SEQUIAM CORPORATION SECURITIES PURCHASE AGREEMENT May 18, 2005
EXHIBIT
4.1
SEQUIAM
CORPORATION
May
18, 2005
THIS
SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered into as of
May 18, 2005, by and between Sequiam Corporation, a California corporation (the
"Company"), and ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Attorney in-Fact for the Trust Under the
Will of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ (the "Purchaser").
RECITALS
WHEREAS,
the Purchaser has previously loaned to the Company $1,350,000 pursuant to a
series of notes as more fully described on Exhibit A attached hereto (the
"Unsecured Debt");
WHEREAS,
The Company has requested and the Purchaser has agreed to advance an amount to
Laurus Master Fund Ltd ("Laurus"), to sufficient to repay the remaining debt to
Laurus in accordance with the terms of the Assignment, Assumption and Release
with Laurus, and in connection therewith, Laurus has agreed to assign to the
Purchaser all of Laurus’ rights under that certain Securities Purchase
Agreement, dated April 27, 2004, by and between the Company and Laurus, as
amended (the "Original Agreement") and such other documents executed in
connection therewith and which are more specifically described on Exhibit B
attached hereto (collectively with the Original Agreement, the "Loan
Documents"), such that the Purchaser shall stand in the place of Laurus
thereunder;
WHEREAS,
in consideration of the Purchaser agreeing to advance the funds to repay Laurus
and assume the place of Laurus under the Loan Documents, the Company has agreed
to amend and restate this Agreement and the other Loan Documents and to
consolidate the advance hereunder to Laurus with the Unsecured
Debt;
WHEREAS,
the Company has authorized the issuance to the Purchaser of an Amended, Restated
and Consolidated Senior Secured Term Note in the initial aggregate principal
amount of $3,450,000 (the "Note"),
WHEREAS,
in further consideration of the additional loan, the Company wishes to issue a
warrant to the Purchaser to purchase up to 6,000,000 shares of the Company's
Common Stock (subject to adjustment as set forth therein) in connection with
Purchaser's acceptance of the Note;
WHEREAS,
the Purchaser desires to accept delivery of the Note and purchase the Warrant
(as defined in Section 2) on the terms and conditions set forth herein;
and
WHEREAS,
the Company desires to make the Note and sell the Warrant to the Purchaser on
the terms and conditions set forth herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Agreement
to Make and Accept the Note.
Pursuant to the terms and conditions set forth in this Agreement, on the Closing
Date (as defined in Section 3), the Company agrees to make to the Purchaser, and
the Purchaser hereby agrees to accept from the Company, a Note in the initial
aggregate principal amount of $3,450,000. A form of the Note is annexed hereto
as Exhibit C. The Note will mature on the Maturity Date (as defined in the
Note).
2. Warrant. On the
Closing Date:
(a) The
Company will issue and deliver to the Purchaser a Warrant to purchase up to
6,000,000 shares of Common Stock in connection with the making of the Note (the
"Warrant") pursuant to Section 1 hereof. The Warrant must be delivered on the
Closing Date. A form of Warrant is annexed hereto as Exhibit D. All the
representations, covenants, warranties, undertakings, and indemnification, and
other rights made or granted to or for the benefit of the Purchaser by the
Company are hereby also made and granted in respect of the Warrant and shares of
the Company's Common Stock issuable upon exercise of the Warrant (the "Warrant
Shares," and collectively with the Warrant, the "Securities").
(b) The
Company shall reimburse the Purchaser for its reasonable legal fees for services
rendered to the Purchaser in preparation of this Agreement and the Related
Agreements (as hereinafter defined), and expenses incurred in connection with
the Purchaser's due diligence review of the Company and its Subsidiaries (as
defined in Section 4.2) and all related matters. Amounts required to be paid
under this Section 2(b) will be paid on the Closing Date and shall be billed at
standard rates for legal fees and for expenses incurred while performing due
diligence inquiries on the Company and its Subsidiaries.
3. Closing,
Delivery and Payment.
3.1 Closing. Subject
to the terms and conditions herein, the closing of the transactions contemplated
hereby (the "Closing"), shall take place on the date hereof, at such time or
place as the Company and Purchaser may mutually agree (such date is hereinafter
referred to as the "Closing Date").
3.2 Delivery. At the
Closing on the Closing Date, the Company will deliver to the Purchaser, among
other things, a Note in the form attached as Exhibit C representing the
aggregate principal amount of $3,450,000 and a Warrant in the form attached as
Exhibit D in the Purchaser's name representing 6,000,000 Warrant
Shares.
4. Representations
and Warranties of the Company. The
Company hereby represents and warrants to the Purchaser as follows (which
representations and warranties are supplemented by the Company's filings under
the Securities Exchange Act of 1934 (collectively, the "Exchange Act Filings"),
copies of which have been provided to the Purchaser):
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4.1 Organization,
Good Standing and Qualification. Each of
the Company and each of its Subsidiaries is a corporation, partnership or
limited liability company, as the case may be, and except for Sequiam Software,
Inc., which, although it has paid franchise taxes and timely filed applicable
tax returns as required under California law, its records have not been updated
by the applicable state authority, are duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each of the
Company and each of its Subsidiaries has the corporate power and authority to
own and operate its properties and assets, to execute and deliver (i) this
Agreement, (ii) the Note and the Warrant to be issued in connection with this
Agreement, (iii) the Amended and Restated Master Security Agreement dated as of
the date hereof between the Company, certain Subsidiaries of the Company and the
Purchaser (as amended, modified or supplemented from time to time, the "Master
Security Agreement"), (iv) the Registration Rights Agreement relating to the
Securities dated as of the date hereof between the Company and the Purchaser (as
amended, modified or supplemented from time to time, the "Registration Rights
Agreement"), (v) the Amended and Restated Subsidiary Guaranty dated as of the
date hereof made by certain Subsidiaries of the Company (as amended, modified or
supplemented from time to time, the "Subsidiary Guaranty"), (vi) the Amended and
Restated Stock Pledge Agreement dated as of the date hereof among the Company,
certain Subsidiaries of the Company and the Purchaser (as amended, modified or
supplemented from time to time, the "Stock Pledge Agreement"), (vii) the
Subordination Agreement dated as of the date hereof among ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ and the Purchaser (as amended, modified or supplemented from time
to time, the "Subordination Agreement") and (viii) all other agreements related
to this Agreement and the Note and referred to herein (the preceding clauses
(ii) through (viii), collectively, the "Related Agreements"), to make and
deliver the Note and to issue and sell the Warrant and the Warrant Shares, and
to carry out the provisions of this Agreement and the Related Agreements and to
carry on its business as presently conducted. Each of the Company and each of
its Subsidiaries, except for Sequiam Software, Inc., is duly qualified and is
authorized to do business and is in good standing as a foreign corporation,
partnership or limited liability company, as the case may be, in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so has not, or could not reasonably be
expected to have, individually or in the aggregate, a material adverse effect on
the business, assets, liabilities, condition (financial or otherwise),
properties, operations or prospects of the Company and it Subsidiaries, taken
individually and as a whole (a "Material Adverse Effect").
