EXHIBIT 1.01.1
STOCK PURCHASE AGREEMENT
BETWEEN
ENUCLEUS, INC.
AND
SIGMA OPPORTUNITY FUND, LLC
DATED
September 14, 2005
EXHIBIT 1.01.1
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STOCK PURCHASE AGREEMENT
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This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 14th day of September, 2005 between eNucleus, Inc., a corporation
organized and existing under the laws of the State of Delaware ("eNucleus" or
the "Company"), and SIGMA OPPORTUNITY FUND, LLC, a Delaware limited liability
company ("Investor").
PRELIMINARY STATEMENT:
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WHEREAS, the Investor wishes to purchase from the Company, upon the terms
and subject to the conditions of this Agreement, at the purchase price of Five
Hundred Twenty Thousand Dollars ($520,000), 2,000,000 shares of Common Stock of
the Company. In addition, the Company will issue to the Investor a Common Stock
Purchase Warrant (the "Warrant") to purchase up to an additional 500,000 shares
of Common Stock of the Company at an exercise price of $.35 per share; and
WHEREAS, the parties intend to memorialize the purchase and sale of the
Common Stock and the Warrants.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby conclusively acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
INCORPORATION BY REFERENCE, SUPERSEDER AND DEFINITIONS
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1.1 Incorporation by Reference. The foregoing recitals, and the Exhibits and
Schedules attached hereto and referred to herein, are hereby acknowledged to be
true and accurate, and are incorporated herein by this reference.
1.2 Superseder. This Agreement, to the extent that it is inconsistent with any
other instrument or understanding among the parties governing the affairs of the
Company, shall supersede such instrument or understanding to the fullest extent
permitted by law. A copy of this Agreement shall be filed at the Company's
principal office.
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1.3 Certain Definitions. For purposes of this Agreement, the following
capitalized terms shall have the following meanings (all capitalized terms used
in this Agreement that are not defined in this Article 1 shall have the meanings
set forth elsewhere in this Agreement):
1.3.1 "1933 Act" means the Securities Act of 1933, as amended.
1.3.2 "1934 Act" means the Securities Exchange Act of 1934, as amended.
1.3.3 "Affiliate" means a Person or Persons directly or indirectly, through
one or more intermediaries, controlling, controlled by or under common control
with the Person(s) in question. The term "control," as used in the immediately
preceding sentence, means, with respect to a Person that is a corporation, the
right to the exercise, directly or indirectly, of more than 50 percent of the
voting rights attributable to the shares of such controlled corporation and,
with respect to a Person that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such controlled Person.
1.3.4 "Certificate" means the Certificate of Incorporation of the Company,
as the same may be amended from time to time.
1.3.5 "Closing" shall mean the Closing of the transactions contemplated by
this Agreement on the Closing Date.
1.3.6 "Closing Date" means the date on which the payment of the Purchase
Price (as defined herein) by the Investor to the Company is completed pursuant
to this Agreement to purchase the Common Stock and Warrant, which shall occur on
September 14, 2005.
1.3.7 "Common Stock" means shares of common stock of the Company, par value
$0.001 per share.
1.3.8 "Delaware Act" means the Delaware General Corporation Law, as
amended.
1.3.9 "Material Adverse Effect" shall mean any adverse effect on the
business, operations, properties or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates, taken
as a whole and/or any condition, circumstance, or situation that would prohibit
or otherwise materially interfere with the ability of the Company to perform any
of its material obligations under this Agreement or the Registration Rights
Agreement or to perform its obligations under any other material agreement.
1.3.10 "Person" means an individual, partnership, firm, limited liability
company, trust, joint venture, association, corporation, or any other legal
entity.
1.3.11 "Purchase Price" means the $520,000 paid by the Investor to the
Company for the Common Stock and the Warrant.
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1.3.12 Registration Rights Agreement" shall mean the registration rights
agreement between the Investor and the Company attached hereto as Exhibit A.
1.3.13 "Registration Statement" shall mean the registration statement under
the 1933 Act to be filed with the Securities and Exchange Commission for the
registration of the Shares pursuant to the Registration Rights Agreement.
1.3.14 "SEC" means the Securities and Exchange Commission.
1.3.15 "SEC Documents" shall mean the Company's latest Form 10-K or 10-KSB
as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter,
and the Proxy Statement for its latest fiscal year as of the time in question
until such time as the Company no longer has an obligation to maintain the
effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
1.3.16 "Shares" shall mean, collectively, the shares of Common Stock of the
Company purchased hereunder and the shares of Common Stock issuable to the
Investor upon exercise of the Warrant.
1.3.17 "Subsequent Financing" shall mean any offer and sale of shares of
Common Stock or debt or preferred stock that is convertible into shares of
Common Stock.
