Exhibit 2.2
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Between
BROOKLYN PASTRY INC.
and
THE PURCHASER(S) LISTED ON
SCHEDULE 1 HERETO
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June 26, 2003
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TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS............................................1
1.1 Certain Definitions..............................................1
ARTICLE II PURCHASE AND SALE OF CONVERTIBLE DEBENTURES....................5
2.2 Purchase and Sale; Purchase Price................................5
2.2 Execution and Delivery of Documents; the Closing.................6
2.3 The Post-Closing.................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES................................8
3.1 Representations, Warranties and Agreements of the Company........8
3.2 Representations and Warranties of the Purchaser.................11
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES...............................13
4.1 Manner of Offering..............................................13
4.2 Furnishing of Information.......................................13
4.3 Notice of Certain Events........................................13
4.4 Copies and Use of Disclosure Documents and Non-Public
Filings.........................................................14
4.5 Modification to Disclosure Documents............................14
4.6 Blue Sky Laws...................................................14
4.7 Integration.....................................................14
4.8 Furnishing of Rule 144(c) Materials.............................15
4.9 Solicitation Materials..........................................15
4.10 Subsequent Financial Statements.................................15
4.11 Prohibition on Certain Actions..................................15
4.12 Listing of Common Stock.........................................15
4.13 Escrow..........................................................15
4.15 Attorney-in-Fact................................................16
4.16 Indemnification.................................................17
4.17 Exclusivity.....................................................19
4.18 Purchaser's Ownership of Common Stock...........................19
4.19 Purchaser's Rights if Trading in Common Stock is
Suspended.......................................................19
4.20 No Violation of Applicable Law..................................20
4.21 Redemption Restrictions.........................................20
4.22 No Other Registration Rights....................................20
4.23 Merger or Consolidation.........................................21
4.24 Registration of Escrow Shares...................................21
4.25 Liquidated Damages..............................................22
4.26 Short Sales.....................................................23
4.27 Fees............................................................23
4.28 Additional Fees.................................................23
4.29 Changes to Federal and State Securities Laws....................24
4.30 Merger Agreement................................................24
ARTICLE V TERMINATION...................................................25
5.1 Termination by the Company or the Purchaser.....................25
5.2. Remedies........................................................26
ARTICLE VI LEGAL FEES AND DEFAULT INTEREST RATE..........................26
ARTICLE VII MISCELLANEOUS.................................................26
7.1 Fees and Expenses...............................................26
7.2 Entire Agreement; Amendments....................................27
7.3 Notices.........................................................27
7.4 Amendments; Waivers.............................................28
7.5 Headings........................................................28
7.6 Successors and Assigns..........................................28
7.7 No Third Party Beneficiaries....................................28
7.8 Governing Law; Venue; Service of Process........................29
7.9 Survival........................................................29
7.10 Counterpart Signatures..........................................29
7.11 Publicity.......................................................29
7.12 Severability....................................................29
7.13 Limitation of Remedies..........................................30
7.14 Omnibus Provision...............................................30
LIST OF SCHEDULES:
Schedule 1 Purchaser(s)
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization and Registration Rights
Schedule 3.1(d) Equity and Equity Equivalent Securities
Schedule 3.1(e) Conflicts
Schedule 3.1(f) Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) Defaults and Violations
Schedule 5.1 Form 8-K Disclosure Obligations
LIST OF EXHIBITS:
Exhibit A-1 First Convertible Debenture A
Exhibit A-2 First Convertible Debenture B
Exhibit B Second Convertible Debenture
Exhibit C Merger Agreement
Exhibit D Articles of Merger
Exhibit E Conversion and Notice Procedures
Exhibit F Escrow Agreement
Exhibit G Power of Attorney
Exhibit H Legal Opinion
Exhibit I Rule 504 Legal Opinion
Exhibit J Officer's Certificate
Exhibit K Note
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THIS CONVERTIBLE DEBENTURE PURCHASE AGREEMENT ("Agreement") is made and
entered into as of June 26, 2003, between BROOKLYN PASTRY INC., a corporation
organized and existing under the laws of the State of Florida (the "Company"),
and the purchaser(s) listed on Schedule 1 hereto (the "Purchaser").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchaser and the Purchaser desires
to acquire from the Company (i) the Company's $980,000, 1% Convertible
Debentures, due June 25, 2008 in the aggregate amount of Nine Hundred Eighty
Thousand Dollars ($980,000), at the aggregate price of Nine Hundred Eighty
Thousand Dollars ($980,000) in the forms of Exhibit A-1 ("First Debenture A")
and Exhibit A-2 ("First Debenture B") annexed hereto and made a part hereof (the
"First Debentures") and (ii) the Company's $20,000, 1% Convertible Debenture,
due June 25, 2008, at the price of Twenty Thousand Dollars ($20,000) in the form
of Exhibit B annexed hereto and made a part hereof (the "Second Debenture";
together, with the First Debentures, the "Debentures").
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and each Purchaser agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" means, with respect to any Person, any Person that, directly
or indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agreement" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"Articles of Merger" shall have the meaning set forth in Section 1.1
hereof.
"Attorney-in-Fact" shall have the meaning set forth in Section 2.2(a)(iv)
hereof.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government actions to close.
"Closing" shall have the meaning set forth in Section 2.2(a).
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"Closing Date" shall have the meaning set forth in Section 2.2(a).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means shares now or hereafter authorized of the class of
common stock, no par value, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
"Company" shall have the meaning set forth in the introductory paragraph.
"Control Person" shall have the meaning set forth in Section 4.16(a)(i)
hereof.
"Conversion Date" shall have the meaning set forth in the Debentures.
"Debentures" shall have the meaning set forth in the recital.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Disclosure Documents" means (a) all documents and written materials
provided to the Purchaser and/or its representatives in connection with the
Company and this offering, including, but not limited to, the Company's
unaudited balance sheet as at March 31, 2003 and profit and loss statement for
the period from inception to March 31, 2003 and (b) the Schedules required to be
to furnished to the Purchaser by or on behalf of the Company pursuant to Section
3.1 hereof.
"ECCM" shall have the meaning set forth in Section 1.1.
"Effective Date" shall mean the date on which articles of merger (the
"Articles of Merger") annexed as Exhibit D hereto is filed with the Secretary of
State of the State of Florida to effect the merger of BPI Acquisition Inc.
("BPI"), a Florida corporation and a wholly owned subsidiary of Columbia
Bakeries, Inc., a Nevada corporation, with and into the Company (the "Merger")
pursuant to the Merger Agreement annexed as Exhibit C hereto.
"Escrow Agent" means Gottbetter & Partners, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; Tel: ▇▇▇-▇▇▇-▇▇▇▇; Fax: ▇▇▇-▇▇▇-▇▇▇▇.
"Escrow Agreement" shall have the meaning set forth in Section 4.13
hereof.
"Escrow Shares" means the certificates representing Fifty Million
(50,000,000) shares of duly issued Common Stock, without restriction and freely
tradable pursuant to Rule 504 of Regulation D of the Securities Act, in the
share denominations specified by the Purchaser, registered in the name of the
Purchaser and/or its assigns to be held in escrow pursuant to this Agreement and
the Escrow Agreement.
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"Event of Default" shall have the meaning set forth in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Execution Date" means the date of this Agreement first written above.
"First Debentures" shall have the meaning set forth in the recitals.
"Full Conversion Shares" shall have the meaning set forth in Section
4.14(b) hereof.
"G&P" means Gottbetter & Partners, LLP.
"Indemnified Party" shall have the meaning set forth in Section 4.16(b)
hereof.
"Indemnifying Party" shall have the meaning set forth in Section 4.16(b)
hereof.
"Limitation on Conversion" shall have the meaning set forth in Section
4.18 hereof.
"Losses" shall have the meaning set forth in Section 4.16(a) hereof.
"Material" shall mean having a financial consequence in excess of
$100,000.
"Material Adverse Effect" shall have the meaning set forth in Section
3.1(a).
"Maximum Share Limit" shall have the meaning set forth in Section 4.14(b).
"Merger Agreement" means the Merger Agreement among ECCM, BPI and the
Company, annexed as Exhibit C hereto.