4.2 Subsidiaries. Each
direct and indirect Subsidiary of the Company, the direct owner of such
Subsidiary and its percentage ownership thereof, is set forth on Schedule 4.2.
For the purpose of this Agreement, a "Subsidiary" of any
person or entity means (i) a corporation or other entity whose shares of stock
or other ownership interests having ordinary voting power (other than stock or
other ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the directors of such corporation, or other
persons or entities performing similar functions for such person or entity, are
owned, directly or indirectly, by such person or entity or (ii) a corporation or
other entity in which such person or entity owns, directly or indirectly, more
than 50% of the equity interests at such time.
4.3 Capitalization;
Voting Rights.
(a) The
authorized capital stock of the Company, as of the date hereof consists of
150,000,000 shares, of which 100,000,000 are shares of Common Stock, par value
$0.001 per share, approximately 53,188,558 shares of which are issued and
outstanding; and of which 50,000,000 are shares of Preferred Stock, par value
$0.001 per share, -0- shares of which are issued and outstanding. The authorized
capital stock of each Subsidiary of the Company is set forth on Schedule
4.3.
(b) Except as
disclosed on Schedule 4.3, other than: (i) the shares reserved for issuance
under the Company's stock option plans; and (ii) shares which may be granted
pursuant to this Agreement and the Related Agreements, there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal), proxy or stockholder agreements, or arrangements or
agreements of any kind for the purchase or acquisition from the Company of any
of its securities. Except as disclosed on Schedule 4.3, and assuming that Laurus
has either assigned or terminated all of its rights under the Loan Documents,
neither the offer, issuance or sale of the Warrant, or the issuance of any of
the Warrant Shares, nor the consummation of any transaction contemplated hereby
will result in a change in the price or number of any securities of the Company
outstanding, under anti-dilution or other similar provisions contained in or
affecting any such securities.
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(c) All
issued and outstanding shares of the Company's Common Stock: (i) have been duly
authorized and validly issued and are fully paid and nonassessable; and (ii)
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities.
(d) The
rights, preferences, privileges and restrictions of the shares of the Common
Stock are as stated in the Company's Articles of Incorporation (the "Charter").
The Warrant Shares have been duly and validly reserved for issuance. When issued
in compliance with the provisions of this Agreement and the Company's Charter,
the Securities will be validly issued, fully paid and nonassessable, and will be
free of any liens or encumbrances; provided, however, that the Securities may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein or as otherwise required by such laws at the time a transfer
is proposed.
4.4 Authorization;
Binding Obligations. All
corporate, partnership or limited liability company, as the case may be, action
on the part of the Company and each of its Subsidiaries (including the
respective officers and directors) necessary for the authorization of this
Agreement and the Related Agreements, the performance of all obligations of the
Company and its Subsidiaries hereunder and under the other Related Agreements at
the Closing and, the authorization and delivery of the Note and the sale and
issuance of the Warrant has been taken or will be taken prior to the Closing.
This Agreement and the other Related Agreements, when executed and delivered and
to the extent it is a party thereto, will be valid and binding obligations of
each of the Company and each of its Subsidiaries, enforceable against each such
person in accordance with their terms, except:
(a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights;
and
(b) general
principles of equity that restrict the availability of equitable or legal
remedies.
The
issuance of the Warrant and the subsequent exercise of the Warrant for Warrant
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.
4.5 Liabilities. Neither
the Company nor any of its Subsidiaries has any contingent liabilities, except
current liabilities incurred in the ordinary course of business and liabilities
disclosed in any Exchange Act Filings.
4.6 Agreements;
Action. Except
as set forth on Schedule 4.6 or as disclosed in any Exchange Act
Filings:
(a) there are
no agreements, understandings, instruments, contracts, proposed transactions,
judgments, orders, writs or decrees to which the Company or any of its
Subsidiaries is a party or by which it is bound which may involve: (i)
obligations (contingent or otherwise) of, or payments to, the Company in excess
of $50,000 (other than obligations of, or payments to, the Company arising from
agreements entered into in the ordinary course of business); or (ii) the
transfer or license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than licenses arising from the purchase of
"off the shelf" or other standard products); or (iii) provisions restricting the
development, manufacture or distribution of the Company's products or services;
or (iv) indemnification by the Company with respect to infringements of
proprietary rights.
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(b) Since
December 31, 2004, except for Intercompany Transactions (as defined below),
neither the Company nor any of its Subsidiaries has: (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock; (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than ordinary course obligations)
individually in excess of $50,000 or, in the case of indebtedness and/or
liabilities individually less than $50,000, in excess of $100,000 in the
aggregate; (iii) made any loans or advances to any person not in excess,
individually or in the aggregate, of $100,000, other than ordinary course
advances for travel expenses; or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business. For the purposes of this Agreement, "Intercompany
Transactions" shall mean, collectively, (i) any dividends paid by any Subsidiary
which is party to the Subsidiary Guaranty, the Master Security Agreement and the
Stock Pledge Agreement (any such Subsidiary, a "Subsidiary Guarantor") to any
other Subsidiary Guarantor or the Company, (ii) any loans made by the Company or
any Subsidiary Guarantor to the Company or any Subsidiary Guarantor, (iii) any
investments made by the Company or any Subsidiary Guarantor in the Company or
any Subsidiary Guarantor and (iv) any transfer of assets by the Company or any
Subsidiary Guarantor to the Company or any Subsidiary Guarantor.
