MERRIMAN CURHAN FORD GROUP, INC. SERIES D PREFERRED STOCK PURCHASE AGREEMENT August [__], 2009
8-25-09
▇▇▇▇▇▇▇▇
CURHAN FORD GROUP, INC.
August
[__], 2009
▇▇▇▇▇▇▇▇
CURHAN FORD GROUP, INC.
SERIES
D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This
Series D Preferred Stock Purchase Agreement (this “Agreement”) is made as of
August [___], 2009, by and among ▇▇▇▇▇▇▇▇ Curhan Ford Group, Inc., a Delaware
corporation (the “Company”), and the persons and
entities (each, an “Investor” and collectively,
the “Investors”) listed
on the Schedule of Investors attached hereto as Exhibit A (the
“Schedule of
Investors”).
SECTION
1
Authorization,
Sale and Issuance of Series D Convertible Preferred Stock.
1.1 Authorization. The
Company has, prior to the Closing (as defined below), adopted and filed with the
Secretary of State of Delaware the Certificate of Designation of the Company, in
substantially the form attached hereto as Exhibit B (the
“Certificate of
Designation”) and authorized (a) the sale and issuance of up to
24,000,000 shares (the “Shares”) of the Company’s
Series D Convertible Preferred Stock, par value $0.0001 per share (the “Series D Preferred”), having
the rights, privileges, preferences and restrictions set forth in the
Certificate of Designation; (b) the reservation of shares of
Common Stock for issuance upon conversion of the Shares (the “Conversion Shares”); (c) the
issuance of the Warrants and the Contingent Warrants (as defined below), (each
as defined in the Investors Rights Agreement); and (d) the reservation of shares
of Common Stock for issuance upon exercise of the Warrants, and Contingent
Warrants (as defined below) (the “Warrant Shares”).
1.2 Sale and Issuance of
Shares. Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase, and the Company agrees
to sell and issue to each Investor, the number of Shares set forth in the column
designated “Number of Series D
Shares” opposite such Investor’s name on the Schedule of Investors, at a
cash purchase price of $0.43 per share (the “Purchase
Price”). For each share of Series D Preferred purchased, the
Company shall issue a warrant to purchase one additional share of Common Stock
at a purchase price of $0.65 per share, in the form attached hereto as Exhibit C (the “Warrants”). The
Company’s agreement with each Investor is a separate agreement, and the sale and
issuance of the Shares to each Investor is a separate sale and
issuance.
SECTION
2
Closing
Dates and Delivery.
2.1 Closing. The purchase
and sale of the Shares shall take place at one closing (the “Closing”). No
agreement binding upon the Company or any Investor shall be created until the
Closing. The Closing shall be deemed to take place at the
offices of ▇▇▇▇▇▇▇▇ Curhan Ford Group, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, at 1:30 p.m. local time on the date
hereof.
2.2 Delivery. At the
Closing, the Company and the Lead Investor shall execute and deliver to the
Escrow Agent provided for in the escrow agreement attached hereto as Exhibit D (the “Escrow Agreement”) a signed
Escrow Agreement. Each Investor shall tender payment of the purchase
price for the number of Shares that such Investor is purchasing in the Closing
as set forth in the column designated “Purchase Price” opposite such
Investor’s name on the Schedule of Investors by means of either: (i) a wire
transfer to the Escrow Agent, or (ii) evidence of cancellation of indebtedness
satisfactory to the Company, or (iii) any combination of the
foregoing. Funds will be held by the Escrow Agent until evidence is
submitted to the Escrow Agent that (A) a certificate in each Investor’s name
representing the number of Shares that such Investor is purchasing in the
Closing; and (B) a Warrant in each Investor’s name for the purchase of an equal
number of shares of Common Stock; have been dispatched to each Investor from
whom payment was received, all as provided in the Escrow
Agreement. Each Investor who has any rights to registration of any
securities of the Company obtained in connection with previously issued
indebtedness of the Company or warrants of the Company, agrees to the
termination of all such rights, and the Company and all Investors agrees that
such securities will be Registrable Securities under the Investor Rights
Agreement.
2.3 Issuance. Promptly
following the Closing, the Company shall cause a notice of the transactions
contemplated by this Agreement to be mailed to the Company’s stockholders in
accordance with Nasdaq Listing Rule 5635(f). On the tenth day
following the mailing, upon evidence submitted to the Escrow Agent that (i) a
certificate in each Investor’s name representing the number of Shares
that such Investor is purchasing in the Closing; and (ii) a Warrant in
each Investor’s name for the purchase of an equal number of shares of
Common Stock; have been dispatched to each Investor from whom payment was
received and such Shares and Warrants are deemed issued, the Escrow Agent shall
(A) release funds to the parties set forth in the exhibit to the Escrow
Agreement as set forth therein; (B) release the remaining funds to the Company;
all as provided in the Escrow Agreement.
SECTION
3
Representations
and Warranties of the Company.
A
Schedule of Exceptions, attached hereto as Exhibit G (each,
a “Schedule of
Exceptions”) shall be delivered to the Investors in connection with the
Closing. Except as set forth on the Schedule of Exceptions delivered
to the Investors at the Closing, the Company hereby represents and warrants to
each of the Investors as follows:
2
3.1 Organization, Good Standing and
Qualification. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. The Company has the corporate or other power and any
required certificates, authorizations or permits issued by any regulatory body
to own, manage, lease and hold its properties and to carry on its business as
described in the SEC Filings as and where such properties are presently located
and such business is presently conducted. The Company is duly
qualified to do business and is in good standing as a foreign corporation in
each of the jurisdictions where the character of its properties or the nature of
its business requires it to be so qualified, except for those jurisdictions in
which failure to do so has not had, 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 its Subsidiaries, taken as a whole (a “Material Adverse
Effect”).
3.2 Corporate Existence and
Qualification. Section 3.2 of the Schedule of Exceptions sets forth a
true and complete list of all of the subsidiaries of the Company including its
broker dealer subsidiary ▇▇▇▇▇▇▇▇ Curhan Ford & Co. Inc. (collectively, the
“Subsidiaries”), the
place of incorporation of each such subsidiary and its authorized
capitalization, its shares of capital stock outstanding, and the record and
beneficial owner of those shares. Each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
place of incorporation; has the corporate or other power and any required
certificates, authorizations or permits issued by any regulatory body to own,
manage, lease and hold its properties and to carry on its business as described
in the SEC Filings as and where such properties are presently located and such
business is presently conducted; and is duly qualified to do business and is in
good standing as a foreign corporation in each of the jurisdictions where the
character of its properties or the nature of its business requires it to be so
qualified, except for those jurisdictions in which failure to do so has not had,
or could not reasonably be expected to have, a Material Adverse
Effect. There are no outstanding (and neither the Company nor the
Subsidiary has any plan to issue, grant or enter into any) options, warrants,
rights (including conversion or preemptive rights), subscriptions or agreements
for the purchase or acquisition from or by the Company or the Subsidiaries of
any shares of capital stock of any Subsidiary. There are no voting
agreements, voting trust agreements, shareholder agreements or other similar
agreements relating to the capital stock of any of the
Subsidiaries.
