BLUE HOLDINGS, INC. SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”),
is
made as of November 13, 2007 (the “Effective
Date”),
by
and among Blue Holdings, Inc., a Nevada corporation, (the “Company”),
and
each of the undersigned investors listed on the Schedule of Investors attached
hereto as Exhibit
A
(individually, an “Investor,”
and
collectively, the “Investors”).
WHEREAS,
the
Company wishes to issue and sell to the Investors up to an aggregate of
1,000,000 shares (the “Preferred
Shares”)
of the
Company’s Series A Convertible Preferred Stock, par value $0.001 per share (the
“Series
A Preferred Stock”),
in
exchange for the cancellation of certain indebtedness due and owing to the
Investors on the Effective Date; and
WHEREAS,
the
Investors, severally and not jointly, wish to purchase the Preferred Shares
on
the terms and subject to the conditions set forth in this
Agreement.
NOW,
THEREFORE,
in
consideration of the premises, representations, warranties and the mutual
covenants contained in this Agreement, the parties agree as
follows:
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1.
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AUTHORIZATION
AND SALE OF PREFERRED
SHARES
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1.1 Issuance,
Sale and Delivery of the Preferred Shares at the Closing.
At the
Closing (as defined in Section 1.2 hereof), on the terms and subject to the
conditions of this Agreement, the Company shall issue and sell to each Investor,
and each Investor shall, severally and not jointly, purchase from the Company,
that number of Preferred Shares set forth opposite the name of such Investor
under the heading “Number of Preferred Shares to be Purchased” on Exhibit
A hereto, at a price of $2.556682 per share for the aggregate purchase
price
set forth opposite the name of such Investor under the heading “Aggregate
Purchase Price for Preferred Shares” on Exhibit A hereto.
1.2 Closing.
The
Closing shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Markiles, LLP,
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇
▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at such date and time as may be agreed upon
between the Company and the Investors (such closing being called the
“Closing” and
such
date and time being called the “Closing
Date”).
At the
Closing, the Company shall issue and deliver to each Investor a stock
certificate or certificates in definitive form, registered in the name of
such
Investor, representing the Preferred Shares being purchased by it at the
Closing. As payment in full for the Preferred Shares being purchased by it
under
this Agreement, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date, each Investor shall deliver to
the
Company by such method as may be reasonably acceptable to the Company a
promissory note or other evidence of indebtedness for cancellation, as
applicable, in the amount and as set forth opposite the name of such Investor
under the heading “Aggregate Purchase Price for Preferred Shares” on Exhibit
A. All amounts shall be paid to the account of the Company as shall have
been designated in writing a reasonable time in advance to the Investors
by the
Company.
1.3 Issuance,
Sale and Delivery of the Preferred Shares at the
Closings.
The
Company has authorized the number of Preferred Shares of Series A Preferred
Stock having the rights, preferences, privileges and restrictions set forth
in
the Certificate of Designations, Preferences, Rights and Limitations of Series
A
Convertible Preferred Stock (the “Certificate”),
which, in the form attached hereto as Exhibit B, shall be adopted and
filed with the Secretary of State of the State of Nevada on or before the
Closing.
1.4 Conversion
Shares.
Shares
of Common Stock issuable upon conversion of the Preferred Shares are referred
to
herein as the “Conversion
Shares.”
Each
share of Series A Preferred Stock shall be convertible, at the option of
the
Investor, at any time after the date of issuance of such share, into such
number
of shares of Common Stock as is determined by dividing (i) the purchase price
per share of Series A Preferred Stock, plus all accrued but unpaid Dividends
(as
defined in the Certificate) on each such share, by (ii) the Conversion Price
in
effect on the date the certificate is surrendered for conversion. The initial
“Conversion
Price”
per
share for the Series A Preferred Stock shall be $0.7347 and shall be subject
to
adjustment as set forth in the Certificate. For the avoidance of doubt, the
Conversion Price represents the average closing price of a share of the Common
Stock, as quoted on the NASDAQ
Capital
Market, over the twenty (20) trading days immediately preceding the Closing
Date.
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2.
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REPRESENTATIONS
AND WARRANTIES OF THE
COMPANY
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2.1 Organization
and Standing; Qualifications.
