Exhibit 10.1
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CONVERTIBLE NOTE PURCHASE AGREEMENT
by and among
GlobalOptions Group, Inc., as Issuer and Company
and
the other parties named herein, as Purchasers
June 28, 2006
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CONVERTIBLE NOTE PURCHASE AGREEMENT (the "AGREEMENT") dated as of June 28,
2006, by and among GlobalOptions Group, Inc., a Nevada corporation (the
"COMPANY"), and each of the other persons listed on SCHEDULE 1 hereto (each is
individually referred to as a "PURCHASER" and collectively, the "PURCHASERS").
RECITALS:
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 the Purchasers, and the Purchasers, severally and not jointly,
desire to purchase from the Company up to an aggregate original principal amount
of up to $31,500,000 of convertible Promissory Notes (the "NOTES") convertible
into (i) the Company's Series B Convertible Preferred Stock, par value $0.001
(the "PREFERRED STOCK") and (ii) two series of Common Stock Purchase Warrants
(the "WARRANTS") entitling the holders thereof to purchase, in the aggregate, up
to 11,025,000 shares of the Company's common stock, par value $0.001 (the
"COMMON STOCK"), as more fully set forth herein.
NOW THEREFORE, in consideration of the mutual promises and representations,
warranties, covenants and agreements set forth herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I - PURCHASE AND SALE
1.1 PURCHASE AND SALE.
(a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing (as defined in Section 2.2(a)), the Company will sell
and each of the Purchasers will purchase the Notes in the amounts set forth on
SCHEDULE 1 hereto.
(b) The shares of Preferred Stock issued or issuable upon conversion of
the Notes are referred to herein as "PREFERRED CONVERSION SHARES", the shares of
Common Stock issued or issuable upon conversion of the Preferred Stock are
referred to herein as the "CONVERSION SHARES," and the shares of Common Stock
issued or issuable upon exercise of the Warrants are referred to herein as the
"WARRANT SHARES."
1.2 TERMS OF THE NOTES, PREFERRED STOCK AND WARRANTS. The terms and
provisions of the Notes are more fully set forth in the form of convertible
Promissory Note attached hereto as EXHIBIT A. The terms and provisions of the
Preferred Stock are set forth in the form of Certificate of Designation of
Series B Convertible Preferred Stock, attached hereto as EXHIBIT B (the
"CERTIFICATE OF DESIGNATION"). The terms and provisions of the Warrants are more
fully set forth in the form of Common Stock Purchase Warrant, attached as
EXHIBIT 1 to the Notes.
ARTICLE II - PURCHASE PRICE AND CLOSING
2.1
PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") to be paid
by each Purchaser to the Company to acquire the Notes shall be the amount set
forth beside the name of each Purchaser on SCHEDULE 1 hereto.
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2.2 THE CLOSING.
(a) The closing of the transactions contemplated under this Agreement (the
"CLOSING") will take place as promptly as practicable, but no later than five
(5) business days following satisfaction or waiver of the conditions set forth
in Articles 6.1(a) and (b) and 6.2(a) (other than those conditions which by
their terms are not to be satisfied or waived until the Closing), at the offices
of ▇▇▇▇▇▇ and ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (or remotely via
exchange of documents and signatures) or at such other place or day as may be
mutually acceptable to the Purchasers and the Company. The date on which the
Closing occurs is the "CLOSING DATE".
(b) At the Closing, the Purchasers shall purchase, severally and not
jointly, and the Company shall issue and sell, in the aggregate, up to
$31,500,000 principal amount of Notes. At the Closing, each Purchaser shall
purchase from the Company, and the Company shall issue and sell to each
Purchaser, Notes having an original principal amount equal to such Purchaser's
Purchase Price as set forth next to such Purchaser's name on SCHEDULE 1.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Company's representations and warranties below are qualified in their
entirety by the SEC Documents (as defined in Section 3.6). The Company
represents and warrants to the Purchasers as follows:
3.1 CORPORATE EXISTENCE AND POWER; SUBSIDIARIES. The Company and its
Subsidiaries (as defined below) are corporations duly incorporated, validly
existing and in good standing under the laws of the state in which they are
incorporated, and have all corporate powers required to carry on their business
as now conducted. The Company and its Subsidiaries are duly qualified to do
business as a foreign corporation and are in good standing in each jurisdiction
where the character of the property owned or leased by them or the nature of
their activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not have or result in
(i) a material adverse effect on the legality, validity or enforceability of any
Transaction Document (as defined below), (ii) a material adverse effect on the
business or financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company's ability to perform in
any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT"). True and
complete copies of the Company's Articles of Incorporation, as amended (the
"CERTIFICATE"), and Bylaws, as amended (the "BYLAWS"), as currently in effect
and as will be in effect on the Closing Date (collectively, the "CERTIFICATE AND
BYLAWS"), have previously been made available to the Purchasers. For purposes of
this Agreement, the term "SUBSIDIARY" or "SUBSIDIARIES" means, with respect to
any entity, any corporation or other organization of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are directly or
indirectly owned by such entity or of which such entity is a partner or is,
directly or indirectly, the beneficial owner of 50% or more of any class of
equity securities or equivalent profit participation interests.
3.2 CORPORATE AUTHORIZATION. The execution, delivery and performance by
the Company of this Agreement, the Notes, the Warrants, the Certificate of
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Designation, the Investor Rights Agreement, and each of the other documents
executed pursuant to and in connection with this Agreement (collectively, the
"TRANSACTION DOCUMENTS"), and the consummation of the transactions contemplated
hereby and thereby (including, but not limited to, the sale and delivery of the
Notes, and the subsequent issuance of the Preferred Conversion Shares and
Warrants upon conversion of the Notes, the Conversion Shares upon conversion of
the Preferred Conversion Shares and the Warrant Shares upon exercise of the
Warrants) have been duly authorized, and no additional corporate or stockholder
action is required for the approval thereof. The Preferred Conversion Shares,
the Conversion Shares and the Warrant Shares have been duly reserved for
issuance by the Company. This Agreement and the other Transaction Documents have
been or, to the extent contemplated hereby or by the Transaction Documents, will
be duly executed and delivered and constitute, or will constitute (as
applicable), the legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with their terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws of general
application relating to or affecting the enforcement of rights of creditors, and
except as enforceability of its obligations hereunder are subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.3 CHARTER, BYLAWS AND CORPORATE RECORDS. The minute books of the Company
and its Subsidiaries contain, in all material respects, complete and accurate
records of all meetings and other corporate actions of the board of directors,
committees of the board of directors, incorporators and stockholders of the
Company and its Subsidiaries to the date hereof. All material corporate
decisions and actions have been validly made or taken. All corporate books,
including without limitation the share transfer register, comply with applicable
laws and regulations in all material respects and have been regularly updated.
Such books correctly reflect all the decisions of the stockholders in all
material respects.
3.4 GOVERNMENTAL AUTHORIZATION. Except as otherwise specifically
contemplated in this Agreement and the other Transaction Documents, and except
for: (i) the filings referenced in Section 5.12; (ii) the filing of a Form D
with respect to the Notes under Regulation D under the Securities Act; (iii) the
filing of the Registration Statement (as defined in the Investor Rights
Agreement) with the Commission; (iv) the application(s) to each trading market
for the listing of the Conversion Shares and the Warrant Shares for trading
thereon; and (v) any filings required under state securities laws that are
permitted to be made after the date hereof, the execution, delivery and
performance by the Company of this Agreement and the other Transaction
Documents, and the consummation of the transactions contemplated hereby and
thereby (including, but not limited to, the sale and delivery of the Notes and
the subsequent issuance of the Preferred Conversion Shares and Warrants upon
conversion of the Notes, the Conversion Shares upon conversion of the Preferred
Conversion Shares and Warrant Shares upon the exercise of the Warrants) by the
Company require no action (including, without limitation, stockholder approval)
by or in respect of, or filing with, any governmental or regulatory body,
agency, official or authority (including, without limitation, Nasdaq), except as
would not cause a Material Adverse Effect.
3.5 NON-CONTRAVENTION. The execution, delivery and performance by the
Company of this Agreement and the other Transaction Documents, and the
consummation by the Company of the transactions contemplated hereby and thereby
(including the issuance of the Notes, Warrants, Preferred Conversion Shares,
Conversion Shares and Warrant Shares) do not and will not (a) contravene or
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conflict with the Certificate (as amended by the Certificate of Designation) and
Bylaws of the Company and its Subsidiaries or any material agreement to which
the Company is a party or by which it is bound; (b) contravene or conflict with
or constitute a violation of any material provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to the Company
or its Subsidiaries; (c) constitute a default (or would constitute a default
with notice or lapse of time or both) under or give rise to a right of
termination, cancellation or acceleration or loss of any benefit under any
material agreement, contract or other instrument binding upon the Company or its
Subsidiaries or under any material license, franchise, permit or other similar
authorization held by the Company or its Subsidiaries; or (d) result in the
creation or imposition of any Lien (as defined below) on any asset of the
Company or its Subsidiaries. For purposes of this Agreement, the term "LIEN"
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest, claim or encumbrance of any kind in respect of such asset.