3.3 Authority, Approval and
Enforceability. This Agreement and the Transaction Agreements have been
duly executed and delivered by the Company, and the Company has all requisite
corporate power and legal capacity to execute and deliver this Agreement, the
Warrants, the Investors’ Rights Agreement in substantially the form attached
hereto as Exhibit E (the
“Investors Rights
Agreement”), the Management Lock-Up Agreements in
substantially the form attached hereto as Exhibit F (each
a “Lock-Up Agreement”), the Escrow
Agreement (this Agreement, the Warrants the Investors Rights Agreement, each
Lock-Up Agreement and the Escrow Agreement collectively, the “Transaction Agreements”), to
issue and sell the Shares, the Conversion Shares and the Warrant Shares and to
perform its obligations pursuant to the Transaction Agreements (including if
required, issuance of the “Registration Warrants,” “Key Man Warrants” and/or the
“▇▇▇▇▇▇▇▇ Warrants” as defined in the Investors Rights Agreement) (the “Contingent Warrants”) and the
shares of common stock pursuant to the exercise of such Contingent Warrants (the
“Contingent Shares”))
and the Certificate of Designation. The Certificate of Designation
has been filed with the State of Delaware. The execution and delivery
of this Agreement and the Transaction Agreements and the performance of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all corporate action necessary on the part of the
Company, any Subsidiary and their respective officers and directors on behalf of
the Company or Subsidiary and all stockholders on behalf of each Subsidiary. No
approval of the Company’s stockholders is required with the execution and
delivery of this Agreement and the Transaction Agreements and the performance of
the transactions contemplated hereby and thereby. This Agreement and each
Transaction Agreement to which the Company is a party constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as such enforcement may be limited by general equitable principles
or by applicable bankruptcy, insolvency, moratorium, or similar laws and
judicial decisions from time to time in effect which affect creditors’ rights
generally.
3
3.4 Issuance of Securities. The
Company has full power and authority to issue the Shares, Warrants, Conversion
Shares, Warrant Shares Contingent Warrants and Contingent Shares (collectively,
the “Securities”). The
issuance of the Securities has been duly authorized, and upon receipt and
acceptance of consideration from the Investor, the Shares and the Warrants when
issued (and, if issued, Contingent Warrants) will be legally and validly issued,
fully paid and non-assessable, free and clear of all liens, charges and
encumbrances, and the Shares will have the rights, preferences and privileges
described in the Certificate of Designation. The Warrant Shares and the
Contingent Shares have been duly reserved for issuance and sale pursuant to
their terms and, when paid for, issued and delivered by the Company pursuant to
due exercise of the Warrants or Contingent Warrants (as the case may be), will
be validly issued, fully paid and nonassessable; 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. The Company has taken all action required by its
Articles of Incorporation and Bylaws to approve the offer and sale of the
securities.
3.5 SEC Filings. The Company has
filed all proxy statements, reports and other documents required to be filed by
it under the Securities Act of 1933, as amended (the “Securities Act”) and the
Securities Exchange Act of 1934 for the twelve months preceding the date hereof
(the “SEC Filings”) on a
timely basis or has received a valid extension of such time of filing and has
filed such SEC Filing before the expiration of any such extension. Each SEC
Filing was, at the time of its filing, in material compliance with the
requirements of its respective form and none of the SEC Filings, or the
financial statements (and the notes thereto) included in the SEC Filings, 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. The financial statements of the Company included in
the SEC Filings, as of their respective filing dates, complied in all material
respects with applicable accounting requirements and the rules and regulations
of the SEC with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. The Company (i) has implemented and maintains disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act)
that are reasonably designed to ensure that material information relating to the
Company, including its Subsidiaries, is made known to the individuals
responsible for the preparation of the Company’s filings with the SEC and (ii)
has disclosed, based on its most recent evaluation prior to the date of this
Agreement, to the Company’s outside auditors and the Board’s Audit Committee (A)
any significant deficiencies and material weaknesses in the design or operation
of internal controls over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) that are reasonably likely to adversely affect the
Company’s ability to record, process, summarize and report financial information
and (B) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s internal controls over
financial reporting. As of the date of this Agreement, to the knowledge of the
Company, there is no reason that its outside auditors and its chief executive
officer and chief financial officer will not be able to give the certifications
and attestations required pursuant to the rules and regulations adopted pursuant
to Section 404 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, without disclosure of material
weaknesses, when next due.
4
3.6 Capitalization; Ownership of
Shares. as of the date hereof, the authorized capital stock of the
Company consists of 300,000,000 authorized shares of common stock, $ 0.0001 par value per share, of
which 12,756,656 were issued and outstanding, and 7,275,716 are reserved for
issuance to employees, officers, directors and consultants pursuant to the
Company’s stock option plans (pursuant to which options to purchase or other
outstanding unissued grants for, in the aggregate, 4,961,174 shares are issued
and outstanding). In addition, the Company has authorized the
following classes of preferred stock as of the date hereof: 2,000,000 shares of
Series A, $0.0001 par
value per share, of which none were issued and outstanding, 12,500,000 shares of
Series B, 0.0001 par
value per share, of which none were issued and outstanding, 14,200,000 shares of
Series C, $ 0.0001 par value per share, of
which none were issued and outstanding. The Company further has the
ability, under its Certificate of Incorporation, to create additional series of
Preferred Stock, or additional shares of any of the above classes of Preferred
Stock, without stockholder approval. Schedule 3.6(a) to the Schedule
of Exceptions contains an accurate list of any person holding options, warrants
or other rights to purchase any class of the Company’s capital stock (other than
the Shares, Warrants, Conversion Shares, Warrant Shares, Contingent Warrants or
Contingent Shares) and the holdings of each such person, and there are no other
outstanding options, warrants, rights (including conversion or preemptive rights
or rights of first offer) or agreements, orally or in writing, for the purchase,
redemption or acquisition from the Company of any shares of its capital
stock. All of the issued and outstanding shares of the Company are
duly authorized, validly issued, fully paid and nonassessable and were issued in
compliance with state and federal securities laws. Except for the Transaction
Agreements and as set forth on Schedule 3.6(b) of the Schedule of Exceptions,
the Company is not a party or subject to any agreement or understanding, and, to
the best of the Company’s knowledge, there is no agreement or understanding
between any person that affects or relates to the voting or giving of written
consents with respect to any security of the Company (including any voting
agreements, voting trust agreements, shareholder agreements or similar
agreements) or the voting by a director of the Company or the sale, transfer,
registration or other disposition with respect to any security of the
Company. The Company does not have outstanding shareholder purchase
rights or “poison pill” or any similar arrangement in effect giving any person
the right to purchase any equity interest in the Company upon the occurrence of
certain events.
