BONDS.COM GROUP, INC. SECURED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT September 24, 2008
▇▇▇▇▇.▇▇▇
GROUP, INC.
SECURED
CONVERTIBLE NOTE AND WARRANT
PURCHASE
AGREEMENT
September
24, 2008
▇▇▇▇▇.▇▇▇ HOLDINGS,
INC.
SECURED CONVERTIBLE NOTE AND
WARRANT
PURCHASE
AGREEMENT
This
Secured Convertible Note and Warrant Purchase Agreement (the “Agreement”) is made
as of September 24, 2008 (the “Initial Closing
Date”) by and between ▇▇▇▇▇.▇▇▇ Group, Inc., a Delaware corporation
(the “Company”)
and each of the entities or persons listed on Exhibit A
attached to this Agreement (each a “Purchaser” and
together the “Purchasers”).
RECITALS
Subject
to the terms and conditions set forth in this Agreement and pursuant to Sections
4(2) and 4(6) of the Securities Act of 1933, as amended (the "Securities Act"), and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, Units (as defined below) of securities of the Company, as more
fully described in this Agreement. As used herein, each "Unit" shall consist of
(i) a secured convertible note of the Company, in substantially the form set
forth on Exhibit
B hereto, in the principal amount of $25,000 (each a “Note” and together,
the “Notes”),
and (ii) a warrant, in substantially the form attached hereto as Exhibit
C hereof, to acquire 16,667 shares of Common Stock at an exercise price
of $0.46875 per share. The Units, the Notes, the Warrants
and the shares of Common Stock to be issued pursuant to the Notes and Warrants
are referred to herein as the “Securities”.
AGREEMENT
In
consideration of the mutual promises contained herein and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties to
this Agreement agree as follows:
1. Purchase
and Sale of Units.
(a) Purchase of
Units.
(i) Units. Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 1(f) and
1(g) below, the Company shall issue and sell to each Buyer, and each Buyer
agrees to purchase from the Company on the applicable Closing Date (as defined
below), the number of Units set forth opposite such Purchaser’s name on Exhibit
A hereto.
(ii) Initial
Closing. The date and time of the initial Closing shall be
10:00 a.m., Eastern Standard Time, on September 24, 2008 (or such later date as
is mutually agreed to by the Company and Purchaser) (the “Initial Closing
Date”). As part of the Initial Closing, the current
debtholders of the Company set forth on Schedule 1(a) hereto
(the “Converting
Holders”) shall exchange the notes set forth on Schedule 1(a) (the
“Converted
Indebtedness’) for Units.
(iii) Additional
Closings. During the period commencing on the Initial Closing
Date and ending December 1, 2008 (the “Additional Sale
Period”), the Company may offer for sale and sell pursuant to this
Agreement such number of Units (the “Additional Units”) as
is equal to: (i) 240 less (ii) the number of Units sold in the Initial Closing
for cash consideration (exclusive of such Units sold at the Initial Closing to
Authorized Noted Holders pursuant to the conversion of Authorized
Notes). The closing or closings hereunder during the Additional Sale
Period with respect to the purchase and sale of additional Units (each of said
closings being sometimes hereinafter referred to as an "Additional Closing
Date," and together with the Initial Closing Date, each a “Closing
Date”).
(iv) Purchase
Price. The purchase price for each Unit (the "Purchase Price")
shall be Twenty-Five Thousand Dollars ($25,000).
(c) Additional
Purchasers.
(i) Upon
the sale of Units during the Additional Sale Period, such additional Purchasers
shall be deemed a Purchaser hereunder and subject to all the obligations and
duties imposed upon, and entitled to all rights and benefits accorded to, the
Purchaser generally under this Agreement to the same extent as if originally
named herein and therein as a Buyer.
(ii) In
connection with the sale and delivery of Units in any Additional Closing, the
Company and each additional Purchaser shall execute and deliver a supplement to
this Agreement (a “Supplement”),
reflecting the name and address of such additional Purchaser, the number of
Units purchased there under and such other changes as are necessary to reflect
the consummation of the transactions contemplated hereby and intervening events
between the date hereof and the date of such sale. Thereupon, Exhibit
A hereto shall be deemed automatically and without further action on the
part of the parties hereto amended to reflect the issuance of the Additional
Units to such additional Buyers.