1.3.18 "Transaction Documents" shall mean this Agreement, all Schedules and
Exhibits attached hereto and all other documents and instruments to be executed
and delivered by the parties in order to consummate the transactions
contemplated hereby, including, but not limited to the documents listed in
Sections 3.2 and 3.3 hereof.
1.3.19 "Warrant" shall mean the Common Stock Purchase Warrant in the form
attached hereto Exhibit B.
ARTICLE II
SALE AND PURCHASE OF ENUCLEUS STOCK AND WARRANT PURCHASE PRICE
2.1 Sale of Common Stock and Issuance of Warrant.
(a) Upon the terms and subject to the conditions set forth herein, and
in accordance with applicable law, the Company agrees to sell to the Investor,
and the Investor agrees to purchase from the Company, on the Closing Date,
2,000,000 shares of Common Stock and the Warrant for the Purchase Price. The
Purchase Price shall be paid by the Investor to the Company on the Closing Date
by a wire transfer or check of the Purchase Price into an account designated by
the Company. The Company shall register the Shares pursuant to the terms and
conditions of the Registration Rights Agreement.
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(b) Upon the execution and delivery of this Agreement and the
Company's receipt of the Purchase Price, the Company shall (x) issue to the
Investor 2,000,000 shares of Common Stock and (y) issue to the Investor the
Warrant to purchase an additional 500,000 shares of Common Stock.
2.2 Purchase Price. The Purchase Price shall be paid by the Investor in the form
of a check or wire transfer of immediately available funds to the Company in
United States Dollars from the Investor to the escrow agent pursuant to the
Escrow agreement on the Closing Date.
ARTICLE III
CLOSING DATE AND DELIVERIES AT CLOSING
3.1 Closing Date The closing of the transactions contemplated by this Agreement
(the "Closing"), unless expressly determined herein, shall be held at the
offices of the Company, at 5:00 P.M. local time, on the Closing Date or on such
other date and at such other place as may be mutually agreed by the parties,
including closing by facsimile with originals to follow.
3.2 Deliveries by the Company. In addition to and without limiting any other
provision of this Agreement, the Company agrees to deliver, or cause to be
delivered, to the Investor, the following:
(a) On the Closing Date, certificates representing the Shares of
Common Stock, which certificates shall be issued in the name of
the Investor.
(b) At or prior to the Closing, an executed Agreement;
(c) At or prior to the Closing, the executed Registration Rights
Agreement;
(d) At or prior to the Closing, an executed Common Stock Purchase
Warrant;
(e) Certifications in form and substance acceptable to the Company
and the Investor from any and all brokers or agents involved in
the transactions contemplated hereby as to the amount of
commission or compensation payable to such broker or agent as a
result of the consummation of the transactions contemplated
hereby and from the Company or the Investor, as appropriate, to
the effect that reasonable reserves for any other commissions or
compensation that may be claimed by any broker or agent have been
set aside;
(f) Evidence of approval of the Board of Directors of the Company of
the Transaction Documents and the transactions contemplated
hereby;
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(g) Certificates of Existence or Authority to Transact Business of
the Company issued by each of the Secretaries of State for
Delaware and Illinois;
(h) Such other documents or certificates as shall be reasonably
requested by the Investor or its counsel, including an officer's
certificate to the effect that the covenants of the Company set
forth in Article VI to be performed on or prior to the Closing
have been performed.
3.3 Deliveries by Investor. In addition to and without limiting any other
provision of this Agreement, the Investor agrees to deliver, or cause to be
delivered, to the Company, the following:
(a) At or prior to the Closing, the Purchase Price;
(b) At or prior to the Closing, an executed Agreement;
(c) At or prior to the Closing, the executed Registration Rights
Agreement; and
(d) Such other documents or certificates as shall be reasonably
requested by the Company or its counsel.
In the event any document provided to the other party in Paragraphs 3.2 and 3.3
herein are provided by facsimile, the party shall forward an original document
to the other party within seven (7) business days.
3.4 Further Assurances. The Company and the Investor shall, upon request, on or
after the Closing Date, cooperate with each other (specifically, the
Company shall cooperate with the Investor, and the Investor shall cooperate
with the Company) by furnishing any additional information, executing and
delivering any additional documents and/or other instruments and doing any
and all such things as may be reasonably required by the parties or their
counsel to consummate or otherwise implement the transactions contemplated
by this Agreement.
