LOAN AND SECURITIES PURCHASE AGREEMENT By and Between MDWERKS, INC., XENI FINANCIAL SERVICES, CORP. and VICIS CAPITAL MASTER FUND DATED APRIL 15, 2009
Exhibit 4.1
By
and Between
XENI
FINANCIAL SERVICES, CORP.
and
VICIS
CAPITAL MASTER FUND
DATED
APRIL 15, 2009
This LOAN
AND SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated this 15th day of
April, 2009, is made by and between MDWERKS, INC., a Delaware corporation
(“MDwerks” or the “Company”), XENI FINANCIAL SERVICES, CORP., a Florida
corporation (“XFSC” and along with MDwerks, each a “Borrower” and collectively
the “Borrowers”), and VICIS CAPITAL MASTER FUND, a sub-trust of Vicis Capital
Series Master Trust, a unit trust organized and existing under the laws of the
Cayman Islands (the “Lender”).
RECITALS
WHEREAS,
the Lender is the holder of that certain Amended and Restated Senior Secured
Promissory Note dated November 14, 2008 having a outstanding principal balance
of $623,450, and accrued interest through the date hereof of $27,924.58, issued
by Borrowers in favor of the Lender (“Existing Note”) pursuant to that certain
Loan and Securities Purchase Agreement dated November 14, 2008 by and between
Borrowers and Debt Opportunity Fund, LLLP (as amended, restated, and modified
from time to time, the “Existing Loan Agreement”) that also provided for, among
other things, the issuance of the Series J Warrant to Purchase Common Stock by
the Company dated November 14, 2008 to purchase an aggregate of 9,339,816 shares
of Common Stock initially at an exercise price of $1.00 (the “Series J
Warrant”);
WHEREAS,
pursuant to the terms and conditions of this Agreement, the Borrowers wish to
borrow an additional $3,200,000 from the Lender to be consolidated with the
indebtedness of Borrowers evidenced by the Existing Note (the
“Loan”);
WHEREAS,
the Loan will be evidenced by the issuance of a Senior Secured Promissory Note
in the form attached hereto as Exhibit A (the
“Note”), and the Existing Note will be canceled;
WHEREAS,
as part of the agreement to make the Loan, the Lender has requested that (a)
MDwerks sell and issue to the Lender a Series K Warrant to purchase an aggregate
of 2,550,000 shares of common stock, par value $.001 per share (the “Common
Stock”), of MDwerks initially at an exercise price of $0.35 per share in the
form attached hereto as Exhibit B (the
“Series K Warrant” or the “Warrant”) and, (b) in lieu of cancellation pursuant
to the Existing Loan Agreement, the Series J Warrant be amended such that there
are a maximum of 493,142 shares of Common Stock purchasable at an initial
exercise price of $0.35 per share pursuant to the form attached hereto as Exhibit C (the
“Series J Amendment”); and
WHEREAS,
the Lender desires to provide the Loan to the Borrowers and purchase the Warrant
from MDwerks according to the terms hereinafter set forth.
NOW,
THEREFORE, the
Borrowers and the Lender hereby agree as follows:
ARTICLE
I
THE
LOAN AND PURCHASE AND SALE OF THE WARRANT
1.1 The Loan and Purchase and
Sale of the Warrant. Subject to the terms and conditions
hereof and in reliance on the representations and warranties contained herein,
or made pursuant hereto, (a) the Borrowers will borrow, and the Lender will lend
the Borrowers at the closing of the transactions contemplated hereby (the
“Closing”), the aggregate amount of up to $3,200,000 under the Note, subject to
a deduction for an original issue discount of 2%, less the fees and expenses
owed to the Lender pursuant to Section 12.9 hereof and (b) MDwerks will (i)
issue and sell to the Lender, and the Lender will purchase from MDwerks at the
Closing, the Warrant for making the Loan to the Borrowers and (ii) execute and
deliver the Series J Amendment to the Lender. The Note will be issued
with an original issue discount of two percent (2%). The Borrowers
shall receive from the Lender $0.98 for each $1.00 of funds delivered under the
Note as indicated in Section 1.3 hereof.
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1.2 Closing. The
Closing shall be deemed to occur at the offices of ▇▇▇▇ ▇▇▇▇, P.A., ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, at 5:00 p.m. EST on April 15, 2009, or at
such other place, date or time as mutually agreeable to the parties (the
“Closing Date”).
1.3 Closing
Matters. On the Closing Date, and subject to the terms and
conditions hereof, the following actions shall be taken:
(a) The
Borrowers will deliver to the Lender the documents set forth in Section 5.1
hereof.
(b) The
Lender shall deliver to the Company $3,200,000 for the Note by, after applying
the 2% original issue discount of $64,000, delivering the sum of $3,136,000,
less the amounts set forth in Section 12.9 hereof, by wire transfer of
immediately available funds in accordance with the instructions of the
Company.
ARTICLE
II
SECURITY
DOCUMENTS
2.1 Security
Documents.
(a) Security Agreement and
Collateral Assignment. All of the obligations of the Borrowers
under the Note shall be secured by a lien on all the personal property and
assets of the Borrowers now existing or hereinafter acquired granted pursuant to
(i) a security agreement from each Borrower dated of even date herewith between
each of the Borrowers and the Lender in the form attached hereto as Exhibit D (“Security
Agreements), and (ii) such other documents as the Lender may reasonably require
from Borrowers to secure its interests under this Agreement.
(b) Guaranty. All
of the obligations of the Borrowers under the Note shall be guaranteed pursuant
to a guaranty agreement in the form attached hereto as Exhibit E (“Guaranty
Agreement”) by each of the following subsidiaries of the Company (each a
“Subsidiary” and collectively, the “Subsidiaries”): MDwerks Global Holdings,
Inc., a corporation, organized under the laws of the State of Florida (“MGHI”),
Xeni Medical Systems, Inc., a corporation organized under the laws of the State
of Delaware (“XMSI”), Xeni Medical Billing, Corp., a corporation organized under
the laws of the State of Delaware (“XMBC”), and Xeni Patient Access Solutions,
Inc., a corporation organized under the laws of the State of Florida
(“XPAS”).
(c) Guarantor Security
Documents. All of the obligations of each Subsidiary under its Guaranty
Agreement shall be secured by a lien on all the personal property and assets of
such Subsidiary now existing or hereinafter acquired granted pursuant to a
guarantor security agreement dated of even date herewith between such Subsidiary
and the Purchaser in the form attached hereto as Exhibit F (“Guarantor
Security Agreement”).
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE BORROWERS
Each of
the Borrowers hereby represents and warrants to the Lender as of the date of
this Agreement as follows:
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3.1 Organization and
Qualification. Each Borrower is a corporation duly organized and validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, and has all requisite corporate power and authority to carry on
its business as now conducted. Each Borrower is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, “Material Adverse Effect” means any material adverse
effect on the business, properties, assets, operations, results of operations,
or condition (financial or otherwise) of the Borrowers and the Subsidiaries,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of a Borrower to perform its obligations in all material
respects under the Transaction Documents.
3.2 Subsidiaries. MDwerks
has no other subsidiaries other than the Subsidiaries, and XFSC has no
subsidiaries. The Company owns, directly or indirectly, all of the capital stock
of each Subsidiary and XFSC, free and clear of any and all Liens, except
Permitted Liens (as defined in Section 8.3), and all the issued and outstanding
shares of capital stock of each Subsidiary and XFSC are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights. Each
Subsidiary is a corporation duly organized and validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated, and has
all requisite corporate power and authority to carry on its business as now
conducted. Each Subsidiary is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect.
3.3 Compliance.
(a) Neither
any Borrower nor any Subsidiary (i) is in default under or in violation of
(and no event has occurred that has not been waived that, with notice or lapse
of time or both, would result in a default by any Borrower or any Subsidiary
under), nor has any Borrower or any Subsidiary received notice of a claim that
it is in default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, except such that, individually or
in the aggregate, such default(s) and violations(s) would not have a Material
Adverse Effect, (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is in violation of any of the provisions of
its certificate or articles of incorporation, bylaws or other organizational or
charter documents.
(b) The
business of each Borrower and each Subsidiary is presently being conducted in
accordance with all applicable foreign, federal, state and local governmental
laws, rules, regulations and ordinances (including, without limitation, rules
and regulations of each governmental and regulatory agency, self regulatory
organization and Trading Market applicable to any Borrower or any Subsidiary),
except such that, individually or in the aggregate, the noncompliance therewith
would not have a Material Adverse Effect. Each Borrower has all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
by it unless the failure to possess such franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals, individually
or in the aggregate, would not have a Material Adverse Effect, and each Borrower
has not received any written notice of proceedings relating to the revocation or
modification of any of the foregoing. For purposes of this Agreement, “Trading
Market” means the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE Arca, OTC
Bulletin Board, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the Nasdaq Capital Market.
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3.4 Capitalization.
(a) As
of the date hereof and without giving effect to the sale of the Warrant at
Closing as contemplated hereby, the Company’s authorized capital stock consists
of (1) 200,000,000 shares of Common Stock, par value $.001 per share, of which
14,390,208 shares are outstanding and (2) 10,000,000 shares of preferred stock,
par value $.001 per share, of which (x) 1,000 shares have been designated as
Series A Convertible Preferred Stock, par value $0.001 per share, of which 1
share is outstanding, and (y) 1,500 shares have been designated as Series B
Preferred Stock, par value $0.001, of which 1,000 shares are outstanding. All of
such outstanding shares have been, or upon issuance will be, validly issued, are
fully paid and nonassessable. 104,961,616 shares of Common Stock are reserved
for issuance upon the exercise or conversion of all outstanding warrants,
convertible notes, options, or other securities exchangeable, convertible or
exercisable into shares of Common Stock.