The
Company is a corporation validly existing and in good standing under the
laws of
the State of Nevada. The Company has all requisite power and authority to
own
and operate its properties and assets, and to carry on its business as conducted
and as proposed to be conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure
to so
qualify could, singly or in the aggregate, have a material adverse effect
on the
business, assets, liabilities, financial condition or results of operations
of
the Company as presently conducted or proposed to be conducted.
2.2 Corporate
Power.
The
Company has all requisite power and authority to execute and deliver this
Agreement, to sell and issue the Preferred Shares hereunder, to issue the
Conversion Shares and to carry out and perform its obligations under the
terms
of this Agreement.
2.3 Authorization.
2.3.1 All
corporate action on the part of the Company, its officers, directors and
stockholders, necessary for (i) the authorization, execution and delivery
of the
Agreement by the Company, (ii) the authorization, sale, issuance and delivery
of
the Preferred Shares and the Conversion Shares, (iii) the filing of the
Certificate, and (iv) the performance of all of the Company’s obligations under
the Agreement has been taken. The Agreement has been duly and validly executed
and delivered by the Company and constitutes the valid and binding obligation
of
the Company, enforceable in accordance with its terms, except as limited
by
applicable bankruptcy, insolvency, reorganization, moratorium, and other
laws of
general application affecting enforcement of creditors’ rights
generally.
2
2.3.2 The
Preferred Shares, when sold, issued and delivered in compliance with the
provisions of this Agreement, will be duly and validly issued, fully paid
and
nonassessable and shall have the rights, preferences, privileges and
restrictions described in the Certificate, and shall be free of any liens,
preemptive or similar rights, encumbrances or restrictions on transfer;
provided, however, that the Preferred Shares may be subject to restrictions
on
transfer under state and/or federal securities laws. The Conversion Shares
have
been duly and validly reserved for issuance and, upon issuance in accordance
with the terms of the Certificate, will be duly and validly issued, fully
paid,
and nonassessable and shall be free of any liens, preemptive or similar rights,
encumbrances or restrictions on transfer; provided, however, that the Conversion
Shares may be subject to restrictions on transfer under state and/or federal
securities laws.
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3.
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REPRESENTATIONS
AND WARRANTIES OF THE
INVESTORS
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Each
Investor hereby represents and warrants to the Company with respect to the
purchase of the Preferred Shares to be purchased by it as follows:
3.1 Experience.
Such Investor acknowledges that it is able to bear the economic risk of its
investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Preferred Shares and the Conversion Shares and is able to bear the
economic risk of its investment in the Preferred Shares and Conversion Shares
for an indefinite period of time.
3.2 Disclosure
of Information. Such Investor further represents that it has had an
opportunity to ask questions of and receive answers from the Company regarding
the terms and conditions of the offering of the Preferred Shares and the
business, prospects, properties and financial condition of the
Company.
3.3 Investment.
Such Investor is acquiring the Preferred Shares and the Conversion Shares
for
investment for its own account, not as a nominee or agent, and not with the
view
to, or for resale in connection with, any distribution thereof. It understands
that the Preferred Shares have not been, and the Conversion Shares will not
be,
(except for specific registration rights granted to the Investors), registered
under the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon,
among
other things, the bona fide nature of the investment intent and the accuracy
of
such Investor’s representations as expressed herein.
3.4 Accredited
Investors. Such Investor is an “accredited investor” as defined in
Rule 501(a) of Regulation D promulgated under the Securities Act.
3.5 Legends.
It is understood that the certificates evidencing the Preferred Shares and
the
Conversion Shares may bear one or all of the following legends:
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“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED, OR UNLESS SOLD PURSUANT TO RULE 144
OF
SUCH ACT.”
Any
other
legend required by the securities laws of the State of California.
3.6 Authorization.
The
execution, delivery and performance by such Investor of the Agreements have
been
duly authorized by all requisite action of such Investor. The Agreements,
when
executed and delivered by such Investor, shall constitute valid and legally
binding obligations of such Investor, enforceable in accordance with their
terms
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally.
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4.
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INVESTORS’
CONDITIONS TO EACH
CLOSING
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Each
Investor’s obligation to purchase the Preferred Shares at the Closing is, at the
option of such Investor, subject to the fulfillment of the following conditions
on or before the Closing:
4.1 Representations
and Warranties True and Correct. The representations and warranties
made by the Company in Section 2 hereof shall be true and correct as of
the Closing, with the same effect as if made as of the Closing.
