EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement
This Securities Purchase Agreement (this "Agreement") is dated as of
March 5, 2004, among Usurf America, Inc., a Nevada corporation (the "Company"),
and the purchasers identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and Rule 506 promulgated thereunder, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
I. ARTICLE I
DEFINITIONS
A. 1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144 under the Securities Act.
B. "Capital Shares" means the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of earnings and
assets of the Company.
C. "Capital Shares Equivalents" means any securities, rights
or obligations that are convertible into or exchangeable for or give
any right to subscribe for or purchase, directly or indirectly, any
Capital Shares or any warrants, options or other rights to subscribe
for or purchase, directly or indirectly, Capital Shares or any such
convertible or exchangeable securities.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means the Trading Day when all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to the
Purchasers' obligations to pay the Subscription Amount have been
satisfied or waived.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par
value $0.0001 per share, and any securities into which such common
stock shall hereinafter have been reclassified into.
"Company Counsel" means ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
"Crestview" shall have the meaning ascribed to such term in
Section 5.2.
"Debentures" means, the Secured Convertible Debentures due
eighteen months from their date of issuance, issued by the Company to
the Purchasers hereunder, in the form of Exhibit A.
"Disclosure Schedules" shall have the meaning ascribed to such
term in Section 3.1 hereof.
"Effective Date" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exempt Securities" shall have the meaning ascribed to such
term in Section 4.13.
"FW" means ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP with offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h) hereof.
"Liens" shall have the meaning ascribed to such term in
Section 3.1(a) hereof.
"Losses" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including without
limitation costs of preparation and reasonable attorneys' fees.
"Market Price" shall mean the average of the 5 VWAPs
immediately prior to the date in question.
"Material Adverse Effect" shall have the meaning assigned to
such term in Section 3.1(b) hereof.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"Principal Market" means initially the American Stock Exchange
and shall also include the OTC Bulletin Board, NASDAQ Small-Cap Market,
New York Stock Exchange, or the NASDAQ National Market, whichever is at
the time the principal trading exchange or market for the Common Stock,
based upon share volume.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers,
in the form of Exhibit B attached hereto.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale of the Underlying Shares by each Purchaser as
provided for in the Registration Rights Agreement.
"Required Approvals" shall have the meaning ascribed to such
term in Section 3.1(e) hereof.
"Required Minimum" means, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially
issuable in the future pursuant to the Transaction Documents, including
any Underlying Shares issuable upon exercise or conversion in full of
all Warrants and Debentures, ignoring any conversion or exercise limits
set forth therein, and assuming that the Set Price is at all times on
and after the date of determination 75% of the then Set Price on the
Trading Day immediately prior to the date of determination.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h) hereof.
"Securities" means the Debentures, the Warrants and the
Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement, dated the
date hereof, among the Company and the Purchasers, in the form of
Exhibit F attached hereto.
"Security Documents" shall mean the Security Agreement and any
other documents and filing required thereunder in order to grant the
Purchasers a first priority security interest in all of the assets of
the Company, including all UCC-1 filing receipts.
"Set Price" shall have the meaning ascribed to such term in
the Debentures.
"Shareholder Approval" means such approval as may be required
by the applicable rules and regulations of the Principal Market (or any
successor entity) from the shareholders of the Company with respect to
the transactions contemplated by the Transaction Documents, including
the issuance of all of the Underlying Shares and shares of Common Stock
issuable upon exercise of the Warrants in excess of 19.9% of the
Company's issued and outstanding Common Stock on the Closing Date.
"Subscription Amount" means, as to each Purchaser, the
aggregate amount to be paid for Debentures and Warrants purchased
hereunder as specified below such Purchaser's name on the signature
page of this Agreement and next to the heading "Subscription Amount",
in United States Dollars and in immediately available funds.
"Subsequent Financing" shall have the meaning ascribed to such
term in Section 4.13.
"Subsidiary" means any subsidiary of the Company as set forth
on Schedule 3.1(a) attached hereto.
"Trading Day" means any day during which the Principal Market
shall be open for business.
"Transaction Documents" means this Agreement, the Debentures,
the Security Agreement, the Warrants, the Registration Rights Agreement
and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Debentures and upon exercise of the Warrants and
issued and issuable in lieu of the cash payment of interest on the
Debentures.
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Principal Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Principal Market on which the Common Stock is
then listed or quoted as reported by Bloomberg Financial L.P. (based on
a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Principal
Market and if prices for the Common Stock are then quoted on the OTC
Bulletin Board, the volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in
the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of
the Common Stock so reported prior to the day in question; or (d) in
all other cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by the
Purchasers and reasonably acceptable to the Company.