3.5 Waiver. The Investor may waive any of the requirements of Section 3.2 of
this Agreement, and the Company at its discretion may waive any of the
provisions of Section 3.3 of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
ENUCLEUS
The Company represents and warrants to the Investor as of Closing
(which warranties and representations shall survive the Closing for a period of
one year regardless of what examinations, inspections, audits and other
investigations the Investor has heretofore made or may hereinafter make with
respect to such warranties and representations) as follows:
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4.1 Organization and Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has the requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted and is
duly qualified to do business in any other jurisdiction by virtue of the nature
of the businesses conducted by it or the ownership or leasing of its properties,
except where the failure to be so qualified will not, when taken together with
all other such failures, have a Material Adverse Effect on the business,
operations, properties, assets, financial condition or results of operation of
the Company and its subsidiaries taken as a whole.
4.2 Articles of Incorporation and By-Laws. The complete and correct copies of
the Company's Certificate and By-Laws, as amended or restated to date which have
been filed with the SEC are a complete and correct copy of such document as in
effect as of the Closing Date.
4.3 Capitalization.
4.3.1 The authorized and outstanding capital stock of the Company is set
forth in the Company's Annual Report on Form 10-KSB, filed on April 22, 2005
with the SEC and updated on all subsequent SEC Documents. All shares of capital
stock have been duly authorized and are validly issued, and are fully paid and
non-assessable, and free of preemptive rights.
4.3.2 Except as set forth on Schedule 4.3.2 hereto, there are not now
outstanding options, warrants, rights to subscribe for, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of any class of capital stock of the Company, or
agreements, understandings or arrangements to which the Company is a party, or
by which the Company is or may be bound, to issue additional shares of its
capital stock or options, warrants, scrip or rights to subscribe for, calls or
commitment of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of any class of its capital
stock. The Company agrees to inform the Investor in writing of any additional
warrants granted prior to the Closing Date.
4.3.3 The Company on the Closing Date (i) will have full right, power, and
authority to sell, assign, transfer, and deliver, by reason of record and
beneficial ownership, to the Investor, the Shares hereunder, free and clear of
all liens, charges, claims, options, pledges, restrictions, and encumbrances
whatsoever; and (ii) upon delivery and payment by the Investor of the Purchase
Price to the Company, and upon exercise of the Warrant, the Investor will
acquire good and marketable title to the Shares, free and clear of all liens,
charges, claims, options, pledges, restrictions, and encumbrances whatsoever.
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4.4 Authority. The Company has all requisite corporate power and authority to
execute and deliver this Agreement and the Common Stock, the Warrant, and other
Transaction Documents, and to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the other Transaction Documents by
the Company and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company is necessary to authorize this
Agreement and the other Transaction Documents or to consummate the transactions
contemplated hereby or thereby except as disclosed in this Agreement or the
other Transaction Documents. 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 terms.
4.5 No Conflict; Required Filings and Consents. The execution and delivery of
this Agreement and the other Transaction Documents by the Company does not, and
the performance by the Company of its obligations hereunder or thereunder will
not: (i) conflict with or violate the Certificate or By-Laws of the Company;
(ii) conflict with, breach or violate any federal, state, foreign or local law,
statute, ordinance, rule, regulation, order, judgment or decree (collectively,
"Laws") in effect as of the date of this Agreement and applicable to the
Company; or (iii) result in any breach of, constitute a default (or an event
that with notice or lapse of time or both would become a default) under, give to
any other entity any right of termination, amendment, acceleration or
cancellation of, require payment under, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party or
by the Company or any of its properties or assets is bound. Excluding from the
foregoing are such violations, conflicts, breaches, defaults, terminations,
accelerations, creations of liens, or incumbency that would not, in the
aggregate, have a Material Adverse Effect.
4.6 Report and Financial Statements. The Company's Annual Report on Form 10-KSB,
filed on April 22, 2005 with the SEC, contains the audited financial statements
of the Company as of December 31, 2004 (the "Financial Statements"). Each of the
balance sheets contained in or incorporated by reference into any such Financial
Statements (including the related notes and schedules thereto) fairly presented
the financial position of the Company, as of its date, and each of the
statements of income and changes in stockholders' equity and cash flows or
equivalent statements in such Financial Statements (including any related notes
and schedules thereto) fairly presents, changes in stockholders' equity and
changes in cash flows, as the case may be, of the Company, for the periods to
which they relate, in each case in accordance with United States generally
accepted accounting principles ("U.S. GAAP") consistently applied during the
periods involved, except in each case as may be noted therein, subject to normal
year-end audit adjustments in the case of unaudited statements. The books and
records of the Company have been, and are being, maintained in all material
respects in accordance with U.S. GAAP and any other applicable legal and
accounting requirements and reflect only actual transaction.
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4.7 Compliance with Applicable Laws. The Company is not in violation of, or, to
the knowledge of the Company, under investigation with respect to or has been
given notice or has been charged with the violation of any Law of a governmental
agency, except for violations which individually or in the aggregate do not have
a Material Adverse Effect.
