SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of May 7, 2007, among WHO’S
YOUR DADDY, INC., a Nevada corporation (the “Company”),
and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser”
and
collectively the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Sections 3(a)(9) and 4(2) of the Securities Act (as defined herein) and Rule
506
promulgated thereunder, the Company desires to issue and sell to each Purchaser,
and each Purchaser, severally but not jointly, desires to purchase from the
Company certain securities of the Company, as more fully described in this
Agreement.
IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for
other
good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and each Purchaser agrees as follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement, for all purposes
of
this Agreement, the following terms have the meanings indicated in this Section
1.1:
“Action”
shall
have the meaning ascribed to such term in Section 3.1(j).
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person as such
terms are used in and construed under Rule 144. With respect to a Purchaser,
any
investment fund or managed account that is managed on a discretionary basis
by
the same investment manager as such Purchaser will be deemed to be an Affiliate
of such Purchaser.
“Closing”
means
the closing of the transaction pursuant to Section 2.1 and 2.2.
“Closing
Date”
means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to
(i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any securities
into which such common stock may hereafter be reclassified.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
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“Company
Counsel”
means
Xxxxxxx Xxxxx Seidenwurm & Xxxxx, LLP.
“Disclosure
Schedules”
means
the Disclosure Schedules of the Company delivered concurrently herewith.
“Effective
Date”
means
the date that the Registration Statement is first declared effective by the
Commission.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“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, convertible securities, options or warrants issued
and outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the number
of
such securities, 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.
“Intellectual
Property Rights”
shall
have the meaning ascribed to such term in Section 3.1(o).
“JB”
means
Xxxx Xxxxxxxxx, attorney-at-law with an office located at 0000 Xxxxxxxxx Xxx.,
Xxxxx 000, Xxxxx, XX 00000.
“Knowledge”
means the actual, personal and present knowledge of the executive officers
of
the Company and such knowledge as a reasonable person charged with the duties
and responsibilities of such person would reasonably be deemed to have.
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.
“Material
Adverse Effect”
shall
have the meaning ascribed to such term in Section 3.1(b).
“Material
Permits”
shall
have the meaning ascribed to such term in Section 3.1(m).
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“Option”
means
the option granted to the Purchasers to purchase shares of Common Stock in
Section 2.3.
“Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Pro
Rata Portion”
shall
mean the ratio of (x) the Subscription Amount of Securities purchased by a
participating Purchaser and (y) the sum of the aggregate Subscription Amount
of
all participating Purchasers.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated as of the date of this Agreement,
among
the Company and each Purchaser, in the form of Exhibit
A
hereto.
“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Purchasers of the
Shares.
“Required
Approvals”
shall
have the meaning ascribed to such term in Section 3.1(e).
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“SEC
Reports”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Securities”
means
the Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Shares”
means
the shares of Common Stock issued or issuable to each Purchaser pursuant to
this
Agreement, including the shares issuable or issued upon exercise of the
Option.
“Subscription
Amount”
means,
as to each Purchaser, the amounts set forth below such Purchaser’s signature
block on the signature page hereto, in United States dollars and in immediately
available funds.
“Subsidiary”
shall
mean the subsidiaries of the Company, if any, set forth on Schedule
3.1(a).
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“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: over-the-counter market, the American
Stock
Exchange, the New York Stock Exchange, the Nasdaq Stock Market.
“Transaction
Documents”
means
this Agreement, the Registration Rights Agreement and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.
ARTICLE
II.
PURCHASE
AND SALE
2.1 Subject
to the terms and conditions contained herein, Company shall assign and
Purchasers
shall assume the rights and obligation of Company under the Securities
Repurchase Agreement (the “Repurchase Agreement”) dated as of April 3, 2007 by
and among the Company and AJW Partners, LLC, AJW Qualified Partners, LLC, AJW
Offshore, Ltd. and New Millennium Partners II, LLC (the “Sellers”), a true and
correct copy of which is filed as Exhibit 2.1 to Company’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on April 13, 2007,
to
purchase from the Sellers $1,750,000 in secured promissory notes issued by
the
Company (the “Notes”) and warrants to purchase 876,170 shares of the Company’s
Common Stock (the “Warrants”) and to pay to the Sellers $1,000,000, 1,000,000
shares of Company’s restricted Common Stock (which restricted shares will be
delivered to the Company Counsel for delivery to the Sellers) and 1,000,000
shares of Company’s Common Stock as set forth of Schedule I hereto. The Company
shall be responsible for all other obligations under the Repurchase Agreement.
2.2 Subject
to the terms and conditions contained herein, the Company shall issue to the
Purchasers 4,500,000 shares of Company Common Stock in exchange for the Notes
and Warrants being acquired by the Purchasers pursuant to the Repurchase
Agreement as set forth of Schedule I hereto.
2.3 Subject
to the terms and conditions contained herein, and as set forth on Schedule
I
hereto, the Purchasers shall have the option to acquire up to 2,000,000 shares
of the Company’s unregistered Common Stock from the Company (the “Option”) for
$.50 per share (the “Option Price”) from time to time within 60 days following
the Closing herein. The Option shall be exercised by written notice directed
to
the President of the Company, at the Company's principal place of business,
accompanied by check in payment of the Option Price for the number of shares
specified. The Company shall deliver a certificate representing such shares
within five (5) business days after receipt of such notice and payment for
such
shares. In the event of any change in the outstanding shares of Common Stock
of
the Company by reason of any stock dividend, stock split, combination or
exchange of shares, recapitalization, reclassification, merger, consolidation,
reorganization, or other similar transactions (the "Capital Adjustments"),
appropriate adjustments in the number and purchase price of shares covered
by
this Option shall be made.
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2.4 Closing.