4.2 Covenants.
All covenants, agreements and conditions contained in this Agreement to be
performed by the Company on or prior to the Closing shall have been performed
or
complied with.
4.3 Certificate.
Prior to the Closing, the Company shall have prepared and executed the
Certificate in the form set forth in Exhibit B. The Certificate shall
have been filed with and accepted by the Secretary of State of the State
of
Nevada and shall have become effective.
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5.
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COMPANY’S
CONDITIONS TO EACH
CLOSING
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The
Company’s obligation to sell and issue any Preferred Shares at the Closing to
each Investor is, at the option of the Company, subject to the fulfillment
of
the following conditions as of the Closing:
5.1 Representations
and Warranties True and Correct.
The
representations and warranties made by such Investor in Section 3 hereof
shall be true and correct when made, and shall be true and correct at the
Closing.
5.2 Covenants.
All covenants, agreements and conditions contained in this Agreement to be
performed by such Investor on or prior to the Closing shall have been performed
or complied with.
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5.3 Certificate.
The Secretary of State of the State of Nevada shall have accepted the
Certificate for filing.
5.4 Purchase
Price Paid.
Such
Investor shall have delivered to the Company the purchase price for the
Preferred Shares set forth in Exhibit A hereto.
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6.
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COVENANTS
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6.1 Reserve
for Conversion Shares. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock,
for
the purpose of effecting the conversion of the Preferred Shares and otherwise
complying with the terms of this Agreement, such number of its duly authorized
shares of Common Stock as shall be sufficient to effect the conversion of
the
Preferred Shares from time to time outstanding or otherwise to comply with
the
terms of this Agreement. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of
the
Preferred Shares or otherwise to comply with the terms of this Agreement,
the
Company will forthwith take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number
of
shares as shall be sufficient for such purposes. The Company will obtain
any
authorization, consent, approval or other action by or make any filing with
any
court or governmental authority that may be required under applicable state
securities laws in connection with the issuance of shares of Common Stock
upon
conversion of the Preferred Shares.
6.2 Further
Assurances. The Company shall cure promptly any defects in the
creation and issuance of the Preferred Shares and the Conversion Shares,
and in
the execution and delivery of the Agreements. The Company, at its expense,
shall
execute and deliver promptly to the Investor upon request all such other
and
further documents, agreements and instruments as may be reasonably necessary
to
permit the Company to comply with its covenants and agreements herein, and
shall
make any recordings, file any notices and obtain any consents as may be
necessary or appropriate in connection therewith.
6.3 Regulation
D Filings. The Company shall file on a timely basis all notices of
sale required to be filed with the Securities and Exchange Commission pursuant
to Regulation D under the Securities Act of 1933, as amended (the “Securities
Act”),
with
respect to the transactions contemplated by this Agreement.
6.4 Piggyback
Registrations.
6.4.1 Right
to Include Conversion Shares.
Each
time that the Company proposes for any reason to register any of its Common
Stock under the Securities Act, either for its own account or for the account
of
a stockholder or stockholders, other than Registration Statements on Forms
S-4
or S-8 (or similar or successor forms) (a “Proposed
Registration”),
the
Company shall promptly give written notice of such Proposed Registration
to all
of the Investors (which notice shall be given in no event less than ten (10)
days prior to the expected filing date of the Proposed Registration) and
shall
offer such Investors the right to request inclusion of any of such Investor’s
Conversion Shares in the Proposed Registration. The rights to piggyback
registration may be exercised on an unlimited number of
occasions.
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6.4.2 Piggyback
Procedure.
Each
Investor shall have twenty (20) days from the date of receipt of the Company’s
notice referred to in Section 6.4.1 above to deliver to the Company a written
request specifying the number of Conversion Shares such Investor intends
to sell
and such Investor’s intended method of disposition. Any Investor shall have the
right to withdraw such Investor’s request for inclusion of such Investor’s
Conversion Shares in any Proposed Registration pursuant to this Section 6.4
by
giving written notice to the Company of such withdrawal; provided,
however,
that
the Company may ignore a notice of withdrawal made within less than one full
business day prior to the date the Proposed Registration is scheduled to
become
effective. Subject to Section 6.4.4 below, the Company shall use its reasonable
best efforts to include
in such Proposed Registration all such Conversion Shares so requested to
be
included therein; provided,
however,
that
the Company may at any time withdraw or cease proceeding with any such Proposed
Registration if it shall at the same time withdraw or cease proceeding with
the
registration of all other shares of Common Stock originally proposed to be
registered.