4.8 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or Commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
4.9 SEC Documents. The Company acknowledges that the Company is a publicly held
company and has made available to the Investor after demand true and complete
copies of any requested SEC Documents. The Company has registered its Common
Stock pursuant to Section 12(d) of the 1934 Act, and the Common Stock is quoted
and traded on the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. The Company has received no notice, either oral or written, with
respect to the continued quotation or trading of the Common Stock on the OTC
Bulletin Board. The Company has not provided to the Investor any information
that, according to applicable law, rule or regulation, should have been
disclosed publicly prior to the date hereof by the Company, but which has not
been so disclosed. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the 1934 Act, and rules and
regulations of the SEC promulgated thereunder and the SEC Documents did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.10 Litigation. To the knowledge of the Company, no litigation, claim, or other
proceeding before any court or governmental agency is pending or, to the
knowledge of the Company, threatened against the Company, the prosecution or
outcome of which may have a Material Adverse Effect.
4.11 Exemption from Registration. Subject to the accuracy of the Investor's
representations in Article V, except as required pursuant to the Registration
Rights Agreement, the sale of the Common Stock and the Warrant by the Company to
the Investor will not require registration under the 1933 Act or any state blue
sky laws. Upon exercise of the Warrant in accordance with its terms, the shares
of Common Stock and the underlying Warrant will be duly and validly issued,
fully paid, and non-assessable. The Company is issuing the Common Stock and the
Warrants in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D as promulgated
by the SEC under the 1933 Act, and/or Section 4(2) of the 1933 Act; provided,
however, that certain filings and registrations may be required under state
securities "blue sky" laws depending upon the residency of the Investor, which
shall timely be made by the Company.
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4.12 No General Solicitation or Advertising in Regard to this Transaction.
Neither the Company nor any of its Affiliates nor, to the knowledge of the
Company, any Person acting on its or their behalf (i) has conducted or will
conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D as promulgated by the SEC under the ▇▇▇▇ ▇▇▇) or general
advertising with respect to the sale of the Common Stock or the Warrant, or (ii)
made any offers or sales of any security or solicited any offers to buy any
security under any circumstances that would require registration of the Common
Stock or the Warrant, under the 1933 Act, except as required herein.
4.13 No Material Adverse Effect. Since December 31, 2004, no event or
circumstance resulting in a Material Adverse Effect has occurred or exists with
respect to the Company. No material supplier has given notice, oral or written,
that it intends to cease or reduce the volume of its business with the Company
from historical levels. Since December 31, 2004, no event or circumstance has
occurred or exists with respect to the Company or its businesses, properties,
prospects, operations or financial condition, that, under any applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed
in writing to the Investor.
4.14 Material Non-Public Information. The Company has not disclosed to the
Investor any material non-public information that (i) if disclosed, would
reasonably be expected to have a material effect on the price of the Common
Stock or (ii) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
4.15 Internal Controls And Procedures. The Company maintains books and records
and internal accounting controls which provide reasonable assurance that (i) all
transactions to which the Company or any subsidiary is a party or by which its
properties are bound are executed with management's authorization; (ii) the
recorded accounting of the Company's consolidated assets is compared with
existing assets at regular intervals; (iii) access to the Company's consolidated
assets is permitted only in accordance with management's authorization; and (iv)
all transactions to which the Company or any subsidiary is a party or by which
its properties are bound are recorded as necessary to permit preparation of the
financial statements of the Company in accordance with U.S. GAAP.
4.16 Full Disclosure. No representation or warranty made by the Company in this
Agreement and no certificate or document furnished or to be furnished to
the Investor pursuant to this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company that:
5.1 Organization and Standing of the Investor. The Investor is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware. The state in which any offer to purchase Shares
hereunder was made or accepted by the Investor is the state shown as the
Investor's address. The Investor was not formed for the purpose of investing
solely in the Common Stock, the Warrant or shares of Common Stock which are the
subject of this Agreement.
5.2 Authorization and Power. The Investor has the requisite power and authority
to enter into and perform this Agreement and to purchase the securities being
sold to it hereunder. The execution, delivery and performance of this Agreement
by the Investor and the consummation by the Investor of the transactions
contemplated hereby have been duly authorized by all necessary company action
where appropriate. This Agreement and the Registration Rights Agreement have
been duly executed and delivered by the Investor and at the Closing shall
constitute valid and binding obligations of the Investor enforceable against the
Investor in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
5.3 No Conflicts. The execution, delivery and performance of this Agreement and
the consummation by the Investor of the transactions contemplated hereby or
relating hereto do not and will not (i) result in a violation of the Investor's
charter documents or bylaws where appropriate or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument to which the Investor is a party, or result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Investor or its properties (except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, have a Material Adverse Effect on such Investor). The Investor is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of the Investor's obligations under this Agreement or to
purchase the securities from the Company in accordance with the terms hereof,
provided that for purposes of the representation made in this sentence, the
Investor is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
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5.4 Financial Risks. The Investor acknowledges that the Investor is able to bear
the financial risks associated with an investment in the securities being
purchased by the Investor from the Company and that it has been given full
access to such records of the Company and the subsidiaries and to the officers
of the Company and the subsidiaries as it has deemed necessary or appropriate to
conduct its due diligence investigation. The Investor is capable of evaluating
the risks and merits of an investment in the securities being purchased by the
Investor from the Company by virtue of its experience as an investor and its
knowledge, experience, and sophistication in financial and business matters and
the Investor is capable of bearing the entire loss of its investment in the
securities being purchased by the Investor from the Company.
