NOTE AND WARRANT PURCHASE AGREEMENT Dated as of August 16, 2007 among JUMA TECHNOLOGY CORP. and THE PURCHASERS LISTED ON EXHIBIT A
Exhibit
4.1
Dated
as of August 16, 2007
among
and
THE
PURCHASERS LISTED ON EXHIBIT A
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TABLE
OF CONTENTS
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Page
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ARTICLE
I Purchase and Sale of the Notes and Warrants
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Section
1.1
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Purchase
and Sale of Notes
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1
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Section
1.2
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Warrants
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1
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Section
1.3
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Conversion
Shares
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1
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Section
1.4
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Purchase
Price and Closing
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2
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ARTICLE
II Representations and Warranties
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Section
2.1
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Representations
and Warranties of the Company
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2
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Section
2.2
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Representations
and Warranties of the Purchasers
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12
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ARTICLE
III Covenants
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Section
3.1
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Securities
Compliance
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14
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Section
3.2
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Registration
and Listing
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14
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Section
3.3
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Inspection
Rights
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15
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Section
3.4
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Compliance
with Laws
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15
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Section
3.5
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Keeping
of Records and Books of Account
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15
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Section
3.6
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Furnishing
of Information
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15
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Section
3.7
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Reporting
Requirements
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15
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Section
3.8
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Amendments
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16
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Section
3.9
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Other
Agreements
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16
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Section
3.10
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Distributions
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16
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Section
3.11
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Status
of Dividends
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16
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Section
3.12
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Use
of Proceeds
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17
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Section
3.13
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Reservation
of Shares
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17
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Section
3.14
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Transfer
Agent Instructions
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17
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Section
3.15
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Disposition
of Assets
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18
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Section
3.16
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Reporting
Status
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18
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Section
3.17
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Disclosure
of Transaction
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18
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Section
3.18
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Disclosure
of Material Information
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18
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Section
3.19
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Pledge
of Securities
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18
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Section
3.20
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Form
SB-2 Eligibility
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19
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Section
3.21
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Lock-Up
Agreement
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19
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Section
3.22
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DTC
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19
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Section
3.23
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Subsequent
Financings
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19
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Section
3.24
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Issuance
of Variable Securities
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20
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Section
3.25
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Approval
of Acquisitions.
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20
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i
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Section
3.26
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Shareholder
Approval
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20
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Section
3.27
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Subsequent
Filings
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20
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Section
3.28
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Most
Favored Nations
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20
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ARTICLE
IV Conditions
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Section
4.1
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Conditions
Precedent to the Obligation of the Company to Sell the
Shares
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21
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Section
4.2
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Conditions
Precedent to the Obligation of the Purchasers to Purchase the
Shares
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21
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ARTICLE
V Stock Certificate Legend
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Section
5.1
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Legend
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23 | |
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ARTICLE
VI Indemnification
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Section
6.1
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General
Indemnity
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24 | |
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Section
6.2
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Indemnification
Procedure
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24 | |
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ARTICLE
VII Miscellaneous
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Section
7.1
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Fees
and Expenses
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25
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Section
7.2
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Specific
Enforcement
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25
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Section
7.3
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Entire
Agreement; Amendment
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26
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Section
7.4
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Rescission
and Withdrawal Right
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26
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Section
7.5
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Notices
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27
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Section
7.6
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Waivers
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27
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Section
7.7
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Headings
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27
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Section
7.8
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Successors
and Assigns
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28
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Section
7.9
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No
Third Party Beneficiaries
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28
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Section
7.10
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Governing
Law; Consent to Jurisdiction
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28
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Section
7.11
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Survival
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28
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Section
7.12
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Counterparts
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28
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Section
7.13
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Publicity
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28
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Section
7.14
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Severability
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29
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Section
7.15
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Further
Assurances
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ii
TABLE
OF CONTENTS
(continued)
EXHIBITS
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Exhibit
A
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List
of Purchasers
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Exhibit
B
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Form
of 6% Convertible Promissory Note
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Exhibit
C
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Certificate
of Designation of the Relative Rights and Preferences of
the Series A Convertible Preferred Stock
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Exhibit
D-1
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Series
A Warrant
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Exhibit
D-2
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Series
B Warrant
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Exhibit
D-3
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Series
C Warrant
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Exhibit
E
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Registration
Rights Agreement
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Exhibit
F
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Lock-Up
Agreement
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Exhibit
G
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Form
of Amended Certificate of Incorporation
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Exhibit
H
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Irrevocable
Transfer Agent Instructions
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Exhibit
I
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Opinion
of Counsel
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iii
This
NOTE
AND WARRANT PURCHASE AGREEMENT (the “Agreement”)
is
dated as of August 16, 2007 by and among Juma Technology Corp., a Delaware
corporation (the “Company”),
and
each of the Purchasers whose names are set forth on Exhibit
A
hereto
(individually, a “Purchaser”
and
collectively, the “Purchasers”).
The
parties hereto agree as follows:
ARTICLE
I
Purchase
and Sale of Preferred Stock
Section
1.1 Purchase
and Sale of Notes.
Upon
the following terms and conditions, the Company shall issue and sell to the
Purchasers and each of the Purchasers shall purchase from the Company, 6%
convertible promissory notes in the aggregate principal amount of up to five
million ($5,000,000) dollars (the “Notes”).
The
Notes provide for (i) optional conversion into shares of the Company’s common
stock, par value $0.0001 per share (the “Common
Stock”)
and
(ii) upon the adoption of the Amended Certificate and the filing of the
Certificate of Designation (each as defined herein), mandatory conversion into
shares of the Company’s Series A Convertible Preferred Stock, par value $0.0001
per share (the “Preferred
Stock”).
The
Note shall be substantially in the form attached hereto as Exhibit
B.
The
designation, rights, preferences and other terms and provisions of the Series
A
Convertible Preferred Stock are set forth in the Certificate of Designation
of
the Relative Rights and Preferences of the Series A Convertible Preferred Stock
attached hereto as Exhibit
C
(the
“Certificate
of Designation”).
The
Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“Commission”)
under
the Securities Act of 1933, as amended (the “Securities
Act”)
or
Section 4(2) of the Securities Act.
Section
1.2 Warrants.
Upon
the following terms and conditions and for no additional consideration, each
of
the Purchasers shall be issued (i) Series A Warrants, in substantially the
form
attached hereto as Exhibit
D-1
(the
“Series
A Warrant”),
(ii)
Series B Warrants, in substantially the form attached hereto as Exhibit
D-2
(the
“Series
B Warrant” and
(iii)
Series C Warrants, in substantially the form attached hereto as Exhibit
D-3
(the
“Series
C Warrant”
and with
the Series A Warrant and Series B Warrant, the “Warrants”).
Any
shares of Common Stock issuable upon exercise of the Warrants (and such shares
when issued) are herein referred to as the “Warrant
Shares.”
Section
1.3 Conversion
Shares.
The
Company has authorized (or will authorize as of the Preferred Stock Filing
Date,
as hereinafter defined) and will reserve and covenants to continue to reserve,
free of preemptive rights and other similar contractual rights of stockholders,
(i) such number of shares of Preferred Stock equal to one hundred twenty percent
(120%) of the number of shares of Preferred Stock as shall from time to time
be
sufficient to effect the entire conversion of the Notes and any interest accrued
and outstanding thereon; (ii) a number of shares of common stock, par value
$0.0001 per share (the “Common
Stock”)
equal
to one hundred twenty percent (120%) of the number of shares of Common Stock
as
shall from time to time be sufficient to effect the conversion of all of the
Notes and/or the Preferred Stock and (iii) as of the date hereof, such number
of
shares of Common Stock equal to one hundred twenty percent (120%) of the number
of shares of Common Stock as shall from time to time be sufficient to effect
the
exercise of the Warrants then outstanding. Any shares of Common Stock issuable
upon conversion of the Note, the Preferred Stock and exercise of the Warrants
(and such shares when issued) are herein referred to as the “Conversion
Shares”
and
the
Warrant Shares, respectively. The Note, the Preferred Stock, the Warrants,
the
Preferred Stock, the Conversion Shares and the Warrant Shares are sometimes
collectively referred to as the “Securities.”
1
Section
1.4 Purchase
Price and Closing.
Subject
to the terms and conditions hereof, the Company agrees to issue and sell to
the
Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the Notes and
the
Warrants for an aggregate purchase price of up to Five Million Dollars
($5,000,000) (the “Purchase
Price”).
The
closing of the purchase and sale of the Notes and the Warrants to be acquired
by
the Purchasers from the Company under this Agreement shall take place at the
offices of Sadis & Xxxxxxxx LLP, 000 Xxxxx Xxxxxx, 00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (the “Closing”)
at
10:00 a.m., New York time on such date as the Purchasers and the Company may
agree upon; provided,
that
all of the conditions set forth in Article
IV
hereof
and applicable to the Closing shall have been fulfilled or waived in accordance
herewith (the “Closing
Date”).
Subject to the terms and conditions of this Agreement, at the Closing the
Company shall deliver or cause to be delivered to each Purchaser (x) its Notes
for the principal amount set forth opposite the name of such Purchaser on
Exhibit
A
hereto,
(y) its Warrants to purchase such number of shares of Common Stock as is set
forth opposite the name of such Purchaser on Exhibit
A
attached
hereto and (z) any other documents required to be delivered pursuant to
Article
IV
hereof.
At the Closing, each Purchaser shall deliver its Purchase Price by wire transfer
to the Company. In addition, the parties acknowledge that Thirty Five Thousand
($35,000) of the Purchase Price funded on the Closing Date shall be deducted
by
the Purchase Price from the total amount otherwise payable to the Company,
and
paid over to counsel for the Purchasers in payment of reasonable legal fees
and
out of pocket expenses of the Purchasers’ counsel.
ARTICLE
II
Representations
and Warranties
Section
2.1 Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchasers, as of the date hereof
and Closing Date (except as set forth on the Schedule of Exceptions attached
hereto with each numbered Schedule corresponding to the section number herein),
as follows:
(a) Organization,
Good Standing and Power.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power to own, lease and operate its properties and assets and to conduct its
business as it is now being conducted. Except as set forth in Schedule
2.1(g)
hereto,
the Company does not have any Subsidiaries. Except as set forth on Schedule
2.1(a),
each of
the Company and each such Subsidiary is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the aggregate) in which
the failure to be so qualified will not have a Material Adverse Effect (as
defined in Section
2.1(c)
hereof)
on the Company’s financial condition.
(b) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Notes, the Warrants, the Registration Rights
Agreement in the form attached hereto as Exhibit
E
(the
“Registration
Rights Agreement”),
the
Lock-Up Agreement (as defined in Section
3.20
hereof)
in the form attached hereto as Exhibit
F,
the
Irrevocable Transfer Agent Instructions (as defined in Section
3.13)
substantially in the form of Exhibit
H
attached
hereto, and the Certificate of Designation (collectively, the “Transaction
Documents”)
and to
issue and sell the Securities in accordance with the terms hereof. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action, and
except as set forth on Schedule
2.1(b),
no
further consent or authorization of the Company or its Board of Directors or
stockholders is required. This Agreement has been duly executed and delivered
by
the Company. The other Transaction Documents will have been duly executed and
delivered by the Company at the Closing. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.