(b) Except
for the Warrant, or as disclosed on Schedule 3.4(b):
(i) no
holder of shares of the Company’s capital stock has any preemptive rights or any
other similar rights or has been granted or holds any Liens or encumbrances
suffered or permitted by the Company;
(ii) there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of any Borrower or any Subsidiary, or contracts, commitments,
understandings or arrangements by which any Borrower or any Subsidiary is or may
become bound to issue additional shares of capital stock of any Borrower or any
Subsidiary or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of any Borrower or any Subsidiary;
(iii) there
are no outstanding debt securities, notes, credit agreements, credit facilities
or other agreements, documents or instruments evidencing Indebtedness (as
defined in Section 3.13 hereof) of any Borrower or any Subsidiary in excess of
$100,000 or by which a Borrower or a Subsidiary is or may become bound and
involves Indebtedness in excess of $100,000;
(iv) there
are no financing statements securing obligations in any material amounts, either
singly or in the aggregate, filed in connection with any Borrower or any
Subsidiary;
(v) there
are no agreements or arrangements under which any Borrower or any Subsidiary is
obligated to register the sale of any of their securities under the Securities
Act of 1933, as amended (the “Securities Act”);
(vi) there
are no outstanding securities or instruments of any Borrower or any Subsidiary
that contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which any Borrower or any
Subsidiary is or may become bound to redeem a security of a Borrower or a
Subsidiary;
(vii) there
are no securities or instruments containing antidilution or similar provisions
that will be triggered by the issuance of the Warrant; and
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(viii) neither
of the Borrowers has any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement.
3.5 Issuance of the
Warrant.
(a) The
Warrant to be issued hereunder is duly authorized and, upon issuance in
accordance with the terms hereof, shall be free from all taxes, Liens and
charges with respect to the issuance thereof. As of the Closing Date, the
Company has authorized and has reserved free of preemptive rights and other
similar contractual rights of stockholders, a number of its authorized but
unissued shares of Common Stock equal to one hundred percent (100%) of the
aggregate number of shares of Common Stock to effect the exercise of the Warrant
(the “Warrant Shares”).
(b) The
Warrant Shares, when issued and paid for upon exercise of the Warrant will be
validly issued, fully paid and nonassessable and free from all taxes, Liens and
charges with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of the Common Stock.
(c) Assuming
the accuracy of each of the representations and warranties made by the Lender
and set forth in Article IV hereof (and assuming no change in applicable law and
no unlawful distribution of the Warrant by the Lender or other Persons), the
issuance by the Company to the Lender of the Warrant is exempt from registration
under the Securities Act.
3.6 Authorization; Enforcement;
Validity. Each Borrower has the respective requisite corporate power and
authority to enter into and perform, as applicable, its obligations under this
Agreement, the Registration Rights Agreement to be entered into between the
Company and the Lender on even date herewith in the form attached hereto as
Exhibit
G (the “Registration Rights Agreement”), the Security
Agreement, the Note, the Warrant, and each of the other agreements or
instruments entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the “Transaction
Documents”) and to issue the Note and the Warrant (including without limitation,
the Warrant Shares) in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by each Borrower and the
consummation by each Borrower of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Note and the
Warrant, have been duly authorized by its Board, and no further consent or
authorization is required by either of the Borrowers, their respective Boards or
stockholders. This Agreement, the Note and the other Transaction Documents have
been duly executed and delivered by each Borrower, as applicable, and constitute
the legal, valid and binding obligations of each Borrower enforceable against
the Borrowers in accordance with their respective terms, except (i) as limited
by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other laws of general
application affecting enforcement of creditors’ rights and remedies generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law or
by principles of public policy thereunder.
3.7 Dilutive Effect. Each
Borrower understands and acknowledges that the Company’s obligation to issue the
Warrant Shares upon exercise of the Warrant is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.
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3.8 No Conflicts. The
execution, delivery and performance of the Transaction Documents by each
Borrower and the consummation by each Borrower of the transactions contemplated
hereby and thereby (including, without limitation, the reservation for issuance
of the Warrant Shares) will not (i) result in a violation of any articles
or certificate of incorporation, any certificate of designations, preferences
and rights of any outstanding series of preferred stock or bylaws of any
Borrower or any Subsidiary or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which any
Borrower or any Subsidiary is a party (except where such defaults, conflicts,
rights of termination, amendment, acceleration or cancellation have been waived
or postponed until the fulfillment of the Borrowers’ obligations under the
Transaction Documents), or (iii) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and rules and
regulations of any governmental or any regulatory agency, self-regulatory
organization, or Trading Market applicable to the Company) or by which any
property or asset of the Borrowers are bound or affected, except in the case of
clauses (ii) and (iii), for such breaches, violations or defaults as would not
be reasonably expected to have a Material Adverse Effect.
3.9 Governmental
Consents. Except for (i) filings required under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) to disclose the existence
of the transactions contemplated by this Agreement, (ii) application(s) to
each Trading Market for the listing of the Warrant Shares for trading thereon in
the time and manner required thereby, and (iii) the filing of Form D with
the Commission and such filings as are required to be made under applicable
state securities laws, neither Borrower is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental or any regulatory agency, self-regulatory organization or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case, in accordance
with the terms hereof or thereof. Each Borrower is unaware of any facts or
circumstances relating to any Borrower or any Subsidiary that might prevent any
Borrower from obtaining or effecting any of the foregoing.
3.10 Registration and Approval of
Sale of Securities. Based in material part upon the representations and
warranties herein (and in the other Transaction Documents) of the Lender, the
Company has complied and will comply with all applicable federal and state
securities laws in connection with the offer, issuance and sale of the Warrant
hereunder (except in the case of state securities laws, for any failures to
comply that, individually or in the aggregate, will not have a Material Adverse
Effect). Assuming the accuracy of the representations and warranties in Article
IV hereof (and assuming no change in applicable law and no unlawful distribution
of the Warrant by the Lender or other Persons), no registration under the
Securities Act is required for the offer and sale of the Warrant by the Company
to the Lender as is contemplated hereby. Neither the Company nor any Person
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy the Warrant or similar securities to, or solicit offers
with respect thereto from, or enter into any negotiations relating thereto with,
any Person, or has taken or will take any action so as to either (a) bring
the issuance and sale of the Warrant under the registration provisions of the
Securities Act or applicable state securities laws, or (b) trigger
shareholder approval provisions under the rules or regulations of any Trading
Market. Neither the Company nor any of its affiliates that it controls, nor any
Person acting on its or their behalf, has: (x) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of any of the Warrant;
or (y) directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would cause
the offering of the Warrant pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the Securities Act in a manner
that would prevent the Company from selling the Warrant pursuant to Regulation D
and Rule 506 thereof under the Securities Act, nor will the Company or any of
its affiliates that it controls or Persons acting on its or their behalf engage
in any form of general solicitation or take any action or steps that would cause
the offering of the Warrant to be integrated with other
offerings.
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3.11 Placement Agent’s
Fees. No brokerage or finder’s fee or commission are or will be payable
to any Person with respect to the transactions contemplated by this Agreement
based upon arrangements made by any Borrower or any Subsidiary. The Borrowers
agree that they shall be responsible for the payment of any placement agent’s
fees, financial advisory fees, or brokers’ commissions (other than for Persons
engaged by the Lender or any of its affiliates) relating to or arising out of
the transactions contemplated hereby. The Borrowers shall pay, and hold the
Lender harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in
connection with any claim for any such fees or commissions.
3.12 Litigation. Except as
disclosed in Schedule 3.12 or as disclosed in the SEC Documents (as
defined in Section 3.14), there is no action, suit, written notice of violation,
or written notice of any proceeding pending or, to the knowledge of the
Borrowers, threatened against or affecting the Common Stock or any Borrower, any
Subsidiary or any of their respective executive officers, directors or
properties before or by any court, arbitrator, governmental or administrative
agency, regulatory authority (federal, state, county, local or foreign), self
regulatory authority or Trading Market (collectively, an “Action”) which
(i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Warrant or
(ii) would, if there were an unfavorable decision, have or reasonably be
expected to result in a Material Adverse Effect. To the Borrowers’ knowledge,
neither the Borrowers nor any Subsidiary, nor any director or executive officer
thereof (in his/her capacity as such), is or, within the last five years, has
been the subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of fiduciary duty.
To the knowledge of the Company, there has not been, and there is not pending or
threatened in writing, any investigation by the United States Securities and
Commission (the “Commission” or “SEC”) involving the Company or any current
director or executive officer of the Company. The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company under the Exchange Act or the Securities Act.
