Exhibit 10.24
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of May 1, 2007,
by and among Midnight Holdings Group, Inc., a Delaware corporation, with
headquarters located at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(the "COMPANY"), and each of the purchasers set forth on the signature pages
hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by the
rules and regulations as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT");
B. Buyers desire to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement (i) 10% secured
convertible notes of the Company, in the form attached hereto as EXHIBIT "A", in
the aggregate principal amount of Four Hundred Fifty Thousand Dollars
($450,0000) (together with any note(s) issued in replacement thereof or
otherwise with respect thereto in accordance with the terms thereof, the
"NOTES"), convertible into shares of common stock, par value $.00005 per share,
of the Company (the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in such Notes and (ii) warrants, in the
form attached hereto as EXHIBIT "B", to purchase an aggregate of Nine Hundred
Thousand (900,000) shares of Common Stock (the "WARRANTS");
C. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amount of Notes and number of Warrants as is set
forth immediately below its name on the signature pages hereto; and
D. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
2. PURCHASE OF NOTES AND WARRANTS. On the Closing Date (as defined
below), the Company shall issue and sell to each Buyer and each Buyer severally
agrees to purchase from the Company such principal amount of Notes and number of
Warrants as is set forth immediately below such Buyer's name on the signature
pages hereto.
3. FORM OF PAYMENT. On the Closing Date (as defined below), (i)each
Buyer shall pay the purchase price for the Notes (less the purchase price paid
with respect to any Bridge Note) and the Warrants to be issued and sold to it at
the Closing (as defined below) (the "PURCHASE PRICE") by wire transfer of
immediately available funds to the Company, in
accordance with the Company's written wiring instructions, against delivery of
the Notes in the principal amount equal to the Purchase Price and the number of
Warrants as is set forth immediately below such Buyer's name on the signature
pages hereto, and (ii) the Company shall deliver such Notes and Warrants duly
executed on behalf of the Company, to such Buyer, against delivery of such
Purchase Price.
4. CLOSING DATE. Subject to the satisfaction (or written waiver) of
the conditions thereto set forth in Section 6 and Section 7 below, the date and
time of the issuance and sale of the Notes and the Warrants pursuant to this
Agreement (the "CLOSING DATE") shall be 12:00 noon, Eastern Standard Time on May
1, 2007, or such other mutually agreed upon time. The closing of the
transactions contemplated by this Agreement (the "CLOSING") shall occur on the
Closing Date at such location as may be agreed to by the parties.
5. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and
not jointly) represents and warrants to the Company solely as to such Buyer
that:
6. and the shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Notes (including, without limitation, such additional
shares of Common Stock, if any, as are issuable (i) on account of interest on
the Notes, (ii) as a result of the events described in Sections 1.3 and 1.4(g)
of the Notes and Section 2(c) of the Registration Rights Agreement or (iii) in
payment of the Standard Liquidated Damages Amount (as defined in Section 2(f)
below) pursuant to this Agreement, such shares of Common Stock being
collectively referred to herein as the "CONVERSION SHARES") and the Warrants and
the shares of Common Stock issuable upon exercise thereof (the "WARRANT SHARES"
and, collectively with the Notes, Warrants and Conversion Shares, the
"SECURITIES") for its own account and not with a present view towards the public
sale or distribution thereof, except pursuant to sales registered or exempted
from registration under the 1933 Act; PROVIDED, HOWEVER, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
7. ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D (an "ACCREDITED
INVESTOR").
8. RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
9. INFORMATION. Such Buyer and its respective advisors, if any, have
been 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 which have been reasonably requested by such Buyer or its advisors.
Such Buyer and its respective advisors, if any, have been afforded the
opportunity to ask questions of the Company. Notwithstanding the foregoing, the
Company
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has not disclosed to such Buyer any material nonpublic information and will not
disclose such information unless such information is disclosed to the public
prior to or promptly following such disclosure to such Buyer. Neither such
inquiries nor any other due diligence investigation conducted by such Buyer or
any of its respective advisors or representatives shall modify, amend or affect
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Such Buyer understands that its investment in the Securities
involves a significant degree of risk.