2
(c) Capitalization.
The
authorized capital stock of the Company and the shares thereof currently issued
and outstanding as of the date hereof are set forth on Schedule
2.1(c)
hereto.
All of the outstanding shares of the Common Stock have been duly and validly
authorized. As of the date hereof, the Company does not possess the ability
to
issue shares of Preferred Stock. All shares of Preferred Stock will be duly
and
validly authorized for issuance upon conversion of the Notes no later than
the
Preferred Stock Filing Date. Except as set forth on Schedule
2.1(c)
hereto,
no shares of Common Stock are entitled to preemptive rights or registration
rights and there are no outstanding options, warrants, scrip, rights to
subscribe to, call or commitments of any character whatsoever relating to,
or
securities or rights convertible into, any shares of capital stock of the
Company. There are no contracts, commitments, understandings, or arrangements
by
which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
shares of capital stock of the Company. Except as set forth on Schedule
2.1(c)
hereto,
the Company is not a party to any agreement granting registration or
anti-dilution rights to any person with respect to any of its equity or debt
securities. The Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. The offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable Federal and state securities laws, and no stockholder has
a
right of rescission or claim for damages with respect thereto. The Company
has
furnished or made available to the Purchasers true and correct copies of the
Company’s Certificate of Incorporation as in effect on the date hereof (the
“Certificate”),
a
copy of the Company’s proposed Amended Certificate of Incorporation to be filed
upon Shareholder Approval (as defined in Section
3.26)
(the
“Amended
Certificate”
-
attached hereto as Exhibit
G),
and
the Company’s Bylaws as in effect on the date hereof (the “Bylaws”).
For
the purposes of this Agreement, “Material
Adverse Effect”
means
any material adverse effect on the business, operations, properties, prospects,
or financial condition of the Company and its Subsidiaries, taken as a whole,
and/or any condition, circumstance, or situation that would prohibit or
otherwise materially interfere with the ability of the Company to perform any
of
its obligations under this Agreement.
(d) Issuance
of Securities.
The
Notes and the Warrants to be issued at the Closing have been duly authorized
by
all necessary corporate action and when paid for or issued in accordance with
the terms hereof, the Notes and Warrants shall be validly issued and
outstanding, free and clear of all liens, encumbrances and rights of refusal
of
any kind. Upon the adoption of the Amended Certificate and the filing of the
Certificate of Designation, the Preferred Stock shall be validly issued and
outstanding, free and clear of all liens, encumbrances and rights of refusal
of
any kind. When the Conversion Shares and the Warrant Shares are issued in
accordance with the terms of this Agreement, the Notes, the Certificate of
Designation and the Warrants, such shares will be duly authorized by all
necessary corporate action and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a holder
of Common Stock.
(e) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Notes and/or the
Certificate of Designation and the consummation by the Company of the
transactions contemplated herein and therein do not and will not (i) violate
any
provision of the Company’s Certificate,
Amended
Certificate or Bylaws, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is a
party or by which it or its properties or assets are bound, except for conflicts
or defaults, which singularly or in the aggregate do not and will not have
a
Material Adverse Effect, (iii) create or impose a lien, mortgage, security
interest, charge or encumbrance of any nature on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, except for liens, mortgages, security interests, charges
or
encumbrances which singularly or in the aggregate do not and will not have
a
Material Adverse Effect, or (iv) result in a violation of any federal, state,
local or foreign statute, rule, regulation, order, judgment or decree (including
Federal and state securities laws and regulations) applicable to the Company
or
any of its Subsidiaries or by which any property or asset of the Company or
any
of its Subsidiaries are bound or affected, except for violations, which
singularly or in the aggregate, do not and will not have a Material Adverse
Effect. The business of the Company and its Subsidiaries is not being conducted
in violation of any laws, ordinances or regulations of any governmental entity,
except for possible violations which singularly or in the aggregate do not
and
will not have a Material Adverse Effect. The Company is not required under
Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of its
obligations under the Transaction Documents, or issue and sell the Notes, the
Warrants, the Preferred Stock, the Conversion Shares and the Warrant Shares
in
accordance with the terms hereof or thereof (other than (x) any consent,
authorization or order that has been obtained as of the date hereof, (y) any
filing or registration that has been made as of the date hereof or (z) any
filings which may be required to be made by the Company with the Commission
or
state securities administrators subsequent to the Closing, any registration
statement which may be filed pursuant hereto or any other Transaction Document,
and the Certificate of Designation); provided,
that
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Purchasers herein.
3
(f) Commission
Documents, Financial Statements.
The
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended the
(“Exchange
Act”),
including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the “Commission
Documents”).
The
Company has delivered or made available via XXXXX or another Internet web-site
to each of the Purchasers true and complete copies of the Commission Documents.
The Company has not provided to the Purchasers any material non-public
information or other information which, according to applicable law, rule or
regulation, was required to have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. At the times of their respective filings, the
Commission Documents complied in all material respects with the requirements
of
the Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and, as of their respective dates, none of the
Commission Documents 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 Commission Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with U. S. generally
accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except (i) as may
be
otherwise indicated in such financial statements or the notes thereto or (ii)
in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in
all
material respects the financial position of the Company and its Subsidiaries
as
of 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
year-end audit adjustments).
4
(g) Subsidiaries.
Schedule
2.1(g)
hereto
sets forth each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person’s
ownership. Each Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of its state of incorporation and has the
requisite corporate power to own, lease and operate its properties and assets
and to conduct its business as it is now being conducted. For the purposes
of
this Agreement, “Subsidiary”
shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued, and
are
fully paid and nonassessable. There are no outstanding preemptive, conversion
or
other rights, options, warrants or agreements granted or issued by or binding
upon any Subsidiary for the purchase or acquisition of any shares of capital
stock of any Subsidiary or any other securities convertible into, exchangeable
for or evidencing the rights to subscribe for any shares of such capital stock.
Neither the Company nor any Subsidiary is subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Neither the Company
nor any Subsidiary is party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of any
Subsidiary.
(h) No
Material Adverse Change.
Other
than as disclosed in the Company’s Commission Documents, since January 1, 2007,
the Company has not experienced or suffered any Material Adverse
Effect.
(i) No
Undisclosed Liabilities.
Except
as set forth on Schedule
2.1(i),
since
January 1, 2007 neither the Company nor any of its Subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) other than
those incurred in the ordinary course of the Company’s or its Subsidiaries’
respective businesses and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company or its Subsidiaries,
as
the case may be.
(j) Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Company and
an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Commission
Documents and
is
not so disclosed or that otherwise would be reasonably likely to have a Material
Adverse Effect.
(k) No
Undisclosed Events or Circumstances.
No
event or circumstance has occurred or exists with respect to the Company or
its
Subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not
been
so publicly announced or disclosed.
(l) Indebtedness.
Schedule
2.1(l)
hereto
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or
any
Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed, whether
individually or in aggregate, in excess of $100,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not
the
same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $25,000 due under
leases required to be capitalized in accordance with GAAP. Except as set forth
on Schedule
2.1(l),
neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.
5
(m) Title
to Assets.
Except
as set forth on Schedule
2.1(m),
each of
the Company and the Subsidiaries has good and marketable title to all of its
real and personal property, free and clear of any mortgages, pledges, charges,
liens, security interests or other encumbrances. Except as set forth on
Schedule
2.1(m),
all
leases of the Company and each of its Subsidiaries are valid and subsisting
and
in full force and effect.
(n)
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 and location in which the Company and the
Subsidiaries are engaged. Neither the Company nor any Subsidiary has any
knowledge that it will be unable to renew its existing insurance coverage for
the Company and the Subsidiaries 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.
(o) Actions
Pending.
There
is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or any other proceeding pending or, to the knowledge
of
the Company, threatened against the Company or any Subsidiary which questions
the validity of this Agreement or any of the other Transaction Documents or
the
transactions contemplated hereby or thereby or any action taken or to be taken
pursuant hereto or thereto. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any Subsidiary or any of their respective properties or assets.
There are no outstanding orders, judgments, injunctions, awards or decrees
of
any court, arbitrator or governmental or regulatory body against the Company
or
any Subsidiary or any officers or directors of the Company or Subsidiary in
their capacities as such.
(p) Compliance
with Law.
The
business of the Company and the Subsidiaries has been and is presently being
conducted in accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except for such
noncompliance that, individually or in the aggregate, would not cause a Material
Adverse Effect. The Company and each of its Subsidiaries have all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
by it unless the failure to possess such franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals, individually
or in the aggregate, would not have a Material Adverse Effect.
(q) Taxes.
The
Company and each of the Subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has
paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected
in
the financial statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is subject and
which are not currently due and payable. None of the federal income tax returns
of the Company or any Subsidiary have been audited by the Internal Revenue
Service. The Company has no knowledge of any additional assessments, adjustments
or contingent tax liability (whether federal or state) of any nature whatsoever,
whether pending or threatened against the Company or any Subsidiary for any
period, nor of any basis for any such assessment, adjustment or
contingency.
6
(r) Certain
Fees.
Except
for the fees payable (which shall not exceed $250,000) pursuant to that certain
securities placement agreement dated June 15, 2007 by and between Westminster
Securities Corporation and the Company, no brokers, finders or financial
advisory fees or commissions will be payable by the Company or any Subsidiary
or
any Purchaser with respect to the transactions contemplated by this
Agreement.
(s) Disclosure.
Neither
this Agreement or the Schedules hereto nor any other documents, certificates
or
instruments furnished to the Purchasers by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material
fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
(t) Operation
of Business.
Except
as set forth in Schedule
2.1(t),
the
Company and each of the Subsidiaries owns or possesses all patents, trademarks,
domain names (whether or not registered) and any patentable improvements or
copyrightable derivative works thereof, websites and intellectual property
rights relating thereto, service marks, trade names, copyrights, licenses and
authorizations, and all rights with respect to the foregoing, which are
necessary for the conduct of its business as now conducted without any conflict
with the rights of others.
(u) Environmental
Compliance.
The
Company and each of its Subsidiaries have obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws. Except as set forth
on
Schedule
2.1(u),
the
Commission Documents describe all material permits, licenses and other
authorizations issued under any Environmental Laws to the Company or its
Subsidiaries. “Environmental
Laws”
shall
mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. The Company
has
all necessary governmental approvals required under all Environmental Laws
and
used in its business or in the business of any of its Subsidiaries. The Company
and each of its Subsidiaries are also in compliance with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws. Except for such instances
as
would not individually or in the aggregate have a Material Adverse Effect,
there
are no past or present events, conditions, circumstances, incidents, actions
or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or may violate any Environmental Law after the Closing Date or
that
may give rise to any environmental liability, or otherwise form the basis of
any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
7
(v) Books
and Record Internal Accounting Controls.