There is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Borrowers, threatened in writing against or involving either of the Borrowers or
any of their respective properties or assets, which individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against either of the
Borrowers or any executive officers or directors of the Borrowers in their
capacities as such, which individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
3.13 Indebtedness and Other
Contracts. Except as disclosed in the SEC Documents, neither any Borrower
nor any Subsidiary (a) has any outstanding Indebtedness (as defined below
in this Section 3.13), (b) is a party to any contract, agreement or
instrument, the violation of which, or default under, by any other party to such
contract, agreement or instrument would result in a Material Adverse Effect,
(c) is in violation of any term of or in default under any contract,
agreement or instrument relating to any Indebtedness, except where such
violations and defaults would not result, individually or in the aggregate, in a
Material Adverse Effect, or (d) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the
judgment of the Borrowers’ officers, has or is expected to have a Material
Adverse Effect. For purposes of this Agreement: (x) “Indebtedness” of any
Person means, without duplication (i) all indebtedness for borrowed money,
(ii) all obligations issued, undertaken or assumed as the deferred purchase
price of property or services (other than trade payables entered into in the
ordinary course of business), (iii) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar
instruments, (iv) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property),
(vi) all monetary obligations under any leasing or similar arrangement
which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease,
(vii) all indebtedness referred to in clauses (i) through (vi) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, Lien, pledge, change,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (viii) all Contingent Obligations in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (i) through (vii) above; (y) “Contingent Obligation” means, as
to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) “Person” means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
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3.14 Financial Information; SEC
Documents. The Company has filed all reports required to be filed by it
under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials,
including the exhibits thereto, being collectively referred to herein as the
“SEC Documents”) on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Documents prior to the expiration of
any such extension. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that the Borrowers make no representation as to the information included in any
SEC Documents prepared by third parties and included therein, and the Borrowers
make no representation as to the accuracy of information contained in third
party studies and reports cited in the SEC Documents. Each registration
statement and any amendment thereto filed by the Company during the two years
preceding the date hereof pursuant to the Securities Act and the rules and
regulations thereunder, as of the date such statement or amendment became
effective, complied as to form in all material respects with the Securities Act
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein not misleading; provided, however, that the Borrowers
make no representation as to the information included in any SEC Documents
prepared by third parties and included therein, and the Borrowers make no
representation as to the accuracy of information contained in third party
studies and reports cited in the SEC Documents; and each prospectus filed
pursuant to Rule 424(b) under the Securities Act, as of its issue date and as of
the closing of any sale of securities pursuant thereto did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Borrowers make no representation as to the
information included in any SEC Documents prepared by third parties and included
therein and the Borrowers make no representation as to the accuracy of
information contained in third party studies and reports cited in the SEC
Documents. The financial statements of the Company included in the SEC Documents
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP and remain
subject to year end adjustments, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal
year-end audit adjustments.
-9-
3.15 Absence of Certain Changes
or Developments. Except as disclosed in Schedule 3.15 attached hereto or
as disclosed in the SEC Documents or as contemplated herein and in the
Transaction Documents, since December 31, 2008:
(a) there
has been no Material Adverse Effect, and no event or circumstance has occurred
or exists with respect to the Company or its businesses, properties, operations
or financial condition, which, under Exchange Act, Securities Act, or rules or
regulations of any Trading Market, requires public disclosure or announcement by
the Company but which has not been so publicly announced or
disclosed;
(b) each
Borrower has not:
(i) issued
any stock, bonds or other corporate securities or any right, options or warrants
with respect thereto, except pursuant to the exercise or conversion of
securities outstanding as of such date;
(ii) borrowed
any amount in excess of $250,000 or incurred or become subject to any other
liabilities in excess of $250,000 (absolute or contingent) except current
liabilities incurred in the ordinary course of business which are comparable in
nature and amount to the current liabilities incurred in the ordinary course of
business during the comparable portion of its prior fiscal year, as adjusted to
reflect the current nature and volume of the business of the
Borrower;
(iii) discharged
or satisfied any Lien or encumbrance in excess of $250,000 or paid any
obligation or liability (absolute or contingent) in excess of $250,000, other
than current liabilities paid in the ordinary course of business and payments of
principal and interest to Gottbetter Capital Master, Ltd. (“Gottbetter”) and the
Lender;
(iv) declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements so
to purchase or redeem, any shares of its capital stock, in each case in excess
of $50,000 individually or $100,000 in the aggregate;
(v) sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, in each case in excess of $250,000, except in the ordinary course of
business;
(vi) sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights in
excess of $250,000, or disclosed any proprietary confidential information to any
person except to customers in the ordinary course of business;
(vii) suffered
any material losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
prospective business;
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(viii) made
any changes in employee compensation except in the ordinary course of business
and consistent with past practices;
(ix) made
capital expenditures or commitments therefor that aggregate in excess of
$250,000;
(x) entered
into any material transaction, whether or not in the ordinary course of business
that has not been disclosed in the SEC Documents;
(xi) made
charitable contributions or pledges in excess of $10,000;
(xii)
suffered any material damage, destruction or casualty loss, whether or not
covered by insurance;
(xiii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment;
(xiv) altered
its method of accounting, except to the extent required by GAAP;
(xv) issued
any equity securities to any officer, director or affiliate (as such term is
defined in Rule 144 of the Securities Act), except pursuant to existing stock
option, equity incentive or similar incentive plans; or
(xvi) entered
into an agreement, written or otherwise, to take any of the foregoing
actions.
3.16 Solvency. No Borrower
has taken, nor does it have any intention to take, any steps to seek protection
pursuant to any bankruptcy or similar law. No Borrower has any actual knowledge
nor has it received any written notice that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact that, as
of the date hereof, would reasonably lead a creditor to do so. After giving
effect to the transactions contemplated hereby to occur at the Closing, no
Borrower will be Insolvent (as hereinafter defined). For purposes of this
Agreement, “Insolvent” means (i) a Borrower is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (ii) a Borrower intends to incur
or believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iii) a Borrower has unreasonably small capital with
which to conduct the business in which it is engaged as such business is now
conducted and is proposed to be conducted.
3.17 Off-Balance Sheet
Arrangements. There is no transaction, arrangement, or other relationship
between a Borrower and an unconsolidated or other off balance sheet entity that
is required to be disclosed by the Company in its Exchange Act filings and is
not so disclosed or that if made or not made would be reasonably likely to have
a Material Adverse Effect.
3.18 Foreign Corrupt
Practices. Neither any Borrower, nor any Subsidiary, nor any of their
respective directors, officers, agents, employees or other Persons acting on
behalf of such subsidiaries has, in the course of their respective actions for
or on behalf of a Borrower or any of its subsidiaries (a) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity, (b) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds, (c) violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended or (d) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or
employee.
-11-
3.19 Transactions With
Affiliates. Except as set forth in the SEC Documents, none of the
officers, directors or employees of either Borrower is presently a party to any
transaction with any Borrower or any Subsidiary (other than for ordinary course
services as employees, officers or 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 such officer, director or employee or, to the
knowledge of the Borrowers, any corporation, partnership, trust or other entity
in which any such officer, director, or employee has a substantial interest or
is an officer, director, trustee or partner.
3.20 Insurance. Each
Borrower and each Subsidiary are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of a Borrower believes to be prudent and customary in the businesses in which
each Borrower and each Subsidiary are engaged. Neither any Borrower nor any
Subsidiary has been refused any insurance coverage sought or applied for and
neither any Borrower nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and 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.
3.21 Employee Relations.
Neither any Borrower nor any Subsidiary is a party to any collective bargaining
agreement or employs any member of a union. No Executive Officer of a Borrower
(as defined in Rule 501(f) of the Securities Act) has notified such Borrower
that such officer intends to leave the Borrower or otherwise terminate such
officer’s employment with the Borrower. No Executive Officer of a Borrower, to
the knowledge of the Borrowers, is, or is now, in violation of any material term
of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant, and, to the actual knowledge of the
Borrowers, the continued employment of each such executive officer does not
subject any Borrower or any Subsidiary to any liability with respect to any of
the foregoing matters. Each Borrower and each Subsidiary are in compliance with
all federal, state, local and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours, except where failure to be in compliance would not, either individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.
3.22 Title. Except as set
forth in the SEC Documents, each Borrower and each Subsidiary have good and
marketable title to all personal property owned by them which is material to
their respective business, in each case free and clear of all Liens (except for
Permitted Liens). Any real property and facilities held under lease by any
Borrower or any Subsidiary are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by any
Borrower or any Subsidiary.
3.23 Intellectual Property
Rights. The Borrowers and the Subsidiaries own or possess the rights to
use all patents, trademarks, domain names (whether or not registered) and any
patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted (collectively, the “Intellectual Property Rights”)
without any conflict with the rights of others, except any failures as,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect. Neither any Borrower nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by any Borrower or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Borrowers, all such Intellectual Property Rights are enforceable and
there is no existing infringement by another Person of any of the Intellectual
Property Rights. The Borrowers and the Subsidiaries have taken reasonable
measures to protect the value of the Intellectual Property
Rights.
-12-
3.24 Environmental Laws.
Each Borrower and each of the Subsidiaries (a) are in compliance with any
and all Environmental Laws (as hereinafter defined), (b) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (c) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (a), (b) and (c), the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. The term “Environmental Laws” means all 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.
3.25 Tax Matters. Each
Borrower and each of the Subsidiaries (a) have made or filed all federal
and state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject, (b) have 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 (c) have set aside on its books
reasonably adequate provision for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply,
except where such failure would not have a Material Adverse Effect. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of each Borrower know of no basis for any
such claim.
3.26 ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act; Internal
Accounting and Disclosure Controls. The Company is in compliance in all
material respects with the requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that
are effective as of the date hereof and applicable to it, and any and all rules
and regulations promulgated by the SEC thereunder that are effective and
applicable to it as of the date hereof. The Company maintains 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 GAAP 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 actions are taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries and XFSC, is made known to the
certifying officers by others within those entities, particularly during the
period in which the Company’s most recently filed periodic report under the
Exchange Act, as the case may be, is being prepared. The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and
procedures as of the date prior to the filing date of the most recently filed
periodic report under the Exchange Act (such date, the “Evaluation Date”). The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
307(c) of Regulation S-B under the Exchange Act) or, to the Company’s knowledge,
in other factors that could significantly affect the Company’s internal
controls. The Company maintains and will continue to maintain a standard system
of accounting established and administered in accordance with United States GAAP
and the applicable requirements of the Exchange Act.
-13-
3.27 Investment Company
Status. The Company is not, and immediately after receipt of payment for
the Warrant will not be, an “investment company,” an “affiliated person” of,
“promoter” for or “principal underwriter” for, or an entity “controlled” by an
“investment company,” within the meaning of the Investment Company
Act.
