SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
November 2, 2005, among InfoSearch Media, Inc., a Delaware corporation (the
"Company"), and the investors identified on the signature pages hereto (each, an
"Investor" and collectively, the "Investors").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below)
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Investor, and each Investor, severally and not jointly, desires to purchase
from the Company certain securities of the Company, as more fully described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Investor
severally, and not jointly, agree, with the intent to be legally bound, as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"Action" means any action, suit, inquiry, comment letter, notice of
violation, proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 144.
With respect to any Investor, any investment fund or managed account that is
managed on a discretionary basis by the same investment manager as such Investor
will be deemed to be an Affiliate of such Investor.
"Business Day" means any day except Saturday, Sunday and any day
that is a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Article II.
"Closing Date" means the date of this Agreement, or such other time
as the Closing shall occur in accordance with the agreement of the parties.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$.001 per share, and any securities into which such common stock may hereafter
be reclassified.
"Common Stock Equivalents" means any securities of the Company or
any Subsidiary which entitle the holder thereof to acquire Common Stock at any
time, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"Company Counsel" means McGuireWoods LLP.
"Disclosure Materials" means the SEC Reports and the Schedules,
considered together.
"Effective Date" means the date that the Registration Statement
required by Sections 2(a) or 2(b) of the Registration Rights Agreement is first
declared effective by the Commission.
"Evaluation Date" means a date within 90 days prior to the filing
date of the Form 10-QSB for the Company's most recently ended fiscal quarter.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means U.S. generally accepted accounting principles applied
on a consistent basis during the periods involved.
"Intellectual Property Rights" means all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material for
use in connection with the Company's business as described in the SEC Reports.
"Investment Amount" means, with respect to each Investor, the
investment amount, in dollars, indicated below such Investor's name on the
signature page of this Agreement.
"Investor Parties" means the Investors, their Affiliates and their
respective directors, officers, shareholders, partners, employees and agents.
"Lien" means any lien, charge, claim, encumbrance, security
interest, right of first refusal, preemptive right or other restrictions of any
kind; other than restrictions on transfer of securities arising under federal or
state securities laws and regulations.
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"Loss" or "Losses" means any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys'
fees and costs of preparation and investigation.
"Material Adverse Effect" means any of (a) an adverse effect on the
legality, validity or enforceability of any Transaction Document, (b) a material
and adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (c) a material and adverse impairment to the Company's ability to
perform, on a timely basis, its obligations under any Transaction Document.
"Material Permits" means all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the
SEC Reports.
"New York Courts" means the state and federal courts sitting in the
City of New York, the Borough of Manhattan.
"Per Share Purchase Price" means, with respect to each Investor, the
per share purchase price indicated below such Investor's name on such Investor's
signature page to this Agreement.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"RBC" means RBC Capital Markets Corporation.
"Registration Statement" means a registration statement, including
amendments and supplements thereto, meeting the requirements set forth in the
Registration Rights Agreement and covering the resale by the Investors of the
Shares and the Warrant Shares.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Investors, in the form of Exhibit A.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"Schedules" means the disclosure schedules prepared by the Company
and attached to this Agreement.
"SEC Reports" means all reports required to be filed by the Company
under the Securities Act and the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the twelve (12) months preceding the date hereof (or
such shorter period as the Company was required by law to file such reports).
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"Securities" means, with respect to each Investor, the number of
Shares, Warrants and Warrant Shares indicated below such Investor's name on such
Investor's signature page to this Agreement and, with respect to the Company,
all Shares, Warrants and Warrant Shares issued or issuable pursuant to this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued or issuable to the
Investors at the Closing.
"Short Sale" means, all "short sales" as defined in Rule 3b-3 of the
Exchange Act.
"Subsidiary" means any "significant subsidiary" as defined in Rule
1-02(w) of the Regulation S-X promulgated by the Commission under the Exchange
Act..
"Trading Day" means (i) a day on which the Common Stock is traded on
a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common
Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a
day on which the Common Stock is traded in the over-the-counter market, as
reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
"Trading Market" means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap Market
or the NASD OTC Bulletin Board on which the Common Stock is listed or quoted for
trading on the date in question.
"Transaction Documents" means this Agreement, the Registration
Rights Agreement, the Warrants and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"Warrants" means the warrants in the form of Exhibit B, which are
issuable to the Investors at the Closing as indicated in each applicable case
below such Investor's name on such Investor's signature page of this Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
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1.2 Other Definitional Provisions.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
masculine and feminine genders.
(b) The parties agree that any rule of construction to the effect
that ambiguities are to be resolved against the draft party shall not be applied
in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including",
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Terms, other than those defined or referenced in Article I, may
be defined elsewhere in the text of this Agreement and, unless otherwise
indicated, shall have the specified meaning throughout this Agreement.