3.6 SEC DOCUMENTS. The Company is obligated under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT") to file reports pursuant to
Sections 13 or 15(d) thereof (all such reports filed or required to be filed by
the Company, including all exhibits thereto or incorporated therein by
reference, and all documents filed by the Company under the Securities Act
hereinafter called the "SEC DOCUMENTS"). The Company has filed all reports or
other documents required to be filed under the Exchange Act. All SEC Documents
filed by the Company (i) were prepared in all material respects in accordance
with the requirements of the Exchange Act and (ii) did not at the time they were
filed (or, if amended or superseded by a filing prior to the date hereof, then
on the date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company has previously made available to
each Purchaser a correct and complete copy of each report which the Company
filed with the Securities and Exchange Commission (the "SEC" or the
"COMMISSION") under the Exchange Act for any period ending on or after December
31, 2005 (the "RECENT REPORTS"). None of the information about the Company or
any of its Subsidiaries which has been disclosed to the Purchasers herein or in
the course of discussions and negotiations with respect hereto which is not
disclosed in the Recent Reports is or was required to be so disclosed, and no
material non-public information has been disclosed to the Purchasers.
3.7 FINANCIAL STATEMENTS. Each of the Company's (i) audited consolidated
balance sheet and related consolidated statements of income, cash flows and
changes in stockholders' equity (including the related notes) as of and for the
years ended December 31, 2005 and December 31, 2004, (ii) the Company's
unaudited consolidated balance sheet and related consolidated statements of
income, cash flows and changes in stockholders' equity as of and for the three
months ended ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) the financial statements of entities acquired
by the Company, in each case as contained in the Recent Reports (each of (i),
(ii) and (iii), collectively, the "COMPANY'S FINANCIAL STATEMENTS" or the
"FINANCIAL STATEMENTS") (x) present fairly in all material respects the
financial position of the Company and its Subsidiaries or such other entities on
a consolidated basis as of the dates thereof and the results of operations, cash
flows and stockholders' equity as of and for each of the periods then ended,
except that the unaudited financial statements are subject to normal year-end
adjustments, and (y) were prepared in accordance with United States generally
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accepted accounting principals ("GAAP") applied on a consistent basis throughout
the periods involved, in each case, except as otherwise indicated in the notes
thereto.
3.8 COMPLIANCE WITH LAW. The Company and its Subsidiaries are in
compliance and have conducted their business so as to comply with all laws,
rules and regulations, judgments, decrees or orders of any court, administrative
agency, commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign, applicable to their operations, the
violation of which would cause a Material Adverse Effect. There are no judgments
or orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration), including any such actions
relating to affirmative action claims or claims of discrimination, against the
Company or its Subsidiaries or against any of their properties or businesses
that would be reasonably likely to have a Material Adverse Effect.
3.9 NO DEFAULTS. The Company and its Subsidiaries are not, nor have they
received notice that they would be with the passage of time, giving of notice,
or both, (i) in violation of any provision of their Certificate and Bylaws (ii)
in default or violation of any term, condition or provision of (A) any judgment,
decree, order, injunction or stipulation applicable to the Company or its
Subsidiaries or (B) any material agreement, note, mortgage, indenture, contract,
lease or instrument, permit, concession, franchise or license to which the
Company or its Subsidiaries are a party or by which the Company or its
Subsidiaries or their properties or assets may be bound, and, to the knowledge
of the Company, no circumstances exist which would entitle any party to any
material agreement, note, mortgage, indenture, contract, lease or instrument to
which such Company or its Subsidiaries are a party, to terminate such as a
result of such Company or its Subsidiaries, having failed to meet any material
provision thereof including, but not limited to, meeting any applicable
milestone under any material agreement or contract.
3.10 LITIGATION. Except as disclosed in the Recent Reports or on SCHEDULE
3.10, there is no action, suit, proceeding, judgment, claim or investigation
pending or, to the best knowledge of the Company, threatened against the Company
and its Subsidiaries which could, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company or its Subsidiaries
or which in any manner challenges or seeks to prevent, enjoin, materially alter
or materially delay any of the transactions contemplated hereby, and, to the
knowledge of the Company, there is no basis for the assertion of any of the
foregoing. There are no material claims or complaints existing or, to the
knowledge of the Company or its Subsidiaries, threatened for product liability
in respect of any product of the Company or its Subsidiaries, and the Company
and its Subsidiaries are not aware of any basis for the assertion of any such
claim.
3.11 ABSENCE OF CERTAIN CHANGES. Since December 31, 2005, the Company has
conducted its business only in the ordinary course and there has not occurred,
except as set forth in the Recent Reports or any exhibit thereto or incorporated
by reference therein:
(a) Any event that could reasonably be expected to have a Material Adverse
Effect on the Company or any of its Subsidiaries;
(b) Any amendments or changes in the Certificate or Bylaws of the Company
and its Subsidiaries, other than on account of the filing of the Certificate of
Designation;
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(c) Any damage, destruction or loss, whether or not covered by insurance,
that would, individually or in the aggregate, have or would be reasonably likely
to have, a Material Adverse Effect on the Company and its Subsidiaries;
(d) Except as set forth on SCHEDULE 3.11(D), any
(i) incurrence, assumption or guarantee by the Company or its
Subsidiaries of any debt for borrowed money other than for equipment leases
in the ordinary course of business;
(ii) issuance or sale of any securities convertible into or
exchangeable for securities of the Company other than to directors,
employees and consultants pursuant to existing equity compensation or stock
purchase plans of the Company;
(iii) issuance or sale of options or other rights to acquire from the
Company or its Subsidiaries, directly or indirectly, securities of the
Company or any securities convertible into or exchangeable for any such
securities, other than options issued to directors, employees and
consultants in the ordinary course of business in accordance with past
practice;
(iv) issuance or sale of any stock, bond or other corporate security;
(v) discharge or satisfaction of any material Lien, other than current
liabilities incurred since December 31, 2005 in the ordinary course of
business;
(vi) declaration or making any payment or distribution to stockholders
or purchase or redemption of any share of its capital stock or other
security;
(vii) sale, assignment or transfer of any of its intangible assets
except in the ordinary course of business, or cancellation of any debt or
claim except in the ordinary course of business;
(viii) waiver of any right of substantial value whether or not in the
ordinary course of business;
(ix) material change in officer compensation except in the ordinary
course of business and consistent with past practices; or
(x) other commitment (contingent or otherwise) to do any of the
foregoing.
(e) Any creation, sufferance or assumption by the Company or any of its
Subsidiaries of any Lien on any material asset (other than Liens in connection
with equipment leases and working capital lines of credit set forth on SCHEDULE
3.11(E)) or any making of any loan, advance or capital contribution to or
investment in any Person in an aggregate amount which exceeds $50,000
outstanding at any time;
(f) Any entry into, amendment of, relinquishment, termination or
non-renewal by the Company or its Subsidiaries of any material contract,
license, lease, transaction, commitment or other right or obligation, other than
in the ordinary course of business; or
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(g) Any transfer or grant of a material right with respect to the
trademarks, trade names, service marks, trade secrets, copyrights or other
intellectual property rights owned or licensed by the Company or its
Subsidiaries, except as among the Company and its Subsidiaries.
3.12 NO UNDISCLOSED LIABILITIES. Except as set forth in the Recent Reports,
and except for liabilities and obligations incurred in the ordinary course of
business since December 31, 2005, as of the date hereof, (i) the Company and its
Subsidiaries do not have any material liabilities or obligations (absolute,
accrued, contingent or otherwise) which, and (ii) to the knowledge of the
Company, there has not been any aspect of the prior or current conduct of the
business of the Company or its Subsidiaries which is likely to form the basis
for any material claim by any third party which if asserted could result in any
such material liabilities or obligations which, are not fully reflected,
reserved against or disclosed in the balance sheet of the Company as at December
31, 2005.