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the Nasdaq Stock Market, Inc.(R)
"Non-Public Filings" shall have the meaning set forth in Section 4.2
hereof.
"Note" shall have the meaning set forth in Section 2.1(b)(ii) hereof.
"Notice of Conversion" shall have the meaning set forth in paragraph 1 of
Exhibit E annexed hereto.
"Original Issuance Date," shall have the meaning set forth in the
Debentures.
"OTCBB" shall mean the NASD over-the counter Bulletin Board(R) or similar
organization or agency succeeding to its functions.
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"per Share Market Value" of the Common Stock means on any particular date
(a) the last sale price of shares of Common Stock on such date or, if no such
sale takes place on such date, the last sale price on the most recent prior
date, in each case as officially reported on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading, or (b)
if the Common Stock is not then listed or admitted to trading on any national
securities exchange, the closing bid price per share as reported by Nasdaq, or
(c) if the Common Stock is not then listed or admitted to trading on the Nasdaq,
the closing bid price per share of the Common Stock on such date as reported on
the OTCBB or if there is no such price on such date, then the last bid price on
the date nearest preceding such date, or (d) if the Common Stock is not quoted
on the OTCBB, the closing bid price for a share of Common Stock on such date in
the over-the-counter market as reported by the Pinksheets LLC (or similar
organization or agency succeeding to its functions of reporting prices) or if
there is no such price on such date, then the last bid price on the date nearest
preceding such date, or (e) if the Common Stock is not publicly traded, the fair
market value of a share of the Common Stock as determined by an Appraiser (as
defined in Section 4(c)(iv) of the Debentures) selected in good faith by the
holders of a majority of the Debentures; provided, however, that the Company,
after receipt of the determination by such Appraiser, shall have the right to
select an additional Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Appraiser.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Post-Closing" shall have the meaning set forth in Section 2.3(a).
"Post-Closing Date" shall have the meaning set forth in Section 2.3(a).
"Power of Attorney" means the power of attorney in the form of Exhibit G
annexed hereto.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Purchase Price" shall have the meaning set forth in Section 2.1(a).
"Purchaser" shall have the meaning set forth in the introductory
paragraph.
"Registrable Securities" means the Underlying Shares, and the Escrow
Shares entitled to registration pursuant to Section 4.24 and Section 4.29.
"Reporting Issuer" means a company that is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act.
"Required Approvals" shall have the meaning set forth in Section 3.1(f).
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"Second Debenture" shall have the meaning set forth in the recital.
"Securities" means the Debentures, the Underlying Shares and the Escrow
Shares.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Short Sale" shall have the meaning set forth in Section 4.26 hereof.
"Subsidiaries" shall have the meaning set forth in Section 3.1(a).
"Trading Day" means (a) a day on which the Common Stock is quoted on
Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has
been listed, or (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or
any stock exchange, a day on which the Common Stock is quoted in the
over-the-counter market, as reported by the Pinksheets LLC (or any similar
organization or agency succeeding its functions of reporting prices).
"Transaction Documents" means this Agreement and all exhibits and
schedules hereto and all other agreements executed pursuant to this Agreement.
"Underlying Shares" means the shares of duly issued Common Stock, without
restriction and freely tradable pursuant to Rule 504 of Regulation D of the
Securities Act, into which the First Debentures and Second Debenture are
convertible in accordance with the terms hereof, the First Debentures and the
Second Debenture.
ARTICLE II
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES
2.1 Purchase and Sale; Purchase Price.
(a) Subject to the terms and conditions set forth herein, the Company
shall issue and sell and the Purchaser shall purchase an aggregate principal
amount of One Million ($1,000,000) (the "Purchase Price") of the Debentures, of
which Nine Hundred Eighty Thousand Dollars ($980,000) shall be attributable to
the First Debentures and Twenty Thousand Dollars ($20,000) shall be attributable
to the Second Debenture. The Debentures shall have the respective rights,
preferences and privileges as set forth in the respective Debentures annexed as
Exhibit ▇-▇, ▇▇▇▇▇▇▇ ▇-▇ and Exhibit B hereto.
(b) The Purchase Price shall be paid and attributable as follows:
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(i) for the First Debenture A substantially in the form of
Exhibit A-1 annexed hereto cash in the amount of Four Hundred Eighty Thousand
Dollars ($480,000);
(ii) for the First Debenture B, a promissory note of the
Purchaser in the amount of Five Hundred Thousand Dollars ($500,000) annexed
hereto as Exhibit K (the "Note"), to be paid in accordance with the terms of the
Note; and
(iii) for the Second Debenture substantially in the form of
Exhibit B, cash in the amount of Twenty Thousand Dollars ($20,000).
2.2 Execution and Delivery of Documents; The Closing.
(a) The Closing of the purchase and sale of the Debentures (the
"Closing") shall take place simultaneously with the execution and delivery of
this Agreement (the "Closing Date"). On the Closing Date,
(i) the parties shall execute and deliver the Escrow Agreement
to the Escrow Agent;
(ii) the Company shall deliver to the Purchaser the (A) the
Disclosure Documents, (B) a duly executed copy of the Merger Agreement and (B)
the legal opinions of counsel to the Company substantially in the form of
Exhibit H and Exhibit I annexed hereto, addressed to the Purchaser and dated the
date hereof;
(iii) the Company shall deliver to the Escrow Agent (A)
original and duly executed Debentures (First Debenture A, First Debenture B and
the Second Debenture) registered in the name of the Purchaser and/or its assigns
in the amount set forth in Schedule 1, (B) an original and duly executed Power
of Attorney and (C) the original Escrow Shares;
(iv) the Company shall execute and deliver to the Purchaser a
certificate of its President, in the form of Exhibit J annexed hereto,
certifying that attached thereto is a copy of resolutions duly adopted by the
Board of Directors of the Company authorizing the Company to execute and deliver
the Transaction Documents and to enter into the transactions contemplated
thereby and the appointment, pursuant to Section 4.14 hereof, of the
attorney-in-fact pursuant to the Power of Attorney annexed as Exhibit F hereto
(the "Attorney-in-Fact"); and
(v) the Purchaser shall deliver to the Escrow Agent the
Purchase Price by (A) wire transfer of immediately available funds in the amount
of Five Hundred Thousand ($500,000) pursuant to written wire transfer
instructions delivered by the Escrow Agent to the Purchaser at least three (3)
Business Days prior to the Closing and (B) delivery of the original executed
Note.
(b) If this Agreement is terminated pursuant to Section 5.1 hereof,
then, within two (2) Business Days from the date of termination, either the
Company or the Purchaser shall notify the Escrow Agent of same, and
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(i) the Escrow Agent shall, within two (2) Business Days of
its receipt of such notice,
(A) return the Purchase Price to the Purchaser;
(B) return the Debentures to the Company; and
(C) return the Escrow Shares to the Company.
2.3 The Post-Closing.
(a) The post-closing of the purchase and sale of the Debentures (the
"Post-Closing") shall take place immediately after the Effective Date (the
"Post-Closing Date") at the offices of Gottbetter & Partners, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; provided, however, that all of the transactions contemplated
by the Merger Agreement annexed as Exhibit C hereto shall have been consummated
in accordance with the terms of the Merger Agreement prior to the Post-Closing;
and further, provided, that the Post-Closing may not occur later than ten (10)
days after the Closing Date (except if such 10th day is not a Business Day, then
the next Business Day), unless the Purchaser agrees in writing in advance to an
extension, which writing shall set forth the new Post-Closing Date. The Merger
Agreement shall be executed immediately after the Closing.
(b) At the Post-Closing,
(i) the Escrow Agent shall deliver to the Purchaser and/or its
assigns an original and duly issued First Debenture A and Second Debenture, each
registered in the name of the Purchaser and in denominations specified by the
Purchaser in the amounts set forth in Schedule 1 hereto or with written notice
to the Escrow Agent prior to the Post-Closing ;
(ii) the Company shall deliver to the Purchaser the following:
(A) certified copies of the Articles of Merger as
filed with the Secretary of State of the State of Florida;
(B) a certificate, dated the Post-Closing Date and
signed by the Secretary of the Company, certifying (1) that
attached thereto are true, correct and complete copies of (a)
the Company's articles or certificate of incorporation, as
amended to the date thereof, (b) the Company's by-laws, as
amended to the date thereof, and (c) a certificate of good
standing from the Secretary of State of Florida and (2) the
incumbency of the officer executing this Agreement;
(C) a certificate of the Company's President,
dated the Post-Closing Date, certifying that the
representations and warranties of the Company contained in
Article III hereof are true and correct in all material
respects on the Post-Closing Date; and
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(D) all other documents, instruments and writings
required to have been delivered by the Company at or prior to
the Post-Closing pursuant to this Agreement.