(d) Form of
Payment. On the applicable Closing Date, subject to the
satisfaction of the conditions to closing, (i) each Purchaser shall deliver by
wire transfer to an account designated by the Company, no later than the close
of business on the Closing Date the aggregate Purchase Price for the Units and
(ii) each of the Authorized Note Holders shall deliver their Converted
Indebtedness to the Company for cancellation.
(e) Location of
Closings. Each Closing shall take place at the offices of Rele
& ▇▇▇▇▇▇ LLC, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇. Alternatively, the Closing can take place by the exchange of
final executed closing documents between legal counsel for the Company and
Purchaser.
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(f) Deliverables of Company at
Closing. On the applicable Closing Date, the Company shall deliver to
each Purchaser (i) a Note in the principal amount set forth opposite such
Purchaser’s name on Exhibit
A hereto, (ii) a Warrant for the number of shares set forth opposite such
Purchaser’s name on Exhibit
A hereto, (iii) an executed copy of this Agreement, (iv) an executed copy
of the Security Agreement in substantially the form set forth on Exhibit
D hereto (the “Security Agreement”),
and (v) with respect to Additional Closings, an executed
Supplement.
(g) Deliverables of Purchaser at
Closing. On the applicable Closing Date, the Purchaser shall
deliver to the Company: (i) an executed copy of this Agreement and the Security
Agreement, (ii) with respect to Purchasers participating in Additional Closings,
an executed Supplement and (iii) the applicable consideration provided for in
Section 1(d) hereof.
(h) Fractional
Units. Other then with respect to the conversion of the
Converted Indebtedness by the Converting Holders in the Initial Closing, no
fractional Units shall be sold by the Company.
(i) Use of Proceeds. The
proceeds from the sale of the Units will be for general working capital of the
Company and the satisfaction of the indebtedness set forth on Schedule 1(i) (the
“Applicable
Indebtedness”).
2. Representations
and Warranties of the Company. The Company
hereby represents and warrants to each Purchaser as follows:
(a) Organization and
Qualification. The Company and its Subsidiaries (as set forth
on Schedule
2(a) hereto) are entities duly organized and validly existing and, to the
extent legally applicable, in good standing under the laws of the State of
Delaware and have the requisite power and authorization to own their properties
and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign entity to do
business and to the extent legally applicable, is in good standing in every
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not reasonably be
expected to have a Material Adverse Effect (as defined below). As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
or condition (financial or otherwise) of the Company and its Subsidiaries, taken
as a whole, or on the transactions contemplated hereby or the other Transaction
Documents (as defined below) or the other instruments to be entered into in
connection herewith or therewith, or on the authority or ability of the Company
to perform its obligations under the Transaction Documents
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(b) Authorization; Enforcement;
Validity. The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement, the
Security Agreement, the Notes, the Warrants and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction
Documents") and to issue the Securities in accordance with the terms
hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Units, the Notes, the Warrants, and the reservation for issuance and the
issuance of the shares (the “Underlying Shares”)
upon conversion of the Notes and exercise of the Warrants, have been duly
authorized by the Company's Board of Directors and no further filing, consent,
or authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other Transaction Documents have
been duly executed and delivered by the Company, and constitute the legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(c) Issuance of
Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents. The Underlying Shares, when issued in
accordance with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all liens imposed by the Company
other than restrictions on transfer provided for in the Transaction Documents.
The Company has reserved from its duly authorized capital stock a number of
shares of Common Stock for issuance of the Underlying Shares at least sufficient
to permit the exercise of all existing Warrants and conversion of all existing
Notes.
