NOTE AND WARRANT PURCHASE AGREEMENT BETWEEN GLOBAL REALTY DEVELOPMENT CORP., a Delaware Corp. AND PURCHASERS As of July [ ], 2007
Exhibit
10.2
BETWEEN
GLOBAL
REALTY DEVELOPMENT CORP., a Delaware Corp.
AND
PURCHASERS
As
of July [ ], 2007
1
THIS
NOTE AND WARRANT PURCHASE AGREEMENT (this
“Agreement”), is dated as of July __, 2007, by and among Global
Realty Development Corp., a Delaware corporation (the
“Company”), and the Purchasers identified on the signature page
hereto (each a “Purchaser” and collectively
“Purchasers”).
R
E C I T A L S
WHEREAS,
the Company and the Purchasers are executing and delivering this Agreement
in
reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2), Section 4(6) and/or Regulation D
(“Regulation D”) as promulgated by the United States Securities
and Exchange Commission (the “SEC”) under the Securities Act of
1933, as amended (the “1933 Act”, collectively the
“Offering Exemption”);
WHEREAS,
the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell (the “Loan”)
to the Purchasers, as provided herein, and the Purchasers, in the aggregate,
shall purchase on a “best-efforts” no minimum basis, up to $6,000,000 in
Offering Units, consisting of 12% Senior Promissory Notes (the
“Notes”) and the Initial Warrants and Additional Warrant
described below (the “Offering Units”). The Notes shall be due and
payable one hundred and eighty (180) days from the date of issuance (the
“Original Maturity Date”) unless extended by the Company for up
to an additional one hundred and eighty (180) days (the “Extended
Maturity Date”). The Notes shall be in the form attached
hereto as Exhibit A. Warrants to purchase an aggregate of up
to 24,000,000 shares of common stock (“Common Stock”) of the
Company (consisting of the Initial Warrants and the Additional Warrant, as
defined below) will be issued by the Company if the full $6,000,000 Loan is
completed. The Initial Warrants are being issued on the basis of
warrants to purchase three (3) shares of Common Stock for every $1.00 of Notes
issued by the Company (the “Initial Warrants”). In
addition to the Initial Warrants, each Offering Unit includes an additional
warrant (the “Additional Warrant”) to purchase one (1) share of
Common Stock for every $1.00 of Notes issued by the Company. The
Additional Warrant is identical in all terms to the Initial Warrants (together,
the “Warrants”), except that the Additional Warrant is
contingent upon the occurrence of certain events and, in the absence of such
events, will never become exercisable or delivered to the
Purchasers. The Warrants shall be in the form attached hereto as
Exhibit B. The shares underlying the Warrants shall have
certain rights to registration as set forth in the Registration Rights Agreement
in the form attached hereto as Exhibit C (the “Registration Rights
Agreement”). Management shall enter into an agreement restricting
sale of shares of Common Stock in the form attached hereto as Exhibit D
(the “Lock Up Agreement”). The Company shall grant a continuing
security interest in certain Beach Boys memorabilia pursuant to a Pledge and
Security Agreement in the form attached hereto as Exhibit E (the
“Security Agreement”). In connection with the Security Agreement, the
Purchasers shall appoint a Collateral Agent pursuant to a Collateral Agent
Agreement in the form attached hereto as Exhibit F (the “Collateral Agent
Agreement”). The Additional Warrants shall be escrowed with an escrow
agent which shall be ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP (the “Escrow Agent”) pursuant to
an escrow agreement between the Escrow Agent, the Company and the Purchasers
(the “Escrow Agreement”) in the form attached hereto as Exhibit
G. This Agreement, the Notes, the Warrants, the Registration
Rights Agreement the Lock Up Agreement, the Security Agreement, the Collateral
Agent Agreement, and the Escrow Agreeement are referred to herein as the
“Transaction Documents.” Capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth
in
the Transaction Documents. The Notes, Warrants, and Warrant Shares
are collectively referred to herein as the
“Securities;” and
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WHEREAS,
pursuant to the Term Sheet dated [February 15, 2007], ▇▇▇▇▇▇▇ Capital (“HC”)
shall act as selling agent for the Offering Units and (i) receive a warrant
to
purchase shares of Common Stock of the Company equal to 7% of the Warrant Shares
underlying the Initial Warrants included in the Offering Units issued in
connection with the Loan up to an aggregate of 1,260,000 shares of Common Stock
if the entire Loan is completed (the “Initial Broker Warrant”); (ii) subject to
removal of the contingencies and delivery of the Additional Warrant to
Purchasers hereunder, receive a warrant to purchase shares of Common Stock
of
the Company equal to 7% of the Warrant Shares underlying the Additional Warrant
up to an aggregate of 420,000 shares of Common Stock if the entire Loan is
completed (the “Additional Broker Warrant”); (iii) receive a cash fee
equal to 7% of the principal amount of Notes; (iii) receive a cash fee at the
time of exercise equal to 7% of the exercise price of the Warrants, payable
upon
exercise of such Warrants; and (iv) be reimbursed its reasonable out-of-pocket
expenses including legal fees and disbursements not to exceed
$15,000. Upon closing of this offering, HC shall serve as financial
advisor to the Company for a period of 12 months at a cost of $15,000 per
month.
NOW,
THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Purchasers hereby
agree as follows:
1. Purchase
and Sale of Notes and Warrants. Upon the terms and subject to the
satisfaction (or waiver) of the terms and conditions of this Agreement, the
Company agrees to sell and each Purchaser hereby irrevocably agrees to purchase
the full amount of Offering Units designated on the signature page hereto
executed by each Purchaser for the Purchase Price (as defined below) indicated
on the signature page hereto. The Purchase Price for the Offering
Units purchased by each Purchaser shall equal the aggregate principal amount
of
the Notes being purchased by such Purchaser (the “Purchase
Price”) .
2. Escrow
Arrangements; Form of Payment. Upon the execution of this
Agreement, each Purchaser agrees to make the deliveries required of such
Purchaser as set forth in this Agreement and the Company agrees to make the
deliveries required of the Company as set forth in this
Agreement. Each Purchaser shall send the subscription (“the
Subscription Amount”) either by wire transfer or by check in
accordance with the following instructions:
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Wire Funds
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Wire
the funds to Global Realty Development Corp. to the following
account:
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Tel:
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______________________ | ||
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Aba
No.:
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______________________
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Acct.
No.:
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______________________
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| Acct. Name: | ______________________ | ||
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Check
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Make
your check payable to “GLOBAL REALTY DEVELOPMENT CORP.”
(Put Account No. _______________ on check)
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3. Securities.
(a) Notes. The
Company is offering up to $6,000,000 principal amount of senior promissory
Notes. Interest on the Notes shall accrue at the rate of 12% per
annum and be payable in cash monthly. The Maturity Date of the Notes
shall be one hundred and eighty (180) days from the date of issuance unless
extended by the Company for up to an additional one hundred and eighty (180)
days. In the event the Company extends the Maturity Date, interest on
the Notes shall accrue at the rate of 16% per annum from the original Maturity
Date until paid.
(b) Warrant
Exercise Period and Price. Each Warrant may be exercised to
purchase three (3) shares of Common Stock (“Warrant Shares”) for every $1.00 of
Notes issued at an Exercise Price per Warrant Share equal to $0.45 per
share. The Warrants shall be exercisable commencing upon issuance for
a five (5) year period following the date of this Agreement.