On the Closing Date, (a) each Purchaser shall purchase from the Sellers
severally and not jointly with the other Purchasers, the Notes and Warrants
and
shall deliver to the Sellers their pro rata portion of the cash and Company
Common Stock required to be paid to the Sellers pursuant to the Repurchase
Agreement as set forth on Schedule I, and (b) each Purchaser shall exchange
the
Notes and Warrants purchased from the Sellers as set forth in this Section
2.4
for the shares of the Company Common Stock pursuant to Section 2.2. Upon
satisfaction of each of the conditions set forth in Section 2.6, the Closing
shall occur.
2.5 Deliveries.
(a) On
or
before the Closing Date, the Company shall deliver or cause to be delivered
to
the Purchasers the following:
(i) this
Agreement duly executed by the Company;
(ii) certificates
for 4,500,000 shares of Company Common Stock registered as set forth in Schedule
I hereto;
(iii) the
Registration Rights Agreement, duly executed by the Company;
(iv) a
legal
opinion of Company Counsel, in agreed form and addressed to the Purchasers;
and
(v) evidence
of the insurance policy referred to in Section 4.15.
(b) On
or
before the Closing Date, the Purchasers shall deliver or cause to be delivered
the following:
(i) this
Agreement duly executed by such Purchaser;
(ii) $1,000,000
by wire transfer to the Sellers pursuant to the Repurchase Agreement;
(iii) 1,000,000
shares of Company Common Stock required to be transferred to the Sellers
pursuant to the Repurchase Agreement.
(iv) 1,000,000
restricted shares of Company Common Stock shall be delivered to the Company
Counsel for reissue and delivery to the Sellers; and
(v) the
Registration Rights Agreement duly executed by such Purchaser.
2.6 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
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(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Purchasers contained herein;
(ii) all
obligations, covenants and agreements of the Purchasers required to be performed
at or prior to the Closing Date shall have been performed;
and
(iii) the
delivery by the Purchasers of the items set forth in Section 2.5(b) of this
Agreement.
(b) The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects on the Closing Date of the representations
and
warranties of the Company contained herein;
(ii) all
obligations, covenants and agreements of the Company required to be performed
at
or prior to the Closing Date shall have been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.5(a) of this
Agreement;
(iv) the
delivery by the Sellers of the Notes and Warrants pursuant to the Repurchase
Agreement;
(v) there
shall have been no Material Adverse Effect with respect to the Company since
the
date hereof;
(vi) From
the
date hereof to the Closing Date, trading in the Common Stock shall not have
been
suspended by the Commission (except for any suspension of trading of limited
duration agreed to by the Company, which suspension shall be terminated prior
to
the Closing), and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Trading Market,
nor shall a banking moratorium have been declared either by the United States
or
New York State authorities nor shall there have occurred any material outbreak
or escalation of hostilities or other national or international calamity of
such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of each Purchaser, makes
it impracticable or inadvisable to purchase the Shares at the Closing; and
(vii) Purchasers
shall have received confirmation from the Company’s Chief Executive Officer and
President that the executive compensation matters set forth in Section 4.17
have
been agreed upon and are effective.
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ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 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, the Company hereby makes
the
representations and warranties set forth below to each Purchaser (which
representations and warranties are supplemented by the Company’s SEC Reports, as
defined in Section 3.1(h), below, copies of which have been provided to the
Purchaser):
(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth on
Schedule
3.1(a).
For the
purpose of this Agreement, a “Subsidiary” means (i) a corporation or other
entity whose shares of stock or other ownership interests having ordinary voting
power (other than stock or other ownership interests having such power only
by
reason of the happening of a contingency) to elect a majority of the directors
of such corporation, or other persons or entites performing similar functions
for such person or entity, are owned, directly or indirectly, by such person
or
entity, or (ii) a corporation or other entity in which such person or entity
owns, directly or indirectly, more than 50% of the equity interests at such
time.
(b) Organization
and Qualification.
Each of
the Company and the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified
to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
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,
prospects or financial condition 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.
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company in connection therewith other than in
connection with the Required Approvals (as defined below). Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company
in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, and (ii) as limited by
general principles of equity that restrict the availability of equitable or
legal remedies.
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(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company,
the issuance and sale of the Shares and the consummation by the Company of
the
other transactions contemplated thereby do not and will not (i) conflict with
or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice
or
lapse of time or both would become a default) under, result in the creation
of
any Lien upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary
is
bound or affected, or (iii) subject to the Required Approvals (defined below)
and to the Company’s Knowledge, conflict with or result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary
is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as would not result
in a Material Adverse Effect.
(e) Filings,
Consents and Approvals.
The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority or other Person
in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required pursuant to Section
4.4
of this Agreement, (ii) the filing with the Commission of the Registration
Statement, and (iii) the filing of Form D with the Commission and such filings
as are required to be made under applicable state securities laws (collectively,
the “Required
Approvals”).
(f) Issuance
of the Shares.
The
Shares are duly authorized and, when issued and paid for in accordance with
the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents. The Company
has reserved from its duly authorized capital stock the maximum number of shares
of Common Stock issuable pursuant to this Agreement and the Option.
8
(g) Capitalization.
On the
date of this Agreement, the authorized capital stock of the Company consists
of
an aggregate of 100,000,000 shares of common stock, $0.001 par value (“Common
Stock”), of which 23,264,208 shares are issued and outstanding, and 20,000,000
shares of preferred stock, $.001 par value (“Preferred Stock”) of which
2,000,000 are issued and outstanding. Other than Around the Clock Partners,
LP,
no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities, as disclosed in the SEC Reports and as set forth
on
Schedule
3.1(g),
there
are no outstanding options, warrants, script rights to subscribe to, calls
or
commitments of any character whatsoever relating to, or securities, rights
or
obligations convertible into or exchangeable for, or giving any Person any
right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, and to the Company’s Knowledge
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. 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 Shares. Except as disclosed
in the SEC Reports, 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.
(h) SEC
Reports; Financial Statements.
