EX-10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of August
15, 2006, by and among Midnight Holdings Group, Inc., a Delaware corporation,
with headquarters located at 00000 Xxxx Xxxx, Xxxxx 000, Xxxxxxx Xxxxxxxx, XX
00000 (the "COMPANY"), and each of the purchasers set forth on the signature
pages hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the rules and regulations as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT");
B. Buyers desire to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement (i) 10% secured
convertible notes of the Company, in the form attached hereto as EXHIBIT "A", in
the aggregate principal amount of Three Hundred Thousand Dollars ($300,000)
(together with any note(s) issued in replacement thereof or otherwise with
respect thereto in accordance with the terms thereof, the "Notes"), convertible
into shares of common stock, par value $.00005 per share, of the Company (the
"COMMON Stock"), upon the terms and subject to the limitations and conditions
set forth in such Notes and (ii) warrants, in the form attached hereto as
EXHIBIT "B", to purchase an aggregate of Six Hundred Thousand (600,000) shares
of Common Stock (the "WARRANTS");
C. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, such principal amount of Notes and number of Warrants as is
set forth immediately below its name on the signature pages hereto; and
D. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
A. PURCHASE OF NOTES AND WARRANTS. On the Closing Date (as defined
below), the Company shall issue and sell to each Buyer and each Buyer severally
agrees to purchase from the Company such principal amount of Notes and number of
Warrants as is set forth immediately below such Buyer's name on the signature
pages hereto.
B. FORM OF PAYMENT. On the Closing Date (as defined below),
(i)each Buyer shall pay the purchase price for the Notes (less the purchase
price paid with respect to any Bridge Note) and the Warrants to be issued and
sold to it at the Closing (as defined below) (the "PURCHASE PRICE") by wire
transfer of immediately available funds to the Company, in accordance with the
Company's written wiring instructions, against delivery of the Notes in the
principal amount equal to the Purchase Price and the number of Warrants as is
set forth immediately below such Buyer's name on the signature pages hereto, and
(ii) the Company shall deliver such Notes and Warrants duly executed on behalf
of the Company, to such Buyer, against delivery of such Purchase Price.
C. CLOSING DATE. Subject to the satisfaction (or written waiver)
of the conditions thereto set forth in Section 6 and Section 7 below, the date
and time of the issuance and sale of the Notes and the Warrants pursuant to this
Agreement (the "CLOSING DATE") shall be 12:00 noon, Eastern Standard Time on
August 15, 2006, or such other mutually agreed upon time. The closing of the
transactions contemplated by this Agreement (the "CLOSING") shall occur on the
Closing Date at such location as may be agreed to by the parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer
severally (and not jointly) represents and warrants to the Company
solely as to such Buyer that:
A. INVESTMENT PURPOSE. As of the date hereof, such Buyer is
purchasing the Notes and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Notes (including, without limitation, such
additional shares of Common Stock, if any, as are issuable (i) on account of
interest on the Notes, (ii) as a result of the events described in Sections 1.3
and 1.4(g) of the Notes and Section 2(c) of the Registration Rights Agreement or
(iii) in payment of the Standard Liquidated Damages Amount (as defined in
Section 2(f) below) pursuant to this Agreement, such shares of Common Stock
being collectively referred to herein as the "CONVERSION SHARES") and the
Warrants and the shares of Common Stock issuable upon exercise thereof (the
"WARRANT SHARES" and, collectively with the Notes, Warrants and Conversion
Shares, the "SECURITIES") for its own account and not with a present view
towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act; PROVIDED, HOWEVER,
that by making the representations herein, such Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
B. ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D (an "ACCREDITED
INVESTOR").
C. RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United
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States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Securities.
D. INFORMATION. Such Buyer and its respective advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been reasonably requested by such Buyer or its advisors.
Such Buyer and its respective advisors, if any, have been afforded the
opportunity to ask questions of the Company. Notwithstanding the foregoing, the
Company has not disclosed to such Buyer any material nonpublic information and
will not disclose such information unless such information is disclosed to the
public prior to or promptly following such disclosure to such Buyer. Neither
such inquiries nor any other due diligence investigation conducted by such Buyer
or any of its respective advisors or representatives shall modify, amend or
affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. Such Buyer understands that its investment in the
Securities involves a significant degree of risk.