4. Closing;
Closing Conditions
4.1 Closing. There
shall be one (1) or more closings (the “Closing”) of the
purchase and sale of the Offering Units. The Purchasers shall
purchase, severally and not jointly, and the Company shall sell and issue,
in
the aggregate, up to $6,000,000 principal amount of the Offering
Units. Each Purchaser shall purchase from the Company, and the
Company shall issue and sell to each Purchaser, such principal amount of Notes
equal to such Purchaser’s Purchase Price. The Closing will be deemed
to occur at the offices of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇▇▇▇ Plaza, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn:
▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq., or such other time and/or location as the parties shall
mutually agree when (A) this Agreement and the other Transaction Documents
(as
defined in the recitals above) have been executed and delivered by the Company
and, to the extent applicable, by each Purchaser, (B) each of the conditions
to
the Closing described in Section 4.2 and Section 4.3 hereof has been
satisfied or waived by the Company or each Purchaser, as appropriate, and (C)
each Purchaser shall have delivered the Purchase Price payable by it to the
Company by wire transfer of immediately available funds against physical
delivery of duly executed certificates representing the Notes and Warrants
being
purchased by such Purchaser. The date on which the Closing occurs is
referred to herein as the “Closing Date”.
4
4.2 Closing
Conditions. Each Purchaser’s obligations to effect the Closing,
including without limitation its obligation to purchase the Notes and Warrants
at the Closing, are conditioned upon the fulfillment (or waiver by such
Purchaser in its sole and absolute discretion) of each of the following events
as of the Closing Date, and the Company shall use commercially reasonably
efforts to cause each of such conditions to be satisfied:
(a) At
Closing, the Company shall deliver or cause to be delivered to each
Purchaser:
(i) a
copy of this Agreement and the Registration Rights Agreement duly executed
by
the Company;
(ii) a
Note, duly executed by the Company, evidencing a principal amount equal to
such
Purchaser’s Purchase Price at Closing registered in the name of such
Purchaser;
(iii) an
Initial Warrant, each duly executed by the Company, registered in the name
of
such Purchaser, pursuant to which such Purchaser shall have the right to acquire
up to three (3) shares of Common Stock for every $1.00 of the Purchaser’s
Purchase Price;
(iv) an
Additional Warrant, each duly executed by the Company, registered in the name
of
such Purchaser, pursuant to which such Purchaser shall have the right to acquire
up to one (1) share of Common Stock for every $1.00 of the Purchaser’s Purchaser
Price, which such Additional Warrant shall be delivered to the Escrow Agent,
and
not to the Purchaser; and
(v) a
Lock Up Agreement, duly executed by management of the Company.
(b) the
representations and warranties of the Company set forth in this Agreement and
in
the other Transaction Documents shall be true and correct in all material
respects as of the Closing Date as if made on such date (except that to the
extent that any such representation or warranty relates to a particular date,
in
which case such representation or warranty shall be true and correct in all
material respects as of that particular date);
(c) the
Company shall have complied with or performed in all material respects all
of
the agreements, obligations and conditions set forth in this Agreement or the
other Transaction Documents that are required to be complied with or performed
by the Company on or before such date;
(d) the
Common Stock shall be quoted on the OTC Bulletin Board maintained by the NASD
or
any National Securities Exchange and from the date hereof to the Closing Date,
trading in the Common Stock shall not have been suspended by the Commission
and,
at any time prior to Closing, trading in securities generally as reported by
Bloomberg Financial Markets shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by such service, or on any Trading Market, nor shall a banking moratorium have
been declared either by the United States or New York State
authorities;
5
(e) the
Company shall have authorized and reserved for issuance not less than the sum
of
one hundred percent (100%) of the number of Warrant Shares issuable upon
exercise of all of the Warrants issuable at the Closing, without regard to
any
limitation on such conversion or exercise that may otherwise exist;
(f) there
shall be no injunction, restraining order or decree of any nature of any court
or government authority of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the transactions contemplated hereby
or by the other Transaction Agreements.
4.3 Conditions
to Company’s Obligations at the Closing. The Company’s
obligations to effect the Closing with each Purchaser are conditioned upon
the
fulfillment (or waiver by the Company in its sole and absolute discretion)
of
each of the following events as of the Closing Date:
(a) At
Closing each Purchaser shall deliver or cause to be delivered to the Company
the
following:
(i) this
Agreement and the Registration Rights Agreement, duly executed by such
Purchaser;
(ii) such
Purchaser’s Subscription Amount by wire transfer or check to escrow pursuant to
the attached wiring instructions provided to the Purchasers by the Company;
and
(iii) an
executed and properly completed copy of the appropriate Confidential Purchaser
Questionnaire containing information reasonably acceptable to the
Company.
(b) the
representations and warranties of such Purchaser set forth in this Agreement
and
in the other Transaction Documents shall be true and correct in all material
respects as of such date as if made on such date (except that to the extent
that
any such representation or warranty relates to a particular date, in which
case
such representation or warranty shall be true and correct in all material
respects as of that particular date);
(c) such
Purchaser shall have complied with or performed all of the agreements,
obligations and conditions set forth in this Agreement and in the other
Transaction Documents that are required to be complied with or performed by
such
Purchaser on or before the Closing Date; and
(d) there
shall be no injunction, restraining order or decree of any nature of any court
or government authority of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the transactions contemplated hereby
or by the other Transaction Documents.
6
5. Purchaser’s
Representations and Warranties. Each Purchaser hereby represents
and warrants as of the date hereof and as of the Closing, to and agrees with
the
Company as to such Purchaser and no other Purchaser that:
(a) Information
on Company. The Purchaser has been furnished, prior to the
Closing Date of this Agreement, with information regarding the business,
operations and financial condition of the Company, including without limitation,
the Company’s Form 10-KSB for the year ended December 31, 2006, as amended, and
filed with the Securities and Exchange Commission (the
“Commission”) together with all filed Forms 10-QSB, 8-K, and
any amendments thereto, filed subsequent to the Form 10-KSB, including any
exhibits filed with such Forms 10-QSB, and/or 8-K, and filings made with the
Commission available at the ▇▇▇▇▇ website (hereinafter referred to collectively
as the “Reports”). In addition, the Purchaser has
received such other information concerning the Company’s operations, financial
condition and other matters as the Purchaser has requested in writing (such
other information is collectively, the “Other Written
Information”), and considered all factors the Purchaser deems material
in deciding on the advisability of investing in the Securities. The
Company has, prior to the Closing Date hereof, granted to such Purchaser the
opportunity to ask questions of and receive satisfactory answers from
representatives of the Company, its officers, directors, employees and agents
concerning the Company and materials relating to the terms and conditions of
the
purchase and sale of the Securities hereunder, and based thereon believes it
can
make an informed decision with respect to its investment in the
Securities. Neither such information nor any other investigation
conducted by such Purchaser or its representatives shall modify, amend or
otherwise affect such Purchaser’s right to rely on the Company’s representations
and warranties contained in this Agreement.
(b) Accredited
Investor. The Purchaser is, and will be at the time of the
Closing, an “accredited investor” as defined in Rule 501(a) of Regulation D
promulgated under the ▇▇▇▇ ▇▇▇. Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Securities Exchange Act
of
1934, as amended (the “1934 Act”); is experienced in
investments and business matters, has made investments of a speculative nature;
understands that an investment in the Securities involves a high degree of
risk,
and, with its representatives, has such knowledge and experience in financial,
tax and other business matters as to enable the Purchaser to utilize the
information made available by the Company to evaluate the merits and risks
of
and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Purchaser
has the authority and is duly and legally qualified to purchase and own the
Securities. The Purchaser is able to bear the risk of such investment
for an indefinite period and to afford a complete loss thereof. The
information set forth on the signature page hereto regarding the Purchaser
is
accurate.
(c) Purchase
of Notes and Warrants. At Closing, the Purchaser will purchase
the Notes and Warrants as principal for its own account for investment only
and
not as a nominee or agent and not with a view towards or for resale in
connection with the distribution of the Securities, except pursuant to sales
that are registered under, or are exempt from the registration requirements
of,
the Securities Act; provided, however, that, in making such
representation, such Purchaser does not agree to hold the Securities for any
minimum or specific term and reserves the right to sell, transfer or otherwise
dispose of the Securities at any time in accordance with the provisions of
this
Agreement and with Federal and state securities laws applicable to such sale,
transfer or disposition.
