SECURITIES PURCHASE AGREEMENT
THIS SECURITIES
PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of June 30, 2008, by and among MOBILEPRO
CORP.,
a
Delaware corporation (the “Company”),
and
the Buyers listed on Schedule I attached hereto (individually, a
“Buyer”
or
collectively “Buyers”).
WITNESSETH
WHEREAS,
the
Company and the Buyer(s) are executing and delivering this Agreement in reliance
upon an exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”);
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Buyer(s), as provided herein,
and the Buyer(s) shall purchase up to Thirteen Million, Three Hundred Ninety
One
Thousand, One Hundred Seventy Four Dollars and 54/100 ($13,391,174.54) of
secured convertible debentures in the form attached hereto as “Exhibit
A”
(the
“Convertible
Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value $0.001
(the “Common
Stock”)
(as
converted, the “Conversion
Shares”).
Consideration for the purchase of the Convertible Debentures (the “Purchase
Price,”
and
the
face value of the Convertible Debentures, the “Subscription
Amount”)
shall
be only
the
exchange of debentures dated June 30, 2006 and May 11, 2007 (the “Existing
Debentures”)
previously issued by the Company to the Buyer. The purchase through exchange
set
forth herein shall take place at the “Closing.”
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, (i)
the
Buyer, the Company, and each Subsidiary of the Company are executing and
delivering a Global Security Agreement (all such security agreements shall
be
referred to as the “Security
Agreement”)
pursuant to which the Company and its wholly owned Subsidiaries agree to provide
the Buyer a security interest in Pledged Property (as this term is defined
in
the Security Agreement), (ii) each Subsidiary of the Company is executing and
delivering a Global Guaranty Agreement dated the date hereof (the “Guaranty”)
and
(iii) the Company and certain Subsidiaries of the Company are executing and
delivering a Global Pledge Agreement (the “Pledge
Agreement”
and
collectively with the Security Agreement and the Guaranty, the “Security
Documents”)
in
favor of the Buyer;
and
WHEREAS,
the
Convertible Debentures and the Conversion Shares collectively are referred
to
herein as the “Securities”.
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:
1. PURCHASE
AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase
of Convertible Debentures.
Subject
to the satisfaction (or waiver) of the terms and conditions of this Agreement,
each Buyer agrees, severally and not jointly, to purchase at the Closing and
the
Company agrees to sell and issue to each Buyer, severally and not jointly,
at
the Closing, Convertible Debentures in amounts corresponding with the
Subscription Amount set forth opposite each Buyer’s name on Schedule I hereto.
(b) Closing
Dates.
The
First Closing of the purchase and sale of the Convertible Debentures shall
take
place at 10:00 a.m. Eastern Standard Time on the fifth (5th)
business day following the date hereof, subject to notification of satisfaction
of the conditions to the Closing set forth herein and in Sections 6 and 7 below
(or such later date as is mutually agreed to by the Company and the Buyer(s))
(the “Closing
Date”).
The
Closing shall occur on the respective Closing Date at the offices of Yorkville
Advisors, LLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000
(or
such other place as is mutually agreed to by the Company and the Buyer(s)).
(c) Form
of Payment.
Subject
to the satisfaction of the terms and conditions of this Agreement, on the
Closing Date, (i) the Buyers shall deliver to the Company the Existing
Debentures; and (ii) the Company shall deliver to each Buyer, Convertible
Debentures which such Buyer is purchasing at such Closing in amounts indicated
opposite such Buyer’s name on Schedule I, duly executed on behalf of the
Company.
2. BUYER’S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer represents and warrants, severally and not jointly, that:
(a) Investment
Purpose.
Each
Buyer is acquiring the Securities for its own account for investment only and
not with a view towards, or for resale in connection with, the public sale
or
distribution thereof, except pursuant to sales registered or exempted under
the
Securities Act; provided, however, that by making the representations herein,
such Buyer reserves the right to dispose of the Securities at any time in
accordance with or pursuant to an effective registration statement covering
such
Securities or an available exemption under the Securities Act. Such Buyer does
not presently have any agreement or understanding, directly or indirectly,
with
any Person to distribute any of the Securities.
(b) Accredited
Investor Status.
Each
Buyer is an “Accredited
Investor”
as
that
term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance
on Exemptions.
Each
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in
part
upon the truth and accuracy of, and such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the
Securities.
(d) Information.
Each
Buyer and its advisors (and his or, its counsel), if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and information he deemed material to making an informed investment
decision regarding his purchase of the Securities, which have been requested
by
such Buyer. Each Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer
or
its advisors, if any, or its representatives shall modify, amend or affect
such
Buyer’s right to rely on the Company’s representations and warranties contained
in Section 3 below. Each Buyer understands that its investment in the Securities
involves a high degree of risk. Each Buyer is in a position regarding the
Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables such Buyer to obtain information from
the
Company in order to evaluate the merits and risks of this investment. Each
Buyer
has sought such accounting, legal and tax advice, as it has considered necessary
to make an informed investment decision with respect to its acquisition of
the
Securities.
