EXHIBIT 4.9
ONE VOICE TECHNOLOGIES, INC.
SECURITIES PURCHASE AGREEMENT
September __, 2001
TABLE OF CONTENTS
Page
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1. Agreement to Sell and Purchase..................................................................... 1
2. Fees and Warrants.................................................................................. 1
3. Closing, Delivery and Payment...................................................................... 2
3.1 Closing................................................................................... 2
3.2 Delivery.................................................................................. 2
4. Representations and Warranties of the Company...................................................... 2
4.1 Organization, Good Standing and Qualification............................................. 2
4.2 Subsidiaries.............................................................................. 3
4.3 Capitalization; Voting Rights............................................................. 3
4.4 Authorization; Binding Obligations........................................................ 4
4.5 Liabilities............................................................................... 4
4.6 Agreements; Action........................................................................ 4
4.7 Obligations to Related Parties............................................................ 5
4.8 Changes................................................................................... 5
4.9 Title to Properties and Assets; Liens, Etc................................................ 7
4.10 Intellectual Property..................................................................... 7
4.11 Compliance with Other Instruments......................................................... 7
4.12 Litigation................................................................................ 8
4.13 Tax Returns and Payments.................................................................. 8
4.14 Employees................................................................................. 8
4.15 Registration Rights and Voting Rights..................................................... 8
4.16 Compliance with Laws; Permits............................................................. 9
4.17 Environmental and Safety Laws............................................................. 9
4.18 Valid Offering............................................................................ 9
4.19 Full Disclosure........................................................................... 9
4.20 Insurance................................................................................. 10
4.21 SEC Reports............................................................................... 10
4.22 No Market Manipulation.................................................................... 10
4.23 Listing................................................................................... 10
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4.24 No Integrated Offering..................................................................... 10
4.25 Stop Transfer.............................................................................. 10
4.26 Dilution................................................................................... 11
5. Representations and Warranties of the Purchasers.................................................... 11
5.1 Requisite Power and Authority.............................................................. 11
5.2 Investment Representations................................................................. 11
5.3 Purchaser Bears Economic Risk.............................................................. 11
5.4 Acquisition for Own Account................................................................ 11
5.5 Purchaser Can Protect Its Interest......................................................... 11
5.6 Accredited Investor........................................................................ 12
5.7 Regulatory Compliance...................................................................... 12
5.8 Legends.................................................................................... 12
5.9 Confidentiality............................................................................ 13
5.10 Certain Acknowledgments.................................................................... 13
6. Covenants of the Company............................................................................ 13
6.1 Stop-Orders................................................................................ 13
6.2 Listing.................................................................................... 13
6.3 Market Regulations......................................................................... 13
6.4 Reporting Requirements.................................................................... 13
6.5 Use of Funds............................................................................... 14
6.6 Access to Facilities....................................................................... 14
6.7 Taxes...................................................................................... 14
6.8 Insurance.................................................................................. 14
6.9 Books and Records.......................................................................... 14
6.10 Intellectual Property...................................................................... 15
6.11 Confidentiality............................................................................ 15
6.12 Required Approvals......................................................................... 15
6.13 Reissuance of Securities................................................................... 16
6.14 Opinion.................................................................................... 16
7. Covenants of the Company and Purchasers Regarding Indemnification................................... 16
7.1 Company Indemnification.................................................................... 17
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7.2 Purchaser's Indemnification................................................................ 17
7.3 Limitations................................................................................ 17
7.4 Procedures................................................................................. 17
8. Conversion of Convertible Notes..................................................................... 18
8.1 Mechanics of Conversion.................................................................... 18
8.2 Mandatory Redemption....................................................................... 19
8.3 Maximum Conversion......................................................................... 19
8.4 Injunction - Posting of Bond............................................................... 19
8.5 Buy-In..................................................................................... 20
8.6 Optional Redemption........................................................................ 20
8.7 Nasdaq Approval............................................................................ 21
9. Registration Rights................................................................................. 21
9.1 Registration Rights Granted................................................................ 21
9.2 Registration Procedures.................................................................... 23
9.3 Provision of Documents..................................................................... 24
9.4 Non-Registration Events.................................................................... 24
9.5 Expenses................................................................................... 25
9.6 Indemnification and Contribution........................................................... 25
10. Offering Restrictions............................................................................... 28
11. Security Interest................................................................................... 28
12. Miscellaneous....................................................................................... 28
12.1 Governing Law.............................................................................. 28
12.2 Survival................................................................................... 28
12.3 Successors and Assigns..................................................................... 28
12.4 Entire Agreement........................................................................... 28
12.5 Severability............................................................................... 28
12.6 Amendment and Waiver....................................................................... 29
12.7 Delays or Omissions........................................................................ 29
12.8 Notices.................................................................................... 29
12.9 Attorneys' Fees............................................................................ 29
12.10 Titles and Subtitles....................................................................... 29
12.11 Counterparts............................................................................... 30
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12.12 Broker's Fees.............................................................................. 30
12.13 Construction............................................................................... 30
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ONE VOICE TECHNOLOGIES, INC.
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is made and entered into as
of September __, 2001, by and among ONE VOICE TECHNOLOGIES, INC., a Nevada
corporation (the "Company"), and the Purchaser listed on Exhibit A hereto (the
"Purchaser").
Recitals
Whereas, the Company has authorized the sale of 8% Convertible Notes in an
aggregate principal amount of $500,000 (the "Notes"), convertible into shares of
the Company's common stock, $0.001 par value per share (the "Common Stock");
Whereas, the Company wishes to issues warrants (the "Warrants") to the Purchaser
to purchase shares of the Company's Common Stock in connection with Purchaser's
purchase of the Notes;
Whereas, Purchaser desires to purchase the Notes and Warrants on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Notes and Warrants to
Purchaser on the terms and conditions set forth herein.
Agreement
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company Notes in the amount set forth next to the Purchaser's
name on Exhibit A under the column heading "Closing Date Notes," convertible in
accordance with the terms thereof into shares of the Company's Common Stock,
which amount shall be equal to $500,000. The Notes purchased on the Closing Date
shall be known as the "Offering." The form of Notes is annexed hereto as Exhibit
B. The Notes will have a Maturity Date (as defined in the Notes) two years from
the date of issuance. Collectively, the Notes and Warrants (as defined in
Section 2) and Common Stock issuable upon conversion of the Notes and exercise
of the Warrants are referred to as the "Securities."
2. Fees and Warrants.
(a) The Company will issue and deliver to the persons listed on
Exhibit A under the column heading "Warrant Holders", or to such other persons
as the Purchaser shall otherwise designate (such named persons, as they may be
so otherwise designated, being referred to as the "Warrant Recipients"),
Warrants to purchase shares of Common Stock in the amounts designated on Exhibit
A hereto in connection with the Offering (the "Warrants") pursuant to Section 1
hereof. The Warrants must be delivered on the Closing Date. The aggregate number
of shares of Common Stock purchasable upon exercise of the Warrants granted on
the Closing Date is set forth on Exhibit A hereto. A form of Warrant is annexed
hereto as Exhibit C. The per share "Purchase Price" of Common Stock as defined
in the Warrants shall be equal to the lesser of (i) 120% of the average of the
three lowest closing prices of the Common Stock as reported by Bloomberg
Financial for the Pink Sheets, the NASD OTC Bulletin Board, NASDAQ SmallCap
Market, NASDAQ National Market, American Stock Exchange, or New York Stock
Exchange (each of the foregoing the "Principal Market"), or such other principal
market or exchange where the
Common Stock is listed or traded, for the ten (10) trading days preceding but
not including the Closing Date or (ii) 120% of the average of the three lowest
closing prices of the Common Stock as reported by Bloomberg Financial on the
Principal Market for the ten trading days prior to but not including the date
the Warrant is exercised. All the representations, covenants, warranties,
undertakings, and indemnification, and other rights made or granted to or for
the benefit of Purchaser are hereby also made and granted to the holders of the
Warrants in respect of the Warrants and shares of the Company's Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares").