(c) Upon receipt by the Purchaser of those items set forth in Sections
2.3(b)(i) through (ii) above, the Escrow Agent shall deliver the following to
the Company:
(i) the Purchase Price, (A) attributable to First Debenture A
and the Second Debenture, by wire transfer of immediately available funds in the
amount of Five Hundred Thousand Dollars ($500,000) pursuant to written wire
transfer instructions delivered by the Company to the Escrow Agent at least
three (3) Business Days prior to the Post-Closing Date and (B) attributable to
First Debenture B by delivery of the original executed Note; and
(ii) all documents, instruments, and writings required to have
been delivered or necessary at or prior to the Post-Closing by the Purchaser
pursuant to this Agreement.
(d) The Escrow Agent shall retain and hold the Escrow Shares, and the
First Debenture B, both of which shall be held in accordance with the terms of
this Agreement, the Note and the Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to the Purchaser, all
of which shall survive the Post-Closing until the earlier of two years from the
date hereof and the date all the Debentures have been converted or redeemed:
(a) Organization and Qualification. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the State
of Florida, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company has no subsidiaries other than as set forth on Schedule 3.1(a) attached
hereto (collectively, the "Subsidiaries"). Each of the Subsidiaries is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries 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 or in good standing, as the case may be, would not, individually or
in the aggregate, have a material adverse effect on the results of operations,
assets, prospects, or financial condition of the Company and the Subsidiaries,
taken as a whole (a "Material Adverse Effect").
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(b) Authorization, Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by each other Transaction Document and to otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and each of the other Transaction Documents to which it is a
party by the Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the part
of the Company. Each of this Agreement and each of the other Transaction
Documents to which it is a party has been or will be duly executed by the
Company and when delivered in accordance with the terms hereof or thereof 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 applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(c) Capitalization. The authorized, issued and outstanding capital
stock of the Company is set forth on Schedule 3.1(c). No Debentures have been
issued as of the date hereof. No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of the Common Stock entitled to
preemptive or similar rights arising out of any agreement or understanding with
the Company by virtue of this Agreement. Except as described in this Agreement,
or disclosed in Schedule 3.1(c), there are no outstanding options, warrants,
script, rights to subscribe to, registration rights, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Debentures hereunder, securities, rights or obligations convertible
into or exchangeable for, or giving any person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments, understandings,
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Neither the Company nor any Subsidiary
is in violation of any of the provisions of its respective Certificate of
Incorporation, bylaws or other charter documents.
(d) Issuance of Securities. The Debentures and the Escrow Shares have
been duly and validly authorized for issuance, offer and sale pursuant to this
Agreement and, when issued and delivered as provided hereunder against payment
in accordance with the terms hereof, shall be valid and binding obligations of
the Company enforceable against the Company in accordance with their respective
terms. The Company has and at all times while the Debentures are outstanding
will continue to maintain an adequate reserve of shares of Common Stock to
enable it to perform its obligations under this Agreement and the Debentures.
When issued in accordance with the terms hereof, the Securities will be duly
authorized, validly issued, fully paid and non-assessable. Except as set forth
in Schedule 3.1(d) hereto, there is no equity, equity equivalent security, debt
or equity lines of credit outstanding that is substantially similar to the
Debentures, including any security having a floating conversion price
substantially similar to the Debentures; provided, however, that, except as
otherwise provided herein, nothing contained in this Section 3.1(d) shall be
deemed to permit the issuance of any convertible security or instrument or
equity line of credit.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company
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and the consummation by the Company of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any provision of its
Certificate of Incorporation or bylaws (each as amended through the date hereof)
or (ii) be subject to obtaining any of the consents referred to in Section
3.1(f), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company is a party, 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 its Subsidiaries is subject (including, but not limited to, those of
other countries and the federal and state securities laws and regulations), or
by which any property or asset of the Company or its Subsidiaries is bound or
affected, except in the case of clause (ii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted in violation
in any material respect of any law, ordinance or regulation of any governmental
authority.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 3.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, 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 this Agreement and each of the other
Transaction Documents, except for the filing of the Articles of Merger with the
Secretary of State of the State of Florida to effect the Merger pursuant to the
Merger Agreement, which shall be filed no later than ten (10) days from the
Closing Date (together with the consents, waivers, authorizations, orders,
notices and filings referred to in Schedule 3.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in
Schedule 3.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the best knowledge of the Company, threatened
against the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
relates to or challenges the legality, validity or enforceability of any of the
Transaction Documents, the Debentures and the Underlying Shares (ii) could,
individually or in the aggregate, have a Material Adverse Effect or (iii) could,
individually or in the aggregate, materially impair the ability of the Company
to perform fully on a timely basis its obligations under the Transaction
Documents.
(h) No Default or Violation. Except as set forth in Schedule 3.1(h)
hereto, neither the Company nor any Subsidiary (i) is in default under or 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, except such defaults or violations as do not have a Material Adverse
Effect, (ii) is in violation of any order of any court, arbitrator or
governmental body, except for such violations as do not have a Material Adverse
Effect, or (iii) is in violation of any statute, rule or regulation of any
governmental authority which could (individually or in the aggregate) (x)
adversely affect the legality, validity or enforceability of this Agreement, (y)
have a Material Adverse Effect or (z) adversely impair the Company's ability or
obligation to perform fully on a timely basis its obligations under this
Agreement.
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(i) Certain Fees. No fees or commission will be payable by the Company
to any investment banker, broker, placement agent or bank with respect to the
consummation of the transactions contemplated hereby except as provided in
Section 4.27 hereof.
(j) Disclosure Documents. The Disclosure Documents taken as a whole
are accurate 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.
(k) Manner of Offering. Assuming the Purchaser's representations and
warranties contained in Section 3.2 are true and correct, (a) the Securities are
being offered and sold to the Purchaser without registration under the
Securities Act in a private placement that is exempt from registration pursuant
to Rule 504 of Regulation D of the Securities Act and without registration under
the Colorado Securities Act of the Colorado Revised Statues (the "Colorado Act")
in reliance upon the exemption provided by Section ▇▇-▇▇-▇▇▇ of the Colorado Act
and regulation 51-3.13B promulgated thereunder; and (b) accordingly, the
Securities are being issued without restriction and may be freely traded
pursuant to Rule 504 of Regulation D of the Securities Act.
(l) Non-Registered Offering. Neither the Company nor any Person acting
on its behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Securities
under the Securities Act) which might subject the offering, issuance or sale of
the Securities to the registration requirements of Section 5 of the Securities
Act.
(m) Not a Reporting Company; Eligibility to use Exemption under
504(b). The Company is not subject to the reporting requirements of Section 13
or Section 15(d) of the Exchange Act. The Company has not sold any securities
under Rule 504(b) in the last twelve months, except as disclosed in Schedule
3.1(m). The Company is eligible to issue securities exempt from registration
pursuant to Rule 504 of Regulation D promulgated under the Securities Act. The
Company is a development stage company that has a specific business plan that is
other than to engage in a merger or acquisition with an unidentified company or
companies.
The Purchaser acknowledges and agrees that the Company makes no representation
or warranty with respect to itself or the transactions contemplated hereby other
than those specifically set forth in Section 3.1 hereof.
3.2 Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows, all of which shall survive
the Post-Closing until the earlier of two years from the date hereof and the
date all the Debentures have been converted or redeemed:
(a) Organization; Authority. The Purchaser is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its formation with the requisite power and authority to
enter into and to consummate the transactions contemplated hereby and by the
other Transaction Documents and otherwise to
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carry out its obligations hereunder and thereunder. The acquisition of the
Debentures to be purchased by the Purchaser hereunder has been duly authorized
by all necessary action on the part of the Purchaser. This Agreement has been
duly executed and delivered by the Purchaser and constitutes the valid and
legally binding obligation of the Purchaser, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to, or affecting generally the enforcement of, creditors rights and
remedies or by other general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the Debentures to be
purchased by it hereunder, and will acquire the Underlying Shares relating to
such Debentures, for its own account for investment purposes only and not with a
view to or for distributing or reselling such Debentures or Underlying Shares or
any part thereof or interest therein, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement, at all times to
sell or otherwise dispose of all or any part of such Debentures or Underlying
Shares in compliance with applicable federal and state securities laws.
