BONDS.COM GROUP, INC. SECURED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT April 30, 2009
Exhibit
10.1
▇▇▇▇▇.▇▇▇
GROUP, INC.
SECURED
CONVERTIBLE NOTE AND WARRANT
PURCHASE
AGREEMENT
April
30, 2009
▇▇▇▇▇.▇▇▇ HOLDINGS,
INC.
SECURED CONVERTIBLE NOTE AND
WARRANT
PURCHASE
AGREEMENT
This
Secured Convertible Note and Warrant Purchase Agreement (the “Agreement”) is made
as of April 30, 2009 (the “Initial Closing
Date”) by and between ▇▇▇▇▇.▇▇▇ Group, Inc., a Delaware corporation
(the “Company”)
and each of the entities or persons listed on Exhibit A
attached to this Agreement (each a “Purchaser” and
together the “Purchasers”).
RECITALS
Subject
to the terms and conditions set forth in this Agreement and pursuant to Sections
4(2) and 4(6) of the Securities Act of 1933, as amended (the "Securities Act"), and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, Units (as defined below) of securities of the Company, as more
fully described in this Agreement. As used herein, each "Unit" shall consist of
(i) a secured convertible note of the Company, in substantially the form set
forth on Exhibit
B hereto, in the principal amount of $25,000 (each a “Note” and together,
the “Notes”),
and (ii) a warrant, in substantially the form attached hereto as Exhibit
C hereof, to acquire 16,667 shares of Common Stock at an exercise price
of $0.46875 per share. The Units, the Notes, the Warrants
and the shares of Common Stock to be issued pursuant to the Notes and Warrants
are referred to herein as the “Securities”.
AGREEMENT
In
consideration of the mutual promises contained herein and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties to
this Agreement agree as follows:
1. Purchase
and Sale of Units.
(a) Purchase of
Units.
(i) Units. Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 1(f) and
1(g) below, the Company shall issue and sell to each Buyer, and each Buyer
agrees to purchase from the Company on the applicable Closing Date (as defined
below), the number of Units set forth opposite such Purchaser’s name on Exhibit
A hereto.
(ii) Closing. The
date and time of the Closing shall be 10:00 a.m., Eastern Standard Time, on
April 30, 2009 (or such later date as is mutually agreed to by the Company and
Purchaser) (the “Closing
Date”).
(iii) Purchase
Price. The purchase price for each Unit (the "Purchase Price")
shall be Twenty-Five Thousand Dollars ($25,000).
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(b) Form of Payment. On the
Closing Date, subject to the satisfaction of the conditions to closing, each
Purchaser shall deliver by wire transfer to an account designated by the
Company, no later than the close of business on the Closing Date the aggregate
Purchase Price for the Units.
(c) Location of
Closing. Each Closing shall take place at the offices of Rele
& ▇▇▇▇▇▇ LLC, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇. Alternatively, the Closing can take place by the exchange of
final executed closing documents between legal counsel for the Company and
Purchaser.
(d) Deliverables of Company at
Closing. On the applicable Closing Date, the Company shall deliver to
each Purchaser (i) a Note in the principal amount set forth opposite such
Purchaser’s name on Exhibit
A hereto, (ii) a Warrant for the number of shares set forth opposite such
Purchaser’s name on Exhibit
A hereto, (iii) an executed copy of this Agreement, (iv) an executed copy
of the Security Agreement in substantially the form set forth on Exhibit
D hereto (the “Security
Agreement”).
(e) Deliverables of Purchaser at
Closing. On the applicable Closing Date, the Purchaser shall
deliver to the Company: (i) an executed copy of this Agreement and the Security
Agreement, and (ii) the applicable consideration provided for in Section 1(d)
hereof.
(f) Fractional
Units. Other then with respect to the conversion of the
Converted Indebtedness by the Converting Holders in the Closing, no fractional
Units shall be sold by the Company.
(g)
Use of
Proceeds. The proceeds from the sale of the Units will be for general
working capital of the Company.
2.
