Exhibit 10.6
XA, INC.
SECURITIES PURCHASE AGREEMENT
As of October 23, 2006
THIS SECURITIES PURCHASE AGREEMENT, dated as of this 23th day of October,
2006 (this "AGREEMENT"), between XA, INC., a Nevada corporation (the "COMPANY"),
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and Vision Opportunity Master Fund, Ltd. (the "PURCHASER").
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W I T N E S S E T H:
WHEREAS, the Company has previously entered into a Securities Purchase
Agreement on August 8, 2006 (the "PRIOR CLOSING" and the "PRIOR PURCHASE
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AGREEMENT"), whereby it sold an aggregate of $1,250,000 in 11% Senior Secured
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Convertible Promissory Notes (the "PRIOR NOTES") and 175,000 warrants to
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purchase shares of its common stock at an exercise price of $1.10 per share (the
"PRIOR WARRANTS"), to five entities (the "PRIOR PURCHASERS") which Prior Notes
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were secured by a Security Agreement (the "PRIOR SECURITY AGREEMENT"). The
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shares of common stock which the Prior Notes were convertible into and the
shares of common stock which the Prior Warrants were convertible into and an
aggregate of 1,000,000 additional warrants previously issued exercisable at
$0.30 per share,(collectively the "PRIOR UNDERLYING SHARES"), were granted
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registration rights pursuant to a Registration Rights Agreement (the "PRIOR
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REGISTRATION AGREEMENT");
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WHEREAS, the Company desires to issue to the Purchaser, and the Purchaser
desires to purchase from the Company, the Securities (as such term is defined
below) as set forth below (the "OFFERING"); and
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WHEREAS, certain capitalized terms used in this Agreement are defined in
Section 9.1 hereof;
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NOW, THEREFORE, in consideration of the promises and mutual covenants and
agreements hereinafter contained, and for good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. SALE AND PURCHASE OF SECURITIES.
1.1 Sale and Purchase of Securities. Subject to the terms and
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conditions of this Agreement, on the Closing Date (as defined in Section
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3.1 hereof), the Company shall issue, sell and deliver to the Purchaser,
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and the Purchaser shall purchase from the Company for the Purchase Price
(as defined in Section 2.1 hereof) (i) 11% Senior Subordinated Secured
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Convertible Promissory Notes in the aggregate principal amount of
$1,250,000 (the "NOTES") and (ii) warrants to purchase one hundred and
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eighty-seven thousand five hundred (187,500) shares (subject to adjustment
as described therein), of the Company's common stock, par value $0.001 per
share (the "COMMON STOCK") at an exercise price of $1.10, and warrants to
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purchase one hundred thousand (100,000) shares at an exercise price of $.30
per share (subject to adjustment as described therein), of the Company's
Common Stock (each a "WARRANT" and collectively the "WARRANTS"). The Notes
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and Warrants shall hereinafter sometimes be collectively referred to as the
"SECURITIES." The names, addresses and principal amount of Notes purchased
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and Warrants received by the Purchaser shall be set forth on Schedule 1.1
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hereto.
2. PURCHASE PRICE.
2.1 Purchase Price. The aggregate purchase price of the Securities to
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be purchased pursuant to Section 1.1 shall be $1,250,000, (the "PURCHASE
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PRICE").
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2.2 Payment of the Purchase Price. At the Closing (as defined in
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Section 3.1 hereof), the Purchaser shall pay the Purchase Price by wire
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transfer of immediately available funds or by such other method as may be
reasonably acceptable to the Company and the Purchaser, to such account of
the Company as shall have been designated in advance to the Purchaser by
the Company. The Company may pay qualified Broker Dealers a selling
concession, with the prior written consent of the Purchaser, of up to 10%
(after subtracting the $20,000 in due diligence fees (as provided below
under Section 8.2(d), and up to $25,000 in legal fees) and an unaccountable
expense allowance of up to 3% of gross proceeds received in connection with
this Offering.
3. CLOSING.
3.1 Closing Date. The closing of the sale and purchase of the
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Securities (the "CLOSING") shall take place on October __, 2006, or at such
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other time, date or place as the parties hereto may mutually agree;
provided, that all conditions to the Closing set forth in this Agreement
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have been satisfied or waived by such date. The date on which the Closing
is held is referred to in this Agreement as the "CLOSING DATE." At the
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Closing (i) the Company shall deliver, or cause to be delivered, the Notes
and Warrants, each executed by the Company and (ii) the documents referred
to in Section 8 hereof.
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4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents, covenants and warrants as of the date hereof and as of the Closing
Date to the Purchaser, acknowledging that the Purchaser is relying upon the
accuracy and completeness of the representations and warranties set forth herein
to, among other things, ensure that registration under Section 5 of the
Securities Act is not required in connection with the sale of the Securities
hereby, as follows:
4.1 Organization and Good Standing; Capitalization.
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(a) The Company (and each Subsidiary) is duly organized, validly
existing and in good standing under the laws of the state of Nevada and has
the corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as now conducted and as it is
proposed to be conducted. The Company is in good standing under the laws of
each jurisdiction in which the conduct of its business or the ownership of
its properties or assets requires such qualification or authorization.
(b) All the outstanding shares of capital stock of the Company have
been duly authorized, and are validly issued, fully paid and
non-assessable. Except as disclosed on Schedule 4.1(b) (i) there is no
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option, warrant, call, right, commitment or other agreement of any
character to which the Company is a party, (ii) there are no securities of
the Company outstanding which upon conversion or exchange, and (iii) there
are no share appreciation rights, or other similar rights based on
securities of the Company which, in the case of clause (i), (ii) or (iii),
would require the issuance, sale or transfer of any additional shares of
capital stock or other equity securities of the Company or other securities
convertible into, exchangeable for or evidencing the right to subscribe for
or purchase share capital or other equity securities of the Company. Other
than as contemplated by this Agreement or Transaction Documents (as defined
in Section 4.2), the Company is not a party to, nor is it aware of, any
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voting trust or other voting, stockholders or similar agreement with
respect to any of the securities of the Company or of any agreement
relating to the issuance, sale, redemption, transfer or other disposition
of the shares of capital stock on other securities of the Company.
4.2 Authorization of Agreement; Enforceability. The Company has all
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requisite corporate power and authority to execute and deliver this
Agreement and each other agreement, document, instrument and certificate,
including, but not limited to, Waiver Agreements, the Bank Consent, the
Notes, Warrants, Registration Rights Agreement and Security Agreement, to
be executed by the Company in connection with the consummation of the
transactions contemplated by this Agreement (collectively, the "TRANSACTION
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DOCUMENTS"), and to perform fully its obligations hereunder and thereunder.
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The execution, delivery and performance by the Company of this Agreement
and the Transaction Documents have been duly authorized by all necessary
corporate action on the part of the Company and its stockholders. This
Agreement and each of the Transaction Documents have been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery thereof by the Purchaser, this Agreement and each of
the Transaction Documents constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with its respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a proceeding at
law or in equity).
4.3 No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby, do not and will not (i) conflict
with or violate any provision of the Company's and/or any Subsidiary's
Articles of Incorporation or by-laws and any and all amendments thereto
(collectively, the "INTERNAL DOCUMENTS"), (ii) conflict with, or constitute
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a default (or an event that 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 (with or without notice, lapse of
time or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise), or other
understanding to which the Company or any Subsidiary is a party or by which
any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which
any property or asset of the Company or a Subsidiary is bound or affected.
4.4 Subsidiaries, Joint Ventures, Partnerships, Etc.
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(a) As of the Closing (i) The Experiential Agency, Inc., (ii) XA
Scenes, Inc., (iii) XA Interactive, Inc., and (iv) Fiori XA, Inc.
(collectively the "SUBSIDIARIES") are the only subsidiaries of the Company.
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Each Subsidiary is wholly owned by the Company, is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation with corporate power and corporate authority under such laws
to own, lease and operate its properties and conduct its business as
currently conducted; and is in good standing (if applicable) in each other
jurisdiction in which it owns or leases property of a nature, or transacts
business of a type, that would make such qualification necessary other than
such qualifications which the failure to have would not reasonably be
expected to have a Material Adverse Effect.