The
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials,
including the exhibits thereto, being collectively referred to herein as the
“SEC
Reports”).
As of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing and such financial statements have
been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved
(“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
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(i) Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports, (i) there has
been
no event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent
with
past practice, and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
The Company does not have pending before the Commission any request for
confidential treatment of information.
(j) Litigation.
There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the
Company, any Subsidiary or any of their respective properties before or by
any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”)
which
(i) adversely affects or challenges the legality, validity or enforceability
of
any of the Transaction Documents or the Securities, or (ii) except as disclosed
in the SEC Reports, could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director, officer or employee thereof,
is or
has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There are no actions, claims or investigations pending, or
to
the Knowledge of any of the Company’s officers, threatened, which relate to (a)
employment discrimination, age discrimination, sex discrimination and/or sexual
harassment; (b) unpaid wages; (c) wrongful discharge, retaliation or breach
of
any alleged employment or other contracts; or (d) claims based on any tort,
such
as invasion of privacy, defamation, fraud and infliction of emotional distress
by any of the Company, any Subsidiary or any of their current or former
employees, officers or managers which could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect.
To the Company’s Knowledge, there is no basis for bringing any such action,
claim or investigation. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
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(k) Labor
Relations.
No
material labor dispute exists or, to the Knowledge of the Company, is imminent
with respect to any of the employees of the Company which could reasonably
be
expected to result in a Material Adverse Effect.
(l) Compliance.
Except
as set forth in the SEC Reports, neither the Company nor any Subsidiary (i)
is
in default under or in violation of (and no event has occurred that has not
been
waived that, with notice or lapse of time or both, would result in a default
by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement
or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal,
state
and local laws applicable to its business except in each case as could not
have
a Material Adverse Effect. The Company has performed all procedures and complies
with all statutes and regulations imposed by any agency or instrumentality
of
any governmental body relative to manufacture and sale of its products including
all "labeling" as contemplated by the Federal Food, Drug and Cosmetic Act,
as
amended, and any other applicable law, rule and regulation. The Company’s
packaging complies which any applicable recycling laws and the Company is in
compliance with any recycling requirements.
(m) Regulatory
Permits.
Except
as set forth on Schedule
3.1(m),
the
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in
the
SEC Reports, except where the failure to possess such permits could not have
or
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”),
and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(n) Title
to Assets.
The
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them that is material to the business of the Company
and
the Subsidiaries and good and marketable title in all personal property owned
by
them that is material to the business of the Company and the Subsidiaries,
in
each case free and clear of all Liens, except for Liens disclosed in the SEC
Reports and Liens that do not materially affect the value of such property
and
do not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under lease by
the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in
compliance.
(o) Patents
and Trademarks.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights necessary or material for use
in
connection with their respective businesses as described in the SEC Reports
and
which the failure to so have could have a Material Adverse Effect (collectively,
the “Intellectual
Property Rights”).
Neither the Company nor any Subsidiary has received a written notice that
the
Intellectual Property Rights as presently used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. To the Knowledge of
the
Company, all such Intellectual Property Rights are enforceable and there
is no
existing infringement by another Person of any of the Intellectual Property
Rights of others.
11
(p) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged. To the best of Company’s Knowledge, such insurance contracts and
policies are accurate and complete. Neither the Company nor any 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 without a
significant increase in cost.
(q) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the Knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the Knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $60,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii)
for
other employee benefits, including stock option agreements under any stock
option plan of the Company.
(r) Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
To the
Company’s Knowledge, it is in material compliance with all provisions of the
Xxxxxxxx-Xxxxx Act of 2002 which are applicable to it as of the Closing Date.
The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general
or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company's most recently
filed periodic report under the Exchange Act, as the case may be, is being
prepared. The Company's certifying officers have evaluated the effectiveness
of
the Company's controls and procedures as of the date prior to the filing date
of
the most recently filed periodic report under the Exchange Act (such date,
the
“Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the Company's Knowledge,
in other factors that could significantly affect the Company's internal
controls.
12
(s) Certain
Fees.
No
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.
(t) Private
Placement.
Assuming the accuracy of the Purchasers representations and warranties set
forth
in Section 3.2, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does
not
contravene the rules and regulations of the Trading Market.
(u) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Shares, 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.
(v) Registration
Rights.
Except
for the Sellers pursuant to the Repurchase Agreement and as disclosed in
Section
3.1(v),
no
Person has any right to cause the Company to effect the registration under
the
Securities Act of any securities of the Company and the Company has not agreed
to do so.
(w) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and the Company has taken no action designed to, 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 Commission is contemplating terminating such registration. The Company
has
not, in the 12 months preceding the date hereof, received notice from any
Trading 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 Trading 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.
13
(x) Application
of Takeover Protections.
To the
best of the Company’s Knowledge, the Company and its Board of Directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company's Certificate of Incorporation (or similar charter documents) or the
laws of its state of incorporation or any other state that is or could become
applicable to the Purchasers as a result of the Purchasers and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including without limitation the Company's issuance of the Securities
and the Purchasers’ ownership of the Securities.
(y) Full
Disclosure.
Each of
the Company and each of its Subsidiaries has provided the Purchaser with its
SEC
Reports which contain all information requested by the Purchaser in connection
with its decision to purchase the Shares. Neither this Agreement, the
Transaction Documents, the schedules hereto and thereto nor any other document
delivered by the Company or any of its Subsidiaries to the Purchaser or its
attorneys or agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby, as qualified by the statements of the Company
in
its SEC Reports, contain any untrue statement of a material fact nor omit to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances in which they are made, not
misleading.
(z) No
Integrated Offering.
Assuming
the accuracy of the Purchasers’ representations and warranties set forth in
Section 3.2 and to the Company’s Knowledge, 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 cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes
of
the Securities Act or any applicable shareholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated.
(aa) Solvency.
Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the
Securities hereunder, (i) the Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of the
Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal
year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts
are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
14
(bb) Taxes.
Except
for matters that would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect, the Company and each
Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no Knowledge of a tax deficiency which has been asserted
or
threatened against the Company or any Subsidiary.
(cc) General
Solicitation.
Neither
the Company nor any person acting on behalf of the Company has offered or sold
any of the Shares by any form of general solicitation or general advertising.
The Company has offered the Securities for sale only to the Purchasers.
(dd) Foreign
Corrupt Practices.
Neither
the Company, nor to the Knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any
corrupt funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or
to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made
by
any person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision of
the
Foreign Corrupt Practices Act of 1977, as amended.
(ee) Accountants.
The
Company’s accountants are Xxxx & Company, P.A. Such firm is a registered
public accounting firm as required by the Securities Act. Such firm has not
advised the Company of any matters which must be disclosed under Item
304(a)(1)(iv)(B) of Commission Regulation S-B.
(ff) Acknowledgment
Regarding Purchasers’ Purchase of Shares.
The
Company acknowledges and agrees that each of the Purchasers is acting solely
in
the capacity of an arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary
of
the Company (or in any similar capacity) with respect to this Agreement and
the
transactions contemplated hereby and any advice given by any Purchaser or any
of
their respective representatives or agents in connection with this Agreement
and
the transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Shares. The Company further represents to each Purchaser that
the Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
(gg) Conduct
of Business.
The
Company manufactures, distributes and sells “King of Energy™” drinks as set for
in its SEC Reports and press releases issued prior to the date hereof concerning
such business and has entered into the distribution agreements as described
in
such SEC Reports and press releases.
15
3.2 Representations
and Warranties of the Purchasers.
Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization;
Authority.
Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with full right,
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution, delivery and performance by
such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(b) Investment
Intent.
Such
Purchaser understands that the Shares, Notes and Warrants are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal
for
its own account and not with a view to or for distributing or reselling such
Securities or any part thereof, has no present intention of distributing any
of
such Securities and has no arrangement or understanding with any other persons
regarding the distribution of such Securities (this representation and warranty
not limiting such Purchaser’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring the Securities hereunder
in
the ordinary course of its business. Such Purchaser does not have any agreement
or understanding, directly or indirectly, with any Person to distribute any
of
the Securities except as set forth herein.
(c) Purchaser
Status.
At the
time such Purchaser was offered the Securities, it was, and at the date hereof
it is, and on each date on which it exercises the Option, it will be either:
(i)
an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required
to be registered as a broker-dealer under Section 15 of the Exchange Act.
(d) Experience
of Such Purchaser.
Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
16
(e) General
Solicitation.
Such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(f) Certain
Trading Activities.
Each
Purchaser represents that from the 60th
day
prior to the date hereof until the closing date hereof, it has not directly
or
indirectly made, nor has any Person over which such Purchaser has direct control
directly or indirectly made, any purchases or sales of, or granted any option
for the purchase of or entered into any hedging or similar transaction with
the
same economic effect as a short sale, of the Common Stock.
(g) Access
to Information.
Such
Purchaser acknowledges that it has been afforded (i) the opportunity to ask
such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Securities;
(ii) access to public information about the Company and the Subsidiaries and
their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional publicly
disseminated information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its representatives
or counsel shall modify, amend or affect such Purchaser’s right to rely on the
truth, accuracy and completeness of the Company’s representations and warranties
contained in the Transaction Documents.
(h) Independent
Investment Decision.
Such
Purchaser has independently evaluated the merits of its decision to purchase
Securities pursuant to the Transaction Documents, and such Purchaser confirms
that it has not relied on the advice of any other Purchaser’s business and/or
legal counsel in making such decision.
The
Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
3.2.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
17
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the Company
or
to an affiliate of a Purchaser or in connection with a pledge as contemplated
in
Section 4.1(b), the Company may require the transferor thereof to provide to
the
Company an opinion of JB or such other counsel selected by the transferor and
to
which the Company has no reasonable objection, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that
such
transfer does not require registration of such transferred Securities under
the
Securities Act. As a condition of transfer, any such transferee shall agree
in
writing to be bound by the terms of this Agreement and shall have the rights
of
a Purchaser under this Agreement and the Registration Rights
Agreement.
(b) The
Purchasers agree to the imprinting, so long as is required by this Section
4.1(b), of a legend on any of the Securities in the following form:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT.
The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject
to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith. Further,
no
notice shall be required of such pledge. At the appropriate Purchaser’s expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including, if the Securities are subject
to registration pursuant to the Registration Rights Agreement, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) under
the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.
18
(c) Certificates
evidencing the Shares shall not contain any legend (including the legend set
forth in Section 4.1(b)), (i) while a registration statement (including the
Registration Statement) covering the resale of such security is effective under
the Securities Act, or (ii) following any sale of such Shares pursuant to Rule
144, or (iii) if such Shares are eligible for sale under Rule 144(k), 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 Commission). The Company shall cause its counsel to issue a legal opinion
to
the Company’s transfer agent promptly after the Effective Date if required by
the Company’s transfer agent to effect the removal of the legend hereunder. If
all or any portion of the Option is exercised at a time when there is an
effective registration statement to cover the resale of the Shares purchased
pursuant to exercise of the Option, such 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 4.1(c), it will, no later
than 5 Trading Days following the delivery by a Purchaser to the Company or
the
Company’s transfer agent of a certificate representing Shares, as the case may
be, issued with a restrictive legend (such date, the “Legend
Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate representing
such Securities 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.
(d) In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Shares (based on the Closing Price of the Common Stock on the
date such Securities are submitted to the Company’s transfer agent) subject to
Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five
(5)
Trading Days after such damages have begun to accrue) for each Trading Day
after
the Legend Removal Date until such certificate is delivered. Nothing herein
shall limit such Purchaser’s right to pursue actual damages for the Company’s
failure to deliver certificates representing any Securities as required by
the
Transaction Documents, and such Purchaser shall have the right to pursue all
remedies available to it at law or in equity including, without limitation,
a
decree of specific performance and/or injunctive relief.