7
(d) Compliance
with Securities Act. The Purchaser understands and agrees that
the Securities are “restricted securities” and have not been registered under
the 1933 Act or any applicable state securities laws, by reason of their
issuance in a transaction that does not require registration under the 1933
Act
(based in part on the accuracy of the representations and warranties of
Purchaser contained herein), and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or any
applicable state securities laws or is exempt from such
registration.
(e) Note
Legend. Such Purchaser understands that the certificates
representing the Notes may bear at issuance the following or similar
legend:
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“THE
SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO GLOBAL REALTY DEVELOPMENT CORP. THAT SUCH REGISTRATION
IS
NOT REQUIRED.”
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(f) Warrants
Legend. Such Purchaser understands that the certificates
representing the Warrants may bear at issuance the following or similar
legend:
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“THIS
WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO
THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE STATE SECURITIES LAW
OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO GLOBAL REALTY DEVELOPMENT
CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.”
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(g) Communication
of Offer. The offer to sell the Securities was directly
communicated to the Purchaser by the Company. At no time was the
Purchaser presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising, or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
8
(h) Organization;
Authority. If an entity, such Purchaser is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its
organization with full right, corporate or partnership power and authority
to
enter into and to consummate the transactions contemplated by the Offering
and
otherwise to carry out its obligations thereunder.
(i) Authority;
Enforceability. This Agreement and other agreements delivered
together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by the Purchaser and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of
general applicability relating to or affecting creditors’ rights generally and
to general principles of equity; and Purchaser has full corporate power and
authority necessary to enter into this Agreement and such other agreements
and
to perform its obligations hereunder and under all other agreements entered
into
by the Purchaser relating hereto.
(j) Correctness
of Representations. Such Purchaser understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of federal and state securities laws and
that
the Company is relying upon the truth and accuracy of the representations and
warranties of such Purchaser set forth in this Section 5 in order to
determine the availability of such exemptions and the eligibility of such
Investor to acquire the Securities. Each Purchaser represents that
the foregoing representations and warranties are true and correct as of the
date
hereof and, unless a Purchaser otherwise notifies the Company prior to the
Closing, shall be true and correct as of Closing. The foregoing
representations and warranties shall survive the Closing Date for a period
of
three (3) years.
(k) No
Tax or Legal Advice. Such Purchaser understands that nothing in
this Agreement, any other agreement or any other materials presented to such
Purchaser in connection with the purchase and sale of the Securities constitutes
legal, tax or investment advice. Such Purchaser has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of
Units. Circular 230
Disclosure: Pursuant to U.S. Treasury Department
Regulations, we are required to advise you that, unless
otherwise expressly indicated, any federal tax advice contained in this
Agreement, is not intended or written to be used, and may not be used, for
the
purpose of (i) avoiding tax-related penalties under the Internal Revenue Code
or
(ii) promoting, marketing or recommending to another party any tax-related
matters addressed herein.
6. Company
Representations and Warranties. The Company represents and
warrants to and agrees with each Purchaser as follows and acknowledges that
such
Purchaser is relying on the representations, acknowledgments and agreements
made
by the Company in this Article 6 and elsewhere in this Agreement in making
investing, trading and other decisions concerning the Company’s
securities:
9
(a) Due
Incorporation. The Company is duly organized, validly existing
and in good standing under the laws of its state of incorporation and has the
requisite corporate power to own its properties and to carry on its business
as
now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, where the failure to be so qualified or in good
standing, as the case may be, would not have or reasonably be expected to result
in (i) a material adverse effect on the legality, validity or enforceability
of
this Agreement or any other document in connection with the Offering, (ii)
a
material adverse effect on the results of operations, assets, business or
financial condition of the Company and each Subsidiary, taken as a whole, or
(iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under this Agreement (any
of
(i), (ii) or (iii), a “Material Adverse Effect”).
(b) Outstanding
Stock. All of the issued and outstanding shares of capital stock
of the Company and each of its subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable. As of July 30,
2007, there were 94,512,410 shares of $0.001 par value Common Stock outstanding
and approximately 107,652,410 shares on a fully diluted basis. All
outstanding shares of capital stock of the Company have been validly issued,
fully paid and nonassessable and free and clear of all Liens. All
outstanding shares of capital stock of the Company were issued, sold and
delivered in full compliance with all applicable Federal and state securities
laws and the similar laws of other foreign jurisdictions as may be
applicable.
(c) Due
Execution; Enforceability. This Agreement and the Notes, Warrants
and Registration Rights Agreement and such other agreements entered into in
connection with the Offering constituting the Transaction Documents, have been
duly authorized, executed and delivered by the Company and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of
general applicability relating to or affecting creditors’ rights generally and
to general principles of equity; and the Company has full corporate power and
authority necessary to enter into this Agreement and the other Transaction
Documents and to perform its obligations hereunder and under all other
Transaction Documents entered into by the Company relating hereto.
(d) Authorization;
Consents. The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and
the
other Transaction Documents, including without limitation its obligations to
issue and sell the Notes and Warrants and to issue the Warrant Shares upon
exercise of the Warrants. All corporate action on the part of the
Company by its officers, directors and stockholders necessary for the
authorization, execution and delivery of, and the performance by the Company
of
its obligations under this Agreement and the other Transaction Documents has
been taken. No further consent, approval, authorization or order of
any court, governmental agency or body or arbitrator having jurisdiction over
the Company, or any of its affiliates, the American Stock Exchange, the NASD,
Inc., Nasdaq, the OTC Bulletin Board nor the Company’s Shareholders or Board of
Directors is required for execution of or full performance under this Agreement
and the other Transaction Document (other than such approval as may be required
under the Securities Act and applicable state securities laws in respect of
the
Registration Rights Agreement), other than if then listed on Nasdaq fifteen
(15)
days prior notification to Nasdaq of the Closing and the Company filing a
listing application with Nasdaq and all other agreements entered into by the
Company relating thereto, including, without limitation, the issuance and sale
of the Securities, and the performance of the Company’s obligations hereunder
and under all such other Transaction Documents. The Board of
Directors of the Company has determined, at a duly convened meeting or pursuant
to a unanimous written consent, that the issuance and sale of the Securities,
and the consummation of the transactions contemplated by this Agreement and
the
other Transaction Documents are in the best interests of the
Company.
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(e) No
Violation or Conflict. Neither the execution and delivery of this
Agreement nor the issuance and sale of the Securities nor the performance of
the
Company’s obligations under this Agreement and all other Transaction Documents
entered into by the Company relating thereto by the Company will:
(i) violate,
conflict with, result in a material breach of, or constitute a default (or
an
event which with the giving of notice or the lapse of time or both would be
reasonably likely to constitute a default) or gives to others any rights of
termination, amendment, acceleration or cancellation under (A) the articles
of
incorporation, charter or bylaws of the Company, (B) any decree, judgment,
order, law, treaty, rule, regulation or determination applicable to the Company
of any court, governmental agency or body, or arbitrator having jurisdiction
over the Company or any of its affiliates (including federal and state
securities laws and regulations) or over the properties or assets of the Company
or any of its affiliates, (C) the terms of any bond, debenture, note or any
other evidence of indebtedness, or any agreement, stock option or other similar
plan, indenture, lease, mortgage, deed of trust or other instrument to which
the
Company or any of its affiliates is a party, by which the Company or any of
its
affiliates is bound or affected, or to which any of the properties or assets
of
the Company or any of its affiliates is subject, or (D) the terms of any
“lock-up” or similar provision of any underwriting or similar agreement to which
the Company, or any of its affiliates is a party except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect on the
Company; or
(ii) result
in the creation or imposition of any lien, charge or encumbrance upon the
securities or any of the assets of the Company, its subsidiaries or any of
its
affiliates.