(b) The Company shall reimburse Purchaser for its reasonable
legal fees of $5,000 for services rendered to Purchaser in preparation of this
Agreement and the Related Agreements. Amounts required to be paid hereunder will
be paid at the Closing.
(c) The Company will pay a cash fee in the amount of ten
percent (10%) of the aggregate gross purchase price to be paid to the Company
from the sale of Notes in the Offering the "Fund Manager's Fee") to the persons
listed on Exhibit A under the column heading "Fund Manager's Fee Recipient." The
Fund Manager's Fee must be paid on the Closing Date. The aforementioned Fund
Manager's Fee and legal fees will be payable at the Closing out of funds held
pursuant to a Funds Escrow Agreement to be entered into by the Company,
Purchaser and an Escrow Agent. Failure to timely deliver the Fund Manager's Fee,
or the Warrants shall be deemed an Event of Default as defined in Article III of
the Notes.
3. Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "Closing"), which closing
is comprised of Purchaser's purchase of Notes in the aggregate principal amount
of $500,000, shall take place on the date hereof, at the offices of Xxxxxx X.
Xxxxxx, Esq., 000 Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, or at
such other time or place as the Company and Purchaser may mutually agree (such
date is hereinafter referred to as the "Closing Date").
3.2 Delivery. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchaser an applicable Note
representing the aggregate principal amount borrowed by the Company at the
Closing from the Purchaser and a warrant certificate registered in the
Purchaser's name representing the number of Warrant Shares as to which the
Warrant is exercisable pursuant to this Agreement, against payment of the
purchase price therefor by certified funds or wire transfer made payable to the
order of the Company, cancellation of indebtedness or any combination of the
foregoing.
4. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser as of
the date of this Agreement as set forth below.
4.1 Organization, Good Standing and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada. The Company has the corporate power and authority
to own and operate its properties and assets, to execute and deliver this
Agreement, the Warrants to be issued in connection with this
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Agreement, the Funds Escrow Agreement, the Security Agreement and all other
agreements referred to herein (collectively, the "Related Agreements"), to issue
and sell the Notes and the shares of Common Stock issuable upon conversion of
the Notes (the "Conversion Shares"), to issue and sell the Warrants and the
Warrant Shares, and to carry out the provisions of this Agreement and the
Related Agreements and to carry on its business as presently conducted and as
presently proposed to be conducted. The Company is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
4.2 Subsidiaries. Except as disclosed on Schedule 4.2, the Company
does not own or control any equity security or other interest of any other
corporation, limited partnership or other business entity. If any entity is
listed on Schedule 4.2. and the Company owns a controlling interest in such
entity, each of the representations and warranties set forth in this Section 4
are being hereby restated with respect to such entity (modified as appropriate
to the nature of such entity.)
4.3 Capitalization; Voting Rights. Except as set forth on Schedule
4.3:
(a) The authorized capital stock of the Company, immediately
prior to the Closing, consists of (i) 50,000,000 shares of Common Stock, par
value $0.001 per share, 14,549,651 shares of which are issued and outstanding as
of August 13, 2001, and (ii) 10,000,000 shares of Preferred Stock, par value
$0.001 per share, no shares of which are issued and outstanding.
(b) Other than (i) the shares reserved for issuance under the
Company's Stock Option Plan and (ii) shares which may be granted pursuant to
this Agreement and the Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or arrangements or agreements of any
kind for the purchase or acquisition from the Company of any of its securities.
Neither the offer, issuance or sale of any of the Notes or Warrants, or the
issuance of any of the Conversion Shares or Warrant Shares, nor the consummation
of any transaction contemplated hereby will result in a change in the price or
number of any securities of the Company outstanding, under anti-dilution or
other similar provisions contained in or affecting any such securities.
(c) All issued and outstanding shares of the Company's Common
Stock and Preferred Stock (to the extent Preferred Stock has been issued) (i)
have been duly authorized and validly issued and are fully paid and
nonassessable and (ii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the
shares of Preferred Stock and the Common Stock are as stated in the Articles of
Incorporation (the "Charter"). The Conversion Shares and Warrant Shares have
been duly and validly reserved for issuance. When issued in compliance with the
provisions of this Agreement and the Company's Charter, the Notes, Warrants,
Conversion Shares and Warrant Shares (sometimes collectively referred to herein
as the "Securities") will be validly issued, fully paid and nonassessable, and
will be free of any liens or encumbrances; provided, however, that the
Securities may be subject to
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restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.
(e) No stock plan, stock purchase, stock option or other
agreement or understanding between the Company and any holder of any equity
securities or rights to purchase equity securities provides for acceleration or
other changes in the vesting provisions or other terms of such agreement or
understanding as the result of any merger, consolidated sale of stock or assets,
change in control or any other transaction(s) by the Company, including the
transactions contemplated hereunder.
4.4 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder at each Closing and the authorization,
sale, issuance and delivery of the Securities pursuant hereto and the Related
Agreements has been taken or will be taken prior to the Closing. The Agreement
and the Related Agreements, when executed and delivered, will be valid and
binding obligations of the Company enforceable in accordance with their terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights, and (b) general principles of equity that restrict the
availability of equitable remedies. The sale of the Notes and the subsequent
conversion of the Notes into Conversion Shares are not and will not be subject
to any preemptive rights or rights of first refusal that have not been properly
waived or complied with. The sale of the Warrants and the subsequent exercise of
the Warrants for Warrant Shares are not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly waived
or complied with. The Notes and the Warrants, when executed and delivered in
accordance with the terms of this Agreement, will be valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
4.5 Liabilities. The Company has no material liabilities and, to the
best of its knowledge, knows of no material contingent liabilities, except
current liabilities incurred in the ordinary course of business which have not
been, either in any individual case or in the aggregate, materially adverse.
4.6 Agreements; Action.
(a) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the transfer or license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products), or (iii) provisions restricting the development, manufacture or
distribution of the Company's products or services, or (iv) indemnification by
the Company with respect to infringements of proprietary rights.
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(b) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess of
$100,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(d) Except as set forth on Schedule 4.6, the Company has not
engaged in the past two years in any discussion (i) with any representative of
any corporation or corporations regarding the consolidation or merger of the
Company with or into any such corporation or corporations, (ii) with any
corporation, partnership, association or other business entity or any individual
regarding the sale, conveyance or disposition of all or substantially all of the
assets of the Company, or a transaction or series of related transactions in
which more than 50% of the voting power of the Company is disposed of or (iii)
regarding any other form of acquisition, liquidation, dissolution or winding up
of the Company.