2
(e) No
Governmental Review.
Each
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities, or the fairness or suitability of the investment
in the Securities, nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer
or Resale.
Each
Buyer understands that, except as set forth in existing agreements between
the
Buyer and the Company: (i) the Securities have not been and are not being
registered under the Securities Act or any state securities laws, and may not
be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration requirements, or
(C)
such Buyer provides the Company with reasonable assurances (in the form of
seller and broker representation letters) that such Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under
the
Securities Act, as amended (or a successor rule thereto) (collectively,
“Rule
144”),
in
each case following the applicable holding period set forth therein; (ii) any
sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions
of
any exemption thereunder.
(g) Legends.
Each
Buyer agrees to the imprinting, so long as is required by this Section 2(g),
of
a restrictive legend in substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
3
Certificates
evidencing the Conversion Shares shall not contain any legend (including the
legend set forth above), (i) while a registration statement (including the
Registration Statement) covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Conversion Shares pursuant
to Rule 144, (iii) if such Conversion Shares are eligible for sale under Rule
144, or (iv) if such legend is not required under applicable requirements of
the
Securities Act (including judicial interpretations and pronouncements issued
by
the staff of the SEC). The Company shall cause its counsel to issue a legal
opinion to the Company’s transfer agent promptly after the effective date (the
“Effective
Date”)
of a
Registration Statement if required by the Company’s transfer agent to effect the
removal of the legend hereunder. If all or any portion of the Convertible
Debentures are exercised by a Buyer that is not an Affiliate of the Company
(a
“Non-Affiliated
Buyer”)
at a
time when there is an effective registration statement to cover the resale
of
the Conversion Shares, such Conversion Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at such time
as
such legend is no longer required under this Section 2(g), it will, no later
than three (3) Trading Days following the delivery by a Non-Affiliated Buyer
to
the Company or the Company’s transfer agent of a certificate representing
Conversion Shares, as the case may be, issued with a restrictive legend (such
third Trading Day, the “Legend
Removal Date”),
deliver or cause to be delivered to such Non-Affiliated Buyer a certificate
representing such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give instructions to
any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section. Each Buyer acknowledges that the Company’s agreement
hereunder to remove all legends from Conversion Shares is not an affirmative
statement or representation that such Conversion Shares are freely tradable.
Each Buyer, severally and not jointly with the other Buyers, agrees that the
removal of the restrictive legend from certificates representing Securities
as
set forth in this Section 2(g) is predicated upon the Company’s reliance that
such Buyer will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold
pursuant to a Registration Statement, they will be sold in compliance with
the
plan of distribution set forth therein.
(h) Authorization,
Enforcement.
This
Agreement has been duly and validly authorized, executed and delivered on behalf
of such Buyer and is a valid and binding agreement of such Buyer enforceable
in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
(i) Receipt
of Documents.
Each
Buyer and his or its counsel has received and read in their entirety: (i) this
Agreement and each representation, warranty and covenant set forth herein and
the Transaction Documents (as defined herein); (ii) all due diligence and other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company’s Form 10-K for the
fiscal year ended March 31, 2007; (iv) the Company’s Form 10-Q for the fiscal
quarter ended December 31, 2007 and (v) answers to all questions each Buyer
submitted to the Company regarding an investment in the Company; and each Buyer
has relied on the information contained therein and has not been furnished
any
other documents, literature, memorandum or prospectus.
4
(j) Due
Formation of Corporate and Other Buyers.
If the
Buyer(s) is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Securities and is not
prohibited from doing so.
(k) No
Legal Advice From the Company.
Each
Buyer acknowledges, that it had the opportunity to review this Agreement and
the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. Each Buyer is relying solely on such counsel
and advisors and not on any statements or representations of the Company or
any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement
or
the securities laws of any jurisdiction.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
Except
as
set forth under the corresponding section of the Disclosure Schedules, which
Disclosure Schedules shall be deemed a part hereof and to qualify any
representation or warranty otherwise made herein to the extent of such
disclosure, the Company hereby makes the representations and warranties set
forth below to each Buyer:
(a) Subsidiaries.
All of
the direct and indirect Subsidiaries (other than Excluded Subsidiaries, listed
on Schedule
4(d)
attached
hereto) of the Company are set forth on Schedule
3(a)
(each a
“Subsidiary”
and
collectively, the “Subsidiaries”).
The
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any liens, and all the issued
and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.
(b) Organization
and Qualification.
