SECURITIES PURCHASE AGREEMENT
Investor:
____________
Amount:
$
USD
SECURITIES
PURCHASE AGREEMENT dated as of November ___, 2006 (the “Agreement”),
between BioMetrx, Inc., a Delaware corporation (the “Company”),
and
_______________,
(the
“Investor”).
WHEREAS,
the
Company is offering up to $300,000 aggregate principal amount, 10% notes due
March 15, 2007 (the “Notes”),
without discount, 99,000 five year warrants at $1.25 per share (the
“Warrants”)
to
purchase shares of the Company’s common stock, $.0001 par value (“Common
Stock”)
and
300,000 shares of Common Stock (the “Shares”).
WHEREAS,
each
$100.00 principal amount is offered together with thirty three (33) Warrants
and
100 shares of our Common Stock.
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Investor, and the Investor
shall
purchase from the Company, (i) the principal amount of the Notes set forth
on
the signature page hereto (ii) the number of Warrants determined by dividing
such principal amount by .33 and multiplying by 100 and (iii) the number of
Shares determined by dividing such principal amount by $100 and multiply by
1.0.
WHEREAS,
such
investments will be made in reliance upon the provisions of Section 4(2)
(“Section
4(2)”)
and/or
Section 4(6) (“Section
4(6)”)
of the
United States Securities Act of 1933, as amended, and/or Regulation D
(“Regulation
D”)
and the
other rules and regulations promulgated thereunder (the “Securities
Act”),
and/or
upon such other exemption from the registration requirements of the Securities
Act as may be available with respect to any or all of the investments in
securities to be made hereunder.
NOW,
THEREFORE,
the
parties hereto agree as follows:
ARTICLE
I
Certain
Definitions
In
addition to the definitions set forth in the text of this Agreement, the
following capitalized terms shall have the meanings ascribed to them
below:
“Capital
Shares”
shall
mean the Common Stock and any shares of any other class of common stock, whether
now or hereafter authorized, having the right to participate in the distribution
of earnings and assets of the Company.
“Closing”
shall
mean each closing of the purchase and sale of the Notes, Warrants, and Shares
pursuant to Section 2.1.
“Closing
Date”
shall
mean each date on which (x) all conditions to Closing have been satisfied or
waived as provided in Section 2.1(b) hereof and (y) a Closing shall have
occurred.
“Common
Stock”
shall
mean the Company’s common stock, $.0001 par value per share.
“Damages”
shall
mean any loss, claim, damage, judgment, penalty, deficiency, liability, costs
or
expenses (including, without limitation, reasonable attorneys’ fees and
disbursements and reasonable costs and expenses of expert witnesses and
investigation).
“Disclosure
Schedule”
shall
mean the written disclosure schedule delivered on or prior to the date hereof
by
the Company to the Investor that is arranged in paragraphs corresponding to
the
numbered and lettered paragraphs contained in this Agreement.
“Environmental
Laws”
shall
mean foreign, Federal, state and local laws and regulations relating to the
protection of human health and safety, the environment, hazardous or toxic
substances or wastes, pollutants or contaminants.
“Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Finders”
shall
mean one or more finders that are either registered broker-dealers or, if the
Investor is not a U.S. Person, otherwise qualified to accept a payment for
introducing the Investor to the Company.
“GAAP”
shall
mean United States generally accepted accounting principles as shall be in
effect from time to time.
“Intellectual
Property”
shall
mean all trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets, know-how (including
trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar proprietary rights,
information and knowledge.
“Legend”
shall
mean the legend set forth in Section 9.1.
“Material
Adverse Effect”
shall
mean any effect on the business, operations, properties, prospects, stock price
or financial condition of the Company that is material and adverse to the
Company and its subsidiaries and affiliates, taken as a whole, or any condition,
circumstance, or situation that would prohibit or otherwise interfere with
the
ability of the Company to enter into and perform any of its obligations under
any of the Transaction Documents in any material respect.
“Notes”
shall
mean the Company’s 10% Notes due March 15, 2007, substantially in the form of
Exhibit
A
hereto.
2
“Outstanding,”
when
used with reference to any Capital Shares, shall mean, at any date as of which
the number of such Capital Shares is to be determined, all issued and
outstanding Capital Shares, and shall include all such Capital Shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in such Capital Shares; provided,
however,
that
“Outstanding” shall not mean any such Capital Shares then directly or indirectly
owned or held by or for the account of the Company.
“Person”
shall
mean an individual, a corporation, a partnership, a limited liability company,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
“Principal
Amount”
shall
mean, at any time, the unpaid principal balance of one or more
Notes.
“Principal
Market”
shall
mean the American Stock Exchange, the New York Stock Exchange, the NASDAQ
National Market, or the NASDAQ SmallCap Market, whichever is at the time the
principal trading exchange or market for the Common Stock, based upon share
volume, or if the Common Stock is not traded on an exchange or The Nasdaq Stock
Market, the OTC Bulletin Board.
“Purchase
Price”
shall
mean the Principal Amount of the Notes purchased.
“Registrable
Securities”
shall
mean the Shares and the Warrant Shares until the Registration Statement has
been
declared effective by the SEC.
“Registration
Statement”
shall
mean a registration statement on Form SB-2 if use of such form is then available
to the Company pursuant to the rules of the SEC and, if not, on such other
form
promulgated by the SEC for which the Company then qualifies and which counsel
for the Company shall deem appropriate, and which form shall be available for
the resale by the Investor of the Registrable Securities to be registered
thereunder in accordance with the provisions of this Agreement and the Warrants
and in accordance with the intended method of distribution of such securities,
for the registration of the resale by the Investor of the Registrable Securities
under the Securities Act.
“Regulation
D”
shall
have the meaning set forth in the recitals of this Agreement.
“SEC”
shall
mean the Securities and Exchange Commission.
“SEC
Documents”
shall
mean the Company’s Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2005 and each report, proxy statement and registration statement
filed by the Company with the SEC pursuant to the Exchange Act or the Securities
Act since the filing of such Annual Report through the date hereof.
“Section
4(2)”
and
“Section
4(6)”
shall
have the meanings set forth in the recitals of this Agreement.
3
“Securities”
shall
mean the Notes, the Warrants and the Warrant Shares, individually and
collectively.
“Securities
Act”
shall
have the meaning set forth in the recitals of this Agreement.
“Subsidiary”
shall
mean any entity in which the Company, directly or indirectly, owns capital
stock
or holds an equity or similar interest.
“Trading
Day”
shall
mean any day during which the Principal Market shall be open for
business.
“Transaction
Documents”
shall
mean this Agreement, the Notes, the Warrants, and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement.
“Warrants”
shall
mean the warrants to purchase Common Stock substantially in the form of
Exhibit
B
to be
issued to the Investor hereunder.
“Warrant
Shares”
shall
mean all shares of Common Stock or other securities issued or issuable pursuant
to exercise of the Warrants.