(d) No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Securities) will not (i) result in a violation of any
certificate of incorporation, certificate of formation, any certificate of
designations or other constituent documents of the Company or any of its
Subsidiaries, any capital stock of the Company or any of its Subsidiaries or
bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or
constitute a default or breach (or an event which with notice or lapse of time
or both would become a default or breach) in any respect under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including foreign, federal and state
securities laws and regulations) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except in the case of clauses (ii) and (iii)
above, to the extent that such violations conflict, default or right would not
reasonably be expected to have a Material Adverse Effect.
(e) Consents. Neither
the Company nor any of its Subsidiaries is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person (as defined below) in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents, in each case
in accordance with the terms hereof or thereof. "Person" means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof
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(f) Capitalization. The
Company has not issued any capital stock since its most recently filed periodic
report under the Exchange Act, other than capital stock issued: (i) pursuant to
the terms hereof, (ii) by the Company and reported by the Company pursuant to a
Current Report filed on Form 8K under the Securities and Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”), (iii)
pursuant to the exercise of employee stock options under the Company’s stock
option plans and/or the issuance of shares of Common Stock to employees pursuant
to the Company’s employee stock purchase plans or (iv) upon the conversion or
exercise of securities of the Company outstanding as of the date of the most
recently filed periodic report under the Exchange Act. No Person has any right
of first refusal, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by the Transaction
Documents.
(g) SEC Reports; Financial
Statements. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by the Company under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension. As
of their respective dates, except as disclosed in Schedule 2(g), the
SEC Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable, and none of the SEC Reports,
when filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. Except as disclosed in Schedule 2(g), the
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.
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(h)
Material
Changes. Except as set forth on Schedule 2(h) or
elsewhere on the schedules hereto, since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there
has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
Except as set forth on Schedule 2(h), the
Company does not have pending before the Commission any request for confidential
treatment of information. Except for the issuance of the Securities contemplated
by this Agreement or as set forth on Schedule 2(h) or
elsewhere on the Schedules hereto, no event, liability or development has
occurred or exists with respect to the Company or its Subsidiaries or their
respective business, properties, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws at
the time this representation is made or deemed made that has not been publicly
disclosed at least 1 trading day prior to the date that this representation is
made.
(i) Litigation. Except as
disclosed in Schedule
2(i), there is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect.
(j) Labor Relations. No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company which could reasonably be
expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that their relationships with their
employees are good.
(k) Compliance. Neither
the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as could not
have or reasonably be expected to result in a Material Adverse
Effect.
(l) Regulatory Permits.
To the Company’s knowledge, the Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
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(m) Title to Assets. The
Company and the Subsidiaries have good and marketable title in fee simple to all
real property owned by them and good and marketable title in all personal
property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all security interests, liens,
claims, charge or encumbrances (“Liens”),
except for (i) liens for current taxes not yet due, (ii) minor imperfections of
title, if any, not material in amount and not materially detracting from the
value or impairing the use of the property subject thereto or impairing the
operations of the Company or (iii) Permitted Liens (as defined
below).
(n) Patents and
Trademarks. The Company and the Subsidiaries have, or have rights to use,
all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other
intellectual property rights and similar rights as described in the SEC Reports
as necessary or material for use in connection with their respective businesses
and which the failure to so have could have a Material Adverse Effect
(collectively, the “Intellectual Property
Rights”). Neither the Company nor any Subsidiary has received a notice
(written or otherwise) that any of the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any third
party. To the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by any third party of any
of the Intellectual Property Rights. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(o) Certain Fees. Except
as set forth on Schedule 2(o), no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisors or consultants, finders, placement agents,
investment bankers, banks or other Persons with respect to the transactions
contemplated by the Transaction Documents. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of any such person or entity set forth on Schedule 2(o) for
fees of a type contemplated in this Section that may be due in connection with
the transactions contemplated by the Transaction Documents.
(p) Private Placement.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3 hereof, no registration under the Securities Act is required
for the offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby.
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(q) Transactions With Affiliates
and Employees. Other than as described in SEC Reports, and except as set
forth on Schedule
2(q), none of the officers, directors, employees and/or affiliates of
Company or the Subsidiaries is a party to any transaction with Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director employee or such affiliate or, to the knowledge of Company, any entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee, partner or affiliate other than
(a) for payment of salary or consulting fees for services rendered,
(b) reimbursement for expenses incurred on behalf of Company and
(c) for other employee benefits, including stock option agreements under
any stock option plan of Company, which in the aggregate (for the total amount
in (a), (b) and (c) combined) does not exceed the amount of $25,000 for any
officer, director, employee or affiliate.