Other
than as set forth on Schedule
3(b)
attached
hereto, the Company and its Subsidiaries are corporations duly organized and
validly existing in good standing under the laws of the jurisdiction in which
they are incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Other than
as
set forth on Schedule
3(b),
each of
the Company and its Subsidiaries is duly qualified as a foreign corporation
to
do business and is in good standing in every jurisdiction in which the nature
of
the business conducted by it makes such qualification necessary, except to
the
extent that the failure to be so qualified or be in good standing would not
have
or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken
as
a whole, or (iii) a material adverse effect on the Company’s ability to perform
in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”)
and no
proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
5
(c) Authorization,
Enforcement, Compliance with Other Instruments.
(i) the Company and each Subsidiary has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and
the
Convertible Debentures (together with the Security Documents, collectively
the
“Transaction
Documents”)
(in
each case, to the extent each is a party thereto) and to issue the Securities
in
accordance with the terms hereof and thereof, (ii) the execution and delivery
of
the Transaction Documents by the Company and each Subsidiary (to the extent
each
is a party thereto) and the consummation by each of them of the transactions
contemplated hereby and thereby, including, without limitation, the issuance
of
the Securities by the Company, the reservation for issuance and the issuance
of
the Conversion Shares by the Company (other than as provided in Section 4(d)
hereof), and the reservation for issuance and the issuance of the Warrant Shares
by the Company (other than as provided in Section 4(d) hereof), have been duly
authorized by the Company’s or each applicable Subsidiary’s Board of Directors
and no further consent or authorization is required by the Company or any
applicable Subsidiary, any Boards of Directors or stockholders, (iii) the
Transaction Documents have been duly executed and delivered by the Company
and
each Subsidiary (to the extent each is a party thereto), (iv) the Transaction
Documents constitute the valid and binding obligations of the Company and each
Subsidiary (to the extent each is a party thereto), enforceable against the
each
of them in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies. The
authorized officer of the Company and each Subsidiary executing the Transaction
Documents knows of no reason why the Company cannot file the Registration
Statement as required under the Registration Rights Agreement or perform any
of
the Company’s or such Subsidiary’s other obligations under the Transaction
Documents.
(d) Capitalization.
The
authorized capital stock of the Company consists of 1,500,000,000 shares of
Common Stock and 20,035,425 shares of Preferred Stock, par value $.001
(“Preferred
Stock”)
of
which 775,821,796 shares of Common Stock and 35,378 shares of Preferred Stock
are issued and outstanding. All of the outstanding shares of capital stock
of
the Company are validly issued, fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. Except as disclosed in
Schedule
3(d):
(i)
none of the Company’s capital stock is subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) there
are
no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there
are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities; (vii) the Company does not have any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement; and (viii) the Company and its Subsidiaries have no liabilities
or
obligations required to be disclosed in the SEC Documents but not so disclosed
in the SEC Documents, other than those incurred in the ordinary course of the
Company's or its Subsidiaries' respective businesses and which, individually
or
in the aggregate, do not or would not have a Material Adverse Effect. The
Company has furnished to the Buyers true, correct and complete copies of the
Company’s and each Subsidiary’s Certificate of Incorporation, as amended and as
in effect on the date hereof (the “Certificates
of Incorporation”),
and
the Company’s and each Subsidiary’s Bylaws, as amended and as in effect on the
date hereof (the “Bylaws”),
and
the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof
in
respect thereto. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among
any
of the Company’s stockholders.
6
(e) Issuance
of Securities.
The
issuance of the Convertible Debentures is duly authorized and free from all
taxes, liens and charges with respect to the issue thereof. Upon conversion
in
accordance with the terms of the Convertible Debentures or exercise in
accordance with the Warrants, as the case may be, the Conversion Shares and
Warrant Shares, respectively, when issued will be validly issued, fully paid
and
nonassessable, free from all taxes, liens and charges with respect to the issue
thereof.
(f) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and its Subsidiaries (to the extent each is a party thereto) and the
consummation by the Company and its Subsidiaries (to the extent each is a party
thereto) of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Convertible Debentures, and reservation for
issuance and issuance of the Conversion Shares) will not (i) result in a
violation of any Certificates of Incorporation, certificate of formation, any
certificate of designations or other constituent documents of the Company or
any
of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries
or Bylaws of the Company or any of its Subsidiaries or (ii) conflict with,
or
constitute a default (or an event which with notice or lapse of time or both
would become a default) in any respect under, or give to others any rights
of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is
a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including foreign, federal and state securities laws and
regulations and the rules and regulations of the National Association of
Securities Dealers Inc.’s OTC Bulletin Board) applicable to the Company or any
of its Subsidiaries or by which any property or asset of the Company or any
of
its Subsidiaries is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could
not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect.