5
3.7 Litigation. Except as
disclosed on Schedule 3.7 of the Schedule of Exceptions, there are no claims,
actions, suits, investigations or proceedings against the Company or any of its
Subsidiaries pending or, to the knowledge of the Company, threatened in any
court or before or by any governmental authority, or before any arbitrator, nor
is there any outstanding judgment, order or decree against, the Company or any
of its Subsidiaries before or by any court, governmental authority or arbitral
body that might have (in the aggregate or if decided adversely to the Company or
Subsidiary) a Material Adverse Effect. Neither the Company nor any of
its Subsidiaries is in default with respect to any judgment, order or decree of
any court or governmental authority in a materially adverse manner. The Company
is not a party or subject to, and none of its assets is bound by, the provisions
of any material order, writ, injunction, judgment, or decree of any court or
governmental authority.
3.8 Liabilities and Losses.
Except as reflected in the balance sheet contained in, or otherwise disclosed
in, any SEC Document, there are no outstanding liabilities of the Company other
than liabilities incurred in the ordinary course of business since the date of
such SEC Document.
3.9 Compliance with Other
Instruments. The execution, delivery and performance of this Agreement
and the consummation by the Company of the transactions contemplated hereby
(including the issuance of the Securities) will not (i) result in a violation of
any certificate of incorporation, certificate of formation, any certificate of
designations or other constituent documents of the Company or any of its
subsidiaries, any capital stock of the Company or any of its subsidiaries or
bylaws of the Company or any of its subsidiaries or (ii) conflict with, or
constitute a default or breach (or an event which with notice or lapse of time
or both would become a default or breach) in any respect under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including foreign, federal and state
securities laws and regulations and rules of self regulatory organizations)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected (including
the Shares), except in the case of clauses (ii) and (iii) above, to the extent
that such violations, conflict, default or right would not reasonably be
expected to have a Material Adverse Effect. No representation or
warranty is made with respect to the Company’s continued listing on the Nasdaq
Capital Market.
3.10 Material Changes. Since the
date of the latest audited financial statements included within the SEC Filings,
except as specifically disclosed in a subsequent SEC Filing filed prior to the
date hereof: (i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or disclosed in filings made with the SEC, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate (as defined in Rule 144 under the Securities Act), except
pursuant to existing Company stock option plans.
6
3.11 Brokers or Finders. The
Company has not incurred, and will not incur, directly or indirectly, as a
result of any action taken by the Company, any liability for brokerage or
finders’ fees or agents’ commissions or any similar charges in connection with
this Agreement or any of the transactions contemplated hereby.
3.12 Private Placement. The offer
and issuance of the Securities to the Investor is being made pursuant to the
exemptions from the registration provisions of the Securities Act afforded by
Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated
thereunder. Assuming the accuracy of the Investors’ representations and
warranties set forth in Section 4 hereof, no registration under the Securities
Act is required for the offer and sale of the Shares, Conversion Shares,
Warrants, Warrant Shares, Contingent Warrants and Contingent Shares by the
Company to the Investors as contemplated hereby or pursuant to the Transaction
Agreements. Neither the Company nor any person acting on behalf of the Company
has offered or sold any of the Securities by any form of general solicitation or
general advertising.
3.13 Governmental Consent.
No consent, approval or authorization of, or designation, declaration or filing
with, any governmental authority or the Financial Industry Regulatory Authority
(“FINRA”) on the part of the Company is required in connection with the valid
execution and delivery of these Transaction Agreements, or the offer, sale or
issuance of the Shares, the Conversion Shares and the Warrant Shares or the
consummation of any other transaction contemplated by these Transaction
Agreements, except (a) filing of the Certificate of Designation with the
office of the Secretary of State of the State of Delaware, (b) the filing
of such notices as may be required under the Securities Act, and (c) such
filings as may be required under applicable state securities laws, which will be
timely filed within the applicable periods therefor.
3.14 Indebtedness. Neither the
Company nor any of its Subsidiaries is after giving effect to the Closing and
the issuance of the Shares and Warrants, in default in the payment of any
material indebtedness or in default under any material agreement relating to its
material indebtedness. Neither the Company nor any of its Subsidiaries has
issued or incurred any debt security or other indebtedness that by its terms is
convertible into or exchangeable for, or accompanied by warrants for or options
to purchase, any capital stock of the Company.
3.15 Title. Each of the Company
and its Subsidiaries has good and marketable title to its property that is real
property and good and valid title to all of its other property (other than
negligible assets not material to the operations of the Company or any of its
Subsidiaries), free and clear of all liens except for liens that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
3.16 Tax Matters.
(a) As
used herein: (x) the term “Tax” or “Taxes” shall mean all taxes,
charges, fees, duties, levies, penalties or other assessments imposed by any
federal, state, local or foreign governmental authority, including income, gross
receipts, excise, property, sales, gain, use, license, custom duty,
unemployment, capital stock, transfer, franchise, payroll, withholding, social
security, minimum estimated, profit, gift, severance, value added, disability,
premium, recapture, credit, occupation, service, leasing, employment, stamp and
other taxes, and shall include interest, penalties or additions attributable
thereto or attributable to any failure to comply with any requirement regarding
Tax Returns; and (y) the term “Tax Return” shall mean any return, declaration,
report, claim for refund, or information return or statement relating to Taxes,
including any such document prepared on a consolidated, combined or unitary
basis and also including any schedule or attachment thereto, and including any
amendment thereof.