"Warrants" means collectively the Common Stock purchase
warrants, in the form of Exhibit C delivered to the Purchasers at the
Closing in accordance with Section 2.2 hereof.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
II. ARTICLE II
PURCHASE AND SALE
a. 2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, up to $2,850,000
principal amount of the Debentures. Each Purchaser shall deliver to the Company
via wire transfer or a certified check immediately available funds equal to
their Subscription Amount and the Company shall deliver to each Purchaser their
respective Debenture and Warrants as determined pursuant to Section 2.2(a)(ii)
and the other items set forth in Section 2.2 issuable at the Closing. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of FW, or such other location as the parties shall mutually
agree.
B. 2.2 Conditions to Closing.
1. (a) At or prior to the Closing, unless otherwise indicated
below, the Company shall deliver or cause to be delivered to each
Purchaser the following:
a. (i) a Debenture with a principal amount equal to such
Purchaser's Subscription Amount, registered in the name of such
Purchaser;
(ii) a Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 125% of such
Purchaser's Subscription Amount divided by the Market Price on the date
hereof, with a term of 5 years and an exercise price equal to $0.25,
subject to adjustment therein;
(iii) the legal opinion of Company Counsel, in the form of
Exhibit D attached hereto, addressed to the Purchasers;
(iv) the Registration Rights Agreement duly executed by the
Company in the form of Exhibit B attached hereto;
(v) the written voting agreement, in the form of Exhibit E
attached hereto, of all of the officers, directors and shareholders
holding more than 10% of the issued and outstanding shares of Common
Stock on the date hereof to vote all Common Stock owned by each of such
officers, directors and shareholders as of the record date for the
annual meeting of shareholders of the Company in favor of Shareholder
Approval amounting to, in the aggregate, at least 10% of the issued and
outstanding Common Stock;
(vi) the Security Agreement along with all Security Documents;
and
(vii) this Agreement, duly executed by the Company.
2. (b) At or prior to the Closing, each Purchaser shall
deliver or cause to be delivered to the Company the following:
(i) such Purchaser's Subscription Amount;
(ii) this Agreement, duly executed by such Purchaser;
(iii) the Security Agreement, duly executed by such Purchaser;
and
(iv) the Registration Rights Agreement duly executed by such
Purchaser.
3. (c) All representations and warranties of the other parties
contained herein shall remain true and correct as of the Closing Date and all
covenants of the other party shall have been performed if due prior to such
date.
4. (d) From the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on the
Principal Market, nor shall a banking moratorium have been declared either by
the United States or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of the Purchasers, makes it impracticable or inadvisable to purchase
the Debentures at the Closing.
III. ARTICLE III
REPRESENTATIONS AND WARRANTIES
A. 3.1 Representations and Warranties of the Company. Except as set
forth under the corresponding section of the disclosure schedules delivered to
the Purchasers concurrently herewith (the "Disclosure Schedules") which
Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.
1. (a) Subsidiaries. All of the direct and indirect
subsidiaries of the Company are set forth on Schedule 3.1(a). The
Company owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any lien, charge,
security interest, encumbrance, right of first refusal or other
restriction (collectively, "Liens"), and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights.
If the Company has no subsidiaries, then references in the Transaction
Documents to the Subsidiaries shall be disregarded.
2. (b) Organization and Qualification. Each of the Company and
the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither the
Company nor any Subsidiary is in violation of any of the provisions of
its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing
as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or
in good standing, as the case may be, could not, individually or in the
aggregate: (i) adversely affect the legality, validity or
enforceability of any Transaction Document, (ii) have or result in or
be reasonably likely to have or result in a material adverse effect on
the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (iii) adversely impair the Company's ability to perform
fully on a timely basis its obligations under any of the Transaction
Documents (any of (i), (ii) or (iii), a "Material Adverse Effect").
3. (c) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate
the transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder or thereunder. The
execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby or thereby have been duly authorized by all necessary action on
the part of the Company and no further consent or action is required by
the Company other than Required Approvals. Each of the Transaction
Documents has been (or upon delivery will be) duly executed by the
Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally and general principles of equity. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other
organizational or charter documents.
4. (d) No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will not:
(i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) subject to obtaining the
Required Approvals, conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound
or affected, or (iii) result, in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could not, individually or in the aggregate,
have or result in a Material Adverse Effect.