3.13 TAXES. All material tax returns and tax reports required to be filed
with respect to the income, operations, business or assets of the Company and
its Subsidiaries have been timely filed (or appropriate extensions have been
obtained) in all material respects with the appropriate governmental agencies in
all jurisdictions in which such returns and reports are required to be filed,
and all of the foregoing as filed are correct and complete in all material
respects and, in all material respects, reflect accurately all liability for
taxes of the Company and its Subsidiaries for the periods to which such returns
relate, and all amounts shown as owing thereon have been paid. All material
income, profits, franchise, sales, use, value added, occupancy, property,
excise, payroll, withholding, FICA, FUTA and other taxes (including interest and
penalties), if any, collectible or payable by the Company and its Subsidiaries
or relating to or chargeable against any of its material assets, revenues or
income or relating to any employee, independent contractor, creditor,
stockholder or other third party through the Closing Date, were fully collected
and paid by such date if due by such date or provided for by adequate reserves
in the Financial Statements as of and for the period ended December 31, 2005
(other than taxes accruing after such date) and all similar items due through
the Closing Date will have been fully paid by that date or provided for by
adequate reserves, whether or not any such taxes were reported or reflected in
any tax returns or filings. No taxation authority has notified the Company in
writing of its intent to audit the records of the Company or any of its
Subsidiaries for the purpose of verifying or disputing any tax returns, reports
or related information and disclosures provided to such taxation authority, or
for the Company's or any of its Subsidiaries' alleged failure to provide any
such tax returns, reports or related information and disclosure. No material
claims or deficiencies have been asserted against or inquiries raised with the
Company or any of its Subsidiaries with respect to any taxes or other
governmental charges or levies which have not been paid or otherwise satisfied,
including claims that, or inquiries whether, the Company or any of its
Subsidiaries has not filed a tax return that it was required to file, and, to
the best of the Company's knowledge, there exists no reasonable basis for the
making of any such claims or inquiries. Neither the Company nor any of its
Subsidiaries has waived any restrictions on assessment or collection of taxes or
consented to the extension of any statute of limitations relating to taxation.
3.14 INTERESTS OF OFFICERS, DIRECTORS AND OTHER AFFILIATES. The description
of any interest held, directly or indirectly, by any officer, director or other
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Affiliate (as defined below) of the Company or its Subsidiaries (other than the
interests of the Company and its Subsidiaries in such assets) in any property,
real or personal, tangible or intangible, used in or pertaining to the Company's
business, including any interest in the Intellectual Property (as defined in
Section 3.15 hereof), as set forth in the Recent Reports, is true and complete
in all material respects, and no officer, director or other Affiliate of the
Company or its Subsidiaries has any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business,
including the Company's Intellectual Property, other than as set forth in the
Recent Reports. As used in this Agreement, "AFFILIATE" means any Person (as such
term is defined below) 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. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser. As used
in this Agreement, "Person" means any individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
of any thereof) or other entity of any kind.
3.15 INTELLECTUAL PROPERTY. Other than as set forth in the Recent Reports:
(a) the Company or a Subsidiary thereof has the right to use or is the
sole and exclusive owner of all right, title and interest in and to all material
foreign and domestic patents, patent rights, trademarks, service marks, trade
names, brands and copyrights (whether or not registered and, if applicable,
including pending applications for registration) owned, used or controlled by
the Company and its Subsidiaries (collectively, the "RIGHTS") and in and to each
material invention, software, trade secret, technology, product, composition,
formula, method of process used by the Company or its Subsidiaries (the Rights
and such other items, the "INTELLECTUAL PROPERTY"), and, to the Company's
knowledge, has the right to use the same, free and clear of any claim or
conflict with the rights of others;
(b) no royalties or fees (license or otherwise) are payable by the Company
or its Subsidiaries to any Person by reason of the ownership or use of any of
the Intellectual Property except as set forth on SCHEDULE 3.15;
(c) there have been no claims made against the Company or its Subsidiaries
asserting the invalidity, abuse, misuse, or unenforceability of any of the
Intellectual Property, and, to its knowledge, there are no reasonable grounds
for any such claims;
(d) neither the Company nor its Subsidiaries have made any claim of any
violation or infringement by others of its rights in the Intellectual Property,
and to the best of the Company's knowledge, no reasonable grounds for such
claims exist; and
(e) neither the Company nor its Subsidiaries have received written notice
that it is in conflict with or infringing upon the asserted rights of others in
connection with the Intellectual Property.
3.16 RESTRICTIONS ON BUSINESS ACTIVITIES. Other than as set forth in the
Recent Reports, there is no agreement, judgment, injunction, order or decree
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binding upon the Company or its Subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of the Company or its Subsidiaries, any material acquisition of
property by the Company or its Subsidiaries or the conduct of business by the
Company or its Subsidiaries as currently conducted or as currently proposed to
be conducted by the Company.
3.17 PREEMPTIVE RIGHTS. Except for such rights which have been duly waived
by the appropriate persons, none of the stockholders of the Company possess any
preemptive rights in respect of the Notes, the Warrants, the Preferred
Conversion Shares, Conversion Shares or Warrant Shares to be issued to the
Purchasers upon conversion of the Notes or the Preferred Stock or exercise of
the Warrants, as applicable.
3.18 INSURANCE. The insurance policies providing insurance coverage to the
Company or its Subsidiaries including for product liability are adequate for the
business conducted by the Company and its Subsidiaries (currently limited to the
testing phase) and are sufficient for compliance by the Company and its
Subsidiaries with all requirements of law and all material agreements to which
the Company or its Subsidiaries are a party or by which any of their assets are
bound in all material respects. All of such policies are in full force and
effect and are valid and enforceable in accordance with their terms, and the
Company and its Subsidiaries have complied with all material terms and
conditions of such policies, including premium payments. None of the insurance
carriers has provided written notice to the Company or its Subsidiaries of an
intention to cancel any such policy.
3.19 SUBSIDIARIES AND INVESTMENTS. Except as set forth in the Recent
Reports or on SCHEDULE 3.19, the Company has no Subsidiaries or Investments. For
purposes of this Agreement, the term "INVESTMENTS" shall mean, with respect to
any Person, all advances, loans or extensions of credit to any other Person, all
purchases or commitments to purchase any stock, bonds, notes, debentures or
other securities of any other Person, and any other investment in any other
Person, including partnerships or joint ventures (whether by capital
contribution or otherwise) or other similar arrangement (whether written or
oral) with any Person, including but not limited to arrangements in which (i)
the Person shares profits and losses, (ii) any such other Person has the right
to obligate or bind the Person to any third party, or (iii) the Person may be
wholly or partially liable for the debts or obligations of such partnership,
joint venture or other arrangement.
3.20 CAPITALIZATION. (a) The authorized capital stock of the Company
consists of 85,000,000 shares of common stock, $0.001 par value per share, of
which [15,310,254] shares are issued and outstanding as of the date hereof, and
15,000,000 shares of preferred stock, issuable in one or more classes or series,
with such relative rights and preferences as the Board of Directors may
determine, of which (i) 16,000 shares have been designated as "Series A
Convertible Preferred Stock", 7,750 of which are issued and outstanding and (ii)
60,000 shares will be, immediately prior to the Closing under this Agreement,
designated as the "Series B Convertible Preferred Stock", of which no shares are
issued and outstanding immediately prior to the execution of this Agreement.
(b) All shares of the Company's issued and outstanding capital stock have
been duly authorized, are validly issued and outstanding, and are fully paid and
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nonassessable. No securities issued by the Company from the date of its
incorporation to the date hereof were issued in violation of any statutory or
common law preemptive rights. There are no dividends which have accrued or been
declared but are unpaid on the capital stock of the Company. All material taxes
required to be paid by Company in connection with the issuance and any transfers
by the Company of the Company's capital stock have been paid. All material
permits or authorizations required to be obtained from or registrations required
to be effected with any Person in connection with any and all issuances of
securities of the Company from the date of the Company's incorporation to the
date hereof have been obtained or effected, and all securities of the Company
have been issued in accordance with the provisions of all applicable securities
or other laws except as could not cause a Material Adverse Effect.
3.21 OPTIONS, WARRANTS, RIGHTS. Except as set forth on SCHEDULE 3.21, there
are no outstanding (a) securities, notes or instruments convertible into or
exercisable for any of the capital stock or other equity interests of the
Company or its Subsidiaries; (b) options, warrants, subscriptions or other
rights to acquire capital stock or other equity interests of the Company or its
Subsidiaries; or (c) commitments, agreements or understandings of any kind,
including employee benefit arrangements, relating to the issuance or repurchase
by the Company or its Subsidiaries of any capital stock or other equity
interests of the Company or its Subsidiaries, any such securities or instruments
convertible or exercisable for securities or any such options, warrants or
rights. Other than the rights of the Purchasers under the Preferred Stock and
the Warrants, and except as set forth on SCHEDULE 3.21, neither the Company nor
the Subsidiaries have granted anti-dilution rights to any person or entity in
connection with any outstanding option, warrant, subscription or any other
instrument convertible or exercisable for the securities of the Company or any
of its Subsidiaries ("ANTI-DILUTION RIGHTS"). SCHEDULE 3.21 accurately describes
all of the adjustments that will occur pursuant to existing Anti-Dilution Rights
as a result of the transactions contemplated by this Agreement and the other
Transaction Documents. Other than the rights granted to the Purchasers under the
Investor Rights Agreement, there are no outstanding rights which permit the
holder thereof to cause the Company or the Subsidiaries to file a registration
statement under the Securities Act or which permit the holder thereof to include
securities of the Company or any of its Subsidiaries in a registration statement
filed by the Company or any of its Subsidiaries under the Securities Act, and
there are no outstanding agreements or other commitments which otherwise relate
to the registration of any securities of the Company or any of its Subsidiaries
for sale or distribution in any jurisdiction, except as set forth on SCHEDULE
3.21.