5.5 Accredited Investor. The Investor is (i) an "accredited investor" as that
term is defined in Rule 501 of Regulation D promulgated under the 1933 Act by
reason of Rule 501(a)(3) and (6), (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an entity)
and professional advisors (who are not affiliated with or compensated in any way
by the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the securities being purchased by the Investor from the Company.
5.6 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or Commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Investor.
5.7 Knowledge of Company. The Investor and the Investor's advisors, if any, have
been, upon request, furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
sale of the securities being purchased by the Investor from the Company. The
Investor and the Investor's advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received complete and satisfactory
answers to any such inquiries.
5.8 Risk Factors The Investor understands that the Investor's investment in the
securities being purchased by the Investor from the Company involves a high
degree of risk. The Investor understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the securities being purchased by the Investor
from the Company. The Investor warrants that the Investor is able to bear the
complete loss of the Investor's investment in the securities being purchased by
the Investor from the Company.
5.9 Full Disclosure. No representation or warranty made by the Investor in this
Agreement and no certificate or document furnished or to be furnished to the
Company pursuant to this Agreement contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading. Except as set
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forth or referred to in this Agreement, the Investor does not have any agreement
or understanding with any person relating to acquiring, holding, voting or
disposing of any equity securities of the Company.
5.10 Reimbursement of Due Diligence Expenses. Upon closing, the Company shall
reimburse the Investor for its expenses actually incurred in connection with the
negotiation and execution of, and closing under, this Agreement up to an
aggregate maximum of $10,000. If the transaction is not closed, there shall be
no reimbursement of any expenses.
ARTICLE VI
COVENANTS OF THE COMPANY
6.1. Registration Rights. The Company shall cause the Registration Rights
Agreement to remain in full force and effect according to the provisions of the
Registration Rights Agreement and the Company shall comply in all material
respects with the terms thereof.
6.2. Reservation Of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to issue the shares of Common Stock underlying the Warrant.
6.3. Compliance with Laws. The Company hereby agrees to comply in all respects
with the Company's reporting, filing and other obligations under the Laws.
6.4. Exchange Act Registration. The Company (a) will continue its obligation to
report to the SEC under Section Section 12(b) or (g) under the 1934 Act and will
use its best efforts to comply in all respects with its reporting and filing
obligations under the 1934 Act, and will not take any action or file any
document (whether or not permitted by the 1934 Act or the rules thereunder) to
terminate or suspend any such registration or to terminate or suspend its
reporting and filing obligations under the 1934 until the Investor has disposed
of all of its Shares.
6.5 Corporate Existence; Conflicting Agreements. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company. The
Company shall not enter into any agreement, the terms of which agreement would
restrict or impair the right or ability of the Company to perform any of its
obligations under this Agreement or any of the other agreements attached as
exhibits hereto.
6.6 Preferred Stock. For a period of two (2) years from the Closing Date, the
Company will not issue any Preferred Stock of the Company.
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6.7 Convertible Debt. On or prior to the Closing Date, the Company will cause to
be cancelled all convertible debt in the Company. For a period of two (2) years
from the Closing Date, the Company will not issue any convertible debt.
6.8 Acquisition Payments. Shares to be issued as a form of payment in any
acquisition, previous, present or future must not be issued below a floor stock
price of $0.40 / share.
6.9 Reset Equity Deals. On or prior to the Closing Date, the Company will cause
to be cancelled any and all reset features related to any shares outstanding
that could result in additional shares being issued, except for securities held
by ▇▇▇▇▇▇ Partners LLP. For a period of two (2) years from the Closing Date, the
Company will not enter into any transactions that have any reset features that
could result in additional shares being issued.