(c) For the
purposes of subsections (a) and (b) above, all indebtedness, liabilities,
agreements, understandings, instruments, contracts and proposed transactions
involving the same person or entity (including persons or entities the Company
has reason to believe are affiliated therewith) shall be aggregated for the
purpose of meeting the individual minimum dollar amounts of such
subsections.
4.7 Obligations
to Related Parties. Except
as set forth on Schedule 4.7, there are no obligations of the Company or any of
its Subsidiaries to officers, directors, stockholders or employees of the
Company or any of its Subsidiaries other than:
(a) for
payment of salary for services rendered and for bonus payments;
(b) reimbursement
for reasonable expenses incurred on behalf of the Company and its
Subsidiaries;
(c) for other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by the
Board of Directors of the Company); and
(d) obligations
listed in the Company's financial statements or disclosed in any of its Exchange
Act Filings.
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Except as
described above or set forth on Schedule 4.7, none of the officers, directors
or, to the best of the Company's knowledge, key employees or stockholders of the
Company or any members of their immediate families, are indebted to the Company,
individually or in the aggregate, in excess of $50,000 or have any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, other than passive investments in
publicly traded companies (representing less than one percent (1%) of such
company) which may compete with the Company. Except as described above, no
officer, director or stockholder, or any member of their immediate families, is,
directly or indirectly, interested in any material contract with the Company and
no agreements, understandings or proposed transactions are contemplated between
the Company and any such person. Except as set forth on Schedule 4.7, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
4.8 Changes. Since
December 31, 2004, except as disclosed in any Exchange Act Filing or in any
Schedule to this Agreement or to any of the Related Agreements, there has not
been:
(a) any
change in the business, assets, liabilities, condition (financial or otherwise),
properties, operations or prospects of the Company or any of its Subsidiaries,
which individually or in the aggregate has had, or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect;
(b) any
resignation or termination of any officer, key employee or group of employees of
the Company or any of its Subsidiaries;
(c) any
material change, except in the ordinary course of business, in the contingent
obligations of the Company or any of its Subsidiaries by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) any
damage, destruction or loss, whether or not covered by insurance, has had, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(e) any
waiver by the Company or any of its Subsidiaries of a valuable right or of a
material debt owed to it;
(f) any
direct or indirect loans made by the Company or any of its Subsidiaries to any
stockholder, employee, officer or director of the Company or any of its
Subsidiaries, other than advances made in the ordinary course of
business;
(g) any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder of the Company or any of its Subsidiaries;
(h) except
for any dividend or other distribution that consists of an Intercompany
Transaction, any declaration or payment of any dividend or other distribution of
the assets of the Company or any of its Subsidiaries;
(i) any labor
organization activity related to the Company or any of its
Subsidiaries;
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(j) any debt,
obligation or liability incurred, assumed or guaranteed by the Company or any of
its Subsidiaries, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) any sale,
assignment or transfer of any patents, trademarks, copyrights, trade secrets or
other intangible assets owned by the Company or any of its
Subsidiaries;
(l) any
change in any material agreement to which the Company or any of its Subsidiaries
is a party or by which either the Company or any of its Subsidiaries is bound
which either individually or in the aggregate has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect;
(m) any other
event or condition of any character that, either individually or in the
aggregate, has had, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect; or
(n) any
arrangement or commitment by the Company or any of its Subsidiaries to do any of
the acts described in subsection (a) through (m) above.
4.9 Title
to Properties and Assets; Liens, Etc. Except
as set forth on Schedule 4.9, each of the Company and each of its Subsidiaries
has good and marketable title to its properties and assets, and good title to
its leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than:
(a) those
resulting from taxes which have not yet become delinquent;
(b) minor
liens and encumbrances which do not materially detract from the value of the
property subject thereto or materially impair the operations of the Company or
any of its Subsidiaries; and
(c) those
that have otherwise arisen in the ordinary course of business.
All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Schedule 4.9, the Company and
its Subsidiaries are in compliance with all material terms of each lease to
which it is a party or is otherwise bound.
4.10
Intellectual
Property.
(a) Each of
the Company and each of its Subsidiaries owns or possesses sufficient legal
rights to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights and processes
necessary for its business as now conducted and to the Company’s knowledge, as
presently proposed to be conducted (the "Intellectual Property"), without any
known infringement of the rights of others. There are no outstanding options,
licenses or agreements of any kind relating to the foregoing proprietary rights,
nor is the Company or any of its Subsidiaries bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of "off
the shelf" or standard products.
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(b) Neither
the Company nor any of its Subsidiaries has received any communications alleging
that the Company or any of its Subsidiaries has violated any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity, nor is the Company or any of
its Subsidiaries aware of any basis therefor.
(c) The
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior to
their employment by the Company or any of its Subsidiaries, except for
inventions, trade secrets or proprietary information that have been rightfully
assigned to the Company or any of its Subsidiaries.
4.11 Compliance
with Other Instruments. Neither
the Company nor any of its Subsidiaries is in violation or default of (x) any
term of its Charter or Bylaws, or (y) of any provision of any indebtedness,
mortgage, indenture, contract, agreement or instrument to which it is party or
by which it is bound or of any judgment, decree, order or writ, which violation
or default, in the case of this clause (y), has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. The execution, delivery and performance of and compliance with this
Agreement and the Related Agreements to which it is a party, and the delivery of
the Note by the Company and the Securities by the Company each pursuant hereto
and thereto, will not, assuming that Laurus has either assigned or terminated
all of its rights under the Loan Documents, with or without the passage of time
or giving of notice, result in any such material violation, or be in conflict
with or constitute a default under any such term or provision, or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or any of its Subsidiaries or the
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to the Company, its business or
operations or any of its assets or properties.