The
books and records of the Company and its Subsidiaries accurately reflect in
all
material respects the information relating to the business of the Company and
the Subsidiaries, the location and collection of their assets, and the nature
of
all transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain
a
system of internal accounting controls sufficient, in the judgment of the
Company, 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.
(w) Material
Agreements.
Except
for the Transaction Documents (with respect to clause (i) only), as disclosed
in
the Commission Documents or as set forth on Schedule
2.1(w)
hereto,
or as would not be reasonably likely to have a Material Adverse Effect, (i)
the
Company and each of its Subsidiaries have performed all obligations required
to
be performed by them to date under any written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement, filed or required to
be
filed with the Commission (the "Material
Agreements"),
(ii)
neither the Company nor any of its Subsidiaries has received any notice of
default under any Material Agreement and, (iii) to the best of the Company's
knowledge, neither the Company nor any of its Subsidiaries is in default under
any Material Agreement now in effect.
(x) Transactions
with Affiliates.
Except
as set forth in the Commission Documents, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions between (a) the Company or any Subsidiary
on
the one hand, and (b) on the other hand, any officer, employee, consultant
or
director of the Company or any of its Subsidiaries, or any person owning any
capital stock of the Company or any Subsidiary or any member of the immediate
family of such officer, employee, consultant, director or stockholder, or any
corporation or other entity controlled by such officer, employee, consultant,
director or stockholder, or a member of the immediate family of such officer,
employee, consultant, director or stockholder.
(y) Xxxxxxxx-Xxxxx;
Disclosure Controls.
The
Company is in compliance in all material respects with all of the provisions
of
the Xxxxxxxx-Xxxxx Act of 2002 which are applicable to it as of the Closing
Date. 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 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 is being prepared. The Company’s
certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the most recent periodic reporting
period 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 over financial reporting (as such
term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) or, to the
Company’s knowledge, in other factors that could reasonably be expected to
materially affect the Company’s internal controls over financial
reporting
(z) Securities
Act of 1933.
Based
in material part upon the representations herein of the Purchasers, the Company
has complied and will comply with all applicable federal and state securities
laws in connection with the offer, issuance and sale of the Securities
hereunder. Neither the Company nor anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy any of
the
Securities or similar securities to, or solicit offers with respect thereto
from, or enter into any preliminary conversations or negotiations relating
thereto with, any person, or has taken or will take any action so as to bring
the issuance and sale of any of the Securities under the registration provisions
of the Securities Act and applicable state securities laws, and neither the
Company nor any of its affiliates, nor any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with the
offer or sale of any of the Securities.
8
(aa) Governmental
Approvals.
Except
for the filing of any notice prior or subsequent to the Closing Date that may
be
required under applicable state and/or Federal securities laws (which if
required, shall be filed on a timely basis), including the filing of a Form
D
and a registration statement or statements pursuant to the Registration Rights
Agreement, and the filing of the Amended Certificate and the Certificate of
Designation with the Secretary of State for the State of Delaware, no
authorization, consent, approval, license, exemption of, filing or registration
with any court or governmental department, commission, board, bureau, agency
or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Notes, Preferred Stock and
the
Warrants, or for the performance by the Company of its obligations under the
Transaction Documents.
(bb) Employees.
Neither
the Company nor any Subsidiary has any collective bargaining arrangements or
agreements covering any of its employees. Except as set forth on Schedule
2.1(bb),
neither
the Company nor any Subsidiary has any employment contract, agreement, regarding
proprietary information, non-competition agreement, non-solicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such Subsidiary. No officer, consultant
or
key employee of the Company or any Subsidiary whose termination, either
individually or in the aggregate, could have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.
(cc) Absence
of Certain Developments.
Except
as set forth on Schedule
2.1(cc),
since
January 1, 2007, neither the Company nor any Subsidiary has:
(i) issued
any stock, bonds or other corporate securities or any rights, options or
warrants with respect thereto;
(ii) borrowed
any amount or incurred or become subject to any liabilities (absolute or
contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of
its
prior fiscal year;
(iii) discharged
or satisfied any lien or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business;
(iv) declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements
so
to purchase or redeem, any shares of its capital stock;
(v) sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, except in the ordinary course of business;
9
(vi) sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights, or
disclosed any proprietary confidential information to any person except to
customers in the ordinary course of business;
(vii) suffered
any substantial losses or waived any rights of material value, whether or not
in
the ordinary course of business, or suffered the loss of any material amount
of
prospective business;
(viii) made
any
changes in employee compensation except in the ordinary course of business
and
consistent with past practices;
(ix) made
capital expenditures or commitments therefor that aggregate in excess of
$100,000;
(x) entered
into any other transaction other than in the ordinary course of business, or
entered into any other material transaction, whether or not in the ordinary
course of business;
(xi) made
charitable contributions or pledges in excess of $25,000;
(xii) suffered
any material damage, destruction or casualty loss, whether or not covered by
insurance;
(xiii) experienced
any material problems with labor or management in connection with the terms
and
conditions of their employment;
(xiv) effected
any two or more events of the foregoing kind which in the aggregate would be
material to the Company or its Subsidiaries; or
(xv) entered
into an agreement, written or otherwise, to take any of the foregoing
actions.
(dd) Public
Utility Holding Company Act and Investment Company Act Status.
The
Company is not a “holding company” or a “public utility company” as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended.
The
Company is not, and as a result of and immediately upon the Closing will not
be,
an “investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
(ee) ERISA.
No
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan (as defined below) by the Company or any of its Subsidiaries
which is or would be materially adverse to the Company and its Subsidiaries.
The
execution and delivery of this Agreement and the issuance and sale of the Shares
will not involve any transaction which is subject to the prohibitions of Section
406 of ERISA or in connection with which a tax could be imposed pursuant to
Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”);
provided
that if
any of the Purchasers, or any person or entity that owns a beneficial interest
in any of the Purchasers, is an “employee pension benefit plan” (within the
meaning of Section 3(2) of ERISA) with respect to which the Company is a “party
in interest” (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in
this
Section
2.1(ee),
the
term “Plan”
shall
mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which
is or has been established or maintained, or to which contributions are or
have
been made, by the Company or any Subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any Subsidiary, is
under common control, as described in Section 414(b) or (c) of the
Code.
10
(ff) Dilutive
Effect.
The
Company understands and acknowledges that its obligation to (i) issue Preferred
Stock upon conversion of the Notes and Conversion Shares upon conversion of
the
Notes and Preferred Stock in accordance with this Agreement, the Note and the
Certificate of Designation, and (ii) its obligations to issue the Warrant Shares
upon the exercise of the Warrants in accordance with this Agreement and the
Warrants, is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interest of other
stockholders of the Company.
(gg) No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would cause
the offering of the Securities pursuant to this Agreement to be integrated
with
prior offerings by the Company for purposes of the Securities Act which would
prevent the Company from selling the Securities pursuant to Rule 506 under
the
Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or Subsidiaries take
any action or steps that would cause the offering of the Shares to be integrated
with other offerings. The Company does not have any registration statement
pending before the Commission or currently under the Commission’s review and
since January
1, 2007, the Company has not offered or sold any of its equity securities or
debt securities convertible into shares of Common Stock.
(hh) Independent
Nature of Purchasers.
The
Company acknowledges that the obligations of each Purchaser under the
Transaction Documents 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 the Transaction
Documents. The Company acknowledges that the decision of each Purchaser to
purchase securities pursuant to this Agreement has been made by such Purchaser
independently of any other purchase and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company or of its Subsidiaries which may have
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any Purchaser (or any other person) relating to or arising from
any
such information, materials, statements or opinions. The Company acknowledges
that nothing contained herein, or in any Transaction Document, and no action
taken by any Purchaser pursuant hereto or 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 Documents. The Company acknowledges
that 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. The Company acknowledges that for reasons of administrative convenience
only, the Transaction Documents have been prepared by counsel for one of the
Purchasers and such counsel does not represent all of the Purchasers but only
such Purchaser and the other Purchasers have retained their own individual
counsel with respect to the transactions contemplated hereby. The Company
acknowledges that it 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.
(ii)
Questionable
Payments.
Neither
the Company nor any of its Subsidiaries, nor, to the Company’s knowledge, any
directors, officers, employees, agents or other Persons acting on behalf of
the
Company or any of its Subsidiaries has, in the course of its actions for, or
on
behalf of, the Company: (a) directly or indirectly, used any corporate funds
for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to foreign or domestic political activity; (b) made any direct or indirect
unlawful payments to any foreign or domestic governmental officials or employees
or to any foreign or domestic political parties or campaigns from corporate
funds; (c) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (d) made any other unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or
domestic government official or employee.
11
(jj)
Application
of Takeover Protections.
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 charter documents
or the laws of its state of incorporation that is or could reasonably be
expected to become applicable to any of 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.
(kk) Transfer
Agent.
The
name, address, telephone number, fax number, contact person and email address
of
the Company’s current transfer agent is set forth on Schedule
2.1(kk)
hereto.
Section
2.2 Representations
and Warranties of the Purchasers.
Each
Purchaser hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:
(a) Organization
and Standing of the Purchasers.
If the
Purchaser is an entity, such Purchaser is a corporation, partnership or limited
liability company duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization
and Power.
Each
Purchaser has the requisite power and authority to enter into and perform this
Agreement and to purchase the Notes and Warrants being sold to it hereunder.
The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement by such Purchaser and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders or
partners, as the case may be, is required. Each of this Agreement and the
Registration Rights Agreement has been duly authorized, executed and delivered
by such Purchaser and constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Purchaser enforceable against
the Purchaser in accordance with the terms thereof, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general
application.
(c) No
Conflicts.
The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement and the consummation by such Purchaser of the transactions
contemplated hereby and thereby or relating hereto do not and will not (i)
result in a violation of such Purchaser’s charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
such Purchaser is a party or by which its properties or assets are bound, or
result in a violation of any law, rule, or regulation, or any order, judgment
or
decree of any court or governmental agency applicable to such Purchaser or
its
properties (except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a material adverse effect on such
Purchaser). Such Purchaser is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or the Registration Rights Agreement or to purchase the
Notes or acquire the Warrants in accordance with the terms hereof; provided
that for
purposes of the representation made in this sentence, such Purchaser is assuming
and relying upon the accuracy of the relevant representations and agreements
of
the Company herein.
12
(d) Acquisition
for Investment.
Such
Purchaser is acquiring the Securities solely for its own account for the purpose
of investment and not with a view to or for sale in connection with
distribution. Each Purchaser does not have a present intention to sell the
Securities, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of the Securities to or through any person
or entity; provided,
however,
that by
making the representations herein and subject to Section
2.2(i)
below,
such Purchaser does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time
in
accordance with Federal and state securities laws applicable to such
disposition. Each Purchaser acknowledges that it is able to bear the financial
risks associated with an investment in the Securities and that it has been
given
full access to such records of the Company and the Subsidiaries and to the
officers of the Company and the Subsidiaries and received such information
as it
has deemed necessary or appropriate to conduct its due diligence investigation
and has sufficient knowledge and experience in investing in companies similar
to
the Company in terms of the Company’s stage of development so as to be able to
evaluate the risks and merits of its investment in the Company.