7
(b) The
Company and each of its Subsidiaries has timely filed (or there have been filed
on their behalf) in correct form with appropriate taxing authorities all
material Tax Returns required to be filed by them on or prior to the
date hereof. Such Tax Returns are true, accurate and complete in all
material respects. With respect to all amounts in respect of Taxes
imposed upon the Company or any subsidiary or for which the Company or any such
subsidiary of the Company is or could be liable, all applicable Tax laws have
been complied with in all material respects, and all such amounts in respect of
Taxes required to be paid by the Company or any of its subsidiaries to taxing
authorities or others, have been paid. The accrual for Taxes set
forth in the financial statements of the Company included in the SEC Filings is
adequate in all material respects to cover the Company’s and its Subsidiaries’
obligations for Taxes as of the date hereof.
(c) The
Company and its Subsidiaries have complied in all material respects with all
applicable laws relating to the withholding of Taxes, and subject to the
foregoing, have, within the time and manner prescribed by law, withheld and paid
over to the proper governmental authorities all amounts required to be withheld
and paid over under all applicable laws.
(d) No
federal, state, local or foreign audits or other administrative proceedings have
formally commenced or are presently pending with regard to any Taxes due from or
with respect to the Company or any of its Subsidiaries. There are no
outstanding requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any Taxes or deficiencies
against the Company or any of its Subsidiaries.
(e)
Neither the Company nor any of its Subsidiaries is a party to any material Tax
sharing, Tax indemnity or other similar agreement or arrangement with any person
or entity other than a Tax sharing, Tax indemnity or other similar agreement to
which the Company and/or one of its Subsidiaries are the sole
parties.
3.17 Compliance with Laws. Neither
the Company nor any of its Subsidiaries is in material violation of any
applicable federal, state, local, foreign or other law, statute, regulation,
rule, ordinance, code, convention, directive, order, judgment or other legal
requirement (collectively, “Laws”) of any governmental
authority or self regulatory organization, except where such violation would
not, individually or in the aggregate, be expected to have a Material Adverse
Effect. To the knowledge of the Company, neither the Company nor any of its
Subsidiaries is being investigated with respect to, or has been overtly
threatened to be charged with or given notice of any violation of, any
applicable Law, except for such of the foregoing as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
3.18 Registration
Rights. Except as provided in the Investors Rights Agreement,
the Company has not granted or agreed to grant, and is not under any obligation
to provide, any rights to register under the Securities Act any of its presently
outstanding securities or any of its securities that may be issued
subsequently.
8
3.19 Investment Company Act.
Neither the Company nor any of its Subsidiaries is an investment company within
the meaning of the Investment Company Act of 1940, or, directly or indirectly,
controlled by or acting on behalf of any person which is an investment company,
within the meaning of said Act.
3.20 Foreign Corrupt Practices. To
the Company’s knowledge, neither the Company, nor any of its subsidiaries, nor
any director, officer, agent, employee or other person acting on behalf of the
Company or any subsidiary has, in the course of his actions for, or on behalf
of, the Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.
3.21 Key
Employees. Each of D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(each a “Key Employee”)
is currently serving the Company and each Subsidiary in the capacities disclosed
in Schedule 3.21 of the Schedule of Exceptions. No Key Employee, to
the knowledge of the Company is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each Key Employee does not subject the Company or any of its Subsidiaries to
any liability with respect to any of the foregoing matters. No Key
Employee has, to the knowledge of the Company, any intention to terminate or
limit his employment with, or services to, the Company or any of its
subsidiaries, nor is any such Key Employee subject to any constraints (e.g.,
litigation) which would cause such employee to be unable to devote his full time
and attention to such employment or services in the capacities disclosed in
Schedule 3.21.
3.22 Employee
Benefits. Neither the Company nor any affiliate of the Company
as determined under the Internal Revenue Code of 1986, as amended (the “Code”) section 414(b), (c),
(m) or (o) (an “ERISA
Affiliate”) maintains, administers or contributes to, or maintained,
administered or contributed to, or has any liability with respect to, nor do the
employees of the Company or any ERISA Affiliate receive or expect to receive as
a condition of employment, benefits pursuant to:
(a) any
employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”)) (“Plan”), including any
multiemployer plan as defined in Section 3(37) of ERISA (“Multiemployer Plan”);
or
(b) any
bonus, deferred compensation, performance compensation, stock purchase, stock
option, stock appreciation, severance, salary continuation, vacation, sick
leave, holiday pay, fringe benefit, personnel policy, reimbursement program,
incentive, insurance, welfare or similar plan, program, policy or arrangement
(“Employee Benefit
Plan”);
9
other
than those Plans and Employee Benefit Plans described in Schedule 3.22 of the
Schedule of Exceptions. Except as required by section 4980B of the
Code, neither the Company nor any ERISA Affiliate has promised any former
employee or other individual not employed by the Company or any ERISA Affiliate
with medical or other benefit coverage. Except as required by section 4980B of
the Code, neither the Company nor any ERISA Affiliate maintains or contributes
to any plan, program, policy or arrangement providing medical benefits, life
insurance or other welfare benefits to former employees, their spouses or
dependents or any other individual not employed by the Company or any ERISA
Affiliate. All Plans and Employee Benefit Plans and any related trust
agreements or annuity contracts (or any related trust instruments) comply with
and are and have been operated in accordance with each applicable provision of
ERISA, the Code (including the requirements, of Code section 401(a) to the
extent any Plan is intended to conform to that section), other Federal statutes,
state law (including state insurance law) and the regulations and rules
promulgated pursuant thereto or in connection therewith except when the failure
to so comply would not have a Material Adverse Effect. A favorable
determination as to the qualification under the Code of each of the Plans that
is intended to be qualified under Section 401(a) of the Code and each amendment
thereto has been made by the Internal Revenue Service (“IRS”), each trust funding a
Plan is and has been tax-exempt and each Plan and related trust agreements
remain qualified under the Code. No Plan is a Multiemployer Plan subject to
Title IV of ERISA.
3.23 Contracts. The SEC
Documents contain a complete and accurate list of all material undischarged
written or oral contracts, agreements, leases or other instruments to which the
Company or any subsidiary is a party or by which the Company or any subsidiary
is bound or to which any of the properties or assets of the Company or any
subsidiary is subject which are required to be listed in the SEC Documents
except where the failure to so list in the SEC Documents would not have a
Material Adverse Effect (each a “Contract”). None of
the Company, its subsidiaries or, to the of the Company, any of the other
parties thereto, is in breach or violation of any Contract, which breach or
violation relates to indebtedness for borrowed money or otherwise would have a
Material Adverse Effect. No event, occurrence or condition exists
which, with the lapse of time, the giving of notice, or both, or the happening
of any further event or condition, would become a breach or default by the
Company or its subsidiaries under any Contract which breach or default would
have a Material Adverse Effect. The Company has provided
to the counsel for the Lead Investor true and complete copies all fidelity bonds
and insurance policies of the Company now in force (including "key man,"
comprehensive general liability, personal and professional liability,
comprehensive general casualty and extended coverage, business interruption,
automobile, fire and lightning, endowment, life, and worker’s compensation
insurance policies).