3.22 EMPLOYEES, EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS. Except as
set forth in the Recent Reports or on SCHEDULE 3.22, there are no employment,
consulting, severance or indemnification arrangements, agreements, or
understandings between the Company and any officer, director, consultant or
employee of the Company or its Subsidiaries (the "EMPLOYMENT AGREEMENTS"). No
Employment Agreement provides for the acceleration or change in the award,
grant, vesting or determination of options, warrants, rights, severance
payments, or other contingent obligations of any nature whatsoever of the
Company or its Subsidiaries in favor of any such parties in connection with the
transactions contemplated by this Agreement. Except as disclosed in the Recent
Reports or on SCHEDULE 3.22 and except to the extent not involving annual
payments by the Company in excess of $500,000, the terms of employment or
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engagement of all directors, officers, employees, agents, consultants and
professional advisors of the Company and its Subsidiaries are such that their
employment or engagement may be terminated upon not more than two weeks' notice
given at any time without liability for payment of compensation or damages and
the Company and its Subsidiaries have not entered into any agreement or
arrangement for the management of their business or any part thereof other than
with their directors or employees.
3.23 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company or any
Subsidiary, nor, to the knowledge of the Company, any Affiliate of the Company,
any agent or employee of the Company, any other Person acting on behalf of or
associated with the Company, or any individual related to any of the foregoing
Persons, acting alone or together, has: (a) received, directly or indirectly,
any rebates, payments, commissions, promotional allowances or any other economic
benefits, regardless of their nature or type, from any customer, supplier,
trading company, shipping company, governmental employee or other Person with
whom the Company has done business directly or indirectly; or (b) directly or
indirectly, given or agreed to give any gift or similar benefit to any customer,
supplier, trading company, shipping company, governmental employee or other
Person who is or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which (i) may subject the Company to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) if not given in
the past, may have had an adverse effect on the Company or (iii) if not
continued in the future, may adversely affect the assets, business, operations
or prospects of the Company or subject the Company to suit or penalty in any
private or governmental litigation or proceeding.
3.24 PRODUCTS AND SERVICES. To the knowledge of the Company and except
as disclosed in the Recent Reports, there exists no set of facts (i) which could
furnish a basis for the withdrawal, suspension or cancellation of any
registration, license, permit or other governmental approval or consent of any
governmental or regulatory agency with respect to any product or service
developed or provided by the Company or its Subsidiaries, (ii) which could
furnish a basis for the withdrawal, suspension or cancellation by order of any
state, federal or foreign court of law of any product or service, or (iii) which
could have a material adverse effect on the continued operation of any facility
of the Company or its Subsidiaries or which could otherwise cause the Company or
its Subsidiaries to withdraw, suspend or cancel any such product or service from
the market or to change the marketing classification of any such product or
service. Each product or service provided by Company or its Subsidiaries has
been provided in accordance in all material respects with the specifications
under which such product or service normally is and has been provided and the
provisions of all applicable laws or regulations.
3.25 ENVIRONMENTAL MATTERS. None of the premises or any properties owned,
occupied or leased by the Company or its Subsidiaries (the "PREMISES") has been
used by the Company or the Subsidiaries or, to the Company's knowledge, by any
other Person, to manufacture, treat, store, or dispose of any substance that has
been designated to be a "HAZARDOUS SUBSTANCE" under applicable Environmental
Laws (hereinafter defined) ("HAZARDOUS SUBSTANCES") in violation of any
applicable Environmental Laws. To its knowledge, the Company and its
Subsidiaries have not disposed of, discharged, emitted or released any Hazardous
Substances which would require, under applicable Environmental Laws,
remediation, investigation or similar response activity. No Hazardous Substances
are present as a result of the actions of the Company or its Subsidiaries or, to
the Company's knowledge, any other Person, in, on or under the Premises which
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would give rise to any liability or clean-up obligations of the Company or its
Subsidiaries under applicable Environmental Laws. The Company and, to the
Company's knowledge, any other Person for whose conduct it may be responsible
pursuant to an agreement or by operation of law, are in compliance in all
material respects with all laws, regulations and other federal, state or local
governmental requirements, and all applicable judgments, orders, writs, notices,
decrees, permits, licenses, approvals, consents or injunctions in effect on the
date of this Agreement relating to the generation, management, handling,
transportation, treatment, disposal, storage, delivery, discharge, release or
emission of any Hazardous Substance (the "ENVIRONMENTAL LAWS"). Neither the
Company nor, to the Company's knowledge, any other Person for whose conduct it
may be responsible pursuant to an agreement or by operation of law has received
any written complaint, notice, order, or citation of any actual, threatened or
alleged noncompliance with any of the Environmental Laws, and there is no
proceeding, suit or investigation pending or, to the Company's knowledge,
threatened against the Company or, to the Company's knowledge, any such Person
with respect to any violation or alleged violation of the Environmental Laws,
and, to the knowledge of the Company, there is no basis for the institution of
any such proceeding, suit or investigation.
3.26 LICENSES; COMPLIANCE WITH REGULATORY REQUIREMENTS. Except as disclosed
in the Recent Reports, the Company holds all material authorizations, consents,
approvals, franchises, licenses and permits required under applicable law or
regulation for the operation of the business of the Company and its Subsidiaries
as presently operated (the "GOVERNMENTAL AUTHORIZATIONS"). All the Governmental
Authorizations have been duly issued or obtained and are in full force and
effect, and the Company and its Subsidiaries are in material compliance with the
terms of all the Governmental Authorizations. The Company and its Subsidiaries
have not engaged in any activity that, to their knowledge, would cause
revocation or suspension of any such Governmental Authorizations. The Company
has no knowledge of any facts which could reasonably be expected to cause the
Company to believe that the Governmental Authorizations will not be renewed by
the appropriate governmental authorities in the ordinary course. Neither the
execution, delivery nor performance of this Agreement shall adversely affect the
status of any of the Governmental Authorizations.
3.27 BROKERS. Except as set forth on SCHEDULE 3.27, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement,
based upon any arrangement made by or on behalf of the Company, which would make
any Purchaser liable for any fees or commissions.
3.28 SECURITIES LAWS. Neither the Company nor its Subsidiaries nor any
agent acting on behalf of the Company or its Subsidiaries has taken or will take
any action which might cause this Agreement or the Notes, Preferred Conversion
Shares, Conversion Shares, Warrants and Warrant Shares (collectively, the
"SECURITIES") to violate the Securities Act or the Exchange Act or any rules or
regulations promulgated thereunder, as in effect on the Closing Date. Assuming
that all of the representations and warranties of the Purchasers set forth in
Article IV are true, the offer and sale of the Notes is being conducted and
completed in compliance with the Securities Act. All shares of capital stock and
other securities issued by the Company and its Subsidiaries prior to the date
hereof have been issued in transactions that were either registered offerings or
were exempt from the registration requirements under the Securities Act and all
applicable state securities or "BLUE SKY" laws and in compliance in all material
respects with all applicable corporate laws, except as could not cause a
Material Adverse Effect.
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3.29 DISCLOSURE. No representation or warranty made by the Company in this
Agreement, nor in any Transaction Document schedule or exhibit prepared and
furnished by the Company or the representatives of the Company pursuant hereto
or in connection with the transactions contemplated hereby, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained herein or therein not misleading in light
of the circumstances under which they were furnished.
3.30 POISON PILL. 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 this Agreement and the other Transaction
Documents, including without limitation the Company's issuance of the Securities
and the Purchasers' ownership of the Securities.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, for itself only, hereby severally and not jointly,
represents and warrants to the Company as follows:
4.1 EXISTENCE AND POWER. The Purchaser, if not a natural person, is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of such Purchaser's organization. Such Purchaser has all powers
required to bind it to the representations, warranties and covenants set forth
herein.