(c) Purchaser Status. At the time the Purchaser was offered the
Debentures to be acquired by it hereunder, it was, at the date hereof it is and
at the Post-Closing it will be an "accredited investor" as defined in Rule
501(a) under the Securities Act. Purchaser is a resident in the State of
Colorado and no other jurisdiction.
(d) Experience of Purchaser. The Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of an investment in the securities to be acquired by it hereunder, and has
so evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The Purchaser is
able to bear the economic risk of an investment in the securities to be acquired
by it hereunder and, at the present time, is able to afford a complete loss of
such investment.
(f) Prohibited Transactions. The securities to be acquired by the
Purchaser hereunder are not being acquired, directly or indirectly, with the
assets of any "employee benefit plan," within the meaning of Section 3(3) of the
Employment Retirement Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt of the
Disclosure Documents and further acknowledges that it 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 Securities and the merits and risks of investing in the Securities; (ii)
access to information about the Company and the Company's financial condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its investment in the Securities; and (iii) the
opportunity to obtain such additional information which 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 and to verify the
accuracy and completeness of the information contained in the Disclosure
Documents.
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(h) Reliance. The Purchaser understands and acknowledges that (i) the
Debentures being offered and sold to it hereunder are being offered and sold
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Rule 504 of
Regulation D under the Securities Act and (ii) the availability of such
exemption depends in part on, and that the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and such Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Manner of Offering. The Securities are being issued pursuant to Rule
504 (b) of Regulation D of the Securities Act. The Securities will be exempt
from restrictions on transfer, and will carry no restrictive legend with respect
to the exemption from registration under the Securities Act. The Company will
use its best efforts to insure that it takes no actions that would jeopardize
the availability of the exemption from registration under Rule 504(b) for the
Securities and, if for any reason such exemption becomes unavailable, shall
cause the Securities to be registered under the Securities Act as required by
Section 4.29.
4.2 Furnishing of Information. As long as the Purchaser owns any of the
Securities, the Company will promptly furnish to the Purchaser all annual and
quarterly reports comparable to those required by Section 13(a) or 15(d) of the
Exchange Act (the "Non-Public Filings").
4.3 Notice of Certain Events. The Company shall, on a continuing basis,
(i) advise the Purchaser promptly after obtaining knowledge of, and, if
requested by the Purchaser, confirm such advice in writing, of (A) the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of the Securities, for offering or
sale in any jurisdiction, or the initiation of any proceeding for such purpose
by any state securities commission or other regulatory authority, or (B) any
event that makes any statement of a material fact made by the Company in Section
3.1 or in the Disclosure Documents untrue or that requires the making of any
additions to or changes in Section 3.1 in or in the Disclosure Documents in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, (ii) use its commercially reasonable best
efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption from qualification of the Securities under any state
securities or Blue Sky laws, and (iii) if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Securities under any such
laws, use its commercially reasonable best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
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4.4 Copies and Use of Disclosure Documents and Non-Public Filings. The
Company shall furnish the Purchaser, without charge, as many copies of the
Disclosure Documents and the Non-Public Filings and any amendments or
supplements thereto as the Purchaser may reasonably request. The Company
consents to the use of the Disclosure Documents and the Non-Public Filings and
any amendments and supplements to any of them by the Purchaser in connection
with resales of the Securities.
4.5 Modification to Disclosure Documents. If any event shall occur as a
result of which, in the reasonable judgment of the Company or the Purchaser, it
becomes necessary or advisable to amend or supplement any of the Disclosure
Documents or the Non-Public Filings in order to make the statements therein, in
the light of the circumstances at the time such Disclosure Documents or the
Non-Public Filings were delivered to the Purchaser, not misleading, or if it
becomes necessary to amend or supplement any of the Disclosure Documents or the
Non-Public Filings to comply with applicable law, the Company shall as soon as
practicable prepare an appropriate amendment or supplement to each such document
in form and substance reasonably satisfactory to both the Purchaser and Company
so that (i) as so amended or supplemented, each such document will not include
an untrue statement of material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to the Purchaser, not misleading and (ii)
the Disclosure Documents and the Non-Public Filings will comply with applicable
law in all material respects.
4.6 Blue Sky Laws. The Company shall cooperate with the Purchaser in
connection with the exemption from registration of the Securities under the
securities or Blue Sky laws of such jurisdictions as the Purchaser may request;
provided, however, that neither the Company nor its Subsidiaries shall be
required in connection therewith to (a) qualify as a foreign corporation where
they are not now so qualified, or (b) submit to general service of process in
such jurisdiction. The Company agrees that it will execute all necessary
documents and pay all necessary state filing or notice fees to enable the
Company to sell the Securities to the Purchaser.
4.7 Integration. The Company shall not and shall use its best efforts to
ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchaser.
4.8 Furnishing of Rule 144(c) Materials. The Company shall, for so long as
any of the Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Exchange Act, make
available to any registered holder of the Securities ("Holder" or "Holders") in
connection with any sale thereof and any prospective purchaser of such
Securities from such Person, such information in accordance with Rule 144(c)(2)
promulgated under the Securities Act as is required to sell the Securities under
Rule 144 promulgated under the Securities Act.
4.9 Solicitation Materials. The Company shall not (i) distribute any
offering materials in connection with the offering and sale of the Debentures or
the Underlying Shares other than the Disclosure Documents and any amendments and
supplements thereto prepared in
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compliance herewith or (ii) solicit any offer to buy or sell the Debentures or
the Underlying Shares by means of any form of general solicitation or
advertising.
4.10 Subsequent Financial Statements. If not otherwise publicly available,
the Company shall promptly furnish to the Purchaser a copy of all financial
statements for any period subsequent to the period covered by the financial
statements included in the Disclosure Documents until the full conversion of the
Debentures.
4.11 Prohibition on Certain Actions. From the date hereof through the
Post-Closing Date, the Company shall not and shall cause the Subsidiaries not
to, without the prior written consent of the Purchaser, (i) amend its
certificate or articles of incorporation, by-laws or other charter documents so
as to adversely affect any rights of the Purchaser; (ii) split, combine or
reclassify its outstanding capital stock; (iii) declare, authorize, set aside or
pay any dividend or other distribution with respect to the Common Stock; (iv)
redeem, repurchase or offer to repurchase or otherwise acquire shares of its
Common Stock; or (v) enter into any agreement with respect to any of the
foregoing other than the Merger Agreement.
4.12 Listing of Common Stock. If the Common Stock shall become listed on
the OTCBB or on another exchange, the Company shall (a) use its commercially
reasonable best efforts to maintain the listing of its Common Stock on the OTCBB
or such other exchange on which the Common Stock is then listed until expiration
of each of the periods during which the Debentures may be converted and (b)
shall provide to the Purchaser evidence of such listing.
4.13 Escrow. The Company and the Purchaser agree to execute and deliver,
simultaneously with the execution and delivery of this Agreement, the escrow
agreement attached hereto and made part hereof as Exhibit F (the "Escrow
Agreement"), and to issue into escrow (A) the certificates to be held by the
Escrow Agent, registered in the name of the Purchaser and without any
restrictive legend of any kind, pursuant to the terms of such escrow and (B) the
Note.
4.14 Conversion Procedures; Maintenance of Escrow Shares. (a) Exhibit E
attached hereto and made a part hereof sets forth the procedures with respect to
the conversion of the Debentures, including the forms of Notice of Conversion to
be provided upon conversion instructions as to the procedures for conversion and
such other information and instructions as may be reasonably necessary to enable
the Purchaser or its permitted transferee(s) to exercise the right of conversion
smoothly and expeditiously.