4.7 Obligations to Related Parties. There are no obligations of the
Company to officers, directors, stockholders or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). None of the officers, directors or stockholders of
the Company, or any members of their immediate families, are indebted to the
Company. None of the officers, directors or, to the best of the Company's
knowledge, key employees or stockholders of the Company or any members of their
immediate families, are indebted to the Company or have any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, other than passive investments in
publicly traded companies (representing less than 1% of such company) which may
compete with the Company. No officer, director or stockholder, or any member of
their immediate families, is, directly or indirectly, interested in any material
contract with the Company and no agreements, understandings or proposed
transactions are contemplated between the Company and any such person. The
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
4.8 Changes. Since June 30, 2001, there has not been:
(a) Any change in the assets, liabilities, financial condition,
prospects or operations of the Company, other than changes in the ordinary
course of business, none of which
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individually or in the aggregate has had or is reasonably expected to have a
material adverse effect on such assets, liabilities, financial condition,
prospects or operations of the Company;
(b) Any resignation or termination of any officer, key employee
or group of employees of the Company;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity related to the Company;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is
a party or by which it is bound which may materially and adversely affect the
business, assets, liabilities, financial condition, operations or prospects of
the Company;
(m) Any other event or condition of any character that, either
individually or cumulatively, has or may materially and adversely affect the
business, assets, liabilities, financial condition, prospects or operations of
the Company; or
(n) Any arrangement or commitment by the Company to do any of the
acts described in subsection (a) through (m) above.
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4.9 Title to Properties and Assets; Liens, Etc. The Company has good
and marketable title to its properties and assets, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) those resulting from taxes which have not
yet become delinquent, (b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company, and (c) those that have otherwise arisen in the
ordinary course of business. All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company are in good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used. The Company is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.
4.10 Intellectual Property.
(a) The Company owns or possesses sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes necessary for
its business as now conducted and to the Company's knowledge as presently
proposed to be conducted (the "Intellectual Property"), without any known
infringement of the rights of others. There are no outstanding options, licenses
or agreements of any kind relating to the foregoing proprietary rights, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard products.
(b) The Company has not received any communications alleging that
the Company has violated any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity, nor is the Company aware of any basis therefor.
(c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been rightfully assigned to
the Company.
4.11 Compliance with Other Instruments. The Company is not in violation
or default of any term of its Charter or Bylaws, or of any provision of any
mortgage, indenture, contract, agreement, instrument or contract to which it is
party or by which it is bound or of any judgment, decree, order or writ. The
execution, delivery and performance of and compliance with this Agreement and
the Related Agreements, and the issuance and sale of Securities pursuant hereto,
will not, with or without the passage of time or giving of notice, result in any
such material violation, or be in conflict with or constitute a default under
any such term or provision, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.
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4.12 Litigation. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement or the Related Agreements or the
right of the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for any of the foregoing. 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. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
4.13 Tax Returns and Payments. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing, have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (a) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (b) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
4.14 Employees. To the Company's knowledge, no employee of the Company,
nor any consultant with whom the Company has contracted, is in violation of any
term of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company is not aware that any of its employees is 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 their duties to the Company. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer, key employee or
group of employees intends to terminate his, her or their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.
4.15 Registration Rights and Voting Rights. Except as set forth on
Schedule 4.15, the Company is presently not under any obligation, and has not
granted any rights, to register any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued. To the
Company's knowledge, no stockholder of the Company has entered into any
agreement with respect to the voting of equity securities of the Company.
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4.16 Compliance with Laws; Permits. To its knowledge, the Company is not
in violation of any applicable statute, rule, regulation, order or restriction
of any domestic or foreign government or any instrumentality or agency thereof
in respect of the conduct of its business or the ownership of its properties
which violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement and the
issuance of any of the Securities, except such as has been duly and validly
obtained or filed, or with respect to any filings that must be made after the
Closing, as will be filed in a timely manner. The Company has all franchises,
permits, licenses and any similar authority necessary for the conduct of its
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects or financial condition of
the Company.
4.17 Environmental and Safety Laws. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation. No Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or, to the Company's knowledge, by
any other person or entity on any property owned, leased or used by the Company.
For the purposes of the preceding sentence, "Hazardous Materials" shall mean (a)
materials which are listed or otherwise defined as "hazardous" or "toxic" under
any applicable local, state, federal and/or foreign laws and regulations that
govern the existence and/or remedy of contamination on property, the protection
of the environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials, or (b)
any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws. Neither the Company nor any agent on its behalf has
solicited or will solicit any offers to sell or has offered to sell or will
offer to sell all or any part of the Securities to any person or persons so as
to bring the sale of such Securities by the Company within the registration
provisions of the Securities Act or any state securities laws.
4.19 Full Disclosure. The Company has provided the Purchaser with all
information requested by the Purchaser in connection with its decision to
purchase the Notes and Warrants, including all information the Company believes
is reasonably necessary to make such investment decision. Neither this
Agreement, the exhibits and schedules hereto, the Related Agreements nor any
other document delivered by the Company to Purchaser in connection herewith or
therewith or with the transactions contemplated hereby or thereby, contain any
untrue statement of a material fact nor omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading. To
the Company's knowledge, there are no facts which
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(individually or in the aggregate) materially adversely affect the business,
assets, liabilities, financial condition, prospects or operations of the Company
that have not been set forth in the Agreement, the exhibits and schedules
hereto, the Related Agreements or in other documents delivered to Purchaser in
connection herewith.
4.20 Insurance. The Company has general commercial, product liability,
fire and casualty insurance policies with coverage customary for companies
similarly situated to the Company.
4.21 SEC Reports. The Company has filed all proxy statements, reports
and other documents required to be filed by it under the Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 2000, (ii) its Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 30, 2001 and June 30, 2001 and
(iii) its Proxy Statement dated September 5, 2000 (collectively, the "SEC
Reports"). Each SEC Report was in substantial compliance with the requirements
of its respective form and none of the SEC Reports, nor the financial statements
(and the notes thereto) included in the SEC Reports, as of their respective
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.22 No Market Manipulation. The Company has not taken, and will not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the Common Stock of the Company to facilitate the sale or resale of any of the
Securities being offered hereby or affect the price at which any of the
Securities being offered hereby may be issued.
4.23 Listing. The Company's Common Stock is listed for trading on the
NASDAQ SmallCap Market. The Company has received a notice that its Common Stock
may be delisted from the NASDAQ SmallCap Market and that the Common Stock does
not meet all requirements for the continuation of such listing.
4.24 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act which would prevent the Company from
selling the Securities pursuant to Rule 506 under the 1933 Act, or any
applicable exchange-related stockholder approval provisions. Nor will the
Company or any of its affiliates or subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other
offerings.
4.25 Stop Transfer. The Securities are restricted securities as of the
date of this Agreement. The Company will not issue any stop transfer order or
other order impeding the sale and delivery of any of the Securities at such time
as the Securities are registered for public sale or an exemption from
registration is available, except as required by federal securities laws.
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4.26 Dilution. The number of shares of Common Stock issuable upon
conversion of the Notes and exercise of the Warrants may increase substantially
in certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines prior to
conversion or exercise of such securities. The Company's executive officers have
studied and fully understand the nature of the Securities being sold hereby and
recognize that they have a potential dilutive effect. The Company specifically
acknowledges that its obligation to issue the shares of Common Stock upon
conversion of the Notes and exercise of the Warrants is binding upon the Company
and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
5. Representations and Warranties of the Purchaser.
The Purchaser hereby represents and warrants to the Company with respect
to itself or himself as follows (such representations and warranties do not
lessen or obviate the representations and warranties of the Company set forth in
this Agreement):
5.1 Requisite Power and Authority. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
action on Purchaser's part required for the lawful execution and delivery of
this Agreement and the Related Agreements have been or will be effectively taken
prior to the Closing. Upon their execution and delivery, this Agreement and the
Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, and (b) as limited by
general principles of equity that restrict the availability of equitable
remedies.