4.2 AUTHORIZATION. The execution, delivery and performance by the
Purchaser of this Agreement, the Transaction Documents to which such Purchaser
is a party, and the consummation by the Purchaser of the transactions
contemplated hereby and thereby have been duly authorized, and no additional
action is required for the approval of this Agreement or the other Transaction
Documents. This Agreement and the other Transaction Documents to which the
Purchaser is a party have been or, to the extent contemplated hereby, will be
duly executed and delivered and constitute valid and binding agreements of the
Purchaser, enforceable against such Purchaser in accordance with their terms,
except as may be limited by bankruptcy, reorganization, insolvency, moratorium
and similar laws of general application relating to or affecting the enforcement
of rights of creditors and except that enforceability of their obligations
thereunder are subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
4.3 INVESTMENT. The Purchaser is acquiring the securities described herein
for its own account and not with a view to, or for sale in connection with, any
distribution thereof, nor with the intention of distributing or reselling the
same, provided, however, that by making the representation herein, the Purchaser
does not agree to hold any of the securities for any minimum or other specific
term and reserves the right to dispose of the securities at any time in
accordance with or pursuant to a registration statement or an exemption under
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the Securities Act. The Purchaser is aware that none of the securities has been
registered under the Securities Act or under applicable state securities or blue
sky laws. The Purchaser is an "ACCREDITED INVESTOR" as such term is defined in
Rule 501 of Regulation D, as promulgated under the Securities Act.
4.4 RELIANCE ON EXEMPTIONS. The Purchaser understands that the Securities
are being offered and sold to such Purchaser in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and such Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the securities.
4.5 EXPERIENCE OF THE PURCHASER. The 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. The 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.
4.6 GENERAL SOLICITATION. The 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.
ARTICLE V - COVENANTS OF THE SELLER AND PURCHASERS
5.1 INSURANCE. The Company and its Subsidiaries shall, from time to time
upon the written request of any Purchaser, promptly furnish or cause to be
furnished to such Purchaser evidence, in form and substance reasonably
satisfactory to the Purchaser, of the maintenance of all insurance maintained by
it for loss or damage by fire and other hazards, damage or injury to persons and
property, including from product liability, and under workmen's compensation
laws.
5.2 REPORTING OBLIGATIONS. So long as any of the Notes or Preferred
Conversion Shares are outstanding, and so long as any Warrant has not been
exercised and has not expired by its terms, the Company shall furnish to the
Purchasers, or any other persons who hold any of the Notes, Preferred Conversion
Shares or Warrants (provided that such subsequent holders give notice to the
Company that they hold Notes, Preferred Conversion Shares or Warrants and
furnish their addresses) promptly upon their becoming available one copy of (A)
each report, notice or proxy statement sent by the Company to its stockholders
generally, and of each regular or periodic report (pursuant to the Exchange Act)
and (B) any registration statement, prospectus or written communication pursuant
to the Securities Act relating to the issuance or registration of Conversion
Shares and the Warrant Shares and filed by the Company with the Commission or
any securities market or exchange on which shares of Common Stock are listed;
provided, however, that the Company shall have no obligation to deliver periodic
reports (pursuant to the Exchange Act) under this Section 5.2 to the extent such
reports are publicly available.
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The Purchasers are hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of the Company which may have been furnished to the
Purchasers hereunder, to any regulatory body or agency having jurisdiction over
the Purchasers or to any Person which shall, or shall have right or obligation
to succeed to all or any part of the Purchasers' interest in the Company or this
Agreement.
5.3 INVESTIGATION. The representations, warranties, covenants and
agreements set forth in this Agreement shall not be affected or diminished in
any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. Without limiting the generality of the
foregoing, the inability or failure of the Purchasers to discover any breach,
default or misrepresentation by the Company under this Agreement or the other
Transaction Documents (including under any certificate furnished pursuant to
this Agreement), notwithstanding the exercise by the Purchasers or other holders
of the Notes or Preferred Conversion Shares of their rights hereunder to conduct
an investigation shall not in any way diminish any liability hereunder.
5.4 FURTHER ASSURANCES. The Company shall, at its cost and expense, upon
written request of the Purchasers, duly execute and deliver, or cause to be duly
executed and delivered, to the Purchasers such further instruments and do and
cause to be done such further acts as may be necessary, advisable or proper, in
the reasonable discretion of the Purchasers, to carry out more effectually the
provisions and purposes of this Agreement. The parties shall use their
reasonable best efforts to timely satisfy each of the conditions described in
Article VI of this Agreement.
5.5 USE OF PROCEEDS. The Company covenants and agrees that the proceeds of
the Purchase Price shall be used by the Company for working capital and general
corporate purposes, including the funding of strategic acquisitions approved by
the Board of Directors of the Company; under no circumstances shall any portion
of the proceeds be applied to:
(i) accelerated repayment of debt existing on the date hereof, except
in connection with the payment of indebtedness related to acquisition of
Safir ▇▇▇▇▇▇▇, LLC and the Company's credit line with Silicon Valley Bank;
(ii) the payment of dividends or other distributions on any capital
stock of the Company other than the Preferred Stock;
(iii) increased executive compensation or loans to officers,
employees, stockholders or directors, unless approved by a disinterested
majority of the Board of Directors;
(iv) the purchase of debt or equity securities of any person,
including the Company and its Subsidiaries, except in connection with
investment of excess cash in high quality (A1/P1 or better) money market
instruments having maturities of one year or less and except in connection
with strategic acquisitions approved by the Board of Directors of the
Company; or
15
(v) any expenditure not directly related to the business of the
Company.
5.6 CORPORATE EXISTENCE. So long as a Purchaser owns Securities, the
Company shall preserve and maintain and cause its Subsidiaries to preserve and
maintain their corporate existence and good standing in the jurisdiction of
their incorporation and the rights, privileges and franchises of the Company and
its Subsidiaries (except, in each case, in the event of a merger or
consolidation in which the Company or its Subsidiaries, as applicable, is not
the surviving entity) in each case where failure to so preserve or maintain
could have a Material Adverse Effect.
5.7 LICENSES. The Company shall, and shall cause its Subsidiaries to,
maintain at all times all material licenses or permits necessary to the conduct
of its business and as required by any governmental agency or instrumentality
thereof.
5.8 LIKE TREATMENT OF PURCHASERS AND HOLDERS. Neither the Company nor any
of its affiliates shall, directly or indirectly, pay or cause to be paid any
consideration (immediate or contingent), whether by way of interest, fee,
payment for redemption, conversion or exercise of the Securities, or otherwise,
to any Purchaser or holder of Securities, for or as an inducement to, or in
connection with the solicitation of, any consent, waiver or amendment to any
terms or provisions of this Agreement or the other Transaction Documents, unless
such consideration is required to be paid to all Purchasers or holders of
Securities bound by such consent, waiver or amendment. In order to treat all of
the Purchasers and holders of Securities equitably, the Company shall not,
directly or indirectly, redeem any Securities unless such offer of redemption is
made pro rata to all Purchasers or holders of Securities, as the case may be, on
identical terms.
5.9 TAXES AND CLAIMS. The Company and its Subsidiaries shall duly pay and
discharge (a) all material taxes, assessments and governmental charges upon or
against the Company or its properties or assets prior to the date on which
penalties attach thereto, unless and to the extent that such taxes are being
diligently contested in good faith and by appropriate proceedings, and
appropriate reserves therefor have been established, and (b) all material lawful
claims, whether for labor, materials, supplies, services or anything else which
might or could, if unpaid, become a lien or charge upon the properties or assets
of the Company or its Subsidiaries unless and to the extent only that the same
are being diligently contested in good faith and by appropriate proceedings and
appropriate reserves therefor have been established.
5.10 PERFORM COVENANTS. The Company shall (a) make full and timely payment
of any and all payments on the Notes, Preferred Conversion Shares, Warrants and
all other obligations of the Company to the Purchasers in connection therewith,
whether now existing or hereafter arising, and (b) duly comply with all the
terms and covenants contained herein and in each of the instruments and
documents given to the Purchasers in connection with or pursuant to this
Agreement, all at the times and places and in the manner set forth herein or
therein.
5.11 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall, within four
business days following the date of this Agreement, file a Current Report on
Form 8-K, disclosing the transactions contemplated hereby and make such other
filings and notices prior to and following the Closing Date in the manner and
time required by the Commission with respect thereto. The Company and North
Sound Capital LLC ("NORTH SOUND") shall consult with each other in issuing any
16
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, or without the prior consent of
North Sound, with respect to any press release of the Company, 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. The Company shall issue such a press release disclosing the
transactions contemplated hereby no later than the Business Day following the
Closing Date.