5. (e) Filings, Consents and Approvals. Neither the Company
nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filings required under Section 4.7, (ii)
the filing with the Commission of the Registration Statement, (iii) the
notice and/or application(s) to each applicable Principal Market for
the issuance and sale of the Debentures and Warrants and the listing of
the Underlying Shares for trading thereon in the time and manner
required thereby, (iv) the filing of Form D with the Commission and
applicable Blue Sky filings and (v) Shareholder Approval (collectively,
the "Required Approvals").
6. (f) Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued,
fully paid and non-assessable, free and clear of all Liens. The Company
has reserved from its duly authorized capital stock a number of shares
of Common Stock for issuance of the Underlying Shares at least equal to
the Required Minimum on the date hereof. The Company has not, and to
the knowledge of the Company, no Affiliate of the Company has sold,
offered for sale or solicited offers to buy or otherwise negotiated in
respect of any security (as defined in Section 2 of the Securities Act)
that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of
the sale of the Securities to the Purchasers, or that would be
integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Principal Market.
7. (g) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is set
forth in the Disclosure Schedules attached hereto. No securities of the
Company are entitled to preemptive or similar rights, and no Person has
any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by
the Transaction Documents. Except as a result of the purchase and sale
of the Securities, there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares
of Common Stock. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities.
All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further
approval or authorization of any stockholder, the Board of Directors of
the Company or others is required for the issuance and sale of the
Shares. Except as disclosed in the SEC Reports, there are no
stockholders agreements, voting agreements or other similar agreements
with respect to the Company's capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the
Company's stockholders.
8. (h) SEC Reports; Financial Statements. The Company has
filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Reports") on a timely basis
or has received a valid extension of such time of filing and has filed
any such SEC Reports prior to the expiration of any such extension. The
Company has identified and made available to the Purchasers a copy of
all SEC Reports filed within the 10 days preceding the date hereof. As
of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission
with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal year-end audit
adjustments.
9. (i) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports: (i) there has been no event,
occurrence or development that has had or that could result in a
Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected in
the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has
not altered its method of accounting or the identity of its auditors,
(iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or
made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company
stock option or similar plans.
10. (j) Litigation. There is no action, suit, inquiry, notice
of violation, proceeding or investigation pending or, to the knowledge
of the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
"Action") which: (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of
fiduciary duty. The Company does not have pending before the Commission
any request for confidential treatment of information. There has not
been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company
or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
11. (k) Compliance. Neither the Company nor any Subsidiary:
(i) is in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is
in default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not
such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has
been in violation of any statute, rule or regulation of any
governmental authority, except in each case as could not, individually
or in the aggregate, have or result in a Material Adverse Effect.
12. (l) Labor Relations. No material labor dispute exists or,
to the knowledge of the Company, is imminent with respect to any of the
employees of the Company.
13. (m) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits could
not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect ("Material Permits"), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
14. (n) Title to Assets. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by
them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held under valid, subsisting and enforceable leases of which the
Company and the Subsidiaries are in compliance.
15. (o) Patents and Trademarks. The Company and the
Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade
names, copyrights, licenses and other similar rights necessary or
material for use in connection with their respective businesses as
described in the SEC Reports and which the failure to so have could
have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received
a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any
Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.
16. (p) Insurance. The Company and the Subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in
the businesses in which the Company and the Subsidiaries are engaged.
To the best of Company's knowledge, such insurance contracts and
policies are accurate and complete. Neither the Company nor any
Subsidiary has any reason to believe 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 without a significant increase in cost.
17. (q) Transactions With Affiliates and Employees. Except as
required to be set forth in the SEC Reports, none of the officers or
directors of the Company and, to the knowledge of the Company, none of
the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (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 entity in which any
officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
18. (r) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Company and designed such disclosures controls and
procedures to ensure that material information relating to the Company,
including its Subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which
the Company's Form 10-K or 10-Q, as the case may be, is being prepared.
The Company's certifying officers have evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the
period ending September 30, 2003 (such date, the "Evaluation Date").
The Company presented in the Form 10-Q for the quarter ended September
30, 2003 the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal control over
financial reporting or, the Company's knowledge, in other factors that
could significantly affect the Company's internal control over
financial reporting.
19. (s) Solvency/Indebtedness. Based on the financial
condition of the Company as of the Closing Date: (i) the fair saleable
value of the Company's assets exceeds the amount that will be required
to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature;
(ii) the Company's assets do not constitute unreasonably small capital
to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into
account the particular capital requirements of the business conducted
by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated
uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe that
it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. The SEC Reports set forth as of the dates thereof all
outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments.