5.2 Investment Representations. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in the Agreement.
5.3 Purchaser Bears Economic Risk. Purchaser has substantial experience
in evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Purchaser must bear the economic risk of this investment until
the Securities are registered pursuant to the Securities Act, or an exemption
from registration is available.
5.4 Acquisition for Own Account. Purchaser is acquiring the Notes for
Purchaser's own account for investment only, and not with a view towards their
distribution.
5.5 Purchaser Can Protect Its Interest. Purchaser represents that by
reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
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5.6 Accredited Investor. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
5.7 Regulatory Compliance. Purchaser agrees that Purchaser will comply
with all relevant rules and regulations of the Securities Exchange Act of 1934,
as amended, including the provisions of Regulation M promulgated thereunder.
5.8 Legends.
(a) The Notes shall bear the following legend until the Notes and
Conversion Shares are covered by an effective registration statement filed with
the SEC:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR, IF APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO ONE VOICE TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) The Conversion Shares and the Warrant Shares shall bear a legend
which shall be in substantially the following form until such shares are covered
by an effective registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IF APPLICABLE, STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO ONE VOICE TECHNOLOGIES, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED."
(c) The Warrants shall bear the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE
COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING SHARES OF
COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF
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COUNSEL REASONABLY SATISFACTORY TO ONE VOICE
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
5.9 Confidentiality. The Purchaser agrees that it will not
include in any public announcement, the name of the Company, unless expressly
agreed to by the Company or unless and until such disclosure is required by law
or applicable regulation, and then only to the extent of such requirement.
5.10 Certain Acknowledgements. The Purchaser hereby acknowledges
that it is aware that (i) the Company currently has no revenue, (ii) the Company
has suffered significant losses, and (iii) the Company's accountant has issue a
"going concern" opinion.
6. Covenants of the Company. The Company covenants and agrees with
the Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly
after it receives notice of issuance by the Securities and Exchange Commission
(the "SEC"), any state securities commission or any other regulatory authority
of any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
6.2 Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon conversion of the Notes and upon the
exercise of the Warrants upon the Principal Market upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall
maintain such listing so long as any other shares of Common Stock shall be so
listed. The Company will maintain the listing of its Common Stock on a Principal
Market, and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable. The Company will
provide the Purchaser copies of all notices it receives notifying the Company of
the threatened and actual delisting of the Common Stock from any Principal
Market.
6.3 Market Regulations. The Company shall notify the SEC, NASD
and applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to Purchaser
and promptly provide copies thereof to Purchaser.
6.4 Reporting Requirements. (a) Until at least two (2) years
after the effectiveness of the Registration Statement on Form SB-2 or such other
Registration Statement described in Section 9.1(d) hereof, the Company will (i)
cause its Common Stock to continue to be registered under Sections 12(b) or
12(g) of the Exchange Act, (ii) comply in all material respects with its
reporting and filing obligations under the Exchange Act, (iii) comply with all
reporting requirements that is applicable to an issuer with a class of shares
registered pursuant to Section 12(g)
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of the Exchange Act, and (iv) comply with all requirements related to any
registration statement filed pursuant to this Agreement. The Company will not
take any action or file any document (whether or not permitted by the Securities
Act or the Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Acts until the earlier of (y) two (2) years after the effective date
of the Registration Statement on Form SB-2 or such other Registration Statement
described in Section 9.1(d) hereof, or (z) the sale by the Purchaser of all the
Securities issuable by the Company pursuant to this Agreement. Until at least
two (2) years after the Warrants have been exercised, the Company will use its
commercial best efforts to continue the listing of the Common Stock on the
NASDAQ SmallCap Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the NASD
and NASDAQ.
6.5 Use of Funds. The Company undertakes to use the proceeds of
the Purchaser's funds for the purposes set forth on Schedule 6.5 attached
hereto. A deviation form the use of proceeds set forth on Schedule 6.5 of more
than 10% per item or more than 20% in the aggregate shall be deemed a material
breach of the Company's obligations hereunder.
6.6 Access to Facilities. For so long as 20% of the principal
amount of the Notes is outstanding,the Company will permit any representatives
designated by the Purchaser (or any transferee of the Purchaser), so long as
such person holds any Securities upon reasonable notice and during normal
business hours, at such person's expense and accompanied by a representative of
the Company, to (a) visit and inspect any of the properties of the Company and
(b) examine the corporate and financial records of the Company (unless such
examination is not permitted by federal, state or local law or by contract) and
make copies thereof or extracts therefrom.
6.7 Taxes. The Company will promptly pay and discharge, or cause
to be paid and discharged, when due and payable, all lawful taxes, assessments
and governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor.
6.8 Insurance. The Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than 100% of
the insurable value of the property insured; and the Company will maintain, with
financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated and to the
extent available on commercially reasonable terms.
6.9 Books and Records. The Company will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation
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to its business and affairs in accordance with generally accepted accounting
principles applied on a consistent basis.
6.10 Intellectual Property. The Company shall maintain in full
force and effect its corporate existence, rights and franchises and all licenses
and other rights to use Intellectual Property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.
6.11 Confidentiality. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchaser, unless expressly agreed to by the Purchaser or unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.
6.12 Required Approvals. For so long as at least $500,000 of the
principal amount of the Notes are outstanding, the Company, without the prior
written consent of the Purchaser, shall not:
(a) enter into any transaction or series of transactions
with any stockholder, director, officer or employee which would require
disclosure pursuant to Rule 404 of the Regulation S-K under the Securities Act;
(b) authorize, create or issue any securities (or any rights
or securities directly or indirectly convertible into or exercisable or
exchangeable for securities) having rights, preferences or privileges superior
to the Conversion Shares;
(c) directly or indirectly declare or pay any dividends or
make any distributions upon any of its capital stock or other equity securities
(or any securities directly or indirectly convertible into or exercisable or
exchangeable for equity securities);
(d) directly or indirectly redeem, purchase or otherwise
acquire any of the Corporation's capital stock or other equity securities
(including, without limitation, the Securities or any warrants, options and
other rights to acquire such capital stock or other equity securities) or
directly or indirectly redeem, purchase or make any payments with respect to any
stock appreciation rights, phantom stock plans or similar rights or plans;
(e) merge or consolidate with any entity or enter into an
agreement to do so;
(f) sell, lease or otherwise dispose of more than 10% of the
assets of the Company (computed on the basis of book value, determined in
accordance with GAAP consistently applied, or fair market value, determined by
the Board of Directors in its reasonable good faith judgment) in any transaction
or series of related transactions (other than sales of inventory in the ordinary
course of business) or sell or permanently dispose of any of its intellectual
property;
(g) liquidate, dissolve or effect a recapitalization,
reclassification or reorganization in any form of transaction (including,
without limitation, any reorganization into a
-15-
limited liability company, a partnership or any other non-corporate entity which
is treated as a partnership for federal income tax purposes or a stock split or
"reverse" stock split of the Common Stock);
(h) acquire any interest in any company or business (whether by a
purchase of assets, purchase of stock, merger or otherwise), enter into any
joint venture or make any investments in any other entity;
(i) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its terms
would (under any circumstances) restrict the Company's right to perform the
provisions of this Agreement or any of the agreements contemplated thereby;
(j) create, incur, assume or suffer to exist indebtedness
exceeding an aggregate principal amount of $375,000 outstanding at any time;
(k) amend, alter or repeal the Company's Charter or Bylaws as to
increase the number of authorized shares of the Common Stock or any series of
preferred stock, or materially affect the rights or other powers of the
Conversion Shares, or otherwise take any action which is designed to, or could
have the effect of, adversely affecting the rights or other powers of the
Conversion Shares; or
(l) materially alter or change the business of the Company.