ARTICLE
II
Purchase
and Sale of Notes, Shares and Warrants
Section
2.1. Investment.
(a) Upon
the
terms and subject to the conditions set forth herein, on the Closing Dates
set
forth below the Company agrees to sell to the Investor, and the Investor agrees
to purchase from the Company, the principal amount of Notes, Shares and related
Warrants set forth beside the Investor’s signature below, as
follows:
(i) Concurrently
with the execution and delivery of this Agreement, the Investor shall deliver
the Purchase Price, in immediately available funds, to the Company. The Company
shall immediately thereafter deliver to each investor an executed original
Note,
Warrant and Certificate representing the Shares.
(b) Each
Closing shall be subject to the satisfaction of the conditions to Closing set
forth below:
(i) The
obligation of the Company hereunder to issue and sell the Note(s) and issue
the
Shares and Warrant(s) to the Investor at a Closing is subject to the
satisfaction, at or before the relevant Closing Date, of each of the following
conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by providing
the Investor with prior written notice thereof:
4
(A) The
Investor shall have executed each of the Transaction Documents to be executed
by
it and delivered the same to the Company.
(B) The
Investor shall have delivered to the Company the Purchase Price for the Notes,
Shares and Warrants being purchased by the Investor at the Closing by wire
transfer of immediately available funds pursuant to the written wire
instructions provided by the Company.
(C) The
representations and warranties of the Investor shall be true and correct as
of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date),
and the Investor shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents
to be
performed, satisfied or complied with by it at or prior to the Closing
Date.
(ii) The
obligation of the Investor hereunder to purchase the Note(s), Share(s), and
Warrant(s) at the Closing is subject to the satisfaction, at or before the
relevant Closing Date, of each of the following conditions, provided that these
conditions are for the Investor’s sole benefit and may be waived by the Investor
at any time in its sole discretion:
(A) The
Company shall have executed each of the Transaction Documents to be executed
by
it and delivered copies of the same to the Investor.
(B) The
Common Stock shall be authorized for quotation on a Principal Market, trading
in
the Common Stock shall not have been suspended by such Principal Market or
the
SEC at any time beginning on the date hereof and through and including the
Closing Date, and, except as set forth on the Disclosure Schedule, the Company
shall not have been notified of any pending or threatened proceeding or other
action to delist or suspend the Common Stock.
(C) The
representations and warranties of the Company shall be true and correct as
of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date)
and
the Company shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date.
The
Investor shall have received a certificate, executed by the Company’s Chief
Executive Officer, dated as of the Closing Date, to the foregoing effect and
as
to such other matters as may be reasonably requested by the
Investor.
5
(D) The
Company shall have executed and delivered to the Closing Agent the Note(s)
(in
such denominations as the Investor shall request) being purchased by the
Investor at the Closing.
(E) The
Company shall have executed and delivered to the Closing Agent the Share(s)
and
Warrant(s) (in such denominations as the Investor shall request) being purchased
by the Investor at such Closing.
(F) The
Board
of Directors of the Company shall have adopted resolutions consistent with
Section 4.2 below (the “Resolutions”).
(G) As
of the
Closing Date, the Company shall have reserved out of its authorized and unissued
Common Stock, for the purpose of effecting the exercise of the Warrants, 99,000
shares of Common Stock.
Section
2.2. Reserved.
ARTICLE
III
Representations
and Warranties of the Investor
The
Investor represents and warrants to the Company that:
Section
3.1. Intent.
The
Investor is entering into this Agreement for its own account and not with a
view
to or for sale in connection with any distribution of the Securities. The
Investor has no present arrangement (whether or not legally binding) at any
time
to sell the Securities to or through any person or entity; provided, however,
that by making the representations herein, the Investor does not agree to hold
such 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.
Section
3.2. Sophisticated
Investor.
The
Investor is an accredited investor (as defined in Rule 501 of Regulation D),
and
the Investor has such experience in business and financial matters that it
has
the capacity to protect its own interests in connection with this transaction
and is capable of evaluating the merits and risks of an investment in the
Securities. The Investor acknowledges that an investment in the Securities
is
speculative and involves a high degree of risk.
Section
3.3. Authority.
This
Agreement and each of the Transaction Documents that are required to be executed
by the Investor have been duly authorized and validly executed and delivered
by
the Investor and are valid and binding agreements of the Investor enforceable
against it in accordance with their terms, subject to applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or other equitable principles of general
application.
6
Section
3.4. Not
an
Affiliate.
The
Investor is not an officer, director or “affiliate”
(as
that term is defined in Rule 405 of the Securities Act) of the
Company.
Section
3.5. Absence
of Conflicts.
The
execution, delivery and performance of this Agreement and each other Transaction
Document, and the consummation of the transactions contemplated hereby and
thereby, and compliance with the requirements hereof and thereof by the
Investor, will not violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Investor or (a) violate any provision
of any indenture, instrument or agreement to which the Investor is a party
or is
subject, or by which the Investor or any of its assets is bound; (b) conflict
with or constitute a material default thereunder; (c) result in the creation
or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by the Investor
to any third party; or (d) require the approval of any third party (which has
not been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which the Investor is subject or to which
any of its assets, operations or management may be subject.
Section
3.6. Disclosure;
Access to Information.
The
Investor has received all documents, records, books and other publicly available
information pertaining to the Investor’s investment in the Company as the
Investor has requested. The Investor acknowledges that the Company is subject
to
the periodic reporting requirements of the Exchange Act, and the Investor has
reviewed copies of all SEC Documents deemed relevant by the Investor.
Section
3.7. Manner
of Sale.
At no
time was Investor presented with or solicited by or through any leaflet, public
promotional meeting, television advertisement or any other form of general
solicitation or advertising.
Section
3.8 Acknowledgment
Regarding Investor’s Purchase of Notes.
The
Investor acknowledges and agrees that it is acting solely in the capacity of
arm’s-length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Investor further acknowledges that it
is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated thereby and any advice given by the Investor or any of its
representatives or agents in connection with the Transaction Documents and
the
transactions contemplated thereby is merely incidental to the Investor’s
purchase of Securities. The Investor further represents to the Company that
the
Investor’s decision to enter into the Transaction Documents has been based
solely on the independent evaluation by the Investor and its
representatives.
Section
3.9 No
Misrepresentation.
The
representations and warranties of the Investor contained in this Agreement,
any
schedule, annex or exhibit hereto and any agreement, instrument or certificate
furnished by the Investor to the Company pursuant to this Agreement, do not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which they were made, not
misleading.
7
ARTICLE
IV
Representations
and Warranties of the Company
The
Company represents and warrants to the Investor that, except as set forth on
the
Disclosure Schedule prepared by the Company and attached hereto:
Section
4.1. Organization
of the Company.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
authority to own its properties and to carry on its business as now being
conducted. The Company’s Subsidiaries are corporations duly incorporated and
validly existing in good standing under the laws of the jurisdiction in which
they are incorporated and have the requisite corporate power and authority
to
own their properties and to carry on their business as now being conducted.