The
business of the Company and its Subsidiaries is not being conducted, and shall
not be conducted in violation of any material law, ordinance, or regulation
of
any governmental entity. Except as specifically contemplated by this Agreement
and as required under the Securities Act and any applicable state securities
laws, the Company 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 its obligations under or
contemplated by this Agreement in accordance with the terms hereof or thereof.
All consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and its
Subsidiaries are unaware of any facts or circumstance, which might give rise
to
any of the foregoing.
7
(g) SEC
Documents; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under the Securities Exchange Act of
1934, as amended (the “Exchange
Act”),
for
the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (all of the foregoing
filed prior to the date hereof or amended after the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the
“SEC
Documents”)
on
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Document prior to the expiration of any such extension.
The
Company has delivered to the Buyers or their representatives, or made available
through the SEC’s website at xxxx://xxx.xxx.xxx., true and complete copies of
the SEC Documents. As of their respective dates, the SEC Documents complied
in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with
the
SEC, contained any untrue statement of a material fact or omitted to state
a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements
of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company
to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(i) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made and not misleading.
(h) 10(b)-5.
The SEC
Documents do not include any untrue statements of material fact, nor do they
omit to state any material fact required to be stated therein necessary to
make
the statements made, in light of the circumstances under which they were made,
not misleading.
8
(i) Absence
of Litigation.
Other
than as disclosed on Schedule
3(i)
attached
hereto, there is no action, suit, proceeding, inquiry or investigation before
or
by any court, public board, government agency, self-regulatory organization
or
body pending against or affecting the Company, the Common Stock or any of the
Company’s Subsidiaries, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect.
(j) Acknowledgment
Regarding Buyer’s Purchase of the Convertible Debentures.
The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that each Buyer is not
acting as a financial advisor or fiduciary of the Company or any Subsidiary
(or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby, and any advice given by each Buyer or any of their
respective representatives or agents in connection with this Agreement and
the
transactions contemplated hereby is merely incidental to such Buyer’s purchase
of the Securities. The Company further represents to each Buyer that the
Company’s decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.
(k) No
General Solicitation.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection
with
the offer or sale of the Securities.
(l) No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security, under circumstances that would require
registration of the Securities under the Securities Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the Securities Act.
(m) Employee
Relations.
Neither
the Company nor any of its Subsidiaries is involved in any labor dispute or,
to
the knowledge of the Company or any of its Subsidiaries, is any such dispute
threatened. None of the Company’s or its Subsidiaries’ employees is a member of
a union and the Company and its Subsidiaries believe that their relations with
their employees are good.
(n) Intellectual
Property Rights.
The
Company and its Subsidiaries own or possess adequate rights or licenses to
use
all trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct
their
respective businesses as now conducted. Listed on Schedule
3(n)
hereof
are the Company’s and each Subsidiary’s trademarks, trade names, service marks,
service xxxx registrations, service names, patents, patent rights, copyrights
and licenses. The Company and its Subsidiaries do not have any knowledge of
any
infringement by the Company or its Subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service xxxx registrations, trade secret or other similar rights of
others, and, to the knowledge of the Company there is no claim, action or
proceeding being made or brought against, or to the Company’s knowledge, being
threatened against, the Company or its Subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service xxxx registrations, trade secret or other infringement;
and the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.
9
(o) Environmental
Laws.
The
Company and its Subsidiaries are (i) in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental
Laws”),
(ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license
or
approval.
(p) Title.
All
real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use
made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(q) Insurance.
The
Company and each of its Subsidiaries is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company
nor
any such Subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a
whole.
(r) Regulatory
Permits.
The
Company and its Subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(s) Internal
Accounting Controls.
The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset accountability, and (iii) the recorded amounts for assets are
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
10
(t) No
Material Adverse Breaches, etc.
Neither
the Company nor any of its Subsidiaries is subject to any charter, corporate
or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company’s officers has or is expected in the future
to have a Material Adverse Effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
Subsidiaries. Neither the Company nor any of its Subsidiaries is in breach
of
any contract or agreement which breach, in the judgment of the Company’s
officers, has or is expected to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its Subsidiaries.
(u) Tax
Status.
Other
than as disclosed on Schedule
3(u)
hereof,
the Company and each of its Subsidiaries has made and filed all federal and
state income and all other tax returns, reports and declarations required by
any
jurisdiction to which it is subject and (unless and only to the extent that
the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has
paid
all taxes and other governmental assessments and charges that are material
in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
Other than as disclosed on Schedule
3(u)
hereof,
there are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
(v) Certain
Transactions.
Except
for arm’s length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors, or employees
of
the Company or any Subsidiary is presently a party to any transaction with
the
Company (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(w) Fees
and Rights of First Refusal.