Notwithstanding the above, if the Purchaser elects not to further fund the
Company within 75 days following the effectiveness of the Registration Statement
required to be filed pursuant to Section 9.1(d) hereof, this Agreement shall be
terminated except for Sections 6.4, 6.13, 7, 8 and 9.
6.13 Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.7 above at such time as (a) the holder thereof is permitted to dispose
of such Securities pursuant to Rule 144(k) under the Act, or (b) upon resale
subject to an effective registration statement after such Securities are
registered under the Act. The Company agrees to cooperate with the Purchaser in
connection with all resales pursuant to Rule 144(d) and Rule 144(k) and provide
legal opinions necessary to allow such resales provided the Company and its
counsel receive reasonably requested representations from the selling Purchaser
and broker, if any.
6.14 Opinion. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the Company's legal
counsel in the form annexed hereto as Exhibit D. The Company will provide, at
the Company's expense, such other legal opinions in the future as are reasonably
necessary for the conversion of the Notes and exercise of the Warrants.
7. Covenants of the Company and Purchaser Regarding
Indemnification.
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7.1 Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend the Purchaser, each of the Purchaser's officers,
directors, agents, affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser which results, arises out of or is based upon (i) any
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement, or (ii) any breach or default in performance by Company of any
covenant or undertaking to be performed by Company hereunder, or any other
agreement entered into by the Company and the Purchaser relating hereto.
7.2 Purchaser's Indemnification. The Purchaser agrees to indemnify,
hold harmless, reimburse and defend the Company at all times against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the Company which results,
arises out of or is based upon (a) any misrepresentation by the Purchaser or
breach of warranty by the Purchaser in this Agreement or in any exhibits or
schedules attached hereto or any Related Agreement; or (b) any breach or default
in performance by the Purchaser of any covenant or undertaking to be performed
by the Purchaser hereunder, or any other agreement entered into by the Company
and the Purchaser relating hereto.
7.3 Limitations. The Purchaser and the Company shall not make any
claim for indemnification until the aggregate amount of such indemnifiable
expenses exceeds $25,000, in which case such party may claim indemnification for
the full amount. In no event shall the Company have liability under this Section
7 to any party in excess of the aggregate purchase price of the outstanding
principal due under the Notes.
7.4 Procedures. The procedures and limitations set forth in Section
9.6 shall apply to the indemnifications set forth in Sections 7.1 and 7.2 above.
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8. Conversion of Convertible Notes.
8.1 Mechanics of Conversion.
(a) Upon the conversion of the Notes or part thereof, the Company
shall, at its own cost and expense, take all necessary action (including the
issuance of an opinion of counsel) to assure that the Company's transfer agent
shall issue stock certificates in the name of the Purchaser (or its nominee) or
such other persons as designated by the Purchaser and in such denominations to
be specified representing the number of Conversion Shares issuable upon such
conversion. The Company warrants that no instructions other than these
instructions have been or will be given to the transfer agent of the Company's
Common Stock and that the Conversion Shares issued will be unlegended,
free-trading, and freely transferable, and will not contain a legend restricting
the resale or transferability of the Conversion Shares, provided the Purchaser
has notified the Company of the Purchaser's intention to sell the Conversion
Shares and the Conversion Shares are included in an effective registration
statement or are otherwise exempt from registration when sold.
(b) Purchaser will give notice of its decision to exercise its
right to convert the Notes or part thereof by telecopying or otherwise
delivering an executed and completed notice of the number of shares to be
converted to the Company (the "Notice of Conversion"). The Purchaser will not be
required to surrender the Notes until the Purchaser receives a certificate or
certificates, as the case may be, representing the Conversion Shares or until
the Note has been fully satisfied. Each date on which a Notice of Conversion is
telecopied or delivered to the Company in accordance with the provisions hereof
shall be deemed a "Conversion Date." The Company will or will cause the transfer
agent to transmit the Company's Common Stock certificates representing the
shares issuable upon conversion of the Notes (and a certificate representing the
balance of the Notes not so converted, if requested by Purchaser) to the
Purchaser via express courier for receipt by such Purchaser within four business
days after receipt by the Company of the Notice of Conversion (the "Delivery
Date").
(c) The Company understands that a delay in the delivery of the
Conversion Shares in the form required pursuant to Section 8 hereof, or the
Mandatory Redemption Payment described in Section 8.2 hereof, beyond the
Delivery Date or Mandatory Redemption Payment Date (as defined in Section 8.2)
could result in economic loss to the Purchaser. As compensation to the Purchaser
for such loss, the Company agrees to pay late payments to the Purchaser for late
issuance of the Conversion Shares in the form required pursuant to Section 8
hereof upon conversion of the Notes or late payment of the Mandatory Redemption
Payment, in the amount of $100 per business day after the Delivery Date or
Mandatory Redemption Payment Date, as the case may be, for each $10,000 Note
principal being converted or redeemed. The Company shall pay any payments
incurred under this Section in immediately available funds upon demand.
Furthermore, in addition to any other remedies which may be available to the
Purchaser, in the event that the Company fails for any reason to effect delivery
of the Conversion Shares by the Delivery Date or make payment by the Mandatory
Redemption Payment Date, the Purchaser will be entitled to revoke all or part of
the relevant Notice of Conversion or rescind all or part of the notice of
Mandatory Redemption by delivery of a notice to such effect to the Company
whereupon the
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Company and the Purchaser shall each be restored to their respective positions
immediately prior to the delivery of such notice, except that late payment
charges described above shall be payable through the date notice of revocation
or rescission is given to the Company.
(d) Nothing contained herein or in any document referred to
herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
amount permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to a Purchaser and thus refunded to
the Company.
8.2 Mandatory Redemption. In the event the Company is unable to issue
Conversion Shares on a Delivery Date or at any time when a Note is convertible,
for any reason, then at the Purchaser's election, the Company must pay to the
Purchaser five (5) business days after request by the Purchaser or on the
Delivery Date (if requested by the Purchaser) a sum of money determined by
multiplying the principal of the Note required to be converted and not so
converted (or otherwise not convertible, as applicable) by 130%, together with
accrued but unpaid interest thereon ("Mandatory Redemption Payment"). The
Mandatory Redemption Payment must be received by the Purchaser on the same date
as the Conversion Shares are otherwise deliverable or within five (5) business
days after request, whichever is sooner ("Mandatory Redemption Payment Date").
Upon receipt of the Mandatory Redemption Payment, the corresponding Note
principal and interest will be deemed paid and no longer outstanding.
8.3 Maximum Conversion. The Purchaser shall not be entitled to
convert on a Conversion Date that amount of a Note or Notes in connection with
that number of shares of Common Stock which would be in excess of the sum of (i)
the number of shares of Common Stock beneficially owned by the Purchaser on a
Conversion Date, and (ii) the number of shares of Common Stock issuable upon the
conversion of the Notes with respect to which the determination of this proviso
is being made on a Conversion Date, which would result in beneficial ownership
by the Purchaser of more than 4.99% of the outstanding shares of Common Stock of
the Company on such Conversion Date. The Purchaser shall have the authority and
obligation to determine whether the restriction contained in this Section 8.3
will limit any conversion hereunder and to the extent that the Purchaser
determines that the limitation contained in this Section applies, the
determination of which portion of the Notes are convertible shall be the
responsibility and obligation of the Purchaser. For the purposes of the proviso
to the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act and Regulation 13d-3
thereunder. Subject to the foregoing, a Purchaser shall not be limited to
aggregate conversions of only 4.99%. A Purchaser may void the conversion
limitation described in this Section 8.3 upon 75 days prior notice to the
Company or upon an Event of Default under the Note. A Purchaser may allocate
which of the equity of the Company deemed beneficially owned by such Purchaser
shall be included in the 4.99% amount described above and which shall be
allocated to the excess above 4.99%.