(e) The words "hereof", "herein", "hereby", and "hereunder", and
words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(f) References to an Article of Section, or an Exhibit, are (unless
otherwise stated) references to an Article or Section of, or an Exhibit to, this
Agreement.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Investor, and
each Investor shall, severally and not jointly, purchase from the Company, such
number of Shares and a Warrant to purchase such number of Warrant Shares, each
as indicated below such Investor's name on the signature page hereto. The
Closing shall take place at the offices of Company Counsel, 1345 Avenue of the
Americas, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on the Closing Date or at
such other location as the parties may agree. 2.2 Closing Conditions. It shall
be a condition to the other party's obligation to perform under this Agreement
that each of the following conditions are satisfied:
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Investor the following:
(i) a facsimile copy of a certificate free and clear of all
restrictive and other legends (except as expressly provided in Section 4.1(b)
hereof), evidencing the number of Shares indicated below such Investor's name on
the signature page hereto, registered in the name of such Investor or its
custodian as indicated on the Investor's signature page hereto (provided that
originals of the same shall delivered pursuant to the terms of Section 4.15);
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(ii) a Warrant, registered in the name of such Investor,
pursuant to which such Investor shall have the right to acquire such number of
Warrant Shares indicated below such Investor's name on its signature page
hereto;
(iii) the Registration Rights Agreement, duly executed by the
Company; and
(iv) the legal opinion of Company Counsel, in the form
attached hereto as Exhibit C, executed by such counsel, addressed to the
Investors and providing that RBC and each of the Investors are entitled to rely
thereon.
(b) At the Closing, each Investor shall deliver or cause to be
delivered to the Company the following:
(i) its Investment Amount, in United States dollars and in
immediately available funds, by wire transfer to an account or accounts
designated by the Company for such purpose as set forth on Schedule I hereto;
and
(ii) the Registration Rights Agreement, duly executed by such
Investor.
(c) All representations and warranties of the other party contained
herein shall remain true and correct as of the Closing Date and all covenants of
the other party to be performed prior to the Closing shall have been performed.
(d) From the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of each Purchaser, makes it impracticable or inadvisable to purchase
the Shares at the Closing.
(e) As of the Closing Date, there shall have been no Material
Adverse Effect since the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to each Investor:
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(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than those listed in the SEC Reports. Except as disclosed in the SEC
Reports and as disclosed on Schedule 3.1(a), the Company owns, directly or
indirectly, all of the capital stock or comparable equity interests of each
Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock or comparable equity interests of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights. If the Company has no Subsidiaries, any
references to Subsidiaries in the Transaction Documents shall be disregarded.
(b) Organization and Qualification. The Company and each Subsidiary
is an entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational, charter or equivalent documents. The Company and each
Subsidiary is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, have or reasonably
be expected to have a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further consent or action is required by the Company,
its Board of Directors or stockholders in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies, (ii) laws relating to the availability of specific
performance, injunctive relief or other equitable principles of general
application, or (iii) with respect to the indemnification provisions of the
Registration Rights Agreement, public policy.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Securities,
(including the issuance of the Warrant Shares upon exercise of the Warrants) and
the consummation by the Company of the transactions contemplated thereby do not
and will not (i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational, charter or equivalent documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
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would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations and the rules and regulations of any self-regulatory organization
(including any Trading Market) to which the Company or its securities are
subject), or by which any property or asset of the Company or a Subsidiary is
bound or affected; except in the case of each of clauses (ii) and (iii), such as
could not, individually or in the aggregate, have or reasonably be expected to
have a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing with the Commission of one or more Registration
Statements in accordance with the requirements of the Registration Rights
Agreement, (ii) filings required by state securities laws, and the filing of a
Notice of Sale of Securities on Form D with the Commission as required under
Regulation D of the Securities Act, (iii) the filings required in accordance
with Section 4.5, (iv) the application(s) to each Trading Market for the listing
of the Shares and the Warrant Shares for trading thereon in the time and manner
required thereby, and (v) those that have been made or obtained prior to the
date of this Agreement.
(f) Issuance of the Securities. The Securities have been duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and non-assessable, and
free and clear of all Liens. The issuance of the Securities (including the
issuance of the Warrant Shares upon exercise of the Warrants) is not subject to
any preemptive or similar right to subscribe for or purchase securities. The
Company has reserved from its duly authorized capital stock the maximum number
of shares of Common Stock issuable pursuant to this Agreement and the Warrants
in order to issue the Shares and the Warrant Shares; and upon exercise in
accordance with their terms, the Warrant Shares will be duly and validly issued,
fully paid and non-assessable, and free and clear of all Liens.
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company, and all shares of Common
Stock reserved for issuance under the Company's various option and incentive
plans, is set forth in the SEC Reports. All outstanding shares of capital stock
are duly authorized, validly issued, fully paid and non-assessable and have been
issued in compliance with all applicable securities laws. Except as set forth in
the SEC Reports, no securities of the Company are entitled to preemptive or
similar rights, and no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and except as disclosed in the SEC Reports and
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Schedule 3.1(g), there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
Common Stock, Common Stock Equivalents, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or Common Stock
Equivalents. There are no anti-dilution or price adjustment provisions contained
in any security issued by the Company (or in any agreement providing rights to
security holders). The issue and sale of the Securities will not, immediately or
with the passage of time, obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Investors) and will not result
in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed all SEC
Reports on a timely basis or has timely filed a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with GAAP, except as may
be otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
All material agreements to which the Company or any Subsidiary is a party or to
which the property or assets of the Company or any Subsidiary are subject are
included as part of or specifically identified in the SEC Reports.