(e) Status
of Purchasers.
Each
Purchaser is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act. Such Purchaser is not required to be registered as
a
broker-dealer under Section 15 of the Exchange Act and such Purchaser is not
a
broker-dealer.
(f) Opportunities
for Additional Information.
Such
Purchaser acknowledges that such Purchaser has had the opportunity to ask
questions of and receive answers from, or obtain additional information from,
the executive officers of the Company concerning the financial and other affairs
of the Company, and to the extent deemed necessary in light of such Purchaser’s
personal knowledge of the Company’s affairs, such Purchaser has asked such
questions and received answers to the full satisfaction of such Purchaser,
and
such Purchaser desires to invest in the Company.
(g) No
General Solicitation.
Such
Purchaser acknowledges that the Securities were not offered to such Purchaser
by
means of any form of general or public solicitation or general advertising,
or
publicly disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio,
or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications.
(h) Rule
144.
Such
Purchaser understands that the Securities must be held indefinitely unless
such
Securities are registered under the Securities Act or an exemption from
registration is available. Such Purchaser acknowledges that such Purchaser
is
familiar with Rule 144 of the rules and regulations of the Commission, as
amended, promulgated pursuant to the Securities Act (“Rule
144”),
and
that such Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
13
(i) General.
Such
Purchaser understands that the Securities are being offered and sold in reliance
on a transactional exemption from the registration requirement of Federal and
state securities laws and the Company is relying upon the truth and accuracy
of
the representations, warranties, agreements, acknowledgments and understandings
of such Purchaser set forth herein in order to determine the applicability
of
such exemptions and the suitability of such Purchaser to acquire the
Securities.
(j) Independent
Investment.
Except
as may be disclosed in any filings with the Commission by any Purchaser under
Section 13 and/or Section 16 of the Exchange Act, such Purchaser has not agreed
to act with any other Purchaser for the purpose of acquiring, holding, voting
or
disposing of the Securities purchased hereunder for purposes of Section 13(d)
under the Exchange Act, and such Purchaser is acting independently with respect
to its investment in the Securities.
(k) Short
Sales.
Each
Purchaser has not, during the last thirty (30) days prior to the date hereof,
directly or indirectly, nor has any party acting on behalf of or pursuant to
any
understanding with such Purchaser, effected or agreed to effect any short sale,
whether or not against the box, established any “put equivalent position” (as
defined in Rule 16(a)-1(h) under the Exchange Act) with respect to any security
of the Company, granted any other right (including, without limitation, any
put
or call option) with respect to any security of the Company or with respect
to
any security that includes, relates to, or derives any significant part of
its
value from any security of the Company or otherwise sought to hedge its
positioning of the Company’s securities. Each Purchaser shall not, and shall
cause any affiliates not to, engage, directly or indirectly, in any transactions
in the securities of the Company (including, without limitation, any short
sales) involving the Company’s securities during the period from the date hereof
until such time as (i) after the transactions contemplated by this Agreement
are
first publicly announced as described in Section
3.16
or (ii)
this Agreement is terminated in full pursuant to Section
7.16. Each
Purchaser understands and acknowledges, severally and not jointly with any
other
Purchaser, that the Commission currently takes the position that covering a
short position established prior to effectiveness of a resale registration
statement with shares included in such registration statement would be a
violation of Section 5 of the Securities Act, as set forth in Item 65, Section
5
under Section A, of the Manual of Publicly Available Telephone Interpretations,
dated July 1997, compiled by the Office of Chief Counsel, Division of
Corporation Finance
ARTICLE
III
Covenants
The
Company covenants with each of the Purchasers as follows, which covenants are
for the benefit of each Purchaser and its permitted assignees (as defined
herein):
Section
3.1 Securities
Compliance.
The
Company shall notify the Commission in accordance with their rules and
regulations, of the transactions contemplated by any of the Transaction
Documents, including filing a Form D with respect to the Notes, Preferred Stock,
Warrants, Conversion Shares and the Warrant Shares as required under Regulation
D and applicable “blue sky” laws, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Notes, Preferred Stock,
the
Warrants, the Conversion Shares and the Warrant Shares to the Purchasers or
subsequent holders.
Section
3.2 Registration
and Listing.
The
Company shall (a) comply in all respects with its reporting and filing
obligations under the Exchange Act, (b) comply with all requirements related
to
any registration statement filed pursuant to this Agreement and the Registration
Rights Agreement, and (c) not take any action or file any document (whether
or
not permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock on the OTC Bulletin Board or other
exchange or market on which the Common Stock is trading or may be traded in
the
future. Subject to the terms of the Transaction Documents, the Company further
covenants that it will take such further action as the Purchasers may reasonably
request, all to the extent required from time to time to enable the Purchasers
to sell the Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act. Upon the request of the Purchasers, the Company shall deliver
to
the Purchasers a written certification of a duly authorized officer as to
whether it has complied with such requirements.
14
Section
3.3 Inspection
Rights. The
Company shall permit, during normal business hours and upon reasonable request
and reasonable notice, each Purchaser or any employees, agents or
representatives thereof, so long as such Purchaser shall be obligated hereunder
to purchase the Notes or shall beneficially own any Preferred Stock, or shall
own Conversion Shares which, in the aggregate, represent more than two percent
(2%) of the total combined voting power of all voting securities then
outstanding, for purposes reasonably related to such Purchaser’s interests as a
stockholder, to examine and make reasonable copies of and extracts from the
records and books of account of, and visit and inspect the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
affairs, finances and accounts of the Company and any Subsidiary with any of
its
officers, consultants, directors, and key employees. As a condition to such
inspection, Purchasers shall keep such information confidential; provided
that
such information may be disclosed (i) to the extent required by applicable
law,
regulation or legal process, subpoena, civil investigative demand or other
similar process, (ii) to the extent reasonably necessary in connection with
the
enforcement of rights under this Agreement, (iii) to any governmental, judicial
or regulatory authority requiring or requesting such information, and (iv)
to
its directors, officers, employees, agents, managers and general partners,
consultants, accountants, financial advisers, legal counsel and other
professional advisers.
Section
3.4 Compliance
with Laws.
The
Company shall comply, and cause each Subsidiary, whether such Subsidiary is
in
existence as of the date of this agreement or formed or acquired subsequent
to
the date of this agreement, to comply, with all applicable laws, rules,
regulations and orders, noncompliance with which could have a Material Adverse
Effect.
Section
3.5 Keeping
of Records and Books of Account.
The
Company shall keep and cause each Subsidiary to keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company
and
its Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section
3.6 Furnishing
of Information.
Until
all of the Securities
are
eligible for sale under Rule 144(k) promulgated under the Securities Act, 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. Until all of the
Securities are eligible for sale under Rule 144(k) promulgated under the
Securities Act, if the Company is not required to file reports pursuant to
such
laws, 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 the Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
15
Section
3.7 Reporting
Requirements.
If the
Commission ceases making periodic reports filed under the Exchange Act available
via the Internet, then at a Purchaser’s request the Company shall furnish the
following to such Purchaser so long as such Purchaser shall be obligated
hereunder to purchase the Notes or shall beneficially own any
Securities:
(a) quarterly
Reports filed with the Commission on Form 10-QSB as soon as practical after
the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission;
(b) annual
Reports filed with the Commission on Form 10-KSB as soon as practical after
the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission; and
(c) copies
of
all notices and information, including without limitation notices and proxy
statements in connection with any meetings, that are provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices
or
information to such holders of Common Stock.
Section
3.8 Amendments.
Other
than the filing of the Amended Certificate, the Company shall not amend or
waive
any provision of the Certificate or Bylaws of the Company in any way that would
materially and adversely affect the liquidation preferences, dividends rights,
conversion rights, voting rights or redemption rights of the Preferred Stock;
provided,
however,
that
any creation and issuance, in accordance with the Certificate of Designation,
of
another series of Junior Stock (as defined in the Certificate of Designation)
or
any other class or series of equity securities which by its terms shall rank
junior to the Preferred Stock shall not be deemed to materially and adversely
affect such rights, preferences or privileges. No
consideration shall be offered or paid to any holders of the Notes, the
Preferred
Stock
or the
Warrants to amend or consent to a waiver or modification of any provision of
any
of the Transaction Documents unless the same consideration also is offered
to
all of the parties to the Transaction Documents, holders of Notes, Preferred
Shares
or
Warrants, as the case may be. The Company has not, directly or indirectly,
made
any agreements with any Purchasers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth
in
the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Purchaser has made any
commitment or promise or has any other obligation to provide any financing
to
the Company or otherwise.
Section
3.9 Other
Agreements.
The
Company shall not enter into any agreement in which the terms of such agreement
would materially restrict or impair the right or ability to perform of the
Company or any Subsidiary under any Transaction Document.
Section
3.10 Distributions.
So long
as any Notes and/or Preferred Stock remain outstanding, the Company agrees
that
it shall not (i) declare or pay any dividends or make any distributions to
any
holder(s) of Common Stock or (ii) purchase or otherwise acquire for value,
directly or indirectly, any Common Stock or other equity security of the
Company.
Section
3.11 Status
of Dividends.
The
Company covenants and agrees that (i) no Federal income tax return or claim
for
refund of Federal income tax or other submission to the Internal Revenue Service
(the “Service”)
will
adversely affect the Notes, the Preferred Stock, any other series of its
preferred stock, or the Common Stock, and no deduction shall operate to
jeopardize the availability to Purchasers of the dividends received deduction
provided by Section 243(a)(1) of the Code or any successor provision, (ii)
in no
report to shareholders or to any governmental body having jurisdiction over
the
Company or otherwise will it treat the Preferred Stock other than as equity
capital or the dividends paid thereon other than as dividends paid on equity
capital unless required to do so by a governmental body having jurisdiction
over
the accounts of the Company or by a change in generally accepted accounting
principles required as a result of action by an authoritative accounting
standards setting body, and (iii) it will take no action which would result
in
the dividends paid by the Company on the Preferred Stock out of the Company’s
current or accumulated earnings and profits being ineligible for the dividends
received deduction provided by Section 243(a)(1) of the Code. In the event
that
the Purchasers have reasonable cause to believe that dividends paid by the
Company on the Preferred Stock out of the Company’s current or accumulated
earnings and profits will not be treated as eligible for the dividends received
deduction provided by Section 243(a)(1) of the Code, or any successor provision,
the Company will, at the reasonable request of the Purchasers of 51% of the
outstanding Preferred Stock, join with the Purchasers in the submission to
the
Service of a request for a ruling that dividends paid on the Securities will
be
so eligible for Federal income tax purposes, at the Purchasers expense. In
addition, the Company will reasonably cooperate with the Purchasers (at
Purchasers’ expense) in any litigation, appeal or other proceeding challenging
or contesting any ruling, technical advice, finding or determination that
earnings and profits are not eligible for the dividends received deduction
provided by Section 243(a)(1) of the Code, or any successor provision to the
extent that the position to be taken in any such litigation, appeal, or other
proceeding is not contrary to any provision of the Code.