For the purposes of this Agreement, "Indebtedness" shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent
obligations, whether or not the same are or should be reflected in the
Company's balance sheet or the notes thereto, except guaranties by
endorsement of negotiable instruments for deposit or collection in the
ordinary course of business, and (c) the present value of any lease
payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
20. (t) Certain Fees. No brokerage or finder's fees or
commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions
contemplated by this Agreement, and the Company has not taken any
action that would cause any Purchaser to be liable for any such fees or
commissions. The Company agrees that the Purchasers shall have no
obligation with respect to any fees or with respect to any claims made
by or on behalf of any Person for fees of the type contemplated by this
Section with the transactions contemplated by this Agreement.
21. (u) Private Placement. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
3.2(b)-(f), the offer, issuance and sale of the Securities to the
Purchasers as contemplated hereby are exempt from the registration
requirements of the Securities Act. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of
the Principal Market, except that Shareholder Approval is required for
the Company to issue in excess of 27,876,847 shares of Common Stock
under the Transaction Documents.
22. (v) Listing and Maintenance Requirements. The Company's
Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received
any notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date
hereof, received notice from any Principal Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such
Principal Market. The Company is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance with
all such listing and maintenance requirements.
23. (w) Registration Rights. The Company has not granted or
agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered
with the Commission or any other governmental authority that have not
been satisfied.
24. (x) Application of Takeover Protections. The Company and
its Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws
of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
Documents, including without limitation as a result of the Company's
issuance of the Securities and the Purchasers' ownership of the
Securities.
25. (y) Seniority. As of the Closing Date, no indebtedness of
the Company is senior to the Debentures in right of payment, whether
with respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness secured by purchase money security
interests (which is senior only as to underlying assets covered
thereby) and capital lease obligations (which is senior only as to the
property covered thereby).
26. (z) Disclosure. The Company confirms that neither it nor
any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that
constitutes or might constitute material, nonpublic information. The
Company understands and confirms that the Purchasers will rely on the
foregoing representations in effecting transactions in securities of
the Company. All disclosure provided to the Purchasers regarding the
Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of
the Company with respect to the representations and warranties made
herein are true and correct with respect to such representations and
warranties and do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading. The Company acknowledges and agrees that no
Purchaser makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 hereof.
27. (aa) Tax Status. 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. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any
such claim. The Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any
foreign, federal, statue or local tax. None of the Company's tax
returns is presently being audited by any taxing authority.
28. (bb) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that the Purchasers 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 Purchaser 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 Purchaser 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 Purchasers' purchase of the Securities. The
Company further represents to each Purchaser that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.
B. (cc) No General Solicitation or Advertising in Regard to
this Transaction. Neither the Company nor, to the knowledge of the
Company, any of its directors or officers (i) has conducted or will
conduct any general solicitation (as that term is used in Rule 502(c)
of Regulation D) or general advertising with respect to the sale of the
Debentures or the Warrants, or (ii) made any offers or sales of any
security or solicited any offers to buy any security under any
circumstances that would require registration of the Debentures, the
Underlying Shares or the Warrants under the Securities Act or made any
"directed selling efforts" as defined in Rule 902 of Regulation S.
(dd) No Disagreements with Accountants and Lawyers. There are
no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the accountants and
lawyers formerly or presently employed by the Company and the Company
is current with respect to any fees owed to its accountants and
lawyers.
(ff) 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 this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act or which
could violate any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of the
Principal Market.
(gg) Foreign Corrupt Practices. Neither the Company, nor to
the knowledge of the Company, any agent or other person acting on
behalf of the Company, has (i) directly or indirectly, used any
corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to foreign or domestic political
activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic
political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended.
C. 3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:
1. (a) Organization; Authority. Such Purchaser is an entity
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with the requisite corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The purchase by such Purchaser of
the Securities hereunder has been duly authorized by all necessary
action on the part of such Purchaser. Each of this Agreement, the
Security Agreement and the Registration Rights Agreement has been duly
executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in
accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
2. (b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account and not with a view to or
for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement, at all times to sell or otherwise dispose
of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act or under an exemption
from such registration and in compliance with applicable federal and
state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Purchaser to hold Securities for any
period of time. Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. Such Purchaser does not have any
agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities (this representation and warranty not
limiting such Purchaser's right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable
federal and state securities laws).
3. (c) Purchaser Status. At the time such Purchaser was
offered the Securities, it was, and at the date hereof it is, and on
each date on which it exercises any Warrants or converts any Debentures
it will be, an "accredited investor" as defined in Rule 501(a) under
the Securities Act. Such Purchaser has not been formed solely for the
purpose of acquiring the Securities. Such Purchaser is not a registered
broker-dealer under Section 15 of the Exchange Act.