3.24 Use of
Proceeds. The Company shall apply up to $4.3 million of the
net proceeds from the issuance and sale of the Securities for settlement of
litigation claims from the claimants provided for in the Escrow Agreement, and
the balance for general corporate purposes, including funding working capital
and the payment of fees and expenses in connection with the transactions
contemplated by this Agreement and the Transaction Agreements.
10
3.25 Disclosure. No
information relating to or concerning the Company set forth in this Agreement or
provided to the Purchaser by or on behalf of the Company in connection with the
transactions contemplated hereby contains an untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements made
herein or therein, in light of the circumstances under which they were made, not
misleading. Except for the execution and performance of this
Agreement and the other Transaction Agreements, no material fact (within the
meaning of the federal securities laws of the United States) which would be
required to be disclosed in the SEC Documents exists with respect to the Company
or any of its subsidiaries which has not been publicly disclosed, except where
the failure to disclose would not have Material Adverse Effect.
SECTION
4
Representations
and Warranties of the Investors.
Each
Investor hereby, severally and not jointly, represents and warrants to the
Company as follows:
4.1 Public Information on
Company. The Investor has had access at the ▇▇▇▇▇ Website of the SEC to
the Company’s Form 10-K/A, filed on April 30, 2009, for the year ended December
31, 2008 and the Company’s Form 10-K, filed on February 12, 2008, for the year
ended December 31, 2007, as filed with the SEC, together with all subsequently
filed Forms 10-Q, 8-K, and other filings made with the SEC available at the
▇▇▇▇▇ website (any such document, an “SEC Document”). The Investor
has reviewed the risk factors contained in the SEC Documents. The Investor has
considered the risk factors and other all factors the Investor deems material in
deciding on the advisability of investing in the Securities. In
furtherance and not in limitation of the preceding sentences, Investor is aware
that the opinion of the Company auditors contained in its Form
10-K/A, filed on April 30, 2009 contained “going concern” language.
4.2 Other Information.
Such Investor has had an opportunity to ask questions of, and receive answers
from, the officers of the Company concerning the Transaction Agreements, the
exhibits and schedules attached hereto and thereto and the transactions
contemplated by the Transaction Agreements, as well as the Company’s business,
management and financial affairs, which questions were answered to its
satisfaction. Such Investor believes that it has received all the
information such Investor considers necessary or appropriate for deciding
whether to purchase the Shares, the Conversion Shares and the Warrant
Shares. Each Investor acknowledges that any business plan or
projection provided to such Investor was prepared by the management of the
Company in a good faith effort to describe the Company’s presently proposed
business and products and the markets therefor. Each Investor also
acknowledges that it is relying solely on its own counsel and not on any
statements or representations of the Company or its agents for legal advice with
respect to this investment or the transactions contemplated by the Transaction
Agreements. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 3 of this Agreement or
otherwise in the Transaction Agreements, or the right of Investor to rely on
such representations or warranties.
11
4.3 No Registration. Such
Investor understands that the Shares and the Conversion Shares, have not been,
and will not be, registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of such Investor’s representations as
expressed herein or otherwise made pursuant hereto.
4.4 Investment Intent. Such
Investor is acquiring the Shares and the Conversion Shares for investment for
its own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof, and that such Investor has
no present intention of selling, granting any participation in, or otherwise
distributing the same. Such Investor further represents that it does
not have any contract, undertaking, agreement or arrangement with any person or
entity to sell, transfer or grant participation to such person or entity or to
any third person or entity with respect to any of the Shares or the Conversion
Shares.
4.5 Investment Experience.
Such Investor has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company and
acknowledges that such Investor can protect its own interests. Such
Investor has such knowledge and experience in financial and business matters so
that such Investor is capable of evaluating the merits and risks of its
investment in the Company.
4.6 Speculative Nature of
Investment. Such Investor understands and acknowledges that the
Company has a limited financial and operating history and that an investment in
the Company is highly speculative and involves substantial
risks. Such Investor can bear the economic risk of such Investor’s
investment and is able, without impairing such Investor’s financial condition,
to hold the Shares and the Conversion Shares for an indefinite period of time
and to suffer a complete loss of such Investor’s investment.
4.7 Accredited Investor. Either:
(a) The
Investor is an “accredited investor” within the meaning of Regulation D,
Rule 501(a), promulgated by the Securities and Exchange Commission under
the Securities Act and shall submit to the Company such further assurances of
such status as may be reasonably requested by the Company; or
(b) The
Investor is not an accredited investor but has executed and returned to the
Company an Investor Questionnaire establishing that the Investor either alone or
with his purchaser representative(s) has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment.
4.8 Residency. The
residency of the Investor (or, in the case of a partnership or corporation, such
entity’s principal place of business) is correctly set forth on the Schedule of
Investors.
12
4.9 Rule 144. Such
Investor acknowledges that the Shares, the Conversion Shares or the Warrant
Shares must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is
available. Such Investor is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than six months after a party has
purchased and paid for the security to be sold, the sale being effected through
a “broker’s transaction” or in transactions directly with a “market maker” and
the number of shares being sold during any three-month period not exceeding
specified limitations. Such Investor acknowledges and understands
that, notwithstanding any obligation under the Investors Rights Agreement, the
Company may not be satisfying the current public information requirement of
Rule 144 at the time the Investor wishes to sell the Shares, the Conversion
Shares or the Warrant Shares, and that, in such event, the Investor may be
precluded from selling such securities under Rule 144, even if the other
requirements of Rule 144 have been satisfied. Such Investor
acknowledges that, in the event all of the requirements of Rule 144 are not
met, registration under the Securities Act or an exemption from registration
will be required for any disposition of the Shares or the underlying Common
Stock. Such Investor understands that, although Rule 144 is not
exclusive, the Securities and Exchange Commission has expressed its opinion that
persons proposing to sell restricted securities received in a private offering
other than in a registered offering or pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales and that such persons and the brokers who
participate in the transactions do so at their own risk.