16
Section
3.12 Use
of
Proceeds.
The net
proceeds from the sale of the Notes and Warrants hereunder shall be used by
the
Company for working capital. The proceeds shall also be used for general
corporate purposes, and not to redeem any Common Stock or securities
convertible, exercisable or exchangeable into Common Stock, to settle any
outstanding litigation or
to
cause any increase in management’s compensation, direct or otherwise, in a
manner other than in the ordinary course of business.
An
estimated allocation of the net proceeds from the sale of the Securities
hereunder is set forth on Schedule
3.12
hereto.
Section
3.13 Reservation
of Shares.
So long
as any of the Notes, Preferred Stock or Warrants remain outstanding, the Company
shall take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, no less than one hundred twenty percent (120%)
of
the aggregate number of shares of Common Stock needed to provide for the
issuance of the Conversion Shares and the Warrant Shares. Upon the adoption
of
the Amended Certificate and the filing of the Certificate of Designation the
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than one hundred twenty percent
(120%) of the aggregate number of shares of Preferred Stock needed to provide
for the conversion of the Notes.
Section
3.14 Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates, registered in the name of
each
Purchaser or its respective nominee(s), for the Preferred Stock, the Conversion
Shares and the Warrant Shares in such amounts as specified from time to time
by
each Purchaser to the Company upon conversion of the Notes, the Preferred Stock
or exercise of the Warrants in the form of Exhibit
H
attached
hereto (the “Irrevocable
Transfer Agent Instructions”).
Prior
to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section
5.1
of this
Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section
3.14
will be
given by the Company to its transfer agent and that the Shares shall otherwise
be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement and the Registration Rights Agreement. If
a
Purchaser provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that a public sale, assignment or transfer of
the
Shares may be made without registration under the Securities Act or the
Purchaser provides the Company with reasonable assurances that such Shares
can
be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Preferred Stock,
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by such Purchaser and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations under this Section
3.14
will
cause irreparable harm to the Purchasers by vitiating the intent and purpose
of
the transaction contemplated hereby. Accordingly, the Company acknowledges
that
the remedy at law for a breach of its obligations under this Section
3.14
will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section
3.14,
that
the Purchasers shall be entitled, in addition to all other available remedies,
to an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
17
Section
3.15 Disposition
of Assets.
So long
as any Notes or Preferred Stock remain outstanding, neither the Company nor
any
Subsidiary shall sell, transfer or otherwise dispose of any of its properties,
assets and rights including, without limitation, its software and intellectual
property, to any person except for (A) sales to customers in the ordinary course
of business; (B) sales of assets in excess of 25% of the Company’s total assets
as shown on its balance sheet; or (C) with the prior written consent of the
holders of a majority of the holders of the Notes, Preferred Stock and/or
Warrants then outstanding.
Section
3.16 Reporting
Status. So
long
as a Purchaser beneficially owns any of the Securities, the Company shall timely
file all reports required to be filed with the Commission pursuant to the
Exchange Act, and the Company shall not cease filing reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination.
Section
3.17 Disclosure
of Transaction.
The
Company shall issue a press release describing the material terms of the
transactions contemplated hereby (the “Press
Release”)
as
soon as practicable after the Closing but in no event later than 24 hours after
the Closing has been consummated. The Company shall also file with the
Commission a Current Report on Form 8-K (the “Form
8-K”)
describing the material terms of the transactions contemplated hereby (and
attaching as exhibits thereto this Agreement, the Registration Rights Agreement,
the form of Certificate of Designation, the Lock-Up Agreement, the form of
each
series of Warrant and the Press Release) as soon as practicable following the
Closing Date but in no event more than four (4) Trading Days following the
Closing Date, which Press Release and Form 8-K shall be subject to prior review
and comment by counsel for the Purchasers. “Trading
Day”
means
any day during which the OTC Bulletin Board (or other quotation venue or
principal exchange on which the Common Stock is traded) shall be open for
trading.
Section
3.18 Disclosure
of Material Information.
The
Company represents, covenants and agrees that neither it nor any other person
acting on its behalf has provided or will provide any Purchaser or its agents
or
counsel with any information that the Company believes constitutes material
non-public information (other than with respect to the transactions contemplated
by this Agreement), 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.
Section
3.19 Pledge
of Securities.
The
Company acknowledges and agrees that the Securities may be pledged by a
Purchaser in connection with a bona
fide
margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer,
sale
or assignment of the Securities hereunder, and no Purchaser effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or
any
other Transaction Document; provided
that a
Purchaser and its pledgee shall be required to comply with the provisions of
Article
V
hereof
in order to effect a sale, transfer or assignment of Securities to such pledgee.
At the Purchasers' expense, the Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a
Purchaser.
18
Section
3.20 Form
SB-2 Eligibility.
The
Company currently meets the “registrant eligibility” and transaction
requirements set forth in the general instructions to Form SB-2 applicable
to
“resale” registrations on Form SB-2 and the Company shall file all reports
required to be filed by the Company with the Commission in a timely
manner.
Section
3.21 Lock-Up
Agreement.
The
persons listed on Schedule
3.21
attached
hereto shall be subject to the terms and provisions of a lock-up agreement
in
substantially the form as Exhibit
F
hereto
(the “Lock-Up
Agreement”),
which
shall provide the manner in which such persons will sell, transfer or dispose
of
their shares of Common Stock.
Section
3.22 DTC.
Not
later than the effective date of the Registration Statement (as defined in
the
Registration Rights Agreement), the Company shall cause its Common Stock to
be
eligible for transfer with its transfer agent pursuant to the Depository Trust
Company Automated Securities Transfer Program.
Section
3.23 Subsequent
Financings.
(a) For
a
period of twelve (12) months following the effective date of the Registration
Statement (as defined in the Registration Rights Agreement), the Company
covenants and agrees to promptly notify (in no event later than five (5) days
after making or receiving an applicable offer) in writing (a “Rights
Notice”)
each
holder of Notes and/or Preferred Stock (as the case may be, each a “Noteholder”
and
collectively the “Noteholders”)
of the
terms and conditions of any proposed offer or sale to, or exchange with (or
other type of distribution to) any third party (a “Subsequent
Financing”),
of
Common Stock or any debt or equity securities convertible, exercisable or
exchangeable into Common Stock; provided,
however,
prior
to delivering to each Noteholder a Rights Notice, the Company shall first
deliver to each Noteholder a written notice of its intention to effect a
Subsequent Financing (“Pre-Notice”)
within
three (3) Trading Days of receiving an applicable offer, which Pre-Notice shall
ask such Noteholder if it wants to review the details of such financing. Upon
the request of a Noteholder, and only upon a request by such Noteholder within
three (3) Trading Days of receipt of a Pre-Notice, the Company shall promptly,
but no later than two (2) Trading Days after such request, deliver a Rights
Notice to such Noteholder. The Rights Notice shall describe, in reasonable
detail, the proposed Subsequent Financing, the names and investment amounts
of
all investors participating in the Subsequent Financing (if known), the proposed
closing date of the Subsequent Financing, which shall be no earlier than ten
(10) Trading Days from the date of the Rights Notice, and all of the terms
and
conditions thereof and proposed definitive documentation to be entered into
in
connection therewith. The Rights Notice shall provide each Noteholder an option
(the “Rights
Option”)
during
the ten (10) Trading Days following delivery of the Rights Notice (the
“Option
Period”)
to
inform the Company whether such Noteholder will purchase up to its pro
rata
portion
of all or a portion of the securities being offered in such Subsequent Financing
on the same, absolute terms and conditions as contemplated by such Subsequent
Financing. If any Noteholder elects not to participate in any such Subsequent
Financing, the other Noteholder may therein participate on a pro
rata
basis.
For purposes of this Section, all references to “pro
rata”
means,
for any Noteholder electing to participate in such Subsequent Financing, the
percentage obtained by dividing (x) the number of Notes and/or Preferred Stock,
(as the case may be), held by such Noteholder at the Closing by (y) the total
number of all of the Notes and/or Preferred Stock (as the case may be),
outstanding. Delivery of any Rights Notice constitutes a representation and
warranty by the Company that there are no other material terms and conditions,
arrangements, agreements or otherwise except for those disclosed in the Rights
Notice, to provide additional compensation to any party participating in any
proposed Subsequent Financing, including, but not limited to, additional
compensation based on changes in the Purchase Price or any type of reset or
adjustment of a purchase or conversion price or to issue additional securities
at any time after the closing date of a Subsequent Financing. If the Company
does not receive notice of exercise of the Rights Option from the Noteholder
within the Option Period, the Company shall have the right to close the
Subsequent Financing on the scheduled closing date with a third party;
provided
that all
of the material terms and conditions of the closing are the same as those
provided to the Noteholder in the Rights Notice. If the closing of the proposed
Subsequent Financing does not occur that date, any closing of the contemplated
Subsequent Financing or any other Subsequent Financing shall be subject to
all
of the provisions of this Section
3.22(a),
including, without limitation, the delivery of a new Rights Notice. The
provisions of this Section
3.22(a)
shall
not apply to issuances of securities in a Permitted Financing.
19
(b) For
purposes of this Agreement, a Permitted Financing (as defined hereinafter)
shall
not be considered a Subsequent Financing. A “Permitted
Financing”
shall
mean (i) securities issued pursuant to the conversion or exercise of convertible
or exercisable securities issued or outstanding on or prior to the date of
this
Agreement or issued pursuant to this Agreement (so long as the conversion or
exercise price in such securities are not amended to lower such price and/or
adversely affect the Purchasers), (ii) Common Stock issued or the issuance
or
grants of options to purchase Common Stock pursuant to the Company’s stock
option plans and employee stock purchase plans that either (x) exist on the
date
hereof, or (y) do not exceed ten percent (10%) of the outstanding Common Stock
of the Company as of the date hereof (such percentage subject to adjustment
consistent with the terms of anti-dilution
terms of the Note or of
the
Certificate of Designation, whichever is outstanding as of the time of
determination), (iii) any warrants issued to the placement agent and its
designees for the transactions contemplated by this Agreement, and (iv)
securities issued in connection with a merger, consolidation, acquisition,
strategic joint venture, or strategic partnership relationship.
Section
3.24 Issuance
of Variable Securities. So
long
as any Notes and/or Preferred Stock remain outstanding, the Company agrees
that
it shall not issue any security with a variable conversion price or variable
exercise price for a period of two (2) years from the Closing Date.
Section
3.25 Approval
of Acquisitions.