4.12
Litigation. Except
as set forth on Schedule 4.12 hereto, there is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its Subsidiaries that prevents the Company or any
of its Subsidiaries from entering into this Agreement or the Related Agreements,
or from consummating the transactions contemplated hereby or thereby, or which
has had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect or any change in the current equity
ownership of the Company or any of its Subsidiaries, nor is the Company aware
that there is any basis to assert any of the foregoing. Neither the Company nor
any of its Subsidiaries is a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company or any of its Subsidiaries currently pending or which the Company or any
of its Subsidiaries intends to initiate.
4.13
Tax
Returns and Payments. Each of
the Company and each of its Subsidiaries has timely filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and all other taxes due
and payable by the Company or any of its Subsidiaries on or before the Closing,
have been paid or will be paid prior to the time they become delinquent. Except
as set forth on Schedule 4.13, neither the Company nor any of its Subsidiaries
has been advised:
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(a) that any
of its returns, federal, state or other, have been or are being audited as of
the date hereof; or
(b) of any
deficiency in assessment or proposed judgment to its federal, state or other
taxes.
The
Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14
Employees. Except
as set forth on Schedule 4.14, neither the Company nor any of its Subsidiaries
has any collective bargaining agreements with any of its employees. There is no
labor union organizing activity pending or, to the Company's knowledge,
threatened with respect to the Company or any of its Subsidiaries. Except as
disclosed in the Exchange Act Filings or on Schedule 4.14, neither the Company
nor any of its Subsidiaries is a party to or bound by any currently effective
employment contract, deferred compensation arrangement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
plan or agreement. To the Company's knowledge, no employee of the Company or any
of its Subsidiaries, nor any consultant with whom the Company or any of its
Subsidiaries has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company or any of its Subsidiaries because of the nature of the business to be
conducted by the Company or any of its Subsidiaries; and to the Company's
knowledge the continued employment by the Company or any of its Subsidiaries of
its present employees, and the performance of the Company's and its
Subsidiaries’ contracts with its independent contractors, will not result in any
such violation. Neither the Company nor any of its Subsidiaries is aware that
any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries has received any notice alleging that
any such violation has occurred. Except for employees who have a current
effective employment agreement with the Company or any of its Subsidiaries, no
employee of the Company or any of its Subsidiaries has been granted the right to
continued employment by the Company or any of its Subsidiaries or to any
material compensation following termination of employment with the Company or
any of its Subsidiaries. Except as set forth on Schedule 4.14, the Company is
not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries have a present
intention to terminate the employment of any officer, key employee or group of
employees.
4.15
Registration
Rights and Voting Rights. Except
as set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings,
neither the Company nor any of its Subsidiaries is presently under any
obligation, and neither the Company nor any of its Subsidiaries has granted any
rights, to register any of the Company's or its Subsidiaries’ presently
outstanding securities or any of its securities that may hereafter be issued.
Except as set forth on Schedule 4.15 and except as disclosed in Exchange Act
Filings, to the Company's knowledge, no stockholder of the Company or any of its
Subsidiaries has entered into any agreement with respect to the voting of equity
securities of the Company or any of its Subsidiaries.
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4.16
Compliance
with Laws; Permits. Neither
the Company nor any of its Subsidiaries is in violation of any applicable
statute, rule, regulation, order or restriction of any domestic or foreign
government or any instrumentality or agency thereof in respect of the conduct of
its business or the ownership of its properties which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement or any other Related Agreement and the issuance of
any of the Securities, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. Each of the Company and its Subsidiaries has
all material franchises, permits, licenses and any similar authority necessary
for the conduct of its business as now being conducted by it, the lack of which
could, either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
4.17
Environmental
and Safety Laws. Neither
the Company nor any of its Subsidiaries is in violation of any applicable
statute, law or regulation relating to the environment or occupational health
and safety, and to its knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
Except as set forth on Schedule 4.17, no Hazardous Materials (as defined below)
are used or have been used, stored, or disposed of by the Company or any of its
Subsidiaries or, to the Company's knowledge, by any other person or entity on
any property owned, leased or used by the Company or any of its Subsidiaries.
For the purposes of the preceding sentence, "Hazardous Materials" shall
mean:
(a) materials
which are listed or otherwise defined as "hazardous" or "toxic" under any
applicable local, state, federal and/or foreign laws and regulations that govern
the existence and/or remedy of contamination on property, the protection of the
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials;
or
(b) any
petroleum products or nuclear materials.
4.18
Valid
Offering.
Assuming the accuracy of the representations and warranties of the Purchaser
contained in this Agreement, the offer, sale and issuance of the Securities will
be exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and will have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities laws.
4.19
Full
Disclosure. Each of
the Company and each of its Subsidiaries has provided the Purchaser with all
information requested by the Purchaser in connection with its decision to
purchase the Warrant, including all information the Company and its Subsidiaries
believe is reasonably necessary to make such investment decision. Neither this
Agreement, the Related Agreements, the exhibits and schedules hereto and thereto
nor any other document delivered by the Company or any of its Subsidiaries to
Purchaser or its attorneys or agents in connection herewith or therewith or with
the transactions contemplated hereby or thereby, contain any untrue statement of
a material fact nor omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading. Any financial projections and other estimates
provided to the Purchaser by the Company or any of its Subsidiaries were based
on the Company's and its Subsidiaries’ experience in the industry and on
assumptions of fact and opinion as to future events which the Company or any of
its Subsidiaries, at the date of the issuance of such projections or estimates,
believed to be reasonable.
10
4.20
Insurance. Each of
the Company and each of its Subsidiaries has general commercial, product
liability, fire and casualty insurance policies with coverages which the Company
believes are customary for companies similarly situated to the Company and its
Subsidiaries in the same or similar business.