The
Company is not obligated to offer the securities offered hereunder on a right
of
first refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers, agents
or other third parties.
(x) Investment
Company.
The
Company is not, and is not an affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
11
(y) Registration
Rights.
Other
than each of the Buyers, no Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company.
There are no outstanding registration statements not yet declared effective
and
there are no outstanding comment letters from the SEC or any other regulatory
agency.
(z) Private
Placement.
Assuming the accuracy of the Buyers’ representations and warranties set forth in
Section 2, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Buyers as contemplated hereby.
The issuance and sale of the Securities hereunder does not contravene the rules
and regulations of the Primary Market.
(aa) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to terminate, or
which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration. The Company has not, in the twelve (12) months preceding the
date
hereof, received notice from any Primary Market on which the Common Stock is
or
has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Primary Market. The Company
is, and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
(bb) Reporting
Status.
With a view to making available to the Buyer the benefits of Rule 144 or any
similar rule or regulation of the SEC that may at any time permit the Buyer
to
sell securities of the Company to the public without registration, and as a
material inducement to the Buyer’s purchase of the Securities, the Company
represents and warrants to the following: (i)
the
Company is, and has been for a period of at least 90 days immediately preceding
the date hereof, subject to the reporting requirements of section 13 or 15(d)
of
the Exchange Act and has filed all required reports under section 13 or 15(d)
of
the Exchange, as applicable, during the 12 months preceding the date hereof
(or
for such shorter period that the Company was required to file such
reports),
and
(ii) the Company is not and for at least the last 12 months prior to the date
hereof has not been a “shell company,” as defined in paragraph (i)(1)(i) of Rule
144;
(cc) Manipulation
of Price.
The Company has not, and to its knowledge no one acting on its behalf has,
(i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company, other than,
in the case of clauses (ii) and (iii), compensation paid to the Company’s
placement agent in connection with the placement of the Securities.
12
(dd) Dilutive
Effect.
The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Convertible Debentures and the Warrant Shares
issuable upon exercise of the Warrants will increase in certain circumstances.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Convertible Debentures in accordance with this Agreement
and the Convertible Debentures and its obligation to issue the Warrant Shares
upon exercise of the Warrants in accordance with this Agreement and the
Warrants, in each case, is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts to timely satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form
D.
The
Company agrees to file a Form D with respect to the Securities as and if
required under Regulation D and to provide a copy thereof to each Buyer promptly
after such filing. The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary to qualify the
Securities, or obtain an exemption for the Securities for sale to the Buyers
at
the Closing pursuant to this Agreement under applicable securities or “Blue Sky”
laws of the states of the United States, and shall provide evidence of any
such
action so taken to the Buyers on or prior to the Closing Date.
(c) Reporting
Status.
With a
view to making available to the Buyer the benefits of Rule 144 or any similar
rule or regulation of the SEC that may at any time permit the Buyer to sell
securities of the Company to the public without registration, and as a material
inducement to the Buyer’s purchase of the Securities, the Company represents,
warrants, and covenants to the following:
(i) The
Company is subject to the reporting requirements of section 13 or 15(d) of
the
Exchange Act and has filed all required reports under section 13 or 15(d) of
the
Exchange Act during the 12 months prior to the date hereof (or for such shorter
period that the issuer was required to file such reports), other than Form
8-K
reports;
(ii) from
the
date hereof until all the Securities either have been sold by the Buyer, or
may
permanently be sold by the Buyer without any restrictions pursuant to Rule
144,
(the “Registration
Period”)
the
Company shall file with the SEC in a timely manner all required reports under
section 13 or 15(d) of the Exchange Act and such reports shall conform to the
requirement of the Exchange Act and the SEC for filing thereunder;
(iii) The
Company shall furnish to the Buyer so long as the Buyer owns Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may
be
reasonably requested to permit the Buyers to sell such securities pursuant
to
Rule 144 without registration; and
13
(iv) During
the Registration Period the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or
the
rules and regulations thereunder would otherwise permit such
termination.
(d) Reservation
of Shares.
The
Company represents that it has, or, as provided in this Section 4(d) below,
will
have, sufficient authorized and unissued shares of Common Stock to effectuate
conversion of the Convertible Debentures by the Buyer (the “Share
Reserve”);
provided that the Company shall take all action reasonably necessary to at
all
times have authorized, and reserved for the purpose of issuance, such number
of
shares of Common Stock as shall be necessary to effect the full conversion
of
the Convertible Debentures. If at any time the Share Reserve is insufficient
to
effect the full conversion of the Convertible Debentures or the full exercise
of
the Warrants, the Company shall increase the Share Reserve accordingly. If
the
Company does not have sufficient authorized and unissued shares of Common Stock
available to increase the Share Reserve, at the next regularly scheduled annual
meeting of the shareholders, the Company shall propose to the shareholders
for
approval of either (i) not more than a one-for-ten reverse stock split of the
Common Stock of the Company; (ii) increasing the number of shares authorized;
or
(iii) such other action as the Company, with the consent of the Buyers, shall
deem necessary to establish and maintain the Share Reserve. The Company’s
management shall recommend to the shareholders to vote in favor of, and
management of the Company shall also vote all of its shares in favor of, such
action with respect to establishing and/or maintaining the Share
Reserve.