So long
as any Notes and/or shares of Preferred Stock remain outstanding, the Company
shall not effect, or agree to effect, an acquisition or buy out of or with
any
entity (including without limitation the acquisition of a substantial portion
of
the outstanding securities or assets of another entity other than in the
ordinary course of business), or a consolidation or merger of the Company with
or into any other corporation or corporations (or other entity or entities),
or
a sale of all or substantially all of the assets of the Company, or the
effectuation by the Company of a transaction or series of related transactions
in which more than 50% of the voting shares of the Company is disposed of or
conveyed, without providing he holders of the Notes and/or Preferred Stock
(as
the case may be) with ten (10) days’ notice of such transaction.
Section
3.26 Shareholder
Approval.
The
Company shall no later than September 15, 2007 obtain shareholder approval
(“Shareholder
Approval”)
for
the filing of the Amended Certificate.
Section
3.27 Subsequent
Filings.
The
Company shall no later than ten (10) calendar days from the date in which they
receive Shareholder Approval, file the Amended Certificate and the Certificate
of Designations with the Secretary of State of Delaware (the date of such
filing, the “Preferred
Stock Filing Date”)
and
inform Purchasers of such filing no later than two (2) business days thereafter.
Section
3.28 Most
Favored Nations.
If the
Company has, on or prior to the date of this Agreement, entered into, or shall
in the future enter into, any agreement with any purchaser or holder of capital
stock of the Company, by providing such purchaser or holder with any terms
that
are more favorable than the rights made available to the Purchasers pursuant
any
terms set out in the Transaction Documents in issue as of the date hereof,
the
Company shall promptly notify the Purchasers of such terms in writing and
Purchasers shall have the right to elect in writing within thirty (30) days
of
the receipt of such notice to elect to have such terms apply to such Transaction
Documents. This provision shall only apply to an equity or convertible debt
investment by one or more investors in excess of $2million and shall terminate
upon the earlier to occur of (A) one (1) year from the date of this Agreement
or
(B) at any time Purchasers own in the aggregate less than four (4%) percent
of
the Company’s outstanding common stock on a fully diluted basis.
20
ARTICLE
IV
Conditions
Section
4.1 Conditions
Precedent to the Obligation of the Company to Sell the
Securities.
The
obligation hereunder of the Company to issue and sell the Securities to the
Purchasers is subject to the satisfaction or waiver, at or before the Closing,
of each of the conditions set forth below. These conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy
of Each Purchaser’s Representations and Warranties.
The
representations and warranties of each Purchaser shall be true and correct
in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in
all
material respects as of such date.
(b) Performance
by the Purchasers.
Each
Purchaser shall have performed, satisfied and complied in all respects with
all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Purchaser at or prior to the
Closing.
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(d) Delivery
of Purchase Price.
The
Purchase Price for the Securities has been delivered to the
Company.
(e) Delivery
of Transaction Documents.
The
Transaction Documents have been duly executed and delivered by the Purchasers
to
the Company.
Section
4.2 Conditions
Precedent to the Obligation of the Purchasers to Purchase the
Shares.
The
obligation hereunder of each Purchaser to acquire and pay for the Securities
is
subject to the satisfaction or waiver, at or before the Closing, of each of
the
conditions set forth below. These conditions are for each Purchaser’s sole
benefit and may be waived by such Purchaser at any time in its sole
discretion.
(a) Accuracy
of the Company’s Representations and Warranties.
Each of
the representations and warranties of the Company in this Agreement and the
Registration Rights Agreement shall be true and correct in all respects as
of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that are expressly made as of a
particular date), which shall be true and correct in all respects as of such
date.
21
(b) Performance
by the Company.
The
Company shall have performed, satisfied and complied in all respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the
Closing.
(c) No
Suspension, Etc.
Trading
in the Company’s Common Stock shall not have been suspended by the Commission or
the OTC Bulletin Board (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to the
applicable Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets (“Bloomberg”)
shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the
New
York Stock Exchange, 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 or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of such Purchaser, makes it impracticable or inadvisable to purchase
the Preferred Shares.
(d) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(e) No
Proceedings or Litigation.
No
action, suit or proceeding before any arbitrator or any governmental authority
shall have been commenced, and no investigation by any governmental authority
shall have been threatened, against the Company or any Subsidiary, or any of
the
officers, directors or affiliates of the Company or any Subsidiary seeking
to
restrain, prevent or change the transactions contemplated by this Agreement,
or
seeking damages in connection with such transactions.
(f) Opinion
of Counsel, Etc.
At the
Closing, the Purchasers shall have received an opinion of counsel to the
Company, dated the date of the Closing, in substantially the form of
Exhibit
I
hereto,
and such other certificates and documents as the Purchasers or its counsel
shall
reasonably require incident to the Closing.
(g) Registration
Rights Agreement.
At the
Closing, the Company shall have executed and delivered the Registration Rights
Agreement to each Purchaser.
(h) Notes
and Warrants.
The
Company shall have executed and delivered to the Purchasers the certificates
(in
such denominations as such Purchaser shall request) for the Notes and Warrants
being acquired by such Purchaser at the Closing (in such denominations as such
Purchaser shall request).
(i) Resolutions.
The
Board of Directors of the Company shall have adopted resolutions consistent
with
Section
2.1(b)
hereof
in a form reasonably acceptable to such Purchaser (the “Resolutions”).
(j) Reservation
of Shares.
So long
as any of the Notes or Warrants remain outstanding, the Company shall take
all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, no less than (i) such number of shares of Preferred Stock equal
to
one hundred twenty percent (120%) of the number of shares of Preferred Stock
as
shall from time to time be sufficient to effect the entire conversion of the
Notes and any interest accrued and outstanding thereon; (ii) a number of shares
of common stock, par value $0.0001 per share (the “Common
Stock”)
equal
to one hundred twenty percent (120%) of the number of shares of Common Stock
as
shall from time to time be sufficient to effect the conversion of all of the
Notes and/or the Preferred Stock and (iii) as of the date hereof, such number
of
shares of Common Stock equal to one hundred twenty percent (120%) of the number
of shares of Common Stock as shall from time to time be sufficient to effect
the
exercise of the Warrants then outstanding..
22
(k) Transfer
Agent Instructions.
As of
the Closing Date, the Irrevocable Transfer Agent Instructions, in the form
of
Exhibit
H
attached
hereto, shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(l) Lock-Up
Agreement.
As of
the Closing Date, the persons listed on Schedule
3.20
hereto
shall have delivered to the Purchasers a fully executed Lock-Up Agreement in
the
form of Exhibit
F
attached
hereto.
(m) Secretary’s
Certificate.
The
Company shall have delivered to such Purchaser a secretary’s certificate, dated
as of the Closing Date, as to (i) the Resolutions, (ii) the Certificate, (iii)
the Bylaws; each as of the Closing, and (iv) the authority and incumbency of
the
officers of the Company executing the Transaction Documents and any other
documents required to be executed or delivered in connection
therewith.
(n) Officer’s
Certificate.
The
Company shall have delivered to the Purchasers a certificate of an executive
officer of the Company, dated as of the Closing Date, confirming the accuracy
of
the Company’s representations, warranties and covenants as of the Closing Date
and confirming the compliance by the Company with the conditions precedent
set
forth in this Section
4.2
as of
the Closing Date.
(o) Material
Adverse Effect.
No
Material Adverse Effect shall have occurred at or before the Closing Date.
ARTICLE
V
Stock
Certificate Legend
Section
5.1 Legend.
Each
certificate representing the Notes, Preferred Stock and the Warrants, and,
if
appropriate, securities issued upon conversion or exercise thereof (or
securities issued in connection with Section
1.4,
shall
be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required by applicable state securities or
“blue
sky” laws):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR MARKETING WORLDWIDE CORPORATION SHALL HAVE RECEIVED
AN
OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
23
The
Company agrees to reissue certificates representing any of the Conversion Shares
and the Warrant Shares, without the legend set forth above if at such time,
prior to making any transfer of any such securities, such holder thereof shall
give written notice to the Company describing the manner and terms of such
transfer and removal as the Company may reasonably request. Such proposed
transfer and removal will not be effected until: (a) either (i) the Company
has
received an opinion of counsel reasonably satisfactory to the Company, to the
effect that the registration of the Conversion Shares or the Warrant Shares
under the Securities Act is not required in connection with such proposed
transfer, (ii) a registration statement under the Securities Act covering such
proposed disposition has been filed by the Company with the Commission and
has
become effective under the Securities Act, (iii) the Company has received other
evidence reasonably satisfactory to the Company that such registration and
qualification under the Securities Act and state securities laws are not
required, or (iv) the holder provides the Company with reasonable assurances
that such security can be sold pursuant to Rule 144 under the Securities Act;
and (b) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that registration or qualification
under the securities or “blue sky” laws of any state is not required in
connection with such proposed disposition, or (ii) compliance with applicable
state securities or “blue sky” laws has been effected or a valid exemption
exists with respect thereto. The Company will respond to any such notice from
a
holder within five (5) business days. In the case of any proposed transfer
under
this Section
5.1,
the
Company will use reasonable efforts to comply with any such applicable state
securities or “blue sky” laws, but shall in no event be required, (x) to qualify
to do business in any state where it is not then qualified, (y) to take any
action that would subject it to tax or to the general service of process in
any
state where it is not then subject, or (z) to comply with state securities
or
“blue sky” laws of any state for which registration by coordination is
unavailable to the Company. The restrictions on transfer contained in this
Section
5.1
shall be
in addition to, and not by way of limitation of, any other restrictions on
transfer contained in any other section of this Agreement. Whenever a
certificate representing the Conversion Shares or Warrant Shares is required
to
be issued to a Purchaser without a legend, in lieu of delivering physical
certificates representing the Conversion Shares or Warrant Shares (provided
that
a registration statement under the Securities Act providing for the resale
of
the Warrant Shares and Conversion Shares is then in effect), the Company shall
cause its transfer agent to electronically transmit the Conversion Shares or
Warrant Shares to a Purchaser by crediting the account of such Purchaser or
such
Purchaser's Prime Broker with the Depository Trust Company (“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”)
system
(to the extent not inconsistent with any provisions of this
Agreement).
ARTICLE
VI
Indemnification
Section
6.1 General
Indemnity.
The
Company agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, managers, partners, members, shareholders,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein.
Section
6.2 Indemnification
Procedure.
Any
party entitled to indemnification under this Article
VI
(an
“indemnified
party”)
will
give written notice to the indemnifying party of any matters giving rise to
a
claim for indemnification; provided
that the
failure of any party entitled to indemnification hereunder to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under this Article
VI
except
to the extent that the indemnifying party is actually prejudiced by such failure
to give notice. In case any action, proceeding or claim is brought against
an
indemnified party in respect of which indemnification is sought hereunder,
the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between
it
and the indemnifying party may exist with respect of such action, proceeding
or
claim, to assume the defense thereof with counsel reasonably satisfactory to
the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle
or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then
the
indemnified party may, at its option, defend, settle or otherwise compromise
or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party’s costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party
and
shall furnish to the indemnifying party all information reasonably available
to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto.