10. GOVERNMENTAL REVIEW. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
11. TRANSFER OR RE-SALE. Such Buyer understands that (i) except as
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities have not been and are not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) such Buyer shall have delivered to the Company
an opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the Company, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("RULE 144")) of such Buyer
who agrees to sell or otherwise transfer the Securities only in accordance with
this Section 2(f) and who is an Accredited Investor, or (d) the Securities are
sold pursuant to Rule 144, and such Buyer shall have delivered to the Company an
opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in corporate transactions, which opinion shall be accepted
by the Company; (ii) any sale of such Securities made in reliance on Rule 144
may be made only in accordance with the terms of said Rule and further, if said
Rule is not applicable, any re-sale 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 defined in the ▇▇▇▇ ▇▇▇) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement). Notwithstanding the foregoing or anything else contained
herein to the contrary, subject to applicable law, the Securities may be pledged
as collateral in connection with a BONA FIDE margin account or other lending
arrangement. In the event that the Company does not accept an opinion of counsel
provided by such Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144, and such opinion is correct in
form and substance, within three (3) business days of delivery of the opinion to
the Company, the Company shall pay to such Buyer liquidated damages of three
percent (3%) of the outstanding amount of the Notes held by such Buyer per month
plus accrued and unpaid interest on the Notes, prorated for partial months, in
cash or shares at the option of the Company ("STANDARD LIQUIDATED DAMAGES
AMOUNT"). If the Company elects to pay the Standard Liquidated Damages Amount in
shares of Common Stock, such shares shall be issued at the Conversion Price at
the time of payment.
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12. LEGENDS. Such Buyer understands that the Notes and the Warrants
and, until such time as the Conversion Shares and Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be
immediately sold, the Conversion Shares and Warrant Shares may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended. The securities may not be sold, transferred,
assigned, or otherwise disposed of in the absence of an
effective registration statement for the securities
under said Act, or an opinion of counsel, in form,
substance and scope customary for opinions of counsel in
comparable transactions, that registration is not
required under said Act or unless sold pursuant to Rule
144 under said Act."
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, (b) such holder provides the Company with an opinion
of counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act, which opinion
shall be accepted by the Company so that the sale or transfer is effected, or
(c) such holder provides the Company with reasonable assurances that such
Security shall be sold pursuant to Rule 144. Such Buyer agrees to sell all
Securities, including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable prospectus delivery
requirements, if any.
13. AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized. This Agreement has been
duly executed and delivered on behalf of such Buyer, and this Agreement
constitutes, and upon execution and delivery by such Buyer of the Registration
Rights Agreement, such agreement will constitute, legal, valid and binding
agreements of such Buyer enforceable in accordance with their respective terms.
14. RESIDENCY. Such Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
15. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
16. ORGANIZATION AND QUALIFICATION. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its
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business as and where now owned, leased, used, operated and conducted. SCHEDULE
3(a) sets forth a list of all of the Subsidiaries (as defined below) of the
Company and the jurisdiction in which each is incorporated. The Company and each
of its Subsidiaries is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such qualification
necessary except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material
adverse effect on the business, operations, assets, financial condition or
prospects of the Company or its Subsidiaries, if any, taken as a whole, or on
the transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith. "SUBSIDIARIES" means any corporation or
other organization, whether incorporated or unincorporated, in which the Company
owns, directly or indirectly, all of the equity or other ownership interests.
17. AUTHORIZATION; ENFORCEMENT. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement, the Notes and the Warrants and, subject to the
adoption of necessary resolutions by the Board of Directors and the stockholders
of the Company to consummate the transactions contemplated hereby and thereby
and to issue the Securities, in accordance with the terms hereof and thereof,
(ii) the execution and delivery of this Agreement, the Registration Rights
Agreement, the Notes and the Warrants by the Company and, the consummation by it
of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes and the Warrants and the issuance and
reservation for issuance of the Conversion Shares and Warrant Shares issuable
upon conversion or exercise thereof) have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board of Directors, or its shareholders is required, (iii) this Agreement has
been duly executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and official
representative with authority to sign this Agreement and the other documents
executed in connection herewith and bind the Company accordingly, and (iv) this
Agreement constitutes, and upon execution and delivery by the Company of the
Registration Rights Agreement, the Notes and the Warrants, each of such
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its respective terms.