(b) Subject to a maximum of 6,250,000 Escrow Shares (the "Maximum
Share Limit"), the Company agrees that, at any time the conversion price of the
Debentures is such that the number of Escrow Shares for the Debentures is less
than 200% of the number of shares of Common Stock that would be needed to
satisfy full conversion of all of such Debentures, given the then current
conversion price (the "Full Conversion Shares"), upon five (5) Business Days
written notice of such circumstance to the Company by the Purchaser and/or the
Escrow Agent, the Company shall issue additional share certificates in the name
of the Purchaser and/or its assigns in denominations specified by the Purchaser,
and deliver same to the Escrow Agent, such that the new number of Escrow Shares
with respect to the Debentures is equal to 200% of the Full Conversion Shares.
15
(c) The Purchaser shall only convert the First Debenture A, First
Debenture B and the Second Debenture into the number of shares of Common Stock
equal to the Maximum Share Limit.
(d) If the Per Share Market Value of the Common Stock is below $0.08
then the Company may, at its option, (a) increase the Maximum Share Limit to
comply with Section 4.14(b) or (b) redeem the unconverted amount of the
Debentures in whole or in part at one hundred forty percent (140%) of the
unconverted amount of the Debentures being redeemed plus accrued interest
thereon.
4.15 Attorney-in-Fact. To effectuate the terms and provisions of this
Agreement, the Escrow Agreement and the Note, the Company hereby agrees to give
a power of attorney as is evidenced by Exhibit G annexed hereto. All acts done
under such power of attorney are hereby ratified and approved and neither the
Attorney-in-Fact nor any designee or agent thereof shall be liable for any acts
of commission or omission, for any error of judgment or for any mistake of fact
or law, as long as the Attorney-in-Fact is operating within the scope of the
power of attorney and this Agreement and its exhibits. The power of attorney,
being coupled with an interest, shall be irrevocable while any of the Debentures
remain unconverted or any portion of this Agreement or the Escrow Agreement
remains unsatisfied. In addition, the Company shall give the Attorney-in-Fact
resolutions executed by the Board of Directors of the Company which authorize
transfers of the Debentures, future issuances of the Underlying Shares for the
Debentures, and which resolutions state that they are irrevocable while any of
the Debentures remain unconverted, or any portion of this Agreement or the
Escrow Agreement remains unsatisfied.
4.16 Indemnification.
(a) Indemnification
(i) The Company shall, notwithstanding termination of this
Agreement, indemnify and hold harmless the Purchaser and its officers,
directors, agents, employees and affiliates, each Person who controls the
Purchaser (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) (each such Person, a "Control Person") and
the officers, directors, agents, employees and affiliates of each such
Control Person, to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and reasonable
attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of, or relating to, a breach or breaches of any
representation, warranty, covenant or agreement by the Company under this
Agreement or any other Transaction Document.
(ii) The Purchaser shall, notwithstanding termination of
this Agreement, indemnify and hold harmless the Company, its officers,
directors, agents and employees, each Control Person of the Company and
the officers, directors, agents and employees of each Control Person, to
the fullest extent permitted by applicable law, from and against any and
all Losses, as incurred, arising out of, or relating to, a breach or
16
breaches of any representation, warranty, covenant or agreement by the
Purchaser under this Agreement or the other Transaction Documents.
(b) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party 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 Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in, but not control, the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
to pay such fees and expenses; or (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impeded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of the claim against the Indemnified Party but will
retain the right to control the overall Proceedings out of which the claim arose
and such counsel employed by the Indemnified Party shall be reasonably
acceptable to the Indemnifying Party and shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All fees and expenses of the Indemnified Party to which the
Indemnified Party is entitled hereunder (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid to
the Indemnified Party, as incurred, within ten (10) Business Days of written
notice thereof to the Indemnifying Party.
No right of indemnification under this Section 4.16 shall be
available as to a particular Indemnified Party if there is a non-appealable
final judicial determination that such Losses arise solely out of the negligence
or bad faith of such Indemnified Party in performing the
17
obligations of such Indemnified Party under this Agreement or a breach by such
Indemnified Party of its obligations under this Agreement.
(c) Contribution. If a claim for indemnification under Section 4.16(a)
is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section 4.16
would apply by its terms (other than by reason of exceptions provided in this
Section 4.16(c)), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and the Indemnified Party on the other and the relative fault of
the Indemnifying Party and Indemnified Party in connection with the actions or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether there was
a judicial determination that such Losses arise in part out of the negligence or
bad faith of the Indemnified Party in performing the obligations of such
Indemnified Party under this Agreement or the Indemnified Party's breach of its
obligations under this Agreement. The amount paid or payable by a party as a
result of any Losses shall be deemed to include any attorneys' or other fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party.
(d) Non-Exclusivity. The indemnity and contribution agreements
contained in this Section are in addition to any obligation or liability that
the Indemnifying Parties may have to the Indemnified Parties.
4.17 Exclusivity. During the five year period commencing on the Original
Issuance Date (as defined in the Debentures), (A) except for the First Debenture
B, the Company and its Affiliates shall not issue or offer any convertible
equity, equity equivalent security or debt with a floating or fixed conversion
rate and (B) the Company and its Affiliates shall not offer any equity lines of
credit, provided, however, that the Company may grant stock options for up to
5,000,000 shares of Common Stock (as adjusted for stock splits, dividends and
combinations) to employees and directors if the exercise price is equal to or
greater than the fair market value of the Common Stock on the date of grant.
4.18 Purchaser's Ownership of Common Stock. In addition to and not in lieu
of the limitations on conversion set forth in the Debentures, the conversion
rights of the Purchaser set forth in the Debentures shall be limited, solely to
the extent required, from time to time, such that, unless the Purchaser gives
written notice 75 days in advance to the Company of the Purchaser's intention to
exceed the Limitation on Conversion as defined herein, with respect to all or a
specified amount of the Debentures and the corresponding number of the
Underlying Shares in no instance shall the Purchaser (singularly, together with
any Persons who in the determination of the Purchaser, together with the
Purchaser, constitute a group as defined in Rule 13d-5 of the Exchange Act) be
entitled to convert the Debentures to the extent such conversion would result in
the Purchaser beneficially owning more than five percent (5%) of the outstanding
shares of Common Stock of the Company. For these purposes, beneficial ownership
shall be defined and calculated in accordance with Rule 13d-3, promulgated under
the Exchange Act (the
18
foregoing being herein referred to as the "Limitation on Conversion"); provided,
however, that the Limitation on Conversion shall not apply to any forced or
automatic conversion pursuant to this Agreement or the Debentures; and provided,
further that if the Purchaser shall have declared an Event of Default and, if a
cure period is provided, the Company shall not have properly and fully cured
such Event of Default within any such cure period, the provisions of this
Section 4.18 shall be null and void from and after such date. The Company shall,
promptly upon its receipt of a Notice of Conversion tendered by the Purchaser
(or its sole designee) for the Debentures, as applicable, notify the Purchaser
by telephone and by facsimile of the number of shares of Common Stock
outstanding on such date and the number of Underlying Shares, which would be
issuable to the Purchaser (or its sole designee, as the case may be) if the
conversion requested in such Notice of Conversion were effected in full and the
number of shares of Common Stock outstanding giving full effect to such
conversion whereupon, in accordance with the Debentures, notwithstanding
anything to the contrary set forth in the Debentures, the Purchaser may within
one (1) Business Day of its receipt of the Company notice required by this
Section 4.18 by facsimile revoke such conversion to the extent (in whole or in
part) that such Purchaser determines that such conversion would result in the
ownership by such Purchaser of shares of Common Stock in excess of the
Limitation on Conversion.