E. GOVERNMENTAL REVIEW. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
F. TRANSFER OR RE-SALE. Such Buyer understands that (i) except as
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities have not been and are not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) such Buyer shall have delivered to the Company
an opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the Company, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("RULE 144")) of such Buyer
who agrees to sell or otherwise transfer the Securities only in accordance with
this Section 2(f) and who is an Accredited Investor, or (d) the Securities are
sold pursuant to Rule 144, and such Buyer shall have delivered to the Company an
opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in corporate transactions, which opinion shall be accepted
by the Company; (ii) any sale of such Securities made in reliance on Rule 144
may be made only in accordance with the terms of said Rule and further, if said
Rule is not applicable, any re-sale of such Securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement). Notwithstanding the foregoing or anything else contained
herein to the contrary, subject to applicable law, the Securities may be pledged
as collateral in connection with a BONA FIDE margin account or other lending
arrangement. In the event that the Company does not accept an opinion of counsel
provided by such Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144, and such opinion is correct in
form and substance, within three (3) business days of delivery of the opinion to
the Company, the Company shall pay to such Buyer liquidated damages of three
3
percent (3%) of the outstanding amount of the Notes held by such Buyer per month
plus accrued and unpaid interest on the Notes, prorated for partial months, in
cash or shares at the option of the Company ("STANDARD LIQUIDATED DAMAGES
AMOUNT"). If the Company elects to pay the Standard Liquidated Damages Amount in
shares of Common Stock, such shares shall be issued at the Conversion Price at
the time of payment.
G. LEGENDS. Such Buyer understands that the Notes and the Warrants
and, until such time as the Conversion Shares and Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be
immediately sold, the Conversion Shares and Warrant Shares may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
"The securities represented by this certificate have
not been registered under the Securities Act of
1933, as amended. The securities may not be sold,
transferred, assigned, or otherwise disposed of in
the absence of an effective registration statement
for the securities under said Act, or an opinion of
counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, that
registration is not required under said Act or
unless sold pursuant to Rule 144 under said Act."
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by applicable
state securities laws, (a) such Security is registered for sale under
an effective registration statement filed under the 1933 Act or
otherwise may be sold pursuant to Rule 144 without any restriction as
to the number of securities as of a particular date that can then be
immediately sold, (b) such holder provides the Company with an opinion
of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under the
1933 Act, which opinion shall be accepted by the Company so that the
sale or transfer is effected, or (c) such holder provides the Company
with reasonable assurances that such Security shall be sold pursuant to
Rule 144. Such Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed,
in compliance with applicable prospectus delivery requirements, if any.
H. AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized. This Agreement has been
duly executed and delivered on behalf of such Buyer, and this Agreement
constitutes, and upon execution and delivery by such Buyer of the Registration
Rights Agreem ent, such agreement will constitute, legal, valid and binding
agreements of such Buyer enforceable in accordance with their respective terms.
I. RESIDENCY. Such Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
A. ORGANIZATION AND QUALIFICATION. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. SCHEDULE 3(A) sets forth
a list of all of the Subsidiaries (as defined below) of the Company and the
jurisdiction in which each is incorporated. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership or use of property or
the nature of the business conducted by it makes such qualification necessary
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, operations, assets, financial condition or prospects of
the Company or its Subsidiaries, if any, taken as a whole, or on the
transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith. "SUBSIDIARIES" means any corporation or
other organization, whether incorporated or unincorporated, in which the Company
owns, directly or indirectly, all of the equity or other ownership interests.
B. AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement, the Notes and the Warrants and, subject to the
adoption of necessary resolutions by the Board of Directors and the stockholders
of the Company to consummate the transactions contemplated hereby and thereby
and to issue the Securities, in accordance with the terms hereof and thereof,
(ii) the execution and delivery of this Agreement, the Registration Rights
Agreement, the Notes and the Warrants by the Company and, the consummation by it
of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes and the Warrants and the issuance and
reservation for issuance of the Conversion Shares and Warrant Shares issuable
upon conversion or exercise thereof) have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board of Directors, or its shareholders is required, (iii) this Agreement has
been duly executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and official
representative with authority to sign this Agreement and the other documents
executed in connection herewith and bind the Company accordingly, and (iv) this
Agreement constitutes, and upon execution and delivery by the Company of the
Registration Rights Agreement, the Notes and the Warrants, each of such
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its respective terms.
C. CAPITALIZATION. Except as set forth on SCHEDULE 3(C), as of
June 30, 2006 hereof, the authorized capital stock of the Company consists of
(i) 1,000,000,000 shares of Common Stock, par value $0.00005, of which
470,050,001 shares are issued and outstanding and (ii) 10,000,000 shares of
preferred stock, par value $0.001, of which no shares are issued and
outstanding. All of such outstanding shares of capital stock are, or upon
issuance will be, duly authorized, validly issued, fully paid and nonassessable.
No shares of capital stock of the Company are subject to preemptive rights or
any other similar rights of the shareholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the Company.
Except as disclosed in SCHEDULE 3(C), as of the date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to,
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or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries,
(ii) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement) and
(iii) there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Notes, the Warrants, the
Conversion Shares or Warrant Shares. The Company has made available to each
Buyer true copies of the Certificate of Incorporation as in effect on the date
hereof, the Company's By-laws, as in effect on the date hereof (the "BY-LAWS"),
and the terms of all securities convertible into or exercisable for Common Stock
of the Company and the material rights of the holders thereof in respect
thereto.
D. ISSUANCE OF SHARES. The Conversion Shares and Warrant Shares
are duly authorized and reserved for issuance and, upon conversion of the Notes
and exercise of the Warrants in accordance with their respective terms, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder thereof.
E. ACKNOWLEDGMENT OF DILUTION. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the Note
or exercise of the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares and Warrant Shares upon conversion of the
Notes or exercise of the Warrants in accordance with this Agreement, the Notes
and the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other shareholders of
the Company.
F. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Notes and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
with or result in a violation of any provision of the Certificate of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are currently subject)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation
of its Certificate of Incorporation, By-laws or other organizational documents
and neither the Company nor any of its Subsidiaries is in default (and no event
has occurred which with notice or lapse of time or both could put the Company or
any of its Subsidiaries in default) under, and neither the Company nor any of
its Subsidiaries has taken any action or failed to take any action that would
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company
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or any of its Subsidiaries is a party or by which any property or assets of the
Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its Subsidiaries, if any, are not
being conducted, and shall not be conducted so long as a Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity, which violation would cause a Material Adverse Effect. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court, governmental agency, regulatory agency, self regulatory organization
or stock market or any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement, the Notes or the Warrants in accordance with the terms hereof or
thereof or to issue and sell the Notes and Warrants in accordance with the terms
hereof and to issue the Conversion Shares upon conversion of the Notes and the
Warrant Shares upon exercise of the Warrants. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or will be obtained
promptly after Closing effected on or prior to the date hereof.
G. ABSENCE OF CERTAIN CHANGES. Since December 31, 2005, there has
been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries.
H. ABSENCE OF LITIGATION. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect. SCHEDULE
3(H) contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
I. PATENTS, COPYRIGHTS, ETC. The Company and each of its
Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how, trade
secrets, trademarks, trademark applications, service marks, service names, trade
names and copyrights ("INTELLECTUAL PROPERTY") necessary to enable it to conduct
its business as now operated (and, to the best of the Company's knowledge, as
presently contemplated to be operated in the future); there is no claim or
action by any person pertaining to, or proceeding pending, or to the Company's
knowledge threatened, which challenges the right of the Company or of a
Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); to the best
of the Company's knowledge, the Company's or its Subsidiaries' current and
intended products, services and processes do not infringe on any Intellectual
Property or other rights held by any person; and the Company is unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company and each of its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of their Intellectual Property.
J. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
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Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
K. TAX STATUS. Except as set forth on SCHEDULE 3(K), the Company
and each of its Subsidiaries has made or filed all federal, state and foreign
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. To the Company's knowledge, there are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction. The
Company has not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal, state or local
tax. Except as set forth on SCHEDULE 3(K), none of the Company's tax returns is
presently being audited by any taxing authority.
L. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3(L) and
except for arm's length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on SCHEDULE
3(C), none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
M. DISCLOSURE. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyers pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is, to the knowledge of the Company, true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading. To the
knowledge of the Company, no event or circumstance has occurred or exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company's reports filed under the 1934 Act
are being incorporated into an effective registration statement filed by the
Company under the 1933 Act).
N. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF SECURITIES. The
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by any Buyer
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or any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Buyers' purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
O. NO INTEGRATED OFFERING. Except for sales of securities to the
Buyers and affiliates thereof heretofore consummated, 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 in any security or solicited any
offers to buy any security under circumstances that would require registration
under the 1933 Act of the issuance of the Securities to the Buyers. The issuance
of the Securities to the Buyers will not be integrated with any other issuance
of the Company's securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its securities.
P. NO BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, transaction fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.
Q. PERMITS; COMPLIANCE. The Company and each of its Subsidiaries
is in possession of all material franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates, approvals and
orders necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the "COMPANY PERMITS"), and
there is no action pending or, to the knowledge of the Company, threatened
regarding suspension or cancellation of any of the Company Permits. Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since December 31,
2005, neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
R. ENVIRONMENTAL MATTERS.
(I) There are, to the Company's knowledge, with respect
to the Company or any of its Subsidiaries or any predecessor of the
Company, no present violations of Environmental Laws (as defined
below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or
contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or
similar federal, state, local or foreign laws and neither the Company
nor any of its Subsidiaries has received any notice with respect to any
of the foregoing, nor is any action pending or, to the Company's
knowledge, threatened in connection with any of the foregoing. The term
"ENVIRONMENTAL LAWS" means all material federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants contaminants, or toxic or
hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS")
into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
9
transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans
or regulations issued, entered, promulgated or approved thereunder.
(II) Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials
are contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously owned,
leased or used by the Company or any of its Subsidiaries during the
period the property was owned, leased or used by the Company or any of
its Subsidiaries, except in the normal course of the Company's or any
of its Subsidiaries' business.
(III) There are no underground storage tanks on or under
any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
S. TITLE TO PROPERTY. Except as set forth on SCHEDULE 3(S), the
Company and its Subsidiaries have good and marketable title to all real property
and good and marketable title to all personal property owned by them which is
material to the business of the Company and its Subsidiaries, in each case free
and clear of all liens and encumbrances and, to the knowledge of the Company,
defects or such as would not have a Material Adverse Effect. To the knowledge of
the Company, any real property and facilities held under lease by the Company
and its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as would not have a Material Adverse Effect.
T. INSURANCE. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect. The Company has provided to Buyer true and correct copies of all
policies relating to directors' and officers' liability coverage, errors and
omissions coverage, and commercial general liability coverage.
U. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
V. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made
10
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.
W. SOLVENCY. The Company (after giving effect to the transactions
contemplated by this Agreement) is solvent (I.E., its assets have a fair market
value in excess of the amount required to pay its probable liabilities on its
existing debts as they become absolute and matured) and currently the Company
has no information that would lead it to reasonably conclude that the Company
would not, after giving effect to the transaction contemplated by this
Agreement, have the ability to, nor does it intend to take any action that would
impair its ability to, pay its debts from time to time incurred in connection
therewith as such debts mature.
X. NO INVESTMENT COMPANY. The Company is not, and upon the
issuance and sale of the Securities as contemplated by this Agreement will not
be an "investment company" required to be registered under the Investment
Company Act of 1940 (an "INVESTMENT COMPANY"). The Company is not controlled by
an Investment Company.