The
Company and each of its Subsidiaries is duly qualified and is in good standing
as a foreign corporation to do business in every jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
Section
4.2. Authority.
(i) The
Company has the requisite corporate power and corporate authority to enter
into
and perform its obligations under the Transaction Documents and to issue the
Securities pursuant to their respective terms; (ii) the execution, issuance
and
delivery of the Transaction Documents, the Notes, the Shares and the Warrants
by
the Company and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate action and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required, and (iii) the Transaction Documents have been duly
executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally
the
enforcement of, creditors’ rights and remedies or other equitable principles of
general application. The Company has duly and validly authorized and reserved
for issuance shares of Common Stock sufficient in number for the exercise of
the
Warrants. The Company understands and acknowledges the potentially dilutive
effect on the Common Stock of the issuance of the Warrant Shares. The Company
further acknowledges that its obligation to issue Warrant Shares upon exercise
of the Warrants in accordance with this Agreement, the Notes and/or the Warrants
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company and notwithstanding the commencement of any case under 11 U.S.C. § 101
et seq. (the “Bankruptcy
Code”).
Section
4.3. No
Pre-Emptive Rights.
The
Company is not a party to any agreement granting preemptive rights to any person
with respect to any of its equity or debt securities.
Section
4.4. Common
Stock.
The
Company has registered its Common Stock pursuant to Section 12(b) or (g) (or
files periodic reports pursuant to Section 15(d)) of the Exchange Act and is
in
full compliance with all reporting requirements of the Exchange Act, and the
Company is in compliance with all requirements for the continued listing or
quotation of its Common Stock, and such Common Stock is currently listed or
quoted on, a Principal Market. As of the date hereof, the Principal Market
is
the OTC Bulletin Board, and except as set forth in the SEC Documents, the
Company has not received any notice regarding, and to its knowledge there is
no
threat of, the termination or discontinuance of the eligibility of the Common
Stock for such listing.
8
Section
4.5. SEC
Documents.
The
Company is subject to the reporting requirements of the Exchange Act and has
timely filed with the SEC the SEC Documents. The Company is not aware of any
event occurring or expected to occur on or prior to the Closing Date (other
than
the transactions effected thereby) that would require the filing of, or with
respect to which the Company intends to file, a current report on Form 8-K
after
the Closing. The Company has delivered to the Investor, by reference to the
SEC
Website and “XXXXX” therender, true and complete copies of the SEC Documents.
The Company has not provided the Investor any information that, according to
applicable law, rule or regulation, should have been disclosed publicly prior
to
the date hereof by the Company, but which has not been so disclosed. As of
their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the Securities Act or the Exchange Act, as the case may be,
and
rules and regulations of the SEC promulgated thereunder, and the SEC Documents
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents complied in all material respects with applicable accounting
requirements and the rules and regulations of the SEC or other applicable rules
and regulations with respect thereto at the time of such inclusion. Such
financial statements have been prepared in accordance with 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 exclude footnotes or may
be
condensed or summary statements) and fairly present in all material respects
the
financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case
of
unaudited interim statements, to normal year-end audit adjustments). Neither
the
Company nor any of its subsidiaries has any material indebtedness, obligations
or liabilities of any kind (whether accrued, absolute, contingent or otherwise,
and whether due or to become due) that would have been required to be reflected
in, reserved against or otherwise described in the financial statements or
in
the notes thereto in accordance with GAAP, which was not fully reflected in,
reserved against or otherwise described in the financial statements or the
notes
thereto included in the SEC Documents or was not incurred in the ordinary course
of business consistent with the Company’s past practices since the last date of
such financial statements. No other information provided by or on behalf of
the
Company to the Investor that is not included in the SEC Documents, including,
without limitation, information referred to in Section 3.6 of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
9
Section
4.6. Exemption
from Registration; Valid Issuances.
Subject
to the accuracy of the Investor’s representations in Article III, the Company’s
sale of the Notes and its issuance of the Shares and Warrants under this
Agreement does not, and the Company’s issuance of the Warrant Shares on the
exercise of the Warrants will not, require registration under the Securities
Act
and/or any applicable state securities law, except as provided for in the
Registration Rights Agreement. When issued in accordance with the terms of
the
Agreement and the Warrants, the Shares and the Warrant Shares, as the case
may
be, will be duly and validly issued, fully-paid, and nonassessable. Neither
the
sales of the Securities pursuant to, nor the Company’s performance of its
obligations under, the Transaction Documents will (i) result in the creation
or
imposition by the Company of any liens, charges, claims or other encumbrances
upon any of the Securities or, except as contemplated herein, any of the assets
of the Company, or (ii) entitle the holders of Outstanding Capital Shares to
preemptive or other rights to subscribe for or acquire the Capital Shares or
other securities of the Company. None of the Securities will subject the
Investor to personal liability to the Company or its creditors by reason of
the
Investor’s possession thereof.
Section
4.7. No
General Solicitation or Advertising in Regard to this
Transaction.
Neither
the Company nor any of its affiliates nor any person acting on its or their
behalf (i) has conducted or will conduct any general solicitation (as that
term
is used in Rule 502(c) of Regulation D) or general advertising with respect
to
the sale of the Notes, the Shares or the Warrants, or (ii) has made any offers
or sales of any security or solicited any offers to buy any security under
any
circumstances that would require registration of the Securities under the
Securities Act.
Section
4.8. No
Conflicts.
The
Company’s execution, delivery and performance of the Transaction Documents, the
Company’s performance of its obligations under the Notes, and the Company’s
consummation of the transactions contemplated hereby and thereby do not and
will
not (i) result in a violation of the Company’s Certificate of Incorporation or
By-Laws or (ii) result in a violation of any law, rule, regulation, order,
judgment or decree (including Federal and state securities laws and regulations
and the rules and regulations of the Principal Market) that may require the
Company to obtain the approval of its stockholders, applicable to the Company
or
by which any property or asset of the Company is bound or affected. The Company
is not otherwise in violation of any term of or in default under its Certificate
of Incorporation or By-laws. The Company’s business is not being conducted in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations that either singly or in the aggregate would not result
in a Material Adverse Effect. Except as specifically contemplated by this
Agreement and as required by the Securities Act, the Company is not required
to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory organization, in order for it to execute, deliver or perform
any
of its obligations under or contemplated by the Transaction Documents, in each
case in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations that the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected
on
or prior to the date hereof. The Company is not in violation of the listing
requirements of the Principal Market as in effect on the date hereof and is
not
aware of any facts which would reasonably lead to delisting of the Common Stock
by the Principal Market in the foreseeable future.
10
Section
4.9. No
Material Adverse Change.
Since
August 15, 2006, no Material Adverse Effect has occurred or exists with respect
to the Company, except as disclosed in any SEC Documents filed at least five
(5)
days prior to the date hereof and available on XXXXX or can reasonably be
expected to have occurred as the result of continuing losses. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to the Bankruptcy Code or any law generally affecting
creditors’ rights nor does the Company have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy
proceedings.
Section
4.10. No
Undisclosed Liabilities.