Representations
and Warranties of the Company. The Company
hereby represents and warrants to each Purchaser as follows:
(a) Organization and
Qualification. The Company and its Subsidiaries (as set forth
on Schedule
2(a) hereto) are entities duly organized and validly existing and, to the
extent legally applicable, in good standing under the laws of the State of
Delaware and have the requisite power and authorization to own their properties
and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign entity to do
business and to the extent legally applicable, is in good standing in every
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not reasonably be
expected to have a Material Adverse Effect (as defined below). As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
or condition (financial or otherwise) of the Company and its Subsidiaries, taken
as a whole, or on the transactions contemplated hereby or the other Transaction
Documents (as defined below) or the other instruments to be entered into in
connection herewith or therewith, or on the authority or ability of the Company
to perform its obligations under the Transaction Documents
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(b) Authorization; Enforcement;
Validity. The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement, the
Security Agreement, the Notes, the Warrants and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction
Documents") and to issue the Securities in accordance with the terms
hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Units, the Notes, the Warrants, and the reservation for issuance and the
issuance of the shares (the “Underlying Shares”)
upon conversion of the Notes and exercise of the Warrants, have been duly
authorized by the Company's Board of Directors and no further filing, consent,
or authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other Transaction Documents have
been duly executed and delivered by the Company, and constitute the legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(c) Issuance of
Securities. The
Securities are duly authorized and, when issued and paid for in accordance with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents. The
Underlying Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable, free and clear
of all liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents. The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock for issuance of the
Underlying Shares at least sufficient to permit the exercise of all existing
Warrants and conversion of all existing Notes.
(d) No
Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Securities) will not
(i) result in a violation of any certificate of incorporation, certificate of
formation, any certificate of designations or other constituent documents of the
Company or any of its Subsidiaries, any capital stock of the Company or any of
its Subsidiaries or bylaws of the Company or any of its Subsidiaries or (ii)
conflict with, or constitute a default or breach (or an event which with notice
or lapse of time or both would become a default or breach) in any respect under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including foreign, federal and
state securities laws and regulations) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except in the case of clauses (ii) and (iii)
above, to the extent that such violations conflict, default or right would not
reasonably be expected to have a Material Adverse Effect.
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(e) Consents. Neither the Company nor any
of its Subsidiaries is required to obtain any consent, authorization or order
of, or make any filing or registration with, any court, governmental agency or
any regulatory or self-regulatory agency or any other Person (as defined below)
in order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case in accordance with the
terms hereof or thereof. "Person" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(f) Capitalization. The Company has not issued any capital
stock since its most recently filed periodic report under the Exchange Act,
other than capital stock issued: (i) pursuant to the terms hereof, (ii) by the
Company and reported by the Company pursuant to a Current Report filed on Form
8K under the Securities and Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the “Exchange
Act”), (iii) pursuant to
the exercise of employee stock options under the Company’s stock option plans
and/or the issuance of shares of Common Stock to employees pursuant to the
Company’s employee stock purchase plans or (iv) upon the conversion or exercise
of securities of the Company outstanding as of the date of the most recently
filed periodic report under the Exchange Act. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction
Documents.
(g) SEC Reports;
Financial Statements. The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law or regulation to file such material) (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC
Reports”) on a timely basis
or has received a valid extension of such time of filing and has filed any such
SEC Reports prior to the expiration of any such extension. As of their
respective dates, except as disclosed in Schedule
2(g), the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Except as disclosed in Schedule
2(g), the financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit
adjustments.
(h) Material
Changes. Except as set
forth on Schedule
2(h) or elsewhere on the
schedules hereto, since the date of the latest audited financial statements
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included within the SEC Reports, except
as specifically disclosed in a subsequent SEC Report filed prior to the date
hereof: (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or disclosed in
filings made with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
Except as set forth on Schedule
2(h), the Company does not
have pending before the Commission any request for confidential treatment of
information. Except for the issuance of the Securities contemplated by this
Agreement or as set forth on Schedule
2(h) or elsewhere on the
Schedules hereto, no event, liability or development has occurred or exists with
respect to the Company or its Subsidiaries or their respective business,
properties, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 trading day prior to the date that this representation is
made.
(i) Litigation. Except as disclosed within the SEC
Reports or in Schedule
2(i), there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or, to
the knowledge of the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse
Effect.
(j) Labor
Relations. No material
labor dispute exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company which could reasonably be
expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that their relationships with their
employees are good.
(k) Compliance. Neither the Company nor any
Subsidiary: (i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body or (iii) is or has been in violation of any statute,
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rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws applicable to its business and all such laws that affect the environment,
except in each case as could not have or reasonably be expected to result in a
Material Adverse Effect.