If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not
be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article
VI
to the
contrary, the indemnifying party shall not, without the indemnified party’s
prior written consent, settle or compromise any claim or consent to entry of
any
judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the indemnified party of a
release from all liability in respect of such claim. The indemnification
required by this Article
VI
shall be
made by periodic payments of the amount thereof during the course of
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred, so long as the indemnified party irrevocably
agrees to refund such moneys if it is ultimately determined by a court of
competent jurisdiction that such party was not entitled to indemnification.
The
indemnity agreements contained herein shall be in addition to (a) any cause
of
action or similar rights of the indemnified party against the indemnifying
party
or others, and (b) any liabilities the indemnifying party may be subject to
pursuant to the law.
24
ARTICLE
VII
Miscellaneous
Section
7.1 Fees
and Expenses.
Except
as otherwise set forth in this Agreement and the other Transaction Documents,
each party shall pay the fees and expenses of its advisors, 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. Notwithstanding the foregoing sentence, the Company shall pay
all reasonable attorneys' fees and expenses (including disbursements and
out-of-pocket expenses) incurred by the Purchasers in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the
other
Transaction Documents and the transactions contemplated thereunder, which
payment shall be made at the Closing (which fees and expenses shall not exceed
$35,000), (ii) the filing and declaration of effectiveness by the Commission
of
the Registration Statement (which fees and expenses shall not exceed $7,500)
and
(iii) any amendments, modifications or waivers of this Agreement or any of
the
other Transaction Documents. The Company shall pay all reasonable fees and
expenses incurred by the Purchasers in connection with the enforcement of this
Agreement or any of the other Transaction Documents, including, without
limitation, all reasonable attorneys' fees and expenses but only if the
Purchasers are successful in any litigation or arbitration relating to such
enforcement.
Section
7.2 Specific
Enforcement.
The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific
terms
or were otherwise breached. It is accordingly agreed that the parties shall
be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement or the Registration Rights Agreement and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.
25
Section
7.3 Entire
Agreement; Amendment.
This
Agreement and the Transaction Documents contains the entire understanding and
agreement of the parties with respect to the matters covered hereby and, except
as specifically set forth herein or in the Transaction Documents, neither the
Company nor any of the Purchasers makes any representations, warranty, covenant
or undertaking with respect to such matters and they supersede all prior
understandings and agreements with respect to said subject matter, all of which
are merged herein. No provision of this Agreement may be waived or amended
other
than by a written instrument signed by the Company and the holders of at least
a
majority of the Notes and/or Preferred Stock (as the case may be) then
outstanding, and no provision hereof may be waived other than by an a written
instrument signed by the party against whom enforcement of any such amendment
or
waiver is sought. No such amendment shall be effective to the extent that it
applies to less than all of the holders of the Notes and/or Preferred Stock
(as
the case may be) then outstanding. 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 or holders of Notes and
Preferred Stock, as the case may be.
Section
7.4 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 material right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within
the periods therein provided, then such 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.
26
Section
7.5 Notices.
Any
notice, demand, request, waiver or other communication required or permitted
to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telex (with correct answer back received), telecopy or facsimile
at
the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business
day
during normal business hours where such notice is to be received) or (b)
on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications
shall be:
|
If
to the Company:
|
000
Xxxxxx Xxxxxx
Xxxxxxxxxxx,
Xxx Xxxx 00000
Attention:
Chief Executive Officer
Tel.
No.: (000) 000-0000
Fax
No.: (000) 000-0000
|
|
with
copies to:
|
Xxxxxxx
Xxxxxx LLP
000
Xxxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxx Xxxxxxxxx, Esq.
Tel.
No.: (000) 000-0000
Fax
No.: (000) 000-0000
|
|
If
to any Purchaser:
|
At
the address of such Purchaser set forth on Exhibit
A
to
this Agreement, with copies to Purchaser’s counsel (which copies shall not
constitute notice to such purchaser) as set forth on Exhibit
A
or
as specified in writing by such Purchaser.
|
|
with
copies to:
|
Sadis
& Xxxxxxxx LLP
000
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxxx, Esq.
Tel
No.: (000) 000-0000
Fax
No.: (000) 000-0000
|
Any
party
hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other parties
hereto.
Section
7.6 Waivers.
No
waiver by either party 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 other provisions, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder
in
any manner impair the exercise of any such right accruing to it
thereafter.
Section
7.7 Headings.
The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose
and
shall not be deemed to limit or affect any of the provisions
hereof.
27
Section
7.8 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.
Section
7.9 No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
Section
7.10 Governing
Law; Consent to Jurisdiction.
The
parties acknowledge and agree that any claim, controversy, dispute or action
relating in any way to this agreement or the subject matter of this agreement
shall be governed solely by the laws of the State of Delaware, without regard
to
any conflict of laws doctrines. The parties irrevocably consent to being served
with legal process issued from the state and federal courts located in New
York
and irrevocably consent to the exclusive personal jurisdiction of the federal
and state courts situated in the State of New York. The parties irrevocably
waive any objections to the personal jurisdiction of these courts. Said courts
shall have sole and exclusive jurisdiction over any and all claims,
controversies, disputes and actions which in any way relate to this agreement
or
the subject matter of this agreement. The parties also irrevocably waive any
objections that these courts constitute an oppressive, unfair, or inconvenient
forum and agree not to seek to change venue on these grounds or any other
grounds.
The
parties hereby agree that the prevailing party in any suit, action or proceeding
arising out of or relating to this Agreement or the Purchase Agreement, shall
be
entitled to reimbursement for reasonable legal fees from the non-prevailing
party. The parties hereby waive all rights to a trial by jury.
Section
7.11 Survival.
The
representations and warranties of the Company and the Purchasers shall survive
the execution and delivery hereof and the Closing hereunder.
Section
7.12 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and all of which taken together
shall
constitute one and the same Agreement, and shall become effective when
counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties need not sign the same counterpart.
In the event that any signature is delivered by facsimile or electronic mail
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
Section
7.13 Publicity.
The
Company agrees that it will not disclose, and will not include in any public
announcement, the name of the Purchasers without the consent of the Purchasers
unless and until such disclosure is required by law or applicable regulation,
and then only to the extent of such requirement.
Section
7.14 Severability.
The
provisions of this Agreement and the Transaction Documents are severable and,
in
the event that any court of competent jurisdiction shall determine that any
one
or more of the provisions or part of the provisions contained in this Agreement
or the Transaction Documents shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision
of
this Agreement or the Transaction Documents and such provision shall be reformed
and construed as if such invalid or illegal or unenforceable provision, or
part
of such provision, had never been contained herein, so that such provisions
would be valid, legal and enforceable to the maximum extent
possible.
28
Section
7.15 Further
Assurances.
From
and after the date of this Agreement, upon the request of any Purchaser or
the
Company, each of the Company and the Purchasers shall execute and deliver
such
instrument, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement, the Preferred Shares, the Conversion Shares,
the
Warrants, the Warrant Shares, the Certificate of Designation and the
Registration Rights Agreement.
[remainder
of page intentionally left blank]
29
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.
| |
|
|
| By: | ||
|
Name:
|
||
| Title: | ||
|
PURCHASER:
|
||
| |
|
|
| By: | ||
|
Name:
|
||
| Title: | ||
30
EXHIBIT
A
to
the
NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR
|
Names
and Addresses of the Purchasers
|
Investment
Amount
|
Shares
& Warrants Purchased
|
||
|
Vision
Opportunity Master Fund, Ltd.
c/o
Vision Opportunity Capital Management, LLC
00
Xxxx 00xx
Xxxxxx
Xxx
Xxxx, XX 00000
Attn:
Antti Uusiheimala
|
$5,000,000
|
$5,000,000
principal amount of Note
Series
A Warrant: 8,333,333
Series
B Warrant: 2,777,778
Series
C Warrant: 2,777,778
|
i
EXHIBIT
B
to
the
NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR
FORM
OF NOTE
ii
EXHIBIT
C
to
the
NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR
FORM
OF CERTIFICATE OF DESIGNATION
iii
EXHIBIT
D-1
to
the
NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR
FORM
OF SERIES A WARRANT
iv
EXHIBIT
D-2
to
the
NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR
FORM
OF SERIES B WARRANT
v
EXHIBIT
D-3
to
the
NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR
FORM
OF SERIES C WARRANT
vi
EXHIBIT
E
to
the
NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR
JUMA
TECHNOLOGY CORP.
FORM
OF REGISTRATION RIGHTS AGREEMENT
vii
EXHIBIT
F
to
the
NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR
JUMA
TECHNOLOGY CORP.
FORM
OF LOCK -UP AGREEMENT
viii
EXHIBIT
G
to
the
JUMA
TECHNOLOGY CORP.
AMENDED
CERTIFICATE OF INCORPORATION
ix
EXHIBIT
H
to
the
JUMA
TECHNOLOGY CORP.
FORM
OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
[NAME
AND ADDRESS OF TRANSFER AGENT]
Attn:
____________________________
Re:
Juma
Technology Corp.
Ladies
and Gentlemen:
Reference
is made to that certain Note and Warrant Purchase Agreement (the “Purchase
Agreement”),
dated
as of August 16, 2007, by and among Juma Technology Corp., a Delaware
corporation (the “Company”),
and
the purchasers named therein (collectively, the “Purchasers”)
pursuant to which the Company is issuing to the Purchasers 6% Convertible Notes
(the “Notes”)
and
warrants (the “Warrants”)
to
purchase shares of the Company’s common stock, par value $0.0001 per share (the
“Common
Stock”).
This
letter shall serve as our irrevocable authorization and direction to you
provided that you are the transfer agent of the Company at such time) to issue
shares of Common Stock upon conversion of the Notes and/or the Preferred Stock
(the “Conversion
Shares”)
and
exercise of the Warrants (the “Warrant
Shares”)
to or
upon the order of a Purchaser from time to time upon (i) surrender to you of
a
properly completed and duly executed Conversion Notice or Exercise Notice,
as
the case may be, in the form attached hereto as Exhibit I and Exhibit II,
respectively, (ii) in the case of the conversion of Notes and/or the Preferred
Stock, a copy of the Note, a copy of the certificates (with the original
certificates delivered to the Company) representing Preferred Stock being
converted or, in the case of Warrants being exercised, a copy of the Warrants
(with the original Warrants delivered to the Company) being exercised (or,
in
each case, an indemnification undertaking with respect to such share
certificates or the warrants in the case of their loss, theft or destruction),
and (iii) delivery of a treasury order or other appropriate order duly executed
by a duly authorized officer of the Company. So long as you have previously
received (x) written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares or Warrant
Shares, as applicable, has been declared effective by the Securities and
Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “1933
Act”),
and
no subsequent notice by the Company or its counsel of the suspension or
termination of its effectiveness and (y) a copy of such registration statement,
and if the Purchaser represents in writing that the Conversion Shares or the
Warrant Shares, as the case may be, were sold pursuant to the Registration
Statement, then certificates representing the Conversion Shares and the Warrant
Shares, as the case may be, shall not bear any legend restricting transfer
of
the Conversion Shares and the Warrant Shares, as the case may be, thereby and
should not be subject to any stop-transfer restriction. Provided, however,
that
if you have not previously received those items and representations listed
above, then the certificates for the Conversion Shares and the Warrant Shares
shall bear the following legend:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR
MARKETING WORLDWIDE CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.”
x
and,
provided further, that the Company may from time to time notify you to place
stop-transfer restrictions on the certificates for the Conversion Shares and
the
Warrant Shares in the event a registration statement covering the Conversion
Shares and the Warrant Shares is subject to amendment for events then
current.