4.21
SEC
Reports. Except
as set forth on Schedule 4.21, the Company has filed all reports and other
documents required to be filed by it under the Exchange Act. The Company has
furnished the Purchaser with copies of: (i) its Annual Reports on Form 10-KSB
for its fiscal years ended December 31, 2003 and December 31, 2004; and (ii) its
Quarterly Reports on Form 10-QSB for its fiscal quarter ended September 30, 2004
(collectively, the "SEC Reports"). Except as set forth on Schedule 4.21, each
SEC Report was, at the time of its filing, in substantial compliance with the
requirements of its respective form and none of the SEC Reports, nor the
financial statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.22
Listing. The
Company's Common Stock is listed for trading on the NASD OTC Bulletin Board
("NASD BB") and satisfies all requirements for the continuation of such trading.
The Company has not received any notice that its Common Stock will not be
eligible to be traded on the NASD BB or that its Common Stock does not meet all
requirements for such trading.
4.23
Stop
Transfer. The
Securities are restricted securities as of the date of this Agreement. Neither
the Company nor any of its Subsidiaries will issue any stop transfer order or
other order impeding the sale and delivery of any of the Securities at such time
as the Securities are registered for public sale or an exemption from
registration is available, except as required by state and federal securities
laws.
4.24
Dilution. The
Company specifically acknowledges that its obligation to issue the shares of
Common Stock upon the exercise of the Warrant is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
4.25
Patriot
Act. The
Company certifies that, to the best of Company’s knowledge, neither the Company
nor any of its Subsidiaries has been designated, and is not owned or controlled,
by a "suspected terrorist" as defined in Executive Order 13224. The Company
hereby acknowledges that the Purchaser seeks to comply with all applicable laws
concerning money laundering and related activities. In furtherance of those
efforts, the Company hereby represents, warrants and agrees that: (i) none of
the cash or property that the Company or any of its Subsidiaries will pay or
will contribute to the Purchaser has been or shall be derived from, or related
to, any activity that is deemed criminal under United States law; and (ii) no
contribution or payment by the Company or any of its Subsidiaries to the
Purchaser, to the extent that they are within the Company’s and/or its
Subsidiaries’ control shall cause the Purchaser to be in violation of the United
States Bank Secrecy Act, the United States International Money Laundering
Control Act of 1986 or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001. The Company shall promptly
notify the Purchaser if any of these representations ceases to be true and
accurate regarding the Company or any of its Subsidiaries. The Company agrees to
provide the Purchaser any additional information regarding the Company or any of
its Subsidiaries that the Purchaser deems necessary or convenient to ensure
compliance with all applicable laws concerning money laundering and similar
activities. The Company understands and agrees that if at any time it is
discovered that any of the foregoing representations are incorrect, or if
otherwise required by applicable law or regulation related to money laundering
similar activities, the Purchaser may undertake appropriate actions to ensure
compliance with applicable law or regulation, including but not limited to
segregation and/or redemption of the Purchaser’s investment in the Company. The
Company further understands that the Purchaser may release confidential
information about the Company and its Subsidiaries and, if applicable, any
underlying beneficial owners, to proper authorities if the Purchaser, in its
sole discretion, in good faith determines that it is legally required to release
such confidential information in light of relevant rules and regulations under
the laws set forth in subsection (ii) above.
11
5. Representations
and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement):
5.1 No
Shorting. The
Purchaser or any of its affiliates and investment partners has not, will not and
will not cause any person or entity, directly or indirectly, to engage in "short
sales" of the Company's Common Stock as long as the Note shall be
outstanding.
5.2 Requisite
Power and Authority. The
Purchaser has all necessary power and authority under all applicable provisions
of law to execute and deliver this Agreement and the Related Agreements and to
carry out their provisions. All corporate action on Purchaser's part required
for the lawful execution and delivery of this Agreement and the Related
Agreements have been or will be effectively taken prior to the Closing. Upon
their execution and delivery, this Agreement and the Related Agreements will be
valid and binding obligations of Purchaser, enforceable in accordance with their
terms, except:
(a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights;
and
(b) as
limited by general principles of equity that restrict the availability of
equitable and legal remedies.
5.3 Investment
Representations.
Purchaser understands that the Securities are being offered and sold pursuant to
an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement, including, without
limitation, that the Purchaser is an "accredited investor" within the meaning of
Regulation D under the Securities Act of 1933, as amended (the "Securities
Act"). The Purchaser confirms that it has received or has had full access to all
the information it considers necessary or appropriate to make an informed
investment decision with respect to the Warrant to be purchased by it under this
Agreement and the Warrant Shares acquired by it upon the exercise of the
Warrant. The Purchaser further confirms that it has had an opportunity to ask
questions and receive answers from the Company regarding the Company's and its
Subsidiaries’ business, management and financial affairs and the terms and
conditions of the Warrant and the Securities and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the Purchaser or to which the Purchaser had
access.
5.4 Purchaser
Bears Economic Risk. The
Purchaser has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company so that
it is capable of evaluating the merits and risks of its investment in the
Company and has the capacity to protect its own interests. The Purchaser must
bear the economic risk of this investment until the Securities are sold pursuant
to: (i) an effective registration statement under the Securities Act; or (ii) an
exemption from registration is available with respect to such sale.
5.5 Acquisition
for Own Account. The
Purchaser is acquiring Warrant and the Warrant Shares for the Purchaser's own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.
12
5.6 Purchaser
Can Protect Its Interest. The
Purchaser represents that by reason of its, or of its management's, business and
financial experience, the Purchaser has the capacity to evaluate the merits and
risks of its investment in the Warrant and the Securities and to protect its own
interests in connection with the transactions contemplated in this Agreement and
the other Related Agreements. Further, the Purchaser is aware of no publication
of any advertisement in connection with the transactions contemplated in the
Agreement or the Related Agreements.
5.7 Accredited
Investor.
Purchaser represents that it is an accredited investor within the meaning of
Regulation D under the Securities Act.