(r)
Registration
Rights. Except as provided herein or as set forth in Schedule 2(r), no
Person has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
(s) No General
Solicitation. Neither the Company nor any person acting on behalf of the
Company has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the Securities for
sale only to the Purchasers and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.
(t) Disclosure. All
disclosure furnished by or on behalf of the Company to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, is true and correct and does 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.
3. Representations
and Warranties of the Purchasers. Each Purchaser
hereby represents, warrants and covenants to the Company that:
(a) Authorization. Such Purchaser has full
power and authority to enter into this Agreement. This
Agreement, when executed and delivered by the Purchaser, will
constitute a valid and legally binding obligation of the Purchaser, enforceable
in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of a specific
performance, injunctive relief, or other equitable remedies.
(b) Purchase Entirely for Own
Account. This Agreement is made with the Purchaser in reliance
upon the Purchaser’s representation to the Company, which by the Purchaser’s
execution of this Agreement, the Purchaser hereby confirms, that the Securities
to be acquired by the Purchaser will be acquired for investment for the
Purchaser’s own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. The Purchaser has not been formed for the specific purpose of
acquiring any of the Securities.
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(c) Knowledge. The
Purchaser is aware of the Company’s business affairs and financial condition and
has acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. The Purchaser has had the
opportunity to review and read the SEC Reports, including without limitation the
“Risk Factors” set forth therein, and hereby acknowledge that they understand
the disclosures made in such SEC Reports and the existence of such “Risk
Factors”.
(d) Restricted
Securities. The Purchaser understands that the Securities have
not been, and will not be, registered under the Securities Act, by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser’s representations as expressed
herein. The Purchaser understands that the Securities are “restricted
securities” under applicable U.S. federal, state and province securities laws
and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they
are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. Other than as set forth herein, the
Purchaser acknowledges that the Company has no obligation to register or qualify
the Securities for resale. The Purchaser further acknowledges that if
an exemption from registration or qualification is available, it may be
conditioned on various requirements including, but not limited to, the time and
manner of sale, the holding period for the Securities, and on requirements
relating to the Company which are outside of the Purchaser’s control, and which
the Company is under no obligation and may not be able to satisfy.
(e) General Solicitation.
Such Purchaser is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(f) Short Sales and
Confidentiality Prior To The Date Hereof. Other than consummating the
transactions contemplated hereunder, such Purchaser has not directly or
indirectly, nor has any person or entity acting on behalf of or pursuant to any
understanding with such Purchaser, executed any purchases or sales, including
“short sales" as defined in Rule 200 of Regulation SHO under the Exchange Act,
of the securities of the Company (“Stock Transactions”)
during the period commencing from the time that such Purchaser first received a
term sheet (written or oral) from the Company or any other person or entity
representing the Company setting forth the material terms of the transactions
contemplated hereunder until the date hereof (“Discussion Time”). The Purchaser
further agrees not to engage in any Stock Transactions until the Company files a
Current Report on Form 8K under the Exchange Act which annexes copies of the
Transaction Documents thereto. The Company covenants to file such
Current Report on Form 8K under the Exchange Act within five trading days of the
Initial Closing.
(g) Accredited
Investor. The Purchaser is
an accredited investor as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
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4. Covenants.
For so long as the Notes remain outstanding,
(a) Maintaining Properties,
Assets. The Company shall reasonably maintain in good repair,
working order and condition its properties and other assets, and those of any
Subsidiary, and from time to time make all reasonably necessary repairs,
renewals and replacements thereto.