(e) Each
Purchaser, severally and not jointly with the other Purchasers, agrees that
the
removal of the restrictive legend from certificates representing Securities
as
set forth in this Section 4.1 is predicated upon the Company’s reliance that the
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
(f) Until
the
date that each Purchaser holds less than 20% of the Shares initially purchased
hereunder by such Purchaser, the Company shall not undertake a reverse or
forward stock split or reclassification of the Common Stock without the prior
written consent of the Purchasers holding a majority in interest of the
Shares.
19
4.2 Furnishing
of Information.
As long
as any Purchaser owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as any Purchaser owns Securities, if
the
Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchasers to sell
the
Securities under Rule 144. The Company further covenants that it will take
such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell such Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
4.3 Integration.
The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that it believes would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent
transaction.
4.4 Securities
Laws Disclosure; Publicity.
The
Company shall, by 8:30 a.m. Eastern time on the fourth (4th)
Trading
Day following the date hereof, issue a Current Report on Form 8-K, reasonably
acceptable to each Purchaser disclosing the material terms of the transactions
contemplated hereby and shall attach the Transaction Documents thereto. The
Company and each Purchaser shall consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser shall issue any such press release or otherwise
make any such public statement without the prior consent of the Company, with
respect to any press release of any Purchaser, or without the prior consent
of
each Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication. Notwithstanding
the
foregoing, the Company shall not publicly disclose the name of any Purchaser,
or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection with
the registration statement contemplated by the Registration Rights Agreement,
and (ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii).
4.5 Shareholder
Rights Plan. No claim will be made or enforced by the Company or, to the
Knowledge of the Company, any other Person that any Purchaser is an “Acquiring
Person” under any shareholder rights plan or similar plan or arrangement in
effect or hereafter adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement, by virtue
of
receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers. The Company shall conduct
its
business in a manner so that it will not become subject to the Investment
Company Act.
20
4.6 Non-Public
Information. The Company covenants and agrees that neither it nor any other
Person acting on its behalf will provide any Purchaser or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.
4.7 Simultaneous
Closing. The transactions set forth in Sections 2.1 and 2.2 herein shall
take place simultaneously. In the event such transactions have not closed as
of
the Closing Date unless otherwise extended, this Agreement shall be null and
void.
4.8 Reimbursement.
If any Purchaser becomes involved in any capacity in any Proceeding by or
against any Person who is a stockholder of the Company (except as a result
of
sales, pledges, margin sales and similar transactions by such Purchaser to
or
with any current stockholder), solely as a result of such Purchaser’s
acquisition of the Securities under this Agreement, the Company will reimburse
such Purchaser for its reasonable legal and other expenses (including the cost
of any investigation preparation and travel in connection therewith) incurred
in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms
and conditions to any Affiliates of the Purchasers who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchasers and any such Affiliate and any such Person. The Company
also agrees that neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have any liability
to
the Company or any Person asserting claims on behalf of or in right of the
Company solely as a result of acquiring the Securities under this
Agreement.
4.9 Indemnification
of Purchasers. Subject to the provisions of this Section 4.9, the Company
will indemnify and hold the Purchasers and their directors, officers,
shareholders, partners, employees and agents (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result
of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents, or (b) any action instituted against a Purchaser, or
any
of them or their respective Affiliates, by any stockholder of the Company who
is
not an Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon
a
breach of such Purchaser’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may
have with any such stockholder or any violations by the Purchaser of state
or
federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action
shall
be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing. Any Purchaser Party shall
have
the right to employ separate counsel in any such action and participate in
the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense
and
to employ counsel, or (iii) in such action there is, in the reasonable opinion
of such separate counsel, a material conflict on any material issue between
the
position of the Company and the position of such Purchaser Party. The Company
will not be liable to any Purchaser Party under this Agreement (i) for any
settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed, or (ii) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by the Purchasers in this Agreement
or
in the other Transaction Documents.
21
4.10 Reservation
of Common Stock.
As of
the date hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights, a sufficient
number of shares of Common Stock for the purpose of enabling the Company to
issue Shares pursuant to this Agreement including any exercise of the
Option.
4.11 Listing
of Common Stock. The
Company hereby agrees to use best efforts to secure the listing of the Common
Stock on the American Stock Exchange (“ASE”). The Company shall use its best
efforts to adopt and comply with all Corporate Governance Rules and Regulations
as is required for listing by the ASE within 60 days of the Closing. The Company
shall submit its application for listing on the ASE within the later of 90
days
of the execution of this agreement or 15 days after the Company meets the
listing requirements of the ASE. If all appropriate actions have been completed
by the Company to gain ASE listing and the stock price at that time is less
than
$2.00 per share, a member of the Board of Directors of the Company shall contact
the ASE to determine if it is reasonable to submit the application at that
time.
If the Company is advised by the ASE it is allowed to submit an application
to
the ASE under an exception rule, the Company shall make the filing. Prior to
listing on the ASE, the Company shall use its best efforts to maintain the
quotation of its Common Stock on the OTC Bulletin Board.
4.12 Equal
Treatment of Purchasers. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of
any
of the Transaction Documents unless the same consideration is also offered
to
all of the parties to the Transaction Documents. For clarification purposes,
this provision constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is intended to treat
for the Company the Purchasers as a class and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.
4.13 Future
Financing. The Company agrees no debt financing will be issued for a period
of 24 months from the Closing without the direct consent and prior approval
of
the Purchasers. This paragraph does not limit the Company from expanding its
production credit line or obtaining additional credit lines for operations.
