liable to the non-breaching party for all costs and expenses
incurred by the non-breaching party not to exceed $50,000.
10.3
Amendment.
This
Agreement may be amended by the parties hereto any time prior to the Closing
Date by an instrument in writing signed by the parties hereto.
10.4 Waiver.
At any
time prior to the Closing Date, the Company or the Investor, as appropriate,
may: (a) extend the time for the performance of any of the obligations or
other
acts of other party or; (b) waive any inaccuracies in the representations
and
warranties contained herein or in any document delivered pursuant hereto
which
have been made to it or them; or (c) waive compliance with any of the agreements
or conditions contained herein for its or their benefit. Any such extension
or
waiver shall be valid only if set forth in an instrument in writing signed
by
the party or parties to be bound hereby.
ARTICLE
XI
GENERAL
PROVISIONS
11.1 Transaction
Costs.
Except
as otherwise provided herein, each of the parties shall pay all of his or
its
costs and expenses (including attorney fees and other legal costs and expenses
and accountants’ fees and other accounting costs and expenses) incurred by that
party in connection with this Agreement; provided, the Company shall pay
Investor such due diligence expenses as described in section 5.10.
11.2 Indemnification.
The
Investor agrees to indemnify, defend and hold the Company (following the
Closing
Date) and its officers and directors harmless against and in respect of any
and
all claims, demands, losses, costs, expenses, obligations, liabilities or
damages, including interest, penalties and reasonable attorney’s fees, that it
shall incur or suffer, which arise out of or result from any breach of this
Agreement by such Investor or failure by such Investor to perform with respect
to any of its representations, warranties or covenants contained in this
Agreement or in any exhibit or other instrument furnished or to be furnished
under this Agreement. The Company agrees to indemnify, defend and hold the
Investor harmless against and in respect of any and all claims, demands,
losses,
costs, expenses, obligations, liabilities or damages, including interest,
penalties and reasonable attorney’s fees, that it shall incur or suffer, which
arise out of, result from or relate to any breach of this Agreement or failure
by the Company to perform with respect to any of its representations, warranties
or covenants contained in this Agreement or in any exhibit or other instrument
furnished or to be furnished under this Agreement. In no event shall the
Company
or the Investors be entitled to recover consequential or punitive damages
resulting from a breach or violation of this Agreement nor shall any party
have
any liability hereunder in the event of gross negligence or willful misconduct
of the indemnified party. In the event of a breach of this Agreement by the
Company, the Investor shall be entitled to pursue a remedy of specific
performance upon tender into the Court an amount equal to the Purchase Price
hereunder. The indemnification by the Investor shall be limited to
$50,000.
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11.3 Headings.
The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
11.4 Entire
Agreement.
This
Agreement (together with the Schedule, Exhibits, Warrants and documents referred
to herein) constitute the entire agreement of the parties and supersede all
prior agreements and undertakings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof.
11.5 Notices.
All
notices and other communications hereunder shall be in writing and shall
be
deemed to have been given (i) on the date they are delivered if delivered
in
person; (ii) on the date initially received if delivered by facsimile
transmission followed by registered or certified mail confirmation; or (iii)
on
the date delivered by an overnight courier service as follows:
If
to
the Company:
Speedemissions,
Inc.
0000
Xxxxxx Xxxx, Xxxxx X0
Xxxxxx,
XX 00000
Facsimile
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxxxxxxx
With
a
copy to:
The
Lebrecht Group, APLC
00000
Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx
Xxxxx Xxxxxxxxx, XX 00000
Facsimile
(000) 000-0000
Attn:
Xxxxx X. Xxxxxxxx, Esq.
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
21 OF 32
If
to
the Investor:
Xxxxxx
Partners L.P.
c/x
Xxxxxx Capital Advisors, LLC
000
Xxxxx
Xxxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Facsimile
(000) 000-0000
Attn:
Xxxxxx Xxxxxx Xxxxxx
11.6 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions
and
provisions of this Agreement shall nevertheless remain in full force and
effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any such term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to
modify this Agreement so as to effect the original intent of the parties
as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
11.7 Binding
Effect.
All the
terms and provisions of this Agreement whether so expressed or not, shall
be
binding upon, inure to the benefit of, and be enforceable by the parties
and
their respective administrators, executors, legal representatives, heirs,
successors and assignees.
11.8 Preparation
of Agreement.
This
Agreement shall not be construed more strongly against any party regardless
of
who is responsible for its preparation. The parties acknowledge each contributed
and is equally responsible for its preparation.
11.9 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of New York, without giving effect to applicable principles of
conflicts of law.
11.10
Jurisdiction.