4.19 Purchaser's Rights if Trading in Common Stock is Suspended. If the
Common Stock is listed on any exchange, then at any time after the Post-Closing
if trading in the shares of the Common Stock is suspended (and not reinstated
within ten (10) Trading Days) on such stock exchange or market upon which the
Common Stock is then listed for trading (other than as a result of the
suspension of trading in securities on such market generally or temporary
suspensions pending the release of material information), or the Common Stock is
delisted from the OTCBB (and not reinstated within ten (10) Trading Days), then,
at the option of the Purchaser exercisable by giving written notice to the
Company (the "Redemption Notice"), the Company shall redeem, as applicable, all
of the Debentures and Underlying Shares owned by such Purchaser at an aggregate
purchase price equal to the sum of:
(i) the product of (1) the average Per Share Market Value for the
five (5) Trading Days immediately preceding (a) the date of the Redemption
Notice, (b) the date of payment in full of the repurchase price under this
Section 4.19 recalculated as of such date, or (c) the day when the Common Stock
was suspended, delisted or deleted from trading, whichever is greater,
multiplied by (2) the aggregate number of Underlying Shares then held and owned
by such Purchaser;
(ii) the greater of (A) the outstanding principal amount and accrued
and unpaid interest on the Debentures owned by such Purchaser and (B) the
product of (1) the average Per Share Market Value for the five (5) Trading Days
immediately preceding (a) the date of the Redemption Notice, (b) the date of
payment in full of the repurchase price under this Section 4.19 recalculated as
of such date, or (c) the day when the Common Stock was suspended, delisted or
deleted from trading, whichever is greater, multiplied by (B) the aggregate
number of Underlying Shares issuable upon the conversion of the outstanding
Debentures then held and owned by the Purchaser (without taking into account the
Limitation on Conversion described in Section 4.18 hereof);
19
(iii) interest on such amounts set forth in (i) and (ii) above
accruing from the seventh (7th) day after the date of the Redemption Notice
until the repurchase price under this Section 4.19 is paid in full, at the rate
of fifteen percent (15%) per annum.
4.20 No Violation of Applicable Law. Notwithstanding any provision of this
Agreement to the contrary, if the redemption of the Debentures or the Underlying
Shares otherwise required under this Agreement or the Debentures would be
prohibited by the relevant provisions of Florida law, such redemption shall be
effected as soon as it is permitted under such law; provided, however, that
interest payable by the Company with respect to any such redemption shall accrue
in accordance with Section 4.19.
4.21 Redemption Restrictions. Notwithstanding any provision of this
Agreement to the contrary, if any redemption of the Debentures or the Underlying
Shares otherwise required under this Agreement or the Debentures would be
prohibited in the absence of consent from any lender to the Company or any of
the Subsidiaries, or by the holders of any class of securities of the Company,
the Company shall use its commercially reasonable best efforts to obtain such
consent as promptly as practicable after any such redemption is required.
Interest payable by the Company with respect to any such redemption shall accrue
in accordance with Section 4.19 until such consent is obtained. Nothing
contained in this Section 4.21 shall be construed as a waiver by the Purchaser
of any rights it may have by virtue of any breach of any representation or
warranty of the Company herein as to the absence of any requirement to obtain
any such consent.
4.22 No Other Registration Rights. During the period commencing on the
date hereof and ending on the Post-Closing Date, the Company shall not file any
registration statement that provides for the registration of shares of Common
Stock to be sold by security holders of the Company, other than the Purchaser
and/or its respective Affiliates or assigns, without the prior written consent
of the Purchaser or its assigns, provided, however, that the limitation on the
right to file registration statements contained in this Section 4.22 shall not
apply to registration statements relating solely to (i) employee benefit plans,
notwithstanding the inclusion of a resale prospectus for securities received
under any such employee benefit plan, or (ii) business combinations not
otherwise prohibited by the terms of this Agreement or the other Transaction
Documents. This registration restriction is in addition to the Company's
registration restrictions set forth in Section 4.24.
4.23 Merger or Consolidation. Until the earlier of (a) the full conversion
of the Debentures and (b) the Maturity Date of the Debentures (as that term is
defined in the Debentures), the Company and each Subsidiary will not, in a
single transaction or a series of related transactions, (i) consolidate with or
merge with or into any other Person, or (ii) permit any other Person to
consolidate with or merge into it, unless (w) either (A) the Company shall be
the survivor of such merger or consolidation or (B) the surviving Person shall
expressly assume by supplemental agreement all of the obligations of the Company
under the Debentures, this Agreement and the other Transaction Documents; (x)
immediately before and immediately after giving effect to such transactions
(including any indebtedness incurred or anticipated to be incurred in connection
with the transactions), no Event of Default shall have occurred and be
continuing; (y) if the Company is not the surviving entity, such surviving
entity's common shares will be listed on either The New York Stock Exchange,
American Stock Exchange, Nasdaq National Market or Nasdaq SmallCap Market, or
the OTCBB on or prior to the closing
20
of such transaction(s) and (z) the Company shall have delivered to the Purchaser
an officers* certificate and opinion of counsel, each stating that such
consolidation, merger (other than the merger contemplated in the Merger
Agreement) or transfer complies with this Agreement, that the surviving Person
agrees to be bound thereby and that all conditions precedent in this Agreement
relating to such transaction(s) have been satisfied.
4.24 Registration of Escrow Shares. (a) So long as the Purchaser and/or
its assigns owns any of the Securities and the Underlying Shares would not be
freely transferable without registration, the Company agrees not to file a
registration statement with the SEC, other than on Form 10, Form S-4 (except for
a public reoffering or resale) or Form S-8 without first having registered the
Registrable Securities for resale under the Securities Act and in such states of
the United States as the holders thereof shall reasonably request.
(b) If the Company shall propose to file with the SEC any registration
statement other than a Form 10, Form S-4 (except for a public reoffering or
resale) or Form S-8 which would cause, or have the effect of causing, the
Company to become a Reporting Issuer or to take any other action, other than the
sale of the Debentures to the Purchaser hereunder, the effect of which would be
to cause the Underlying Shares to be restricted securities (as such term is
defined in Rule 144 promulgated under the Securities Act), the Company agrees to
give written notification of such to the holders of the Securities at least two
weeks prior to such filing or taking of the proposed action. If any of the
Securities are then outstanding, the Company agrees to include in such
registration statement the Registrable Securities unless the Underlying Shares
would be freely transferable upon conversion of the Debentures without such
registration, so as to permit the public resale thereof.
If the registration of which the Company gives notice is for a registered
public offering involving an underwriting, the Company will so advise the
holders of the Securities. In such event, these registration rights shall be
conditioned upon such holder's participation in such underwriting and the
inclusion of such holder's Registrable Securities in the underwriting to the
extent provided herein. All holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter selected by the Company. In the event
that the lead or managing underwriter in its good faith judgment determines that
material adverse market factors require a limitation on the number of shares to
be underwritten, the underwriter may limit the number of Registrable Securities.
In such event, the Company shall so advise all holders of securities requesting
registration, and the number of shares of the Registrable Securities that are
entitled to be included in the registration and underwriting shall be allocated
pro rata among all holders and other participants, including the Company, in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities and other securities which they had requested to be included in such
registration statement at the time of filing the registration statement. If any
holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter,
provided such notice is delivered within sixty (60) days of full disclosure of
such terms to such holder, without thereby affecting the right of such holder to
participate in subsequent offerings hereunder.
(c) Notwithstanding the foregoing, if the Company for any reason shall
have taken any action, other than the sale of the Debentures to the Purchaser
hereunder, the effect of which
21
would be to cause the Registrable Securities to be restricted securities (as
such term is defined in Rule 144 promulgated under the Securities Act), the
Company agrees to use its commercially reasonable best efforts to file a
registration statement with the SEC and use its commercially reasonable best
efforts to have such registration statement declared effective by the SEC which
would permit the public resale of the Registrable Securities under the
Securities Act and in such states of the United States as the holders thereof
shall reasonably request.
(d) The Company agrees to keep any registration required pursuant to
this Section 4.24 continuously effective under the Securities Act and with such
states of the United States as the holders of the Registrable Securities shall
reasonably request until the earlier of (i) the date on which all of the
Registrable Securities covered by any such registration have been sold, (ii) two
(2) years from the effective date of any such registration, or (iii) the date on
which all of the Registrable Securities may be sold without restriction pursuant
to Rule 144 of the Securities Act. All costs and expenses of any such
registration and related Blue Sky filings and maintaining continuous
effectiveness of such registration and filings shall be borne by the Company,
other than underwriters and brokers, fees and commissions.
(e) The Escrow Shares shall be registered by the Company under the
Securities Act if required by Section 4.29 and subject to the conditions stated
therein.