6.10 Independent Directors. The Company will cause a majority of the board of
directors at all times to be qualified independent directors. If the board shall
not be composed in the majority of qualified independent directors for any
period in excess of thirty consecutive days, the Company shall pay to the
Investor, as liquidated damages and not as a penalty, an amount equal to sixty
percent (60%) of the Purchase Price per annum, payable in cash monthly, pro
rated based upon the number of Shares then held by the Investor. The parties
agree that the only damages payable for a violation of the terms of this
Agreement with respect to which liquidated damages are expressly provided shall
be such liquidated damages. Nothing shall preclude the Investor from pursuing or
obtaining specific performance or other equitable relief with respect to this
Agreement. The parties hereto agree that the liquidated damages provided for in
this Section 6.10 constitute a reasonable estimate of the damages that may be
incurred by the Investor by reason of the failure of the Company to appoint a
majority of the board of directors in accordance with the provision hereof.
6.11 Independent Directors To Be Majority of Audit and Compensation Committees.
The Company will cause the audit and compensation committees of the board of
directors to at all times be comprised of a majority of independent directors.
If such independent directors do not compose the majority of the audit and
compensation committees for any period in excess of thirty consecutive days, the
Company shall pay to the Investor, as liquidated damages and not as a penalty,
an amount equal to sixty percent (60%) of the Purchase Price per annum, payable
in cash monthly, pro rated based upon the number of shares then held by
Investor. The parties agree that the only damages payable for a violation of the
terms of this Agreement with respect to which liquidated damages are expressly
provided shall be such liquidated damages. Nothing shall preclude the Investor
from pursuing other remedies or obtaining specific performance or other
equitable relief with respect to this Agreement. The parties hereto agree that
the liquidated damages provided for in this Section 6.11 constitute a reasonable
estimate of the damages that may be incurred by the Investor by reason of the
failure of the Company to appoint a majority of independent directors to the
audit and compensation committees, in accordance with the provision hereof.
PAGE 14 OF 23
EXHIBIT 1.01.1
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6.12 [Reserved]
6.13 Use of Proceeds. The Company will use the proceeds from the sale of the
Common Stock and the Warrant (excluding amounts paid by the Company for legal
and administrative fees in connection with the sale of such securities) for
working capital and acquisitions.
6.14 Right of First Refusal. The Investor shall have the right to participate in
any funding by the Company following the Closing Date on a pro rata basis at
ninety percent (90%) of the applicable offering price; provided that such right
shall terminate on the earlier of (x) the three (3) year anniversary of the date
of this Agreement and (y) such time as the Investor no longer holds more than
twenty percent (20%) of the Shares acquired herein.
6.15 Insider Selling. The earliest any "Insiders" can start selling their shares
shall be one year from the Closing Date. Insiders shall include all officers and
directors of the Company. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Investor shall not be
considered "Insiders".
6.16 Employment and Consulting Contracts. Employment and consulting contracts
with officers and directors shall at time of Closing and for two years
thereafter not contain: any bonuses not related directly to increases in
earnings; any car allowances not approved by the unanimous vote of the board of
directors; any anti-dilution or reverse split protection provisions for shares,
options or warrants; any deferred compensation; any unreasonable compensation or
benefit clauses; or any termination clauses of over one year of salary.
Notwithstanding the foregoing, the annual salaries for each of ▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇ shall be $175,000 for a period of two years with a bonus plan that is
tied to earnings per share growth and the issuance of 700,000 options to each
payable in two installments of 350,000 each per year over a two year period.
6.17 Debt Limitation. The Company agrees for three years after Closing not to
enter into any new borrowings of more than twice as much as the sum of the
EBITDA from recurring operations over the past four quarters.
6.18 Subsequent Equity Sales. From the date hereof until such time as the
Investor no longer holds any of the Shares, the Company shall be prohibited from
effecting or entering into an agreement to effect any Subsequent Financing
involving a "Variable Rate Transaction" (as defined below). The term "Variable
Rate Transaction" shall mean a transaction in which the Company issues or sells
(i) any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
PAGE 15 OF 23
EXHIBIT 1.01.1
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the Common Stock. For a period of five years from the date hereof, the Company
shall be prohibited from effecting or entering into an agreement to effect a
Subsequent Financing including an "MFN Transaction" (as defined below). The term
"MFN Transaction" shall mean a transaction in which the Company issues or sells
any securities in a capital raising transaction or series of related
transactions which grants to an investor the right to receive additional shares
based upon future transactions of the Company on terms more favorable than those
granted to such investor in such offering. The Investor shall be entitled to
obtain injunctive relief against the Company to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.
6.19 Penalties. All penalties, resets, interest, or any additional compensation
of any kind to investor is either paid in cash or other at choice of investor.
ARTICLE VII
COVENANTS OF THE INVESTOR
7.1 Compliance with Law. The Investor's trading activities with respect to
shares of the Company's Common Stock will be in compliance with all applicable
state and federal securities laws, rules and regulations and rules and
regulations of any public market on which the Company's Common Stock is listed.