4. (d) Experience of such Purchaser. Such Purchaser, either
alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks
of such investment. Such Purchaser is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
5. (e) General Solicitation. Such Purchaser is not purchasing
the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or
radio or presented at any seminar or any other general solicitation or
general advertisement.
6. (f) Open Short Position. As of the date hereof, each
Purchaser, for itself only, represents and warrants that neither it,
nor any person or entity acting at the direction of such Purchaser,
holds an open short position in the Company's Common Stock.
IV. ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
A. 4.1 Transfer Restrictions.
1. (a) The Securities may only be disposed of in compliance
with state and federal securities laws. In connection with any transfer
of Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a
Purchaser, the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.
2. (b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any
certificate evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement or grant a
security interest in some or all of the Securities to a financial
institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities
to the pledgees or secured parties. Such pledge or transfer would not
be subject to approval of the Company; provided the Company may require
a legal opinion of legal counsel of the pledgee , secured party or
pledgor in connection with any eventual transfer of beneficial
ownership resulting from such pledge. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the
Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in
connection with a pledge or transfer of the Securities, including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
3. (c) Certificates evidencing the Underlying Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)
hereof and provided the holder of such certificates is not a control
person of the Company (as such term is defined under Rule 144 of the
Securities Act)): (i) while a registration statement (including the
Registration Statement) covering the resale of such security is
effective under the Securities Act, or (ii) following any sale of such
Underlying Shares pursuant to Rule 144, or (iii) if such Underlying
Shares are eligible for sale under Rule 144(k), or (iv) if such legend
is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the
staff of the Commission); provided, however, in connection with the
issuance of the Underlying Shares, each Purchaser, severally and not
jointly with the other Purchasers, hereby agrees to adhere to and abide
by all prospectus delivery requirements under the Securities Act and
rules and regulations of the Commission. The Company shall cause its
counsel to issue a legal opinion to the Company's transfer agent
promptly after the Effective Date if required by the Company's transfer
agent to effect the removal of the legend hereunder. If all or any
portion of a Debenture or Warrant is converted or exercised (as
applicable) at a time when there is an effective registration statement
to cover the resale of the Underlying Shares, or if such Underlying
Shares may be sold under Rule 144(k) or if such legend is not otherwise
required under applicable requirements of the Securities Act (including
judicial interpretations thereof) then such Underlying Shares shall be
issued free of all legends. The Company agrees that following the
Effective Date or at such time as such legend is no longer required
under this Section 4.1(c), it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Company's
transfer agent of a certificate representing Underlying Shares, as
applicable, issued with a restrictive legend (such third Trading Day,
the "Legend Removal Date"), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company
that enlarge the restrictions on transfer set forth in this Section.
4. (d) In addition to such Purchaser's other available
remedies, the Company shall pay to a Purchaser, in cash, as liquidated
damages and not as a penalty, for each $5,000 of Underlying Shares
(based on the VWAP of the Common Stock on the date such Securities are
submitted to the Company's transfer agent) delivered for removal of the
restrictive legend and subject to this Section 4.1(c), $50 per Trading
Day (increasing to $100 per Trading Day 3 Trading Days after such
damages have begun to accrue) for each Trading Day after the Legend
Removal Date until such certificate is delivered without a legend.
Nothing herein shall limit such Purchaser's right to pursue actual
damages for the Company's failure to deliver certificates representing
any Securities as required by the Transaction Documents, and such
Purchaser shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.
B. 4.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.
C. 4.3 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to use best efforts to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. Upon the request of any Purchaser, the Company shall deliver
to such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
D. 4.4 Integration. The Company shall not, and shall use its best
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Principal Market.
E. 4.5 Reservation and Listing of Securities.
1. (a) The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents.
2. (b) If, on any date, the number of authorized but unissued
(and otherwise unreserved) shares of Common Stock is less than the
Required Minimum on such date, then the Board of Directors of the
Company shall use commercially reasonable efforts to amend the
Company's certificate or articles of incorporation to increase the
number of authorized but unissued shares of Common Stock to at least
the Required Minimum at such time, as soon as possible and in any event
not later than the 75th day after such date.
3. (c) The Company shall, if applicable: (i) in the time and
manner required by the Principal Market, prepare and file with such
Principal Market an additional shares listing application covering a
number of shares of Common Stock at least equal to the Required Minimum
on the date of such application, (ii) take all steps necessary to cause
such shares of Common Stock to be approved for listing on the Principal
Market as soon as possible thereafter, (iii) provide to the Purchasers
evidence of such listing, and (iv) maintain the listing of such Common
Stock on any date at least equal to the Required Minimum on such date
on such Principal Market or another Principal Market. In addition, the
Company shall hold a special meeting of shareholders (which may also be
the annual meeting of shareholders) at the earliest practical date, but
in no event later than September 30, 2004, for the purpose of obtaining
Shareholder Approval, with the recommendation of the Company's Board of
Directors that such proposal be approved, and the Company shall solicit
proxies from its shareholders in connection therewith in the same
manner as all other management proposals in such proxy statement and
all management-appointed proxyholders shall vote their proxies in favor
of such proposal.