(b) Neither the Company nor its Subsidiaries is a party to any joint
venture, partnership or similar arrangement or agreement.
4.5 Consents of Third Parties. None of the execution and delivery by
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the Company of this Agreement and the Transaction Documents, the Bank
Consent, the consummation of the transactions contemplated hereby or
thereby, or compliance by the Company with any of the provisions hereof or
thereof will (a) conflict with, or result in the breach of, any provision
of the Certificate of Incorporation or Bylaws of the Company (or any
Subsidiary), (b) conflict with, violate, result in the breach or
termination of, or constitute a default or give rise to any right of
termination or acceleration or right to increase the obligations or
otherwise modify the terms thereof under any Permit or Order to which the
Company (or any Subsidiary) is a party or any Contract to which the Company
or its Subsidiaries is bound or by which the Company or any of its
properties or assets is bound, other than such conflicts, violations,
breaches, defaults, termination or accelerations that would not reasonably
be expected to have a Material Adverse Effect, (c) constitute a violation
of any Law applicable to the Company (or any Subsidiary) or (d) result in
the creation of any Lien upon the properties or assets of the Company (or
any Subsidiary). No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any
Person or Governmental Body is required on the part of the Company and/or
its Subsidiaries in connection with the execution and delivery of this
Agreement, and/or the Transaction Documents, or the compliance by the
Company with any of the provisions hereof or thereof.
4.6 Authorization of Securities.
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(a) On the Closing Date, the issuance, sale, and delivery of the
Securities to be purchased pursuant to Section 1.1 will have been duly
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authorized by all requisite action of the Company, and, when issued, sold,
delivered and paid for in accordance with this Agreement, the Securities
will be validly issued and outstanding, with no personal liability
attaching to the ownership thereof.
(b) On the Closing Date, the issuance and delivery of the shares of
Common Stock to be delivered upon conversion of the Notes (the "CONVERSION
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SHARES") and upon exercise of the Warrants (the "WARRANT SHARES") in
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accordance with the terms thereof (collectively, the Conversion Shares and
the Warrants Shares, the "UNDERLYING SHARES") will have been duly
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authorized by all requisite action of the Company and, when issued and
delivered in accordance with the terms of the Securities, the Underlying
Shares will be validly issued and outstanding, fully paid and
non-assessable, with no personal liability attaching to the ownership
thereof, and not subject to preemptive or any other similar rights of the
stockholders of the Company or others.
4.7 Certain Waivers.
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(a) The Waiver of Rights Agreement (the "WAIVER AGREEMENT") entered
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into as of July 17, 2006, effective as of June 30, 2006, and extended via
email on August 3, 2006, to August 9, 2006, by Alpha Capital
Aktiengesellschaft, Xxxxxxxxxxx Limited Partnership, Whalehaven Funds
Limited, Greenwich Growth Fund Limited and Genesis Microcap Inc. (each a
"PRIOR NOTE CREDITOR" and collectively the "PRIOR NOTE CREDITORS") in favor
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of the Company is a valid and binding agreement, duly executed, enforceable
against the Company and each Note Creditor in accordance with its terms and
is in full force and effect. To the best of the Company's knowledge, no
action has been brought or is contemplated to be brought changing the
enforcement of the Waiver Agreement. The executed Waiver Agreement is
attached hereto as Schedule 4.7(a).
(b) The Waiver of Rights Agreement (the "SECOND WAIVER AGREEMENT")
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entered into as of September 13, 2006, by the Prior Note Creditors in favor
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of the Company is a valid and binding agreement, duly executed, enforceable
against the Company and each Note Creditor in accordance with its terms and
is in full force and effect. To the best of the Company's knowledge, no
action has been brought or is contemplated to be brought changing the
enforcement of the Second Waiver Agreement. The executed Second Waiver
Agreement is attached hereto as Schedule 4.78(b).
4.8 Capitalization. Schedule 4.8 hereto sets forth in detail all
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outstanding securities of the Company (including the terms, the holders and
the amounts thereof). Other than as disclosed in Schedule 4.8, (i) there
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are no outstanding securities of the Company or any of its Subsidiaries
which contain any preemptive, redemption or similar provisions, nor is any
holder of securities of the Company or any Subsidiary entitled to
preemptive or similar rights arising out of any agreement or understanding
with the Company or any Subsidiary by virtue of any of the Transaction
Documents, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may
become bound to redeem a security of the Company or any of its
Subsidiaries; (ii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement;
and (iii) there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities, except as a result of the purchase and sale of the
Transaction Securities, or rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is
or may become bound to issue additional shares of Common Stock, or
secur-ities or rights convertible or exchangeable into shares of Common
Stock.
4.9 SEC Reports; Financial Statements. The Company has filed all
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reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or Section 15(d) of the
Exchange Act, for the one (1) year preceding the date hereof (or such
shorter period as the Company was required by law to file such material)
(the foregoing materials, including the exhibits thereto, being
collectively referred to herein as the "SEC REPORTS"). As of their
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respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, as applicable,
and none of the SEC Reports, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or
assets of the Company are subject have been filed as exhibits to the SEC
Reports to the extent required. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission
with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved ("GAAP"), except as may be otherwise specified in such financial
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statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and
its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject,
in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. Additionally, since the adoption of the Xxxxxxxx-Xxxxx Act of
2002 (the "NEW ACT") and to the extent that the Company is subject to the
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New Act, the Company has complied in all material respects with the laws,
rules and regulation under the New Act.
4.10 Material Changes. Since December 31, 2005, (i) there has been no
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event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any material liabilities (contingent or otherwise) other than (A)
trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to
be reflected in the Company's financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made payment or distribution
of any dividend or distribution of cash or other property to its holders of
Common Stock or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued
any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.
4.11 No Undisclosed Liabilities. Other than as disclosed in the SEC
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Reports, neither the Company nor its Subsidiaries has any liabilities
(whether accrued, absolute, contingent or otherwise, and whether due or to
become due or asserted or unasserted), except (a) liabilities provided for
in the Financial Statements (other than liabilities which, in accordance
with GAAP, need not be disclosed), (b) liabilities disclosed on Schedule
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4.11 hereto and (c) liabilities incurred in the ordinary course of business
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which do not materially exceed historic levels.