(i) Material Changes. Since the date of the latest audited financial
statements included in the Company's most recent Annual Report on Form 10-KSB,
except as specifically disclosed in the SEC Reports or as set forth in Schedule
3.1(i), (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to have a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than
(A) trade payables, accrued expenses, and other liabilities incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its critical accounting policies or the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any securities to any officer, director or Affiliate,
except pursuant to existing Company stock option plans under registration
statements on Form S-8. The Company does not have pending before the Commission
any request for confidential treatment of information or documents.
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(j) Litigation. There is no Action which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as specifically disclosed in the SEC
Reports, could, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty, except as specifically disclosed in the SEC Reports. There has
not been, and to the knowledge of the Company, there is not pending or
contemplated, any Action by the Commission involving the Company or any current
director or officer of the Company. To the knowledge of the Company, there has
not been, and there is not pending or contemplated, any Action by the Commission
involving any former director or officer of the Company or any current or former
stockholder of the Company. The Company has not received any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(l) Compliance. Except as set forth in Schedule 3.1(l), neither the
Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, banking, occupational health and safety, product
quality and safety and employment and labor matters, except in the case of
clauses (i) and (iii) above as could not, individually or in the aggregate, have
or reasonably be expected to have a Material Adverse Effect. The Company is in
compliance with the requirements that are currently applicable to it under the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended, and the rules and regulations
thereunder, except where such noncompliance could not have or reasonably be
expected to have a Material Adverse Effect.
(m) Material Permits. The Company and the Subsidiaries possess all
Material Permits certificates, except where the failure to possess such permits
could not, individually or in the aggregate, have or reasonably be expected to
have a Material Adverse Effect, and neither the Company nor any Subsidiary has
received any notice of any Action relating to the revocation or modification of
any Material Permit.
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(n) Private Placement.
(i) Neither the Company nor any Person acting on the Company's
behalf has sold, offered to sell or solicited any offer to buy the Securities by
means of any form of general solicitation or advertising. Neither the Company,
any of its Affiliates nor any Person acting on the Company's behalf has,
directly or indirectly, at any time within the past six (6) months, made any
offer or sale of any security or solicitation of any offer to buy any security
under circumstances that would (A) eliminate the availability of the exemption
from registration under Regulation D under the Securities Act in connection with
the offer and sale of the Securities as contemplated hereby or (B) cause the
offering of the Securities pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or stockholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market.
(ii) The Company is not a United States real property holding
corporation within the meaning of the Foreign Investment in Real Property Tax
Act of 1980.
(o) Form SB-2 Eligibility. The Company is eligible to register its
Common Stock for resale by the Investors using a registration statement on Form
SB-2 promulgated under the Securities Act.
(p) Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, 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 charter documents or the laws of its state of incorporation
that is or could become applicable to any of the Investors as a result of the
Investors and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including, without limitation, as a
result of the Company's issuance of the Securities and the Investors' ownership
of the Securities.
(q) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities or personal property held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance, except as could not, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect.
(r) Acknowledgment Regarding Investors' Purchase of Securities. The
Company acknowledges and agrees that each of the Investors is acting solely in
the capacity of an arm's length purchaser with respect to the Company, this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Investor is acting as a financial advisor or fiduciary of
the Company or, to the Company's knowledge, any other Investor, with respect to
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this Agreement and the transactions contemplated hereby. The Company further
represents to each Investor that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives, and no
statement, commitment or promise to the Company or any of its representatives by
any Investor is or was an inducement to the Company to enter into this Agreement
or otherwise.
(s) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all Intellectual Property Rights except where the failure
to so have could not, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any
Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person, except where such infringement could not have reasonably be expected
to have a Material Adverse Effect. Except as set forth in the SEC Reports, all
such Intellectual Property Rights are enforceable and, to the Company's
knowledge, there is no existing infringement by another Person of any of the
Intellectual Property Rights.
(t) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
(u) Transactions With Affiliates and Employees. None of the officers
or directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case that would be required
to be disclosed now or in the future in an SEC Report pursuant to the
requirements of Item 404 of Regulation S-K.
(v) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
12
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed
such disclosure controls and procedures to ensure that material information
relating to the Company, including its Subsidiaries, is made known to the
certifying officers by others within those entities, particularly during the
period in which the Company's Forms 10-KSB or 10-QSB, as the case may be, are
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of the Evaluation
Date. The Company presented in its most recently filed Form 10-KSB or Form
10-QSB the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as described in Item 308(c) of
Regulation S-K under the Exchange Act) or, to the Company's knowledge, in other
factors that could significantly affect the Company's internal controls.
(w) Investment Company. The Company is not, and will not after the
consummation of the offering of Securities contemplated by this Agreement be, an
"investment company" or an Affiliate of an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
(x) Certain Fees. Except with respect to RBC, no brokerage or
finder's fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Investors shall have no obligation with respect to any fees
or with respect to any claims (other than such fees or commissions owed by an
Investor pursuant to written agreements executed by such Investor which fees or
commissions shall be the sole responsibility of such Investor) made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.
(y) Certain Registration Matters. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 3.2(b)-(g) and
(l), the offer and sale of the Securities (including the issuance of the Warrant
Shares upon exercise of the Warrants) by the Company to the Investors under this
Agreement is exempt from the registration requirements of the Securities Act and
the securities or "blue sky" laws of any of the states described in Schedule
3.1(y). Except as described in Schedule 3.1(y), the Company has not granted or
agreed to grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company that are currently outstanding
registered with the Commission or any other governmental authority that have not
been satisfied.