5.8 Legends.
(a) The
Warrant Shares, if not issued by DWAC system (as hereinafter defined), shall
bear a legend which shall be in substantially the following form until such
shares are covered by an effective registration statement filed with the
SEC:
|
"THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO SEQUIAM CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED." |
(b) The
Warrant shall bear substantially the following legend:
|
"THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES
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 OR THE UNDERLYING SHARES OF COMMON STOCK
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO SEQUIAM CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED." |
13
6. Covenants
of the Company. The
Company covenants and agrees with the Purchaser as follows:
6.1 Stop-Orders. The
Company will advise the Purchaser, promptly after it receives notice of issuance
by the Securities and Exchange Commission (the "SEC"), 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.
6.2 Listing. The
Company shall promptly secure the listing of the shares of Common Stock issuable
upon the exercise of the Warrant on the NASD BB (the "Principal Market") upon
which shares of Common Stock are listed (subject to official notice of issuance)
and shall maintain such listing so long as any other shares of Common Stock
shall be so listed. The Company will maintain the listing of its Common Stock on
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 National Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
6.3 Market
Regulations. The
Company shall notify the SEC, NASD and applicable state authorities, in
accordance with their requirements, 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 Purchaser and promptly provide copies
thereof to the Purchaser.
6.4 Reporting
Requirements. The
Company will timely file with the SEC all reports required to be filed pursuant
to the Exchange Act and refrain from terminating its status as an issuer
required by the Exchange Act to file reports thereunder even if the Exchange Act
or the rules or regulations thereunder would permit such termination. SEC
reports shall be deemed to have been filed timely with the SEC if filed in
accordance with Rule 12b-25 of the Exchange Act.
6.5 Use of
Funds. The
Company agrees that the amounts received in connection with the Note and
proceeds received in connection with the Warrant and the revenues of the Company
shall be used by the Company and the Subsidiary Guarantors only for their
respective general working capital purposes and only in accordance with the
budget approved by the Purchaser in the form annexed hereto as Exhibit E;
provided that, notwithstanding the foregoing, none of the amounts received in
connection with the Note or the proceeds received in connection with the Warrant
shall be used to pay any portion of the Accrued Salary Amount (as defined in the
Subordination Agreement) or to repay any of the Outstanding Indebtedness (as
defined in the Subordination Agreement).
6.6 Access
to Facilities. Each of
the Company and each of its Subsidiaries will permit any representatives
designated by the Purchaser (or any successor of the Purchaser), upon reasonable
notice and during normal business hours, at such person's expense and
accompanied by a representative of the Company, to:
(a) visit and
inspect any of the properties of the Company or any of its
Subsidiaries;
(b) examine
the corporate and financial records of the Company or any of its Subsidiaries
(unless such examination is not permitted by federal, state or local law or by
contract) and make copies thereof or extracts therefrom; and
(c) discuss
the affairs, finances and accounts of the Company or any of its Subsidiaries
with the directors, officers and independent accountants of the Company or any
of its Subsidiaries.
14
Notwithstanding
the foregoing, neither the Company nor any of its Subsidiaries will provide any
material, non-public information to the Purchaser unless the Purchaser signs a
confidentiality agreement and otherwise complies with Regulation FD, under the
federal securities laws.
6.7 Taxes. Each of
the Company and each of its Subsidiaries 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 and its Subsidiaries; 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 and/or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
and its Subsidiaries 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 therefor.
6.8 Insurance. Each of
the Company and its Subsidiaries 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 similar business similarly situated as the Company and its
Subsidiaries; and the Company and its Subsidiaries 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
which the Company reasonably believes is customary for companies in similar
business similarly situated as the Company and its Subsidiaries and to the
extent available on commercially reasonable terms. The
Company, and each of its Subsidiaries will jointly and severally bear the full
risk of loss from any loss of any nature whatsoever with respect to the assets
pledged to the Purchaser as security for its obligations hereunder and under the
Related Agreements. At the Company's and each of its Subsidiaries’ joint and
several cost and expense in amounts and with carriers reasonably acceptable to
Purchaser, the Company and each of its Subsidiaries shall (i) keep all its
insurable properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to the Company's or the
respective Subsidiary's including business interruption insurance; (ii) maintain
a bond in such amounts as is customary in the case of companies engaged in
businesses similar to the Company's or the respective Subsidiary's insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of the Company or any of
its Subsidiaries either
directly or through governmental authority to draw upon such funds or to direct
generally the disposition of such assets; (iii) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (iv) maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which the Company or the respective Subsidiary is engaged in business; and (v)
furnish Purchaser with (x) copies of all policies and evidence of the
maintenance of such policies at least thirty (30) days before any expiration
date, (y) excepting the Company's workers' compensation policy, endorsements to
such policies naming Purchaser as "co-insured" or "additional insured" and
appropriate loss payable endorsements in form and substance satisfactory to
Purchaser, naming Purchaser as loss payee, and (z) evidence that as to Purchaser
the insurance coverage shall not be impaired or invalidated by any act or
neglect of the Company or any Subsidiary and the insurer will provide Purchaser
with at least thirty (30) days notice prior to cancellation. The Company and
each Subsidiary shall instruct the insurance carriers that in the event of any
loss thereunder, the carriers shall make payment for such loss to the Company
and/or the Subsidiary and Purchaser jointly. In the event that as of the date of
receipt of each loss recovery upon any such insurance, the Purchaser has not
declared an event of default with respect to this Agreement or any of the
Related Agreements, then the Company and/or such Subsidiary shall be permitted
to direct the application of such loss recovery proceeds toward investment in
property, plant and equipment that would comprise "Collateral" secured by
Purchaser's security interest pursuant to its security agreement, with any
surplus funds to be applied toward payment of the obligations of the Company to
Purchaser. In the event that Purchaser has properly declared an event of default
with respect to this Agreement or any of the Related Agreements, then all loss
recoveries received by Purchaser upon any such insurance thereafter may be
applied to the obligations of the Company hereunder and under the Related
Agreements, in such order as the Purchaser may determine. Any surplus (following
satisfaction of all Company obligations to Purchaser) shall be paid by Purchaser
to the Company or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by the Company or the Subsidiary, as applicable, to
Purchaser, on demand.