4.10 Authorization.
(a) Such
Investor has all requisite power and authority to execute and deliver the
Transaction Agreements, to purchase the Shares hereunder and to carry out and
perform its obligations under the terms of the Transaction
Agreements. All action on the part of the Investor necessary for the
authorization, execution, delivery and performance of the Transaction
Agreements, and the performance of all of the Investor’s obligations under the
Transaction Agreements, has been taken or will be taken prior to the
Closing.
(b) The
Transaction Agreements, when executed and delivered by the Investor, will
constitute valid and legally binding obligations of the Investor, enforceable in
accordance with their terms except: (i) to the extent that the
indemnification provisions contained in the Investors Rights Agreement may be
limited by applicable law and principles of public policy, (ii) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally, and
(iii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies or by general
principles of equity.
(c) No
consent, approval, authorization, order, filing, registration or qualification
of or with any court, governmental authority or third person is required to be
obtained by the Investor in connection with the execution and delivery of the
Transaction Agreements by the Investor or the performance of the Investor’s
obligations hereunder or thereunder.
13
4.11 Brokers or Finders.
Such Investor has not engaged any brokers, finders or agents in connection with
the transactions contemplated herein, and neither the Company nor any other
Investor has, nor will, incur, directly or indirectly, as a result of any action
taken by the Investor, any liability for brokerage or finders’ fees or agents’
commissions or any similar charges in connection with the Transaction
Agreements.
4.12 Tax Advisors. Such
Investor has reviewed with its own tax advisors the U.S. federal, state, local
and foreign tax consequences of this investment and the transactions
contemplated by the Transaction Agreements. With respect to such
matters, such Investor relies solely on such advisors and not on any statements
or representations of the Company or any of its agents, written or
oral. The Investor understands that it (and not the Company) shall be
responsible for its own tax liability that may arise as a result of this
investment or the transactions contemplated by the Transaction
Agreements. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 3 of this Agreement or
otherwise in the Transaction Agreements, or the right of Investor to rely on
such representations or warranties.
4.13 Legends. Such Investor
understands and agrees that the certificates evidencing the Shares or the
Conversion Shares, or any other securities issued in respect of the Shares or
the Conversion Shares upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall bear the following legend (in
addition to any legend required by the Investors Rights Agreement or under
applicable state securities laws):
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES
LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.”
SECTION
5
The
Company’s Actions.
The
following have occurred:
5.1 Representations and
Warranties. The representations and warranties made by the Company
in Section 3 (as modified by the disclosures on the Schedule of Exceptions)
are true and correct in all respects as of the date hereof.
14
5.2 Covenants. All
covenants, agreements and conditions contained in this Agreement to be performed
by the Company on or prior to the Closing shall have been performed or complied
with.
5.3 Qualifications. All
authorizations, approvals or permits, if any, of any governmental authority or
regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Shares pursuant to this
Agreement are duly obtained and effective, except any notices of sale required
to be filed with applicable federal and state agencies that may be filed
following Closing, which will be timely filed within the applicable periods
therefor.
5.4 Certificate of
Designation. The Certificate of Designation has been duly
authorized, executed and filed with and accepted by the Secretary of State of
the State of Delaware.
5.5 Investors Rights
Agreement. The Company and the Investors (as defined in the
Investors Rights Agreement) shall have executed and delivered the Investors
Rights Agreement.
5.6 Management Lock-Up
Agreement. The Company, and each of D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ have executed and delivered the Management
Lock-Up Agreement.
5.7 Opinion. The Company
shall have delivered to counsel to ▇▇▇▇▇▇ ▇. Chez (the “Lead Investor”) an opinion
addressed to each Investor from ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., counsel to the Company,
dated as of the date hereof, in substantially the form attached hereto as Exhibit H.
5.8 Escrow
Agreement. The Escrow Agreement has been executed and
delivered by the Company, the Lead Investor, and the Escrow Agent.
5.9 Settlement
Agreement. The Settlement Agreement in the form attached
hereto as Exhibit J has been executed by the Company and “Settling Claimants”
representing in the aggregate at least $34.6 million in “Value of Original
Claim” as shown on Schedule A of the Settlement Agreement.
5.10 Payment of Investor
Expenses. The Escrow Agreement contains irrevocable
instructions for the payment of $35,000 as described in Section
7.5.
5.11 Life Insurance
Policy. The Company has purchased the insurance policy on the
life of D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in the form attached hereto as Exhibit I (the “Life Insurance
Policy”).
5.12 Warrant
Returns. D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ have
returned 50% of the warrants originally issued to them by the Company in
connection with their guarantees of the Secured Promissory Note issued by the
Company in favor of ▇▇▇▇▇▇ ▇. Chez dated July 31, 2009.
15
SECTION
6
Investors’
Actions.
The
following have occurred:
6.1 Representations and
Warranties. The representations and warranties made by each
Investor in Section 4 is true and correct in all respects as of the date
hereof.
6.2 Covenants. All
covenants, agreements and conditions contained in the Transaction Agreements to
be performed by Investors on or prior to the date of the Closing shall have been
performed or complied with.
6.3 Compliance with Securities
Laws. The Company is satisfied that the offer and sale of the
Shares and the Conversion Shares and the Warrants are be qualified or exempt
from registration or qualification under all applicable federal and state
securities laws (including receipt by the Company of all necessary blue sky law
permits and qualifications required by any state, if any).
SECTION
7
Miscellaneous
7.1 Amendment. Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument referencing this Agreement and signed by the
Company and the Investors holding [at least a majority] of the Shares or the
Conversion Shares and the Warrants (calculated by assuming all Shares have been
converted to Conversion Shares and the Warrants converted to Warrant Shares as
of the date of such amendment, waiver, discharge or termination, and excluding
any of such shares or warrants that have been sold to the public or pursuant to
Rule 144). Any such amendment, waiver, discharge or termination
affected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding (including
securities into which such securities have been converted or exchanged or for
which such securities have been exercised) and each future holder of all such
securities. Each Investor acknowledges that by the operation of this
paragraph, the holders of at least a majority of the Shares or the Conversion
Shares (excluding any of such shares that have been sold to the public or
pursuant to Rule 144) will have the right and power to diminish or
eliminate all rights of such Investor under this Agreement.