No
liability has occurred or exists with respect to the Company or its Subsidiaries
or their respective businesses, properties, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement filed with the SEC relating to
an
issuance and sale by the Company of its Common Stock and that has not been
publicly announced.
Section
4.11. No
Integrated Offering.
The
Company has not, directly or indirectly, made any offers or sales of any
security, or solicited any offers to buy any security, under circumstances
that
would require registration of any of the Securities under the Securities Act
or
cause this offering of Securities to be integrated with prior offerings of
securities by the Company for purposes of the Securities Act or any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of the Principal Market; nor will the Company or any of its
Subsidiaries, to the best of its ability, take any action or steps that would
require registration of the Securities under the Securities Act or cause the
offering of the Securities to be integrated with other offerings.
Section
4.12. Litigation
and Other Proceedings.
Except
as disclosed in the SEC Documents, there are no lawsuits or proceedings pending
or, to the knowledge of the Company, threatened, against the Company or any
Subsidiary or any of their officers or directors in their capacities as such,
nor has the Company received any written or oral notice of any such action,
suit, proceeding or investigation, which could reasonably be expected to have
a
Material Adverse Effect. Except as set forth in the SEC Documents, no judgment,
order, writ, injunction or decree or award has been issued by or, to the
knowledge of the Company, requested of any court, arbitrator or governmental
agency that could result in a Material Adverse Effect.
Section
4.13. Intellectual
Property.
Each of
the Company and its Subsidiaries owns or possesses adequate and enforceable
rights or licenses to use all Intellectual Property necessary for the conduct
of
its business as now being conducted. None of the Company’s or any Subsidiary’s
Intellectual Property necessary to conduct its business as now conducted or
as
proposed to be conducted has expired or terminated, or is expected to expire
or
terminate within two years from the date of this Agreement. To the Company’s
knowledge, except as disclosed in the SEC Documents, neither the Company nor
any
of its subsidiaries is infringing upon or in conflict with any right of any
other person with respect to any Intellectual Property. Except as disclosed
in
the SEC Documents, no adverse claims have been asserted by any person to the
ownership or use of any Intellectual Property, and the Company has no knowledge
of any basis for such claim.
11
Section
4.14. Internal
Controls and Procedures.
The
Company maintains books and records and internal accounting controls that
provide reasonable assurance that (i) all transactions to which the Company
or
any Subsidiary is a party or by which its properties are bound are executed
with
management’s authorization; (ii) the recorded accounting of the Company’s
consolidated assets is compared with existing assets at regular intervals;
(iii)
access to the Company’s consolidated assets is permitted only in accordance with
management’s authorization; and (iv) all transactions to which the Company or
any Subsidiary is a party or by which its properties are bound are recorded
as
necessary to permit preparation of the financial statements of the Company
in
accordance with GAAP.
Section
4.15. Acknowledgment
Regarding Investor’ Purchase of Notes.
The
Company acknowledges and agrees that each of the Investors is acting solely
independently in the capacity of arm’s-length purchaser with respect to the
Transaction Documents and the transactions contemplated thereby. The Company
further acknowledges that no Investor is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any of the Investor or any of their respective representatives or
agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Investor’s purchase of the
Securities. The Company further represents to the Investor that the Company’s
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
Section
4.16. Environmental
Laws.
The
Company and its Subsidiaries (i) are in compliance with any and all applicable
Environmental Laws, (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any
such
permit, license or approval where, in each of the three foregoing cases, the
failure to so comply would have, individually or in the aggregate, a Material
Adverse Effect.
Section
4.17. Regulatory
Permits.
The
Company and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate Federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, except where
the
failure to possess such items would not have, individually or in the aggregate,
a Material Adverse Effect, and neither the Company nor any such Subsidiary
has
received any notice of proceedings relating to the revocation or modification
of
any such certificate, authorization or permit.
Section
4.18. No
Materially Adverse Contracts, Etc.
Neither
the Company nor any of its Subsidiaries is subject to any charter, corporate
or
other legal restriction, or any judgment, decree, order, rule or regulation
that
in the judgment of the Company’s officers has a Material Adverse Effect. Neither
the Company nor any of its Subsidiaries is a party to any contract or agreement
that in the reasonable judgment of the Company’s officers has or is expected to
have a Material Adverse Effect.
Section
4.19. No
Other Agreements.
The
Company has not, directly or indirectly, made any agreements with any Investor
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents, except as set forth in the Transaction
Documents.
12
Section
4.20. No
Misrepresentation.
The
representations and warranties of the Company contained in this Agreement,
any
schedule, annex or exhibit hereto and any agreement, instrument or certificate
furnished by the Company to the Investor pursuant to this Agreement, do not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which they were made, not
misleading.
ARTICLE
V
Covenants
of the Investor
Section
5.1. Best
Efforts.
The
Investor covenants with the Company that it shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Article
II
of this Agreement.
Section
5.2. Certain
Selling Restrictions.
So long
as the Company is in compliance in all material respects with its obligations
to
the Investor under this Agreement, the Note and Warrant, the Investor agrees
on
its behalf and on behalf of its Affiliates (as defined in Rule 405 under the
Securities Act) that it will not short sell, or engage in any short sales with
respect to, any shares of Common Stock on any Principal Market where the Common
Stock is then listed for trading.
ARTICLE
VI
Covenants
of the Company
Section
6.1. Best
Efforts.
The
Company shall use its best efforts to timely satisfy each of the conditions
to
be satisfied by it as provided in Article II of this Agreement.
Section
6.2. Registration
Rights.
The
Company shall cause the Registration Rights Agreement to remain in full force
and effect, and the Company shall comply in all material respects with the
terms
thereof.
Section
6.3. Reservation
of Common Stock.
The
Company shall at all times keep reserved and available, for the purpose of
enabling the Company to issue the Warrant Shares pursuant to any or exercise
of
the Warrants, the number of shares of Common Stock needed to provide for the
issuance of the Warrant Shares.
Section
6.4. Listing
of Common Stock.
The
Company shall use its best efforts to maintain the listing of the Common Stock
on a Principal Market and, as soon as required by the rules of the Principal
Market and any other national securities exchange or automated quotation system,
if any, upon which shares of Common Stock are listed, shall list the Shares
and
the Warrant Shares on the Principal Market and each such other exchange or
system. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Principal Market, that it will include in such
application the Warrant Shares, and will take such other action as is necessary
or desirable in the opinion of the Investor to cause the Warrant Shares to
be
listed on such other Principal Market as promptly as possible.
13
Section
6.5. Reserved.
Section
6.6. Legends.
The
certificates evidencing the Registrable Securities shall be free of legends,
except as set forth in Article IX.
Section
6.7. Corporate
Existence; Conflicting Agreements.
The
Company will take all steps necessary to preserve and continue its corporate
existence. The Company shall not enter into any agreement, the terms of which
agreement would restrict or impair the right or ability of the Company to
perform any of its obligations under this Agreement or any of the other
Transaction Documents.
Section
6.8. Consolidation;
Merger.