F. 4.6 Conversion and Exercise Procedures. The form of Notice of
Exercise included in the Warrants and the form of Notice of Conversion included
in the Debentures set forth the totality of the procedures required of the
Purchasers in order to exercise the Warrants or convert the Debentures. No
additional legal opinion or other information or instructions shall be required
of the Purchasers to exercise their Warrants or convert their Debentures. The
Company shall honor exercises of the Warrants and conversions of the Debentures
and shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.
G. 4.7 Securities Laws Disclosure; Publicity. The Company shall, by
8:30 a.m. Eastern time on the Trading Day following the date of this Agreement,
issue a press release or file a Current Report on Form 8-K reasonably acceptable
to each Purchaser disclosing all material terms of the transactions contemplated
hereby. The Company and the Purchasers shall consult with each other in issuing
any press releases with respect to the transactions contemplated hereby and
neither the Company nor any Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, with respect to any
press release of the Company, which consent shall not unreasonably be withheld,
except if such disclosure is required by law, in which case the disclosing party
shall promptly provide the other party with prior notice of such public
statement or communication. Notwithstanding the foregoing, other than in any
registration statement filed pursuant to the Registration Rights Agreement and
filings related thereto, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Principal Market, without the prior
written consent of such Purchaser, except to the extent such disclosure is
required by law or Principal Market regulations, in which case the Company shall
provide each Purchaser with prior notice of such disclosure.
H. 4.8 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
I. 4.9 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables, capital lease obligations and accrued expenses in the ordinary course
of the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.
J. 4.10 Reimbursement. If any Purchaser becomes involved in any
capacity in any Proceeding by or against any Person who is a stockholder of the
Company, solely as a result of such Purchaser's acquisition of the Securities
under this Agreement and without causation by any other activity, obligation,
condition or liability on the part of, or pertaining to such Purchaser and not
to the purchase of Securities pursuant to this Agreement, the Company will
reimburse such Purchaser, to the extent such reimbursement is not provided for
in Section 4.11, for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred. The reimbursement
obligations (and limitations thereon) of the Company under this paragraph shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any Affiliates of the Purchasers
who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement except to the extent any covenant or warranty owing to the
Company is breached.
K. 4.11 Indemnification. The Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, employees and
agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to: (a) any misrepresentation, breach
or inaccuracy, or any allegation by a third party that, if true, would
constitute a breach or inaccuracy, of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents; or (b) any cause of action, suit or claim brought or made
against such Purchaser Party and arising solely out of or solely resulting from
the execution, delivery, performance or enforcement of this Agreement or any of
the other Transaction Documents and without causation by any other activity,
obligation, condition or liability pertaining to such Purchaser and not to the
transactions contemplated by this Agreement. The Company will reimburse such
Purchaser for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred.
L. 4.12 Shareholders Rights Plan. In the event that a shareholders
rights plan is adopted by the Company, no claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
the plan or in any way could be deemed to trigger the provisions of such plan by
virtue of receiving Securities under the Transaction Documents.
M. 4.13 Participation in Future Financing. From the date hereof until
18 months after the Effective Date, upon any financing by the Company or any of
its Subsidiaries of Capital Shares or Capital Shares Equivalents (a "Subsequent
Financing"), each Purchaser shall have the right to participate in up to 100% of
such Subsequent Financing. At least 10 Trading Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing ("Pre-Notice"), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a "Subsequent Financing Notice"). Upon the
request of a Purchaser, and only upon a request by such Purchaser, for a
Subsequent Financing Notice, the Company shall promptly, but no later than 1
Trading Day after such request, deliver a Subsequent Financing Notice to such
Purchaser. The Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto. If by 6:30 p.m. (New York City time) on the 10th
Trading Day after all of the Purchasers have received the Pre-Notice,
notifications of the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to provide) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Purchaser as of such 10th Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate. The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of participation
set forth above in this Section 4.13, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason
substantially on terms no more favorable to the Purchasers than those set forth
in such Subsequent Financing Notice within 60 Trading Days after the date of the
initial Subsequent Financing Notice. In the event the Company receives responses
to Subsequent Financing Notices from Purchasers seeking to purchase more than
the aggregate amount of the Subsequent Financing, each such Purchaser shall have
the right to purchase their Pro Rata Portion (as defined below) of the
Subsequent Financing. "Pro Rata Portion" is the ratio of (x) the Subscription
Amount of a participating Purchaser and (y) the sum of the aggregate
Subscription Amount of all participating Purchasers. Notwithstanding the
foregoing, this Section 4.13 shall not apply in respect of the issuance of (a)
shares of Common Stock or options to employees, officers or directors of the
Company pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such
purpose, (b) securities upon the exercise of or conversion of any convertible
securities, options or warrants issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities (unless such amendment
results from the application of any anti dilution provisions applicable to such
securities) or (c) following the 120th day after the Closing Date, up to
$3,000,000 principal amount of convertible debentures less any principal amounts
of debentures purchased pursuant to Section 4.16 by any Crestview Entities (as
defined therein) on identical terms as the debentures (including the conversion
price) issuable pursuant to Section 4.16 (collectively, the "Exempt
Securities").