7.2 Transfer Restrictions. The Investor acknowledges that (1) the Common Stock,
the Warrant and shares of Common Stock underlying the Warrant, have not been
registered under the provisions of the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Investor shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Common Stock, the
Warrant and shares of Common Stock underlying the Warrant, to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; and (2) any sale of the Common Stock, the Warrant and shares of
Common Stock underlying the Warrant, made in reliance on Rule 144 promulgated
under the 1933 Act may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such securities under
circumstances in which the seller, or the person through whom the sale is made,
may be deemed to be an underwriter, as that term is used in the 1933 Act, may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder.
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EXHIBIT 1.01.1
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7.3 Restrictive Legend. The Investor acknowledges and agrees that the Common
Stock, the Warrant and shares of Common Stock underlying the Warrant, and, until
such time as the Shares, and the shares of Common Stock underlying the Warrant,
have been registered under the 1933 Act and sold in accordance with an effective
Registration Statement, certificates and other instruments representing any of
the Shares, shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of any such
securities):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1)
A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR (2) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION
S, OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT."
ARTICLE VIII
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to consummate the transactions contemplated
hereby shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:
8.1 No Termination. This Agreement shall not have been terminated pursuant to
Article X hereof.
8.2 Representations True and Correct. The representations and warranties of the
Investor contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if made
on as of the Closing Date.
8.3 Compliance with Covenants. The Investor shall have performed and complied in
all material respects with all covenants, agreements, and conditions required by
this Agreement to be performed or complied by it prior to or at the Closing
Date.
8.4 No Adverse Proceedings. On the Closing Date, no action or proceeding shall
be pending by any public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the consummation
of this Agreement or the transactions contemplated hereby or to recover any
damages or obtain other relief as a result of the transactions proposed hereby.
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EXHIBIT 1.01.1
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ARTICLE IX
CONDITIONS PRECEDENT TO INVESTOR'S OBLIGATIONS
The obligation of the Investor to consummate the transactions contemplated
hereby shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:
9.1 No Termination. This Agreement shall not have been terminated pursuant to
Article X hereof.
9.2 Representations True and Correct. The representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if made
on as of the Closing Date.
9.3 Compliance with Covenants . The Company shall have performed and complied in
all material respects with all covenants, agreements, and conditions required by
this Agreement to be performed or complied by it prior to or at the Closing
Date.
9.4 No Adverse Proceedings. On the Closing Date, no action or proceeding shall
be pending by any public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the consummation
of this Agreement or the transactions contemplated hereby or to recover any
damages or obtain other relief as a result of the transactions proposed hereby.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
10.1.1 by mutual written consent of the Investor and the Company;
10.1.2 by the Company upon a material breach of any representation,
warranty, covenant or agreement on the part of the Investor set forth in this
Agreement, or the Investor upon a material breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company or the Investor,
respectively, shall have become untrue, in either case such that any of the
conditions set forth in Article VIII or Article IX hereof would not be satisfied
(a "Terminating Breach"), and such breach shall, if capable of cure, not have
been cured within five (5) business days after receipt by the party in breach of
a notice from the non-breaching party setting forth in detail the nature of such
breach.
PAGE 18 OF 23
EXHIBIT 1.01.1
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10.2 Effect of Termination. Except as otherwise provided herein, in the event of
the termination of this Agreement pursuant to Section 10.1 hereof, there shall
be no liability on the part of the Company or the Investor or any of their
respective officers, directors, agents or other representatives and all rights
and obligations of any party hereto shall cease; provided that in the event of a
Terminating Breach, the breaching party shall be liable to the non-breaching
party for all costs and expenses incurred by the non-breaching party not to
exceed $50,000.
10.3 Amendment. This Agreement may be amended by the parties hereto any time
prior to the Closing Date by an instrument in writing signed by the parties
hereto.
10.4 Waiver. At any time prior to the Closing Date, the Company or the Investor,
as appropriate, may: (a) extend the time for the performance of any of the
obligations or other acts of other party or; (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto which have been made to it or them; or (c) waive compliance with
any of the agreements or conditions contained herein for its or their benefit.
Any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the party or parties to be bound hereby.
ARTICLE XI
GENERAL PROVISIONS
11.1 Transaction Costs. Except as otherwise provided herein, each of the parties
shall pay all of its costs and expenses (including attorney fees and other legal
costs and expenses and accountants' fees and other accounting costs and
expenses) incurred by that party in connection with this Agreement.