(z) Listing and Maintenance Requirements. The Company is required to
file reports pursuant to Section 13(a) or 15(d) of the Exchange Act. The Company
has not, in the two (2) years preceding the date hereof, received notice from
any Trading Market to the effect that the Company is not in compliance with the
listing or maintenance requirements thereof. The Company is, and has no reason
to believe that it will not in the foreseeable future continue to be, in
compliance with the listing and maintenance requirements for continued listing
or quotation of the Common Stock on the Trading Market. The issuance and sale of
the Securities under the Transaction Documents does not contravene the rules and
regulations of any Trading Market on which the Common Stock is currently listed
or quoted, and no approval of the shareholders of the Company thereunder is
required for the Company to issue and deliver to the Investors the maximum
number of Securities contemplated by the Transaction Documents.
13
(aa) Disclosure. The Company confirms that neither it, its
employees, officers or directors, nor, to its knowledge, any Person acting on
its behalf has provided any of the Investors or their agents or counsel with any
information that the Company believes constitutes material, non-public
information, except for the material terms embodied in this Agreement (which
will be disclosed as provided in Section 4.6). The Company understands and
confirms that the Investors will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Investors regarding the Company, its business and the transactions
contemplated hereby, furnished by the Company, its employees, officers or
directors (including the Company's representations and warranties set forth in
this Agreement and the Schedules to this Agreement), or, to its knowledge,
furnished on behalf of the Company, are true and correct in all material
respects and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. No
event or circumstance has occurred or information exists with respect to the
Company or any of its Subsidiaries or its or their business, properties,
prospects, operations or financial conditions, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed.
(bb) No Additional Representations. The Company acknowledges that no
Investor makes or has made any representations, warranties or agreements with
respect to the transactions contemplated hereby other than those specifically
set forth in the Transaction Documents.
(cc) Acknowledgement Regarding Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for
Section 4.9 hereof as to the Investors), it is understood and agreed by the
Company (i) that none of the Investors or any Person to whom an offer of
Securities have been made (each, an "Offeree") have been asked to agree, nor has
any Investor or Offeree agreed, to desist from purchasing or selling, long
and/or short, securities of the Company, or "derivative" securities based on
securities issued by the Company or to hold the Securities, securities of the
Company, or "derivative" securities based on securities issued by the Company
for any specified term; (ii) that past or future open market or other
transactions by any Investor or Offeree, including without limitation, Short
Sales or "derivative" transactions, before or after the closing of this or
future private placement transactions, may negatively impact the market price of
the Company's publicly-traded securities; (iii) that any Investor or Offeree,
and counter parties in "derivative" transactions to which any such Investor or
Offeree is a party, directly or indirectly, presently may have a "short"
position in the Common Stock, and (iv) that no Investor or Offeree shall be
deemed to have any affiliation with or control over any arm's length
counter-party in any "derivative" transaction.
14
(dd) Tax Status. The Company and each of its Subsidiaries has made
or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject and
which are due (unless and only to the extent that the Company and each of its
Subsidiaries has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes or has obtained an extension of the
deadline for such filing) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. To the Company's knowledge, there are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company has not executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any foreign, federal,
statue or local tax. To the Company's knowledge, none of the Company's tax
returns is presently being audited by any taxing authority.
(ee) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and either its accountants or lawyers
formerly or presently employed by the Company. The Company is current with
respect to any fees owed to its accountants and lawyers.
(ff) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other Person acting on behalf of the
Company, has (i) directly or indirectly, used any corrupt funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(gg) Solvency. Based on the financial condition of the Company as of
the Closing Date (and assuming that the Closing shall have occurred), (i) the
Company's fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive at the
Closing, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The Company does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).
15
3.2 Representations and Warranties of the Investors. Each Investor hereby,
for itself and for no other Investor, represents and warrants to the Company as
follows:
(a) Organization; Authority. Such Investor is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate, partnership or
other power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such
Investor of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or, if such Investor is not a corporation,
such partnership, limited liability company or other applicable like action, on
the part of such Investor. Each of the Transaction Documents has been duly
executed by such Investor, and when delivered by such Investor in accordance
with terms hereof, will constitute the valid and legally binding obligation of
such Investor, enforceable against it in accordance with its terms, except as
such enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies, (ii)
laws relating to the availability of specific performance, injunctive relief or
other equitable principles of general application or (iii) with respect to the
indemnification provisions of the Registration Rights Agreement, public policy.
(b) Investment Intent. Such Investor is acquiring the Securities as
principal for its own account and not with a view to or for distributing such
Securities or any part thereof in violation of applicable federal and state
securities laws; provided, however that such representation is made without
prejudice to such Investor's right at all times to sell or otherwise dispose of
all or any part of such Securities in compliance with applicable federal and
state securities laws. Nothing contained herein shall be deemed a representation
or warranty by such Investor to hold the Securities for any period of time.
(c) Investor Status. At the time such Investor was offered the
Securities, it was, and at the date hereof it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Investor is not a
registered broker-dealer under Section 15 of the Exchange Act.