This
Agreement shall be exclusively governed by and construed in accordance with
the
laws of the State of New York. If any action is brought among the parties
with
respect to this Agreement or otherwise, by way of a claim or counterclaim,
the
parties agree that in any such action, and on all issues, the parties
irrevocably waive their right to a trial by jury. Exclusive jurisdiction
and
venue for any such action shall be the Federal Courts serving the State of
New
York. In the event suit or action is brought by any party under this Agreement
to enforce any of its terms, or in any appeal therefrom, it is agreed that
the
prevailing party shall be entitled to reasonable attorneys fees to be fixed
by
the arbitrator, trial court, and/or appellate court.
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
22 OF 32
11.11
Preparation
and Filing of Securities and Exchange Commission
filings.
The
Investor shall reasonably assist and cooperate with the Company in the
preparation of all filings with the SEC after the Closing Date due after
the
Closing Date.
11.12 Further
Assurances, Cooperation.
Each
party shall, upon reasonable request by the other party, execute and deliver
any
additional documents necessary or desirable to complete the transactions
herein
pursuant to and in the manner contemplated by this Agreement. The parties
hereto
agree to cooperate and use their respective best efforts to consummate the
transactions contemplated by this Agreement.
11.13 Survival.
The
representations, warranties, covenants and agreements made herein shall survive
the Closing of the transaction contemplated hereby.
11.14 Third
Parties.
Except
as disclosed in this Agreement, nothing in this Agreement, whether express
or
implied, is intended to confer any rights or remedies under or by reason
of this
Agreement on any persons other than the parties hereto and their respective
administrators, executors, legal representatives, heirs, successors and
assignees. Nothing in this Agreement is intended to relieve or discharge
the
obligation or liability of any third persons to any party to this Agreement,
nor
shall any provision give any third persons any right of subrogation or action
over or against any party to this Agreement.
11.15 Failure
or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and
remedies existing under this Agreement are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
11.16 Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Agreement
shall
be legal and binding on all parties hereto.
[SIGNATURES
ON FOLLOWING PAGE]
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
23 OF 32
IN
WITNESS WHEREOF,
the
Investors and the Company have as of the date first written above executed
this
Agreement.
THE
COMPANY:
SPEEDEMISSIONS,
INC.
/s/
Xxxxxxx
X.
Xxxxxxxxxxx
By:
Xxxxxxx X. Xxxxxxxxxxx
Title:
President
INVESTOR:
XXXXXX
PARTNERS LP
/s/
Xxxxxx Xxxxxx
Xxxxxx
Xxxxxx
Xxxxxx Xxxxxx
President,
General Partner of
Xxxxxx
Partners LP
000
Xxxxx
Xxxxxx, 0xx Xxxxx
Xxx
Xxxx
XX 00000
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
24 OF 32
Schedule
A
|
NAME
AND ADDRESS
|
AMOUNT
OF INVESTMENT
|
NUMBER
OF SHARES
OF
COMMON STOCK
INTO
WHICH PREFERRED
STOCK
IS CONVERTIBLE
|
|
Xxxxxx
Partners LP
000
Xxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attn:
Xxxxxx Xxxxxx Xxxxxx
|
$6,420,000
|
107,000,000
|
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
25 OF 32
Schedule
4.3 - Warrants
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
26 OF 32
Schedule
4.8 - List of Brokers
|
Cash
Proceeds
|
Warrants
|
|||
|
Name
and Address
|
Commission
|
Strike
Price
|
Total
Shares
|
|
|
Prospect
Financial Advisors, LLC
|
$513,600.00
|
$0..12
|
2,850,000
|
|
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
27 OF 32
Exhibit
A
Form
of Certificate of Designations of Preferences, Rights and
Limitations
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
28 OF 32
Exhibit
B
Registration
Rights Agreement
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
29 OF 32
Warrants
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
30 OF 32
Exhibit
D
Escrow
Agreement
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
31 OF 32
Exhibit
E
Conversion
Price Adjustment
If
the
acquisition of Just Inc., Dekra, and Mr. Sticker (the “Three Proposed
Transactions”) do not close within 30 days post Closing the conversion price
shall be adjusted based upon the intrinsic value formula as
follows:
Conversion
Price Per Share = (((Run rate annualized seasonally adjusted EBITDA for the
combined Company - Recurring Capital Expenditures for the combined business)
x 6
(Growth Rate Multiple) + excess cash - total debt and seller notes outstanding)
/ Total Fully Diluted Shares Outstanding)*69%
STOCK
PURCHASE AGREEMENT BETWEEN
SPEEDEMISSIONS,
INC. AND XXXXXX PARTNERS LP
PAGE
32 OF 32