4.12 Absence of Certain Developments. In the ordinary course of
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business or in the context of the Transactions contemplated in this
Agreement and the Transaction Documents:
(a) there has not been any Material Adverse Change nor has any event
occurred which could result in any Material Adverse Change;
(b) there has not been any declaration, setting a record date, setting
aside or authorizing the payment of, any dividend or other distribution in
respect of any shares of capital stock of the Company or its Subsidiaries
or any repurchase, redemption or other acquisition by the Company or its
Subsidiaries, of any of the outstanding shares of capital stock or other
securities of, or other ownership interest in, the Company or its
Subsidiaries;
(c) there has not been any transfer, issue, sale or other disposition
by the Company of any shares of capital stock or other securities of the
Company or its Subsidiaries or any grant of options, warrants, calls or
other rights to purchase or otherwise acquire shares of such capital stock
or such other securities;
(d) neither the Company nor its Subsidiaries has (i) awarded or paid
any bonuses to employees or representatives of the Company, (ii) entered
into any employment, deferred compensation, severance or similar agreements
(nor amended any such agreement), other than in the ordinary course of
business;
(e) neither the Company nor its Subsidiaries has made any loans,
advances (other than advances to officers and employees of the Company or
its Subsidiaries which advances are made in the ordinary course of
business), or capital contributions to, or investments in, any Person or
paid any fees or expenses to any Affiliate of the Company other than its
Subsidiaries;
(f) neither the Company nor its Subsidiaries has transferred or
granted any rights under any Contracts or licenses, used by the Company in
its business;
(g) there has not been any damage, destruction or loss, whether or not
covered by insurance, with respect to the property or assets of the Company
or its Subsidiaries having a replacement cost of more than $10,000 for any
single loss or $20,000 for all such losses;
(h) neither the Company nor its Subsidiaries has mortgaged, pledged or
subjected to any Lien any of its assets, or acquired any assets for a
purchase price in excess of $10,000 in the aggregate or sold, assigned,
transferred, conveyed, leased or otherwise disposed of any assets of the
Company or its Subsidiaries for a sale price in excess of $10,000 in the
aggregate except for assets acquired or sold, assigned, transferred,
conveyed, leased or otherwise disposed of in the ordinary course of
business;
(i) neither the Company nor its Subsidiaries has canceled or
compromised any debt or claim, or amended, canceled, terminated,
relinquished, waived or released any Contract or right, except in the
ordinary course of business consistent with past practice and which,
individually or in the aggregate, would not be material to the Company or
its Subsidiaries;
(j) neither the Company nor its Subsidiaries has made any binding
commitment to make any capital expenditures or capital additions or
betterments in excess of $20,000 individually or $50,000 in the aggregate;
(k) neither the Company nor its Subsidiaries has incurred any debts,
obligations or liabilities, whether due or to become due, except current
liabilities incurred in the ordinary course of business, none of which
current liabilities (individually or in the aggregate) could result in a
Material Adverse Change;
(l) neither the Company nor its Subsidiaries has entered into any
transaction other than in the ordinary course of business except for (in
the case of the Company) this Agreement;
(m) neither the Company nor its Subsidiaries has encountered any labor
difficulties or labor union organizing activities;
(n) neither the Company nor its Subsidiaries has made any change in
the accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted;
(o) neither the Company nor its Subsidiaries has disclosed to any
Person any material trade secrets except for disclosures made to Persons
subject to valid and enforceable confidentiality agreements;
(p) neither the Company nor its Subsidiaries has suffered or
experienced any change in the relationship or course of dealings between
the Company and/or its Subsidiaries and any of their suppliers or customers
which supply goods or services to the Company or its Subsidiaries or
purchase goods or services from the Company and or its Subsidiaries; and
(q) neither the Company nor its Subsidiaries has made any payment to,
or received any payment from, or made or received any investment in, or
entered into any transaction or series of related transactions (including
without limitation, the purchase, sale, exchange or lease of assets,
property or services, or the making of a loan or guarantee) with any
Affiliate in each case, in excess of $10,000 or its equivalent (other than
any transactions between or among the Company and its Subsidiaries) (each,
an "AFFILIATE TRANSACTION").
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4.13 Taxes. The Company and its Subsidiaries have filed all Tax
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returns (including statements of estimated Taxes owed) and reports required
to be filed within the applicable periods (subject to extensions) for such
filings and have paid all Taxes required to be paid, and has established
adequate reserves (net of estimated Tax payments already made) for the
payment of all Taxes payable in respect of the period subsequent to the
last periods covered by such returns. No deficiencies for any Tax are
currently assessed against the Company or any Subsidiary. There is no Tax
Lien, whether imposed by any federal, state or local taxing authority,
outstanding against the assets, properties or business of the Company or
its Subsidiaries other than Liens for Taxes which are not yet due. Neither
the Company nor its Subsidiaries has executed any waiver of the statute of
limitations on the assessment or collection of any Tax or governmental
charge. The Company and its Subsidiaries have properly charged, collected
and paid all applicable stamp, sales, use and other similar Taxes on or
before the Closing Date.
4.14 Real Property. The Company currently has (i) leased certain
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locations for office space and all material leases, and (ii) owns real
property, all of which leases and real property are listed (including the
terms of such leases) on Schedule 4.14.
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4.15 Tangible Personal Property; Assets. All material items of
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personal property and assets owned or leased by the Company and its
Subsidiaries are in good operating condition, normal wear and tear
excepted.
4.16 Intangible Property. The Company and its Subsidiaries own, or
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possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted, the lack of which could reasonably
be expected to have a Material Adverse Effect. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company
or its Subsidiaries of trademarks, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks,
service xxxx registrations, trade secrets or other similar rights of
others, or of any such development of similar or identical trade secrets or
technical information by others and no claim, action or proceeding has been
made or brought against, or to the Company's knowledge, has been threatened
against, the Company or its Subsidiaries regarding trademarks, trade name
rights, patents, patent rights, inventions, copyrights, licenses, service
names, service marks, service xxxx registrations, trade secrets or other
infringement, except where such infringement, claim, action or proceeding
would not reasonably be expected to have either individually or in the
aggregate a Material Adverse Effect. None of the Company's employees,
officers, or consultants are obligated under any contract (including
licenses, covenants, or commitments of any nature) or other agreement, or
subject to any judgment, decree, or order of any court or administrative
agency, that would interfere with the use of such employee's, officer's, or
consultant's commercially reasonable efforts to promote the interests of
the Company or that would conflict with the Company's business as
conducted. Neither the execution nor delivery of the Transaction Documents,
nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, any contract, covenant, or
instrument under which any of such employees, officers or consultants are
now obligated.
4.17 Material Contracts.
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Other than as set forth on Schedule 4.17, or otherwise disclosed in
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the Company's Securities and Exchange Commission filings (a) neither the
Company nor its Subsidiaries nor any of their respective properties or
assets is a party to or bound by any (i) Contract not made in the ordinary
course of business, or involving a commitment or payment by the Company or
any Subsidiary in excess of $10,000 or, in the Company's belief, otherwise
material to the business of the Company or its Subsidiaries, (ii) Contract
among members or granting a right of first refusal or for a partnership or
a joint venture or for the acquisition, sale or lease of any assets or
share capital of the Company or any other Person or involving a sharing of
profits, (iii) mortgage, pledge, conditional sales contract, security
agreement, factoring agreement or other similar Contract with respect to
any real or tangible personal property of the Company or its Subsidiaries,
(iv) loan agreement, credit agreement, promissory note, guarantee,
subordination agreement, letter of credit or any other similar type of
Contract, (v) Contract with any Governmental Body outside the ordinary
course of business, (vi) Contract with respect to the discharge, storage or
removal of hazardous materials or (vii) binding commitment or agreement to
enter into any of the foregoing.
(b) (i) Each of the Contracts listed on Schedule 4.17 is valid and
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enforceable against the Company or its Subsidiaries in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law
or in equity), and there is no default under any Contract listed on
Schedule 4.17 by the Company or any of its Subsidiaries or, to the
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knowledge of the Company, by any other party thereto, which is likely to
have a Material Adverse Effect, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a default by
the Company thereunder which is likely to have a Material Adverse Effect.
(ii) No previous or current party to any Contract has given
written notice to the Company or any Subsidiary of, or made a claim,
verbal or written, with respect to any breach or default thereunder
and the Company has no knowledge of any notice of or claim with
respect to any such breach or default other than such notices or
claims with respect to any such breaches or defaults that would not,
either individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect.
(c) With respect to the Contracts listed on Schedule 4.17 that were
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assigned to the Company or any Subsidiary by a third party, all necessary
consents to such assignment have been obtained other than such contents
which the failure to obtain would not be reasonably expected to have a
Material Adverse Effect.
4.18 Employee Benefits. Except as set forth on Schedule 4.18, neither
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the Company nor any of its Subsidiaries has in effect any employment
agreements, consulting agreements, deferred compensation, pension or
retirement agreements or arrangements, bonus, incentive or profit-sharing
plans or arrangements, or labor or collective bargaining agreements,
written or oral. The Company and its Subsidiaries are in compliance in all
material respects with all applicable Laws relating to labor, employment,
fair employment practices, terms and conditions of employment, and wages
and hours.
4.19 Employees.
---------
(a) No key executive Employee, group of Employees nor independent
contractors of the Company or its Subsidiaries has any plans to terminate
his or her employment or relationship as an Employee or independent
contractor with the Company or its Subsidiaries.