(d) Reliance on Exemptions. Such Investor understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of federal and state securities laws and that
the Company is relying upon the truth and accuracy of, and the Investor's
compliance with, the representations, warranties, agreements, acknowledgements
and understandings of the Investor set forth in this Section 3.2 in order to
determine the availability of such exemption and the eligibility of the Investor
to acquire the Securities.
(e) General Solicitation. Such Investor 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.
16
(f) Access to Information. Such Investor acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing therein, (ii)
access to public information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment, and
(iii) the opportunity to obtain such additional public information that the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents. Such Investor has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
(g) Experience of Such Purchaser. Such Investor, 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.
(h) Independent Investment Decision. Such Investor has independently
evaluated the merits of its decision to purchase Securities pursuant to this
Agreement, such decision has been independently made by such Investor and such
Investor confirms that it has only relied on the advice of its own business
and/or legal counsel and not on the advice of any other Investor's business
and/or legal counsel in making such decision.
(i) No Trading. Each Investor represents and warrants that from the
time such Investor was first informed of the transactions contemplated by this
Agreement (the "Discussion Time") up through the time the transactions
contemplated by this Agreement are first publicly announced by the Company as
provided in Section 4.5, the Investor did not and will not, directly or
indirectly, execute any Short Sales or engage in any other trading in any
securities of the Company or any "derivative" security thereof.
(j) Acknowledgement of Risk. Such Investor acknowledges and
understands that (i) its investment in the Securities involves a significant
degree of risk, including, without limitation, those risks described in the
"Risk Factors" section of the Company's Pre-Effective Amendment No. 1 to Form
SB-2 filed on April 22, 2005 or other SEC Report which include Risk Factors, and
(ii) in the event of a disposition of the Securities, the Investor could sustain
the loss of its entire investment.
(k) Transfer or Resale. The Investor understands that except as
otherwise provided in this Agreement and the Registration Rights Agreement, the
Securities have not been and are not being registered under the Securities Act
or any applicable state securities laws and, consequently, the Investor may have
to bear the risk of owning the Securities for an indefinite period of time
17
because the Securities may not be transferred unless (i) the resale of the
Securities is registered pursuant to an effective registration statement under
the Securities Act, (ii) subject to the provisions of Section 4.1, the Investor
has delivered to the Company an opinion of counsel to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration, or (iii) the Securities are sold or
transferred pursuant to Rule 144 and, subject to the provisions of Section 4.1,
the Investor has delivered to the Company an opinion of counsel to the effect
that the Securities to be sold or transferred may be sold or transferred
pursuant to Rule 144.
(l) Residence and Formation. If such Investor is an individual, then
such Purchaser resides in the state or province identified in the address of
such Purchaser set forth on the signature page hereto. If such Investor is a
partnership, corporation, limited liability company or other entity, then (i)
such Investor was not formed for the purpose of making an investment in the
Securities, and (ii) the office or offices of such Investor in which its
investment decision was made is located at the address or addresses of such
Investor set forth on the signature page hereto.
(m) No Additional Representations. Each Investor acknowledges that
the Company does not make and has not made any representations, warranties or
agreements with respect to the transactions contemplated hereby other than those
specifically set forth in the Transaction Documents.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) Each of the Company and each Investor severally and not jointly
agree, that the Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to (i) an effective registration statement, (ii) to the Company,
(iii) to an Affiliate of an Investor, or (iv) in connection with a pledge as
contemplated in Section 4.1(b), the transferor thereof will, if required by the
Company, provide to the Company an opinion of counsel selected by the
transferor, reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have the
rights of an Investor hereunder and under the Registration Rights Agreement.
(b) Certificates evidencing the Securities will contain the
following legend, until such time as they are not required under Section 4.1(c):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
18
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE
SECURITIES ACT OR A WRITTEN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION FOR SUCH SALE,
OFFER, TRANSFER OR OTHER ASSIGNMENT IS AVAILABLE UNDER THE SECURITIES
ACT AND SUCH STATE LAWS. THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES IN A MANNER
THAT COMPLIES WITH THE SECURITIES ACT.
The Company acknowledges and agrees that an Investor may from time
to time pledge, and/or grant a security interest in some or all of the
Securities pursuant to a bona fide margin agreement in connection with a bona
fide margin account and, if required under the terms of such agreement or
account, such Investor may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to
approval or consent of the Company and no legal opinion of legal counsel to the
pledgee, secured party or pledgor shall be required in connection with the
pledge, but such legal opinion may be required in connection with a subsequent
transfer following default by the Investor transferee of the pledge. No notice
shall be required of such pledge. At the appropriate Investor's expense, the
Company will execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection with a pledge
or transfer of the Securities including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
(c) Certificates evidencing the Shares and the Warrant Shares shall
not contain any legend (including the legend set forth in Section 4.1(b)): (i)
while a registration statement (including the Registration Statement) is
effective that covers the resale of the Shares and the Warrant Shares or (ii)
following a sale of such Shares or the Warrant Shares pursuant to Rule 144
(assuming the transferor is not an Affiliate of the Company), or (iii) while
such Shares or the Warrant Shares are eligible for sale under Rule 144(k), or
(iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission). Following such time as restrictive legends are not
required to be placed on certificates representing Shares or the Warrant Shares
in accordance with this Section, the Company will, no later than three (3)
Trading Days following the delivery by the Investor to the Company or the
Company's transfer agent of (i) the certificate representing the Shares or the
Warrant Shares containing a restrictive legend, and (ii) an opinion of counsel
selected by the Investor, reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such certificate is no longer required to contain the
restrictive legend, deliver or cause to be delivered to such Investor a
certificate representing such Shares or the 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.