3.28 Material Contracts.
Each contract of a Borrower that involves expenditures or receipts in excess of
$250,000 (each, a “Material Contract”) is in full force and effect and is valid
and enforceable in accordance with its terms. Each Borrower is and has been in
full compliance with all applicable terms and requirements of each its Material
Contract and no event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with or result in a violation
or breach of, or give a Borrower or any other entity the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify any Material Contract. Each
Borrower has not given or received from any other Person any notice or other
communication (whether oral or written) regarding any actual, alleged, possible
or potential violation or breach of, or default under, any Material
Contract.
3.29 [Intentionally
Omitted].
3.30 No Disagreements with
Accountants. There are no disagreements of any kind presently existing,
or reasonably anticipated by the Borrowers to arise, between the Borrowers and
the accountants formerly or presently employed by the Borrowers.
3.31 Senior
Debt. Except as disclosed in the SEC Documents, there is no
Indebtedness of a Borrower that is senior to or ranks pari passu with the Note in
right of payment, whether with respect of payment of redemptions, interest,
damages or upon liquidation or dissolution.
3.32 Manipulation of
Price. Each Borrower has not, and to its knowledge no one acting on its
behalf has, taken, directly or indirectly, any action designed to cause or to
result or that could reasonably be expected to cause or result, in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Warrant.
3.33 Listing and Maintenance
Requirements. The Company has not, in the 12 months preceding the date
hereof, received notice from any Trading Market on which the Common Stock is or
has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Trading Market. The Company
is in compliance with all such maintenance requirements.
3.34 Application of Takeover
Protections. Each Borrower and its Board of Directors have taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the
respective Certificates of Incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become applicable to the
Lender as a result of the Lender and the Borrowers fulfilling their obligations
or exercising their rights under the Transaction Documents, including without
limitation the Company’s issuance of the Warrant and the Lender’s ownership of
the Warrant.
-14-
3.35
Disclosure. All
written disclosure provided to the Lender regarding each Borrower, its business
and the transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Borrowers are true and correct and
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading; provided
however, the Borrowers make no representation as to studies and reports prepared
by third parties not engaged by the Borrowers and included in the materials
delivered to Lender.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE LENDER
The
Lender hereby represents and warrants to the Borrowers as of the date of this
Agreement as follows:
4.1 Organization;
Authority. The Lender is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization with
full right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution, delivery and
performance by the Lender of the transactions contemplated by this Agreement
have been duly authorized by all necessary partnership or similar action on the
part of the Lender. Each Transaction Document to which it is a party has been
duly executed by the Lender, and when delivered by the Lender in accordance with
the terms hereof, will constitute the valid and legally binding obligation of
the Lender, enforceable against it in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
4.2 Own Account. The
Lender understands that the Warrant is a “restricted security” and has not been
registered under the Securities Act or any applicable state securities law and
is acquiring the Warrant as principal for its own account and not with a view to
or for distributing or reselling such Warrant or Warrant Shares or any part
thereof except in compliance with the Securities Act, has no present intention
of distributing the Warrant or Warrant Shares and has no arrangement or
understanding with any other persons regarding the distribution of the Warrant
or Warrant Shares (this representation and warranty not limiting the Lender’s
right to sell the Warrant or Warrant Shares pursuant to a Registration Statement
(defined below) or otherwise in compliance with applicable federal and state
securities laws), except in compliance with the Securities Act. The Lender is
acquiring the Warrant hereunder in the ordinary course of its business. The
Lender does not have any agreement or understanding, directly or indirectly,
with any Person to distribute the Warrant or Warrant Shares.
4.3 Lender Status. At the
time the Lender was offered the Warrant, it was, and at the date hereof it is,
and on each date on which it exercises any warrant issued by the Company, it
will be either: (i) an “accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities
Act.
4.4 Experience of Such
Lender. The Lender, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Warrant and the shares issuable thereunder, and
has so evaluated the merits and risks of such investment. The Lender is able to
bear the economic risk of an investment in the Warrant and the shares issuable
thereunder and, at the present time, is able to afford a complete loss of such
investment.
-15-
4.5 General Solicitation.
The Lender is not purchasing the Warrant as a result of any advertisement,
article, notice or other communication regarding the Warrant published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
4.6 No Short Position.
Neither the Lender nor any of its affiliates has an open short position in the
Common Stock of the Company. From and after Closing, the Lender will not use any
share of Common Stock acquired pursuant to this Agreement to cover any short
position until such time as the Registration Statement covering such share of
Common Stock has been declared effective by the Commission. For purposes of this
Agreement a “short sale” or “short position” includes, without limitation, all
“short sales” as defined in Rule 200 promulgated under Regulation SHO under the
1934 Act and all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, swaps and similar arrangements (including on a
total return basis), and sales and other transactions through non-US broker
dealers or foreign regulated brokers.
ARTICLE
V
CONDITIONS
TO CLOSING OF THE PURCHASER
The
obligation of the Lender to make the Loan and purchase the Warrant at the
Closing is subject to the fulfillment to the Lender’s satisfaction on or prior
to the Closing Date of each of the conditions set forth in Sections 5.1 through
5.7 below, any of which may be waived by such Lender.
5.1 Other Agreements and
Documents. The Borrowers shall have delivered the following agreements
and documents:
(a) The
Note in the form of Exhibit A attached
hereto, executed by the Borrowers;
(b) The
Series K Warrant in the form of Exhibit B attached
hereto;
(c) The
Series J Amendment in the form of Exhibit C attached
hereto;
(d) The
Security Agreement in the form of Exhibit D attached
hereto, executed by each Borrower;
(e) The
Guaranty Agreement in the form of Exhibit E attached
hereto, executed by each Subsidiary;
(f) The
Guarantor Security Agreement in the form of Exhibit F attached
hereto, executed by each Subsidiary;
(g) The
Registration Rights Agreement in the form of Exhibit G attached
hereto, executed by the Company;
(h) An
opinion of counsel to the Borrowers, dated the date of the Closing,
substantially in the form of Exhibit H hereto,
with such exceptions and limitations as shall be reasonably acceptable to
counsel to the Lender;
(i)
The Irrevocable Transfer Agent Instructions,
substantially in the form of Exhibit I attached
hereto, shall have been delivered to the Company’s transfer
agent;
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(j) Financing
Statements on Form UCC-1 with respect to the personal property and assets of
each Borrower and each Subsidiary as to which the Lender will hold a security
interest if requested by Lender;
(k) A
Certificate of Good Standing from the state of incorporation of each Borrower
and each Subsidiary;
(l) A
certificate of the Secretary of each Borrower, dated as of the Closing Date,
certifying the Board resolutions approving this Agreement and the transactions
contemplated hereby and in a form acceptable to Lender;
(m) A
certificate of each Borrower’s CEO, dated as of the Closing Date, certifying the
fulfillment of the conditions specified in Sections 5.2 and 5.3 of this
Agreement and such other matters as the Lender shall reasonably request;
and
(n) A
completed and duly executed Florida documentary stamp tax return on Form
DR-228.
5.2 Representations and
Warranties Correct. The representations and warranties in Article III
hereof shall be true and correct when made, and shall be true and correct on the
Closing Date, with the same force and effect as if they had been made on and as
of the Closing Date.
5.3 Performance. All
covenants, agreements and conditions contained in this Agreement to be performed
or complied with by the Borrowers on or prior to the Closing Date shall have
been performed or complied with by the Borrowers in all material
respects.
5.4 No Impediments.
Neither the Borrowers nor the Lender shall be subject to any order, decree or
injunction of a court or administrative agency of competent jurisdiction that
prohibits the transactions contemplated hereby or would impose any material
limitation on the ability of such Lender to exercise its full rights under the
Note or full rights of ownership of the Warrant. At the time of the Closing, the
Loan and purchase of the Warrant by the Lender hereunder shall be legally
permitted by all laws and regulations to which the Lender and the Borrowers are
subject.
5.5 Trading Markets. The
listing or trading of the Warrant Shares on each Trading Market shall have been
approved by such Trading Market authority.
5.6 Material Adverse Changes;
Investigation. There shall have been no change which would have a
Material Adverse Effect on Borrower or any Guarantor since the date of the most
recent financial statements of such person delivered to Lender from time to
time. No fact shall have been discovered with regard to (a) a Borrower or
Subsidiary or any affiliates thereof or (b) this transaction, which in the
Lender’s determination would make the consummation of the transactions
contemplated by this Agreement not in the Lender’s best interests.
5.7 Further
Assurances. Borrower shall have delivered such further
documentation or assurances as Lender may reasonably require.
ARTICLE
VI
CONDITIONS
TO CLOSING OF THE BORROWERS
The
Borrowers’ obligations to issue the Note and the Company’s obligation to sell
the Warrant at the Closing are subject to the fulfillment to its satisfaction on
or prior to the Closing Date of each of the following
conditions:
-17-
6.1 Representations. The
representations made by the Lender pursuant to Article IV hereof shall be
true and correct when made and shall be true and correct on the Closing
Date.
6.2 No Impediments.
Neither the Borrowers nor the Lender shall be subject to any order, decree or
injunction of a court or administrative agency of competent jurisdiction that
prohibits the transactions contemplated hereby or would impose any material
limitation on the ability of the Lender to exercise full rights of ownership of
the Warrant. At the time of the Closing, the making of the Loan and purchase of
the Warrant by the Lender hereunder shall be legally permitted by all laws and
regulations to which the Lender and the Borrowers are subject.