(b) To the best of the Company's knowledge, no key executive Employee
or any other Employee of the Company or its Subsidiaries is a party to or
is otherwise bound by any agreement or arrangement (including, without
limitation, confidentiality agreements, non-competition agreements,
licenses, covenants, or commitments of any nature), or subject to any
judgment, decree, or Order of any court or Governmental Body, (i) that
would conflict with such employee's obligation diligently to promote and
further the interest of the Company or its Subsidiaries or (ii) that would
conflict with the Company's (or its Subsidiaries) business as now conducted
or as proposed to be conducted.
(c) Schedule 4.19(c) sets forth a list of each of the key executive
----------------
Employees of the Company who have entered into an employment and/or
confidentiality agreement with the Company.
4.20 Litigation. Other than is set forth on Schedule 4.20, there is no
---------- -------------
action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, currently threatened against
or affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency and/or regulatory authority (federal, state, county,
local or foreign), (collectively, an "ACTION") which does and/or could (i)
------
adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents and/or the Transaction Securities or to
consummate the transactions contemplated hereby or thereby or (ii) could,
if there were an unfavorable decision, have or reasonably be expected to
result in, either individually or in the aggregate, a Material Adverse
Effect. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act. The
foregoing includes, without limitation, actions, pending or threatened (or
any basis therefor known to the Company), involving the prior employment of
any of the Company's employees, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of
their former employers, or their obligations under any agreements with
prior employers. The Company is not a party or subject to the provisions of
any order, writ, injunction, judgment, or decree of any court or government
agency or instrumentality.
4.21 Compliance with Laws; Permits. Neither the Company nor any
--------------------------------
Subsidiary (i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or
both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is
in default under or that it is in violation of, any indenture, mortgage,
decree, lease, license, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties
is bound (whether or not such default or violation has been waived), (ii)
is in violation of any order of any court, arbitrator or governmental body,
or (iii) is or has been in violation of any statute, rule or regulation of
any governmental authority, including without limitation all foreign,
federal, state and local laws applicable to its business, except in the
case of clauses (i), (ii) and (iii) as would not result in a Material
Adverse Effect. Neither the Company nor any of the Subsidiaries has
received any written notice of any violation of or noncompliance with, any
federal, state, local or foreign laws, ordinances, regulations and orders
(including, without limitation, those relating to environmental protection,
occupational safety and health, federal securities laws, equal employment
opportunity, consumer protection, credit reporting, "truth-in-lending", and
warranties and trade practices) applicable to its business or to the
business of any Subsidiary, the violation of, or noncompliance with, which
would have a materially adverse effect on either the Company's business or
operations, or that of any Subsidiary, and the Company knows of no facts or
set of circumstances which would give rise to such a notice. The execution,
delivery, and performance of the Transaction Documents and the consummation
of the transactions contemplated thereby will not result in any such
violation or be in conflict with or constitute, with or without the passage
of time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract, or an event which
results in the creation of any lien, charge, or encumbrance upon any assets
of the Company or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets
or properties, except as would not reasonably be expected to have a
Material Adverse Effect.
4.22 Environmental and Safety Laws. Neither the Company nor its
--------------------------------
Subsidiaries are in violation of any applicable Laws relating to the
environment or occupational health and safety where the failure to so
comply could have a Material Adverse Effect and no material expenditures
are or will be required in order to comply with any such existing Laws.
4.23 Investment Company Act. The Company is not, nor is it directly or
----------------------
indirectly controlled by or acting on behalf of, any Person that is an
investment company within the meaning of the Investment Company Act of
1940, as amended.
4.24 Financial Advisors. Except for Xxxxxxx, no agent, broker,
-------------------
investment banker, finder, financial advisor or other Person is or will be
entitled to any broker's or finder's fee or any other commission or similar
fee from the Company, directly or indirectly, in connection with the
transactions contemplated by this Agreement or any Transaction Document and
no Person is entitled to any fee or commission or like payment from the
Company in respect thereof based in any way on agreements, arrangements or
understandings made by or on behalf of the Company.
4.25 Condition of Properties. All facilities, machinery, equipment,
-------------------------
fixtures, vehicles and other properties owned, leased or used by the
Company and its Subsidiaries are in good operating condition and repair,
are reasonably fit and usable for the purposes for which they are being
used, are adequate and sufficient for the Company and its Subsidiaries
respective businesses and conform in all material respects with all
applicable Laws.
4.26 Pending Changes. The Company has no knowledge of any development
---------------
which might reasonably be expected to result in a material adverse affect
on the operations or financial condition of the Company or its
Subsidiaries.
4.27 Securities Laws. The Company has complied in all material
----------------
respects with all applicable U.S. federal and state securities laws in
connection with (i) all offers, issuances and sales of its securities prior
to the date hereof and (ii) the offer, issuance and sale of the Securities.
All sales and issuances of currently outstanding securities by the Company
have been to accredited investors within the meaning of Rule 501 of
Regulation D under the Securities Act. Prior to the Closing, neither the
Company nor anyone acting on its behalf has sold, offered to sell or
solicited offers to buy the Securities or similar securities to, or solicit
offers with respect thereto from, or entered into any preliminary
conversations or negotiations relating thereto with, any Person, so as to
bring the issuance and sale of the Securities under the registration
provisions of the Securities Act, and applicable state securities laws.
Neither the Company nor any Person acting on its behalf has offered the
Securities to any Person by means of general or public solicitation or
general or public advertising, such as by newspaper or magazine
advertisements, by broadcast media, or at any seminar or meeting whose
attendees were solicited by such means.
4.28 Registration Rights. Except for any rights granted under the
--------------------
Transaction Documents and the Prior Registration Agreement, no Person has
demand or other rights to cause the Company to file any registration
statement under the Securities Act relating to any securities of the
Company or any right to participate in any such registration statement.
4.29 Disclosure; Survival. There is no fact which has not been
---------------------
disclosed to the Purchaser of which the Company has knowledge and which has
had or could reasonably be anticipated to result in a Material Adverse
Change. All representations and warranties set forth in this Agreement or
in any of the Transaction Documents or in any writing or certificate
delivered in connection with this Agreement shall survive the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby for a period of two (2) years (the "SURVIVAL PERIOD")
---------------
and shall not be affected by any examination made for or on behalf of the
Purchaser, the knowledge of the Purchaser, or the acceptance by the
Purchaser of any certificate or opinion.
4.30 No General Solicitation. Neither the Company, its Subsidiaries,
------------------------
any of their affiliates nor any person acting on their behalf, has engaged
in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the
offer or sale of the Notes and the Warrants.
4.31 Insurance. The Company has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed, and the Company has
insurance against other hazards, risks, and liabilities to persons and
property to the extent and in the manner customary for companies in similar
businesses similarly situated.
4.32 Regulatory Permits. The Company and the Subsidiaries possess all
------------------
licenses, certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses, except where the failure
to possess such permits would not have or reasonably be expected to result
in a Material Adverse Effect ("MATERIAL PERMITS"), and believes it can
----------------
obtain, without undue burden or expense, any similar authority for the
conduct of its business as planned to be conducted, and neither the Company
nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
4.33 Title to Property and Assets. The Company (and each Subsidiary)
-----------------------------
owns its property and assets free and clear of all mortgages, liens, loans,
pledges, security interests, claims, equitable interests, charges, and
encumbrances, except such encumbrances and liens which arise in the
ordinary course of business and do not materially impair the Company's (and
each Subsidiary's) ownership or use of such property or assets and/or any
such liens, encumbrances and security interests which arose in connection
with the Prior Security Agreement. With respect to the property and assets
it leases, the Company (and each Subsidiary) is in compliance with such
leases and, to its knowledge, holds a valid leasehold interest free of any
liens, claims, or encumbrances.
4.34 Foreign Assets Control Legislation. Neither the sale of the Notes
----------------------------------
nor the Warrants by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of
the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto. Without limiting the
foregoing, neither the Company nor any of its Subsidiaries (a) is a person
whose property or interests in property are blocked pursuant to Section 1
of Executive Order 13224 of September 23, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) engages in any
dealings or transactions, or be otherwise associated, with any such person.