The
Company shall not, at any time after the date hereof, effect any merger or
consolidation of the Company with or into, or a transfer of all or substantially
all of the assets of the Company to, another entity (a “Consolidation
Event”)
unless
the resulting successor or acquiring entity (if not the Company) assumes by
written instrument or by operation of law the obligation to deliver to the
Investor such shares of stock and/or securities as the Investor are entitled
to
receive pursuant to this Agreement and the Notes.
Section
6.9. Issuance
of Notes and Warrant Shares.
To the
best of the Company’s knowledge the sale of the Notes and the Warrants and the
issuance of the Warrant Shares pursuant to exercise of the Warrants shall be
made in accordance with the provisions and requirements of Section 4(2), Section
4(6) or Regulation D and any applicable state securities law. The Company shall
file a Form D with respect to the Notes as required under Regulation D and
provide a copy thereof to the Investor promptly after such filing. The Company
shall take such action as reasonably necessary to qualify the Notes for, or
obtain exemption for the Notes for, sale to the Investor at the Closing pursuant
to this Agreement under applicable securities or “Blue Sky” laws of the states
of the United States, and shall provide evidence of any such action so taken
to
the Investor on or prior to the Closing Date. The Company shall make all filings
and reports relating to the offer and sale of the Securities required under
the
applicable securities or “Blue Sky” laws of the states of the United States
following the Closing Date.
Section
6.10. Relief
in Bankruptcy.
The
Company shall not seek judicial relief from its obligations hereunder, except
pursuant to the Bankruptcy Code. In the event the Company is a debtor under
the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted
any
rights to relief it may have under 11 U.S.C. § 362 in respect of the conversion
of the Notes and the exercise of the Warrants. The Company agrees, without
cost
or expense to the Investor, to take or consent to any and all action necessary
to effectuate relief under 11 U.S.C. § 362.
Section
6.11. Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Notes for general working
capital purposes and in the operation of the Company’s business. None of the
proceeds will be used, directly or indirectly, to make any loan to or investment
in any other Person (other than financing the Company’s Subsidiaries in the
ordinary course of business or in connection with an acquisition of another
corporation or business or assets of another corporation or business).
14
Section
6.12. Financial
Information.
Until
all Registrable Securities may be sold without registration under the Securities
Act, the Company shall send the following to each holder of Registrable
Securities if
not
available via the Internet through XXXXX or any similar service: (i) within
five
(5) business days after the filing thereof with the SEC, a copy of its Annual
Report on Form 10-KSB, its Quarterly Reports on Form 10-QSB, any Current Reports
on Form 8-K and any registration statements or amendments (other than on Form
S-8) filed pursuant to the Securities Act; and (ii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to
the
stockholders.
ARTICLE
VII
Survival;
Indemnification
Section
7.1. Survival.
The
representations, warranties and covenants made by each of the Company and the
Investor in this Agreement, the annexes, schedules and exhibits hereto and
in
each instrument, agreement and certificate entered into and delivered by them
pursuant to this Agreement, shall survive the Closing and the consummation
of
the transactions contemplated hereby. In the event of a breach or violation
of
any of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement, irrespective of any investigation made by or on behalf of
such party on or prior to the Closing Date.
Section
7.2. Indemnity
by Company.
To the
extent permitted by law, the Company shall indemnify and hold harmless the
Investor, their respective Affiliates and their respective officers, directors,
partners and members (each an “Indemnified Party”), from and against any and all
Damages, and shall reimburse the Indemnified Parties for all reasonable
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by such Indemnified Party and to
the
extent arising out of or in connection with:
|
(i)
|
any
misrepresentation, omission of fact or breach of any of the Company’s
representations or warranties contained in any of the Transaction
Documents, the annexes, schedules or exhibits thereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant
hereto or thereto; or
|
|
(ii)
|
any
failure by the Company to perform in any material respect any of
its
covenants, agreements, undertakings or obligations set forth in any
of the
Transaction Documents, the annexes, schedules or exhibits thereto
or any
instrument, agreement or certificate entered into or delivered by
the
Company pursuant hereto or thereto;
or
|
15
|
(iii)
|
any
action instituted against the Investor, or any of them, by any stockholder
of the Company who is not an Affiliate of the Investor, with respect
to
any of the transactions contemplated by the Transaction
Documents.
|
provided,
however, that the indemnity agreement contained in this Section 7.2 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld, conditioned or delayed),
and
that the Company shall not be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a statement, omission, or violation which occurs in reliance upon and
in
conformity with written information furnished in a certificate expressly for
use
in connection with such registration by any such Investor, or controlling person
thereof.
Section
7.3 Contribution.
If a
court of competent jurisdiction holds that the foregoing indemnity is
unavailable, then the indemnifying party shall contribute to the amount paid
or
payable by the indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect
the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other (taking into consideration, among other things,
the fact that the provision of the registration rights and indemnification
hereunder is a material inducement to the Investors to purchase Registrable
Securities) or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in such proportion as is appropriate
to
reflect not only the relative benefits received by the indemnifying party on
the
one hand and the indemnified party on the other (taking into consideration,
among other things, the fact that the provision of the registration rights
and
indemnification hereunder is a material inducement to the Investors to purchase
Registrable Securities) but also the relative fault of the indemnifying party
and the indemnified party as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact
or the omission or alleged omission to state a material fact relates to
information supplied by or on behalf of the indemnifying party or the
indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
Notwithstanding anything to the contrary in this Section 7.3, no Investor shall
be required, pursuant to this Section 7.3, to contribute any amount in excess
of
the net proceeds received by such indemnifying party from the sale of securities
in the offering to which the losses, claims, damages, liabilities or expenses
of
the indemnified party relate.
Section
7.4. Notice.
Promptly after receipt by an Indemnified Party seeking indemnification pursuant
to Section 7.2 or Section 7.3 of written notice of any investigation, claim,
proceeding or other action in respect of which indemnification is being sought
(each, a “Claim”),
the
Indemnified Party promptly shall notify the other party of the commencement
thereof; but the omission so to notify the other party shall not relieve it
from
any liability that it otherwise may have to the Indemnified Party, except to
the
extent that the other party is actually prejudiced by such omission or delay.
In
connection with any Claim as to which both the Indemnified Party and the other
party are parties, the other party shall be entitled to assume the defense
thereof. Notwithstanding the assumption of the defense of any Claim by the
other
party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the other party
shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the other
party shall have agreed to pay such fees, out-of-pocket costs and expenses,
(y)
the Indemnified Party reasonably shall have concluded that representation of
the
Indemnified Party and the other party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal counsel to
the
Indemnified Party, potentially differing interests between such parties in
the
conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the other party, or (z) the other party shall have failed
to
employ legal counsel reasonably satisfactory to the Indemnified Party within
a
reasonable period of time after notice of the commencement of such Claim. If
the
Indemnified Party employs separate legal counsel in circumstances other than
as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of
such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the other party shall not, in connection with any Claim in
the
same jurisdiction, be liable for the fees and expenses of more than one firm
of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The other party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be withheld), settle
or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
16
Section
7.5. Direct
Claims.