(l) Regulatory
Permits. To the Company’s
knowledge, the Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses
as described in the SEC Reports, except where the failure to possess such
permits could not reasonably be expected to result in a Material Adverse Effect
(“Material
Permits”), and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Material Permit.
(m) Title to
Assets. The Company and the
Subsidiaries have good and marketable title in fee simple to all real property
owned by them and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all security interests, liens, claims, charge
or encumbrances (“Liens”), except for (i) liens for
current taxes not yet due, (ii) minor imperfections of title, if any, not
material in amount and not materially detracting from the value or impairing the
use of the property subject thereto or impairing the operations of the Company
or (iii) Permitted Liens (as defined below).
(n) Patents and
Trademarks. The Company and
the Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property rights and
similar rights as described in the SEC Reports as necessary or material for use
in connection with their respective businesses and which the failure to so have
could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”). Neither
the Company nor any Subsidiary has received a notice (written or otherwise) that
any of the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any third party. To the knowledge of
the Company, all such Intellectual Property Rights are enforceable and there is
no existing infringement by any third party of any of the Intellectual Property
Rights. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(o) Intentionally
Omitted.
(p) Private
Placement. Assuming the
accuracy of the Purchasers’ representations and warranties set forth in Section
3 hereof, no registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as contemplated
hereby.
(q) Transactions With Affiliates
and Employees. Other than as described in SEC Reports, and except as set
forth on Schedule
2(q), none of the officers, directors, employees and/or affiliates of
Company or the Subsidiaries is a party to any transaction with Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or
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otherwise
requiring payments to or from any officer, director employee or such affiliate
or, to the knowledge of Company, any entity in which any officer, director, or
any such employee has a substantial interest or is an officer, director,
trustee, partner or affiliate other than (a) for payment of salary or
consulting fees for services rendered, (b) reimbursement for expenses
incurred on behalf of Company and (c) for other employee benefits,
including stock option agreements under any stock option plan of Company, which
in the aggregate (for the total amount in (a), (b) and (c) combined) does not
exceed the amount of $25,000 for any officer, director, employee or
affiliate.
(r) Registration
Rights. Except as provided
herein or as set forth in Schedule
2(r), no Person has any
right to cause the Company to effect the registration under the Securities Act
of any securities of the Company.
(s) No General
Solicitation. Neither the
Company nor any person acting on behalf of the Company has offered or sold any
of the Securities by any form of general solicitation or general advertising.
The Company has offered the Securities for sale only to the Purchasers and
certain other “accredited investors” within the meaning of Rule 501 under the
Securities Act.
(t) Disclosure. All disclosure furnished by or on
behalf of the Company to the Purchasers regarding the Company, its business and
the transactions contemplated hereby, including the Schedules to this Agreement,
is true and correct and does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
3.
Representations
and Warranties of the Purchasers. Each Purchaser
hereby represents, warrants and covenants to the Company that:
(a) Authorization. Such Purchaser has full
power and authority to enter into this Agreement. This
Agreement, when executed and delivered by the Purchaser, will
constitute a valid and legally binding obligation of the Purchaser, enforceable
in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of a specific
performance, injunctive relief, or other equitable remedies.
(b) Purchase Entirely for Own
Account. This Agreement is made with the Purchaser in reliance
upon the Purchaser’s representation to the Company, which by the Purchaser’s
execution of this Agreement, the Purchaser hereby confirms, that the Securities
to be acquired by the Purchaser will be acquired for investment for the
Purchaser’s own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of
the Securities. The Purchaser has not been formed for the specific purpose of
acquiring any of the Securities.
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(c) Knowledge. The
Purchaser is aware of the Company’s business affairs and financial condition and
has acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. The Purchaser has had the
opportunity to review and read the SEC Reports, including without limitation the
“Risk Factors” set forth therein, and hereby acknowledge that they understand
the disclosures made in such SEC Reports and the existence of such “Risk
Factors”.