(f) The
Securities. The Notes, Warrants and Warrant Shares upon
issuance:
(i) are,
or will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and
any
applicable state securities laws;
(ii) assuming
the accuracy of each Purchaser’s representations in this Agreement, will be
issued, sold and delivered in compliance with all applicable Federal and state
securities laws;
11
(iii) have
been, or will be, duly and validly authorized and on the date of issuance,
and
upon exercise of the Warrants, the shares of Common Stock issuable thereunder
will be duly and validly issued, fully paid and nonassessable (and if registered
pursuant to the 1933 Act, and resold pursuant to an effective registration
statement will be free trading and unrestricted, provided that each Purchaser
complies with the prospectus delivery requirements of the 1933 Act and any
state
securities laws);
(iv) will
not have been issued or sold in violation of any preemptive or other similar
rights of the holders of any securities of the Company; and
(v) will
not subject the holders thereof to personal liability by reason of being such
holders.
(g) Litigation. Except
as disclosed in the Reports, there is not pending against the Company or any
Subsidiary, nor, to the best knowledge of the Company, there are no actions,
suits, proceeding inquiries, notices of violation, or investigations threatened
against the Company or any Subsidiary by or before any court, governmental
or
administrative agency or regulatory body (federal, state, county, local or
foreign), or arbitrator having jurisdiction over the Company, or any of its
affiliates. Except as disclosed in the Reports, there is no pending
or, to the best knowledge of the Company, threatened action, suit, proceeding
or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, its subsidiaries, or any of its
affiliates, which litigation or proceeding, if adversely determined could have
a
Material Adverse Effect on the Company. The Company is not a party to
or subject to the provisions of, any order, writ, injunction, judgment or decree
of any court or governmental authority which has had or would reasonably be
expected to have a Material Adverse Effect.
(h) Reporting
Company. The Company is subject to reporting obligations pursuant
to Sections 15(d) and 13 of the 1934 Act and has a class of common stock, par
value $.01, registered pursuant to Section 12(g) of the 1934
Act. Pursuant to the provisions of the 1934 Act, the Company has
filed all reports and other materials required to be filed thereunder with
the
Commission during the preceding two years, and has no outstanding SEC comments.
Each Report, as of the date of the filing thereof with the Commission, complied
in all material respects with the requirements of the Securities Act or Exchange
Act, as applicable, and the rules and regulations promulgated thereunder, and
has no outstanding SEC comments which render the existing reports
deficient. All documents required to be filed as exhibits to the
Reports have been filed as required.
(i) No
Market Manipulation. The Company has not taken, and will not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price
of
the common stock of the Company to facilitate the sale or resale of the
Securities or affect the price at which the Securities may be issued or
resold.
(j) Information
Concerning Company; Financial Statements. The Reports since
December 31, 2006, contain all material information relating to the Company
and
its operations and financial condition as of their respective dates which
information is required to be disclosed therein. Since the date
of the financial statements included in the Reports, there has been no Material
Adverse Effect in the Company’s business, financial condition or affairs not
disclosed in the Reports. The Reports since December 31, 2006 do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made. The Company has
not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission. The Company has not
altered its method of accounting or any policies or practices related
thereto. 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. The Company does not have pending before the Commission any
request for confidential treatment of information.
12
(k) SEC
Action; Stop Transfers. There has not been, and to the Company’s
best knowledge there has not been, there is not pending or contemplated, any
investigation by the Commission involving the Company. The Commission has
not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the 1933
Act
or the 1934 Act. The Securities, when issued, will be restricted
securities. The Company will not issue any stop transfer order or
other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities
laws. Except as described in this Agreement, the Company will not
issue any stop transfer or other order impeding the sale, resale or delivery
of
the Securities unless contemporaneous notice of such instruction is given to
the
Purchaser.
(l) Defaults;
Permits. The Company is not in violation of its Articles of
Incorporation or ByLaws. The Company is not (i) in default (including
the occurrence of any event that with the passage of time will become a default)
under or in violation of any other material agreement or instrument to which
it
is a party or by which it or any of its properties are bound or affected, which
default or violation would have a Material Adverse Effect on the Company, (ii)
in default with respect to any order of any court, arbitrator or governmental
body or subject to or party to any order of any court or governmental authority
arising out of any action, suit or proceeding under any statute or other law
respecting antitrust, monopoly, restraint of trade, unfair competition or
similar matters or (iii) to its knowledge in violation of any statute, rule
or
regulation of any governmental authority which violation would have a Material
Adverse Effect on the Company. The Company possesses all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct its business,
other
than where the failure to possess such certificates, authorizations or permits,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect. Neither the Company nor
any of its Subsidiaries has received any notice or otherwise become aware of
any
proceedings, inquiries or investigations relating to the revocation or
modification of any such certificate, authorization or permit.
(m) No
Integration or General Solicitation. Neither the Company, nor any
of its affiliates, nor to the Company’s knowledge, any person acting on its or
their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security that would cause the offer
of the Securities pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions. The Company or any of its affiliates
will not take any action or steps that would cause the offer of the Securities
to be integrated with other offerings if such integration would eliminate the
Offering Exemption. The Company will not conduct any offering other
than the transactions contemplated hereby that will be integrated with the
offer
or issuance of the Securities, unless otherwise advised by Nasdaq or the
Commission. Neither the Company nor its Affiliates, nor to the
Company’s knowledge, any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning
of
Regulation D) in connection with the offer or sale of the
Securities.
13
(n) Listing. The
Company’s common stock is listed for trading on the OTC Bulletin Board (“OTCBB”)
maintained by the NASD. Except for prior notices which, as of the
date hereof, have been satisfied and as provided for in Section 11(b) below,
the
Company has not received any oral or written notice that its common stock will
be delisted from the OTCBB nor that its common stock does not meet all
requirements for the continuation of such quotation and the Company satisfies
the requirements for the continued listing of its common stock on the
OTCBB. The Company has taken no action designed to, or which, to the
knowledge of the Company, may have the effect of, terminating the Company’s
reporting obligation under the Exchange Act or the removal of the Common Stock
from the OTCBB.
(o) No
Undisclosed Liabilities. The Company has no liabilities, debt or
other obligations which are material, individually or in the aggregate, since
December 31, 2006, which are not disclosed in the Reports and/or Other Written
Information (and in which case have been publicly announced), other than (i)
those incurred in the ordinary course of the Company’s businesses since December
31, 2006 and which, individually or in the aggregate, would not reasonably
be
expected to have a Material Adverse Effect on the Company’s financial
condition.
(p) No
Undisclosed Events or Circumstances. Since December 31, 2006, no
event or circumstance has occurred or exists with respect to the Company or
its
businesses, properties, operations or financial condition, that may have a
Material Adverse Effect or, under applicable law, rule or regulation, requires
public disclosure or announcement prior to the date hereof by the Company but
which has not been so publicly announced or disclosed in the
Reports.
(q) Capitalization. The
capitalization of the Company, since December 31, 2006 and as of the date
hereof, including its authorized capital stock, the number of shares issued
and
outstanding and the number of shares issuable and reserved for issuance pursuant
to the Company’s stock option plans is disclosed in the Reports.
(r) Correctness
of Representations. The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in
all
material respects. The foregoing representations and warranties shall
survive until one (1) year after the Closing Date.