Y. BREACH OF REPRESENTATIONS AND WARRANTIES BY THE COMPANY. If the
Company breaches any of the representations or warranties set forth in this
Section 3, and in addition to any other remedies available to the Buyers
pursuant to this Agreement, the Company shall pay to the Buyers the Standard
Liquidated Damages Amount in cash or in shares of Common Stock at the option of
the Company, until such breach is cured. If the Company elects to pay the
Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.
4. COVENANTS.
A. BEST EFFORTS. The parties shall use their best efforts to
satisfy timely each of the conditions agreed to thereby described in Section 6
and 7 of this Agreement.
B. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to make available a
copy thereof to each Buyer promptly after such filing. The Company shall, on,
before or promptly after the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers under applicable securities or "blue sky" laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
make available evidence of any such action so taken to each Buyer on or prior to
the Closing Date.
C. REPORTING STATUS; ELIGIBILITY TO USE FORM S-3, SB-2 OR FORM
S-1. The Company represents and warrants that it shall use its best efforts to
meet the requirements for the use of Form S-3 (or if the Company is not eligible
for the use of Form S-3 as of the Filing Date (as defined in the Registration
Rights Agreement), the Company may use the form of registration for which it is
eligible at that time) for registration of the sale by the Buyer of the
Registrable Securities (as defined in the Registration Rights Agreement). So
long as any Buyer beneficially owns any of the Securities, the Company shall use
its best efforts to timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or
11
the rules and regulations thereunder would permit such termination. The Company
further agrees that it shall use its best efforts to file all reports required
to be filed by the Company with the SEC in a timely manner so as to become
eligible, and thereafter to maintain its eligibility, for the use of Form S-3.
The Company shall issue a press release describing the materials terms of the
transaction contemplated hereby as soon as practicable following the Closing
Date but in no event more than five (5) business days of the Closing Date, which
press release shall be subject to prior review by the Buyers. The Company agrees
that such press release shall not disclose the name of the Buyers unless
expressly consented to in writing by the Buyers or unless required by applicable
law or regulation, and then only to the extent of such requirement.
D. USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Notes and the Warrants for general working capital purposes and
shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other person
(except in connection with its currently existing direct or indirect
Subsidiaries.
E. FUTURE OFFERINGS. Subject to the exceptions described below,
the Company will not, without the prior written consent of a
majority-in-interest of the Buyers, not to be unreasonably withheld, negotiate
or contract with any party to obtain additional equity financing (including debt
financing with an equity component) that involves (A) the issuance of Common
Stock at a discount to the market price of the Common Stock on the date of
issuance (taking into account the value of any warrants or options to acquire
Common Stock issued in connection therewith) or (B) the issuance of convertible
securities that are convertible into an indeterminate number of shares of Common
Stock or (C) the issuance of warrants during the period (the "LOCK-UP PERIOD")
beginning on the Closing Date and ending on the later of (i) two hundred seventy
(270) days from the Closing Date and (ii) one hundred eighty (180) days from the
date the Registration Statement (as defined in the Registration Rights
Agreement) is declared effective (plus any days in which sales cannot be made
thereunder). In addition, subject to the exceptions described below, the Company
will not conduct any equity financing (including debt with an equity component)
("FUTURE OFFERINGS") during the period beginning on the Closing Date and ending
two (2) years after the end of the Lock-up Period unless it shall have first
delivered to each Buyer, at least twenty (20) business days prior to the closing
of such Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection therewith, and providing each Buyer an option
during the fifteen (15) day period following delivery of such notice to purchase
its pro rata share (based on the ratio that the aggregate principal amount of
Notes purchased by it hereunder bears to the aggregate principal amount of Notes
purchased hereunder) of the securities being offered in the Future Offering on
the same terms as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding sentence are collectively referred to as
the "CAPITAL RAISING LIMITATIONS"). In the event the terms and conditions of a
proposed Future Offering are amended in any respect after delivery of the notice
to the Buyers concerning the proposed Future Offering, the Company shall deliver
a new notice to each Buyer describing the amended terms and conditions of the
proposed Future Offering and each Buyer thereafter shall have an option during
the fifteen (15) day period following delivery of such new notice to purchase
its pro rata share of the securities being offered on the same terms as
contemplated by such proposed Future Offering, as amended. The foregoing
sentence shall apply to successive amendments to the terms and conditions of any
proposed Future Offering. The Capital Raising Limitations shall not apply to any
transaction involving (i) issuances of securities in a firm commitment
underwritten public offering (excluding a continuous offering pursuant to Rule
415 under the 0000 Xxx) or (ii) issuances of securities as consideration for a
merger, consolidation or purchase of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
12
equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company. The Capital Raising Limitations
also shall not apply to the issuance of securities upon exercise or conversion
of the Company's options, warrants or other convertible securities outstanding
as of the date hereof or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or restricted
stock plan approved by the shareholders of the Company.