A
form of
written confirmation from counsel to the Company that a registration statement
covering resales of the Conversion Shares and the Warrant Shares has been
declared effective by the SEC under the 1933 Act is attached hereto as Exhibit
III.
Please
be
advised that the Purchasers are relying upon this letter as an inducement to
enter into the Purchase Agreement and, accordingly, each Purchaser is a third
party beneficiary to these instructions.
Please
execute this letter in the space indicated to acknowledge your agreement to
act
in accordance with these instructions. Should you have any questions concerning
this matter, please contact me at ___________.
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Very
truly yours,
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||
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JUMA
TECHNOLOGY CORP.
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||
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| By: | ||
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Name: |
||
| Title: | ||
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ACKNOWLEDGED
AND AGREED:
|
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[TRANSFER
AGENT]
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By:
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Name:
Title:
Date:
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xi
EXHIBIT
I
CONVERSION
NOTICE
JUMA
TECHNOLOGY CORP.
(To
be
Executed by the Registered Holder in order to Convert the Note)
In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Note into such number of shares of Common stock, of Juma Technology
Corp., a Delaware corporation (the “Company”),
indicated below:
Date
of
Conversion:
___________________________________________________________
Applicable
Conversion
Price:______________________________________________________
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the date of
Conversion__________________________________________
|
Dated: ____________________
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Signature:
___________________________________________________________
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|
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Address:___________________________________________________________
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||
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___________________________________________________________
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___________________________________________________________
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xii
EXHIBIT
II
CONVERSION
NOTICE
JUMA
TECHNOLOGY CORP.
Reference
is made to the Certificate of Designation of the Relative Rights and Preferences
of the Series A Convertible Preferred Stock of Juma Technology Corp. (the
“Certificate
of Designation”).
In
accordance with and pursuant to the Certificate of Designation, the undersigned
hereby elects to convert the number of shares of Series A Convertible Preferred
Stock, par value $0.0001 per share (the “Preferred
Shares”),
of
Juma Technology Corp., a Delaware corporation (the “Company”),
indicated below into shares of Common Stock, par value $0.0001 per share (the
“Common
Stock”),
of
the Company, by tendering the stock certificate(s) representing the share(s)
of
Preferred Shares specified below as of the date specified
below.
Date
of
Conversion:
____________________________________________________________
Number
of
Preferred Stock to be
converted: ___________________________________________
Stock
certificate no(s). of Preferred Shares to be
converted: _______________________________
The
Common Stock have been sold pursuant to the Registration Statement (as defined
in the Registration Rights Agreement): YES o
NO o
Please
confirm the following information:
Conversion
Price: ____________________________________________________________
Number
of
shares of Common Stock to be issued:
______________________________________
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion: _____________________________
Please
issue the Common Stock into which the Preferred Stock are being converted and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
|
Issue
to:
|
____________________________________________________________
____________________________________________________________
Facsimile
No.: ____________________________________________________________
|
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Authorization: ____________________________________________________________
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|
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By: ____________________________________________________________
Title: ____________________________________________________________
Dated: ____________________________________________________________
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|
xiii
EXHIBIT
III
FORM
OF EXERCISE NOTICE
JUMA
TECHNOLOGY CORP.
The
undersigned_______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase ______ shares of Common Stock of Juma Technology
Corp.
covered by the within Warrant.
|
Dated: ____________________
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Signature: ___________________________________________________________
|
|
|
Address: ___________________________________________________________
|
||
|
___________________________________________________________
|
||
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the date of Exercise:
ASSIGNMENT
FOR
VALUE
RECEIVED, ______________________ hereby sells, assigns and transfers unto
_____________________ the within Warrant and all rights evidenced thereby and
does irrevocably constitute and appoint __________________________, attorney,
to
transfer the said Warrant on the books of the within named
corporation.
|
Dated: ____________________
|
Signature:
___________________________________________________________
|
|
|
Address:
___________________________________________________________
|
||
|
___________________________________________________________
|
||
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, ______________________ hereby sells, assigns and transfers unto
_____________________ the right to purchase ___________________ shares of
Warrant Stock evidenced by the within Warrant together with all rights therein,
and does irrevocably constitute and appoint __________________________,
attorney, to transfer that part of the said Warrant on the books of the within
named corporation.
|
Dated: ___________________
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Signature:
___________________________________________________________
|
|
|
Address:
___________________________________________________________
|
||
|
___________________________________________________________
|
||
FOR
USE BY THE ISSUER ONLY:
This
Warrant No. W-__________ canceled (or transferred or exchanged) this _______
day
of ______________, _______, shares of Common Stock issued therefor in the name
of __________________________, Warrant No. W-_________ issued for ______________
shares of Common Stock in the name of ______________________.
xiv
EXHIBIT
IV
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
[NAME
AND ADDRESS OF TRANSFER AGENT]
Attn:
____________________________
Re:
Juma
Technology Corp.
Ladies
and Gentlemen:
We
are
special counsel to Juma Technology Corp., a Delaware corporation (the
“Company”),
and
have represented the Company in connection with that certain Note and Warrant
Purchase Agreement (the “Purchase
Agreement”),
dated
as of August 16, 2007, by and among the Company and the purchasers named therein
(collectively, the “Purchasers”)
pursuant to which the Company issued to the Purchasers 6% convertible promissory
notes (the “Notes”)
and
warrants (the “Warrants”)
to
purchase shares of the Company’s common stock, par value $0.0001 per share (the
“Common
Stock”).
Pursuant to the Purchase Agreement, the Company has also entered into a
Registration Rights Agreement with the Purchasers (the “Registration
Rights Agreement”),
dated
as of August 16, 2007, pursuant to which the Company agreed, among other things,
to register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of
the
Notes, the Preferred Stock underlying the Notes and the shares of Common Stock
issuable upon exercise of the Warrants, under the Securities Act of 1933, as
amended (the “1933
Act”).
In
connection with the Company’s obligations under the Registration Rights
Agreement, on ________________, 2007, the Company filed a Registration Statement
on Form SB-2 (File No. 333-________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the resale of the Registrable Securities which names each of the
present Purchasers as a selling stockholder thereunder.
In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC
and
accordingly, the Registrable Securities are available for resale under the
1933
Act pursuant to the Registration Statement.
|
Very
truly yours,
|
||
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[COMPANY
COUNSEL]
|
||
| |
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|
| By: | ||
|
|
||
cc:
[LIST NAMES OF PURCHASERS]
xv
EXHIBIT
I
to
the
JUMA
TECHNOLOGY
CORP.
FORM
OF OPINION OF COUNSEL
1.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power to own, lease and operate its properties and assets, and to carry on
its
business as presently conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, which the failure to so qualify could have a Material
Adverse Effect on the Company.
2.
Each
of the following Subsidiaries of the Company (the “Subsidiaries”)
is a
corporation, duly organized and in good standing under the laws of [Insert
State]: [Insert Subsidiary Name]
3.
The
Company has the requisite corporate power and authority to enter into and
perform its obligations under the Transaction Documents and to issue the Notes,
the Warrants, the Preferred Stock issuable upon conversion of the Notes, the
Common Stock issuable upon conversion of the Notes and the Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants. The
execution, delivery and performance of each of the Transaction Documents by
the
Company and the consummation by it of the transactions contemplated thereby
have
been duly and validly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required. Each of the Transaction Documents have been duly
executed and delivered, and the Notes and the Warrants have been duly executed,
issued and delivered by the Company and each of the Transaction Documents
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms. The Common Stock
issuable upon conversion of the Notes and the Preferred Stock and exercise
of
the Warrants are not subject to any preemptive rights under the Certificate
of
Incorporation or the Bylaws.
4.
The
Notes and the Warrants have been duly authorized and, when delivered against
payment in full as provided in the Purchase Agreement, will be validly issued,
fully paid and nonassessable. The shares of Common Stock issuable upon
conversion of the Notes and/or the Preferred Stock and exercise of the Warrants,
have been duly authorized and reserved for issuance, and, when delivered upon
exercise or payment in full as provided in the Warrants will be validly issued,
fully paid and nonassessable.
5.
The
execution, delivery and performance of and compliance with the terms of the
Transaction Documents and the issuance of Notes, the Warrants, the Preferred
Stock issuable upon conversion of the Notes and the Common Stock issuable upon
conversion of the Preferred Stock and exercise of the Warrants do not (i)
violate any provision of the Certificate of Incorporation or Bylaws, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights
of
termination, amendment, acceleration or cancellation of, any material agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party, (iii) create or impose
a lien, charge or encumbrance on any property of the Company under any agreement
or any commitment to which the Company is a party or by which the Company is
bound or by which any of its respective properties or assets are bound, or
(iv)
result in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment, injunction or decree (including Federal and state
securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound or affected, except, in all cases
other than violations pursuant to clauses (i) and (iv) above, for such
conflicts, default, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.
xvi
6.
No
consent, approval or authorization of or designation, declaration or filing
with
any governmental authority on the part of the Company is required under Federal,
state or local law, rule or regulation in connection with the valid execution
and delivery of the Transaction Documents, or the offer, sale or issuance of
the
Preferred Stock, the Warrants or the Common Stock issuable upon conversion
of
the Preferred Stock and exercise of the Warrants other than the Certificate
of
Designation and the Registration Statement.
7.
To our
knowledge, there is no action, suit, claim, investigation or proceeding pending
or threatened against the Company which questions the validity of this Agreement
or the transactions contemplated hereby or any action taken or to be taken
pursuant hereto or thereto. To our knowledge, there is no action, suit, claim,
investigation or proceeding pending, or to our knowledge, threatened, against
or
involving the Company or any of its properties or assets and which, if adversely
determined, is reasonably likely to result in a Material Adverse Effect. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or
any
officers or directors of the Company in their capacities as such.
8.
Based
upon the representations of the Purchaser, the offer, issuance and sale of
the
Notes and the Warrants and the offer, issuance and sale of the shares of
Preferred Stock issuable upon conversion of the Notes and the Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants
pursuant to the Purchase Agreement, the Certificate of Designation and the
Warrants, as applicable, are exempt from the registration requirements of the
Securities Act.
9.
The
Company is not, and as a result of and immediately upon Closing will not be,
an
“investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
|
Very
truly yours,
|
||
|
[COMPANY
COUNSEL]
|
||
| |
|
|
| By: | ||
|
|
||
xvii