18. CAPITALIZATION. Except as set forth on SCHEDULE 3(c), as of June
30, 2006 hereof, the authorized capital stock of the Company consists of (i)
1,000,000,000 shares of Common Stock, par value $0.00005, of which 470,050,001
shares are issued and outstanding and (ii) 10,000,000 shares of preferred stock,
par value $0.001, of which no shares are issued and outstanding. All of such
outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are subject to preemptive rights or any other similar
rights of the shareholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as disclosed in
SCHEDULE 3(c), as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments or rights of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
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or any of its Subsidiaries, (ii) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of its or their securities under the 1933 Act (except the Registration
Rights Agreement) and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any agreement
providing rights to security holders) that will be triggered by the issuance of
the Notes, the Warrants, the Conversion Shares or Warrant Shares. The Company
has made available to each Buyer true copies of the Certificate of Incorporation
as in effect on the date hereof, the Company's By-laws, as in effect on the date
hereof (the "BY-LAWS"), and the terms of all securities convertible into or
exercisable for Common Stock of the Company and the material rights of the
holders thereof in respect thereto.
19. ISSUANCE OF SHARES. The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance and, upon conversion of the Notes and
exercise of the Warrants in accordance with their respective terms, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder thereof.
20. ACKNOWLEDGMENT OF DILUTION. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the Note
or exercise of the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares and Warrant Shares upon conversion of the
Notes or exercise of the Warrants in accordance with this Agreement, the Notes
and the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other shareholders of
the Company.
21. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Notes and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
with or result in a violation of any provision of the Certificate of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license 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 federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are currently subject)
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 for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation
of its Certificate of Incorporation, By-laws or other organizational documents
and neither the Company nor any of its Subsidiaries is in default (and no event
has occurred which with notice or lapse of time or both could put the Company or
any of its Subsidiaries in default) under, and neither the Company nor any of
its Subsidiaries has
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taken any action or failed to take any action that would 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 by which any property or assets of the Company or any
of its Subsidiaries is bound or affected, except for possible defaults as would
not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being conducted,
and shall not be conducted so long as a Buyer owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity, which
violation would cause a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency, regulatory agency, self regulatory organization or
stock market or any third party in order for it to execute, deliver or perform
any of its obligations under this Agreement, the Registration Rights Agreement,
the Notes or the Warrants in accordance with the terms hereof or thereof or to
issue and sell the Notes and Warrants in accordance with the terms hereof and to
issue the Conversion Shares upon conversion of the Notes and the Warrant Shares
upon exercise of the Warrants. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or will be obtained promptly after Closing effected
on or prior to the date hereof.
22. ABSENCE OF CERTAIN CHANGES. Since December 31, 2005, there has
been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries.
23. ABSENCE OF LITIGATION. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect. SCHEDULE
3(h) contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
24. PATENTS, COPYRIGHTS, ETC. The Company and each of its
Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how, trade
secrets, trademarks, trademark applications, service marks, service names, trade
names and copyrights ("INTELLECTUAL PROPERTY") necessary to enable it to conduct
its business as now operated (and, to the best of the Company's knowledge, as
presently contemplated to be operated in the future); there is no claim or
action by any person pertaining to, or proceeding pending, or to the Company's
knowledge threatened, which challenges the right of the Company or of a
Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); to the best
of the Company's knowledge, the Company's or its Subsidiaries' current and
intended products, services and processes do not infringe on any Intellectual
Property or other rights held by any person; and the Company is
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unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company and each of its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of their
Intellectual Property.
25. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
26. TAX STATUS. Except as set forth on SCHEDULE 3(k), the Company
and each of its Subsidiaries has made or filed all federal, state and foreign
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. To the Company's knowledge, there are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction. The
Company has not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal, state or local
tax. Except as set forth on SCHEDULE 3(k), none of the Company's tax returns is
presently being audited by any taxing authority.
27. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3(l) and
except for arm's length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on SCHEDULE
3(c), none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (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 otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
28. DISCLOSURE. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyers pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is, to the knowledge of the Company, true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading. To the
knowledge of the Company, no event or circumstance has occurred or exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or
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financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed (assuming for this purpose that the Company's
reports filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933 Act).
29. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF SECURITIES. The
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyers' purchase of the Securities. The Company further represents to
each Buyer that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.
30. NO INTEGRATED OFFERING. Except for sales of securities to the
Buyers and affiliates thereof heretofore consummated, neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or solicited any
offers to buy any security under circumstances that would require registration
under the 1933 Act of the issuance of the Securities to the Buyers. The issuance
of the Securities to the Buyers will not be integrated with any other issuance
of the Company's securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its securities.
31. NO BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, transaction fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.
32. PERMITS; COMPLIANCE. The Company and each of its Subsidiaries is
in possession of all material franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates, approvals and
orders necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the "COMPANY PERMITS"), and
there is no action pending or, to the knowledge of the Company, threatened
regarding suspension or cancellation of any of the Company Permits. Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since December 31,
2005, neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
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A. ENVIRONMENTAL MATTERS.
(i) There are, to the Company's knowledge, with respect
to the Company or any of its Subsidiaries or any predecessor of the Company, no
present violations of Environmental Laws (as defined below), releases of any
material into the environment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws and neither the Company nor any of its
Subsidiaries has received any notice with respect to any of the foregoing, nor
is any action pending or, to the Company's knowledge, threatened in connection
with any of the foregoing. The term "ENVIRONMENTAL LAWS" means all material
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, "HAZARDOUS MATERIALS") into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as
well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the
Company or any of its Subsidiaries, and no Hazardous Materials were released on
or about any real property previously owned, leased or used by the Company or
any of its Subsidiaries during the period the property was owned, leased or used
by the Company or any of its Subsidiaries, except in the normal course of the
Company's or any of its Subsidiaries' business.
(iii) There are no underground storage tanks on or under
any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
33. TITLE TO PROPERTY. Except as set forth on SCHEDULE 3(s), the
Company and its Subsidiaries have good and marketable title to all real property
and good and marketable title to all personal property owned by them which is
material to the business of the Company and its Subsidiaries, in each case free
and clear of all liens and encumbrances and, to the knowledge of the Company,
defects or such as would not have a Material Adverse Effect. To the knowledge of
the Company, any real property and facilities held under lease by the Company
and its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as would not have a Material Adverse Effect.
34. INSURANCE. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and
10
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect. The Company has provided to Buyer true and correct
copies of all policies relating to directors' and officers' liability coverage,
errors and omissions coverage, and commercial general liability coverage.
35. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
36. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended, or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.
37. SOLVENCY. The Company (after giving effect to the transactions
contemplated by this Agreement) is solvent (I.E., its assets have a fair market
value in excess of the amount required to pay its probable liabilities on its
existing debts as they become absolute and matured) and currently the Company
has no information that would lead it to reasonably conclude that the Company
would not, after giving effect to the transaction contemplated by this
Agreement, have the ability to, nor does it intend to take any action that would
impair its ability to, pay its debts from time to time incurred in connection
therewith as such debts mature.
38. NO INVESTMENT COMPANY. The Company is not, and upon the issuance
and sale of the Securities as contemplated by this Agreement will not be an
"investment company" required to be registered under the Investment Company Act
of 1940 (an "INVESTMENT COMPANY"). The Company is not controlled by an
Investment Company.