From
the date hereof until 12 months after the Closing Date, upon any financing
by
the Company by sale of its Common Stock or Common Stock Equivalents in an amount
exceeding $3,000,000 and provided that
22
each
Purchaser continues to hold at least 60% of the Shares (a “Subsequent
Financing”), each Purchaser shall have the right to participate in up to
100% of such Subsequent Financing (the “Participation Maximum”). At
least 15 Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Purchaser a written notice of its intention
to
effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask
such Purchaser if it wants to review the details of such financing (such
additional notice, a “Subsequent Financing Notice”). Upon the
request of a Purchaser, and only upon a request by such Purchaser, for a
Subsequent Financing Notice, the Company shall promptly, but no later than
1
Trading Day after such request, deliver a Subsequent Financing Notice to
such
Purchaser. The Subsequent Financing Notice shall describe in reasonable
detail the proposed terms of such Subsequent Financing, the amount of proceeds
intended to be raised thereunder, the Person with whom such Subsequent Financing
is proposed to be effected, and attached to which shall be a term sheet or
similar document relating thereto. If by 6:30 p.m. (Eastern time) on
the second Trading Day after all of the Purchasers have received the Pre-Notice,
notifications by the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate) is, in
the
aggregate, less than the total amount of the Participation Maximum, then
the
Company may effect the remaining portion of such Subsequent Financing on
the
terms and to the Persons set forth in the Subsequent Financing Notice. If
the Company receives no notice from a Purchaser as of such 2nd
Trading
Day, such Purchaser shall be deemed to have notified the Company that it
does
not elect to participate. The Company must provide the Purchasers with a
second Subsequent Financing Notice, and the Purchasers will again have the
right
of participation set forth above in this Section 4.13, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice
within
60 Trading Days after the date of the initial Subsequent Financing Notice.
In
the event the Company receives responses to Subsequent Financing Notices
from
Purchasers seeking to purchase more than the aggregate amount of the
Participation Maximum, each such Purchaser shall have the right to purchase
their Pro Rata Portion of the Participation Maximum. Notwithstanding the
foregoing, this Section 4.13 shall not apply in respect of an Exempt
Issuance.
4.14 Subsequent
Equity Sales. Except for (i) the transactions provided for herein, (ii) the
vesting of stock options in the ordinary course, (iii) the exercise of currently
outstanding warrants, and (iv) the payment of restricted Common Stock for
director fees, from the date hereof until 90 days after the Effective Date
neither the Company nor any Subsidiary shall issue shares of Common Stock or
Common Stock Equivalents; provided, however, the 90 day period set
forth in this Section 4.14 shall be extended for the number of Trading Days
during such period in which (y) trading in the Common Stock is suspended by
any
Trading Market, or (z) following the Effective Date, the Registration Statement
is not effective or the prospectus included in the Registration Statement may
not be used by the Purchasers for the resale of the Shares and Option Shares.
In
addition to the limitations set forth herein, from the date hereof until such
time as no Purchaser holds any of the Securities, 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
23
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 4.14 shall not apply in respect of an Exempt Issuance,
except that no Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance.
4.15 Insurance.
The Company will purchase a life insurance policy in the amount of $1,000,000
naming the Purchasers as the beneficiaries, on Xx. Xxxxx Moya1 as long as
he is
employed by the Company and on any future Chief Executive Officer of the
Company. Each such policy shall be a 10 year term policy. The insurance purchase
shall be applied for no later than May 7, 2007 and the Company shall use
commercially reasonable efforts to complete this insurance purchase by no
later
than May 31, 2007. Each Purchaser shall be a pro rata beneficiary of each
such
life insurance policy based on the Shares of Common Stock acquired under
this
Agreement.
4.16 (a)
Optional Purchaser Designated Directors; Expenses of Directors.
(i) Contingent
upon and effective as of the Closing, the Company’s Board of Directors shall
have elected up to two (2) persons, one of which shall be designated by Around
the Clock Partners, LP (“ATC”) (which director shall be Xxxxx Xxxxxxxx or
such other person to whom the Company has no reasonable objection) and one
of
whom shall be jointly designated by ATC and Cohiba Partners (“Cohiba”) to
the Company’s Board of Directors (the “ATC Directors”) and one such
director appointed by ATC shall serve on the Company’s compensation committee.
The Company shall not appoint an executive committee. At each annual meeting
of
the stockholders of the Company and at each special meeting of the stockholders
of the Company called for the purposes of electing directors, and at any
time at
which stockholders of the Company shall have the right to, or shall, vote
for or
consent to the election of directors, then the Company shall nominate for
election the ATC Directors provided that ATC continues to hold 20% of the
Shares
it purchased hereunder and provided further that neither ATC nor Cohiba are
in
material default under any agreement with the Company or are in breach of
their
respective fiduciary obligations to the Company, and such default or breach
has
not been cured within 30 days after receipt of notice from the Company
specifying such default or breach. The ATC Directors shall have the right
to
attend any meetings of the Board of Directors and its committees by telephone
conference call and shall receive all reports and materials provided to the
directors of the Company at the time such reports and materials are provided
to
the other Company directors.
24
(ii) ATC
shall
timely notify the Company in writing of the person or persons designated
by
pursuant to this Section as nominee for election to the Board, and shall
promptly furnish all information necessary for all required filings with
the
SEC. In the absence of any notice from ATC, the ATC Directors then serving
and
previously designated by ATC shall be renominated.
(iii) Any
vacancy
on the Board of Directors created by the resignation, removal, incapacity,
or
death of any ATC Director may be filled by another ATC Director selected
by ATC.