5.12 SECURITIES LAW COMPLIANCE.
(a) SECURITIES ACT. The Company shall timely prepare and file with the
Commission the form of notice of the sale of securities pursuant to the
requirements of Regulation D regarding the sale of the Notes under this
Agreement.
(b) STATE SECURITIES LAW COMPLIANCE -- SALE. The Company shall timely
prepare and file such applications, consents to service of process (but not
including a general consent to service of process) and similar documents and
take such other steps and perform such further acts as shall be required by the
state securities law requirements of each jurisdiction where a Purchaser
resides, as indicated on SCHEDULE 1, with respect to the sale of the Notes under
this Agreement provided, however, that the Company shall not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action that would subject it to general service of
process in any jurisdiction where it is not then so subject or subject the
Company to any material tax in any such jurisdiction where it is not then so
subject.
(c) STATE SECURITIES LAW COMPLIANCE --RESALE. Beginning no later than 30
days following any date, from time to time, on which the Common Stock is no
longer a "covered security" under Section 18(b)(1)(A) of the Securities Act and
continuing until either (i) the Purchasers have sold all of their Conversion
Shares and Warrant Shares under a registration statement pursuant to the
Investor Rights Agreement or (ii) the Common Stock becomes a "covered security"
under Section 18(b)(1)(A) of the Securities Act, the Company shall maintain
within either ▇▇▇▇▇'▇ Industrial Manual or Standard and Poor's Standard
Corporation Descriptions (or any successors to these manuals which are similarly
qualified as "recognized securities manuals" under state Blue Sky laws) an
updated listing containing (i) the names of the officers and directors of the
Company, (ii) a balance sheet of the Company as of a date that is at no time
older than eighteen months and (iii) a profit and loss statement of the Company
for either the preceding fiscal year or the most recent year of operations.
5.13 NON-PUBLIC INFORMATION.
(a) The Company 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
and agreement in effecting transactions in securities of the Company.
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(b) In the event of a breach of the covenant set forth in Section 5.13(a)
by the Company or any other Person acting on its behalf, the Company shall
promptly, but no later than 48 hours after becoming aware of such breach or
being notified by the Purchaser in writing of such breach, disclose such
information by filing a Current Report on Form 8-K, unless the Company shall
promptly, but no later than 24 hours after receiving such notice from the
Purchaser, notify the Purchaser in writing that it has determined in good faith
that the applicable information does not constitute material non-public
information.
(c) In addition to any other remedy provided herein or in the other
Transaction Documents, if, following a breach of Section 5.13(a), the Company
fails to comply with Section 5.13(b), then a Purchaser shall have the right to
make a public disclosure, in the form of a press release, public advertisement
or otherwise, of such material, nonpublic information without the prior approval
by the Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Purchaser shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure pursuant to
this Section 5.13(c).
5.14 LISTING OF COMMON STOCK. The Company agrees that, if the Company
applies to have the Common Stock listed or re-listed on any of the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
Nasdaq Capital Market (each a "TRADING MARKET"), it will include in such
application the Conversion Shares and the Warrant Shares, and will take such
other action as is necessary to cause the Conversion Shares and Warrant Shares
to be listed on such Trading Market as promptly as possible.
5.15 TRANSFER RESTRICTIONS.
(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, to the Company, to an
Affiliate of the Purchaser (who is an accredited investor and executes a
customary representation letter) or in connection with a pledge as contemplated
in Section 5.15(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that the transfer does not require registration of the transferred
Securities under the Securities Act, PROVIDED, HOWEVER, that in the case of a
transfer pursuant to Rule 144, no opinion shall be required if the transferor
provides the Company with a customary seller's representation letter, and if the
sale is not pursuant to subsection (k) of Rule 144, a customary broker's
representation letter and a Form 144. Any transferee that agrees in writing to
be bound by the terms of this Agreement and the Investor Rights Agreement shall
have the rights of a Purchaser under this Agreement and the Investor Rights
Agreement. Except as required by federal securities laws and the securities law
of any state or other jurisdiction within the United States, the Securities may
be transferred, in whole or in part, by a Purchaser to any person at any time.
The Company shall reissue certificates evidencing the Securities upon surrender
of certificates evidencing the Securities being transferred in accordance with
this Section 5.15(a).
(b) Each Purchaser agrees to the imprinting, so long as is required by
this Section 5.15(b), of a legend on any of the Securities in substantially the
following form:
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THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO THIS EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT.
The Company acknowledges and agrees that each Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer 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 the arrangement,
each Purchaser may transfer pledged or secured Securities to the pledgees or
secured parties. The a pledge or transfer would not be subject to approval of
the Company and no legal opinion of legal counsel of the pledgee, secured party
or pledgor shall be required in connection therewith; provided, however, that
the Purchaser shall provide the Company with the documentation as is reasonably
requested by the Company to ensure that the pledge is pursuant to a bona fide
margin agreement with a registered broker-dealer or 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. The Company will
execute and deliver the 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) under the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of selling
stockholders thereunder.
(c) Certificates evidencing the Conversion Shares and Warrant Shares shall
not contain any legend (including the legend set forth in Section 5.15(b)), (i)
following any sale of the Conversion Shares or Warrant Shares pursuant to Rule
144 or pursuant to an effective registration statement, or (ii) if the
Conversion Shares or Warrant Shares are eligible for sale under Rule 144(k),
provided that the Purchaser shall provide the Company with such information
about such shares and such Purchaser as is reasonably necessary to permit the
Company to conclude that such shares are so eligible, or (iii) if the legend is
not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the
Commission). The Company shall cause its counsel to issue a legal opinion to the
Company's transfer agent promptly upon the occurrence of any of the events in
clauses (i), (ii) or (iii) above to effect the removal of the legend hereunder
and shall also cause its counsel to issue a "blanket" legal opinion to the
Company's transfer agent promptly after the Effective Date (as defined in the
Investor Rights Agreement), if required by the Company's transfer agent, to
allow sales pursuant to an effective Registration Statement, which opinion may
be subject to customary qualifications. The Company agrees that at the time as
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the legend is no longer required under this Section 5.15(c), it will, no later
than three trading days following the delivery by the Purchaser to the Company
or the Company's transfer agent of a certificate representing Conversion Shares
or Warrant Shares, as the case may be, issued with a restrictive legend, deliver
or cause to be delivered to the Purchaser a certificate representing the
Conversion Shares or Warrant 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 5.15.
(d) Each Purchaser agrees that the removal of the restrictive legend from
certificates representing Conversion Shares or Warrant Shares as set forth in
this Section 5.15 is predicated upon the Company's reliance on, and such
Purchaser's agreement that it will not sell any Securities except pursuant to
either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom.
5.16 ISSUANCE OF ADDITIONAL SECURITIES. From the date of the Closing until
such date as all of the Notes have been converted into Preferred Stock and
Warrants pursuant to the terms thereof, the Company shall not issue or sell any
shares of Common Stock or any warrants or other rights to subscribe for or
purchase any additional shares of Common Stock or any securities convertible,
directly or indirectly, into shares of Common Stock ("COMMON STOCK
EQUIVALENTS"), other than (a) the issuance of the Notes pursuant hereto, (b) the
issuance of the Preferred Stock and Warrants upon conversion of the Notes, (c)
the issuance of Preferred Stock and Warrants to the holders of the promissory
notes of the Company set forth on SCHEDULE 5.16 (the "EXISTING NOTES") and (d)
any Exempt Issuance (as defined in the Certificate of Designation).
5.17 ISSUANCE OF ADDITIONAL PREFERRED STOCK. Upon the prior written consent
of North Sound, the Company may issue any shares of Preferred Stock that are
authorized as of the date hereof (and following the filing of the Certificate of
Designation) but not otherwise issued upon conversion of the Notes or the
Existing Notes pursuant to such terms and conditions as are acceptable to North
Sound in its sole discretion.
5.18 CONSENT TO DILUTIVE ISSUANCES. From the date of this Agreement until
the Expiration Date (as defined below), the Company shall not, without the prior
written consent of North Sound, issue, sell or enter into an agreement to issue
or sell any shares of Common Stock or any options, warrants or other rights to
subscribe for or purchase any shares of Common Stock or any securities
convertible into shares of Common Stock (in each case, a "TRANSACTION") if such
Transaction would result in an adjustment (that has not been waived by all
holders of the Series A Preferred Stock) pursuant to Section 6(d) of the
Company's Certificate of Designations, Powers, Preferences and other rights and
Qualifications of the Series A Convertible Preferred Stock (the "SERIES A
DESIGNATION" and such Series A Convertible Preferred Stock, the "SERIES A
PREFERRED STOCK") to the Conversion Rate (as defined in the Series A
Designation) of the Series A Preferred Stock (an "ANTI-DILUTION ADJUSTMENT").