(e) Listings
or Quotation.
The
Company’s Common Stock shall be listed or quoted for trading on any of (a) the
American Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq Global
Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin Board
(which does not include the Pink Sheets LLC) (“OTCBB”)
(each,
a “Primary
Market”).
The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock
is
then listed (subject to official notice of issuance) and shall maintain such
listing of all Registrable Securities from time to time issuable under the
terms
of the Transaction Documents.
(f) Fees
and Expenses.
(i) The
Company shall pay all of its costs and expenses, including, without limitation,
attorney’s fees and expenses, incurred by it connection with the negotiation,
investigation, preparation, execution and delivery of the Transaction Documents.
(g) Corporate
Existence.
So long
as any of the Convertible Debentures remain outstanding and except as described
in Section 4(d), the Company shall not directly or indirectly consummate any
merger, reorganization, restructuring, reverse stock split consolidation, sale
of all or substantially all of the Company’s or any Subsidiary’s assets or any
similar transaction or related transactions (each such transaction, an
“Organizational
Change”)
unless, prior to the consummation an Organizational Change, the Company obtains
the written consent of each Buyer. In any such case, the Company will make
appropriate provision with respect to such holders’ rights and interests to
insure that the provisions of this Section 4(g) will thereafter be applicable
to
the Convertible Debentures.
14
(h) Transactions
With Affiliates.
So long
as any Convertible Debentures are outstanding, the Company shall not, and shall
cause each of its Subsidiaries not to, enter into, amend, modify or supplement,
or permit any Subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or any
Subsidiary’s officers, directors, person who were officers or directors at any
time during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below)
or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a
five
percent (5%) or more beneficial interest (each a “Related
Party”),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any investment in an Affiliate of the Company, (c) any
agreement, transaction, commitment, or arrangement on an arms-length basis
on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, (d) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the disinterested
directors of the Company; for purposes hereof, any director who is also an
officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. “Affiliate”
for
purposes hereof means, with respect to any person or entity, another person
or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity,
or
(iv) shares common control with that person or entity. “Control”
or
“controls”
for
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity.
(i) Transfer
Agent.
The
Company covenants and agrees that, in the event that the Company’s agency
relationship with the transfer agent should be terminated for any reason prior
to a date which is two (2) years after the Closing Date, the Company shall
immediately appoint a new transfer agent and shall require that the new transfer
agent execute and agree to be bound by the terms of the Irrevocable Transfer
Agent Instructions to the Existing Debentures.
(j) Restriction
on Issuance of the Capital Stock.
So long
as any Convertible Debentures are outstanding, the Company shall not, without
the prior written consent of the Buyer(s), (i) issue or sell shares of Common
Stock or Preferred Stock without consideration or for a consideration per share
less than the bid price of the Common Stock determined immediately prior to
its
issuance, (ii) issue any preferred stock, warrant, option, right, contract,
call, or other security or instrument granting the holder thereof the right
to
acquire Common Stock without consideration or for a consideration less than
such
Common Stock’s Bid Price determined immediately prior to its issuance, (iii)
enter into any security instrument granting the holder a security interest
in
any and all assets of the Company, or (iv) file any registration statement
on
Form S-8.
(k) Neither
the Buyer(s) nor any of its affiliates have an open short position in the Common
Stock of the Company, and the Buyer(s) agrees that it shall not, and that it
will cause its affiliates not to, engage in any short sales of or hedging
transactions with respect to the Common Stock as long as any Convertible
Debentures shall remain outstanding.
15
(l) Review
of Public Disclosures.
All SEC
filings (including, without limitation, all filings required under the Exchange
Act, which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other
public disclosures made by the Company, including, without limitation, all
press
releases, investor relations materials, and scripts of analysts meetings and
calls, shall be reviewed and approved for release by the Company’s attorneys
and, if containing financial information, the Company’s independent certified
public accountants.
(m) Disclosure
of Transaction.
Within
four Business Days following the date of this Agreement, the Company shall
file
a Current Report on Form 8-K or an Annual Report on form 10-K, whichever may
be
authorized or required under Exchange Act Regulations, describing the terms
of
the transactions contemplated by the Transaction Documents in the form required
by the Exchange Act and attaching the material Transaction Documents (including,
without limitation, this Agreement, the form of the Convertible Debenture,
the
form of Warrant and the form of the Registration Rights Agreement) as exhibits
to such filing.