(iv) The
ATC
Directors shall be entitled to reimbursement for reasonable out-of-pocket
expenses incurred in connection with the attending of meetings of the Board
of
Directors and any committees of the Board of Directors and performance of
their
duties as a Director. The ATC Directors shall be provided with indemnification
and advancement of expenses to the fullest extent allowed under the laws
of the
Company’s state of incorporation. The ATC Directors shall be covered by such
indemnification insurance and indemnification policies and compensation policies
established by the Board of Directors for all Directors generally in addition
to
any rights that the ATC Directors may have at common law, pursuant to the
Company's Articles of Incorporation, the Company's Bylaws, Resolutions of
the
Board of Directors, or otherwise.
(b) Observer
Rights.
ATC and
Cohiba shall each be allowed one representative (the “Board
Observer”)
of its
choice (which individual shall be reasonably acceptable to the Company) to
attend all meetings of the Company’s Board of Directors and all committees
thereof for so long as ATC and Cohiba shall have the option to have a ATC
Director appointed but there is no ATC Director on the Company’s Board of
Directors. In connection therewith, the Company shall provide the Board Observer
with copies of all notices, minutes, consents, and other materials, financial
or
otherwise, that the Company provides to its Board of Directors. The Company
shall reimburse the Board Observer for any reasonable expenses incurred in
connection with its function as a Board Observer, including travel and lodging
expenses incurred to attend meetings of the Company’s Board of Directors and its
committees. The Board Observer shall have the right to attend any such meetings
by telephone conference call. The Board Observer’s rights shall be limited to
observation and shall not include the right to vote or otherwise participate
in
any meeting of the Company’s Board of Directors. Notwithstanding the foregoing,
the Company’s Board of Directors, acting upon the advice of counsel, may limit
the observation rights provided hereunder to the extent that such limitation
may
be reasonably necessary to preserve for the Company the benefit of the
attorney-client privilege. The Company also may require each Board Observer
to
enter into such confidentiality arrangements as may be reasonably necessary
to
preserve, in connection with the observation rights granted hereunder, the
confidentiality of information made available to the Company’s Board of
Directors.
4.17 Certain
Executive Compensation Matters. The current Chief Executive Officer and
President of the Company shall forgo their right to receive any compensation
from the Company based on Company Gross Revenues, as set forth in their
Employment Agreements dated December 27, 2005. In lieu of this payment, the
Chief Executive Officer and President shall receive five year options to
purchase Company Common Stock based on annual gross revenues of the Company
in
each year during the term of their respective employment agreements. In each
year beginning on January 1, 2007, at the time it is determined the Company
surpasses $5 million in gross revenues, options will be issued to the Chief
25
Executive
Officer and President to purchase Company Common Stock. The strike price
of such
option will be at 100% of the closing price of the Company’s Common Stock on the
day of such option grant(s) and the number of shares of such options shall
be
$120,000 divided by the strike price. For each additional $5 million in
gross
revenues in each year, warrants will be issued on the same basis except
that the
number of shares subject to purchase on exercise of such options shall
be
$100,000 divided by the applicable strike price. At the end of each year
they
will receive additional stock options on a pro-rata basis for any sales
over $5
million in such year for which they have not previously received stock
options.
For example, if annual sales were $9 million, they will have receive options
on
the first $5 million of sales during the year and will be entitled to received
additional options on the last trading day of the year with an aggregate
option
price of $80,000 ($4 million/$5 million x $100,000). As compensation for
amending their Employment Agreements as set forth herein, the CEO and President
will receive 5 year stock options for 100,000 shares of Common Stock with
an
exercise price of $1.50 per share. In the event any outstanding stock options
and warrants held by the CEO, President and any other employee, officer
or
director of the Company allows cashless exercise, such options and warrants
will
be modified to require a full cash payment to the Company upon exercise
and
cashless exercise shall not be permitted. The Purchasers likewise agree
to
exercise any options and warrants held by them by cash payment of the purchase
price and not by cashless exercise.
4.18 Use
of
Proceeds. The Company shall use the proceeds from the sale of Shares set
forth in Section 2.3 for current working capital requirements of the business
of
the Company and not for payment of past wages or other debts, liabilities
and
obligations outstanding as of the date hereof.
ARTICLE
V.
MISCELLANEOUS
5.1 Fees
and Expenses.
The
Company shall reimburse Around the Clock Partners, LP any legal fees and
expenses in connection with the transactions herein, including expenses in
connection with filing any forms, reports and schedules with the Commission,
in
an amount not to exceed $17,500. Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the sale of the Securities.
5.2 Entire
Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
5.3 Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth
on
the signature pages attached hereto prior to 6:30 p.m. (Eastern time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
set
forth on the signature pages attached hereto on a day that is not a Trading
Day
or later than 6:30 p.m. (Eastern time) on any Trading Day, (c) the second
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such
notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.
26
5.4 Amendments;
Waivers. No provision of this Agreement may be waived or amended except in a
written instrument signed, in the case of an amendment, by the Company and
each
Purchaser or, in the case of a waiver, by the party against whom enforcement
of
any such waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be
a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
5.5 Construction.
The headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
5.6 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser. Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply
to
the “Purchasers”.
5.7 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 4.9.
5.8 Governing
Law. All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed
and enforced in accordance with the internal laws of the State of California,
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in
any way any right to serve process in any manner permitted by law. The parties
hereby waive all rights to a trial by jury. If either party shall commence
an
action or proceeding to enforce any provisions of the Transaction Documents,
then the prevailing party in such action or proceeding shall be reimbursed
by
the other party for its attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
27
5.9
Survival.
The representations and warranties herein shall survive the Closing and delivery
of the Shares.
5.10 Execution.
This Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
5.11 Severability.
If any provision of this Agreement is held to be invalid or unenforceable in
any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
5.12 Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Purchaser exercises a right, election, demand or option under
a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then the Company has the right
to cure such failure upon 30 business days prior written notice to the Company.
If the Company fails to perform its obligations by the expiration of the 30
day
cure period, then such Purchaser may rescind or withdraw, in its sole discretion
from time to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its future actions
and rights.