11.2 Indemnification. The Investor agrees to indemnify, defend and hold the
Company (following the Closing Date) and its officers and directors harmless
against and in respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities or damages, including interest, penalties and
reasonable attorney's fees, that it shall incur or suffer, which arise out of or
result from any breach of this Agreement by the Investor or failure by the
Investor to perform with respect to any of its representations, warranties or
covenants contained in this Agreement or in any exhibit or other instrument
furnished or to be furnished under this Agreement. The Company agrees to
indemnify, defend and hold the Investor harmless against and in respect of any
and all claims, demands, losses, costs, expenses, obligations, liabilities or
damages, including interest, penalties and reasonable attorney's fees, that it
shall incur or suffer, which arise out of, result from or relate to any breach
of this Agreement or failure by the Company to perform with respect to any of
PAGE 19 OF 23
EXHIBIT 1.01.1
--------------
its representations, warranties or covenants contained in this Agreement or in
any exhibit or other instrument furnished or to be furnished under this
Agreement. In no event shall the Company or the Investor be entitled to recover
consequential or punitive damages resulting from a breach or violation of this
Agreement nor shall any party have any liability hereunder in the event of gross
negligence or willful misconduct of the indemnified party. In the event of a
breach of this Agreement by the Company, the Investor shall be entitled to
pursue a remedy of specific performance upon tender into the Court an amount
equal to the Purchase Price hereunder. The indemnification shall be mutually
limited to the Purchase Price.
11.3 Headings. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.4 Entire Agreement. This Agreement (together with the Schedule, Exhibits,
Warrants and documents referred to herein) and the other Transaction Documents
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof.
11.5 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been given (i) on the date they are delivered if
delivered in person; (ii) on the date initially received if delivered by
facsimile transmission followed by registered or certified mail confirmation;
(iii) on the date delivered by an overnight courier service; or (iv) on the
third business day after it is mailed by registered or certified mail, return
receipt requested with postage and other fees prepaid as follows:
If to the Company:
-----------------
eNucleus, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to:
--------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
PAGE 20 OF 23
EXHIBIT 1.01.1
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If to the Investor:
Sigma Opportunity Fund, LLC
c/o Sigma Capital Advisors, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Thom Whey
With a copy to:
--------------
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
11.6 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any such term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
11.7 Binding Effect. All the terms and provisions of this Agreement whether so
expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective administrators, executors, legal
representatives, heirs, successors and assignees.
11.8 Preparation of Agreement. This Agreement shall not be construed more
strongly against any party regardless of who is responsible for its preparation.
The parties acknowledge each contributed and is equally responsible for its
preparation.
11.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to
applicable principles of conflicts of law.
11.10 Jurisdiction. This Agreement shall be exclusively governed by and
construed in accordance with the laws of the State of Illinois. If any action is
brought among the parties with respect to this Agreement or otherwise, by way of
a claim or counterclaim, the parties agree that in any such action, and on all
issues, the parties irrevocably waive their right to a trial by jury. Exclusive
jurisdiction and venue for any such action shall be the Federal Courts serving
the State of New York. In the event suit or action is brought by any party under
PAGE 21 OF 23
EXHIBIT 1.01.1
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this Agreement to enforce any of its terms, or in any appeal therefrom, it is
agreed that the prevailing party shall be entitled to reasonable attorneys fees
to be fixed by the arbitrator, trial court, and/or appellate court.
11.11 Preparation and Filing of Securities and Exchange Commission filings. The
Investor shall reasonably assist and cooperate with the Company in the
preparation of all filings with the SEC after the Closing Date due after the
Closing Date relating to the purchase of the Shares.
11.12 Further Assurances, Cooperation. Each party shall, upon reasonable request
by the other party, execute and deliver any additional documents necessary or
desirable to complete the transactions herein pursuant to and in the manner
contemplated by this Agreement. The parties hereto agree to cooperate and use
their respective best efforts to consummate the transactions contemplated by
this Agreement.
11.13 Survival The representations, warranties, covenants and agreements made
herein shall survive the Closing of the transaction contemplated hereby as
provided herein.
11.14 Third Parties Except as disclosed in this Agreement, nothing in this
Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties hereto and their respective administrators, executors, legal
representatives, heirs, successors and assignees. Nothing in this Agreement is
intended to relieve or discharge the obligation or liability of any third
persons to any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any party to this
Agreement.
11.15 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay
on the part of any party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty, covenant or agreement herein, nor shall
any single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
11.16 Counterparts. This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto.
[SIGNATURES ON FOLLOWING PAGE]
PAGE 22 OF 23
EXHIBIT 1.01.1
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IN WITNESS WHEREOF, the Investor and the Company have as of the date first
written above executed this Agreement.
THE COMPANY:
ENUCLEUS, INC.
By: /s/
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
President and CEO
INVESTOR:
SIGMA OPPORTUNITY FUND, LLC
By: Sigma Capital Advisors, LLC, its
managing member
By: /s/
------------------------------------
▇▇▇▇ ▇▇▇▇, Manager
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
PAGE 23 OF 23