7.2 Notices. All notices
and other communications required or permitted hereunder shall be in writing and
shall be mailed by registered or certified mail, postage prepaid, sent by
facsimile or electronic mail or otherwise delivered by hand or by messenger
addressed:
(a) if to
an Investor, at the Investor’s address, facsimile number or electronic mail
address as shown in the Company’s records, as may be updated in accordance with
the provisions hereof;
16
(b) if to
any other holder of any Shares or Conversion Shares, at such address, facsimile
number, or electronic mail address as shown in the Company’s records, or, until
any such holder so furnishes an address, facsimile number or electronic mail
address to the Company, then at the address of the last holder of such Shares or
Conversion Shares for which the Company has contact information in its records;
or
(c) if to
the Company, one copy should be sent to ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: Chief Executive Officer, or at such other address
as the Company shall have furnished to the Investors, with a copy to ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: Chief Compliance Officer.
With
respect to any notice given by the Company under any provision of the Delaware
General Corporation Law, the Certificate of Designation or the Company’s Bylaws,
each Investor agrees that such notice may be given by facsimile or by electronic
mail (with confirmed delivery).
Each such
notice or other communication shall for all purposes of this Agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or 3 business
days after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid or, if
sent by facsimile, the business day following confirmation of facsimile transfer
or, if sent by electronic mail, the business day following confirmation of
delivery when directed to the electronic mail address provided pursuant hereto,
or, if sent by nationally recognized overnight delivery service, on the date
when delivered.
7.3 Governing Law. This
Agreement shall be governed in all respects by the internal laws of the State of
Delaware, without regard to principles of conflicts of law.
7.4 Brokers or Finders. The
Company shall indemnify and hold harmless each Investor from any liability for
any commission or compensation in the nature of a brokerage or finder’s fee or
agent’s commission (and the costs and expenses of defending against such
liability or asserted liability) for which such Investor or any of its
constituent partners, members, agents, officers, directors, employees or
representatives is responsible to the extent such liability is attributable to
any inaccuracy or breach of the representations and warranties contained in
Section 3.11, and
each Investor agrees to indemnify and hold harmless the Company and each other
Investor from any liability for any commission or compensation in the nature of
a brokerage or finder’s fee or agent’s commission (and the costs and expenses of
defending against such liability or asserted liability) for which the Company,
any other Investor or any of their constituent partners, members, agents,
officers, directors, employees or representatives is responsible to the extent
such liability is attributable to any inaccuracy or breach of the
representations and warranties of such Investor contained in Section 4.11.
7.5 Expenses. The Company
and the Investors shall each pay their own expenses in connection with the
transactions contemplated by this Agreement; provided, however, that if the
Closing is effected, the Company at the Closing shall reimburse the reasonable
documented fees of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, counsel for the Lead Investor, and other
fees and expenses involved for due diligence and other transaction related
expenses, an amount not to exceed $35,000.
17
7.6 Successors and Assigns.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including permitted transferees of any Shares sold
hereunder or any Conversion Shares or Warrants). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. This provision shall
not limit an Investor right to transfer any securities pursuant to the terms of
this Agreement or any of the Transaction Agreements.
7.7 Entire Agreement. This
Agreement and the other Transaction Agreements, including the exhibits attached
hereto and thereto, constitute the full and entire understanding and agreement
among the parties with regard to the subjects hereof and thereof. No
party shall be liable or bound to any other party in any manner with regard to
the subjects hereof or thereof by any warranties, representations or covenants
except as specifically set forth herein or therein.
7.8 Delays or Omissions.
Except as expressly provided herein, no delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement upon any breach or
default of any other party under this Agreement shall impair any such right,
power or remedy of such non-defaulting party, nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring, nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party to this Agreement, shall be cumulative and not
alternative.
7.9 California Corporate Securities
Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION
25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
7.10 Severability. If any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, portions of such provision,
or such provision in its entirety, to the extent necessary, shall be severed
from this Agreement, and such court will replace such illegal, void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the same economic, business and other
purposes of the illegal, void or unenforceable provision. The balance
of this Agreement shall be enforceable in accordance with its
terms.
18
7.11 Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
enforceable against the parties actually executing such counterparts, and all of
which together shall constitute one instrument.
7.12 Telecopy Execution and
Delivery. A facsimile, telecopy or other reproduction of this
Agreement may be executed by one or more parties hereto and delivered by such
party by facsimile or any similar electronic transmission device pursuant to
which the signature of or on behalf of such party can be seen. Such
execution and delivery shall be considered valid, binding and effective for all
purposes. At the request of any party hereto, all parties hereto
agree to execute and deliver an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.
7.13 Jurisdiction; Venue.
With respect to any disputes arising out of or related to this Agreement, the
parties consent to the exclusive jurisdiction of, and venue in, the state courts
in the city of Chicago, and county of ▇▇▇▇, Illinois (or in the event of
exclusive federal jurisdiction, the courts of the Northern District of
Illinois). EACH OF THE PARTIES KNOWINGLY, INTENTIONALLY AND
VOLUNTAIRILY WITH AND UPON THE ADVICE OF COMPETENT COUNSEL IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PORCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY. The Company agrees and acknowledges that any violation or
breach of its covenants, agreements and undertakings contained in this Agreement
or in the other Investment Agreements shall cause Investors irreversible injury
and, in addition to any other right or remedy available to a party at law or in
equity, an Investor shall be entitled to enforcement by court injunction for
specific performance of the obligations of the other party hereunder (without
the requirement of posting a bond). Notwithstanding the foregoing
sentence, nothing herein shall be construed as prohibiting a party from also
pursuing any other rights, remedies or defenses, for such breach or threatened
breach, including receiving damages and attorneys’ fees. The election
of any remedy shall not be construed as a waiver on the part of any party of any
rights such party might otherwise have at law or in equity. Said
rights and remedies shall be cumulative
7.14 Further Assurances.
Each party hereto agrees to execute and deliver, by the proper exercise of its
corporate, limited liability company, partnership or other powers, all such
other and additional instruments and documents and do all such other acts and
things as may be necessary to more fully effectuate this Agreement.
7.15 Attorney’s Fees. In the
event that any suit or action is instituted to enforce any provisions in this
Agreement, the prevailing party in such dispute shall be entitled to recover
from the losing party such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
7.16 Survival of
Warranties. The warranties, representations and covenants of
the Company and each Investor contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the
Closing. The representations, warranties, covenants and obligations
of the Company, and the rights and remedies that may be exercised by the
Investors, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or knowledge of, any of
the Investors or any of their representatives.