The Company and its Subsidiaries are in compliance with the USA Patriot Act
of 2001 (signed into law October 26, 2001).
4.35 Solvency. Based on the financial condition of the Company as of
--------
the Closing Date (after giving effect to the transactions contemplated
herein and in the other Transaction Documents), (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to be
paid on or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company's
assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets, after taking
into account all anticipated uses of the cash, would be sufficient to pay
all amounts on or in respect of its debt when such amounts are required to
be paid. The Company does not intend to incur debts beyond its ability to
pay such debts as they mature (taking into account the timing and amounts
of cash to be payable on or in respect to its debt).
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Each Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the
Company, acknowledging that the Company is relying upon the accuracy and
completeness of the representations and warranties set forth herein to, among
other things, ensure that registration under Section 5 of the Securities Act is
not required in connection with the sale of the Securities hereby, as follows
5.1 Organization; Authority. The Purchaser is an entity duly
------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or limited
liability company power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement has been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. Each Transaction Document to which it
is a party has been duly executed by such Purchaser, and when delivered by
such Purchaser in accordance with the terms hereof, will constitute the
valid and legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally
and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
5.2 Investment Intent. The Purchaser represents and warrants to the
------------------
Company that it is (a) an "accredited investor" as defined in Rule 501 of
Regulation D of the Securities Act; and (b) acquiring the Purchased
Securities to be purchased by it pursuant to this Agreement for investment
and not with a view to the distribution thereof.
5.3 Investment Purposes. (a) The Purchaser is acquiring the Securities
-------------------
for investment purposes only, for its own account, and not as nominee or
agent for any other Person, and not with a view to, or for resale in
connection with, any distribution thereof within the meaning of the
Securities Act, (b) it understands and acknowledges that the Securities
have not been registered under the Securities Act or any other securities
laws, (c) it is not an "affiliate" (as defined in Rule 144 under the
Securities Act) of the Company, (d) it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of its investment, (e) each is an "accredited investor" within
the meaning of Rule 501 of Regulation D under the Securities Act, (f) the
Company has made available to it the opportunity to ask questions and to
receive answers, and to obtain information necessary to evaluate the merits
and risks of this investment, and (g) the Purchaser understands,
acknowledges and agrees that the Securities have not been registered under
(and that the Company has no present intention to register the Securities
under) the Securities Act or applicable state securities laws, and may not
be sold or otherwise transferred by the Purchaser to a United States person
unless the Securities have been registered under the Securities Act and
applicable U.S. state securities laws or are sold or transferred in a
transaction exempt therefrom.
5.4 Short Selling. The Purchaser hereby represents to the Company that
-------------
the Purchaser will not make or maintain a "short" position in the Company's
securities (i) until such date as the Registration Statement is declared
effective by the Commission, and (ii) during such portion of the Mandatory
Conversion Period (as defined in the Note) until the Purchaser has
delivered its Optional Conversion Election Form (as defined in the Note).
6. FURTHER AGREEMENTS OF THE PARTIES.
6.1 Reserved Shares. For so long as the Securities are outstanding,
----------------
the Company shall reserve that number of shares of Common Stock issuable
upon conversion of the Notes and exercise of the Warrants, which shares
shall not be subject to any preemptive or other similar rights.
6.2 Access to Information. The Purchaser and its representatives shall
---------------------
be entitled, upon reasonable notice, to make such investigation of the
properties, business and operations of the Company and such examination of
the books, records and financial condition of the Company as it reasonably
requests to make extracts and copies of such books and records, upon
reasonable notice during regular business hours. Any such investigation and
examination shall be conducted during regular business hours and under
reasonable circumstances without material interference with the Company's
normal business operations, and the Company and its representatives shall
cooperate fully therein. No investigation by a Purchaser or its
Representatives prior to or after the date of this Agreement shall diminish
or obviate any of the representations, warranties, covenants or agreements
of the Company contained in this Agreement or the Transaction Documents. In
order for Purchaser to have full opportunity to make such physical,
business, accounting and legal review, examination of the affairs of the
Company and investigation as may be reasonably requested, the Company shall
cause its Representatives to cooperate fully with the Representatives of
the Purchaser in connection with such review and examination.
6.3 Confidentiality. Except as may be required by applicable Law or as
---------------
otherwise agreed among the parties hereto, neither the Company, the
Purchaser nor any of its Affiliates shall at any time divulge, disclose,
disseminate, announce or release any information to any Person concerning
this Agreement, the Transaction Documents, the transactions contemplated
hereby or thereby, any trade secrets or other confidential information of
the Company or the Purchaser, without first obtaining the prior written
consent of the other parties hereto.
6.4 Other Actions. The Company and the Purchaser agree to execute and
-------------
deliver such other documents and take such other actions as the other
parties may reasonably request for the purpose of carrying out the intent
of this Agreement and the Transaction Documents.
6.5 Indemnification. The Company shall indemnify and hold harmless
---------------
each Purchaser, the officers, directors, agents and employees of each of
them, each Person who controls any such Purchaser (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person,
to the fullest extent permitted by applicable law, from and against any and
all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorneys' fees) and expenses (including the cost
[including without limitation, reasonable attorneys' fees] and expenses
relating to an Indemnified Party's (as defined below) actions to enforce
the provisions of this Section 6.5) (collectively, "LOSSES"), as incurred,
----------- ------
to the extent arising out of or relating to (i) any material
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents, or, (ii) any material breach of any
covenant, agreement or obligation of the Company contained in the
Transaction Documents, or (iii) any cause of action, suit or claim brought
or made against such Indemnified Party and arising out of or resulting from
the execution, delivery, performance or enforcement of the Transaction
Documents executed pursuant hereto by any of the Indemnified Parties. If
the indemnification provided for in this Section 6.5 is held by a court of
-----------
competent jurisdiction to be unavailable to an Indemnified Party with
respect to any Losses, then the Indemnifying Party (as defined below), in
lieu of indemnifying such Indemnified Party hereunder, shall contribute to
the amount paid or payable by such Indemnified Party as a result of Losses
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the actions or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The Company
shall notify the Purchaser promptly of the institution, threat or assertion
of any proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Conduct of Indemnification Proceedings. If any proceeding shall be
--------------------------------------
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the
------------------
other party (the "INDEMNIFYING PARTY") in writing, and the Indemnifying
-------------------
Party shall have the right to assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, however, that the failure of any Indemnified Party to
give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to
the extent that such failure shall have materially and adversely prejudiced
the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; (2) the Indemnifying Party shall
have failed promptly to assume the defense of such proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
proceeding; or (3) the named parties to any such proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the
defense thereof and the reasonable fees and expenses of one separate
counsel for all Indemnified Parties in any matters related on a factual
basis shall be at the expense of the Indemnifying Party). The Indemnifying
Party shall not be liable for any settlement of any such proceeding
affected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any
pending proceeding in respect of which any Indemnified Party is a party,
unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter
of such proceeding.
The indemnification obligations under this Section 6.5 are in addition
to any indemnification or similar obligations under any other Transaction
Document.
(d) The provisions of this Section 6.5 shall survive the termination
of this Agreement for a period of three (3) years.
(e) All payments to be made to Purchaser pursuant to this Section 6.5,
shall be paid no later than five (5) business days after request for
payment is sent to the Company.
6.6 Co-Investment Rights. Each Purchaser hereby shall have the right
---------------------
of first refusal (which right shall be shared with the Prior Purchasers) to
invest (in such amounts that all of such Purchasers (including the Prior
Purchasers and other Purchasers who invest during the offering to which
this Agreement is a part) shall so elect) in any and all future financings
("FUTURE FINANCINGS") of the Company for thirty-six (36) months from the
------------------
date of this Agreement on the identical terms offered to other Investors.