4.25 Liquidated Damages. The Company understands and agrees that a breach
by the Company of Section 4.1, Section 4.24, Section 4.29, Section 4.30 or an
Event of Default as contained in this Agreement and/or any other Transaction
Document will result in substantial economic loss to the Purchaser, which loss
will be extremely difficult to calculate with precision. Therefore, if, for any
reason, the Company breaches Sections 4.1, Section 4.24, Section 4.29, Section
4.30 or fails to cure any Event of Default under Section 5.1 (a) (iii) (iv) (v)
(vi) and (viii) within the time, if any, given to cure such Event of Default, as
compensation and liquidated damages for such breach or default, and not as a
penalty, the Company agrees to pay the Purchaser an amount equal to the Purchase
Price. The Company shall, upon demand, pay the Purchaser such liquidated damages
by wire transfer of immediately available funds to an account designated by the
Purchaser. Nothing herein shall limit the right of the Purchaser to pursue
actual damages (less the amount of any liquidated damages received pursuant to
the foregoing) for the Company's breach of Section 4.1, Section 4.24, Section
4.29, Section 4.30 or failure to cure an Event of Default under Section 5.1 (a)
(iii) (iv) (v) (vi) and (viii), consistent with the terms of this Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR THE
OTHER TRANSACTION DOCUMENTS, THE COMPANY'S OBLIGATIONS UNDER THIS SECTION SHALL
SURVIVE ANY TERMINATION OF THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.
4.26 Short Sales. The Purchaser agrees that it will not enter into any
Short Sales (as hereinafter defined) until the earlier to occur of the date that
the Purchaser no longer owns the Debentures and the Maturity Date. For purpose
hereof, a "Short Sale" shall mean a sale of Common Stock by the Purchaser that
is marked as a short sale and that is made at a time when there is no equivalent
offsetting long position in the Common Stock by the Purchaser. For the purposes
of determining whether there is an equivalent offsetting long position in the
Common Stock held by the Purchaser, shares of Common Stock issuable upon
conversion of the Debentures shall be deemed to be held long by the Purchaser
with respect to the Underlying
22
Shares for which a Notice of Conversion is delivered within two (2) Trading Days
following the Trading Day that such short sale is entered into. The Purchaser
will comply with all rules and regulations contained in the Securities Act and
the Exchange Act.
4.27 Fees. The Company will pay the following fees and expenses in
connection with the transactions contemplated hereby: (a) to G&P (i) legal fees
for document production in the amount of $20,000 and (ii) all out-of-pocket
expenses incurred in connection with such document production and (b) to the
Escrow Agent, $5,000 for the escrow agent fee. Unless paid prior, all fees and
expenses will be paid at Post-Closing and the Company and the Purchaser hereby
authorize and direct the Escrow Agent to deduct such fees and expenses directly
from escrow prior to distributing any funds to the Company. Except with respect
to the fees set forth in subparagraph (b) of this Section 4.27, all fees and
expenses shall be paid regardless of whether the transactions contemplated
hereby are closed or otherwise completed. All fees to be paid hereunder shall
have no offsets, are non-refundable and non-cancelable.
4.28 Additional Fees. If the Company or any of its Affiliates enters into
any future financing with any prospective purchaser introduced by the Purchaser
within a period of two (2) years from the date hereof, the Company agrees to pay
to the Purchaser simultaneously with the closing of such financing an amount
equal to four percent (4%) of the aggregate amount of the portion of such
financing purchased by or for the account of such Person.
4.29 Changes to Federal and State Securities Laws. If any of the
Securities require registration with or approval of any governmental authority
under any federal (including but not limited to the Securities Act or similar
federal statute then in force) or state law, or listing on any national
securities exchange, before they may be resold or transferred without any
restrictions on their resale or transfer for reasons including, but not limited
to, a material change in Rule 504 of Regulation D promulgated under the
Securities Act or a change to the exemption for sales made to Accredited
Investors in the state in which the Purchaser resides, the Company will, at its
expense, (a) as expeditiously as possible cause the Registrable Securities to be
duly registered or approved or listed on the relevant national securities
exchange, as the case may be, and (b) keep such registration, approval or
listing, as the case may be, continuously effective until the earlier of (i) the
date on which all of the Registrable Securities have been sold, (ii) two (2)
years from the effective date of any such registration, or (iii) the date on
which all of the Registerable Shares may be sold without restriction pursuant to
Rule 144 of the Securities Act. The Registrable Securities shall be registered
by the Company under the Securities Act if required by Section 4.24 and subject
to the conditions stated therein.
4.30 Merger Agreement. Immediately upon the Effective Date, all of the
transactions contemplated by the Merger Agreement annexed hereto as Exhibit C
shall be consummated in accordance with the terms thereof.
4.31 Second Debenture Restriction. The Purchaser shall not convert the
Second Debenture in a principal amount in excess of $10,000, unless and until
the First Debenture B is issued to the Purchaser and fully paid for.
4.32 Future Financing. If, at any time the Debenture is outstanding, the
Company, or its successors in interest due to mergers, consolidations and/or
acquisitions (the "Successors-
23
in-Interest"), is funded an amount equal to or exceeding Five Million United
States dollars ($5,000,000), the Company or the Successors-in-Interest, as the
case may be, agrees to pay the Purchaser an amount equal to One Hundred Fifty
Percent (150%) of the then outstanding Debenture (the "Lump Sum Payment"). Upon
the Purchaser's receipt of the Lump Sum Payment, any and all remaining
obligations then outstanding between the Company or the Successors-in-Interest,
as the case may be, and Purchaser in connection with this Agreement and the
Debentures shall be deem satisfied, and the Agreement and the Debentures shall
be terminated. This provision shall survive both Closing and Post-Closing.
ARTICLE V
TERMINATION
5.1 Termination by the Company or the Purchaser. This Agreement shall be
terminated as follows upon the occurrence of any of the following events (each
an "Event of Default"):
(a) Automatically terminated prior to Post-Closing if:
(i) there shall be in effect any statute, rule, law or regulation,
including an amendment to Regulation D or an interpretive release
promulgated or issued thereunder, that prohibits the consummation of the
Post-Closing or if the consummation of the Post-Closing would violate any
non-appealable final judgment, order, decree, ruling or injunction of any
court of or governmental authority having competent jurisdiction;
(ii) the Post-Closing shall not have occurred by the Post-Closing
Date through no fault of the Company;
(iii) the common stock of ECCM is not registered under Section 12
of the Exchange Act;
(iv) ECCM is not current in its reporting obligations under
Section 13 or 15(d) of the Exchange Act;
(v) an event occurs prior to the Post-Closing requiring ECCM to
report such event to the SEC on Form 8-K and not otherwise set forth in
Schedule 5.1, provided, however, such event shall only include the
following items under Form 8-K: Item 1; Item 2 to the extent that any
event is reported under Item 2 that involves a change in the nature of
ECCM's business; Item 3; or Item 4 (provided further, that as to Item 4,
only if the event requires disclosure under Item 304 (a)(1)(iv) under
Regulation S-B);
(vi) the Company causes the Post-Closing to not occur by the
Post-Closing Date;
24
(vii) trading in the common stock of ECCM has been suspended,
delisted, or otherwise ceased by the Commission or the NASD or other
exchange or the Nasdaq (whether the National Market or otherwise), except
for any suspension of trading of limited duration solely to permit
dissemination of material information regarding ECCM, and not reinstated
within ten (10) Trading Days; or
(viii) the Company fails to deliver or cause to be delivered the
Debentures and Escrow Shares as required by and by the date set forth in
Section 2.2 hereof.
(b) Prior to Post-Closing by the Purchaser, by giving written notice
of such termination to the Company, if (A) the Company has materially breached
any representation, warranty, covenant or agreement contained in this Agreement
or the other Transaction Documents and such breach is not cured within five (5)
Business Days following receipt by the Company of notice of such breach or (B)
the Company's one-for thirty reverse stock split has not been effected under all
applicable Federal and State laws and the applicable Nasdaq rules and
regulations.
(c) Prior to Post-Closing by the Company, by giving written notice of
such termination to the Purchaser, if the Purchaser has materially breached any
representation, warranty, covenant or agreement contained in this Agreement or
the other Transaction Documents and such breach is not cured within five (5)
Business Days following receipt by the Purchaser of notice of such breach.