19
4.2 Furnishing of Information. As long as any Investor owns the
Securities, from the date hereof and ending on the second anniversary of the
Closing Date, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof.
As long as any Investor owns Securities, if the Company is not required to file
such reports, it will prepare and furnish to the Investors and make publicly
available in accordance with Rule 144(c) such information as is required for the
Investors to sell the Shares and the Warrant Shares under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Shares and the Warrant Shares without
registration under the Securities Act pursuant to Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any securities of the Company
or any of its Affiliates that would be integrated with the offer or sale of the
Securities pursuant to this Agreement in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Investors, or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market.
4.4 Subsequent Registrations. Other than pursuant to the Registration
Statement, the Company may not file any registration statement (other than on
Form S-8) with the Commission with respect to any securities of the Company
until the later to occur of the Effective Date or the date 90 days from the date
hereof.
4.5 Securities Laws Disclosure; Publicity. By 8:30 a.m. (New York time) on
November 3, 2005, the Company will issue a press release disclosing all material
terms of the transactions contemplated hereby and by 5:30 p.m. (New York time)
on November 8, 2005 the Company will file a Current Report on Form 8-K with the
Commission disclosing all material terms of the transactions contemplated hereby
(and attach as exhibits thereto the Transaction Documents) in accordance with
the applicable Commission rules and regulations. In addition, the Company will
make such other filings and notices in the manner and time required by the
Commission and any Trading Market on which the Common Stock is listed or quoted.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Investor, or include the name of any Investor in any filing with the
Commission (other than the Registration Statement and any exhibits to filings
made in respect of this transaction in accordance with periodic filing
requirements under the Exchange Act) or any regulatory agency or Trading Market,
without the prior written consent of such Investor, except to the extent such
disclosure is required by law or Trading Market regulations, in which case the
Company shall provide the Investors with prior notice of such disclosure.
4.6 Indemnification of Investors.
(a) In addition to the indemnity provided in the Registration Rights
Agreement, the Company will indemnify and hold the Investor Parties harmless
from any and all Losses that any such Investor Party may suffer or incur as a
result of or relating to (i) any breach of any of the representations,
warranties, covenants or agreements made by the Company in any Transaction
Document or (ii) any Action instituted against an Investor Party by any
20
shareholder of the Company who is not an Affiliate of such Investor Party, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such Action is based upon a breach of such Investor's representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Investor Party may have with any such shareholder or any
violations by the Investor Party of state or federal securities laws or any
conduct by such Investor Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). The Company will not be liable to any
Investor Party under this Agreement to the extent, but only to the extent that a
Loss is attributable to any breach of any of the representations, warranties,
covenants or agreements made by the Investors in this Agreement or in the other
Transaction Documents. In addition to the indemnity contained herein, the
Company will reimburse each Investor Party for its reasonable legal and other
expenses (including the cost of any investigation, preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred.
(b)(i) If any Action shall be brought or asserted against any
Investor Party in respect of which indemnity may be sought pursuant to this
Agreement, such Investor Party shall promptly notify the Company in writing, and
the Company shall have the right to assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Investor Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided that the failure of any Investor Party to give such notice shall not
relieve the Company of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have proximately and
materially adversely prejudiced the Company.
(ii) An Investor Party shall have the right to employ separate
counsel in any such Action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Investor Party
unless: (1) the Company has agreed in writing to pay such fees and expenses; (2)
the Company shall have failed promptly to assume the defense of such Action or
to employ counsel reasonably satisfactory to such Investor Party in any such
Action; or (3) the named parties to any such Action (including any impleaded
parties) include both such Investor Party and the Company, and such Investor
Party shall have been advised by counsel that a material conflict of interest is
likely to exist if the same counsel were to represent such Investor Party and
the Company (in which case, if such Investor Party notifies the Company in
writing that it elects to employ separate counsel at the expense of the Company,
the Company shall not have the right to assume the defense thereof and such
counsel shall be at the expense of the Company; provided, however, that in the
event one or more Investor Parties is a party to such Action, the Company shall
only be required to pay the expenses of one law firm serving as counsel to said
Investor Parties). The Company shall not be liable for any settlement of any
21
such Action effected without its written consent, which consent shall not be
unreasonably withheld. The Company shall not, without the prior written consent
of the Investor Party, effect any settlement of any pending Action in respect of
which any Investor Party is a party, unless such settlement includes an
unconditional release of such Investor Party from all liability on claims that
are the subject matter of such Action.
(iii) All fees and expenses of the Investor Party (including
reasonable fees and expenses of counsel to the extent incurred in connection
with investigating or preparing to defend such Action in a manner not
inconsistent with this Section) shall be paid to the Investor Party, as
incurred, within ten (10) Trading Days of written notice thereof to the Company
(regardless of whether it is ultimately determined that an Investor Party is not
entitled to indemnification hereunder; provided, that the Company may require
such Investor Party to undertake to reimburse all such fees and expenses to the
extent it is finally judicially determined that such Investor Party is not
entitled to indemnification hereunder).