8.4 Injunction - Posting of Bond. In the event a Purchaser shall
elect to convert a Note or part thereof, the Company may not refuse conversion
for any reason, unless an injunction from a court, on notice, restraining and or
enjoining conversion of all or part of said Note shall have
-19-
been sought and obtained and the Company posts a surety bond for the benefit of
such Purchaser in the amount of 130% of the amount of the Note, which is subject
to the injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Purchaser to the extent it obtains judgment.
8.5 Buy-In. In addition to any other rights available to the
Purchaser, if the Company fails to deliver to the Purchaser Conversion Shares by
the Delivery Date and if after the Delivery Date the Purchaser purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Purchaser of the Common Stock which the Purchaser
anticipated receiving upon such conversion (a "Buy-In"), then the Company shall
pay in cash to the Purchaser (in addition to any remedies available to or
elected by such Purchaser) the amount by which (A) the Purchaser's total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (B) the aggregate principal and/or interest
amount of the Note, for which such conversion was not timely honored, together
with interest thereon at a rate of 15% per annum, accruing until such amount and
any accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if the Purchaser
purchases shares of Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of $10,000 of Note
principal and/or interest, the Company shall be required to pay the Purchaser
$1,000, plus interest. The Purchaser shall provide the Company written notice
indicating the amounts payable to the Purchaser in respect of the Buy-In.
8.6 Optional Redemption. The Company will have the option of
redeeming any outstanding Notes ("Optional Redemption") by paying to the
Purchaser a sum of money as follows:
from the Closing Date through 30 days after the Closing Date
- 120%
from 31 days through 90 days after the Closing Date - 135%
from 91 days through 180 days after the Closing Date - 150%
after 180 days following the Closing Date - 200%
of the principal amount of the Note together with accrued but unpaid interest
thereon and any and all other sums due, accrued or payable to the Purchaser
arising under this Agreement, Note or any other document delivered herewith
("Redemption Amount") outstanding on the day notice of redemption ("Notice of
Redemption) is given to a Purchaser ("Redemption Date"). A Notice of Redemption
may not be given in connection with any portion of Note for which notice of
conversion has been given by the Purchaser at any time before receipt of a
Notice of Redemption. The Purchaser may elect within five (5) business days
after receipt of a Notice of Redemption to give the Company Notice of Conversion
in connection with some or all of the Note principal and interest which was the
subject of the Notice of Redemption. A Notice of Redemption must be accompanied
by a certificate signed by the chief executive officer or chief financial
officer of the Company stating that the Company has on deposit and segregated
ready funds equal to the Redemption Amount. The Redemption Amount must be paid
in good funds to the Purchaser no later than the seventh (7/th/) business day
after the Redemption Date ("Optional Redemption Payment Date"). In the event the
Company fails to pay the Redemption Amount by the Optional Redemption Payment
Date, then the Redemption Notice will be null and void and the Company will
thereafter have no further right to
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effect an Optional Redemption, and at the Purchaser's election, the Redemption
Amount will be deemed a Mandatory Redemption Payment and the Optional Redemption
Payment Date will be deemed a Mandatory Redemption Payment Date. Such failure
will also be deemed an Event of Default under the Note. Any Notice of Redemption
must be given to all holders of Notes issued in connection with the Offering, in
proportion to their holdings of Note principal on a Redemption Date. A Notice of
Redemption may be given by the Company, provided (i) no Event of Default, as
described in the Note shall have occurred or be continuing; and (ii) the
Conversion Shares issuable upon conversion of the full outstanding Note
principal are included for unrestricted resale in a registration statement
effective as of the Redemption Date. Note proceeds may not be used to effect an
Optional Redemption.
8.7 NASDAQ Approval. The Company and the Purchaser agree that until
the Company either obtains shareholder approval of the issuance of the
Securities, or an exemption from NASDAQ's corporate governance rules as they may
apply to the Securities, and an opinion of counsel reasonably acceptable to the
Purchaser that NASDAQ's corporate governance rules do not conflict with nor may
result in a delisting of the Company's common stock from the SmallCap Market
(the "Approval") upon the conversion of the Notes, the Purchaser may not receive
upon conversion of the Notes more than the number of common shares greater than
19.9% of the shares of Company's common stock outstanding on the Closing Date.
Provided the closing price of the Common Stock on a Principal Market is less
than $.25 per share for three consecutive trading days (such third day being the
"Trigger Date"), the Company covenants to obtain the Approval required pursuant
to the NASDAQ's corporate governance rules to allow conversion of all the Notes
and interest thereon. The Company further covenants to file the preliminary
proxy statement relating to the Approval with the Commission on or before thirty
days after the Trigger Date ("Proxy Filing Date"). The Company further covenants
to obtain the Approval no later than ninety days after the Trigger Date
("Approval Date"). The Company's failure to (i) file the proxy on or before the
Proxy Filing Date; or (ii) the Company's failure to obtain the Approval on or
before the Approval Date (each being an "Approval Default") shall be deemed an
Event of Default under the Note, but only to the extent the Notes and interest
thereon that may not be converted due to the Company's failure to obtain such
Approval.
9. Registration Rights.
9.1 Registration Rights Granted. The Company hereby grants the
following registration rights to holders of the securities purchased hereby.
(a) On two occasions, for a period commencing 90 days after the
Closing Date, but not later than two (2) years after the Closing Date (the
"Request Date"), the Company, upon a written request therefor from holders of
more than 50% of the aggregate of the Company's Securities then outstanding, on
an as converted basis (the Conversion Shares and Warrant Shares issued or
issuable with respect to all Notes or Warrants issued or to be issued hereunder,
being, the "Registrable Securities"), shall prepare and file with the SEC a
registration statement under the Securities Act covering the Registrable
Securities which are the subject of such request, unless such Registrable
Securities are the subject of an effective registration statement. In addition,
upon the receipt of such request, the Company shall promptly give written notice
to all other record holders of
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the Registrable Securities that such registration statement is to be filed and
shall include in such registration statement Registrable Securities for which it
has received written requests within 10 days after the Company gives such
written notice. Such other requesting record holders shall be deemed to have
exercised their demand registration right under this Section 9.1. As a condition
precedent to the inclusion of Registrable Securities, the holder thereof shall
provide the Company with such information as the Company reasonably requests.
The obligation of the Company under this Section 9.1 shall be limited to two
registration statements.
(b) If the Company at any time proposes to register any of
its securities under the Act for sale to the public, whether for its own account
or for the account of other security holders or both, except with respect to
registration statements on Forms X-0, X-0 or another form not available for
registering the Registrable Securities for sale to the public, provided the
Registrable Securities are not otherwise registered for resale by the Purchaser
or subsequent holder pursuant to an effective registration statement, each such
time it will give at least 30 days' prior written notice to the record holder of
any Securities of its intention so to do. Upon the written request of the
holder, received by the Company within 30 days after the giving of any such
notice by the Company, to register any of the Registrable Securities, the
Company will cause such Registrable Securities as to which registration shall
have been so requested to be included with the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition of the Registrable Securities
so registered by the holder of such Registrable Securities (the "Seller"). In
the event that any registration pursuant to this Section 9.1(b) shall be, in
whole or in part, an underwritten public offering of Common Stock of the
Company, the number of shares of Registrable Securities to be included in such
an underwriting may be reduced by the managing underwriter if and to the extent
that the Company and the underwriter shall reasonably be of the opinion that
such inclusion would adversely affect the marketing of the securities to be sold
by the Company therein; provided, however, that the Company shall notify the
Seller in writing of any such reduction. Notwithstanding the forgoing
provisions, or Section 9.1(a) hereof, the Company may withdraw or delay or
suffer a delay of any registration statement referred to in this Section 9.1(b)
without thereby incurring any liability to the Seller.