39. BREACH OF REPRESENTATIONS AND WARRANTIES BY THE COMPANY. If the
Company breaches any of the representations or warranties set forth in this
Section 3, and in addition to any other remedies available to the Buyers
pursuant to this Agreement, the Company shall pay to the Buyers the Standard
Liquidated Damages Amount in cash or in shares of Common Stock at the option of
the Company, until such breach is cured. If the Company elects to pay the
Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.
11
40. COVENANTS.
41. BEST EFFORTS. The parties shall use their best efforts to
satisfy timely each of the conditions agreed to thereby described in Section 6
and 7 of this Agreement.
42. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to make available a
copy thereof to each Buyer promptly after such filing. The Company shall, on,
before or promptly after the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers under applicable securities or "blue sky" laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
make available evidence of any such action so taken to each Buyer on or prior to
the Closing Date.
43. REPORTING STATUS; ELIGIBILITY TO USE FORM S-3, SB-2 OR FORM S-1.
The Company represents and warrants that it shall use its best efforts to meet
the requirements for the use of Form S-3 (or if the Company is not eligible for
the use of Form S-3 as of the Filing Date (as defined in the Registration Rights
Agreement), the Company may use the form of registration for which it is
eligible at that time) for registration of the sale by the Buyer of the
Registrable Securities (as defined in the Registration Rights Agreement). So
long as any Buyer beneficially owns any of the Securities, the Company shall use
its best efforts to timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination. The Company
further agrees that it shall use its best efforts to file all reports required
to be filed by the Company with the SEC in a timely manner so as to become
eligible, and thereafter to maintain its eligibility, for the use of Form S-3.
The Company shall issue a press release describing the materials terms of the
transaction contemplated hereby as soon as practicable following the Closing
Date but in no event more than five (5) business days of the Closing Date, which
press release shall be subject to prior review by the Buyers. The Company agrees
that such press release shall not disclose the name of the Buyers unless
expressly consented to in writing by the Buyers or unless required by applicable
law or regulation, and then only to the extent of such requirement.
44. USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Notes and the Warrants for general working capital purposes and
shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other person
(except in connection with its currently existing direct or indirect
Subsidiaries.
45. FUTURE OFFERINGS. Subject to the exceptions described below, the
Company will not, without the prior written consent of a majority-in-interest of
the Buyers, not to be unreasonably withheld, negotiate or contract with any
party to obtain additional equity financing (including debt financing with an
equity component) that involves (A) the issuance of Common Stock at a discount
to the market price of the Common Stock on the date of issuance (taking into
account the value of any warrants or options to acquire Common Stock issued in
connection therewith) or (B) the issuance of convertible securities that are
convertible into an indeterminate number of shares of Common Stock or (C) the
issuance of warrants during the
12
period (the "LOCK-UP PERIOD") beginning on the Closing Date and ending on the
later of (i) two hundred seventy (270) days from the Closing Date and (ii) one
hundred eighty (180) days from the date the Registration Statement (as defined
in the Registration Rights Agreement) is declared effective (plus any days in
which sales cannot be made thereunder). In addition, subject to the exceptions
described below, the Company will not conduct any equity financing (including
debt with an equity component) ("FUTURE OFFERINGS") during the period beginning
on the Closing Date and ending two (2) years after the end of the Lock-up Period
unless it shall have first delivered to each Buyer, at least twenty (20)
business days prior to the closing of such Future Offering, written notice
describing the proposed Future Offering, including the terms and conditions
thereof and proposed definitive documentation to be entered into in connection
therewith, and providing each Buyer an option during the fifteen (15) day period
following delivery of such notice to purchase its pro rata share (based on the
ratio that the aggregate principal amount of Notes purchased by it hereunder
bears to the aggregate principal amount of Notes purchased hereunder) of the
securities being offered in the Future Offering on the same terms as
contemplated by such Future Offering (the limitations referred to in this
sentence and the preceding sentence are collectively referred to as the "CAPITAL
RAISING LIMITATIONS"). In the event the terms and conditions of a proposed
Future Offering are amended in any respect after delivery of the notice to the
Buyers concerning the proposed Future Offering, the Company shall deliver a new
notice to each Buyer describing the amended terms and conditions of the proposed
Future Offering and each Buyer thereafter shall have an option during the
fifteen (15) day period following delivery of such new notice to purchase its
pro rata share of the securities being offered on the same terms as contemplated
by such proposed Future Offering, as amended. The foregoing sentence shall apply
to successive amendments to the terms and conditions of any proposed Future
Offering. The Capital Raising Limitations shall not apply to any transaction
involving (i) issuances of securities in a firm commitment underwritten public
offering (excluding a continuous offering pursuant to Rule 415 under the ▇▇▇▇
▇▇▇) or (ii) issuances of securities as consideration for a merger,
consolidation or purchase of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or in connection with the disposition or acquisition of a
business, product or license by the Company. The Capital Raising Limitations
also shall not apply to the issuance of securities upon exercise or conversion
of the Company's options, warrants or other convertible securities outstanding
as of the date hereof or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or restricted
stock plan approved by the shareholders of the Company.