Notwithstanding the foregoing, from the date of this Agreement until the
Expiration Date, the Company shall not, without the prior written consent of
North Sound, engage in any Transaction pursuant to which the Company or any
Affiliate or Person acting on the Company's behalf, provides any consideration
of any kind whatsoever to the holders of the Series A Preferred Stock in
20
exchange for any of such holders' waiver of their right to an Anti-dilution
Adjustment to which they would otherwise be entitled in connection with such
Transaction. "EXPIRATION DATE" shall mean such time as any of the following
occur: (a) North Sound holds less than 25% of the shares of Preferred Stock
issued to North Sound upon conversion of the Note, (b) less than 25% of the
shares of Series A Preferred Stock outstanding on the date of this Agreement
remain outstanding or (c) the Series A Designation is amended such that the
Conversion Rate of the Series A Preferred Stock will be adjusted pursuant to a
weighted average anti-dilution formula equivalent to that by which the
Conversion Value (as defined in the Certificate of Designation) of the Series B
Preferred Stock is adjusted pursuant to Section 5(i) of the Certificate of
Designation..
ARTICLE VI -- CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF PURCHASERS TO EFFECT THE CLOSING. The
obligations of a Purchaser to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing, of each of the following conditions, any of which may be waived,
in writing, by a Purchaser:
(a) The Company shall deliver or cause to be delivered to each of the
Purchasers the following:
1. An original Note in the original principal amount as is indicated
on SCHEDULE 1 to be purchased at the Closing by such Purchaser, registered
in the name of such Purchaser.
2. The Investor Rights Agreement, in the form attached hereto as
EXHIBIT D (the "INVESTOR RIGHTS AGREEMENT"), duly executed by the Company.
3. A legal opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
("COMPANY'S Counsel"), counsel to the Company, in the form attached hereto
as EXHIBIT E.
4. A certificate of the Secretary of the Company (the "SECRETARY'S
CERTIFICATE"), as of the Closing Date, in form and substance satisfactory
to the Purchasers, certifying as follows:
(i) that the Certificate of Designation authorizing the
Preferred Stock has been duly filed in the office of the Secretary of
State of the State of Nevada, and that attached to the Secretary's
Certificate is true and complete copy of the Articles of Incorporation
of the Company, as amended, and the Certificate of Designation;
(ii) that a true copy of the Bylaws of the Company, as amended
to the Closing Date, is attached to the Secretary's Certificate;
(iii) that attached thereto are true and complete copies of the
resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement and the other
Transaction Documents, instruments and certificates required to be
executed by it in connection herewith and approving the consummation
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of the transactions in the manner contemplated hereby including, but
not limited to, the authorization and issuance of the Notes and the
Preferred Stock and that such resolutions are in full force and effect
and that there are no other resolutions of the Board of Directors with
respect to the subject matter thereof;
(iv) the names and true signatures of the officers of the
Company signing this Agreement and all other documents to be delivered
in connection with this Agreement;
(v) such other matters as required by this Agreement; and
(vi) such other matters as the Purchasers may reasonably
request.
5. A wire transfer representing the Purchasers' reasonable legal
fees and other expenses as described in Section 8.2 hereof; such fee may,
at the election of the Purchasers, be paid out of the funds due from the
Purchasers at the Closing.
6. Proof of due filing with the Secretary of State of the State of
Nevada of the Certificate of Designation authorizing the Preferred Stock.
7. Company shall have applied to each U.S. securities exchange,
interdealer quotation system and other trading market, if any, where its
Common Stock is currently listed or qualified for trading or quotation for
the listing or qualification of the Conversion Shares and the Warrant
Shares for trading or quotation thereon in the time and manner required
thereby.
8. A good standing certificate of the Company, of recent date,
certified by the Secretary of State of the State of Nevada.
9. Such other documents as the Purchasers shall reasonably request.
(b) All of the Purchasers, the Company and Silicon Valley Bank shall have
entered into a Subordination Agreement in the form attached hereto as EXHIBIT F
(the "SUBORDINATION AGREEMENT").
(c) As of the Closing Date, there shall have been no Material Adverse
Effect with respect to the Company since the date hereof.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE CLOSING. The
obligations of the Company to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, by the Company:
Each of the Purchasers shall deliver or cause to be delivered to the
Company (i) payment of the Purchase Price set forth opposite such Purchaser's
name on SCHEDULE 1, in cash by wire transfer of immediately available funds to
the account of the Company designated in writing by the Company prior to the
date hereof; (ii) an executed copy of this Agreement; (iii) an executed copy of
22
the Investor Rights Agreement; (iv) an executed copy of the Subordination
Agreement; and (v) such other documents as the Company shall reasonably request.
ARTICLE VII - INDEMNIFICATION, TERMINATION AND DAMAGES
7.1 SURVIVAL OF REPRESENTATIONS. Except as otherwise provided herein, the
representations and warranties of the Company and the Purchasers contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing Date and shall continue in full force and effect for a
period of two (2) years from the Closing Date; provided, however, that the
Company's warranties and representations under Sections 3.13 (Taxes), 3.19
(Subsidiaries and Investments), 3.20 (Capitalization), and 3.21 (Options,
Warrants, Rights), shall survive the Closing Date and continue in full force and
effect until the expiration of all applicable statutes of limitation; and
further provided that the Company's warranties and representations under Section
3.25 (Environmental Matters) shall survive the Closing Date and continue in full
force and effect for a period of six (6) years from the Closing Date. The
Company's and the Purchasers' warranties and representations shall in no way be
affected or diminished in any way by any investigation of the subject matter
thereof made by or on behalf of the Company or the Purchasers.
7.2 INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the Purchasers,
their Affiliates, each of their officers, directors, partners, employees and
agents and their respective successors and assigns, from and against any losses,
damages, or expenses which are caused by or arise out of (i) any breach or
default in the performance by the Company of any covenant or agreement made by
the Company in this Agreement or in any of the Transaction Documents; (ii) any
breach of warranty or representation made by the Company in this Agreement or in
any of the Transaction Documents (iii) any and all third party actions, suits,
proceedings, claims, demands, judgments, costs and expenses (including
reasonable legal fees and expenses) incident to any of the foregoing.
(b) Each of the Purchasers, severally and not jointly, agree to indemnify
and hold harmless the Company, its Affiliates, each of their officers,
directors, partners, employees and agents and their respective successors and
assigns, from and against any losses, damages, or expenses which are caused by
or arise out of (A) any breach or default in the performance by such Purchaser
of any covenant or agreement made by such Purchaser in this Agreement or in any
of the Transaction Documents; (B) any breach of warranty or representation made
by such Purchaser in this Agreement or in any of the Transaction Documents; and
(C) any and all third party actions, suits, proceedings, claims, demands,
judgments, costs and expenses (including reasonable legal fees and expenses)
incident to any of the foregoing; provided, however, that a Purchaser's
liability under this Section 7.2(b) shall not exceed the Purchase Price paid by
such Purchaser hereunder.
7.3 INDEMNITY PROCEDURE. A party or parties hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this Agreement is
referred to herein as the "INDEMNIFYING PARTY" and the other party or parties
claiming indemnity is referred to as the "INDEMNIFIED PARTY". An Indemnified
23
Party under this Agreement shall, with respect to claims asserted against such
party by any third party, give written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity under this Agreement
within sixty (60) business days of the receipt of any written claim from any
such third party, but not later than twenty (20) days prior to the date any
answer or responsive pleading is due, and with respect to other matters for
which the Indemnified Party may seek indemnification, give prompt written notice
to the Indemnifying Party of any liability which might give rise to a claim for
indemnity; provided, however, that any failure to give such notice will not
waive any rights of the Indemnified Party except to the extent the rights of the
Indemnifying Party are materially adversely prejudiced.