F. EXPENSES. At the Closing, the Company shall reimburse Buyers
for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith ("DOCUMENTS"), including, without
limitation, attorneys' and consultants' fees and expenses, transfer agent fees,
fees for stock quotation services, fees relating to any amendments or
modifications of the Documents or any consents or waivers of provisions in the
Documents, fees for the preparation of opinions of counsel, escrow fees, and
costs of restructuring the transactions contemplated by the Documents in an
amount not to exceed $30,000. When possible, the Company must pay these fees
directly, otherwise the Company must make immediate payment for reimbursement to
the Buyers for all fees and expenses immediately upon written notice by the
Buyer or the submission of an invoice by the Buyer. If the Company fails to
reimburse the Buyer in full within three (3) business days of the written notice
or submission of invoice by the Buyer, the Company shall pay interest on the
total amount of fees to be reimbursed at a rate of 15% per annum.
G. FINANCIAL INFORMATION. The Company agrees to send the following
reports to each Buyer until such Buyer transfers, assigns, or sells all of the
Securities: (i) within ten (10) days after the filing with the SEC, a copy of
its Annual Report on Form 10-KSB its Quarterly Reports on Form 10-QSB and any
Current Reports on Form 8-K; (ii) within one (1) day after release, copies of
all press releases issued by the Company or any of its Subsidiaries; and (iii)
contemporaneously with the making available or giving to the shareholders of the
Company, copies of any notices or other information the Company makes available
or gives to such shareholders.
H. AUTHORIZATION AND RESERVATION OF SHARES. The Company shall at
all times have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the full conversion
or exercise of the outstanding Notes and Warrants and issuance of the Conversion
Shares and Warrant Shares in connection therewith (based on the Conversion Price
of the Notes or Exercise Price of the Warrants in effect from time to time) and
as otherwise required by the Notes. The Company shall not reduce the number of
shares of Common Stock reserved for issuance upon conversion of Notes and
exercise of the Warrants without the consent of each Buyer. The Company shall at
all times maintain the number of shares of Common Stock so reserved for issuance
at an amount ("RESERVED AMOUNT") equal to no less than two (2) times the number
that is then actually issuable upon full conversion of the Notes and upon
exercise of the Warrants (based on the Conversion Price of the Notes or the
Exercise Price of the Warrants in effect from time to time). If at any time the
number of shares of Common Stock authorized and reserved for issuance
("AUTHORIZED AND RESERVED SHARES") is below the Reserved Amount, the Company
will promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of shareholders to authorize additional shares to meet the Company's
obligations under this Section 4(h), in the case of an insufficient number of
authorized shares, obtain shareholder approval of an increase in such authorized
number of shares, and voting the management shares of the Company in favor of an
increase in the authorized shares of the Company to ensure that the number of
authorized shares is sufficient to meet the Reserved Amount. If the Company
fails to obtain such shareholder approval within sixty (60) days following the
date on which the number of Reserved Amount exceeds the Authorized and Reserved
Shares, the Company shall pay to the
13
Buyers the Standard Liquidated Damages Amount, in cash or in shares of Common
Stock at the option of each Buyer. If a Buyer elects to be paid the Standard
Liquidated Damages Amount in shares of Common Stock, such shares shall be issued
at the Conversion Price at the time of payment. In order to ensure that the
Company has authorized a sufficient amount of shares to meet the Reserved Amount
at all times, the Company shall use its best efforts to deliver to a
representative for the Buyers at the end of every month a list detailing (1) the
current amount of shares authorized by the Company and reserved for the Buyers;
and (2) amount of shares issuable upon conversion of the Notes and upon exercise
of the Warrants and as payment of interest accrued on the Notes for one year. If
the Company fails to provide such list within five (5) business days of having
received a written demand therefor, the Company shall pay the Standard
Liquidated Damages Amount, in cash or in shares of Common Stock at the option of
the Buyer, until the list is delivered. If the Buyer elects to be paid the
Standard Liquidated Damages Amount in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.