46. EXPENSES. At the Closing, the Company shall reimburse Buyers for
expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith ("DOCUMENTS"), including, without
limitation, attorneys' and consultants' fees and expenses, transfer agent fees,
fees for stock quotation services, fees relating to any amendments or
modifications of the Documents or any consents or waivers of provisions in the
Documents, fees for the preparation of opinions of counsel, escrow fees, and
costs of restructuring the transactions contemplated by the Documents in an
amount not to exceed $30,000. When possible, the Company must pay these fees
directly, otherwise the Company must make immediate payment for reimbursement to
the Buyers for all fees and expenses immediately upon written notice by the
Buyer or the submission of an invoice by the Buyer. If the Company fails to
reimburse the Buyer in full within three (3) business days of the written notice
or submission
13
of invoice by the Buyer, the Company shall pay interest on the total amount of
fees to be reimbursed at a rate of 15% per annum.
47. FINANCIAL INFORMATION. The Company agrees to send the following
reports to each Buyer until such Buyer transfers, assigns, or sells all of the
Securities: (i) within ten (10) days after the filing with the SEC, a copy of
its Annual Report on Form 10-KSB its Quarterly Reports on Form 10-QSB and any
Current Reports on Form 8-K; (ii) within one (1) day after release, copies of
all press releases issued by the Company or any of its Subsidiaries; and (iii)
contemporaneously with the making available or giving to the shareholders of the
Company, copies of any notices or other information the Company makes available
or gives to such shareholders.
48. AUTHORIZATION AND RESERVATION OF SHARES. The Company shall at
all times have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the full conversion
or exercise of the outstanding Notes and Warrants and issuance of the Conversion
Shares and Warrant Shares in connection therewith (based on the Conversion Price
of the Notes or Exercise Price of the Warrants in effect from time to time) and
as otherwise required by the Notes. The Company shall not reduce the number of
shares of Common Stock reserved for issuance upon conversion of Notes and
exercise of the Warrants without the consent of each Buyer. The Company shall at
all times maintain the number of shares of Common Stock so reserved for issuance
at an amount ("RESERVED AMOUNT") equal to no less than two (2) times the number
that is then actually issuable upon full conversion of the Notes and upon
exercise of the Warrants (based on the Conversion Price of the Notes or the
Exercise Price of the Warrants in effect from time to time). If at any time the
number of shares of Common Stock authorized and reserved for issuance
("AUTHORIZED AND RESERVED SHARES") is below the Reserved Amount, the Company
will promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of shareholders to authorize additional shares to meet the Company's
obligations under this Section 4(h), in the case of an insufficient number of
authorized shares, obtain shareholder approval of an increase in such authorized
number of shares, and voting the management shares of the Company in favor of an
increase in the authorized shares of the Company to ensure that the number of
authorized shares is sufficient to meet the Reserved Amount. If the Company
fails to obtain such shareholder approval within sixty (60) days following the
date on which the number of Reserved Amount exceeds the Authorized and Reserved
Shares, the Company shall pay to the Buyers the Standard Liquidated Damages
Amount, in cash or in shares of Common Stock at the option of each Buyer. If a
Buyer elects to be paid the Standard Liquidated Damages Amount in shares of
Common Stock, such shares shall be issued at the Conversion Price at the time of
payment. In order to ensure that the Company has authorized a sufficient amount
of shares to meet the Reserved Amount at all times, the Company shall use its
best efforts to deliver to a representative for the Buyers at the end of every
month a list detailing (1) the current amount of shares authorized by the
Company and reserved for the Buyers; and (2) amount of shares issuable upon
conversion of the Notes and upon exercise of the Warrants and as payment of
interest accrued on the Notes for one year. If the Company fails to provide such
list within five (5) business days of having received a written demand therefor,
the Company shall pay the Standard Liquidated Damages Amount, in cash or in
shares of Common Stock at the option of the Buyer, until the list is delivered.