The Company shall provide each Purchaser with (i) express prior written
notice of a Future Financing, and (ii) all required documentation requested
by the Purchaser related to any Future Financing all no later than ten (10)
business days prior to the final date of the offering period (or other
applicable investment period) for any such Future Financings. Such
Co-Investment rights shall continue even if a Purchaser elects not to
invest in one or more Future Financing.
6.7 Elimination of the Preferred Stock. The Company agrees that it
-------------------------------------
shall retire all of its Series A Preferred Stock (the "SUPER PREFERRED")
---------------
for $1.00 in the aggregate, upon the earlier to occur of (i) the sale of an
aggregate of $2,500,000 in additional identical promissory notes (of which
$1,250,000 in notes were previously sold in August 2006) to the Notes
following the Closing of the Bridge Financing (as defined in the Note)
and/or other securities, to repay the remaining 6% Convertible Notes (the
"6% NOTES") currently held by the Prior Note Creditors, and (ii) upon any
---------
default of the Notes or other outstanding debt/securities.
6.8 Board Representation. The Company, effective on the Closing,
---------------------
hereby grants Purchaser, which right shall be shared with all of the
Purchasers (including the Prior Purchasers and other Purchasers who invest
during the offering to which this Agreement is a part), the right to
appoint one Director, or if it so elects, a Board Advisory Seat (with both
the Prior Purchasers and current Purchaser electing as a group, one
Director or Board Advisory Seat), and to receive all financial and other
information provided to board members and to observe at all board meetings.
The Purchaser nominee shall be immediately included and maintained in the
Company's Director and Officer insurance coverage. In the event Purchaser
exercises its right to appoint a board member, the Company shall nominate
an additional board member so that the total number of board members will
be five (5). The Company shall provide to the Purchaser and any then
designated observer, concurrently with, and by the same method of,
transmission to the Board or any committee thereof, any notice of meeting,
agenda and other materials.
6.9 Bank Consent. The Company, prior to the Closing Date shall obtain
------------
the express written consent and/or necessary waivers from LaSalle Bank
Nation Association (the "BANK") and any other person, so as to approve
----
and/or waive, as the case may be (i) this Agreement; (ii) the Notes and
Warrants; (iii) the Bridge Financing; (iv) any defaults or event of default
that may have or will have occurred; and (v) all other such Transaction
Documents as may be deemed necessary (the "BANK CONSENT").
-------------
6.10 Fees and Expenses. 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, provided that the
Company shall pay all actual attorneys' fees and expenses (including
disbursements and out-of-pocket expenses) for the counsel to the Purchaser
incurred by the Purchaser 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 Closing and shall not exceed $25,000 and (iii) any
amendments, modifications or waivers of this Agreement or any of the other
Transaction Documents. In addition, the Company shall pay $20,000 towards
due diligence fees and expenses incurred by the Purchaser in connection
with the transaction contemplated by this Agreement.
7. OTHER OBLIGATIONS OF THE PARTIES.
7.1 Public Announcements. The Company hereby agrees not to, and not to
--------------------
permit its Subsidiaries to, issue any press release, or otherwise make any
public statements (collectively, "PRESS RELEASES") with respect to the
---------------
transactions contemplated hereby without the prior written consent of the
Purchaser, except as may be required by law. Furthermore, where the Company
desires to issue any such Press Release, the parties agree to cooperate in
good faith in order to prepare such Press Release in such form and
substance as is agreeable to both parties.
7.2 Furnishing Information. Each of the parties hereto will, as soon
-----------------------
as practicable after reasonable request therefor, furnish all the
information concerning it required for inclusion in any statement or
application made by any of them to any governmental or regulatory body in
connection with the transactions contemplated by this Agreement.
7.3 Transfer Restrictions.
----------------------
(a) The Underlying Shares may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of the
Underlying Shares other than pursuant to an effective registration
statement, or in connection with a pledge, as contemplated in Section
-------
7.3(b) hereof, the Company may require the transferor thereof to provide to
-----
the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred Underlying Shares under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is required by
this Section 7.3(b), of a legend on any of the Underlying Shares in the
--------------
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
--------------
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY.
(c) Certificates evidencing the Underlying Shares shall not contain
any legend (including the legend set forth in Section 7.3(b) (i) subsequent
-------------
to the date the Commission declares effective a registration statement
covering the resale of the Underlying Shares, (ii) following any sale of
the Underlying Shares pursuant to Rule 144, or (iii) if such Underlying
Shares are eligible for sale under Rule 144(k). The Company agrees that at
such time as such legend is no longer required under and pursuant to this
Section 7.3(c), it will, no later than two (2) Trading Days following the
--------------
delivery by a Purchaser to the Company or the Company's transfer agent of a
Note for conversion, a Warrant for exercise, a restricted stock certificate
or a lost securities affidavit, if any, of such securities are lost, as the
case may be, deliver to such Purchaser a certificate representing
Underlying Shares that is free from all restrictive and other legends (the
"DEADLINE"). The Company may not make any notation on its records or give
--------
instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section.
7.4 Underlying Share Delivery Damages. In the event that a
------------------------------------
non-legended certificate for Underlying Shares is not received by a
Purchaser by the Deadline, as partial compensation to the Purchaser for
such loss as a result of such delivery delay, the Company shall pay (as
liquidated damages and not a penalty) to the Purchaser for late issuance of
the Underlying Shares an amount of $100 per business day after the Deadline
for each $10,000 of principal amount of the Note being converted, and/or or
$10,000 of market value (based upon the then stock price of the Company) of
Underlying Shares of the Warrant being exercised for as the case may be,
which are not timely delivered. The penalties in this Section 7.4 are in
addition to any shall not limit any other penalty provisions in the
Transaction Documents and shall not limit the Purchaser's right to collect
other damages and/or remedies.
7.5 Integration. The Company shall not sell, offer for sale or solicit
-----------
offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer
or sale of any of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Purchaser or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market.
7.6 Use of Proceeds. The Company covenants and agrees that all of the
---------------
net proceeds that it receives from the sale of the Notes and Warrants
pursuant to this Agreement, shall be used solely to repay and/or retire the
6% Notes currently held by the Prior Note Creditors in the aggregate
principal amount of $1,012,434 as of the date hereof with the balance to be
utilized for working capital.
7.7 Form D and Blue Sky. The Company shall file a Form D with respect
-------------------
to the Securities as required under Regulation D under the Securities Act
and, upon written request, provide a copy thereof to each Purchaser
promptly after such filing. The Company shall, on or before the Closing,
take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for or to qualify any Securities for sale to
the Purchaser 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 Purchaser on or prior to the
Closing. The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or
"Blue Sky" laws of the states of the United States following the Closing.
7.8 Reservation of Common Stock. As of the date hereof, the Company
-----------------------------
has reserved and the Company shall continue to reserve and keep available
at all times, free of preemptive rights, a sufficient number of shares of
Common Stock for the purpose of enabling the Company to issue the
Conversion Shares and the Warrant Shares.
7.9 Securities Laws Disclosure. The Company shall, by the end of
----------------------------
business on the second (2nd) Business Day following the Closing, issue a
press release or file a Current Report on Form 8-K, disclosing the
transactions contemplated hereby and make such other filings and notices in
the manner and time required by the Commission.
8. CONDITIONS TO CLOSING.
8.1 Conditions of Obligations of the Purchaser. The obligation of the
------------------------------------------
Purchaser to purchase and pay for the Securities is subject to the
fulfillment prior to or on the Closing Date of the following conditions,
any of which may be waived in whole or in part by the Purchaser:
(a) Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of the Company under this Agreement shall be deemed to have been
made again on the Closing Date (other than those representations and
warranties made expressly as of a date prior to the Closing Date) and shall
then be true and correct. The Company shall represent to the Purchaser that
all of the information contained herein does not contain any untrue
statement of a material fact, or contain any omission of a material fact
relating to such information that is necessary in order to make the
information, in light of the circumstances under which the information is
provided, not misleading.
(b) Compliance with Agreement. The Company shall have performed and
---------------------------
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by the Company on or before the
Closing Date.