I. LISTING. The Company shall use its best efforts to secure the
listing of the Conversion Shares and Warrant Shares upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and, so
long as any Buyer owns any of the Securities, shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares and Warrant Shares from time to time issuable upon conversion of the
Notes or exercise of the Warrants. The Company will use best efforts to obtain
and, so long as any Buyer owns any of the Securities, maintain the listing and
trading of its Common Stock on the OTCBB or any equivalent replacement exchange,
the Nasdaq National Market ("NASDAQ"), the Nasdaq SmallCap Market ("NASDAQ
SMALLCAP"), the New York Stock Exchange ("NYSE"), or the American Stock Exchange
("AMEX") 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 shall
promptly provide to each Buyer copies of any notices it receives from the OTCBB
and any other exchanges or quotation systems on which the Common Stock is then
listed regarding the continued eligibility of the Common Stock for listing on
such exchanges and quotation systems.
J. CORPORATE EXISTENCE. So long as a Buyer beneficially owns any
Notes or Warrants, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCBB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.
K. NO INTEGRATION. The Company shall not make any offers or sales
of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
L. BREACH OF COVENANTS. If the Company breaches any of the
covenants set forth in this Section 4, and in addition to any other remedies
available to the Buyers pursuant to this Agreement, the Company shall pay to the
Buyers the Standard Liquidated Damages Amount, in cash or in shares of Common
Stock at the option of the Company, until such breach is cured. If the Company
elects to pay the
14
Standard Liquidated Damages Amount in shares, such shares shall be issued at the
Conversion Price at the time of payment.
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent to issue certificates,
registered in the name of each Buyer or its nominee, for the Conversion
Shares and Warrant Shares in such amounts as specified from time to
time by each Buyer to the Company upon conversion of the Notes or
exercise of the Warrants in accordance with the terms thereof (the
"IRREVOCABLE TRANSFER AGENT Instructions"). Prior to registration of
the Conversion Shares and Warrant Shares under the 1933 Act or the date
on which the Conversion Shares and Warrant Shares may be sold pursuant
to Rule 144 without any restriction as to the number of Securities as
of a particular date that can then be immediately sold, all such
certificates shall bear the restrictive legend specified in Section
2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this
Section 5, and stop transfer instructions to give effect to Section
2(f) hereof (in the case of the Conversion Shares and Warrant Shares,
prior to registration of the Conversion Shares and Warrant Shares under
the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to
the number of Securities as of a particular date that can then be
immediately sold), will be given by the Company to its transfer agent
and that the Securities shall otherwise be freely transferable on the
books and records of the Company, subject to and to the extent provided
in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way each Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all
applicable prospectus delivery requirements, if any, upon re-sale of
the Securities. If a Buyer provides the Company with (i) an opinion of
counsel in form, substance and scope customary for opinions in
comparable transactions, to the effect that a public sale or transfer
of such Securities may be made without registration under the 1933 Act
and such sale or transfer is effected or (ii) the Buyer provides
reasonable assurances that the Securities can be sold pursuant to Rule
144, the Company shall permit the transfer, and, in the case of the
Conversion Shares and Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates, free from restrictive legend,
in such name and in such denominations as specified by such Buyer. The
Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Buyers, by vitiating the intent and
purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 may be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions
of this Section, that the Buyers shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and
requiring immediate transfer, without the necessity of showing economic
loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Notes and
Warrants to a Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date of each of the following conditions thereto,
provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion:
A. The applicable Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.
15
B. The applicable Buyer shall have delivered the Purchase Price in
accordance with Section 1(b) above.