N. 4.14 Prohibition on Subsequent Financings. From the date hereof
until 90 days after the Effective Date, other than as contemplated by this
Agreement, neither the Company nor any Subsidiary shall issue or sell any
Capital Shares or Capital Shares Equivalents. Notwithstanding anything herein to
the contrary, the 90 day period set forth in this Section 4.14 shall be extended
for the number of Trading Days during such period in which (y) trading in the
Common Stock is suspended by any Principal Market, or (z) following the
Effective Date, the Registration Statement is not effective or the prospectus
included in the Registration Statement may not be used by the Purchasers for the
resale of the Underlying Shares. Notwithstanding anything to the contrary
herein, this Section 4.14 shall not apply to any Exempt Securities. In addition,
unless Shareholder Approval has been obtained and deemed effective in accordance
with Section 4.5(c), the Company shall not make any issuance whatsoever of
Capital Shares or Capital Shares Equivalents which would cause any adjustment of
the Set Price (other than pursuant to Section 4(c)(ii) of the Debentures) to the
extent the holders of Debentures would not be permitted, pursuant to Section
4(a)(ii)(A) of the Debenture and Section 3(c)(ii) of the Warrant, to convert
their respective outstanding Debentures and exercise their respective Warrants
in full.
O. 4.15 Equal Treatment of Purchasers. No consideration shall be
offered or paid to any person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
is also offered to all of the parties to the Transaction Documents. Further, the
Company shall not make any payment of principal or interest on the Debentures in
amounts which are disproportionate to the respective principal amounts
outstanding on the Debentures at any applicable time. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended to
treat for the Company the Debenture holders as a class and shall not in any way
be construed as the Purchasers acting in concert or as a group with respect to
the purchase, disposition or voting of Securities or otherwise.
P. 4.16 Additional Investment Option of Purchasers. From the date
hereof until 120 days after the Closing Date, Crestview (and/or any of its
designated Affiliates, collectively, the "Crestview Entities"), in its sole
determination, may elect to purchase additional convertible debentures. The
Crestview Entities shall have the right to purchase up to an amount equal to, at
the election of such entities, $3,000,000 principal amount of debentures. Any
additional investment will be on terms identical those set forth in the
Transaction Documents, mutatis mutandis, except that, the conversion price of
the convertible debentures shall be $0.192, subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement and
no additional warrants shall be issued in connection with such issuance. In
order to effectuate a purchase and sale of such convertible debentures, the
Company and the Crestview Entities shall enter into the following agreements:
(x) a securities purchase agreement otherwise identical to this Agreement,
mutatis mutandis and shall include updated disclosure schedules and (y) a
registration rights agreement otherwise identical to the Registration Rights
Agreement, mutatis mutandis and shall include updated disclosure schedules.
4.17 Underlying Shares Price Protection. From the date hereof until 18
months after the Closing Date, if in connection with a Subsequent Financing, the
Company or any subsidiary thereof shall issue any Capital Shares or Capital
Shares Equivalents entitling any person or entity to acquire shares of Common
Stock at a price per share less than the effective price paid by a holder of
Underlying Shares (the "Discounted Purchase Price", as further defined below),
the Company shall issue to such holder that number of additional shares of
Common Stock equal to (a) the effective aggregate purchase price paid by such
holder for all Underlying Shares then held by such holder divided by the
Discounted Purchase Price, less (b) the Underlying Shares then held by such
holder. The term "Discounted Purchase Price" shall mean the amount actually paid
by third parties for a share of Common Stock. The sale of Common Shares
Equivalents shall be deemed to have occurred at the time of the issuance of the
Common Shares Equivalents and the Discounted Purchase Price covered thereby
shall also include the actual exercise or conversion price thereof at the time
of the conversion or exercise (in addition to the consideration per share of
Common Stock underlying the Common Shares Equivalents received by the Company
upon such sale or issuance of the Common Shares Equivalents). In the case of any
Subsequent Financing involving a "Variable Rate Transaction" or an "MFN
Transaction" (each as defined below), the Discounted Purchase Price shall be
deemed to be the lowest actual conversion or exercise price at which such
securities are converted or exercised in the case of a Variable Rate
Transaction, or the lowest adjustment price in the case of an MFN Transaction.