If the Buyer
14
elects to be paid the Standard Liquidated Damages Amount in shares of Common
Stock, such shares shall be issued at the Conversion Price at the time of
payment.
49. LISTING. The Company shall use its best efforts to secure the
listing of the Conversion Shares and Warrant Shares upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and, so
long as any Buyer owns any of the Securities, shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares and Warrant Shares from time to time issuable upon conversion of the
Notes or exercise of the Warrants. The Company will use best efforts to obtain
and, so long as any Buyer owns any of the Securities, maintain the listing and
trading of its Common Stock on the OTCBB or any equivalent replacement exchange,
the Nasdaq National Market ("NASDAQ"), the Nasdaq SmallCap Market ("NASDAQ
SMALLCAP"), the New York Stock Exchange ("NYSE"), or the American Stock Exchange
("AMEX") and will comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable. The Company shall
promptly provide to each Buyer copies of any notices it receives from the OTCBB
and any other exchanges or quotation systems on which the Common Stock is then
listed regarding the continued eligibility of the Common Stock for listing on
such exchanges and quotation systems.
50. CORPORATE EXISTENCE. So long as a Buyer beneficially owns any
Notes or Warrants, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCBB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.
51. NO INTEGRATION. The Company shall not make any offers or sales
of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
52. BREACH OF COVENANTS. If the Company breaches any of the
covenants set forth in this Section 4, and in addition to any other remedies
available to the Buyers pursuant to this Agreement, the Company shall pay to the
Buyers the Standard Liquidated Damages Amount, in cash or in shares of Common
Stock at the option of the Company, until such breach is cured. If the Company
elects to pay the Standard Liquidated Damages Amount in shares, such shares
shall be issued at the Conversion Price at the time of payment.
53. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares and Warrant Shares in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in accordance with the terms
thereof (the "IRREVOCABLE TRANSFER AGENT
15
INSTRUCTIONS"). Prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold, all
such certificates shall bear the restrictive legend specified in Section 2(g) of
this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof (in the case of the
Conversion Shares and Warrant Shares, prior to registration of the Conversion
Shares and Warrant Shares under the 1933 Act or the date on which the Conversion
Shares and Warrant Shares may be sold pursuant to Rule 144 without any
restriction as to the number of Securities as of a particular date that can then
be immediately sold), will be given by the Company to its transfer agent and
that the Securities shall otherwise be freely transferable on the books and
records of the Company, subject to and to the extent provided in this Agreement
and the Registration Rights Agreement. Nothing in this Section shall affect in
any way each Buyer's obligations and agreement set forth in Section 2(g) hereof
to comply with all applicable prospectus delivery requirements, if any, upon
re-sale of the Securities. If a Buyer provides the Company with (i) an opinion
of counsel in form, substance and scope customary for opinions in comparable
transactions, to the effect that a public sale or transfer of such Securities
may be made without registration under the 1933 Act and such sale or transfer is
effected or (ii) the Buyer provides reasonable assurances that the Securities
can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Conversion Shares and Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates, free from restrictive legend,
in such name and in such denominations as specified by such Buyer. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers, by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 may be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyers shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being required.
54. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation
of the Company hereunder to issue and sell the Notes and Warrants to a Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion:
55. The applicable Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.
56. The applicable Buyer shall have delivered the Purchase Price in
accordance with Section 1(b) above.
57. The representations and warranties of the applicable Buyer shall
be true and correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material
16
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer at
or prior to the Closing Date.
58. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
59. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The
obligation of each Buyer hereunder to purchase the Notes and Warrants at the
Closing is subject to the satisfaction, at or before the Closing Date of each of
the following conditions, provided that these conditions are for such Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion:
60. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
61. The Company shall have delivered to such Buyer duly executed
Notes (in such denominations as the Buyer shall request) and Warrants in
accordance with Section 1(b) above.
62. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.
63. The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by the chief executive
officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer
including, but not limited to certificates with respect to the Company's
Articles of Incorporation, By-laws and Board of Directors' resolutions relating
to the transactions contemplated hereby.
64. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
65. No event shall have occurred which could reasonably be expected
to have a Material Adverse Effect on the Company.
17
66. The Buyer shall have received an officer's certificate described
in Section 3(c) above, dated as of the Closing Date.
67. GOVERNING LAW; MISCELLANEOUS.
68. GOVERNING LAW. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE
THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.
69. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
70. HEADINGS. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
71. SEVERABILITY. In the event that any provision of this Agreement
is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
72. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the
18
Company nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
73. NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Midnight Holdings Group, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Reitler ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
With copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Ingersoll, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Each party shall provide notice to the other party of any change in
address.
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74. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person who is an "Accredited Investor" that purchases
Securities in a private transaction from a Buyer or to any of its "affiliates,"
as that term is defined under the 1934 Act, without the consent of the Company.
75. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
76. SURVIVAL. The representations and warranties of the Company and
the agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive
the closing hereunder notwithstanding any due diligence investigation conducted
by or on behalf of the Buyers. The Company agrees to indemnify and hold harmless
each of the Buyers and all their officers, directors, employees and agents for
loss or damage arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and covenants set forth
in Sections 3 and 4 hereof or any of its covenants and obligations under this
Agreement or the Registration Rights Agreement, including advancement of
reasonable expenses as they are incurred.
77. PUBLICITY. The Company and each of the Buyers shall have the
right to review a reasonable period of time before issuance of any press
releases, SEC, OTCBB or NASD filings, or any other public statements with
respect to the transactions contemplated hereby; PROVIDED, HOWEVER, that the
Company shall be entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, OTCBB (or other applicable trading market) or
NASD filings with respect to such transactions as is required by applicable law
and regulations (although each of the Buyers shall be consulted by the Company
in connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).
78. FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
79. NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
E. REMEDIES. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that
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the Buyers shall be entitled, in addition to all other available remedies at law
or in equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach of this
Agreement and to enforce specifically the terms and provisions hereof, without
the necessity of showing economic loss and without any bond or other security
being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
MIDNIGHT HOLDINGS GROUP, INC.
________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
AJW PARTNERS, LLC
By: SMS Group, LLC
______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
RESIDENCE: Delaware
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $
Number of Warrants:
Aggregate Remaining Purchase Price (after
accounting for any principal of Bridge Note): $
22
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
RESIDENCE: Cayman Islands
ADDRESS: AJW Offshore, Ltd.
▇.▇. ▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, B.W.I.
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $
Number of Warrants:
Aggregate Remaining Purchase Price (after
accounting for any principal of Bridge Note): $
23
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
RESIDENCE: New York
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $
Number of Warrants:
Aggregate Remaining Purchase Price (after
accounting for any principal of Bridge Note): $
24
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLP
______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
RESIDENCE: New York
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes: $
Number of Warrants:
Aggregate Remaining Purchase Price (after
accounting for any principal of Bridge Note): $
25
EXHIBIT A
FORM OF NOTE
(See Attached)
26
EXHIBIT B
FORM OF WARRANT
(See Attached)
27
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
(See Attached)
28