19
7.17 Company
Indemnification. The Company agrees to indemnify and hold
harmless the Investors and each of their officers, directors, shareholders,
members, employees, partners, agents and affiliates and any direct or indirect
investors, shareholders, officers, directors, agents, partners, employees,
members, agents or affiliates of any of the foregoing for loss or damage arising
as a result of or related to (a) any breach by the Company of any of its
representations or covenants set forth herein or the unenforceability or
invalidity of any provision of any of the Transaction Agreements other than the
Investor Rights Agreement and Warrants, or (b) any cause of action, suit or
claim brought or made against such indemnitee (other than directly by the
Company solely for breach of this Agreement, or any Transaction Agreement other
than the Investor Rights Agreement and Warrants by the indemnitee or by
governmental or regulatory authorities), and arising out of or resulting from
(whether in whole or in part) the execution, delivery, performance or
enforcement of this Agreement or any other Transaction Agreement other than the
Investor Rights Agreement and Warrants or any other instrument, document or
agreement executed pursuant hereto or thereto or contemplated hereby or thereby
(including the acquisition of the Securities, the Warrants, the Warrant Shares,
the Contingent Warrants or the Contingent Shares), any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities or the status of the Investor as an investor in
the Company, except to the extent that such actual loss or damage results from a
breach by such indemnitee of this Agreement, or other Transaction Agreement or
any other instrument, document or agreement executed pursuant hereto or thereto
or contemplated hereby or thereby. If any action shall be brought
against any Investor in respect of which indemnity may be sought pursuant to
this Agreement, such Investor shall promptly notify the Company in writing,
(provided that the failure of an Investor to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations, to the extent such
failure is not materially prejudicial) and the and the Company shall have the
right to assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Investor. Any Investor 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 Investor unless
representation of such Investor by the counsel retained by the Company would be
inappropriate due to actual or potential conflicting interests between such
Investor and any other party represented by such counsel in such proceeding or
should the Company failed promptly to assume the defense of such
proceeding. The Company will not be liable to any Investor under this
Agreement for any settlement by an Investor effected without the Company’s prior
written consent, which shall not be unreasonably withheld or
delayed. The right to indemnification shall include the right to
repayment of legal fees only if the indemnitee has prevailed on the merits in a
final judgment of a court from which no further appeal is
possible.
20
7.18 Investor
Indemnification. Each Investor, severally and not jointly,
agrees to indemnify and hold harmless the Company and each of its officers,
directors, shareholders, members, employees, partners, agents and affiliates and
any direct or indirect investors, shareholders, officers, directors, agents,
partners, employees, members, agents or affiliates of any of the foregoing for
loss or damage arising as a result of or related to (a) any breach by the
Investor of any of its representations or covenants set forth
herein. If any action shall be brought against the Company in respect
of which indemnity may be sought pursuant to this Agreement, the Company shall
promptly notify the Investor in writing, and the Investor shall have the right
to assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Company. The Company 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 the
Company. Each Investor will not be liable to the Company under this
Agreement for any settlement by the Company effected without the Investor’s
prior written consent, which shall not be unreasonably withheld or
delayed. The right to indemnification shall include the right to
repayment of legal fees only if the indemnitee has prevailed on the merits in a
final judgment of a court from which no further appeal is possible.
7.19 Public Filings; Publicity.
Immediately following execution of this Agreement, the Company shall issue a
press release with respect to the transactions contemplated hereby, and the
notice to investors required pursuant to Section 5635(f) of the NASDAQ Listing
rules. The Company and the Lead Investor shall have the right to approve before
issuance any press releases or notices (including the foregoing press release
and notice), SEC or other filings, or any other public statements, with respect
to the transactions contemplated hereby; provided, however, that either the Lead
Investor, on the one hand, or the Company, on the other hand, shall be entitled,
without the prior approval of the other party, to make any press release or SEC
or exchange filings with respect to such transactions as is required by
applicable law and regulations (although such party making such release or
filing shall (to the extent time permits) consult with the other party in
connection with any such press release or filing prior to its release and shall
be provided with a copy thereof).
7.20 Construction. The headings of
this Agreement are for convenience of reference and shall not form part of, or
affect the interpretation of, this Agreement. When used in this
Agreement, the word “including” means “including, without limitation”, and the
word “person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, governmental authority, or other
entity.
[Signatures
set forth on the following page]
21
IN
WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
|
“COMPANY”
|
|
|
▇▇▇▇▇▇▇▇
CURHAN FORD GROUP, INC.
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|
|
a
Delaware corporation
|
|
|
D.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
|
|
Signature
Page to Series D Preferred Stock Purchase Agreement
IN
WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
|
INVESTORS:
|
EXHIBIT
A
SCHEDULE
OF INVESTORS
|
Investor
|
Number of
Series D Shares
|
Number of
Warrants
|
Purchase Price
|
||||
|
Total
|
$
|
EXHIBIT
B
CERTIFICATE
OF DESIGNATION
EXHIBIT
C
FORM
OF WARRANT
EXHIBIT
D
ESCROW
AGREEMENT
EXHIBIT
E
INVESTORS’
RIGHTS AGREEMENT
EXHIBIT
F
MANAGEMENT
LOCK-UP AGREEMENT
EXHIBIT
G
▇▇▇▇▇▇▇▇
CURHAN FORD GROUP, INC.
SCHEDULE
OF EXCEPTIONS
This
Schedule of Exceptions is made and given pursuant to Section 3 of the Series D
Preferred Stock Purchase Agreement, dated as of __________, 2009 (the “Agreement”), among ▇▇▇▇▇▇▇▇
Curhan Ford Group, Inc. (the “Company”) and the Investors
listed on Exhibit A
thereto (the “Investors”). All
capitalized terms used but not defined herein shall have the meanings as defined
in the Agreement, unless otherwise provided. The section numbers
below correspond to the section numbers of the representations and warranties in
the Agreement; provided, however, that any information disclosed herein under
any section number shall be deemed to be disclosed and incorporated into any
other section number under the Agreement where such disclosure would be
reasonably apparent, other than with respect to sections for which a specific
schedule is provided for in Section 3.
Nothing
in this Schedule of Exceptions is intended to broaden the scope of any
representation or warranty contained in the Agreement or to create any
covenant. Inclusion of any item in this Schedule of Exceptions does
not represent a determination that such item is material or establish a standard
of materiality and shall not constitute, or be deemed to be, an admission to any
third party concerning such item.
EXHIBIT
H
OPINION
OF COUNSEL TO THE COMPANY
EXHIBIT
I
LIFE
INSURANCE POLICY
EXHIBIT
J
SETTLEMENT
AGREEMENT