14
(s) Title
to Assets. Except as disclosed in the Reports, the Company has good
and marketable title in fee simple to all real property owned by them that
is
material to the business of the Company and each Subsidiary, taken as a whole,
and good and marketable title in all personal property owned by them that is
material to the business of the Company and such Subsidiary, taken as a whole,
in each case free and clear of all liens, charges, security interests,
encumbrances, rights of first refusal, or other restrictions (collectively
“Liens”) except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and proposed
to be made of such property by the Company and each Subsidiary and Liens for
the
payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities held
under lease by the Company is held by the Company under valid, subsisting and
enforceable leases with which the Company and each Subsidiary is in material
compliance.
(u) Disclosure.
All disclosure provided to the Purchasers regarding the Company, its business
and the transactions contemplated hereby, including the Disclosure Schedules
to
this Agreement, furnished by or on behalf of the Company are true and correct
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.
(w) Intellectual
Property.
(i) The
Company and/or its Subsidiaries own, free and clear of claims or rights of
any
other Person, with full right to use, sell, license, sublicense, dispose of,
and
bring actions for infringement of, or has acquired licenses or other rights
to
use, all Intellectual Property necessary for the conduct of its business as
presently conducted (other than with respect to “off-the-shelf” software which
is generally commercially available and open source software which may be
subject to one or more “general public” licenses). All works that are
used or incorporated into the Company’s or its Subsidiaries’ services, products
or services or products actively under development and which is proprietary
to
the Company or its Subsidiaries was developed by or for the Company or its
Subsidiaries by the current or former employees, consultants or independent
contractors of the Company or its Subsidiaries or purchased by the Company
or
its Subsidiaries and are owned by the Company or its Subsidiaries, free and
clear of claims and rights of any other Person.
(ii) The
business of the Company and its Subsidiaries as presently conducted and the
production, marketing, licensing, use and servicing of any products or services
of the Company and its Subsidiaries do not, to the Company’s knowledge, infringe
or conflict with any patent, trademark, copyright, or trade secret rights of
any
third parties or any other Intellectual Property of any third
parties. Neither the Company nor any of its Subsidiaries has received
written notice from any third party asserting that any Intellectual Property
owned or licensed by the Company or its Subsidiaries, or which the Company
or
its Subsidiaries otherwise has the right to use, is invalid or unenforceable
by
the Company or its Subsidiaries, as the case may be, and, to the Company’s
knowledge, there is no valid basis for any such claim (whether or not pending
or
threatened). No claim is pending or, to the Company’s knowledge,
threatened against the Company or any of its Subsidiaries nor has the Company
or
any of its Subsidiaries received any written notice or other written claim
from
any Person asserting that any of the Company’s or its Subsidiaries’
present or contemplated activities infringe or may infringe in any material
respect any Intellectual Property of such Person, and the Company is not aware
of any infringement by any other Person of any material rights of the Company
or
any of its Subsidiaries under any Intellectual Property Rights.
15
(iii) All
unexpired and in force licenses or other agreements under which the Company
or
any of its Subsidiaries is granted Intellectual Property (excluding licenses
to
use “off-the-shelf” software utilized in the Company’s or its Subsidiaries’
internal operations and which is generally commercially available) are in full
force and effect and, to the Company’s knowledge, there is no material default
by any party thereto. The Company has no reason to believe that the
licensors under such licenses and other agreements do not have and did not
have
all requisite power and authority to grant the rights to the Intellectual
Property purported to be granted thereby. All unexpired licenses or
other agreements under which the Company or any of its Subsidiaries has granted
rights to Intellectual Property to others (including all end-user agreements)
are in full force and effect, there has been no material default by the Company
or its Subsidiaries thereunder and, to the Company’s knowledge, there is no
material default by any other party thereto.
(iv) Each
of the Company and its Subsidiaries have taken all steps required in accordance
with commercially reasonable business practice to establish and preserve its
respective ownership in its owned Intellectual Property and to keep confidential
all material technical information developed by or belonging to the Company
or
its Subsidiaries which has not been patented or copyrighted. To the
Company’s knowledge, neither the Company nor any of its Subsidiaries is making
unlawful use of any Intellectual Property of any other Person, including,
without limitation, any former employer of any past or present employees of
the
Company or any of its Subsidiaries. Current and former employees,
independent contractors or consultants of the Company and its Subsidiaries
have
executed agreements regarding confidentiality, proprietary information and
assignment of inventions and copyrights to the Company or its Subsidiaries
(as
the case may be), and neither the Company nor any of its Subsidiaries has
received written notice that any employee, consultant or independent contractor
is in violation of any agreement or in breach of any agreement or arrangement
with former or present employers relating to proprietary information or
assignment of inventions. Without limiting the foregoing: (i) the
Company and each of its Subsidiaries have taken reasonable security measures
to
guard against unauthorized disclosure or use of any of its Intellectual
Property; and (ii) the Company has no reason to believe that any Person
(including, without limitation, any former employee or consultant of the Company
or its Subsidiaries) has unauthorized possession of any of its Intellectual
Property, or any part thereof, or that any Person has obtained unauthorized
access to any of its Intellectual Property. The consummation of the
transactions contemplated by this Agreement and the other Transaction Agreements
will not materially alter or impair, individually or in the aggregate, any
of
such rights of the Company or its Subsidiaries.
(x) Foreign
Corrupt Practices. Neither the Company, nor, to the Company’s
knowledge, any director, officer, agent, employee or other person acting on
behalf of the Company or any Subsidiary, since December 31, 2006, has (i) used
any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity, (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee (including without limitation any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment), or (iii) violated any provision
of
the Foreign Corrupt Practices Act of 1977, as amended.
16
(y) Employee
Matters. There is no strike, labor dispute or union organization
activities pending or, to the knowledge of the Company, threatened between
it
and its employees (or between any of its Subsidiaries and such Subsidiary’s
employees). No employees of the Company belong to any union or
collective bargaining unit. The Company has complied in all material
respects with all applicable federal and state equal opportunity and other
laws
related to employment.
(z) Environment. To
the Company’s knowledge, neither the Company nor any of its Subsidiaries has any
current liability under any Environmental Law, nor, to the knowledge of the
Company, do any factors exist that are reasonably likely to give rise to any
such liability that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect. To the
Company’s knowledge, neither the Company nor any of its Subsidiaries has
violated any Environmental Law applicable to it now or previously in effect,
other than such violations or infringements that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect.
(aa) Investment
Company Status. The Company is not, and immediately after receipt
of the Purchase Price for the Securities issued under this Agreement will not
be, an “investment company” or an entity “controlled” by an
“investment company” within the meaning of the Investment Company Act of
1940, as amended (the “Investment Company Act”), and the
Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(bb) Taxes. Except
as disclosed in Schedule 6(bb), the Company and each of its Subsidiaries (i)
have prepared in good faith all tax returns required to be filed by it or is
on
a current extension and such returns are complete and accurate in all material
respects and (ii) have paid all taxes required to have been paid by it, except
for taxes which it reasonably disputes in good faith or the failure of which
to
pay has not had or would not reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries has any
liability with respect to accrued taxes in excess of the amounts that are
described as accrued in the most recent financial statements included in the
Reports. No stock transfer or other taxes (other than income taxes)
are required to be paid in connection with the issuance and sale of any of
the
Securities, other than such taxes for which the Company has established
appropriate reserves and intends to pay in full on or before the
Closing.
(cc) Solvency. (i)
The fair saleable value of the Company’s assets exceeds the amount that will be
required to be paid on or in respect of the Company's existing Debt as such
Debt
matures or is otherwise payable; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal
year
as now conducted and as proposed to be conducted taking into account the current
and projected capital requirements of the business conducted by the Company
and
projected capital availability; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive upon liquidation of its
assets, after taking into account all anticipated uses of such amounts, would
be
sufficient to pay all Debt when such Debt is required to be paid. The
Company has no knowledge of any facts or circumstances which lead it to believe
that it will be required to file for reorganization or liquidation under the
bankruptcy or reorganization laws of any jurisdiction, and has no present
intention to so file.