15
6.9 Intellectual
Property. Each of
the Company and each of its Subsidiaries shall maintain in full force and effect
its existence, rights and franchises and all licenses and other rights to use
Intellectual Property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business.
6.10
Properties. Each of
the Company and each of its Subsidiaries 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 each of the Company and each of its
Subsidiaries 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
provision could, either individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
6.11
Confidentiality. The
Company agrees that it will not disclose, and will not include in any public
announcement, the name of the Purchaser, unless expressly agreed to by the
Purchaser or unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement. Notwithstanding the
foregoing, the Company may disclose Purchaser's identity and the terms of this
Agreement to its current and prospective debt and equity financing sources and
in any filing made with the SEC or any other state or federal governmental
authority or agency.
6.12 Required
Approvals. For so
long as twenty-five percent (25%) of the principal amount of the Note is
outstanding, the Company, without the prior written consent of the Purchaser,
shall not:
(a) directly
or indirectly declare or pay any dividends, other than dividends paid to the
Company or any of its wholly-owned Subsidiaries;
(b) issue any
preferred equity interests;
(c) liquidate,
dissolve or effect a material reorganization;
(d) become
subject to (including, without limitation, by way of amendment to or
modification of) any agreement or instrument which by its terms would (under any
circumstances) restrict the Company's or any of its Subsidiaries right to
perform the provisions of this Agreement, any other Related Agreement or any of
the agreements contemplated hereby or thereby;
16
(e) materially
alter or change the scope of the business of the Company and its Subsidiaries
taken as a whole;
(f) (i)
create, incur, assume or suffer to exist any indebtedness (exclusive of trade
debt and debt incurred to finance the purchase of equipment (not in excess of
five percent (5%) per annum of the fair market value of the Company's assets)
whether secured or unsecured other than (x) the Company's indebtedness to the
Purchaser, (y) indebtedness set forth on Schedule
6.12(f) attached
hereto and made a part hereof and any refinancings or replacements thereof on
terms no less favorable to the Purchaser than the indebtedness being refinanced
or replaced, and (z) any debt incurred in connection with the purchase of assets
in the ordinary course of business, or any refinancings or replacements thereof
on terms no less favorable to the Purchaser than the indebtedness being
refinanced or replaced; (ii) cancel any debt owing to it in excess of $50,000 in
the aggregate during any 12 month period; (iii) assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any other person, except (x) the endorsement of negotiable
instruments by the Company for deposit or collection or similar transactions in
the ordinary course of business, (y) guarantees of indebtedness otherwise
permitted to be outstanding pursuant to this clause (f) or (z) obligations of
the Company and/or any of its Subsidiaries to indemnify directors’ officers’ and
agents’ pursuant to customary and ordinary course indemnification arrangements
set forth in the respective certificate of incorporation, by-laws or other
agreement;
(g) create or
acquire any Subsidiary after the date hereof unless (i) such Subsidiary is a
wholly-owned Subsidiary of the Company and (ii) such Subsidiary becomes party to
the Master Security Agreement, the Stock Pledge Agreement and the Subsidiary
Guaranty (either by executing a counterpart thereof or an assumption or join
under agreement in respect thereof) and, to the extent required by the
Purchaser, satisfies each condition of this Agreement and the Related Agreements
as if such Subsidiary were a Subsidiary on the Closing Date;
(h) issue any
capital stock other than: (i) in connection with any existing stock options,
warrants, stock appreciation rights. Restricted stock grants or any other
securities convertible into capital stock of the Company (collectively,
“Convertible
Securities”); (ii)
in connection with any grants of securities pursuant to the Company’s 2003
Employee Stock Incentive Plan or the Sequiam Corporation 2003 Non-Employee
Directors and Consultants Stock Plan, each as may be amended or modified from
time to time, or any other equity compensation plan registered on Form S-8 with
the SEC; or (iii) in connection with any existing or future commitments to issue
Convertible Securities in connection with any existing or future employment
agreements.
(i) spend
funds in contravention of the budget approved by the Purchaser; and
(j) prevent
the Purchaser or its representatives from attending meetings of the Board of the
Company; provided, however, that in the event that a representative of the
Purchaser is elected to serve on the Board of the Company, then this Section
6.12(j) shall be deemed to have been waived by the Purchaser.
17
6.13
Reissuance
of Securities. The
Company agrees to reissue certificates representing the Securities without the
legends set forth in Section 5.7 above at such time as:
(a) the
holder thereof is permitted to dispose of such Securities pursuant to Rule
144(k) under the Securities Act; or
(b) upon
resale subject to an effective registration statement after such Securities are
registered under the Securities Act.
The
Company agrees to cooperate with the Purchaser in connection with all resales
pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary to
allow such resales provided the Company and its counsel receive reasonably
requested representations from the selling Purchaser and broker, if
any.
6.14
Opinion. On the
Closing Date, the Company will deliver to the Purchaser an opinion acceptable to
the Purchaser from the Company's external legal counsel. The Company will
provide, at the Company's expense, such other legal opinions in the future as
are deemed reasonably necessary by the Purchaser (and acceptable to the
Purchaser) in connection with the exercise of the Warrant.
7. Covenants
of the Purchaser. The
Purchaser covenants and agrees with the Company as follows:
7.1 Confidentiality. The
Purchaser agrees that it will not disclose, and will not include in any public
announcement, the name of the Company, unless expressly agreed to by the Company
or unless and until such disclosure is required by law or applicable regulation,
and then only to the extent of such requirement.
7.2 Non-Public
Information. The
Purchaser agrees not to effect any sales in the shares of the Company's Common
Stock while in possession of material, non-public information regarding the
Company if such sales would violate applicable securities law.
8. Covenants
of the Company and Purchaser Regarding Indemnification.