In the
event an Indemnified Party should have a claim for indemnification that does
not
involve a claim or demand being asserted by a third party, the Indemnified
Party
promptly shall deliver notice of such claim to the other party. If the other
Party disputes the claim, such dispute shall be resolved by mutual agreement
of
the Indemnified Party and the other party or by binding arbitration conducted
in
accordance with the procedures and rules of the American Arbitration Association
as set forth in Article X. Judgment upon any award rendered by any arbitrators
may be entered in any court having competent jurisdiction thereof.
ARTICLE
VIII
Due
Diligence Review; Non-Disclosure of Non-Public
Information.
Section
8.1. Due
Diligence Review.
Subject
to Section 8.2, the Company shall make available for inspection and review
by
the Investor, advisors to and representatives of the Investor (who may or may
not be affiliated with the Investor and who are reasonably acceptable to the
Company), any underwriter participating in any disposition of the Registrable
Securities on behalf of the Investor pursuant to the Registration Statement,
any
such registration statement or amendment or supplement thereto or any blue
sky,
Nasdaq or other filing, all SEC Documents and other filings with the SEC, and
all other publicly available corporate documents and properties of the Company
as may be reasonably necessary for the purpose of such review, and cause the
Company’s officers, directors and employees to supply all such publicly
available information reasonably requested by the Investor or any such
representative, advisor or underwriter in connection with such Registration
Statement (including, without limitation, in response to all questions and
other
inquiries reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of the Registration Statement for
the
sole purpose of enabling the Investor and such representatives, advisors and
underwriters and their respective accountants and attorneys to conduct initial
and ongoing due diligence with respect to the Company and the accuracy of the
Registration Statement.
17
Section
8.2. Non-Disclosure
of Non-Public Information.
(a) The
Company shall not further disclose material non-public information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. Other than disclosure of any comment letters
received from the SEC staff with respect to the Registration Statement, the
Company may, as a condition to disclosing any non-public information hereunder,
require the Investor’ advisors and representatives to enter into a
confidentiality agreement in form and content reasonably satisfactory to the
Company and the Investor. With respect to material non-public information
disclosed to Investor prior to Closing under Confidentiality Agreement, Investor
shall remain bound by the terms of that Confidentiality Agreement.
(b) Nothing
herein shall require the Company to disclose material non-public information
to
the Investor or their advisors or representatives, and the Company represents
that, outside of disclosures made pursuant to written confidentiality
agreements, it does not disseminate material non-public information to any
investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts; provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
promptly notify the advisors and representatives of the Investor and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting material non-public information (whether or not requested
of
the Company specifically or generally during the course of due diligence by
such
persons or entities), which, if not disclosed in the prospectus included in
the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements therein, in light of the circumstances in which they
were
made, not misleading. Nothing contained in this Section 8.2 shall be construed
to mean that such persons or entities other than the Investor (without the
written consent of the Investor prior to disclosure of such information as
set
forth in Section 8.2(a)) may not obtain non-public information in the course
of
conducting due diligence in accordance with the terms of this Agreement and
nothing herein shall prevent any such persons or entities from notifying the
Company of their opinion that based on such due diligence by such persons or
entities, that the Registration Statement contains an untrue statement of a
material fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in light of
the
circumstances in which they were made, not misleading.
18
ARTICLE
IX
Legends;
Transfer Agent Instructions
Section
9.1. Legends.
Unless
otherwise provided below, each certificate representing Registrable Securities
will bear the following legend or equivalent (the “Legend”):
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED
OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH
REGISTRATION.
Section
9.2. No
Other Legend or Stock Transfer Restrictions.
No
legend other than the one specified in Section 9.1 has been or shall be placed
on the share certificates representing the Registrable Securities and no
instructions or “stop transfer orders,” “stock transfer restrictions,” or other
restrictions have been or shall be given to the Company’s transfer agent with
respect thereto other than as expressly set forth in this Article
IX.
Section
9.3. Investor’
Compliance.
Nothing
in this Article shall affect in any way the Investor’s obligations to comply
with all applicable securities laws upon resale of the Common Stock including
delivery of the resale prospectus to the purchaser of such securities.
Section
9.4. Transfers
without Registration.
If the
Investor provides the Company with an opinion of counsel, in generally
acceptable form, that registration of a resale by the Investor of any Securities
is not required under the Securities Act, the Company shall permit the transfer
and, in the case of the Warrant Shares, promptly instruct its transfer agent
to
issue one or more certificates in such name and in such denominations as
specified by the Investor and, if such opinion provides that such legends can
be
removed, without any restrictive legends.
Section
9.5. Injunctive
Relief.
The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Investor 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 Article XI will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Article XI, that the Investor shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
19
ARTICLE
X
Choice
of Law; Jurisdiction
Section
10.1. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York applicable to contracts made in the State of Delaware without
regard to its principles of conflicts of laws.
Section
10.2. Jurisdiction.
Each of
the parties consents to the jurisdiction of the United States District Court
for
the Southern District of New York or the state courts of the State of New York
located in New York City, New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
Section
10.3. Waiver
of Jury Trial.
EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS WARRANT. EACH
PARTY HERETO (1) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OF
THE OTHER PARTIES HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY OF THE
OTHER
PARTIES WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (2) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 10.3.
ARTICLE
XI
Assignment
Neither
this Agreement nor any rights of the Investor or the Company hereunder may
be
assigned by any party to any other person. Notwithstanding the foregoing, (a)
the provisions of this Agreement shall inure to the benefit of, and be
enforceable by, any permitted transferee of any Securities, and (b) upon the
prior written consent of the Company, which consent shall not unreasonably
be
withheld or delayed, the Investor’s interest in this Agreement may be assigned
at any time, in whole or in part, to any other Person (including any affiliate
of the Investor) who agrees to make the representations and warranties contained
in Article III and who agrees to be bound by the terms of this
Agreement.
20
ARTICLE
XII
Notices
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) hand delivered, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice
or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, 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 first business day
following the date of sending by reputable courier service, fully prepaid,
addressed to such address, or (c) upon actual receipt of such mailing, if
mailed. The addresses for such communications shall be:
|
If
to the Company:
|
BioMetrx,
Inc.
|
|
000
Xxxxx Xxxxxxxx, Xxxxx 000
|
|
|
Xxxxxxx,
XX 00000
|
|
|
Attn:
Xxxx Xxxxxx, CEO
|
|
|
Tel:
(000) 000-0000
|
|
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Fax:
(000) 000-0000
|
|
with
a copy to:
|
Xxxxxx
& Xxxxxxxxx LLP
|
|
(which
shall not constitute notice)
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000
Xxxxxxx Xxxxxx, Xxxxx 000
|
|
Xxxxxx
Xxxx, XX 00000
|
|
|
Attention:
Xxxx X. Xxxxxxxxx, Esq.
|
|
|
Telephone:
(000) 000-0000
|
|
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Facsimile:
(000) 000-0000
|
|
If
to the Investor:
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As
set forth on the signature page
hereto
|
Either
party hereto may from time to time change its address or facsimile number for
notices under this Article XII by giving written notice of such changed address
or facsimile number to the other party hereto as provided in this Article
XII.