(c) If, at the time any written request for registration is
received by the Company pursuant to Section 9.1(a), the Company has determined
to proceed with the actual preparation and filing of a registration statement
under the Securities Act in connection with the proposed offer and sale for cash
of any of its securities for the Company's own account, such written request
shall be deemed to have been given pursuant to Section 9.1(b) rather than
Section 9.1(a), and the rights of the holders of Registrable Securities covered
by such written request shall be governed by Section 9.1(b) except that the
Company or underwriter, if any, may not withdraw such registration or limit the
amount of Registrable Securities included in such registration.
(d) The Company shall file with the SEC within 14 days of
the date the Company's registration statement on Form SB-2, File No. 333-69750
is declared effective by the SEC (the "Filing Date"), and use its reasonable
commercial efforts to cause to be declared effective a Form SB-2 registration
statement (or such other form that it is eligible to use) within 90 days of the
Closing Date in order to register the Registrable Securities for resale and
distribution under the Securities Act. The registration statement described in
this paragraph must be declared effective by
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the SEC within 90 days of the Closing Date (as defined herein) ("Effective
Date"). The Company will register not less than a number of shares of Common
Stock in the aforedescribed registration statement that is equal to 300% of the
Warrant Shares and Conversion Shares issuable at the Conversion Prices set forth
in the Warrants and Notes, respectively, that would be in effect on the Closing
Date or the date of filing of such registration statement (employing the
conversion price which would result in the greater number of Shares), assuming
the conversion of 100% of the Notes which are then outstanding or issuable
hereunder, and at least one share of common stock for each common share issuable
upon exercise of the Warrants which are then outstanding or issuable hereunder
(employing the Conversion Price that would result in the greater number of
shares). The Registrable Securities shall be reserved and set aside exclusively
for the benefit of the Purchaser and the holders of the Warrants, as the case
may be, and not issued, employed or reserved for anyone other than the Purchaser
and the holders of the Warrants. Such registration statement will be promptly
amended or additional registration statements will be promptly filed by the
Company as necessary to register additional Company Shares to allow the public
resale of all Common Stock included in and issuable by virtue of the Registrable
Securities. No securities of the Company other than the Registrable Securities
will be included in the registration statement described in this Section 9.1(d).
9.2 Registration Procedures. If and whenever the Company is
required by the provisions hereof to effect the registration of any shares of
Registrable Securities under the Act, the Company will, as expeditiously as
possible:
(a) prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and promptly
provide to the holders of Registrable Securities copies of all filings and SEC
letters of comment;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until the later of: (i) six months after the latest exercise period of the
Warrants; (ii) twelve months after the Maturity Date of the last maturing Notes
or (iii) four years after the Closing Date, and comply with the provisions of
the Securities Act with respect to the disposition of all of the Registrable
Securities covered by such registration statement in accordance with the
Seller's intended method of disposition set forth in such registration statement
for such period;
(c) furnish to the Seller, and to each underwriter if any,
such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request to facilitate the public sale or their disposition of the securities
covered by such registration statement;
(d) use its best efforts to register or qualify the
Seller's Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller and in the
case of an underwritten public offering, the managing
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underwriter shall reasonably request, provided, however, that the Company shall
not for any such purpose be required to qualify generally to transact business
as a foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify the Seller and each underwriter
under such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event of which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and
(g) make available for inspection by the Seller, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by the Seller or
underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
9.3 Provision of Documents.
(a) At the request of the Seller, provided a demand for
registration has been made pursuant to Section 9.1(a) or a request for
registration has been made pursuant to Section 9.1(b), the Registrable
Securities will be included in a registration statement filed pursuant to this
Section 9.
(b) In connection with each registration hereunder, the
Seller will furnish to the Company in writing such information and
representation letters with respect to itself and the proposed distribution by
it as reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws. In connection with each registration
pursuant to Section 9 covering an underwritten public offering, the Company and
the Seller agree to enter into a written agreement with the managing underwriter
in such form and containing such provisions as are customary in the securities
business for such an arrangement between such underwriter and companies of the
Company's size and investment stature.
9.4 Non-Registration Events. The Company and the Purchaser agree
that the Seller will suffer damages if any registration statement required under
Section 9.1(a) above is not filed within 30 days after written request by the
holder and not declared effective by the SEC within 90 days after such request,
and maintained in the manner and within the time periods contemplated by Section
9 hereof, and it would not be feasible to ascertain the extent of such damages
with precision. Accordingly, if (i) the Registration Statement described in
Section 9.1(a) is not filed within 30 days of such written request, or is not
declared effective by the SEC on or prior to the date
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that is 90 days after such request, or (ii) the registration statement on Form
SB-2 or such other form as described in Section 9.1(d) is not filed on or before
the Filing Date or not declared effective on or before the sooner of the
Effective Date, or within five days of receipt by the Company of a communication
from the SEC that the registration statement described in Section 9.1(d) will
not be reviewed, or (iii) any registration statement described in Section 9.1(a)
or (d) is filed and declared effective but shall thereafter cease to be
effective (without being succeeded immediately by an additional registration
statement filed and declared effective) for a period of time which shall exceed
30 days in the aggregate per year but not more than 20 consecutive calendar days
(defined as a period of 365 days commencing on the date the Registration
Statement is declared effective) (each such event referred to in this Section
9.4 is referred to herein as a "Non-Registration Event"), then, for so long as
such Non-Registration Event shall continue, (i) the Company shall pay in cash as
Liquidated Damages to each holder of any Registrable Securities an amount equal
to two percent (2%) per month or part thereof during the pendency of such
Non-Registration Event of the principal of the Notes issued in connection with
the Offering, whether or not converted, then owned of record by such holder or
issuable as of or subsequent to the occurrence of such Non-Registration Event
and (ii) the Conversion Price as defined in Section 2.1 of the Notes shall be
reduced by 10% for each 30-day period following the Effective Date that the
Registration Statement is not declared effective by the SEC. Payments to be made
pursuant to this Section shall be due and payable immediately upon demand in
immediately available funds. In the event a Mandatory Redemption Payment is
demanded from the Company by the holder pursuant to Section 8.2 of this
Agreement, then the Liquidated Damages described in this Section 9.4 shall no
longer accrue on the portion of the purchase price underlying the Mandatory
Redemption Payment, from and after the date the holder receives the Mandatory
Redemption Payment. It shall be deemed a Non-Registration Event to the extent
that all the Common Stock included in the Registrable Securities and underlying
the Securities is not included in an effective registration statement as of and
after the Effective Date at the conversion prices in effect from and after the
Effective Date.
9.5 Expenses. All expenses incurred by the Company in complying with
Section 9, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the NASD, transfer taxes, fees of transfer agents and registrars,
fees of, and disbursements incurred by, one counsel for the Seller, and costs of
insurance are called "Registration Expenses". All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities, including
any fees and disbursements of any special counsel to the Seller beyond those
included in Registration Expenses, are called "Selling Expenses."