ARTICLE
VII
AFFIRMATIVE
COVENANTS
Each of
the Borrowers hereby covenants and agrees, so long as any amounts remain
outstanding under the Note, as follows:
7.1 Maintenance of Corporate
Existence. Each Borrower shall and shall cause its subsidiaries to,
maintain in full force and effect its corporate existence, rights and franchises
and all material terms of licenses and other rights to use licenses, trademarks,
trade names, service marks, copyrights, patents or processes owned or possessed
by it and necessary to the conduct of its business, except where the failure to
maintain such corporate existence, rights, franchises, licenses and rights to
use licenses, trademarks, trade names, service marks, copyrights, patents or
processes would not (a) result in a Material Adverse Effect or (b) materially
adversely affect the rights of Lender under any Transaction
Document.
7.2 Maintenance of
Properties. Each Borrower shall and shall cause its subsidiaries to, keep
each of its properties necessary to the conduct of its business in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto; and each Borrower shall and shall cause its subsidiaries
to at all times comply with each material provision of all material leases to
which it is a party or under which it occupies property.
7.3 Payment of Taxes.
Each Borrower shall and shall cause its subsidiaries to, promptly pay and
discharge, or cause to be paid and discharged when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, assets, property or business of the Borrower and its subsidiaries;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall be contested timely and in good faith by
appropriate proceedings, if the Borrower or its subsidiaries shall have set
aside on its books adequate reserves with respect thereto, and the failure to
pay shall not be prejudicial in any material respect to the holders of the
Warrant, and provided, further, that the Borrower or its subsidiaries will pay
or cause to be paid any such tax, assessment, charge or levy forthwith upon the
commencement of proceedings to foreclose any Lien which may have attached as
security therefor.
7.4 Payment of
Indebtedness. Each Borrower shall, and shall cause its subsidiaries to,
pay or cause to be paid when due all Indebtedness incident to the operations of
the Borrower or its subsidiaries (including, without limitation, claims or
demands of workmen, materialmen, vendors, suppliers, mechanics, carriers,
warehousemen and landlords) which, if unpaid might become a Lien (except for
Permitted Liens) upon the assets or property of the Borrower or its
subsidiaries, except where the Borrower (or its subsidiary, as the case may be)
disputes the payment of such Indebtedness in good faith by appropriate
proceedings.
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7.5 Reservation of Common
Stock. The Company shall continue to reserve, free of preemptive rights
and other similar contractual rights of stockholders, a number of its authorized
but unissued shares of Common Stock not less than one hundred percent (100%) of
the aggregate number of shares of Common Stock to effect the exercise of the
Warrant.
7.6 Maintenance of
Insurance. Each Borrower shall and shall cause its subsidiaries to, keep
its assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by theft, fire, explosion and other
risks customarily insured against by companies in the line of business of the
Borrower or its subsidiaries, in amounts sufficient to prevent the Borrower and
its subsidiaries from becoming a co-insurer of the property insured; and the
Borrower shall and shall cause its subsidiaries to maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies in similar businesses similarly situated or as may be required by law,
including, without limitation, general liability, fire and business interruption
insurance, and product liability insurance as may be required pursuant to any
license agreement to which the Borrower or its subsidiaries is a party or by
which it is bound.
7.7 Notice of Adverse
Change. The Borrowers shall promptly give notice to all holders of the
Note or Warrant (but in any event within seven (7) days) after becoming aware of
the existence of any condition or event which constitutes, or the occurrence of,
any of the following:
(a) any
Event of Default (as hereinafter defined);
(b) any
other event of noncompliance by any Borrower or its subsidiaries under this
Agreement in any material respect;
(c) the
institution of an action, suit or proceeding against any Borrower or any
subsidiary before any court, administrative agency or arbitrator, including,
without limitation, any action of a foreign government or instrumentality,
which, if adversely decided, would result in a Material Adverse Effect whether
or not arising in the ordinary course of business; or
(d) any
information relating to a Borrower or any subsidiary which would reasonably be
expected to result in a material adverse effect on its inability to perform its
obligations of under any Transaction Document.
Any
notice given under this Section 7.7 shall specify the nature and period of
existence of the condition, event, information, development or circumstance, the
anticipated effect thereof and what actions the Borrowers have taken and/or
proposes to take with respect thereto.
7.8 Compliance With
Agreements. Each Borrower shall and shall cause its subsidiaries to
comply in all material respects, with the terms and conditions of all material
agreements, commitments or instruments to which the Borrower or any of its
subsidiaries is a party or by which it or they may be bound.
7.9 Other Agreements.
Each Borrower shall not enter into any agreement in which the terms of such
agreement would restrict or impair the right or ability to perform of the
Borrower under any Transaction Document.
7.10 Compliance With Laws.
Each Borrower shall and shall cause each of its subsidiaries to duly comply in
all material respects with any material laws, ordinances, rules and regulations
of any foreign, federal, state or local government or any agency thereof, or any
writ, order or decree, and conform to all valid requirements of governmental
authorities relating to the conduct of their respective businesses, properties
or assets.
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7.11 Protection of Licenses,
etc. Each Borrower shall and shall cause its subsidiaries to, maintain,
defend and protect to the best of their ability licenses and sublicenses (and to
the extent the Borrower or a subsidiary is a licensee or sublicensee under any
license or sublicense, as permitted by the license or sublicense agreement),
trademarks, trade names, service marks, patents and applications therefor and
other proprietary information owned or used by it or them, (except where the
failure to defend and protect such licenses and sublicenses would not (a) result
in a Material Adverse Effect or (b) materially adversely affect the rights of
Lender under any Transaction Document) and shall keep duplicate copies of any
licenses, trademarks, service marks or patents owned or used by it, if any, at a
secure place selected by the Borrower.
7.12 Accounts and Records;
Inspections.
(a) Each
Borrower shall keep true records and books of account in which full, true and
correct entries will be made of all dealings or transactions in relation to the
business and affairs of the Borrower and its subsidiaries in accordance with
GAAP applied on a consistent basis.
(b) Each
Borrower shall permit the holder(s) of the Note and the Warrant or any of such
holder’s officers, employees or representatives during regular business hours of
the Borrower, upon reasonable notice and as often as such holder may reasonably
request, to visit and inspect the offices and properties of the Borrower and its
subsidiaries and to make extracts or copies of the books, accounts and records
of the Borrower or its subsidiaries at such holder’s expense.
(c) Nothing
contained in this Section 7.12 shall be construed to limit any rights which a
holder of the Note or the Warrant may otherwise have with respect to the books
and records of any Borrower or its subsidiaries, to inspect its properties or to
discuss its affairs, finances and accounts.
7.13 Maintenance of
Office. Each Borrower will maintain its principal office at the address
of the Borrower set forth in Section 12.6 of this Agreement where notices,
presentments and demands in respect of this Agreement, the Note or the Warrant
may be made upon the Borrower, until such time as the Borrower shall notify the
holders of the Note and the Warrant in writing, at least thirty (30) days prior
thereto, of any change of location of such office.
7.14 Use of Proceeds. The
Borrowers shall use the proceeds received from the Loan solely for the operation
of their business.
7.15 Payments on the
Note. The Borrowers shall make all payments required by the
Note in the time, the manner and the form as provided in the Note.
7.16 SEC Reporting
Requirements. For so long as the Lender beneficially owns the Warrant,
and until such time as all Warrant Shares are saleable by the Lender without
restriction as to volume or manner of sale under Rule 144 under the Securities
Act, the Company shall timely file all reports required to be filed with the
Commission pursuant to the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination. As long as the Lender owns the Warrant or Warrant Shares, the
Company will prepare and furnish to the Lender and make publicly available in
accordance with Rule 144 or any successor rule such information as is required
for the Lender to sell the Warrant or Warrant Shares under Rule 144 without
regard to the volume and manner of sale limitations. The Company further
covenants that it will take such further action as any holder of the Warrant or
Warrant Shares may reasonably request, all to the extent required from time to
time to enable such Person to sell such Warrant or Warrant Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
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7.17 Listing Maintenance.
The Company hereby agrees to use best efforts to maintain the listing or trading
of the Common Stock on a Trading Market. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Trading Market, it
will include in such application all of the Warrant Shares, and will take such
other action as is necessary to cause all of the Warrant Shares to be listed on
such other Trading Market as promptly as possible. The Company will take all
action reasonably necessary to continue the listing and trading of its Common
Stock on, and will comply in all respects with the Company’s reporting, filing
and other obligations under the bylaws or rules of, each such Trading Market on
which the Company’s Common Stock is listed or trades.
7.18 Disclosure of
Transaction. The Company shall issue a press release describing the
material terms of the transactions contemplated hereby (the “Press Release”) and
shall also file with the Commission a Current Report on Form 8-K (the “Form
8-K”) describing the material terms of the transactions contemplated hereby (and
attaching as exhibits thereto this Agreement, the Registration Rights Agreement,
the Security Agreement, the Collateral Assignment, the Guaranty Agreements, the
Guarantor Security Agreements, the form of Warrant and the Press Release) as
soon as practicable following the Closing Date but in no event more than four
(4) Trading Days (defined below) following the Closing Date, which Press Release
and Form 8-K shall be subject to prior review and reasonable comment by the
Lender. For purposes of this Agreement, “Trading Day” means any day during which
the principal Trading Market on which the Common Stock is listed or traded shall
be open for trading.
7.19 Further Assurances.
From time to time, each Borrower shall execute and deliver to the Lender and the
Lender shall execute and deliver to the Borrowers such other instruments,
certificates, agreements and documents and take such other action and do all
other things as may be reasonably requested by the other party in order to
implement or effectuate the terms and provisions of this Agreement and any of
the Transaction Documents.
For
purposes of Articles VII-IX, the term “subsidiary” shall be deemed to include
each Subsidiary and any subsidiary of the Borrower acquired or formed after the
date hereof.