(b) Liens. Company
shall not, and shall not permit any of its Subsidiaries to, create, incur or
suffer to exist any Lien upon any of its or its Subsidiaries’ assets or
properties, except for (i) Liens created by
operation of law such as materialmen’s liens, mechanic’s liens and other similar
liens; (ii) deposits, pledges or Liens securing obligations incurred in
respect of workers’ compensation, unemployment insurance or other forms of
governmental insurance or benefits; (iii) Liens imposed by any
governmental authority for taxes, assessments or charges not yet due or that are
being contested in good faith by appropriate proceedings with the establishment
of adequate reserves on the balance sheet of Company; (iv) Liens securing
indebtedness to commercial banks and other institutional lenders; (v) Liens that
are subordinate in all respects to the Liens held by the Purchasers; (vi) Liens
in existence as of the date hereof or (vii) Liens arising from or pursuant to
the Converted Indebtedness and/or the Applicable Indebtedness and
(viii) Liens approved by the holders of a majority of the principal amount of
indebtedness outstanding under the Notes (collectively, the “Permitted Liens”).
(c) Extraordinary
Actions. Unless otherwise approved by the holders
of a majority of the principal amount of indebtedness outstanding under the
Notes, the Company shall not nor shall it permit any Subsidiary to: (i) acquire,
sell or otherwise transfer any material assets or rights of the Company or a
Subsidiary or enter into any contract or agreement relating to the sale of
assets which is not consummated pursuant to an arms length transaction, (ii)
enter into any contract, agreement or transaction (including any transfer or
sale of Intellectual Property Rights) with any officer, director, stockholder or
affiliate of the Company or a Subsidiary other than transactions pursuant to
arms length terms (as determined in the sole discretion of the Board), (iii)
other then repayment of the Applicable Indebtedness, directly or indirectly pay
or declare any dividend or make any distribution upon, redeem, retire or
repurchase or otherwise acquire, any shares of capital stock or other securities
of the Company or a Subsidiary, or (iv) materially change the Company’s line of
business as currently conducted.
5. Other
Agreements of the Parties.
(a) Transfer
Restrictions.
(i) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an affiliate of a Purchaser, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this
Agreement.
10
(ii) The
Purchasers agree to the imprinting, so long as is required by this Section 5(a),
of a legend on any of the Securities in the following form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
(b) Removal of Legend.
Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4(a) hereof): (i) while a
registration statement covering the resale of such security is effective under
the Securities Act, or (ii) following any sale of such Underlying Shares
pursuant to Rule 144, or (iii) if such Underlying Shares are eligible for sale
under Rule 144, without the requirement for the Company to be in compliance with
the current public information required under Rule 144 as to such Underlying
Shares and without volume or manner-of-sale restrictions, or (iv) if such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal opinion to the
Company’s transfer agent promptly if required by the Company’s transfer agent to
effect the removal of the legend hereunder. If all or any portion of
a Note or Warrant is converted or exercised (as applicable) at a time when there
is an effective registration statement to cover the resale of the Underlying
Shares, or if such Underlying Shares may be sold under Rule 144, without the
requirement for the Company to be in compliance with the current public
information required under Rule 144 as to such Underlying Shares and without
volume or manner-of-sale restrictions, or if such legend is not otherwise
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) then
such Underlying Shares shall be issued free of all legends. The
Company agrees that at such time as such legend is no longer required under this
Section 4(b), it will, no later than three trading days following the delivery
by a Purchaser to the Company or the Company’s transfer agent of a certificate
representing Underlying Shares, as applicable, issued with a restrictive legend
(such third trading day, the "Legend Removal Date"), deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is free
from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Company’s transfer agent
that enlarge the restrictions on transfer set forth in this
Section.
11
(c) Compliance with Securities
Act. Each Purchaser, severally and not jointly with the other
Purchasers, agrees that such Purchaser will sell any Securities pursuant to
either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom, and that
if Securities are sold pursuant to a registration statement, they will be sold
in compliance with the plan of distribution set forth therein, and acknowledges
that the removal of the restrictive legend from certificates representing
Securities as set forth in Section 4(b) is predicated upon the Company's
reliance upon this understanding.
(d) Furnishing of
Information. Until the earliest of the time that no Purchaser
owns Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule
144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.