The Indemnifying Party shall have the right, at its election, to take over
the defense or settlement of such claim by giving written notice to the
Indemnified Party at least fifteen (15) days prior to the time when an answer or
other responsive pleading or notice with respect thereto is required. If the
Indemnifying Party makes such election, it may conduct the defense of such claim
through counsel of its choosing (subject to the Indemnified Party's approval of
such counsel, which approval shall not be unreasonably withheld), shall be
solely responsible for the expenses of such defense and shall be bound by the
results of its defense or settlement of the claim. The Indemnifying Party shall
not settle any such claim without prior notice to and consultation with the
Indemnified Party, and no such settlement involving any equitable relief or
which might have an adverse effect on the Indemnified Party may be agreed to
without the written consent of the Indemnified Party (which consent shall not be
unreasonably withheld). So long as the Indemnifying Party is diligently
contesting any such claim in good faith, the Indemnified Party may pay or settle
such claim only at its own expense and the Indemnifying Party will not be
responsible for the fees of separate legal counsel to the Indemnified Party,
unless the named parties to any proceeding include both parties or
representation of both parties by the same counsel would be inappropriate due to
conflicts of interest or otherwise. If the Indemnifying Party does not make such
election, or having made such election does not, in the reasonable opinion of
the Indemnified Party proceed diligently to defend such claim, then the
Indemnified Party may (after written notice to the Indemnifying Party), at the
expense of the Indemnifying Party, elect to take over the defense of and proceed
to handle such claim in its discretion and the Indemnifying Party shall be bound
by any defense or settlement that the Indemnified Party may make in good faith
with respect to such claim. In connection therewith, the Indemnifying Party will
fully cooperate with the Indemnified Party should the Indemnified Party elect to
take over the defense of any such claim. The parties agree to cooperate in
defending such third party claims and the Indemnified Party shall provide, at
the expense of the Indemnifying Party, such cooperation and such access to its
books, records and properties as the Indemnifying Party shall reasonably request
with respect to any matter for which indemnification is sought hereunder; and
the parties hereto agree to cooperate with each other in order to ensure the
proper and adequate defense thereof.
With regard to claims of third parties for which indemnification is payable
hereunder, such indemnification shall be paid by the Indemnifying Party upon the
earlier to occur of: (i) the entry of a judgment against the Indemnified Party
and the expiration of any applicable appeal period, or if earlier, five (5) days
prior to the date that the judgment creditor has the right to execute the
judgment; (ii) the entry of an unappealable judgment or final appellate decision
against the Indemnified Party; or (iii) a settlement of the claim.
24
Notwithstanding the foregoing, the reasonable expenses of counsel to the
Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party. With regard to other claims for which indemnification is payable
hereunder, such indemnification shall be paid promptly by the Indemnifying Party
upon demand by the Indemnified Party.
ARTICLE VIII - MISCELLANEOUS
8.1 FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to better evidence and reflect the transactions described herein
and contemplated hereby and to carry into effect the intents and purposes of
this Agreement, and further agrees to take promptly, or cause to be taken, all
actions, and to do promptly, or cause to be done, all things necessary, proper
or advisable under applicable law to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings, and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement.
8.2 FEES AND EXPENSES. The Company shall be responsible for the payment of
the Purchasers' reasonable legal fees and other third-party expenses relating to
the preparation and negotiation of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated herein and
therein, up to $45,000. This Section 8.2 shall not limit or modify the Company's
obligation to pay any amounts pursuant to Section 4 of the Investor Rights
Agreement.
8.3 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 in this Section prior to 5:00 p.m. (New York City time) on a business
day, (b) the next business 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 business day or later than 5:00 p.m. (New
York City time) on any business day, or (c) the business day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service such
as Federal Express with next day delivery specified. The address for such
notices and communications shall be as follows:
If to the Purchasers at each Purchaser's address set forth under its name
on SCHEDULE 1 attached hereto, or with respect to the Company, addressed to:
GlobalOptions Group, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or addresses or facsimile number or numbers as any such
25
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, Park Avenue Tower, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., Facsimile No. 212-451-2222.
Copies of notices to any Purchaser shall be sent to the addresses, if any,
listed on SCHEDULE 1 attached hereto.
Unless otherwise stated above, such communications shall be effective when
they are received by the addressee thereof in conformity with this Section 8.3.
Any party may change its address for such communications by giving notice
thereof to the other parties in conformity with this Section.
8.4 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
enforced in accordance with the laws of the State of New York without reference
to the conflicts of laws principles thereof.
8.5 JURISDICTION AND VENUE. This Agreement shall be subject to the
exclusive jurisdiction of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of New
York and if such court does not have proper jurisdiction, the State Courts of
New York County, New York. The parties to this Agreement agree that any breach
of any term or condition of this Agreement shall be deemed to be a breach
occurring in the State of New York by virtue of a failure to perform an act
required to be performed in the State of New York and irrevocably and expressly
agree to submit to the jurisdiction of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ of New York and if such court does not have proper jurisdiction, the
State Courts of New York County, New York for the purpose of resolving any
disputes among the parties relating to this Agreement or the transactions
contemplated hereby. The parties irrevocably waive, to the fullest extent
permitted by law, any objection which they may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement, or any judgment entered by any court in respect hereof brought
in New York County, New York, and further irrevocably waive any claim that any
suit, action or proceeding brought in ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
of New York and if such court does not have proper jurisdiction, the State
Courts of New York County, New York has been brought in an inconvenient forum.
Each of the parties hereto consents to process being served in any such suit,
action or proceeding, by mailing a copy thereof 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 in
this Section 8.5 shall affect or limit any right to serve process in any other
manner permitted by law.
8.6 SUCCESSORS AND ASSIGNS. This Agreement is personal to each of the
parties and may not be assigned without the written consent of the other
parties; provided, however, that any of the Purchasers shall be permitted to
assign this Agreement to any Person to whom it assigns or transfers securities
issued or issuable pursuant to this Agreement. Any assignee must be an
"ACCREDITED INVESTOR" as defined in Rule 501(a) promulgated under the Securities
Act.
8.7 SEVERABILITY. If any provision of this Agreement, or the application
thereof, shall for any reason or to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances shall continue in full force and effect and in no way be
affected, impaired or invalidated.
26
8.8 ENTIRE AGREEMENT. This Agreement and the other agreements and
instruments referenced herein constitute the entire understanding and agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings.
8.9 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law, or in equity
on such party, and the exercise of any one remedy shall not preclude the
exercise of any other.
8.10 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a writing signed by the Company and the holders of at least a
majority-in-interest of the Securities then outstanding, and such waiver or
amendment, as the case may be, shall be binding upon all Purchasers. The waiver
by a party of any breach hereof or default in the performance hereof shall not
be deemed to constitute a waiver of any other default or any succeeding breach
or default. No amendment shall be effected to impact a holder of Securities in a
disproportionately adverse fashion without the consent of such individual
holder.
8.11 NO WAIVER. The failure of any party to enforce any of the provisions
hereof shall not be construed to be a waiver of the right of such party
thereafter to enforce such provisions.
8.12 CONSTRUCTION OF AGREEMENT; KNOWLEDGE. For purposes of this Agreement,
the term "KNOWLEDGE," when used in reference to a corporation means the
knowledge of the directors and executive officers of such corporation
(including, if applicable, any person designated as a chief scientific, medical
or technical officer) assuming such persons shall have made inquiry that is
customary and appropriate under the circumstances to which reference is made,
and when used in reference to an individual means the knowledge of such
individual assuming the individual shall have made inquiry that is customary and
appropriate under the circumstances to which reference is made. Whenever any
form of the word "include" is used in this Agreement, it shall be interpreted as
if it were followed by the phrase "without limitation".
8.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories. In the event that any
signature is delivered by facsimile or other electronic image transmission
technology, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such signature page were an original thereof.
8.14 NO THIRD PARTY BENEFICIARY. Except as expressly set forth in Article
VII, nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or give any person other than the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.
27
8.15 WAIVER OF TRIAL BY JURY. THE PARTIES HERETO IRREVOCABLY WAIVE TRIAL BY
JURY IN ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
8.16 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under this Agreement or any Transaction Documents
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 such agreement. Nothing contained herein or in
any Transaction Documents, 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 group or 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 such
agreement. 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 represents that it has been
represented by its own separate legal counsel in its review and negotiation of
this Agreement and the other Transaction Documents. For reasons of
administrative convenience only, the Purchasers acknowledge and agree that they
and their respective counsel have chosen to communicate with the Company through
▇▇▇▇▇▇ and ▇▇▇▇ LLP, but ▇▇▇▇▇▇ and ▇▇▇▇ LLP does not represent any of the
Purchasers in this transaction other than North Sound Capital LLC.
[SIGNATURE PAGE FOLLOWS]
28
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SELLER:
GLOBALOPTIONS GROUP, INC.
By:________________________________
Name:
Title:
29
OMNIBUS SIGNATURE PAGE TO
GLOBALOPTIONS GROUP, INC.
CONVERTIBLE NOTE PURCHASE AGREEMENT
The undersigned hereby executes and delivers the Convertible Note Purchase
Agreement to which this signature page is attached, which, together with all
counterparts of the Agreement and signature pages of the other parties named in
said Agreement, shall constitute one and the same document in accordance with
the terms of the Agreement.
Print Name: _______________________________
By: _______________________________
Name: _______________________________
Title: _______________________________
Address: _______________________________
_______________________________
_______________________________
Telephone: _______________________________
Facsimile: _______________________________
SOC/EIN#: _______________________________
Original Principal Amount of Notes
Purchased: _______________________________