5. TRANSFER
AGENT INSTRUCTIONS.
(a) The
Irrevocable Transfer Agent Instructions among the Company, the Buyer, and
Interwest Transfer Company, Inc. (the “Transfer
Agent”)
shall
remain in effect and shall apply to the Convertible Debentures on the same
terms
as they applied to the Existing Debentures. The Company shall notify the
Transfer Agent in writing promptly after the Closing that the Existing
Debentures have been exchanged for the Convertible Debentures and shall execute
any documents required by the Transfer Agent to ensure that the terms of the
Irrevocable Transfer Agent Instructions shall be applicable on the same terms
to
the Convertible Debentures as they were to the Existing Debentures. The Company
shall not change its transfer agent without the express written consent of
the
Buyers, which may be withheld by the Buyers in their sole discretion. The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions
to
give effect pursuant to Section 2(g) hereof (in the case of the Conversion
Shares prior to registration of such shares under the Securities Act) will
be
given by the Company to Transfer Agent, and that the Securities shall otherwise
be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement and the other Transaction Documents. If a
Buyer effects a sale, assignment or transfer of the Securities in accordance
with Section 2(f), the Company shall promptly instruct Transfer Agent to issue
one or more certificates or credit shares to the applicable balance accounts
at
DTC in such name and in such denominations as specified by such Buyer to effect
such sale, transfer or assignment and, with respect to any transfer, shall
permit the transfer. In the event that such sale, assignment or transfer
involves Conversion Shares sold, assigned or transferred pursuant to an
effective registration statement or pursuant to Rule 144, the Transfer Agent
shall issue such Securities to the Buyer, assignee or transferee, as the case
may be, without any restrictive legend. Nothing in this Section 5 shall affect
in any way the Buyer’s obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares. The Company acknowledges
that
a breach by it of its obligations hereunder will cause irreparable harm to
the
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees,
in
the event of a breach or threatened breach by the Company of the provisions
of
this Section 5, that the Buyer(s) shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss
and without any bond or other security being required.
16
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Convertible Debentures
to the Buyer(s) at the Closing is subject to the satisfaction, at or before
the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:
(a) Each
Buyer shall have executed the Transaction Documents and delivered them to the
Company.
(b) The
Buyer(s) shall have delivered to the Company the Existing
Debentures.
(c) The
representations and warranties of the Buyer(s) shall be true and correct in
all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as
of a
specific date), and the Buyer(s) shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Buyer(s)
at or
prior to the Closing Date.
7. CONDITIONS
TO THE BUYER’S OBLIGATION TO PURCHASE.
(a) The
obligation of the Buyer(s) hereunder to purchase the Convertible Debentures
at
the Closing is subject to the satisfaction, at or before the Closing Date,
of
each of the following conditions, provided that these conditions are for the
Buyer’s sole benefit and may be waived by the Buyer at any time in its sole
discretion:
(i) The
Company shall have executed the Transaction Documents and delivered the same
to
the Buyers.
(ii) The
Common Stock shall be authorized for quotation or trading on the Primary Market,
trading in the Common Stock shall not have been suspended for any reason, and
all the Conversion Shares issuable upon the conversion of the Convertible
Debentures shall be approved for listing or trading on the Primary Market.
(iii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date
17
(iv) The
Company shall have executed and delivered to the Buyer(s) the Convertible
Debentures in the respective amounts set forth opposite each Buyer’s name on
Schedule I attached hereto.
(v) The
Company shall have provided all information reasonably requested by the Buyer
in
connection with the preparation of the Security Documents.
(vi) The
Company shall cause counsel to the Company and its Subsidiaries to deliver
an
opinion of counsel, in form and substance reasonably acceptable to
Buyers.
8. INDEMNIFICATION.
(a) In
consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder, and
in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
each
other holder of the Convertible Debentures and the Conversion Shares, and all
of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Buyer
Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action
for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified
Liabilities”),
incurred by the Buyer Indemnitees or any of them as a result of, or arising
out
of, or relating to (a) any misrepresentation or breach of any representation
or
warranty made by the Company in this Agreement, the Convertible Debentures
or
the other Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, or the other Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Buyer Indemnitee and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the parties hereto,
any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Convertible Debentures
or
the status of the Buyer or holder of the Convertible Debentures or the
Conversion Shares, as a Buyer of Convertible Debentures in the Company. To
the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment
and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
18
(b) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Buyer’s other obligations under this Agreement, the Buyer
shall defend, protect, indemnify and hold harmless the Company, its Subsidiaries
and all of their respective officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Company
Indemnitees”)
from
and against any and all Indemnified Liabilities incurred by the Company
Indemnitees or any of them as a result of, or arising out of, or relating to
(a)
any misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, instrument or document contemplated hereby or
thereby executed by the Buyer(s), (b) any breach of any covenant, agreement
or
obligation of the Buyer(s) contained in this Agreement, the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby executed by the Buyer, or (c) any cause of action, suit or claim
brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement,
the
Transaction Documents or any other instrument, document or agreement executed
pursuant hereto by any of the parties hereto. To the extent that the foregoing
undertaking by each Buyer may be unenforceable for any reason, each Buyer shall
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities, which is permissible under applicable law.