(e) Disclosure;
Publicity. No Purchaser shall issue any other press release or
other public disclosure with respect to the transactions contemplated hereby,
and neither the Company nor any Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company.
(f) Reservation of
Securities. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may then be required to fulfill its obligations in
full under the Transaction Documents. If, on any date, the
number of authorized but unissued (and otherwise unreserved) shares of Common
Stock is less than the number of Underlying Shares issuable upon the conversion
and exercise of all Securities outstanding on such date, then the Board of
Directors shall use commercially reasonable efforts to amend the Company's
certificate or articles of incorporation to sufficiently increase the number of
authorized but unissued shares of Common Stock.
12
(g) Form D and Blue
Sky. If required, Company shall file a Form D with respect to the
issuance of the Notes and Warrants (or the issuance of the Underlying Shares) as
required under Regulation D under the Securities Act and, upon written
request, provide a copy thereof to Purchasers promptly after such filing. The
Company shall take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for or to qualify the Notes and
Warrants for sale to Purchasers pursuant to the terms hereof (or the Underlying
Shares upon conversion of this Notes or exercise of the Warrants) under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of any such action so taken to Purchasers promptly after
such filing. However, the Company shall not be required to execute
any general consent to service of process in order to obtain such blue sky
clearance, except in a jurisdiction where the Company is already subject to such
process.
(h) Guarantee. Each
of the Subsidiaries jointly and severally hereby irrevocably, absolutely and
unconditionally guarantees to the Purchasers, the full performance of the
Company’s obligations hereunder and punctual payment by the Company of all
amounts when due under the terms of the Transaction Documents. Each such
guarantee is a guarantee of performance, and not merely a guaranty of payment,
and may be enforced directly by the Purchasers and its affiliates and agents
without the necessity of first pursuing claims against the Company.
6. Piggyback
Registration Rights in Company. If, at any time, there is not
an effective registration statement covering the resale all of the Underlying
Shares, and Company shall determine to prepare and file with the Securities and
Exchange Commission (the “Commission”) a
registration statement relating to an offering for its own account or the
account of others under the Securities Act, of any of its equity securities
(other than on Form S-4 or Form S-8 (each
as promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock option
or other employee benefit plans), then Company shall send to Purchasers a
written notice of such determination and, if within ten (10) days after receipt
by Purchasers of such notice, Company shall receive a request in writing from
Purchasers, Company shall include in such registration statement all or any part
of such Registrable Securities holders requests to be registered at no cost to
Holders (other than underwriting discounts, fees
and commissions). Holders (or their designee(s)) shall also be
provided with such other rights, and Company shall have such obligations, as
customarily accompany investor piggyback registration rights, including, without
limitation, the right of Holders to customary indemnification by Company,
Company’s obligation to prepare and file with the Commission such amendments and
supplements to such registration statement as may be necessary to keep such
registration statement effective until the disposition of all securities covered
by such registration statement, the obligation of Company to register and
qualify the securities covered by such registration statement under applicable
state securities and blue sky laws, the obligation of Company to cause the
securities covered by such registration statement to be listed or quoted on the
Trading Market on which Company’s securities are then listed or quoted and the
obligation of Company to cause to be provided customary legal opinions and
comfort letters of its independent certified accountants if requested in
connection with a sale pursuant to such registration statement). Notwithstanding the foregoing, if a
registration involves an underwritten offering, and the lead managing
underwriter shall advise Company that the amount of securities to be included in
the offering exceeds the amount which can be sold in the offering, the number of
securities owned by Holders to be included in the offering shall be eliminated
or reduced as required by the managing underwriter.
13
7. Miscellaneous.
(a) Successors
and Assigns. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(b) Governing
Law. This Agreement
and all acts and transactions pursuant hereto and the rights and obligations of
the parties hereto shall be governed, construed and interpreted in accordance
with the laws of the State of Florida, without giving effect to principles of
conflicts of law. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in Palm Beach County,
Florida. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in Palm Beach County,
Florida for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper or is an inconvenient
venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by
law. If either party shall commence an action or proceeding to
enforce any provisions of the Transaction Documents, then the prevailing party
in such action or proceeding shall be reimbursed by the other party for its
reasonable attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.