21
ARTICLE
XIII
Miscellaneous
Section
13.1. Counterparts/
Facsimile/ Amendments.
This
Agreement may be executed in multiple counterparts, each of which may be
executed by fewer than all of the parties, and shall be deemed to be an original
instrument that shall be enforceable against the parties actually executing
such
counterparts and all of which together shall constitute one and the same
instrument. Except as otherwise stated herein, in lieu of the original
documents, a facsimile transmission or copy of the original documents shall
be
as effective and enforceable as the original. This Agreement may be amended
only
by a writing executed by all parties.
Section
13.2. Entire
Agreement.
This
Agreement, the other Transaction Documents, which include, but are not limited
to, the Notes and the Warrants, set forth the entire agreement and understanding
of the parties relating to the subject matter hereof and supersede all prior
and
contemporaneous agreements, negotiations and understandings between and among
the parties, both oral and written, relating to the subject matter hereof.
The
terms and conditions of all Exhibits to this Agreement are incorporated herein
by this reference and shall constitute part of this Agreement as is fully set
forth herein.
Section
13.3. Severability.
In the
event that any provision of this Agreement becomes or is declared by a court
of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without such provision; provided that
such severability shall be ineffective if it materially changes the economic
benefit of this Agreement to any party.
Section
13.4. Headings.
The
headings used in this Agreement are used for convenience only and are not to
be
considered in construing or interpreting this Agreement.
Section
13.5. Number
and Gender.
One or
more Investor may be parties to this Agreement, which Investor may be natural
persons or entities. All references to plural Investor shall apply equally
to a
single Investor if there is only one Investor, and all references to the
Investor as “it” shall apply equally to a natural person.
Section
13.6. Reporting
Entity for the Common Stock.
The
reporting entity relied upon for the determination of the trading price or
trading volume of the Common Stock on any given Trading Day for the purposes
of
this Agreement shall be Bloomberg, L.P. or any successor thereto. The written
agreement of the Investors holding more than a majority of the Registrable
Securities and the Company shall be required to employ any other reporting
entity.
Section
13.7. Replacement
of Certificates.
Upon
(i) receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of a certificate representing any Securities
and (ii) in the case of any such loss, theft or destruction of such certificate,
upon delivery of an indemnity agreement or security reasonably satisfactory
in
form to the Company (which shall not include the posting of any bond) or (iii)
in the case of any such mutilation, on surrender and cancellation of such
certificate, the Company at its expense will execute and deliver, in lieu
thereof, a new certificate of like tenor.
22
Section
13.8. Fees
and Expenses.
Each of
the Company and the Investor agrees to pay its own expenses incident to the
performance of its obligations hereunder.
Section
13.9. Brokerage.
Each of
the parties hereto represents that it has had no dealings in connection with
this transaction with any finder or broker who will demand payment of any fee
or
commission from the other party except for the Finders, whose fee shall be
paid
by the Company. The Company on the one hand, and the Investor, on the other
hand, each agree to indemnify the other against and hold the other harmless
from
any and all liabilities to any person claiming brokerage commissions or finder’s
fees on account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section
13.10. Publicity.
The
Company agrees that it will not issue any press release or other public
announcement of the transactions contemplated by this Agreement without the
prior consent of the Investor, which shall not be unreasonably withheld nor
delayed by more than two (2) Trading Days from their receipt of such proposed
release. No release shall name the Investor without their express consent.
Notwithstanding the foregoing, the Company may file such information as is
required by the rules and regulations of the SEC, in the reasonable opinion
of
the Company’s counsel.
Section
13.11. Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
Section
13.12. Termination.
If the
initial Closing shall not have occurred on or before fifteen (15) business
days
from the date hereof due to the Company’s or the Investor’s failure to satisfy
the conditions set forth in Article II above (and the nonbreaching party’s
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching
party
at the close of business on such date without liability of any party to any
other party. Upon such termination, the Closing Agent will return funds
deposited by Investor in the Closing Agent’s account, promptly after Investors
provide Closing agent with a copy of such notices of termination, and
appropriate written instructions as to the account to which such funds should
be
returned.
Section
13.13. No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
Section
13.14. Remedies.
The
Investor and each holder of Securities shall have all rights and remedies set
forth in this Agreement and the Notes and all rights and remedies that such
Investor and holders have been granted at any time under any other agreement
or
contract and all of the rights that such Investor and holders have under any
law. Any person or entity having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by
law.
23
Section
13.15. Payment
Set Aside.
To the
extent that the Company makes a payment or payments to the Investor hereunder
or
pursuant to the Notes or the Investor enforces or exercise its rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, by a
trustee, receiver or any other person or entity under any law (including,
without limitation, any bankruptcy law, state or federal law, common law or
equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made
or
such enforcement or setoff had not occurred.
14. REGISTRATION
RIGHTS.
The
Investor shall have the rights of registration set forth in this Section 14
with
respect to any or all of the Shares and Warrant Shares.
14.1 Demand
Registrations.
If at
any time after the 120-day period following the Closing hereunder, any Investors
holding 25% of the Shares or Warrant Shares issued pursuant to this Agreement
or
the Warrant requests that the Company file a registration statement on Form
XX-0, X-0, X-0, or S-3 or any successors thereto for a public offering of all
or
any portion of the Shares or the Warrant Shares held by such Investor, then
the
Company shall use its best efforts to register under the Securities Act on
Form
XX-0, X-0, X-0, or S-3 or any successors thereto (a “Demand
Registration”),
for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Common Stock specified in such notice;
provided,
however,
that
the Company shall have no obligation to undertake more than two Demand
Registrations in any twelve month period. The initiating Investor(s) shall
be
entitled to request an aggregate of two (2) Demand Registrations on Form S-1.
Other than as set forth above, there is no limitation on the number of
registrations pursuant to this Section 14.1 that the Company is obligated to
effect. The Company shall not be obligated to effect any Demand Registration
within six (6) months after the effective date of a previous Demand
Registration, or within three (3) months of a previous S-3 registration or
a
previous registration under which the initialing Investor had piggyback rights
pursuant to Section 14.2 hereof wherein the Initiating Holders were permitted
to
register, and sold, at least fifty percent (50%) of the shares of Common Stock
requested to be included therein.
14.2 Joining
Registration Statements.