(c) Approvals. The Company shall have obtained any and all consents,
---------
waivers, approvals or authorizations, with or by any Governmental Body or
any other Person required for the valid execution of this Agreement and the
transactions contemplated hereby.
(d) No Injunction. No Governmental Body or any other Person shall have
-------------
issued an Order which shall then be in effect restraining or prohibiting
the completion of the transactions contemplated hereby, nor shall any such
Order be threatened or pending.
(e) No Material Adverse Change. Since June 30, 2006, there shall not
---------------------------
have been a Material Adverse Change.
(f) Certificate of Officer. The Company shall have delivered to the
------------------------
Purchaser a certificate dated the Closing Date, executed by its Chief
Executive Officer and Chief Financial Officer, certifying the satisfaction
of the conditions specified in paragraphs (a), (b), (c), (d) and (e) of
this Section 8.1.
------------
(g) Opinion of the Company's Counsel. The Purchaser shall have
------------------------------------
received from Company counsel, in a form satisfactory to the Purchaser and
its counsel, an opinion dated the Closing Date.
(h) Certificate of Incorporation and By-Laws. The Certificate of
--------------------------------------------
Incorporation, as amended, and the By-Laws, shall be in full force and
effect as of the Closing under the laws of the State of Nevada and shall
not have been further amended or modified. A certified copy of the
Certificate of Incorporation, as so amended, shall have been delivered to
counsel for the Purchaser.
(i) Closing Documents Provided By Company. The Purchaser (or such
-----------------------------------------
other person as referred to herein) shall have received the following:
(i) a Note in favor of each Purchaser, duly executed by the
Company, entitling the Purchaser to payment in the amount as stated in
Schedule 1.1 herein;
(ii) Warrants in the name of the Purchaser, duly executed by the
Company, entitling the Purchaser to purchase such amount of Warrant
Shares as stated in Schedule 1.1 herein;
(iii) Warrants to purchase 100,000 and 133,000 shares assigned to
the Purchaser by Mastodon Ventures, Inc. and Sands Brothers Venture
Capital, LLC, respectively;
(iv) the Registration Rights Agreement duly executed by the
Company;
(v) the Security Agreement duly executed by the Company and all
documents necessary to perfect the security interest of the Purchaser;
(vi) this Agreement duly executed by the Company;
(vii) Secretary's Certificate in a form reasonably acceptable to
Purchaser, with good standing certificates of the Company and each
Subsidiary as of a recent date;
(viii) Legal Opinion;
(ix) Copy of the Bank Consent for the Company to enter into this
new debt and all necessary waivers of Bank covenants prohibiting such
action;
(x) A Waiver Agreement executed by the Prior Purchasers;
(xi) Copies of all Uniform Commercial Code Financing Statements
filed in the State of Nevada in connection with the Security
Agreement; and
(ix) such other documents as the Purchaser and/or its legal
counsel may request and/or deem necessary (including, but not limited
to, a Good Standing Certificate of recent date from the Secretary of
State of the State of incorporation).
8.2 Conditions of Company's Obligations. The Company's obligation to
------------------------------------
issue and sell the Securities to the Purchaser on the Closing Date is
subject to the fulfillment prior to or on the Closing Date of the following
conditions, any of which may be waived in whole or in part by the Company:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Purchaser under this Agreement shall be deemed to have been made
again on the Closing Date and shall then be true and correct in all
material respects.
(b) Compliance with Agreement. The Purchaser shall have performed and
-------------------------
complied with all agreements and conditions required by this Agreement to
be performed or complied with by such Purchaser on or before the Closing.
(c) Approvals. The Purchaser shall have obtained any and all consents,
---------
waivers, approvals, Permits or authorizations, with or by any Governmental
Body or any other Person required for the valid execution of this Agreement
and the transactions contemplated hereby including, but not limited to the
approval by.
(d) Payment of Purchase Price. The Purchaser shall have delivered to
--------------------------
the Company the Purchase Price specified in Section 2.1 hereof (less
-----------
commissions and all fees and expenses of Purchaser counsel, and including
the due diligence fee of $20,000).
(e) No Injunction. No Governmental Body or any other Person shall have
-------------
issued an Order which shall then be in effect restraining or prohibiting
the completion of the transactions contemplated hereby including, but not
limited to, the, Acquisition nor shall any such Order be threatened or
pending.
(f) Closing Documents Provided By Purchaser. The Company shall have
-----------------------------------------
received the following:
(i) this Agreement duly executed by the Purchaser;
(ii) the Registration Rights Agreement duly executed by the
Purchaser.
(iii) the Security Agreement executed by the Purchaser
8.3 Post Closing Obligations. Following the Closing Date:
--------------------------
(i) the Company shall file all necessary documents in accordance
with their obligations under the Security Agreement;
(ii) Purchaser Counsel shall file all post closing Blue Sky
filings in the necessary jurisdictions.
9. MISCELLANEOUS.
9.1 Certain Definitions.
--------------------
"ACTION" shall have the meaning ascribed to such term in Section 4.20.
------
"AFFILIATE" of any Person means any Person that directly or indirectly
---------
controls, or is under control with, or is controlled by, such Person. As
used in this definition, "CONTROL" (including with its correlative
-------
meanings, "CONTROLLED BY" and "UNDER CONTROL WITH") shall mean the
-------------- --------------------
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise).
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
------------
shall be a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other
governmental action to close.
"CLOSING" means the closing of the purchase and sale of the Notes and
-------
the Warrants pursuant to Section 3.1 on October __, 2006, or such other
date as mutually agreed to by the parties.
"CLOSING DATE" means the date of the Closing.
-------------
"CODE" means the Internal Revenue Code of 1986, as amended, and the
----
rules and regulations promulgated thereunder.
"COMMISSION" means the Securities and Exchange Commission.
----------
"COMMON STOCK" means the shares of common stock, par value $0.001 per
-------------
share, of the Company.
"COMPANY COUNSEL" means Xxxxx X. Xxxx, Esq.
----------------
"CONTRACT" means any contract, agreement, indenture, note, bond, loan,
--------
instrument, lease, conditional sales contract, mortgage, license,
franchise, insurance policy, commitment or other arrangement or agreement,
whether written or oral.
"CONVERSION SHARES" means all shares of Common Stock issuable upon
------------------
conversion of the Notes.
"EMPLOYEE" means any current employee, office consultant, agent,
--------
officer or director of the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
-------------
"EXHIBITS" shall mean the following exhibits attached hereto and made
--------
a part of this Agreement:
Exhibit A - Registration Rights Agreement
----------
Exhibit B - Form of Warrants
----------
Exhibit C - Form of Note
----------
Exhibit D - Security Agreement
----------
"GOVERNMENTAL BODY" means any government or governmental or regulatory
-----------------
body thereof, or political subdivision thereof, whether federal, state,
local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
"LAW" means any federal, state, local or foreign law (including law),
---
statute, code, ordinance, rule, regulation or other requirement or
guideline.
"LEGAL PROCEEDING" means any judicial, administrative or arbitral
-----------------
actions, suits, proceedings (public or private), claims or governmental
proceedings.
"LIEN" means any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind, including, without limitation, any conditional
sale or other title retention agreement, any lease in the nature thereof
and the filing of or agreement to give any financing statement under the
Uniform Commercial Code (or similar laws) of any jurisdiction and including
any lien or charge arising by statute or other law.
"MATERIAL ADVERSE CHANGE" means any material adverse change in the
-------------------------
business, assets, liabilities, prospects, properties, results of operations
or condition (financial or otherwise) of the Company and its Subsidiaries,
taken as a whole.
"MATERIAL ADVERSE EFFECT" means any event, circumstance, condition,
fact, effect, or other matter which has had or could reasonably be expected
to have a material adverse effect (i) on the business, assets, liabilities,
prospects, properties, results of operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole or (ii) on
the ability of the Company or its Subsidiaries to perform on a timely basis
any material obligation under this Agreement or to consummate the
transactions contemplated hereby.
"NOTES" shall have the meaning ascribed to such term in Section 1.1.