(c) Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument.
(d) Titles
and Subtitles. The titles and
subtitles used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement.
(e) Notices. Any notice
required or permitted by this Agreement shall be in writing and shall be deemed
sufficient upon receipt, when delivered personally or by courier, overnight
delivery service, or 48 hours after being deposited in the U.S. mail as
certified or registered mail with postage prepaid and return receipt requested,
if such notice is addressed to the party to be notified at such party’s address
as set forth below or as subsequently modified by written notice.
14
(f) Replacement
of Securities. If any certificate or instrument evidencing any Securities
is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof (in the
case of mutilation), or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs (including customary indemnity) associated with the issuance
of such replacement Securities.
(g) Amendments
and Waivers. Any term of this
Agreement may be amended or waived only with the written consent of the Company
and the holders of a majority of the outstanding principal amount of the Notes.
Any amendment or waiver effected in accordance with this Section 7(g) shall
be binding upon each Holder and each transferee of the Securities, each future
holder of all such Securities, and the Company.
(h) Severability. If one or more
provisions of this Agreement are held to be unenforceable
under applicable law, the parties agree to renegotiate such provision in good
faith, in order to maintain the economic position enjoyed by each party as close
as possible to that under the provision rendered unenforceable. In
the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (i) such provision shall be excluded
from this Agreement, (ii) the balance of the Agreement shall be interpreted
as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(i) Entire
Agreement. This Agreement,
and the documents referred to herein constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements existing between the parties hereto are expressly
canceled.
(j) Survival
of Representations, Warranties and Covenants. The representations and
warranties contained in Sections 2 hereof shall survive until such time as the
later of: (i) the date on which all the Notes have been converted or satisfied
and (ii) the date on which all the Warrants have been exercised in full or
expired.
(k) Exculpation
Among Purchasers. Each Holder
acknowledges that it is not relying upon any person, firm or corporation, other
than the Company and its officers and directors, in making its investment or
decision to invest in the Company. Each Holder agrees that no Holder
nor the respective controlling persons, officers, directors, partners, agents,
or employees of any Holder shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Securities.
[Signature
Pages Follow]
15
The
parties have executed this Secured Convertible Note and Warrant Purchase Agreement as of
the date first written above.
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COMPANY:
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▇▇▇▇▇.▇▇▇
GROUP, INC.
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By:
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Name:
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Title:
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Address:
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Number:
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With
respect to Section 5(h) hereof,
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▇▇▇▇▇.▇▇▇
Holdings, Inc.
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By:
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Name:
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Title:
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| ▇▇▇▇▇.▇▇▇, Inc. | |||
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By:
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Name:
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Title:
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By:
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Name:
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SIGNATURE
PAGE TO SECURED CONVERTIBLE NOTE AND WARRANT
PURCHASE
AGREEMENT
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PURCHASERS:
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(Purchaser)
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By:
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Name:
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(print)
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Title:
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Address:
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Exhibits
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Exhibit
A
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Schedule
of Purchasers
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Exhibit
B
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Form
of Secured Convertible Promissory Note
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Exhibit
C
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Form
of Common Stock Warrant
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Exhibit
D
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Form
of Security Agreement
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DISCLOSURE
SCHEDULE TO THE SECURITIES PURCHASE AGREEMENT DATED
AS
OF SEPTEMBER 24, 2008 AMONG ▇▇▇▇▇.▇▇▇ GROUP, INC. AND THE
PURCHASERS
IDENTIFIED THEREIN
The
inclusion of any information on Schedules contained herein (the “Disclosure
Schedules”) to the Securities Purchase Agreement (the “Agreement”) shall not
be deemed to be an admission or acknowledgment by ▇▇▇▇▇.▇▇▇ Group, Inc. or its
subsidiaries (collectively, the “Company”) that such
information is material to, or outside the ordinary course of business of, the
Company. Nothing herein constitutes an admission of liability or
obligation of the Company or an admission against the Company’s
interest. Any information disclosed in any single schedule of the
Disclosure Schedules shall be deemed disclosed in all schedules attached
hereto. All capitalized terms used and not otherwise defined herein
shall have the meanings ascribed thereto in the Purchase Agreement.