ARTICLE
VIII
NEGATIVE
COVENANTS
Each
Borrower hereby covenants and agrees, so long as any amounts under the Note
remain outstanding, it will not (and not allow any subsidiary to), without the
prior written consent of the holder(s) of the Note, directly or
indirectly:
8.1 Distributions and
Redemptions. (i) Except with respect to the Series B Preferred Stock
of the Company, declare or pay any dividends or make any distributions to any
holder(s) of any shares of capital stock of the Company or (ii) purchase,
redeem or otherwise acquire for value, directly or indirectly, any shares of
Common Stock of the Company or warrants or rights to acquire such Common Stock,
except as may be required by the terms of the Series B Preferred Stock of the
Company; or (iii) purchase, redeem or otherwise acquire for value, directly or
indirectly, any shares of preferred stock of the Company or warrants or rights
to acquire such stock, except as may be required by the terms of such preferred
stock.
8.2 Reclassification.
Effect any reclassification, combination or reverse stock split of the Common
Stock.
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8.3 Liens. Except as
provided in this Agreement, create, incur, assume or permit to exist any
mortgage, lien, pledge, charge, security interest or other encumbrance, or any
interest or title of any vendor, lessor, lender or other secured party to or of
a Borrower or any subsidiary under any conditional sale or other title retention
agreement or any capital lease, upon or with respect to any property or asset of
either Borrower or any subsidiary (each, a “Lien” and collectively, “Liens”),
except that the foregoing restrictions shall not apply to:
(a) liens
for taxes, assessments and other governmental charges, if payment thereof shall
not at the time be required to be made, and provided such reserve as shall be
required by generally accepted accounting principles consistently applied shall
have been made therefor;
(b) liens
of workmen, materialmen, vendors, suppliers, mechanics, carriers, warehouseman
and landlords or other like liens, incurred in the ordinary course of business
for sums not then due or being contested in good faith, if an adverse decision
in which contest would not materially affect the business of a
Borrower;
(c) liens
existing on the date hereof securing Indebtedness of a Borrower or any
subsidiary that are senior to liens on the same assets held by the Lender and
that are filed prior to the date hereof and disclosed in the SEC
Documents;
(d) liens
securing Indebtedness of a Borrower or any subsidiary which is in an aggregate
principal amount not exceeding $250,000 and which liens are subordinate to liens
on the same assets held by the Lender;
(e) statutory
liens of landlords, statutory liens of banks and rights of set-off, and other
liens imposed by law, in each case incurred in the ordinary course of business
(i) for amounts not yet overdue or (ii) for amounts that are overdue
and that are being contested in good faith by appropriate proceedings, so long
as such reserves or other appropriate provisions, if any, as shall be required
by generally accepted accounting principles shall have been made for any such
contested amounts;
(f) liens
incurred or deposits made in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);
(g) any
attachment or judgment lien not constituting an Event of Default;
(h) easements,
rights-of-way, restrictions, encroachments, and other minor defects or
irregularities in title, in each case which do not and will not interfere in any
material respect with the ordinary conduct of the business of a Borrower or any
of its subsidiaries;
(i) any
(i) interest or title of a lessor or sublessor under any lease,
(ii) restriction or encumbrance that the interest or title of such lessor
or sublessor may be subject to, or (iii) subordination of the interest of
the lessee or sublessee under such lease to any restriction or encumbrance
referred to in the preceding clause (ii), so long as the holder of such
restriction or encumbrance agrees to recognize the rights of such lessee or
sublessee under such lease;
(j) liens
in favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of
goods;
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(k) any
zoning or similar law or right reserved to or vested in any governmental office
or agency to control or regulate the use of any real property;
(l)
liens securing obligations (other than
obligations representing debt for borrowed money) under operating, reciprocal
easement or similar agreements entered into in the ordinary course of business
of a Borrower and its subsidiaries; and
(m) the
replacement, extension or renewal of any lien permitted by this Section 8.3 upon
or in the same property theretofore subject or the replacement, extension or
renewal (without increase in the amount or change in any direct or contingent
obligor) of the Indebtedness secured thereby.
All of
the foregoing Liens described in subsections (a) – (m) above shall be
referred to as “Permitted Liens”.
8.4 Indebtedness. Create,
incur, assume, suffer, permit to exist, or guarantee, directly or indirectly,
any Indebtedness, excluding, however, from the operation of this
covenant:
(a) Indebtedness
to the extent disclosed in the SEC Documents filed prior to the date hereof and
otherwise existing on the date hereof;
(b) Indebtedness
which may, from time to time be incurred or guaranteed by a Borrower, which in
the aggregate principal amount does not exceed $250,000 and is subordinate to
the Indebtedness under this Agreement;
(c) the
endorsement of instruments for the purpose of deposit or collection in the
ordinary course of business;
(d) Indebtedness
relating to contingent obligations of a Borrower and its subsidiaries under
guaranties in the ordinary course of business of the obligations of suppliers,
customers, and licensees of a Borrower and its subsidiaries;
(e) Indebtedness
relating to loans from a Borrower to its subsidiaries;
(f) Indebtedness
relating to capital leases in an amount not to exceed $250,000;
(g) accounts
or notes payable arising out of the purchase of merchandise, supplies,
equipment, software, computer programs or services in the ordinary course of
business.
8.5 Liquidation or Sale.
Sell, transfer, lease or otherwise dispose of 10% or more of its consolidated
assets (as shown on the most recent financial statements of either Borrower or a
subsidiary, as the case may be) in any single transaction or series of related
transactions (other than the sale of inventory in the ordinary course of
business), or liquidate, dissolve, recapitalize or reorganize in any form of
transaction.
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8.6 Change of Control
Transaction. Enter into a Change in Control Transaction. For purposes of
this Agreement, “Change in Control Transaction” means the occurrence of
(a) an acquisition by an individual or legal entity or “group” (as
described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital stock of a
Borrower, by contract or otherwise) of in excess of fifty percent (50%) of the
voting securities of a Borrower (except that the acquisition of the Warrant by
the Lender shall not constitute a Change in Control for purposes of this
Section), (b) a replacement at one time or over time of more than one-half
of the members of the Board of a Borrower that is not approved by a majority of
those individuals who are members of the Board on the date hereof (or by those
individuals who are serving as members of the Board on any date whose nomination
to the Board was approved by a majority of the members of the Board who are
members on the date hereof), (c) the merger or consolidation of a Borrower
or any subsidiary of a Borrower in one or a series of related transactions with
or into another entity (except in connection with a merger involving a Borrower
solely for the purpose, and with the sole effect, of reorganizing that Borrower
under the laws of another jurisdiction; provided that the certificate of
incorporation and bylaws (or similar charter or organizational documents) of the
surviving entity are substantively identical to those of the Borrower and do not
otherwise adversely impair the rights of the Lender), or (d) the execution
by a Borrower of an agreement to which the Borrower is a party or by which it is
bound, providing for any of the events set forth above in (a), (b) or
(c).
8.7 Amendment of Charter
Documents. Amend or waive any provision of the Certificate of
Incorporation or Bylaws of a Borrower in any way that materially adversely
affects the rights of the Lender without the prior written consent of the
Lender.
8.8 Loans and Advances.
Except for loans and advances outstanding as of the Closing Date and loans and
advances to clients through XFSC, directly or indirectly, make any advance or
loan to, or guarantee any obligation of, any Person, except for intercompany
loans or advances and those provided for in this Agreement.
8.9 Transactions with
Affiliates.
(a) Make
any intercompany transfers from XFSC of monies or other assets in any single
transaction or series of transactions, except as otherwise permitted in this
Agreement.
(b) Engage
in any transaction with any of the officers, directors, employees or affiliates
of a Borrower or of its subsidiaries, except on terms no less favorable to the
Borrower or the subsidiary as could be obtained in an arm’s length
transaction.
(c) Divert
(or permit anyone to divert) any business or opportunity of a Borrower or
subsidiary to any other corporate or business entity.
8.10 Other Business. Enter
into or engage, directly or indirectly, in any business other than the business
currently conducted or proposed to be conducted as of the date of this Agreement
by a Borrower or any subsidiary, except where the entry into such new lines of
business in the aggregate does not involve expenditures by a Borrower or its
subsidiaries in excess of $250,000 in a calendar year or the issuance of
securities in the aggregate with a value in excess of $250,000 in a calendar
year.
8.11 Investments. Make any
investments in excess of $250,000 in a calendar year in the aggregate in, or
purchase any stock, option, warrant, or other security or evidence of
Indebtedness of, any Person (exclusive of any subsidiary), other than (i)
obligations of the United States Government or certificates of deposit or other
instruments maturing within one year from the date of purchase from financial
institutions with capital in excess of $50 million; (ii) loans made to, and
purchases of accounts receivable of, healthcare providers in the ordinary course
of business of XFSC; and (iii) loans in the aggregate amount of $1,198,716.78
from the Company to PAS.
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8.12 Registration
Statements. Without the consent of the Lender, file any registration
statement with the Commission until the earlier of: (i) 60 Trading Days
following the date that a registration statement or registration statements
registering all the Warrant Shares is declared effective by the Commission; and
(ii) the date the Warrant Shares are saleable by Lender under Rule 144 under the
Securities Act without limitation as to volume or manner of sale; provided that
this Section shall not prohibit the Company from filing a registration statement
on Form S-4 or other applicable form for securities to be issued in connection
with acquisitions of businesses by a Borrower or its subsidiaries, or post
effective amendments to registration statements that were declared effective
prior to the date hereof or to a registration statement filed with the
Commission on Forms S-4 or S-8.
8.13 Expand the Board of
Directors. Except as required by this Agreement, expand the size of the
Board of Directors of a Borrower.