17
(dd) Transactions
with Interested Person. Except for ▇▇▇▇▇ ▇▇▇▇, no officer,
director or employee of the Company or any of its Subsidiaries is or has taken
any steps to become a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner.
(ee) No
Other Agreements. The Company has not, directly or indirectly,
entered into any agreement with or granted any right to any Purchaser relating
to the terms or conditions of the transactions contemplated by this Agreement
or
the Transaction Agreements except as expressly set forth therein.
7. Regulation
D Offering. This Offering is being made pursuant to the exemption
from the registration provisions of the 1933 Act afforded by Section 4(2) or
Section 4(6) of the 1933 Act and/or Rule 506 of Regulation D promulgated
thereunder. The Company will provide, at the Company’s expense, such
other legal opinions in the future as are reasonably necessary for the exercise
of the Warrants, and resale of the Warrant Shares.
8. Reissuance
of Securities. The Company agrees to reissue certificates
representing the Warrant Shares without the legends set forth in Sections 5(e)
and 5(f) above at such time as (a) the holder thereof is permitted to and
disposes of the Securities pursuant to Rule 144(d) and/or Rule 144(k) under
the
1933 Act in the opinion of counsel reasonably satisfactory to the Company,
or
(b) upon resale subject to an effective registration statement after the Shares
and the Warrant Shares are registered under the 1933 Act. The Company
agrees to cooperate with each Purchaser in connection with all resales pursuant
to Rule 144(d) and Rule 144(k) and provide legal opinions at the Company’s
expense necessary to allow such resales provided the Company and its counsel
receive reasonably requested written representations from each Purchaser and
selling broker, if any.
9. Broker’s
Compensation.
The
Company agrees to indemnify the Purchaser against and hold it harmless from
any
and all liabilities to any persons claiming brokerage commissions on account
of
services purported to have been rendered on behalf of the indemnifying party
in
connection with this Agreement or the transactions contemplated hereby and
arising out of such party’s actions. The Company represents that
other than ▇▇▇▇▇▇▇ Capital there are no other parties entitled to receive fees,
commissions, or similar payments in connection with the offering described
in
this Agreement.
18
10. Covenants
of the Company. The Company covenants and agrees with the
Purchasers that from the Closing Date until two (2) years from the Closing
Date
or such later date as is expressly set forth below, as follows:
(a) Stop
Orders. The Company will advise the Purchasers, promptly after it
receives notice of issuance by the Commission, any state securities commission
or any other regulatory authority of any stop order or of any order preventing
or suspending any offering of any securities of the Company, or of the
suspension of the qualification of the Common Stock of the Company for offering
or sale in any jurisdiction, or the initiation of any proceeding for any such
purpose.
(b) Listing;
Bluesky. If applicable, the Company shall use its reasonable best
efforts to promptly secure the listing of the Warrant Shares upon each national
securities exchange, or automated quotation system, if any, upon which shares
of
common stock are then listed (subject to official notice of issuance) and shall
use its reasonable best efforts to maintain such listing so long as any
Securities are outstanding. The Company shall use its reasonable best
efforts to maintain the listing of its Common Stock on the American Stock
Exchange, Nasdaq, OTC Bulletin Board, or New York Stock Exchange (whichever
of
the foregoing is at the time the principal trading exchange or market for the
Common Stock (the “Principal Market”)), and will comply in all
material respects with the Company’s reporting, filing and other obligations
under the bylaws or rules of the Principal Market, as applicable. The
Company will provide the Purchasers copies of all notices it receives notifying
the Company of the threatened and actual delisting of the Common Stock from
any
Principal Market.
(c) Market
Regulations. If required, the Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, if any, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may
be
required and permitted by applicable law, rule and regulation, for the legal
and
valid issuance of the Securities to the Purchasers and promptly provide copies
thereof to Purchaser.
(d) Reporting
Requirements. The Company will (i) cause its Common Stock to
continue to be registered under Section 12(b) or 12(g) of the 1934 Act, (ii)
comply in all respects with its reporting and filing obligations under the
1934
Act, (iii) comply with all reporting requirements that are applicable to an
issuer with a class of shares registered pursuant to Section 12(b) or 12(g)
of
the 1934 Act, as applicable, and (iv) comply with all requirements related
to
any registration statement filed pursuant to this Agreement. The
Company will not take any action or file any document (whether or not permitted
by the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said acts. Until the earlier of the resale of the
Warrant Shares by each Purchaser or at least two (2) years after the Warrants
have been exercised, the Company will use its best efforts to continue the
listing or quotation of the Common Stock on the Principal Market and will comply
in all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Principal Market.
(e) Use
of Proceeds. The Purchase Price will be used by the Company as
disclosed in Schedule 10(e).
19
(f) Reservation
of Common Stock. The Company undertakes to reserve from its
authorized but unissued common stock, at all times that Warrants remain
outstanding, a number of common shares equal to the amount of shares of Common
Stock issuable upon exercise of the Warrants.
(g) Taxes. The
Company will promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges
or
levies imposed upon the income, profits, property or business of the Company;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefore.
(h) Insurance. The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the
businesses in which the Company and each subsidiary is engaged. Neither
the Company nor any subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in
cost. The Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against
by
companies in the Company’s line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than 100%
of
the insurable value of the property insured; and the Company will maintain,
with
financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated and to the
extent available on commercially reasonable terms.
(i) Books
and Records. The Company will keep true records and books of
account in which full, true and correct entries will be made of all dealings
or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent
basis.
(j) Governmental
Authorities. The Company shall duly observe and conform in all
material respects to all valid requirements of governmental authorities relating
to the conduct of its business or to its properties or assets.
(k) Good
Standing; Stockholder Information. The Company and its Subsidiaries will
maintain its corporate existence in good standing and provide each Purchaser
with copies of all materials sent to its stockholders, in each such case at
the
same time as such materials are delivered to such stockholders.
(l) Properties;
Operations. The Company will keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time
to
time make all needful and proper repairs, renewals, replacements, additions
and
improvements thereto; and the Company will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such material provision could reasonably be expected
to have a Material Adverse Effect. The Company will further comply
with all agreements, documents and instruments binding on it or affecting its
business, including, without limitation, all material contracts, except for
instances of noncompliance that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse
Effect. The Company shall maintain in full force and effect all
rights and licenses necessary to conduct its business and to use Intellectual
Property owned or possessed by it that is reasonably necessary to the conduct
of
its business. The Company shall refrain from taking any action or
entering into any arrangement which in any way materially and adversely affects
the provisions of this Agreement or any other Transaction Document.
20
(m) Confidentiality. The
Company agrees that it will not disclose publicly or privately the identity
of
the Purchasers unless expressly agreed to in writing by a Purchaser or only
to
the extent required by law; provided, however, the Purchasers consent to being
named in the 8-K filed by the Company in connection with the sale of the
Securities.
(n) Transactions
with Affiliates. Any transaction or arrangement between the
Company or any of its Subsidiaries and any Affiliate or employee of the Company
or any of its Subsidiaries shall be effected only on an arms’ length basis and
shall be approved by the Board of Directors, including a majority of the
Company’s directors not having an interest in such
transaction. Purchasers acknowledge that the sale of 100,000,000
shares of Common Stock to ▇▇▇▇▇ ▇▇▇▇, or his affiliated investment entity,
for
$25,000,000 shall not be deemed a violation of this section.