Schedule 1(a) Converted
Indebtedness and Converting Holders.
The
entire $250,000 unsecured promissory note payable to ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, one
of the Company's directors, originating from a total of $250,000 in cash
received in January and February of 2008, bearing interest at 10% per annum,
principal and accrued interest is due at maturity on December 31,
2008. The accumulated interest due under this Note as of the Initial
Closing is $15,486.00.
The
entire $950,000 secured promissory note payable to ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, one of
the Company's directors, originating from $400,000 in cash received in April of
2008, bearing interest at 9% per annum, principal and accrued interest is due at
maturity on April 30, 2009, secured by the Company's ▇▇▇▇▇.▇▇▇ domain
name. The accumulated interest due under this Note as of the Initial
Closing is $21,350.00.
$200,000
of the principal amount (and the accumulated unpaid interest associated
therewith) of the $600,000 secured promissory note (the “Valhalla Note”) payable
to Valhalla Investment Partners, an investment fund co-managed by ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, one of the Company's directors, bearing interest at 9% per annum,
principal and accrued interest is due at maturity on April 30, 2009, secured by
the Company's ▇▇▇▇▇.▇▇▇ domain name. The accumulated interest due
under the $200,000 portion of the Note as of the Initial Closing is
$3,800.00.
Schedule 1(i) Applicable
Indebtedness
The
remaining $400,000 of the principal amount (and the accumulated unpaid
indebtedness associated therewith) of the Valhalla Note.
The
entire $250,000 unsecured promissory note payable to ▇▇▇▇ ▇▇▇▇▇ III, one of the
Company's directors, originating from a total of $250,000 in cash received in
January and February of 2008, bearing interest at 10% per annum, principal and
accrued interest is due at maturity on December 31, 2008.
Schedule 2(a)
Subsidiaries
▇▇▇▇▇.▇▇▇
Holdings, Inc., a Delaware corporation
Insight
Capital Management, LLC, a Delaware limited liability corporation
▇▇▇▇▇.▇▇▇,
Inc., a Delaware corporation.
▇▇▇▇▇.▇▇▇,
LLC, a Delaware limited liability corporation
Schedule 2(i)
Litigation
On
February 21, 2008, a complaint was filed against the Company in the Superior
Court of New Jersey by Z6 Solutions, Inc. (“Z6”) under an alleged breach of
contract, asserting a claim for a sum of $50,000 for damages plus interest and
all costs including attorney’s fees. The Company believes the claim is without
merit and plans to defend the case accordingly. The Company has filed
a countersuit against Z6 seeking damages against Z6 arising from the Company’s
belief that Z6’s breached its obligations to the Company and violated the New
Jersey Computer Related Offense Act.
On
September 2, 2008, a complaint was filed against the Company and its
subsidiaries in the Circuit Court of the 15th Circuit
in and for Palm Beach County, Florida by ▇▇▇▇▇▇▇ ▇▇▇▇, under an alleged breach
of contract arising from the Company’s termination of ▇▇. ▇▇▇▇’ Employment
Agreement with the Company. In connection with such claim, ▇▇. ▇▇▇▇
has also threatened to file a complaint with the Equal
Employment Opportunity Commission and the Florida Department of
Labor. The Company
believes the claim is without merit and plans to defend the claim
accordingly.
Schedule 2(q) Related Party
Transactions
The
Converted Indebtedness
The
Applicable Indebtedness
Schedule 2(r) Registration
Rights Agreements
Registration
Rights Agreement, dated as of October 19, 2007, by and among the Company and the
purchasers of Common Stock set forth therein.
Registration
Rights Agreement, dated as of December 21, 2007, by and among the Company and
certain persons who were stockholders of IPOR Russia, a company which
consummated a reverse merger with the Company on December 21, 2007.
A
registration statement is currently in effect covering all shares required to be
registered under the foregoing Registration Rights Agreements.