(d) Restricted
Securities. The Purchaser understands that the Securities have
not been, and will not be, registered under the Securities Act, by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser’s representations as expressed
herein. The Purchaser understands that the Securities are “restricted
securities” under applicable U.S. federal, state and province securities laws
and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they
are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. Other than as set forth herein, the
Purchaser acknowledges that the Company has no obligation to register or qualify
the Securities for resale. The Purchaser further acknowledges that if
an exemption from registration or qualification is available, it may be
conditioned on various requirements including, but not limited to, the time and
manner of sale, the holding period for the Securities, and on requirements
relating to the Company which are outside of the Purchaser’s control, and which
the Company is under no obligation and may not be able to satisfy.
(e) General Solicitation.
Such Purchaser is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(f) Short Sales and
Confidentiality Prior To The Date Hereof. Other than consummating the
transactions contemplated hereunder, such Purchaser has not directly or
indirectly, nor has any person or entity acting on behalf of or pursuant to any
understanding with such Purchaser, executed any purchases or sales, including
“short sales" as defined in Rule 200 of Regulation SHO under the Exchange Act,
of the securities of the Company (“Stock Transactions”)
during the period commencing from the time that such Purchaser first received a
term sheet (written or oral) from the Company or any other person or entity
representing the Company setting forth the material terms of the transactions
contemplated hereunder until the date hereof (“Discussion Time”). The Purchaser
further agrees not to engage in any Stock Transactions until the Company files a
Current Report on Form 8K under the Exchange Act which annexes copies of the
Transaction Documents thereto. The Company covenants to file such
Current Report on Form 8K under the Exchange Act within five trading days of the
Initial Closing.
(g) Accredited
Investor. The Purchaser is
an accredited investor as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
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4.
Covenants.
For so long as the Notes remain outstanding,
(a) Maintaining Properties,
Assets. The Company shall reasonably maintain in good repair,
working order and condition its properties and other assets, and those of any
Subsidiary, and from time to time make all reasonably necessary repairs,
renewals and replacements thereto.
(b) Liens. Company
shall not, and shall not permit any of its Subsidiaries to, create, incur or
suffer to exist any Lien upon any of its or its Subsidiaries’ assets or
properties, except for
(i) Liens created by operation of law such as materialmen’s liens,
mechanic’s liens and other similar liens; (ii) deposits, pledges or Liens
securing obligations incurred in respect of workers’ compensation, unemployment
insurance or other forms of governmental insurance or benefits;
(iii) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good faith by
appropriate proceedings with the establishment of adequate reserves on the
balance sheet of Company; (iv) Liens securing indebtedness to commercial banks
and other institutional lenders; (v) Liens that are subordinate in all respects
to the Liens held by the Purchasers; (vi) Liens in existence as of the date hereof
or (vii) Liens arising from or pursuant to the Converted Indebtedness, (viii)
Liens approved by the holders of a majority of the principal amount of
indebtedness outstanding under the Notes and (ix) the first priority
security interest in the domain name ▇▇▇▇▇.▇▇▇ held by Valhalla Investment
Partners pursuant to a Amended and Restated Secured Note in the principal amount
of 400,000 (the “Applicable
Indebtedness”) dated on or
about May 1, 2009 (collectively, the “Permitted
Liens”).
(c) Extraordinary
Actions. Unless otherwise
approved by the holders of a majority of the principal amount of indebtedness
outstanding under the Notes, the Company shall not nor shall it permit any
Subsidiary to: (i) acquire,
sell or otherwise transfer any material assets or rights of the Company or a
Subsidiary or enter into any contract or agreement relating to the sale of
assets which is not consummated pursuant to an arms length transaction, (ii)
enter into any contract, agreement or transaction (including any transfer or
sale of Intellectual Property Rights) with any officer, director, stockholder or
affiliate of the Company or a Subsidiary other than transactions pursuant to
arms length terms (as determined in the sole discretion of the Board), (iii)
other then repayment of the Applicable Indebtedness or any other indebtedness
outstanding as of the date hereof, directly or indirectly pay or declare any
dividend or make any distribution upon, redeem, retire or repurchase or
otherwise acquire, any shares of capital stock or other securities of the
Company or a Subsidiary, or (iv) materially change the Company’s line of
business as currently conducted.
5.
Other
Agreements of the Parties.
(a) Transfer
Restrictions.
(i) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an affiliate of a Purchaser, the Company may require the transferor
thereof
9
to
provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement.
(ii) The
Purchasers agree to the imprinting, so long as is required by this Section 5(a),
of a legend on any of the Securities in the following form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
(b) Removal of Legend.
Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4(a) hereof): (i) while a
registration statement covering the resale of such security is effective under
the Securities Act, or (ii) following any sale of such Underlying Shares
pursuant to Rule 144, or (iii) if such Underlying Shares are eligible for sale
under Rule 144, without the requirement for the Company to be in compliance with
the current public information required under Rule 144 as to such Underlying
Shares and without volume or manner-of-sale restrictions, or (iv) if such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company agrees that at such time as such legend is
no longer required under this Section 4(b), it will, no later than three trading
days following the delivery by a Purchaser to the Company or the Company’s
transfer agent of a certificate representing Underlying Shares, as applicable,
issued with a restrictive legend (such third trading day, the "Legend Removal
Date"), along with an acceptable legal opinion and broker representation letter,
deliver or cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to the
Company’s transfer agent that enlarge the restrictions on transfer set forth in
this Section.
10
(c) Compliance with Securities
Act. Each Purchaser, severally and not jointly with the other
Purchasers, agrees that such Purchaser will sell any Securities pursuant to
either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom, and that
if Securities are sold pursuant to a registration statement, they will be sold
in compliance with the plan of distribution set forth therein, and acknowledges
that the removal of the restrictive legend from certificates representing
Securities as set forth in Section 4(b) is predicated upon the Company's
reliance upon this understanding.
(d) Furnishing of
Information. Until the earliest of the time that no Purchaser
owns Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule
144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.
(e) Disclosure;
Publicity. No Purchaser shall issue any other press release or
other public disclosure with respect to the transactions contemplated hereby,
and neither the Company nor any Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company.
(f) Reservation of
Securities. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may then be required to fulfill its obligations in
full under the Transaction Documents. If, on any date, the
number of authorized but unissued (and otherwise unreserved) shares of Common
Stock is less than the number of Underlying Shares issuable upon the conversion
and exercise of all Securities outstanding on such date, then the Board of
Directors shall use commercially reasonable efforts to amend the Company's
certificate or articles of incorporation to sufficiently increase the number of
authorized but unissued shares of Common Stock.
(g) Form D and Blue
Sky. If required, Company shall file a Form D with respect to the
issuance of the Notes and Warrants (or the issuance of the Underlying Shares) as
required under Regulation D under the Securities Act and, upon written
request, provide a copy thereof to Purchasers promptly after such filing. The
Company shall take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for or to qualify the Notes and
Warrants for sale to Purchasers pursuant to the terms hereof (or the Underlying
Shares upon conversion of this Notes or exercise of the Warrants) under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of any such action so taken to Purchasers promptly after
such filing. However, the Company shall not be
required to execute any general consent to service of process in order to obtain
such blue sky clearance, except in a jurisdiction where the Company is already
subject to such process.
11
6.
Piggyback
Registration Rights in
Company. If, at any time, there is not an effective
registration statement covering the resale all of the Underlying Shares, and
Company shall determine to prepare and file with the Securities and Exchange
Commission (the “Commission”) a
registration statement relating to an offering for its own account or the
account of others under the Securities Act, of any of its equity securities
(other than on Form S-4 or
Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), then Company
shall send to Purchasers a written notice of such determination and, if within
ten (10) days after receipt by Purchasers of such notice, Company shall receive
a request in writing from Purchasers, Company shall include in such registration
statement all or any part of such Registrable Securities holders requests to be
registered at no cost to Holders
(other than underwriting discounts, fees and
commissions). Holders (or their designee(s)) shall also be
provided with such other rights, and Company shall have such obligations, as
customarily accompany investor piggyback registration rights, including, without
limitation, the right of Holders to customary indemnification by Company,
Company’s obligation to prepare and file with the Commission such amendments and
supplements to such registration statement as may be necessary to keep such
registration statement effective until the disposition of all securities covered
by such registration statement, the obligation of Company to register and
qualify the securities covered by such registration statement under applicable
state securities and blue sky laws, the obligation of Company to cause the
securities covered by such registration statement to be listed or quoted on the
Trading Market on which Company’s securities are then listed or quoted and the
obligation of Company to cause to be provided customary legal opinions and
comfort letters of its independent certified accountants if requested in
connection with a sale pursuant to such registration statement). Notwithstanding the
foregoing, if a registration involves an underwritten offering, and the lead
managing underwriter shall advise Company that the amount of securities to be
included in the offering exceeds the amount which can be sold in the offering,
the number of securities owned by Holders to be included in the offering shall
be eliminated or reduced as required by the managing underwriter. Notwithstanding anything
contained herein to the contrary, securities shall cease to be Registrable
Securities when (a) a Registration Statement covering such Registrable
Securities has been declared effective by the Commission and it has been
disposed of pursuant to such effective Registration Statement or (b) such
Registrable Securities may be sold pursuant to Rule 144 under the Securities Act
without volume restriction.