6.4.3 Selection
of Underwriters.
The
managing underwriter for any Proposed Registration that involves an underwritten
public offering shall be one or more reputable nationally recognized investment
banks selected by the Company.
6.4.4 Priority
for Piggyback Registration.
6.4.4.1 Notwithstanding
any other provision of this Section 6.4, if the managing underwriter of an
underwritten public offering determines and advises the Company and the
Investors in writing that the inclusion of all Conversion Shares proposed
to be
included by the Investors in the underwritten public offering would materially
and adversely interfere with the successful marketing of the Company’s
securities in the Proposed Registration, then the Investors shall not be
permitted to include any Conversion Shares in excess of the amount, if any,
of
Conversion Shares which the managing underwriter of such underwritten public
offering shall reasonably and in good faith agree in writing to include in
such
public offering in addition to the amount of securities to be registered
for the
Company. The Company will be obligated to include in such Proposed Registration,
as to each Investor, only a portion of the Conversion Shares such Investor
has
requested be registered equal to the ratio which such Investor’s requested
Conversion Shares bears to the total number of Conversion Shares requested
to be
included in such Proposed Registration by all Investors who have requested
that
their Conversion Shares be included in such Registration Statement, and no
party, other than the Company and the Investors, shall be permitted to include
their Conversion Shares in any such Proposed Registration unless such shares
are
also limited on a pro rata basis equal to the ratio which such party’s requested
Conversion Shares bear to the total number of Conversion Shares requested
to be
included in such Proposed Registration by all Investors who have requested
that
their Conversion Shares be included in such Proposed Registration. The
securities to be included in a Proposed Registration initiated by the Company
shall be allocated:
first,
to the Company; second, pari
passu
to the
Investors, and third, to any others requesting registration of securities
of the
Company.
6.4.4.2 Notwithstanding
any portion of the foregoing to the contrary, in no event shall the shares
to be
sold by the Investors be reduced below twenty percent (20%) of the total
amount
of securities included in the Proposed Registration. No stockholder of the
Company shall be granted piggyback registration rights which would reduce
the
number of shares to be included by the Investors in such registration without
the consent of the Investors of at least a majority of the Conversion
Shares.
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6.4.4.3 If
as a
result of the provisions of this Section 6.4, any Investor shall not be entitled
to include more than 50% of its Conversion Shares in a registration that
such
Investor has requested to be so included, such Investor may withdraw such
Investor’s request to include Conversion Shares in such Proposed
Registration.
6.4.5 Underwritten
Offering.
In the
event that the Proposed Registration by the Company is, in whole or in part,
an
underwritten public offering of securities of the Company, any request under
this Section 6.4 shall specify that the Conversion Shares be included in
the
underwriting on the same terms and conditions as the shares, if any, otherwise
being sold through the underwriters under such registration.
6.4.6 Transfer.
The
foregoing registration rights may be transferred to any transferee that acquires
all of the Series A Preferred Stock.
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7.
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MISCELLANEOUS
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7.1 Closing.
Each
Investor hereto expressly acknowledges and agrees that immediately following
an
applicable Closing, such Investor shall have deemed such Investor’s conditions
to closing identified in Section 4 hereof to have been satisfied or
waived.
7.2 Governing
Law. This Agreement shall be governed in all respects by the
internal laws of the State of California, without giving effect to principles
of
conflicts of law, as applied to agreements entered into among California
State
residents to be performed entirely within California. Each party hereto
irrevocably and unconditionally (i) agrees that any action, suit or claim
brought hereunder must be brought in the courts of the United States in the
State of California or the state courts of the State of California which
shall
serve as the exclusive jurisdiction and venue for any and all disputes arising
out of and/or relating to this Agreement; (ii) consents to the jurisdiction
of
any such court in any such suit, action or proceeding; and (iii) waives any
objection which such party may have to the laying of venue of any such suit,
action or proceeding in any such court.
7.3 Successors
and Assigns. Except as otherwise provided herein, the provisions of
this Agreement shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
(including to any transferee of any Preferred Shares or Conversion Shares
that
is an affiliate of the Investor). 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.