ARTICLE
IX
EVENTS
OF DEFAULT
9.1 Events of Default.
The occurrence and continuance of any of the following events shall constitute
an event of default under this Agreement (each, an “Event of Default” and,
collectively, “Events of Default”):
(a) if
a Borrower shall default in the payment of any sums due under the Note or other
Transaction Document when the same shall become due and payable; and in each
case such default shall have continued without cure for five (5) days after
written notice (a “Default Notice”) is given to the Borrowers of such
default;
(b) if
(i) a Borrower shall default in the performance of any of the covenants
contained in Articles VII or VIII hereof and (x) such default shall have
continued without cure for ten (10) Trading Days after a Default Notice is given
to the Borrowers or (y) such default shall have materially adversely affected
the Lender regardless of any action taken by the Borrowers to cure such default;
(ii) a Borrower shall default in the performance of any other agreement or
covenant contained in this Agreement or the Transaction Documents and such
default shall not have been remedied to the satisfaction of the Lender within
thirty (30) days after a Default Notice shall have been given to the Borrowers;
or (iii) a Borrower or any Guarantor shall default in the performance of any
other obligation now or hereafter owed by Borrower or any Guarantor to Lender
and such default is not cured within the grace period, if any, provided
therein.
(c) the
suspension from listing, without subsequent listing on any one of, or the
failure of the Common Stock to be listed or quoted on at least one of the
following: the OTC Bulletin Board, the American Stock Exchange, the Nasdaq
Global Market, the Nasdaq Capital Market or The New York Stock Exchange, Inc.
for a period of ten (10) consecutive Trading Days and such suspension from
listing (or listing on an alternate exchange or quotation system) is not cured
within ten (10) days after the tenth (10th) consecutive day of such suspension
from listing;
(d) the
Company’s notice to the Lender, including by way of public announcement, at any
time, of its inability to comply for any reason or its intention not to comply
with proper requests for issuance of Warrant Shares upon exercise of the
Warrant;
(e) the
Company shall fail to (i) timely deliver the shares of Common Stock upon
exercise of a Warrant by the fifth (5th) Trading Day after the date of delivery
required therefor or otherwise in accordance with the provisions of the
Transaction Documents, (ii) file a Registration Statement in accordance with the
terms of the Registration Rights Agreement, or (iii) make the payment of any
fees and/or liquidated damages under this Agreement or any Transaction Document,
which failure in the case of items (i) and (iii) of this Section is not remedied
within five (5) Trading Days after the incurrence thereof and, solely with
respect to item (iii) above, five (5) Trading Days after the Lender delivers a
Default Notice to the Company of the incurrence thereof;
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(f) if
any material representation or warranty made in this Agreement, any Transaction
Document or in or any certificate delivered by a Borrower or its subsidiaries
pursuant hereto or thereto shall prove to have been incorrect in any material
respect when made;
(g) a
Borrower shall (A) default in any payment of any amount or amounts of principal
of or interest on any Indebtedness (other than the Indebtedness hereunder) the
aggregate principal amount of which Indebtedness is in excess of $250,000 or (B)
default in the observance or performance of any other agreement or condition
relating to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders or beneficiary or beneficiaries of
such Indebtedness to cause with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity;
(h) if
a Borrower or its subsidiaries shall default in the observance or performance of
any term or provision of an agreement to which it is a party or by which it is
bound, which default will have a Material Adverse Effect and such default is not
waived or cured within the applicable grace period provided for in such
agreement;
(i) if
a final judgment which, either alone or together with other outstanding final
judgments against a Borrower and its subsidiaries, exceeds an aggregate of
$250,000 shall be rendered against a Borrower or any subsidiary and such
judgment shall have continued undischarged or unstayed for thirty-five (35) days
after entry thereof;
(j) a
Borrower or any subsidiary shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property or assets, (ii) make a
general assignment for the benefit of its creditors, (iii) commence a voluntary
case under the United States Bankruptcy Code (as now or hereafter in effect) or
under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
or admit in writing its inability to pay its debts (vi) issue a notice of
bankruptcy or winding down of its operations or issue a press release regarding
same, or (vii) take any action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing; or
(k) a
proceeding or case shall be commenced in respect of a Borrower or any
subsidiary, without its application or consent, in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, moratorium,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets in connection with the liquidation
or dissolution of the Company or any of its subsidiaries or (iii) similar relief
in respect of it under any law providing for the relief of debtors, and such
proceeding or case described in clause (i), (ii) or (iii) shall continue
undismissed, or unstayed and in effect, for a period of sixty (60) days or any
order for relief shall be entered in an involuntary case under United States
Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of
any jurisdiction (foreign or domestic) against a Borrower or any subsidiary or
action under the laws of any jurisdiction (foreign or domestic) analogous to any
of the foregoing shall be taken with respect to a Borrower or any subsidiary and
shall continue undismissed, or unstayed and in effect for a period of thirty
(30) days.
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9.2 Remedies.
(a) Upon
the occurrence and continuance of an Event of Default, the Lender may at any
time (unless all defaults shall theretofore have been remedied) at its option,
by written notice or notices to the Borrowers, each effective upon dispatch,
declare the entire unpaid principal amounts then outstanding under the Note and
other Transaction Documents, all interest accrued and unpaid under the Note and
other Transaction Documents and all other obligations of the Borrowers to the
Lender under this Agreement or any of the other Transaction Documents to be
forthwith due and payable. Thereupon, the then outstanding principal amounts
under the Note and other Transaction Documents, all such accrued interest and
all such other obligations shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by each Borrower, and the Lender may immediately
enforce payment of all such amounts and exercise any or all of the rights and
remedies of the Lender under this Agreement and other Transaction Documents,
including without limitation the right to resort to any or all collateral
securing any obligations under the Transaction Documents and exercise any or all
of the rights of a secured party pursuant to the Uniform Commercial Code of
Florida and other applicable similar statutes in other
jurisdictions. The remedy conferred by this Section 9.2(a) shall not
be exclusive of any other remedy provided by any Transaction Document or now or
hereafter available at law, in equity, by statute or otherwise.
(b) The
Lender, by written notice or notices to the Borrowers, may in its own discretion
waive an Event of Default and its consequences and rescind or annul such
declaration; provided that, no such waiver shall extend to or affect any
subsequent Event of Default or impair any right resulting
therefrom.
(c) In
case any one or more Events of Default shall occur and be continuing, the Lender
may proceed to protect and enforce its rights by an action at law, suit in
equity or other appropriate proceeding, whether for the specific performance of
any agreement contained herein or in any Transaction Document or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law. In case of a
default in the payment of any amount due under the Note or other Transaction
Document, the Borrowers will pay to the Lender such further amount as shall be
sufficient to cover the cost and the expenses of collection, including, without
limitation, actual attorney’s fees, expenses and disbursements. No course of
dealing and no delay on the part of a Lender in exercising any rights shall
operate as a waiver thereof or otherwise prejudice such Lender’s rights. No
right conferred hereby or by any Transaction Document upon the Lender shall be
exclusive of any other right referred to herein or therein or now available at
law in equity, by statute or otherwise.
ARTICLE
X
CERTIFICATE
LEGENDS
10.1 Legend. The Warrant
and the certificates representing Warrant Shares shall be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required by applicable state securities or “blue sky” laws):
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
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The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates, registered in the name of each
Lender or its respective nominee(s), for the Warrant Shares in such amounts as
specified from time to time by the Lender to the Company upon exercise of the
Warrant in the form of Exhibit I attached
hereto (the “Irrevocable Transfer Agent
Instructions”). Prior to registration of the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in this Section 10.1. Certificates evidencing the Warrant
Shares shall not contain any legend (including the legend set forth in
Section 10.1 hereof), (i) while a registration statement (including
the Registration Statement) covering the resale of such security is effective
under the Securities Act, or (ii) following any sale of such Warrant Shares
pursuant to Rule 144, or (iii) if such Warrant Shares are eligible for sale
under Rule 144 by the Lender without limitation as to volume or manner of sale,
or (iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission). The Company shall cause its counsel to issue a
legal opinion to the Company’s transfer agent promptly after the effective date
of a registration statement covering such Warrant Shares, if required by the
Company’s transfer agent, to effect the removal of the legend hereunder. If all
or any portion of the Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares, such Warrant
Shares, as the case may be, shall be issued free of all legends. The Company
agrees that following the effective date of the registration statement covering
Warrant Shares or at such time as such legend is no longer required under this
Section 10.1, it will, no later than five (5) Trading Days following the
delivery by the Lender to the Company or the Company’s transfer agent of a
certificate representing Warrant Shares, as the case may be, issued with a
restrictive legend (such date, the “Delivery Date”), deliver or cause to be
delivered to the Lender a certificate representing such securities that is free
from all restrictive and other legends. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section. Whenever a
certificate representing the Warrant Shares is required to be issued to the
Lender without a legend, in lieu of delivering physical certificates
representing the Warrant Shares, provided the Company’s transfer agent is
participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer program, the Company shall use its reasonable best efforts to cause its
transfer agent to electronically transmit the Warrant Shares to the Lender by
crediting the account of such Lender’s Prime Broker with DTC through its Deposit
Withdrawal Agent Commission (“DWAC”) system (to the extent not inconsistent with
any provisions of this Agreement).
10.2 Liquidated Damages.
The Borrowers understand that a delay in the delivery of unlegended certificates
for the Warrant Shares as set forth in Section 10.1 hereof beyond the
Delivery Date could result in economic loss to the Lender. If the Company fails
to deliver to a Lender such shares via DWAC or a certificate or certificates
pursuant to this Section hereunder by the Delivery Date, the Borrowers
shall pay to the Lender, in cash, as partial liquidated damages and not as a
penalty, for each $500 of Warrant Shares (based on the closing price of the
Common Stock reported by the principal Trading Market on the date such
securities are submitted to the Company’s transfer agent) subject to Section
10.1, $10 per Trading Day (increasing to $15 per Trading Day five (5) Trading
Days after such damages have begun to accrue and increasing to $20 per Trading
Day ten (10) Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is delivered.