11. Indemnification
of Purchasers. The Company will indemnify and hold each
Purchaser and its directors, managers, officers, shareholders, members,
partners, employees and agents (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as
a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or
in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder
of
the Company who is not an Affiliate of such Purchaser, with respect to any
of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach by such Purchaser of its representations, warranties
or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by such
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or
malfeasance). If any action shall be brought against any Purchaser Party
in respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing and to control any settlement of the claim; provided, however,
that the Company will not settle any claim unless it first obtains the consent
of the relevant Purchaser Parties, which consent shall not be unreasonably
withheld if such settlement (i) does not require the Purchaser Parties to make
any payment that is not indemnified under this Agreement, (ii) does not impose
any non-financial obligations on the Purchaser Parties and (iii) does not
require an acknowledgment of wrongdoing on the part of the Purchaser
Parties. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees
and expenses of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of such separate counsel,
a
material conflict on any material issue between the position of the Company
and
the position of such Purchaser Party. The Company will not be liable to
any Purchaser Party under this Agreement (i) for any settlement by an Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed (it being agreed that it shall not
be unreasonable for the Company to withhold or delay such consent if the Company
(x) has acknowledged in writing its obligation to indemnify such Purchaser
Party
with respect to such matter, (y) the Company has assumed and is actively and
in
good faith pursuing the defense of such matter as herein provided, and (z)
provided to such Purchaser Party reasonably acceptable evidence that the Company
is able to comply with its indemnification obligations hereunder); or (ii)
to
the extent, but only to the extent that a loss, claim, damage or liability
is
attributable to such Purchaser Party’s wrongful actions or omissions, or gross
negligence or to such Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by such Purchaser in this Agreement
or
in the other Transaction Documents.
21
12. Miscellaneous.
(a) Notices. All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) delivered by reputable
air courier service with charges prepaid, or (iii) transmitted by hand delivery,
email, or facsimile, addressed as set forth below or to such other address
as
such party shall have specified most recently by written notice. Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile or email,
with accurate confirmation generated by the transmitting facsimile machine,
or
confirmation of email delivery, at the address or number designated below (if
delivered on a business day during normal business hours where such notice
is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice
is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be: (i) if to the Company, to: Global
Realty Development Corp., ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇; telecopier number: ▇▇▇-▇▇▇-▇▇▇▇, with a copy by fax only to:
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇▇▇▇ Plaza, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, fax number: ▇▇▇-▇▇▇-▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇,
and (ii) if to the Purchasers, to: the address and telecopier number indicated
on the signature page hereto.
(b) Entire
Agreement; Amendment; Waivers; Assignment. This Agreement and
other Transaction Documents delivered in connection herewith represent the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by the Company and the
Purchaser or Purchasers holding a majority of the Notes, with respect to
amendments affecting the Notes, or a majority of the Warrants with respect
to
amendments affecting the Warrants, or a majority of the Warrant Shares with
respect to amendments affecting the Warrant Shares. No provision hereof may
be
waived other than by a written instrument signed by the party against whom
enforcement of any such waiver is sought, unless such waiver is approved by
a
majority of the holders entitled to amend such provision as set forth
above. Any waver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Neither the
Company nor the Purchasers have relied on any representations not contained
or
referred to in this Agreement and the documents delivered
herewith. No right or obligation of either party shall be
assigned by that party without prior notice to and the written consent of the
other party; however, each Purchaser may assign its rights and obligations
hereunder, in connection with any private sale or transfer of Notes or Warrants
in accordance with the terms hereof, as long as, as a condition precedent to
such transfer, the transferee executes an acknowledgment agreeing to be bound
by
the applicable provisions of this Agreement, in which case the term
“Purchaser” shall be deemed to refer to such transferee as though such
transferee were an original signatory hereto. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and permitted assigns of the parties.
22
(c) Execution. This
Agreement may be executed by facsimile transmission, and in counterparts, each
of which will be deemed an original.
(d) Law
Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida without regard
to
principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of Florida or in the federal courts
located in the state of Florida. Both parties and the individuals
executing this Agreement and other agreements on behalf of the Company agree
to
submit to the jurisdiction of such courts and waive trial by jury. In
the event that any provision of this Agreement or any other agreement delivered
in connection herewith is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with
such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability
of
any other provision of any agreement.
(e) Specific
Enforcement, Consent to Jurisdiction. The Company and Purchaser
acknowledge and agree that irreparable damage would occur in the event that
any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
or
cure breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity. Subject
to this Section 12(e) hereof, each of the Company and Purchaser hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim
that
it is not personally subject to the jurisdiction of such court of the State
of
Florida, that the suit, action or proceeding is brought in an inconvenient
forum
or that the venue of the suit, action or proceeding is
improper. Nothing in this Section shall affect or limit any right to
serve process in any other manner permitted by law.
23
(f) Fees
and Expenses. Each Purchaser and the Company 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 and the
Transaction Documents.
(g) Survival;
Severability. The representations, warranties, covenants and
indemnities made by the parties herein and in the other Transaction Documents
shall survive the Closing notwithstanding any due diligence investigation made
by or on behalf of the party seeking to rely thereon. In the event
that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision;
provided, that in such case the parties shall negotiate in good faith
to replace such provision with a new provision which is not illegal,
unenforceable or void, as long as such new provision does not materially change
the economic benefits of this Agreement to the parties.
(h) Independent
Nature of Purchaser’s Obligations and Rights. The obligations of
each Purchaser hereunder are several and not joint with the obligations of
the
other Purchasers hereunder, and no Purchaser shall be responsible in any way
for
the performance of the obligations of any other Purchaser
hereunder. Nothing contained herein or in any other Transaction
Agreement, and no action taken by any Purchaser pursuant hereto or thereto,
shall be deemed to constitute any Purchasers as a partnership, an association,
a
joint venture or any other kind of entity, or a “group” as described in Section
13(d) of the Exchange Act, or create a presumption that any Investors are in
any
way acting in concert with respect to such obligations or the transactions
contemplated by this Agreement. Each Purchaser has been represented
by its own separate counsel in connection with the transactions contemplated
hereby, shall be entitled to protect and enforce its rights, including without
limitation rights arising out of this Agreement or the other Transaction
Agreements, individually, and shall not be required to join any other Purchaser
as an additional party in any proceeding for such purpose.
(i) Limited
Liability. Notwithstanding anything herein to the contrary, the
Company acknowledges and agrees that the liability of a Purchaser rising
directly or indirectly, under any Transaction Agreement of any and every nature
whatsoever shall be satisfied solely out of the assets of such Purchaser, and
that no trustee, officer, other investment vehicle or any other Affiliate of
such Purchaser or any investor, shareholder or holder of shares of beneficial
interest of such a Purchaser shall be personally liable for any liabilities
of
such Purchaser.
13. Certain
Definitions. When used herein, the following terms shall have the
respective meanings indicated:
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
a
Person, as such terms are used in and construed under Rule 144.
“Business
Day” means any day other than a Saturday, a Sunday or a day on which the New
York Stock Exchange or commercial banks located in Florida are authorized or
permitted by law to close.
24
“Debt”
means, as to any Person at any time: (a) all indebtedness, liabilities and
obligations of such Person for borrowed money; (b) all indebtedness, liabilities
and obligations of such Person to pay the deferred purchase price of Property
or
services, except trade accounts payable of such Person arising in the ordinary
course of business that are not past due by more than 60 days; (c) all capital
lease obligations of such Person; (d) all indebtedness, liabilities and
obligations of others guaranteed by such Person; (e) all indebtedness,
liabilities and obligations secured by a Lien existing on Property owned by
such
Person, whether or not the indebtedness, liabilities or obligations secured
thereby have been assumed by such Person or are non-recourse to such Person;
(f)
all reimbursement obligations of such Person (whether contingent or otherwise)
in respect of letters of credit, bankers’ acceptances, surety or other bonds and
similar instruments; and (g) all indebtedness, liabilities and obligations
of
such Person to redeem or retire shares of capital stock of such
Person.