7.4 Amendment.
Any provision of this Agreement may be amended, waived, modified, discharged
or
terminated only with the written consent of the Company and the holders of
a
majority of the Preferred Shares, voting together as a single class. Any
amendment or waiver affected in accordance with this Section 7.4 shall be
binding upon the Company and each holder of any securities subject to this
Agreement (including securities into which such securities are convertible)
and
future holders of all such securities. Each Investor may waive his, her or
its
rights or the Company’s obligations with respect to its Preferred Shares
hereunder without obtaining the consent of any other natural person or
Person.
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7.5 Notices.
All notices required or permitted hereunder shall be in writing and shall
be
deemed effectively given (a) upon personal delivery to the party to be notified,
(b) five (5) days after deposit in the United States mail, by registered
or
certified mail, postage prepaid and properly addressed to the party to be
notified as set forth in the Company records, or (c) when received if
transmitted by telecopy (to be followed by U.S. mail), electronic or digital
transmission method. In each case notice shall be sent to the addresses set
forth on the Company’s records or at such other address as a party may designate
by ten (10) days’ advance written notice to the other parties
hereto.
7.6 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be enforceable against the parties actually executing such counterparts,
and all of which together shall constitute one and the same
instrument.
7.7 Severability.
In the event that any provision of this Agreement becomes or is declared
by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said
provision.
7.8 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.
7.9 Survival
of Agreement
All
covenants and agreements made in this Agreement shall survive the execution
and
delivery hereof and the issuance, sale and delivery of the Preferred Shares,
and
the issuance and delivery of the Conversion Shares. For the avoidance of
doubt,
the representations and warranties made in this Agreement shall not survive
the
execution and delivery hereof.
7.11 Attorneys'
Fees.
If any
action at law or in equity (including arbitration) is necessary to enforce
or
interpret the terms of any of the Agreements, the prevailing party shall
be
entitled to reasonable attorney’s fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
7.12 Facsimile
Signatures.
This
Agreement may be executed and delivered by facsimile and, upon such delivery,
the facsimile will be deemed to have the same effect as if the original
signature had been delivered to the other party. Each Investor agrees to
deliver
to the Company the original signature copy by express overnight delivery.
The
failure to deliver the original signature copy and/or the nonreceipt of the
original signature copy shall have no effect upon the binding and enforceable
nature of this Agreement.
7.13 Entire
Agreement. This Agreement, together with the Exhibits hereto, the
certificates, documents, instruments and writings that are delivered pursuant
hereto and each of the other Agreements, constitutes the entire agreement
and
understanding of the parties hereto in respect of its subject matters and
supersedes all prior understandings, agreements, or representations by or
among
the parties hereto, written or oral, to the extent they relate in any way
to the
subject matter hereof or the transactions contemplated hereby.
[Signature
Pages Follow]
8
Company
Signature Page to Series A Convertible Preferred Stock Purchase
Agreement
IN
WITNESS WHEREOF,
the
parties have executed this Series A Convertible Preferred Stock Purchase
Agreement on the day and year first set forth above.
| Blue Holding, Inc | |
| /s/ ▇▇▇▇▇ ▇▇▇▇▇▇ | |
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By:
|
▇▇▇▇▇
▇▇▇▇▇▇
|
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Title:
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Chief
Executive Officer
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Investors
Signature Page to Series A Convertible Preferred Stock Purchase
Agreement
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INVESTOR:
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|
/s/
▇▇▇▇ ▇▇▇▇
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By:
▇▇▇▇ ▇▇▇▇
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EXHIBIT
A
Schedule
of Investors
|
Closing
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Investor
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Number
of Preferred Shares
To
Be Purchased
|
Aggregate
Purchase Price
For
Preferred Shares
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▇▇▇▇
▇▇▇▇*
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1,000,000
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$2,556,682**
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*
Investor
may be ▇▇▇▇ ▇▇▇▇ or any accredited investor designee thereof that executes
a
joinder hereto.
**
Represents
the cancellation of that certain Promissory Note, in the aggregate principal
and
interest amount of $2,556,682, issued by the Company to ▇▇▇▇
▇▇▇▇.
EXHIBIT
B
Certificate
of Designations, Preferences, Rights and Limitations
of
Series A Convertible Preferred Stock