12
7.
Miscellaneous.
(a)
Successors
and Assigns. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(b)
Governing
Law. This Agreement
and all acts and transactions pursuant hereto and the rights and obligations of
the parties hereto shall be governed, construed and interpreted in accordance
with the laws of the State of Florida, without giving effect to principles of
conflicts of law. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in Palm Beach County,
Florida. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in Palm Beach County,
Florida for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper or is an inconvenient
venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by
law. If either party shall commence an action or proceeding to
enforce any provisions of the Transaction Documents, then the prevailing party
in such action or proceeding shall be reimbursed by the other party for its
reasonable attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.
(c)
Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall be deemed
an original and all of which together shall constitute one
instrument.
(d)
Titles
and Subtitles. The titles and
subtitles used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement.
(e)
Notices. Any notice
required or permitted by this Agreement shall be in writing and shall be deemed
sufficient upon receipt, when delivered personally or by courier, overnight
delivery service, or 48 hours after being deposited in the U.S. mail as
certified or registered mail with postage prepaid and return receipt requested,
if such notice is addressed to the party
to be notified at such party’s address as set forth below or as subsequently
modified by written notice.
13
(f)
Replacement
of Securities. If any certificate or instrument evidencing any Securities
is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof (in the
case of mutilation), or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs (including customary indemnity) associated with the issuance
of such replacement Securities.
(g) Amendments
and Waivers. Any term of this
Agreement may be amended or waived only with the written consent of the Company
and the holders of a majority of the outstanding principal amount of the Notes.
Any amendment or waiver effected in accordance with this Section 7(g) shall
be binding upon each Holder and each transferee of the Securities, each future
holder of all such Securities, and the Company.
(h) Severability. If one or more
provisions of this Agreement are held to be unenforceable
under applicable law, the parties agree to renegotiate such provision in good
faith, in order to maintain the economic position enjoyed by each party as close
as possible to that under the provision rendered unenforceable. In
the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (i) such provision shall be excluded
from this Agreement, (ii) the balance of the Agreement shall be interpreted
as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(i)
Entire
Agreement. This Agreement,
and the documents referred to herein constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements existing between the parties hereto are expressly
canceled.
(j)
Survival
of Representations, Warranties and Covenants. The representations and
warranties contained in Sections 2 hereof shall survive until such time as the
later of: (i) the date on which all the Notes have been converted or satisfied
and (ii) the date on which all the Warrants have been exercised in full or
expired.
(k) Exculpation
Among Purchasers. Each Holder
acknowledges that it is not relying upon any person, firm or corporation, other
than the Company and its officers and directors, in making its investment or
decision to invest in the Company. Each Holder agrees that no Holder
nor the respective controlling persons, officers, directors, partners, agents,
or employees of any Holder shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Securities.
[Signature
Pages Follow]
14
The
parties have executed this Secured Convertible Note and Warrant Purchase Agreement as of
the date first written above.
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COMPANY:
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▇▇▇▇▇.▇▇▇
GROUP, INC.
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By.
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Name:
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Title:
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Address:
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Facsimile
Number:
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SIGNATURE
PAGE TO SECURED CONVERTIBLE NOTE AND WARRANT
PURCHASE
AGREEMENT
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PURCHASERS:
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(Purchaser)
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By.
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Name:
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(print)
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Title:
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Address:
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Facsimile
Number:
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Exhibits
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Exhibit A
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Schedule
of Purchasers
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Exhibit B
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Form
of Secured Convertible Promissory Note
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Exhibit
C
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Form
of Common Stock Warrant
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Exhibit
D
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Form
of Security
Agreement
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Exhibit
A
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Purchaser
Name & Address
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Number
of Units
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Principal
Amount of Note
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Number
of shares of Common Stock exercisable under Warrant
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