5.13 Replacement
of Securities. If any certificate or instrument evidencing any Securities is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in
lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable indemnification agreement,
if
requested, but no indemnity bond shall be required in connection with such
replacement. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Securities.
5.14 Remedies.
In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Purchasers and the Company
will be entitled to specific performance under the Transaction Documents. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be
adequate.
28
5.15 Payment
Set Aside. To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser enforces or
exercises its rights thereunder, and such payment or payments or the proceeds
of
such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation
or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
5.16 Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in
any
way for the performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any Transaction Document,
and no action taken by any Purchaser pursuant thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture
or
any other kind of entity, or create a presumption that the Purchasers are in
any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Document. Each Purchaser shall
be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser
to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser has been represented by its own separate legal counsel in their review
and negotiation of the Transaction Documents. For reasons of administrative
convenience only, Purchasers and their respective counsel have chosen to
communicate with the Company through JB. JB does not represent all of the
Purchasers but only Around the Clock Partners, LP. The Company has elected
to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to
do so
by the Purchasers.
5.17 Liquidated
Damages. The Company’s obligations to pay any partial liquidated damages or
other amounts owing under the Transaction Documents is a continuing obligation
of the Company and shall not terminate until all unpaid partial liquidated
damages and other amounts have been paid notwithstanding the fact that the
instrument or security pursuant to which such partial liquidated damages or
other amounts are due and payable shall have been canceled.
(Signature
Page Follows)
29
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
|
WHO’S
YOUR DADDY, INC., a Nevada Corporation
|
Address
for Notice:
President
Who’s
Your Daddy, Inc.
0000
Xx Xxxxxx Xxxx
Xxxxx
000
Xxxxxxxx,
XX 00000
|
|
By:
/s/ Xxxx
Xxxxx
Name: Xxxx Xxxxx
Title: CEO
|
|
|
With
a copy to (which shall not constitute notice):
Xxxxx
X. Xxxxxxx, Esq.
XXXXXXX
XXXX SEIDENWURM & XXXXX LLP
000
“X” Xxxxxx, Xxxxx 0000
Xxx
Xxxxx, Xxxxxxxxxx 00000
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOR PURCHASERS FOLLOW]
30
[PURCHASER SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Investing Entity: AROUND
THE CLOCK PARTNERS, LP
|
By:
Around
the Clock Trading and Capital Management, LLC,
General
Partner
By:
/s/ Xxxxx
Xxxxxxxx
Xxxxx
Xxxxxxxx
Managing
Member
|
Email
Address of Authorized Entity: xxxxxxxxx@xxxxxxxxxxxxxxxxx.xxx
Address
for Notice of Investing Entity:
|
Xxxxx
Xxxxxxxx, Managing Member
Around
the Clock Trading and Capital Management, LLC
000
Xxxxx Xxxxxx Xxxxx
Xxxxx
000
Xx.
Xxxxxxxxxx, XX 00000
|
This
signature page also constitutes the signature page for the purchase of 140,000
shares of Company Common Stock for $70,000 pursuant to Section 2.3 of the
Agreement.
[SIGNATURE
PAGES CONTINUE]
31
[PURCHASER
SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE
AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Investing Entity: COHIBA
PARTNERS INC.
Signature
of Authorized Signatory of Investing Entity:
/s/
Xxxxxx
Xxx
Name
of
Authorized Signatory: Xxxxxx
Xxx
Title
of
Authorized Signatory: President
Email
Address of Authorized
Entity:________________________________________________
Address
for Notice of Investing Entity:
Address
for Delivery of Securities for Investing Entity (if not same as
above):
32
[PURCHASER
SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE
AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Investing Entity: AROUND THE CLOCK TRADING AND CAPITAL MANAGEMENT, LLC
Signature
of Authorized Signatory of Investing Entity:
/s/
Xxxxx
Xxxxxxxx
Name
of
Authorized Signatory: Xxxxx Xxxxxxxx
Title
of
Authorized Signatory: Managing Member
Email
Address of Authorized Entity: xxxxxxxxx@xxxxxxxxxxxxxxxxx.xxx
Address
for Notice of Investing Entity:
Xxxxx
Xxxxxxxx, Managing Member
Around
the Clock Trading and Capital Management, LLC
000
Xxxxx
Xxxxxx Xxxxx
Xxxxx
000
Xx.
Xxxxxxxxxx, XX 00000
33
[PURCHASER
SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE
AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Investing Entity: STRONG
PARTNERS CORPORATION
Signature
of Authorized Signatory of Investing Entity:
/s/
Xxxxxxx
XxXxxxx
Name
of
Authorized Signatory: Xxxxxxx
XxXxxxx
Title
of
Authorized Signatory: Chief
Executive Officer
Email
Address of Authorized
Entity:________________________________________________
Address
for Notice of Investing Entity:
Address
for Delivery of Securities for Investing Entity (if not same as
above):
34
[PURCHASER
SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE
AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Investing Entity: TURID
HOLDINGS
Signature
of Authorized Signatory of Investing Entity:
/s/
Xxxxx
Xxxx
Name
of
Authorized Signatory: Xxxxx
Xxxx
Title
of
Authorized Signatory: Managing
Director
Email
Address of Authorized
Entity:________________________________________________
Address
for Notice of Investing Entity:
Address
for Delivery of Securities for Investing Entity (if not same as
above):
35
[PURCHASER
SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE AGREEMENT FOR
PURCHASE PURSUANT TO SECTION 2.3]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Investors: XXXXX XXXXXXX and XXX XXXXXXX, as joint tenants in
common
|
Signatures: /s/ Xxxxx
Xxxxxxx
Xxxxx
Xxxxxxx
|
/s/ Xxx
Xxxxxxx
Xxx Xxxxxxx
|
Address
for Notice of Investors:
Address
for Delivery of Securities for Investors (if not same as above):
Subscription
Amount: $250,000
Shares:
500,000
36