9. GOVERNING
LAW: MISCELLANEOUS.
(a) Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New Jersey without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in Xxxxxx
County, New Jersey, and expressly consent to the jurisdiction and venue of
the
Superior Court of New Jersey, sitting in Xxxxxx County and the United States
District Court for the District of New Jersey sitting in Newark, New Jersey
for
the adjudication of any civil action asserted pursuant to this
Paragraph.
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
In
the event any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause four (4) additional original executed
signature pages to be physically delivered to the other party within five (5)
days of the execution and delivery hereof.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement, Amendments.
This
Agreement supersedes all other prior oral or written agreements between the
Buyer(s), the Company, their affiliates and persons acting on their behalf
with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
19
(f) Notices.
Any
notices, consents, waivers, or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If
to the Company, to:
|
|
0000
Xxxxxxxxx Xxxx., Xxxxx 000
|
|
Xxxxxxxx,
XX 00000
|
|
Attention:
Xxx Xxxxxx, Chairman and Chief Executive Officer
|
|
Telephone:
(000) 000-0000
|
|
Facsimile:
(000) 000-0000
|
|
With
a copy to:
|
Seyfarth
Xxxx LLP
|
000
Xxxxxxxxxxx Xxxxxx, XX, Xxxxx 000
|
|
Xxxxxxxxxx,
XX 00000-0000
|
|
Attention: Xxxxxx
X. Xxxxx, Esquire
|
|
Telephone: (000)
000-0000
|
|
Facsimile: (000)
000-0000
|
|
If
to the
Buyer(s), to its address and facsimile number on Schedule I, with copies to
the
Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5)
days’ prior written notice to the other party of any change in address or
facsimile number.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. Neither the Company nor any Buyer
shall
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto.
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) Survival.
Unless
this Agreement is terminated under Section 9(l), all agreements, representations
and warranties contained in this Agreement or made in writing by or on behalf
of
any party in connection with the transactions contemplated by this Agreement
shall survive the execution and delivery of this Agreement and the
Closing.
(j) Publicity.
The
Company and the Buyer(s) shall have the right to approve, before issuance any
press release or any other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that the Company
shall
be entitled, without the prior approval of the Buyer(s), to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company shall
use
its best efforts to consult the Buyer(s) in connection with any such press
release or other public disclosure prior to its release and Buyer(s) shall
be
provided with a copy thereof upon release thereof).
20
(k) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(l) Brokerage.
The
Company represents that no broker, agent, finder or other party has been
retained by it in connection with the transactions contemplated hereby and
that
no other fee or commission has been agreed by the Company to be paid for or
on
account of the transactions contemplated hereby.
(m) No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
21
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
|
|
By:
/s/ Xxx
Xxxxxx
|
|
Name: Xxx
Xxxxxx
|
|
Title: Chairman
and CEO
|
|
22
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
BUYERS:
|
|
YA
GLOBAL INVESTMENTS, L.P.
|
|
By:
Yorkville
Advisors, LLC
|
|
Its: Investment
Manager
|
|
By:
/s/ Xxxxx
Xxxxx
|
|
Name: Xxxxx
Xxxxx
|
|
Its: Managing
Member
|
23
SCHEDULE
I
SCHEDULE
OF BUYERS
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
(7)
|
(8)
|
Buyer
|
Subscription
Amount
|
Legal
Representative’s Address and Facsimile Number
|
|||||
Closing
|
|||||||
YA
Global Investments, L.P.
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx
Xxxx, XX 00000
Attention:
Xxxx Xxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Residence:
Cayman Islands
|
___________
|
Xxxx
Xxxxx or Xxxxx Xxxxxxxx, Esq.
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx
Xxxx, Xxx Xxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
|
|||||
LIST
OF EXHIBITS:
Disclosure
Schedule
Schedule
3(a) - Subsidiaries
Schedule
3(b) - Organization and Qualification
Schedule
3(d) - Capitalization
Schedule
3(i) - Litigation
Schedule
3(n) - Intellectual Property
Schedule
3(u) - Tax Status
Schedule
4(d) - Excluded Subsidiaries
Exhibit
A
- Form of Convertible Debentures
DISCLOSURE
SCHEDULE