----- -----------
"ORDER" means any order, injunction, judgment, decree, ruling, writ,
-----
assessment or arbitration award.
"PERMITS" means any approvals, authorizations, consents, licenses,
-------
permits or certificates by or of any Governmental Body.
"PERSON" means any individual, corporation, partnership, firm, joint
------
venture, association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
"REGISTRATION STATEMENT" means a registration statement meeting the
-----------------------
requirements set forth in the Registration Rights Agreement and covering,
among other items, the resale by the Purchaser of the Underlying Shares.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
-------------------------------
Agreement, dated as of the date of this Agreement, among the Company and
the Purchaser, in the form of EXHIBIT A hereto.
----------
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
---------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC REPORTS" shall have the meaning ascribed to such term in Section
------------ -------
4.9.
---
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
---------------
similar federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect at
the time.
"SUBSIDIARY" shall have the meaning ascribed to such term in Section
---------- -------
4.4.
---
"TAXES" means any federal, state, local or foreign income, gross
-----
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, share capital, franchise,
profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value-added, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"TRADING DAY" means (a) a day on which the Common Stock is traded on a
-----------
Trading Market, or (b) if the Common Stock is not quoted on a Trading
Market, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding to its functions of reporting
price); provided, that in the event that the Common Stock is not listed or
quoted as set forth in (a), and (b) hereof, then Trading Day shall mean a
Business Day;
"TRADING MARKET" means the following markets or exchanges on which the
--------------
Common Stock is listed or quoted for trading on the date in question: the
OTC Bulletin Board, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
"WARRANT SHARES" means all shares of Common Stock issuable upon
---------------
exercise of the Warrants.
"WARRANTS" shall have the meaning ascribed to such term in Section
--------- -------
1.1.
---
9.2 Further Assurances. The Company and the Purchaser agree to execute
------------------
and deliver such other documents or agreements as may be necessary or
desirable for the implementation of this Agreement and the consummation of
the transactions contemplated hereby.
9.3 Entire Agreement; Amendments and Waivers. This Agreement
--------------------------------------------
(including the schedules and exhibits hereto) represents the entire
understanding and agreement among the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the parties hereto. No action taken
pursuant to this Agreement, including without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representation, warranty,
covenant or agreement contained herein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed
as a further or continuing waiver of such breach or as a waiver of any
other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
of such right, power or remedy by such party preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.
9.4 Construction. The headings herein are for convenience only, do not
------------
constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against
any party.
9.5 Successors and Assigns. This Agreement shall be binding upon and
-----------------------
inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser.
Any Purchaser, however, may assign any or all of its Securities and/or
rights under any of the Transaction Documents to any Person, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities and otherwise, by the provisions hereof that apply to the
"Purchaser."
9.6 No Third-Party Beneficiaries. This Agreement is intended for the
-----------------------------
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
9.7 Governing Law. This Agreement shall be governed by and construed
--------------
exclusively in accordance with the internal laws of the State of New York
without regard to the conflicts of laws principles thereof. The parties
hereto hereby irrevocably agree that any suit or proceeding arising
directly and/or indirectly pursuant to or under this Agreement, shall be
brought solely in a federal or state court located in the City, County and
State of New York. By its execution hereof, the parties hereby covenant and
irrevocably submit to the in personam jurisdiction of the federal and state
-----------
courts located in the City, County and State of New York and agree that any
process in any such action may be served upon any of them personally, or by
certified mail or registered mail upon them or their agent, return receipt
requested, with the same full force and effect as if personally served upon
them in New York City. The parties hereto waive any claim that any such
jurisdiction is not a convenient forum for any such suit or proceeding and
any defense or lack of in personam jurisdiction with respect thereto. In
-----------
the event of any such action or proceeding, the party prevailing therein
shall be entitled to payment from the other party hereto of all of its
reasonable legal fees and expenses.
9.8 Headings; Interpretive Matters. The section headings of this
--------------------------------
Agreement are for reference purposes only and are to be given no effect in
the construction or interpretation of this Agreement. No provision of this
Agreement will be interpreted in favor of, or against, any of the parties
hereto by reason of the extent to which any such party or its counsel
participated in the drafting thereof or by reason of the extent to which
any such provision is inconsistent with any prior draft hereof or thereof.
9.9 Confidentiality. Each party hereto covenants and agrees to treat
---------------
any non-public information provided to it by the Company concerning the
business and finances of the Company ("CORPORATE INFORMATION") as
----------------------
confidential and agrees further that it will not use, exploit, reproduce,
disclose or provide Corporate Information to any third-party (other than
any agents of the parties who are bound by substantially similar
obligations of confidentiality) on its own behalf or otherwise, except with
the consent of the Company or as required by law, legal process or any
federal or state regulatory body having jurisdiction over such party. The
provisions of this Section 9.9 shall not apply to any information which:
-----------
(a) was within the public domain prior to the time of disclosure of
Corporate Information to the receiving party or which comes into the public
domain other than as a result of a breach by the party of this Section 9.9;
-----------
(b) was rightfully acquired by the receiving party from a third party
without, to the knowledge of the receiving party, any restriction or any
obligation of confidentiality; or
(c) was independently developed by the receiving party without any use
or reference to the Corporate Information.
The provisions of this Section 9.9 shall survive the termination of
this Agreement, either in whole or as to any party, for a period of two (2)
years.
9.10 Notices. Any and all notices or other communications or
-------
deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on (a) the next Business
Day, if sent by U.S. nationally recognized overnight courier service, or
(b) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications to the Company shall
be as set forth below and for each Purchaser shall be as set forth on the
signature pages attached hereto.
If to the Company:
XA, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx, President
Telephone: 000-000-0000
With a copy to:
Xxxxx X. Xxxx
Attorney at Law
0000 Xxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: 000-000-0000
If to the Purchaser:
Vision Capital Advisors, LLC
00 Xxxx 00xx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000-0000
Telephone: (000) 000-0000
With a copy to:
Xxxxxx Xxxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxxxx Xxxxxxx
Telephone: (000) 000-0000
All notices are effective upon receipt or upon refusal if
properly delivered.
9.11 Severability. If any provision of this Agreement is invalid or
------------
unenforceable, the balance of this Agreement shall remain in effect.
9.12 Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and insure to the benefit of the parties and their respective successors
and permitted assigns. No assignment of this Agreement or of any rights or
obligations hereunder may be made by the Company or the Purchaser (by
operation of law or otherwise) without the prior written consent of the
other parties hereto and any attempted assignment without the required
consents shall be void.
9.13 Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
9.14 Incorporation by Reference; Breach of Security Agreement. Any
-----------------------------------------------------------
default and/or breach of the Security Agreement shall be considered a
breach and/or default of this Agreement. All covenants, agreements and
obligations of the Company in the Security Agreement shall be expressly
incorporated by reference herein as if made directly herein and shall
survive termination of this Agreement.
[The rest of this page has been intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have executed or have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first written above.
XA, INC.
By: /s/ Xxxxxx Xxxxxx
------------------------
Xxxxxx Xxxxxx
Chief Executive Officer
PURCHASER'S SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
Vision Opportunity Master Fund, Ltd.
------------------------------------
By: /s/ Xxxx Xxxxxxxx
--------------------------
Name: Xxxx Xxxxxxxx
Title: Portfolio Manager
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
-----------------------------
Address
000-000-0000
-----------------------------
Facsimile Number
$1,250,000
SCHEDULE 1.1
PURCHASER
NAME AND ADDRESS PRINCIPAL NOTE WARRANT SHARES
OF EACH PURCHASER AMOUNT PURCHASED TO BE RECEIVED
----------------- ---------------- --------------
Vision Opportunity Master Fund, Ltd.
c/o Vision Capital Advisors, LLC
00 Xxxx 00xx Xxxxxx 187,500 at $1.10
0xx Xxxxx x0,000,000
Xxx Xxxx, XX 00000-0000 100,000 at $.30
(000) 000-0000
(000) 000-0000 Fax