5.2 Remedies. Notwithstanding anything else contained herein to the
contrary, if an Event of Default has occurred pursuant to Section 5.1, and only
with respect to Section 5.1(b) has not been cured within the cure period
provided for therein, the defaulting party shall be deemed in default hereof and
the non-defaulting party shall be entitled to pursue all available rights
without further notice. The defaulting party shall pay all attorney's fees and
costs incurred in enforcing this Agreement and the other Transaction Documents.
In addition, all unpaid amounts shall accrue interest at a rate of 15% per
annum.
25
ARTICLE VI
LEGAL FEES AND DEFAULT INTEREST RATE
In the event any party hereto commences legal action to enforce its rights
under this Agreement or any other Transaction Document, the non-prevailing party
shall pay all reasonable costs and expenses (including but not limited to
reasonable attorney's fees, accountant's fees, appraiser's fees and
investigative fees) incurred in enforcing such rights. In the event of an
uncured Event of Default by any party hereunder, interest shall accrue on all
unpaid amounts due the aggrieved party at the rate of 15% per annum, compounded
annually.
ARTICLE VII
MISCELLANEOUS
7.1 Fees and Expenses. Except as set forth in this Agreement, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay the fees of the Escrow Agent and all stamp and other taxes
and duties levied in connection with the issuance of the Debentures (and, upon
conversion, the Underlying Shares) pursuant hereto. The Purchaser shall be
responsible for any taxes (other than income taxes) payable by the Purchaser
that may arise as a result of the investment hereunder or the transactions
contemplated by this Agreement or any other Transaction Document. Whether or not
the transactions contemplated hereby and thereby are consummated or this
Agreement is terminated, the Company shall pay (i) all costs, expenses, fees and
all taxes incident to and in connection with: (A) the preparation, printing and
distribution of any registration statement required hereunder and all amendments
and supplements thereto (including, without limitation, financial statements and
exhibits), and all preliminary and final Blue Sky memoranda and all other
agreements, memoranda, correspondence and other documents prepared and delivered
in connection herewith, (B) the issuance and delivery of the Securities, (C) the
exemption from registration of the Securities for offer and sale to the
Purchaser under the securities or Blue Sky laws of the applicable jurisdiction,
(D) furnishing such copies of any registration statement required hereunder, the
preliminary and final prospectuses and all amendments and supplements thereto,
as may reasonably be requested for use in connection with resales of the
Securities, and (E) the preparation of certificates for the Securities
(including, without limitation, printing and engraving thereof), (ii) all fees
and expenses of counsel and accountants of the Company and (iii) all expenses
and fees of listing on securities exchanges, if any.
7.2 Entire Agreement; Amendments. This Agreement, together with all of the
Exhibits and Schedules annexed hereto, and any other Transaction Document
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. This Agreement shall be deemed to have
been drafted and negotiated by both parties hereto and no presumptions as to
interpretation, construction or enforceability shall be made by or against
either party in such regard.
7.3 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed to have been duly given only
if delivered to the party personally or sent to the party by telecopy (promptly
followed by a hard-copy delivered in accordance with this Section 7.3) or by
registered or certified mail (return receipt requested), with postage and
registration or certification fees thereon prepaid, addressed to the party at
its address set forth below:
If to the Company: Brooklyn Pastry Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
26
If to the Purchaser: See Schedule 1 attached hereto
With copies to: Gottbetter & Partners, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Escrow Agent: Gottbetter & Partners, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as may be designated hereafter by notice given pursuant to
the terms of this Section 7.3.
7.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchaser, or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any 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 accruing to it thereafter.
7.5 Headings. 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.
7.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns. This Agreement and any of the rights, interests or obligations
hereunder may be assigned by the Purchaser to an accredited investor without the
consent of the Company as long as such assignee agrees to be bound by this
Agreement. This Agreement and any of the rights, interests or obligations
hereunder may not be assigned by the Company without the prior written consent
of the Purchaser. In the event the Company, in accordance with this Agreement,
enters into a consolidation with, or a merger with or into, any other
corporation, limited liability company or other entity, as a result of which the
shares of Common Stock are converted into securities of another corporation,
limited liability company or other entity, as a condition to consummating
27
such consolidation or merger, the Company shall cause the corporation, limited
liability company or other entity issuing such securities to assume all of the
Company's obligations under this Agreement and the Debentures. Upon such
assumption, the Company's obligations under Article IV hereof (other than the
Company's obligations under Section 4.1, 4.4, 4.5, 4.7, 4.9, 4.16, 4.25, 4.27
and 4.28), and the Company's obligations to issue shares of Common Stock upon
the conversion of the Debentures, shall be released and terminated and none of
such provisions shall have any force or effect with respect to the Company and
shall apply to and bind only such assuming corporations, limited liability
company or other entity.
7.7 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person, except in accordance with Section 4.16.
7.8 Governing Law; Venue; Service of Process. The parties hereto
acknowledge that the transactions contemplated by this Agreement and the
exhibits hereto bear a reasonable relation to the State of New York. The parties
hereto agree that the internal laws of the State of New York shall govern this
Agreement and the exhibits hereto, including, but not limited to, all issues
related to usury. Any action to enforce the terms of this Agreement or any of
its exhibits shall be brought exclusively in the state and/or federal courts
situated in the County and State of New York. Service of process in any action
by the Purchaser to enforce the terms of this Agreement may be made by serving a
copy of the summons and complaint, in addition to any other relevant documents,
by commercial overnight courier to the Company at its principal address set
forth in this Agreement.
7.9 Survival. The representations and warranties of the Company and the
Purchaser contained in Article III shall survive the Post-Closing until the
earlier of two (2) years from the date hereof and the date all the Debentures
have been converted or redeemed and the agreements and covenants of the parties
contained in Article IV and this Article VII shall survive the Post-Closing (or
any earlier termination of this Agreement).
7.10 Counterpart Signatures. 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) the same with the same force and effect as if such facsimile signature
page were an original thereof.
7.11 Publicity. The Company and the Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, unless counsel for the disclosing party deems such public
statement to be required by applicable federal and/or state securities laws.
Except as otherwise required by applicable law or regulation, the Company will
not disclose to any third party the names of the Purchaser.
28
7.12 Severability. In case any one or more of the provisions of this
Agreement shall 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 which shall be a reasonable substitute
therefore, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
7.13 Limitation of Remedies. With respect to claims by the Company or the
Purchaser or any person acting by or through the Company or the Purchaser for
remedies at law or at equity relating to or arising out of a breach of this
Agreement, liability, if any, shall, in no event, include loss of profits or
incidental, indirect, exemplary, punitive, special or consequential damages of
any kind.
7.14 Omnibus Provision. Anything contained herein or in the other
Transaction Documents notwithstanding, in the event that the Common Stock shall
become listed on the OTCBB and subsequently ceases to be listed for trading on
the OTCBB, then any reference thereto in this Agreement or the other Transaction
Documents shall be deemed to be a reference to (a) the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading, or (b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange, Nasdaq, or (c) if the Common Stock is not then
listed or admitted to trading on Nasdaq, then the over-the-counter market
reported by the Pinksheets LLC (or similar organization or agency succeeding to
its functions of reporting prices).
[Signature Page Follows]
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Company:
BROOKLYN PASTRY INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Purchaser:
HEM MUTUAL ASSURANCE LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Manager
30
Schedule 1
Purchaser(s)
-------------------------------- --------------------------
Name and Address of Purchaser Full Amount of Debentures
to be Purchased
-------------------------------- --------------------------
HEM Mutual Assurance LLC
One ▇▇▇▇▇ Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ $1,000,000
Suite 1000
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
31
Schedule 3.1(a)
Subsidiaries
None.
32
Schedule 3.1(c)
Capitalization and Registration Rights
The articles of incorporation authorize 1,500 shares of Common Stock to be
outstanding at one time. 100 shares of Common Stock are outstanding.
33
Schedule 3.1(d)
Equity and Equity Equivalent Securities
None.
34
Schedule 3.1(e)
Conflicts
None.
35
Schedule 3.1(f)
Consents and Approvals
SEC Filing - Form D
Colorado Blue Sky Filing (or exemption therefrom)
36
Schedule 3.1(g)
Litigation
None.
37
Schedule 3.1(h)
Defaults and Violations
None.
38
Schedule 5.1
Form 8-K Disclosure Obligations
None.
39