8.1 Company
Indemnification. The
Company agrees to indemnify, hold harmless, reimburse and defend the Purchaser,
each of the Purchaser's officers, directors, agents, affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Purchaser which results, arises out of
or is based upon: (i) any misrepresentation by the Company or any of its
Subsidiaries or breach of any warranty by the Company or any of its Subsidiaries
in this Agreement, any other Related Agreement or in any exhibits or schedules
attached hereto or thereto; or (ii) any breach or default in performance by the
Company or any of its Subsidiaries of any covenant or undertaking to be
performed by Company or any of its Subsidiaries hereunder, under any other
Related Agreement or any other agreement entered into by the Company and/or any
of its Subsidiaries and Purchaser relating hereto or thereto.
8.2 Purchaser's
Indemnification.
Purchaser agrees to indemnify, hold harmless, reimburse and defend the Company
and each of the Company's officers, directors, agents, affiliates, control
persons and principal shareholders, at all times against any claim, cost,
expense, liability, obligation, loss or damage (including reasonable legal fees)
of any nature, incurred by or imposed upon the Company which results, arises out
of or is based upon: (i) any misrepresentation by Purchaser or breach of any
warranty by Purchaser in this Agreement or in any exhibits or schedules attached
hereto or any Related Agreement; or (ii) any breach or default in performance by
Purchaser of any covenant or undertaking to be performed by Purchaser hereunder,
or any other agreement entered into by the Company and Purchaser relating
hereto.
18
8.3 Procedures.
The procedures and limitations set forth in Section 10.2(c) and (d) shall apply
to the indemnifications set forth in Sections 8.1 and 8.2 above.
Nothing
contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required to
be paid or other charges hereunder exceed the maximum amount permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to a Purchaser and thus refunded to the
Company.
9. Registration
Rights.
9.1 Registration
Rights Granted. The
Company hereby grants registration rights to the Purchaser pursuant to a
Registration Rights Agreement dated as of even date herewith between the Company
and the Purchaser.
10. Miscellaneous.
10.1
Governing
Law. THIS
AGREEMENT AND EACH RELATED AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER
CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND EACH RELATED
AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE
FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK. BOTH PARTIES AND THE
INDIVIDUALS EXECUTING THIS AGREEMENT AND THE RELATED 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 RELATED 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 THIS AGREEMENT OR ANY RELATED
AGREEMENT.
10.2
Survival. The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by the Purchaser and the closing of the transactions
contemplated hereby to the extent provided therein. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or
instrument.
10.3
Successors. Except
as otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, heirs, executors and
administrators of the parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of the Securities from time to
time, other than the holders of Common Stock which has been sold by the
Purchaser pursuant to Rule 144 or an effective registration statement. Purchaser
may not assign its rights hereunder to a competitor of the Company.
10.4
Entire
Agreement. This
Agreement, the Related Agreements, the exhibits and schedules hereto and thereto
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
19
10.5
Severability. In case
any provision of the Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
10.6
Amendment
and Waiver.
(a) This
Agreement may be amended or modified only upon the written consent of the
Company and the Purchaser.
(b) The
obligations of the Company and the rights of the Purchaser under this Agreement
may be waived only with the written consent of the Purchaser.
(c) The
obligations of the Purchaser and the rights of the Company under this Agreement
may be waived only with the written consent of the Company.
10.7
Delays
or Omissions. It is
agreed that no delay or omission to exercise any right, power or remedy accruing
to any party, upon any breach, default or noncompliance by another party under
this Agreement or the Related Agreements, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. All remedies, either under this
Agreement or the Related Agreements, by law or otherwise afforded to any party,
shall be cumulative and not alternative.
10.8
Notices. All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given:
(a) upon
personal delivery to the party to be notified;
(b) when sent
by confirmed facsimile if sent during normal business hours of the recipient, if
not, then on the next business day;
(c) three (3)
business days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or
(d) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt.
All
communications shall be sent as follows:
|
If
to the Company, to: |
Sequiam
Corporation
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ |
|
with
a copy to: | |
|
▇▇▇▇▇▇▇▇▇
Traurig, P.A.
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ | |
|
Attention: ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ | |
|
If
to the Purchaser, to: |
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Attorney in-Fact for the Trust Under the Will of ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ |
20
or at
such other address as the Company or the Purchaser may designate by written
notice to the other parties hereto given in accordance herewith.
10.9
Attorneys'
Fees. In the
event that any suit or action is instituted to enforce any provision in this
Agreement, the prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any right of
such prevailing party under or with respect to this Agreement, including,
without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
10.10 Titles
and Subtitles. The
titles of the sections and subsections of this Agreement are for convenience of
reference only and are not to be considered in construing this
Agreement.
10.11 Facsimile
Signatures; Counterparts. This
Agreement may be executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.12 Broker's
Fees. Each
party hereto represents and warrants that no agent, broker, investment banker,
person or firm acting on behalf of or under the authority of such party hereto
is or will be entitled to any broker's or finder's fee or any other commission
directly or indirectly in connection with the transactions contemplated herein.
Each party hereto further agrees to indemnify each other party for any claims,
losses or expenses incurred by such other party as a result of the
representation in this Section 11.12 being untrue.
10.13 Construction Each
party acknowledges that its legal counsel participated in the preparation of
this Agreement and the Related Agreements and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Agreement to favor any
party against the other.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
21
IN
WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.
|
COMPANY: |
PURCHASER: | |||
|
SEQUIAM
CORPORATION |
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Attorney in-Fact for the Trust Under the Will of ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ | |||
|
By: |
/s/
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ |
By: |
/s/
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
|
Name: |
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ |
Name: |
||
|
Title: |
CEO |
Title: |
||
22
EXHIBIT
A
UNSECURED
DEBT
A-1
EXHIBIT
B
LOAN
DOCUMENTS
B-1
EXHIBIT
C
FORM
OF NOTE
C-1
EXHIBIT
D
FORM
OF WARRANT
C-2
EXHIBIT
E
BUDGET
E-1