Nothing herein shall limit the Lender’s right to pursue actual damages for the
Company’s failure to deliver certificates representing any securities as
required by the Transaction Documents, and the Lender shall have the right to
pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief.
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10.3 Sales by the Lender.
The Lender agrees that the removal of the restrictive legend from certificates
representing the Warrant or Warrant Shares as set forth in Section 10.1 is
predicated upon the Company’s reliance that the Lender will sell any such
securities pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom.
ARTICLE
XI
INDEMNIFICATION
11.1 Indemnification by the
Borrowers. Each Borrower, jointly and severally, agrees to defend,
indemnify and hold harmless the Lender and shall reimburse the Lender for, from
and against each claim, loss, liability, cost and expense (including without
limitation, interest, penalties, costs of preparation and investigation, and the
actual fees, disbursements and expenses of attorneys, accountants and other
professional advisors) (collectively, “Losses”) directly or indirectly relating
to, resulting from or arising out of (a) any untrue representation,
misrepresentation, breach of warranty or non-fulfillment of any covenant,
agreement or other obligation by or of any Borrower contained in any Transaction
Document or in any certificate, document, or instrument delivered by a Borrower
to the Lender pursuant to Section 5.4 hereof; or (b) any action instituted
against the Lender or its affiliates, by any stockholder of the Company who is
not an affiliate of the Lender, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of the Lender’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings the Lender may have
with any such stockholder or any violations by the Lender of state or federal
securities laws or any conduct by the Lender which constitutes fraud, gross
negligence, willful misconduct or malfeasance).
11.2 Indemnification by the
Lender. Lender shall defend, indemnify and hold harmless the Borrowers
and the Subsidiaries and shall reimburse the Borrowers and the Subsidiaries for,
from and against each Loss directly or indirectly relating to, resulting from or
arising out of any untrue representation, misrepresentation, breach of warranty
or non-fulfillment of any covenant, agreement or other obligation by or of the
Lender contained in any Transaction Document delivered to the Borrowers or any
of its subsidiaries pursuant thereto.
11.3 Procedure.
(a) The
indemnified party shall promptly notify the indemnifying party of any claim,
demand, action or proceeding for which indemnification will be sought under this
Agreement; provided, that the failure of any party entitled to indemnification
hereunder to give notice as provided herein shall not relieve the indemnifying
party of its obligations under this Article XI except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice.
(b) In
case any such action, proceeding or claim is brought against an indemnified
party in respect of which indemnification is sought hereunder, the indemnifying
party shall be entitled to participate in and, unless in the reasonable,
good-faith judgment of the indemnified party a conflict of interest between it
and the indemnifying party exists with respect to such action, proceeding or
claim (in which case the indemnifying party shall be responsible for the
reasonable fees and expenses of one separate counsel for the indemnified party),
to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. If the indemnifying party elects to defend any such action or
claim, then the indemnified party shall be entitled to participate in such
defense (but not control) with counsel of its choice at its sole cost and
expense (except that the indemnifying party shall remain responsible for the
reasonable fees and expenses of one separate counsel for the indemnified party
in the event in the reasonable, good-faith judgment of the indemnified party a
conflict of interest between it and the indemnifying party
exists).
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(c) In
the event that the indemnifying party advises an indemnified party that it will
contest such a claim for indemnification hereunder, or fails, within thirty (30)
days of receipt of any indemnification notice to notify, in writing, such person
of its election to defend, settle or compromise, at its sole cost and expense,
any action, proceeding or claim (or discontinues its defense at any time after
it commences such defense), then the indemnified party may, at its option,
defend, settle or otherwise compromise or pay such action or claim. In any
event, unless and until the indemnifying party elects in writing to assume and
does so assume the defense of any such claim, proceeding or action, the
indemnified party’s costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be Losses subject to
indemnification hereunder.
(d) The
parties shall cooperate fully with each other in connection with any negotiation
or defense of any such action or claim and shall furnish to the other party all
information reasonably available to such party which relates to such action or
claim. Each party shall keep the other party fully apprised at all times as to
the status of the defense or any settlement negotiations with respect
thereto.
(e) Notwithstanding
anything in this Article XI to the contrary, the indemnifying party shall not,
without the indemnified party’s prior written consent, settle or compromise any
claim or consent to entry of any judgment in respect thereof which imposes any
future obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. The
indemnification obligations to defend the indemnified party required by this
Article XI shall be made by periodic payments of the amount thereof during the
course of investigation or defense, as and when the Loss is incurred, so long as
the indemnified party shall refund such moneys if it is ultimately determined by
a court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
ARTICLE
XII
MISCELLANEOUS
12.1 Governing Law. This
Agreement and the rights of the parties hereunder shall be governed in all
respects by the laws of the State of New York wherein the terms of this
Agreement were negotiated.
12.2 Survival. Except as
specifically provided herein, the representations, warranties, covenants and
agreements made herein shall survive the Closing.
12.3 Amendment. This
Agreement may not be amended, discharged or terminated (or any provision hereof
waived) without the written consent of each Borrower and the
Lender.
12.4 Successors and
Assigns. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon and enforceable by and
against, the successors, assigns, heirs, executors and administrators of the
parties hereto. The Lender may transfer or assign its some or all of its rights
hereunder, including, without limitation, sell a participation interest in the
Loan, and the Borrowers may not assign their rights or obligations hereunder
without the consent of the Lender.
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12.5 Entire Agreement.
This Agreement, the Transaction Documents and the other documents delivered
pursuant hereto and simultaneously herewith constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof.
12.6 Notices, etc. All
notices, demands or other communications given hereunder shall be in writing and
shall be sufficiently given if delivered either personally, by facsimile, or by
a nationally recognized courier service marked for next business day delivery or
sent in a sealed envelope by first class mail, postage prepaid and either
registered or certified with return receipt, addressed as follows:
if to
either of the Borrowers:
▇▇▇▇ ▇▇
▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CEO
with a
copy (which shall not constitute notice hereunder) to:
▇▇▇▇
▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇
& ▇▇▇▇▇, LLP
Mission
Bay Office Plaza - Suite 300
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇
▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone
(▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇)
▇▇▇-▇▇▇▇
if to the
Lender:
Vicis
Capital Master Fund
Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
with a
copy to:
▇▇▇▇▇ ▇.
▇▇▇▇▇, Esq.
▇▇▇▇
▇▇▇▇, P.A.
▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇, ▇▇
▇▇▇▇▇
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Such
communications shall be effective immediately if delivered in person or by
confirmed facsimile, upon the date acknowledged to have been received in return
receipt, or upon the next business day if sent by overnight courier
service.
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12.7 Delays or Omissions.
No delay or omission to exercise any right, power or remedy accruing to the
holder(s) of the Note or Warrant upon any breach or default of a Borrower under
this Agreement shall impair any such right, power or remedy of such holder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence, therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
holder of any breach or default under this Agreement, or any waiver on the part
of any holder of any provisions or conditions of this Agreement must be, made in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
12.8 Severability. The
invalidity of any provision or portion of a provision of this Agreement shall
not affect the validity of any other provision of this Agreement or the
remaining portion of the applicable provision. It is the desire and intent of
the parties hereto that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
12.9 Expenses. Borrowers
shall bear their own expenses and legal fees incurred on their behalf with
respect to the negotiation, execution and consummation of the transactions
contemplated by this Agreement and shall pay all documentary stamp or similar
taxes imposed by any authority upon the transactions contemplated by this
Agreement or any Transaction Document. Without requiring any documentation
therefor, Borrowers will reimburse the Lender $25,000 for all fees and expenses
incurred by it with respect to the negotiation, execution and consummation of
the transactions contemplated by this Agreement and the transactions
contemplated hereby and due diligence conducted in connection therewith,
including the fees and disbursements of counsel and auditors for the Lender.
Such reimbursement shall be paid on the Closing Date as provided in Section 1.1
of this Agreement. The Borrowers shall pay all reasonable, documented
third-party fees and expenses incurred by the Lender in connection with the
enforcement of this Agreement or any of the other Transaction Documents,
including, without limitation, all actual reasonable attorneys’ fees and
expenses.
12.10 Consent to Jurisdiction;
Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS LOCATED IN THE STATE AND COUNTY OF NEW YORK FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT
AND THE TRANSACTION DOCUMENTS. EACH OF THE PARTIES TO THIS AGREEMENT IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH SUCH PARTY
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN ANY SUCH COURTS AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN ANY
SUCH COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO
TRIAL BY JURY IN ANY SUCH LEGAL PROCEEDING. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY CONSENTS TO SERVICE OF PROCESS BY NOTICE IN THE MANNER
SPECIFIED IN SECTION 12.6 AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION SUCH PARTY MAY NOW OR HEREAFTER HAVE TO SERVICE
OF PROCESS IN SUCH MANNER.
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12.11 Titles and Subtitles.
The titles of the articles, sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
12.12 Execution. This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
[Signature page
follows]
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IN
WITNESS WHEREOF, the parties hereto have duly executed this Loan and Securities
Purchase Agreement, as of the day and year first above written.
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By:
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/s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇. ▇▇▇▇▇▇
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Title:
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Chief
Executive Officer
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XENI
FINANCIAL SERVICES, CORP.
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By:
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/s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇. ▇▇▇▇▇▇
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Title:
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Chief
Executive Officer
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VICIS
CAPITAL MASTER FUND
By: Vicis
Capital, LLC
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By:
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/s/
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇
▇▇▇▇▇▇▇▇
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Title:
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Managing
Director
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[Signature page to Loan and
Securities Purchase Agreement]
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