The Company will pay all Registration Expenses in connection with
the registration statement under Section 9. All Selling Expenses in connection
with each registration statement under Section 9 shall be borne by the Seller
and may be apportioned among the Sellers in proportion to the number of shares
sold by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
9.6 Indemnification and Contribution.
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(a) In the event of a registration of any Registrable Securities
under the Securities Act pursuant to Section 9, the Company will indemnify and
hold harmless each Seller, each officer of each Seller, each director of each
Seller, each underwriter of such Registrable Securities thereunder and each
other person, if any, who controls any such Seller or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Seller, or such underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Registrable Securities was registered under the Act pursuant to
Section 9, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
if and to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished by any such
Seller, the underwriter or any such controlling person in writing specifically
for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Section 9, the Seller will indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the Securities Act, each officer of the Company who signs
the registration statement and each director of the Company, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer or director may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Registrable Securities were registered under the Securities Act
pursuant to Section 9, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer or director for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action, provided,
however, that the Seller will be liable hereunder in any such case if and only
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
pertaining to such Seller, as such, furnished in writing to the Company by such
Seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of the Seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the
Registrable Securities sold by the Seller under such registration statement
bears to the total public offering price of all securities sold thereunder, but
not
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in any event to exceed the net proceeds received by the Seller from the sale of
Registrable Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 9.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 9.6(c) if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9.6(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in
the event of joint liability under the Act in any case in which either (i) the
Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 9.6 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 9.6 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of the Seller
or controlling person of the Seller in circumstances for which indemnification
is provided under this Section 9.6; then, and in each such case, the Company and
the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (A) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
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10. Offering Restrictions. Intentionally omitted.
11. Security Interest. Intentionally omitted.
12. Miscellaneous.
12.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individuals executing this Agreement
and other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any other agreement
delivered in connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.
12.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby for a period of 24 months
from the date hereof. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
12.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Securities from time to time.
12.4 Entire Agreement. This Agreement, the exhibits and schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
12.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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12.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the holders
of the Securities under the Agreement may be waived only with the written
consent of such holders of Securities. The rights of the holder of a Note may be
waived only with the written consent of the holder of such Note.
12.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character on the Purchaser's part of any breach, default
or noncompliance under this Agreement, the Notes or the Related Agreements or
any waiver on such party's part of any provisions or conditions of the
Agreement, a Note or the Related Agreements must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, the Notes or the Related Agreements, by
law or otherwise afforded to any party, shall be cumulative and not alternative.
12.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address as set forth on the signature page hereof and to the Purchaser at
the address set forth on the signature page hereto for such Purchaser, with a
copy in the case of the Purchaser to Xxxxxx X. Xxxxxx, Esq., 000 Xxxx 00/xx/
Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, facsimile number (000) 000-0000, or at
such other address as the Company or the Purchaser may designate by ten days
advance written notice to the other parties hereto.
12.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
12.10 Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
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12.11 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
12.12 Broker's Fees. Each party hereto represents and warrants
that no agent, broker, investment banker, person or firm acting on behalf of or
under the authority of such party hereto is or will be entitled to any broker's
or finder's fee or any other commission directly or indirectly in connection
with the transactions contemplated herein, except as specified herein with
respect to the Purchaser. Each party hereto further agrees to indemnify each
other party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 12.12 being untrue.
12.13 Construction. Each party acknowledges that its legal
counsel participated in the preparation of this Agreement and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Agreement to favor any party against the other.
-30-
In Witness Whereof, the parties hereto have executed the Securities Purchase
Agreement as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
One Voice Technologies, Inc. Xxxxxxxxxxx Limited Partnership
By:______________________________
By:________________________________________ Name:
Name: Address: c/o Canaccord Capital,
Title: 000 Xxx Xxxxxx, Xxxxx
Xxxxxxx: 0000 Xxxxxxxxx Xxxxx, Xxxxx 000 1300 Toronto, Ontario
Xxx Xxxxx, Xxxxxxxxxx 00000 X0X 0X0 Xxxxxx
[Securities Purchase Agreement Signature Page]
List of Exhibits
Schedule of Purchasers Exhibit A
Form of Offering Convertible Note Exhibit B
Form of Warrant Exhibit C
Form of Opinion Exhibit D
EXHIBIT A
SCHEDULE OF PURCHASERS
--------------------------------------------------------------------------------
Purchaser Closing Date Notes
--------------------------------------------------------------------------------
Xxxxxxxxxxx Limited Partnership $500,000
TOTAL $500,000
--------------------------------------------------------------------------------
SCHEDULE OF WARRANT HOLDERS
--------------------------------------------------------------------------------
Name of Warrant Holder Number of Warrant Shares
--------------------------------------------------------------------------------
Xxxxxxxxxxx Limited Partnership 83,333
--------------------------------------------------------------------------------
SCHEDULE OF FUND MANAGER'S FEE RECIPIENTS
--------------------------------------------------------------------------------
Fund Manager Closing Date Fund Manager's Fees
--------------------------------------------------------------------------------
Laurus Capital Management, L.L.C. $50,000
--------------------------------------------------------------------------------
TOTAL $50,000 (10% of Closing)
--------------------------------------------------------------------------------
A-1
EXHIBIT B
FORM OF CONVERTIBLE NOTE
B-1
EXHIBIT C
FORM OF WARRANT
C-1
EXHIBIT D
FORM OF OPINIoN
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Nevada and has all requisite corporate
power and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted.
2. The Company has the requisite corporate power and authority
to execute, deliver and perform its obligations under the Agreement and Related
Agreements. All corporate action on the part of the Company, its officers,
directors and stockholders necessary for (i) the authorization of the Agreement
and Related Agreements, and the performance of all obligations of the Company
thereunder at each Closing, and (ii) the authorization, sale, issuance and
delivery of the Securities pursuant to the Agreement and the Related Agreements
has been taken. The Conversion Shares and the Warrant Shares, when issued
pursuant to and in accordance with the terms of the Agreement and upon delivery,
shall be validly issued and outstanding, fully paid and non assessable.
3. The execution, delivery and performance of the Agreement,
the Notes or the Related Agreements by the Company and the consummation of the
transactions contemplated by any thereof, will not, with or without the giving
of notice or the passage of time or both:
(a) Violate the provisions of the Charter or bylaws of
the Company; or
(b) To the best of such counsel's knowledge, violate
any judgment, decree, order or award of any court binding upon
the Company.
4. The Agreement and Related Agreements constitute and the
Notes, upon their issuance will constitute, valid and legally binding
obligations of the Company, and are enforceable against the Company in
accordance with their respective terms.
5. The sale of the Notes and the subsequent conversion of the
Notes into Conversion Shares are not and will not be subject to any preemptive
rights or, to such counsel's knowledge, rights of first refusal that have not
been properly waived or complied with. The sale of the Warrants and the
subsequent exercise of the Warrants for Warrant Shares are not and will not be
subject to any preemptive rights or, to such counsel's knowledge, rights of
first refusal that have not been properly waived or complied with.
6. There is no action, suit, proceeding or investigation pending
or, to the best of such counsel's knowledge, currently threatened against the
Company that questions the validity of the Agreement or the Related Agreements
or the right of the Company to enter into any of such agreements, or to
consummate the transactions contemplated thereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or
D-1
prospects of the Company, financially or otherwise, or any change in the current
equity ownership of the Company. To the best of such counsel's knowledge, 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; nor is there any action, suit, proceeding or investigation by
the Company currently pending or which the Company intends to initiate.
D-2