4.7 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Investor or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Investor shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Investor shall be
relying on the foregoing covenant in effecting transactions in securities of the
Company. In the event of a breach of the foregoing covenant by the Company or
any Person acting on its behalf, the Company shall, upon written notice of such
breach, make public disclosure of such material non-public information. In the
event that the Company has not made such public disclosure within two (2)
Trading Days of such written notice, in addition to any other remedy provided
herein or in the Transaction Documents or otherwise available, an Investor shall
have the right to make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material non-public information
without the prior approval by the Company or any Person acting on its or their
behalf. No Investor shall have any liability to the Company or any Person acting
on its or their behalf for any such disclosure.
4.8 Use of Proceeds. The Company will use the net proceeds from the sale
of the Securities hereunder for business expansion and general working capital
purposes.
4.9 Trading Limitations and Restrictions on Short Sales. Each Investor
hereby, for itself and for no other Investor, represents, warrants, covenants
and agrees that:
(a) from the Discussion Time through the date hereof, such Investor
did not, and
(b) from the date hereof until the date the transactions
contemplated by this Agreement are first publicly announced by the Company as
described in Section 4.5, such Investor will not, directly or indirectly, (i)
trade in the Common Stock or execute or effect (or cause to be executed or
effected) any Short Sale in the Common Stock, or (ii) sell, offer to sell,
solicit offers to buy, dispose of, loan, pledge or grant any right with respect
to shares of Common Stock, except in compliance with all relevant securities
laws and regulations.
22
Notwithstanding the foregoing, no Investor makes any representation,
warranty or covenant hereby that it will not engage in Short Sales in the
securities of the Company after the time that the transactions contemplated by
this Agreement are first publicly announced by the Company as described in
Section 4.5.
4.10 Reservation and Listing of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, a sufficient number of shares
of Common Stock for the purpose of enabling the Company to issue the Shares
pursuant to this Agreement and the Warrant Shares pursuant to any exercise of
the Warrants. The Company shall use commercially reasonably efforts to as soon
as reasonably practicable following the Closing, list the Shares and the Warrant
Shares on any Trading Market on which the Common Stock trades or is quoted. The
Company further agrees that if the Company applies and is accepted to have the
Common Stock traded on any other Trading Market, it will use commercially
reasonable efforts, as soon as reasonably practicable, to list all of the Shares
and the Warrant Shares on said Trading Market. Once so listed, the Company will
comply in all material respects with the Company's reporting, filing and other
obligations under the bylaws, rules or regulations of the Trading Market.
4.11 Equal Treatment of Investors. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of this Agreement unless the same consideration is also offered to all
of the parties to this Agreement.
4.12 Acknowledgment Regarding RBC. Each Investor acknowledges that RBC is
acting solely as a placement agent for the Company in connection with the
offering of the Securities by the Company and will be compensated by the Company
for acting in such capacity. Each Investor further acknowledges that the
provisions of this Section 4.12 are for the benefit of and may be enforced by
RBC.
4.13 Sales by Investors. Each Investor covenants to sell any Securities
sold by it in compliance with applicable prospectus delivery requirements, if
any, or otherwise in compliance with the requirements for an exemption from
registration under the Securities Act and the rules and regulations promulgated
thereunder. No Investor will make any sale, transfer or other disposition of the
Securities in violation of federal or state securities laws.
4.14 Delivery of Share Certificates. As soon as practicable after the
Closing, but in no event more than ten (10) Trading Days after the Closing, the
Company agrees to cause manually executed originals of a certificate evidencing
the number of Shares indicated below such Investor's name on its signature page
hereto, registered in the name of such Investor or its custodian as indicated on
the Investor's signature page hereto.
23
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of the Transaction Documents. The Company shall pay all
stamp and other taxes and duties levied in connection with the sale of the
Securities.
5.2 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Investors such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
5.3 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 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as follows:
If to the Company: InfoSearch Media, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to McGuireWoods LLP
(which shall not 1345 Avenue of the Americas
constitute notice): ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to an Investor: To the address set forth under such Investor's
name on the signature pages hereof;
or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
24
5.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, (a) in the case of an amendment,
by the Company and the Investors contributing two-thirds (2/3) of the aggregate
Investment Amount payable under this Agreement, except that if an amendment
would adversely affect the rights of an Investor, the amendment must also be
approved by such Investor, or (b) in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Securities; provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Investors"; and provided, further that such
transferee or assignee is approved by the Company (such approval not to be
unreasonably withheld). Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.6 (as to each
Investor Party) and Section 4.12.
5.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) will be exclusively commenced in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
25
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Action, any claim that it is not personally subject to the jurisdiction
of any such New York Court, or that such Action has been commenced in an
improper or inconvenient forum. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
Action by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Action to
enforce any provisions of a Transaction Document, then the prevailing party in
such Action shall be reimbursed by the other party for its attorney's fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Action.