C. The representations and warranties of the applicable Buyer
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the Closing
Date.
D. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The
obligation of each Buyer hereunder to purchase the Notes and Warrants
at the Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions, provided that these
conditions are for such Buyer's sole benefit and may be waived by such
Buyer at any time in its sole discretion:
A. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
B. The Company shall have delivered to such Buyer duly executed
Notes (in such denominations as the Buyer shall request) and Warrants in
accordance with Section 1(b) above.
C. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.
D. The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by the chief executive
officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer
including, but not limited to certificates with respect to the Company's
Articles of Incorporation, By-laws and Board of Directors' resolutions relating
to the transactions contemplated hereby.
E. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
16
F. No event shall have occurred which could reasonably be expected
to have a Material Adverse Effect on the Company.
G. The Buyer shall have received an officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
8. GOVERNING LAW; MISCELLANEOUS.
A. GOVERNING LAW. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE
THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.
B. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
C. HEADINGS. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
D. SEVERABILITY. In the event that any provision of this Agreement
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 provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
E. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein
17
and therein and, except as specifically set forth herein or therein, neither the
Company nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
F. NOTICES. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
Midnight Holdings Group, Inc.
00000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
With a copy to:
Reitler Xxxxx & Xxxxxxxxxx LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
With copy to:
Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, LLP
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxx.xxx
Each party shall provide notice to the other party of any change in
address.
18
G. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person who is an "Accredited Investor" that purchases
Securities in a private transaction from a Buyer or to any of its "affiliates,"
as that term is defined under the 1934 Act, without the consent of the Company.
H. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
I. SURVIVAL. The representations and warranties of the Company and
the agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive
the closing hereunder notwithstanding any due diligence investigation conducted
by or on behalf of the Buyers. The Company agrees to indemnify and hold harmless
each of the Buyers and all their officers, directors, employees and agents for
loss or damage arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and covenants set forth
in Sections 3 and 4 hereof or any of its covenants and obligations under this
Agreement or the Registration Rights Agreement, including advancement of
reasonable expenses as they are incurred.
J. PUBLICITY. The Company and each of the Buyers shall have the
right to review a reasonable period of time before issuance of any press
releases, SEC, OTCBB or NASD filings, or any other public statements with
respect to the transactions contemplated hereby; PROVIDED, HOWEVER, that the
Company shall be entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, OTCBB (or other applicable trading market) or
NASD filings with respect to such transactions as is required by applicable law
and regulations (although each of the Buyers shall be consulted by the Company
in connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).
K. FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
L. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
M. REMEDIES. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the
Buyers shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Agreement
and to enforce
19
specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
MIDNIGHT HOLDINGS GROUP, INC.
/s/ Xxxxxxxx Xxxxx
--------------------------------
Xxxxxxxx Xxxxx
Chief Executive Officer
AJW PARTNERS, LLC
By: SMS Group, LLC
/s/ Xxxxx Xxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: Delaware
ADDRESS: 0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $
Number of Warrants:
Aggregate Remaining Purchase Price (after
accounting for any principal of Bridge Note): $
21
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
/s/ Xxxxx Xxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: Cayman Islands
ADDRESS: AJW Offshore, Ltd.
X.X. Xxx 00000 XXX
Xxxxx Xxxxxx, Xxxxxx Xxxxxx, B.W.I.
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $
Number of Warrants:
Aggregate Remaining Purchase Price (after
accounting for any principal of Bridge Note): $
22
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
/s/ Xxxxx Xxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: New York
ADDRESS: 0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $
Number of Warrants:
Aggregate Remaining Purchase Price (after
accounting for any principal of Bridge Note): $
23
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLP
/s/ Xxxxx Ribostky
------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: New York
ADDRESS: 0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $
Number of Warrants:
Aggregate Remaining Purchase Price (after
accounting for any principal of Bridge Note): $
24
EXHIBIT A
FORM OF NOTE
------------
(See Attached)
25
EXHIBIT B
FORM OF WARRANT
---------------
(See Attached)
26
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
(See Attached)
27