If shares are issued for a consideration other than cash, the per share selling
price shall be the fair value of such consideration as determined in good faith
by the Board of Directors of the Company. The term "Variable Rate Transaction"
shall mean a transaction in which the Company issues or sells any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (x) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or (y)
with a conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock. The
term "MFN Transaction" shall mean a transaction in which the Company issues or
sells any securities in a capital raising transaction or series of related
transactions which grants to an investor the right to receive additional shares
based upon future transactions of the Company on terms more favorable than those
granted to the such investor in such offering. The Company may not refuse to
issue a Purchaser additional Shares hereunder based on any claim that such
Purchaser or any one associated or affiliated with such Purchaser has been
engaged in any violation of law, agreement or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining an issuance
hereunder shall have been sought and obtained and the Company posts a surety
bond for the benefit of such Purchaser in the amount of 150% of the market value
of such Shares (based on the Closing Price of the Common Stock on the date of
the event giving rise to the Company's obligation hereunder), which is subject
to the injunction, which bond shall remain in effect until the completion of
litigation of the dispute and the proceeds of which shall be payable to the
Purchaser to the extent it obtains judgment. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's failure to deliver
Shares hereunder and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. Notwithstanding anything to the
contrary herein, this Section 4.17 shall not apply to Exempt Securities.
V. ARTICLE V
MISCELLANEOUS
A. 5.1 Termination. This Agreement may be terminated by any Purchaser,
by written notice to the other parties, if the Closing has not been consummated
on or before March 5, 2004; provided that no such termination will affect the
right of any party to ▇▇▇ for any breach by the other party (or parties).
B. 5.2 Fees and Expenses. At the Closing, the Company has agreed to
reimburse Crestview Capital Master LLC ("Crestview") $30,000 for its legal fees
and expenses and such funds shall be wired per the instructions of Crestview.
Except as expressly set forth in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the issuance of any Securities.
C. 5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
D. 5.4 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified on the signature page attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day and an electronic confirmation of
delivery is received by the sender, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (c) three Trading
Days following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The addresses for such notices and
communications are those set forth on the signature pages hereof, or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.
E. 5.5 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.
F. 5.6 Construction. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
G. 5.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.
H. 5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.
I. 5.9 Governing Law; Venue; Waiver of Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of the
Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
this Agreement, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys' fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.
J. 5.10 Survival. The representations and warranties contained herein
shall survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.
K. 5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) such document with the same force and effect as if such facsimile
signature page were an original thereof.
L. 5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
M. 5.13 Rescission and Withdrawal Right. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of a conversion of a Debenture or exercise
of a Warrant, the Purchaser shall be required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.
N. 5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested.
O. 5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate. Without limiting the generality of the
foregoing, the Company expressly agrees that its breach of the next to last
sentence of Section 4.14 would cause each Purchaser irreparable harm, and
consents to granting of injunctive relieve by any court having jurisdiction to
preclude any such issuance of securities.
P. 5.16 Payment Set Aside. To the extent that the Company makes a
payment or payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
Q. 5.17 Usury. To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date forward, unless such
application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser's election.
5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Crestview. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.
5.19 Liquidated Damages. The Company's obligations to pay any
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
liquidated damages and other amounts have been paid notwithstanding the fact
that the instrument or security pursuant to which such liquidated damages or
other amounts are due and payable shall have been canceled.
(Signature Pages Follow)
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
USURF AMERICA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. McKinnno
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Address for Notice:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇. ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
[PURCHASER'S SIGNATURE PAGE - UAX]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Investing Entity: __Crestview Capital Master LLC________________________
Signature of Authorized Signatory of Investing Entity: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------
Name of Authorized Signatory: ▇▇▇▇▇▇▇ ▇▇▇▇
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Title of Authorized Signatory: Managing Partner
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Email Address of Authorized Signatory: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
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Address for Notice of Investing Entity: ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount:
Principal Amount of Debenture:
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]