5.9 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Shares and Warrants for a period of
two years from the Closing. The agreements and covenants contained herein shall
survive the Closing in accordance with their respective terms.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.11 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not timely perform
its related obligations within the periods therein provided, then such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
5.13 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
26
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor hereunder or pursuant to the Warrants, or any Investor
enforces or exercises its rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company by a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.16 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
5.17 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to this Agreement has been made by such Investor
independently of any other Investor and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Investor or by any agent or employee of any other
Investor, and no Investor or any of its agents or employees shall have any
liability to any other Investor (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
27
herein or in any Transaction Document, and no action taken by any Investor
pursuant thereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Investor acknowledges that no other Investor has
acted as agent for such Investor in connection with making its investment
hereunder and that no Investor will be acting as agent of such Investor in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents. Each Investor 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 Investor to be joined as an
additional party in any proceeding for such purpose. Each Investor represents
that it has been represented by its own separate legal counsel in its review and
negotiations of this Agreement and the Transaction Documents.
5.18 Limitation of Liability. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGES FOR INVESTORS FOLLOW]
28
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
INFOSEARCH MEDIA, INC.
By:_____________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGES FOR INVESTORS FOLLOW]
S-1
IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first written above.
-----------------------------------
By: __________________________
Name: __________________________
Title: __________________________
Investment Amount: _______________
Per Share Purchase Price: $0.64
Shares:_________________________
Warrant Shares: _________________
Address for Notice:
------------------------
------------------------
------------------------
------------------------
------------------------
Facsimile No.: ________
Telephone No.: _________
Attn: _________________
Name of Custodian/Address for Delivery of Certificates
(or precise legal name for stock registration; please
affirmatively indicate if certificates will not be held
by a custodian)
------------------------
------------------------
------------------------
------------------------
------------------------
Facsimile No.: ________
Telephone No.: _________
Attn: _________________
S-2
Schedule I
Wire Instructions
DOMESTIC WIRE TRANSFERS:
Amount: Investment Amount indicated on Investor's
signature page
Receiving Bank: SIL VLY BK SJ
Routing and Transit #: ▇▇▇▇▇▇▇▇▇
For Credit of: INFOSEARCH MEDIA, INC.
Credit Account #: 3300477469
Originator Information (ORG): [INVESTOR NAME]
[Investor Address]
INTERNATIONAL WIRE TRANSFERS:
Amount: Investment Amount indicated on Investor's
signature page
Receiving Bank: FC - SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Routing and Transit #: ▇▇▇▇▇▇▇▇▇
For Credit of: INFOSEARCH MEDIA, INC.
Final Credit Account #: 3300477469
Originator Information (ORG): [INVESTOR NAME]
[Investor Address]
Exhibit A
Registration Rights Agreement
A-1
Exhibit B
Form of Warrant
B-1
Exhibit C
Form of Legal Opinion
1. The Company (a) is a corporation validly existing in good standing
under the laws of the State of Delaware and (b) has the corporate power to own
its property, to conduct the business in which it is engaged as described in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2004, to
execute and deliver each of the Transaction Documents to which it is a party and
to perform its obligations thereunder. The Company is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except where the failure to be so qualified and in good
standing would not result in a Material Adverse Effect.
2. The Company has the requisite power and authority to execute, deliver
and perform its obligations under the Transaction Documents.
3. The Company has duly authorized, executed and delivered each of the
Transaction Documents and each such Transaction Document constitutes the legal,
valid and binding obligation of the Company and is enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies, (ii) laws relating to the availability of
specific performance, injunctive relief or other equitable principles of general
application, or (iii) with respect to the indemnification provisions of the
Registration Rights Agreement, public policy.
4. The Shares being issued pursuant to the Securities Purchase Agreement
have been duly authorized and, when delivered and paid for pursuant to the
Securities Purchase Agreement, will be validly issued, fully paid and
nonassessable, and the issuance thereof will not violate any statutory or, to
our knowledge, contractual preemptive or similar rights.
5. The Company has authorized and reserved for issuance upon exercise of
the Warrant ______ shares of its Common Stock. When the Warrant Shares are
issued out of the Company's duly authorized Common Stock upon exercise of, and
pursuant to the provisions of, the Warrant and the Securities Purchase Agreement
and the Company has received the consideration therefore in accordance with the
terms of the Warrant and the Securities Purchase Agreement, such shares will be
duly authorized, validly issued, fully paid and non-assessable, and the issuance
thereof will not violate any statutory or, to our knowledge, contractual
preemptive or similar rights.
6. The execution and delivery by the Company of the Transaction Documents
and the performance by the Company of its obligations thereunder will not
violate (a) the certificate of incorporation or by-laws of the Company, as
amended or supplemented to date, or (b) any provision of any New York or federal
law, statute, rule or regulation or of the Delaware General Corporation Law.
C-1
7. To our knowledge, after having made inquiry of officers of the Company
but without having made any other investigation, the Company is not a party to
any Action which (a) places in question the validity or enforceability of, or
seeks to enjoin the performance of, the Transaction Documents, or (b) if
resolved in a manner unfavorable to the Company would have a Material Adverse
Effect.
8. Assuming the accuracy of the representations of the Investors in
Section 3.2(b)-(g) and (l) of the Securities Purchase Agreement, and assuming
the performance by the Investors of their obligations under the Securities
Purchase Agreement, the offer, issuance, sale and delivery of the Securities to
the Investors under the Securities Purchase Agreement do not require
registration under the Securities Act of 1933, as amended, or the securities or
"blue sky" laws of any of the states described in Schedule 3.1(y).
9. The Company is eligible to register its Common Stock for resale by the
Investors using a registration statement on Form SB-2 promulgated under the
Securities Act.
C-2
Disclosure Schedules