If at
any time or times, the Company proposes to file one or more Registra-tion
Statements (except for the Registration Statement for the First Montauk
Investors) on Form SB-2, X-0, X-0, X-0 or other appropriate form for the
registration of its Common Stock or other equity securi-ties under the Act
for a
public offering, whether or not underwritten (excluding the issuance of shares
pursuant to employees' options, incentive or similar plans, or in connection
with an acquisition, merger or exchange of securities which involves no
distribution for cash), it shall give a Notice of Registration to the Investor
and shall include in each Registration Statement referred to in such notice
all
such Shares and Warrant Shares with respect to which the Investor shall have
delivered to the Company a Notice of Intent to Sell within 20 days after the
Company has given its Notice of Registration. Such Notice of Registration shall
be given not later than ten days prior to the filing of any such Registration
Statement and such Registration Statement will not be filed unless the Investor
has at least ten days actual notice. All expenses incurred by the Company in
complying with the foregoing registration requirements (except fees and
disbursements of counsel for the Investor; underwriting discounts, commissions
or similar expenses to be incurred in connection with the sale of Shares and
Warrant Shares to be registered for the Investor) shall be borne by the Company.
The Company shall have no obligation to register any Securities under this
Section 7.1 unless the Investor agrees to join in the underwriting arrangements,
if any, proposed for the other securities being registered on the same terms
as
other similarly situated participants in the distribution, unless such
underwriters decline to include the Shares and Warrant Shares therein in which
event the Company may delay the delivery of prospectuses to the Investor and
the
Investor will agree not to sell the Shares or Warrant Shares registered for
a
period not in excess of 90 days from the effective date of such Registration
Statement.
24
14.3 Notice
of Intent to Sell and Notice of Registration.“Notice
of Intent to Sell” shall mean a written notice signed by the Investor (i)
setting forth the number of Shares which the Investor desires to have registered
for sale, (ii) representing that the Investor has a present intention to sell
the same, (iii) setting forth the intended method by which such sale will be
effected and the names of the underwriters, if any; whose services are intended
to be used to effect such sale, and (iv) agreeing to execute all con-sents,
powers of attorneys, registration statements, and other documents required
in
order to permit such Registration Statement to be made effective and carry
out
the distribution. “Notice of Registration” shall mean a written notice signed by
an officer of the Company and setting forth the approximate date on which it
intends to file a Registration Statement on Form XX-0, X-0, X-0 or S-3 or other
appropriate form for the registration of its Common Stock pursuant to the Act,
and the approximate date on which it contemplates such Registration Statement
will become effective whether the Registration Statement is being
filed.
14.4 Indemnification.
The
obligation of the Company to register Shares and Warrant Shares for the Investor
pursuant to this Agreement shall be subject to the receipt by the Company of
an
agreement from the Investor and each underwriter of any securities registered
for the Investor, in form and substance satisfactory to the Company,
indemnifying the Company against liability arising out of or based upon any
untrue statement or alleged untrue statement of a material fact in the
Registration Statement or the omission or alleged omission to state therein
any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, if such statement or omission was made by
the
Company in reliance upon and in conformity with written information furnished
to
the Company specifically for use in such Registration Statement by or on behalf
of the Investor with respect to the Investor or any underwriter of any
securities registered for the Investor. In connection with registration under
the Act of securities owned by the Investor, the Company hereby agrees to
indemnify the Investor and each underwriter of any securities registered for
the
Investor against liability arising out of or based upon any untrue statement
or
alleged untrue statement of a material fact in a Registration statement filed
by
the Company pursuant hereto, or the omission or alleged omission to state in
such Registration Statement any material fact required to be stated therein
or
necessary in order to make the statement therein not misleading, other than
any
such statement included in, or omission from, such Registration Statement by
the
Company in reliance upon and in conformity with written information furnished
to
the Company, specifically for use therein by or on behalf of the Investor with
respect to the Investor or by any underwriter of the securities included therein
and to join in an underwriting agreement having usual and customary terms,
including customary representations, warranties and agreements (in addition
to
the indemnification agreements provided by this Section 14.4).
25
14.5 Certain
Terms and Conditions.
The
following provisions shall be applicable to all registration rights granted
in
this Section 14:
|
(a)
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(b)
|
in
the event that the Investor was afforded an opportuni-ty to join
in a
Registration Statement under Section 14.2 (pursuant to which sales
were
consummated), and either declined to join therein or included securities
therein, then the Investor may not request to be included in a
Registration Statement under Section 14.1 for a period of six (6)
months
after the Investor received the Notice of Registration with respect
to the
Registration Statement in which the Investor participated or declined
to
participate;
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(c)
|
the
Company shall not be required to maintain any Registration Statement
under
Section 14.2 in effect for a period of more than nine months; provided,
however, that this period shall be extended at the request of the
Investor;
|
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(d)
|
the
Company need not include Shares or Warrant Shares owned by the Investor
in
any Registration Statement provided for under Section 14.2 if in
the
opinion of counsel for the Company satisfactory to counsel for the
Investor, registration of such Shares under the Act is not necessary
for
the Investor to dispose of such Shares and/or Warrant Shares in a
public
offering and distribution in the open market in compliance with the
Act;
provided, in such case the opinion of such counsel shall be in writing
addressed to the Investor and shall be rendered within twenty (20)
days
after the Notice of Intent to Sell is received by the Company;
and
|
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(e)
|
the
Company shall have the right to delay the effective date or withdraw
any
Registration Statement it files.
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26
14.6 Rule
144 and Other Exemption Requirements.
The
Company agrees to:
|
(a)
|
make
and keep available adequate current public information with respect
to the
Company, as those terms are understood and defined in Rule 144 under
the
Act;
|
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(b)
|
file
with the Commission in a timely manner all reports and other documents
required of the Company under the Act and the Securities Exchange
Act of
1934 (the “Exchange Act”);
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(c)
|
furnish
to Investor, upon request, a written statement by the Company as
to its
compliance with the reporting requirements of said Rule 144, and
the Act
and the Exchange Act, a copy of the most recent annual or quarterly
report
of the Company, and such other reports and documents of the Company
as the
Investor may reasonably request to avail itself of any similar rule
or
regulation of the Commission allowing it to sell any such securities
without registration; and
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(d)
|
the
Company will transfer the Shares and Warrant Shares at the request
of
Investor provided it receives an opinion of counsel, reasonably acceptable
to the Company, that such transfer would not violate the Act or applicable
state securities laws and will remove the restrictive legend from
the
certificate for the shares at the request of Investor provided it
receives
an opinion of counsel reasonably satisfactory to the Company that
the
presence of such legend is not required to assure compliance with
the Act
or applicable state securities
laws.
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[SIGNATURE
PAGE FOLLOWS]
27
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
the undersigned, thereunto duly authorized, as of the date first set forth
above.
| BioMetrx, Inc. | ||
| |
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| By: | ||
|
Name:
Title:
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||
| Closing Date: | ||
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| Investor: | ||
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| |
|
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| By: | ||
|
Name: |
||
|
Jurisdiction
of Incorporation
or
Residence: _________________________
Principal
Amount of Notes
Purchased:
_________
Number
of Warrants: ________
Number
of Shares: ________
Purchase
Price (principal amount of
Notes
Purchased): $_________
|
Address
of Investor:
Facsimile:
________________________
E-Mail
Address:____________________
|
Exhibits:
Exhibit
A
- Note
Exhibit
B
- Warrant
28