“Intellectual
Property” means any U.S. or foreign patents, patent rights, patent
applications, trademarks, trade names, service marks, brand names, logos and
other trade designations (including unregistered names and marks), trademark
and
service ▇▇▇▇ registrations and applications, copyrights and copyright
registrations and applications, inventions, invention disclosures, protected
formulae, formulations, processes, methods, trade secrets, computer software,
computer programs and source codes, manufacturing research and similar technical
information, engineering know-how, customer and supplier information, assembly
and test data drawings or royalty rights.
“Lien”
means
any lien, charge,
encumbrance, security interest, right of first refusal or other restrictions
of
any kind.
“Person”
means any individual, corporation, trust, association, company, partnership,
joint venture, limited liability company, joint stock company, Governmental
Authority or other entity.
“Senior
Securities” means (i)
any Debt issued or assumed by the Company and (ii) any securities of the Company
which by their terms have a preference over the Notes in respect of payment
of
dividends, redemption or distribution upon liquidation.
“Subsidiary”
or
“Subsidiaries”
means, with respect to the Company, TFM Group, LLC, a Delaware limited liability
company, MJD Films, Inc., a Delaware corporation, and SMS Text Media, Inc.
a
Nevada corporation. “Subsidiary” or “Subsidiaries” as used herein or
in any of the Transaction Documents expressly does not include any other
subsidiaries of the Company, including, without limitation, (i) Australian
Agricultural and Property Management Limited, (ii) No. 2 Holdings
Pty. Ltd., (iii) Victorian Land Development Pty. Ltd, and (iv)
Ausland Properties Pty Ltd. As used herein, the lower-case term
“subsidiary” or “subsidiaries”, refers to any and all subsidiaries of the
Company, without limitation, whether currently in existence or created after
the
date herein.
25
[Signatures
Page Follows]
26
SIGNATURE
PAGE TO THE NOTE AND WARRANT PURCHASE AGREEMENT
Please
acknowledge your acceptance of the foregoing Note and Warrant Purchase Agreement
by signing and returning a copy to the undersigned whereupon it shall become
a
binding agreement between us.
| A Delaware corporation | |||
|
|
By:
|
/s/ | |
| Name: ▇▇▇▇▇▇ ▇▇▇▇ | |||
| Title: Chief Executive Officer | |||
| Dated: July [ ], 2007 | |||
|
PURCHASER
|
PURCHASE
PRICE
|
WARRANTS
|
|
________________________________________
(Signature)
Name
and Address
|
27
EXHIBIT
A
FORM
OF 12% SENIOR PROMISSORY NOTE
28
EXHIBIT
B
FORM
OF WARRANT
29
EXHIBIT
C
REGISTRATION
RIGHTS AGREEMENT
30
EXHIBIT
D
LOCK
UP AGREEMENT
31
EXHIBIT
E
PLEDGE
AND SECURITY AGREEMENT
32
EXHIBIT
F
COLLATERAL
AGENT AGREEMENTEXHIBIT G
ESCROW
AGREEMENT
33
Schedule
6 (bb)
|
State
of Delaware Division of Corporations
Franchise
Tax
|
[ $57,000 ]
|
34
Schedule
10 (e)
Debt
Funding – Use Of Proceeds Schedule
Re:
▇▇▇▇▇▇▇ Fees
Escrowed
Funds
MJD
Films
TFM
Group – (Loan)
SMS
Text Media, Inc. – Acquisition
Global
– (Fees)
1st $1,000,000.00
|
1.
|
$70,000.00
– ▇▇▇▇▇▇▇ Capital Escrowed Fees = 12% per annum x 6
Months*
|
|
2.
|
$50,000.00
– MJD Films
|
|
3.
|
$300,000.00
– TFM Group (Loan)
|
|
4.
|
$530,000.00
– SMS Text Media, Inc.
(Acquisition)
|
|
5.
|
$50,000.00
– Global
|
2nd $1,000,000.00
|
1.
|
$70,000.00
– ▇▇▇▇▇▇▇ Capital Escrowed Fees = 12% per annum x 6
Months
|
|
2.
|
$300,000.00
– TFM Group (Loan)
|
|
3.
|
$580,000.00
– SMS Text Media Inc. (Acquisition)
|
|
4.
|
$10,000.00
–MJD Films
|
|
5.
|
$40,000.00
- Global
|
3rd $1,000,000.00
|
1.
|
$70,000.00
– ▇▇▇▇▇▇▇ Capital Escrowed Fees plus interest at 12% per annum (not
included in total)
|
|
2.
|
$100,000.00
– TFM Group (Loan)
|
|
3.
|
$780,000.00
– SMS Text Media, Inc. (Acquisition
)
|
|
4.
|
$10,000.00
– MJD Films
|
|
5.
|
$40,000.00
– Global
|
4th $1,000,000.00
|
1.
|
$70,000.00
– ▇▇▇▇▇▇▇ Capital Fees = 7% x
$1,000,000.00
|
|
2.
|
$60,000.00
– Escrowed Fees = 12% per annum x 6
Months
|
|
3.
|
$100,000.00
– TFM Group (Loan)
|
|
4.
|
$400,000.00
– SMS Text Media, Inc.
(Acquisition)
|
|
5.
|
$370,000.00
– Global
|
5th $1,000,000.00
|
1.
|
$70,000.00
– ▇▇▇▇▇▇▇ Capital Fees = 7% x
$1,000,000.00
|
|
2.
|
$250,000.00
– TFM Group (Loan)
|
|
3.
|
$50,000.00
– MJD Films
|
|
4.
|
$420,000.00
– SMS Text Media, Inc.
(Acquisition)
|
|
5.
|
$210,000.00
– Global
|
35
6th $1,000,000.00
|
1.
|
$70,000.00
– ▇▇▇▇▇▇▇ Capital Fees = 7% x
$1,000,000.00
|
|
2.
|
$250,000.00
– TFM Group (Loan)
|
|
3.
|
$290,000.00
– SMS Text Media , Inc .
|
|
4.
|
$290,000.00
– Global
|
|
5.
|
$100,000.00
– MJD Films
|
Totals:
|
1.
|
$420,000.00
– ▇▇▇▇▇▇▇ Capital Fees (excluding any earned
interest)
|
|
2.
|
$220,000.00
– MJD Films
|
|
3.
|
$1,300,000.00
– TFM Group (Loan)
|
| 4. | $3,000,000.00 – SMS Text Media, Inc. (Acquisition) |
|
5.
|
$1,060,000.00
– Global (Fees)
|
$6,000,000.00
*Note:
▇▇▇▇▇▇▇ Capital will permit the Company to escrow its fees on this transaction
and pay them once ▇▇▇▇▇▇▇ Capital raises three million dollars ($3,000,000).
All
warrants then due to ▇▇▇▇▇▇▇ Capital will also be issued at this time. Following
the initial $3,000,000 raised, fees will be paid to ▇▇▇▇▇▇▇ Capital within
5
business days of the Company’s receipt of funds. For convenience, ▇▇▇▇▇▇▇
Capital may permit the company to issue warrants fees less frequently to
consolidate documentation. For any reason, should the total raised by
▇▇▇▇▇▇▇ Capital be less than three million dollars ($3,000,000) and ▇▇▇▇▇▇▇
Capital, in its sole discretion, decides that further funds can not be raised,
▇▇▇▇▇▇▇ Capital may demand full payment of all fees due to it, and the escrow
agent shall pay such fees within 5 business days. Fees held by the escrow agent
shall accrue interest at 12% per annum. At any time prior to its receipt of
the
cash portion of its fees, ▇▇▇▇▇▇▇ Capital shall have the right to convert such
cash fees into Offering Units, effective the date the fees were
earned.