SECURITIES PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT (this "AGREEMENT," “PURCHASE AGREEMENT,” or “SECURITIES
PURCHASE AGREEMENT”), dated as of December 28, 2006, by and among bioMETRX,
Inc.,
a
Delaware corporation, ("COMPANY"), and __________
(the
"BUYER").
WHEREAS:
A.
The
Company and the Buyer are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Rule 506 under
Regulation D ("REGULATION D") as promulgated by the United States Securities
and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT" or the “Securities Act”);
B.
Buyer
and other buyers desire to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement, (i) senior
convertible debentures (the “Debentures”) of the Company and (ii) Warrants (as
defined in Section 1(b)(iv) in the form described in this Agreement, to purchase
shares of Common Stock of the Company in a private offering. This offering
of
the Debentures to the Buyers shall be in the principal amount of up to One
Million Five Hundred Thousand Dollars (U.S. $1,500,000) (the “Offering”);
C. The
terms
of the Debentures, including the terms on which the Debentures may be converted
into common stock, $0.001
par
value, of the Company (the "Common Stock"), are set forth in Debenture, in
the
form attached hereto as EXHIBIT
A;
D.
Contemporaneous with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement, in the
form
attached hereto as EXHIBIT
B
(the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company has agreed
to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW
THEREFORE,
the
Company and the Buyer hereby agree as follows:
1.
PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
(a)
CERTAIN DEFINITIONS. This Securities Purchase Agreement, the Debenture, the
Registration Rights Agreement, the Warrants, and any other agreements delivered
together with this Agreement or in connection herewith shall be referred to
herein as the “Transaction Documents.” The Company and the Buyer mutually agree
to the terms of each of the Transaction Documents. For purposes
hereof:
“Buyers”
means the Buyer, and other buyers of Debentures pursuant to the
Offering.
“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which
would entitle the holder thereof to acquire, directly or indirectly, at any
time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into
or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
“Exempt
Issuance” means the issuance of (a) shares of restricted Common Stock or options
to employees, officers, directors or consultants (provided that such issuances
to consultants, if at a price per share of less than $2.00, shall not exceed
350,000 shares, subject to adjustment for reverse and forward stock splits
and
the like of the Company, in the six (6) month period immediately following
the
Closing Date and, if at a price per share of less than $2.00, shall not exceed
200,000 shares, subject to adjustment for reverse and forward stock splits
and
the like of the Company in any rolling 12 month period thereafter), provided
that such issuance of shares of Common Stock or options to employees, officers,
directors or consultants either (i) occurs pursuant to any stock or option
plan
duly adopted by a majority of the non-employee members of the Board of Directors
of the Company or a majority of the members of a committee of non-employee
directors established for such purpose, or (ii) is authorized by a majority
of
the non-employee members of the board of directors of the Company, and (b)
securities upon the exercise, exchange of, conversion or redemption of, or
payment of interest or liquidated or similar damages on, any Securities issued
hereunder and/or other securities exercisable, exchangeable for, convertible
into, or redeemable for shares of Common Stock issued and outstanding on the
date of this Agreement, provided that such securities have not been amended
since the date of this Agreement to increase the number of such securities
or to
decrease the exercise, exchange or conversion price of such securities (and
including any issuances of securities pursuant to the anti-dilution provisions
of any such securities). The Company shall provide the Buyer with prompt written
notice of any Exempt Issuance.
“Person”
shall mean an individual, a limited liability company, a partnership, a joint
venture, an exempted company, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
“Payment
Shares” shall mean (i) Default Shares (as defined in the Debenture), (ii)
Interest Payment Shares (as defined in the Debenture) and (iii) shares issuable
upon conversion of Failure Payments and other Required Cash Payments (as each
is
defined in the Debenture) into Common Stock of the Company. The Payment Shares
shall be treated as Common Stock issuable upon conversion of the Debentures
for
all purposes hereof and thereof and shall be subject to all of the limitations
and afforded all of the rights of the other shares of Common Stock issuable
hereunder, including without limitation, the right to be included in the
Registration Statement filed pursuant to the Registration Rights Agreement.
(b)
PURCHASE OF DEBENTURES AND WARRANTS.
Subject
to the satisfaction or waiver of the terms and conditions of this Agreement,
on
the Closing Date (as defined below), the Company shall issue and sell to Buyer
and Buyer agrees to purchase from the Company the Debenture in a principal
amount equal to the Subscription Amount (as defined in Section 10) and an
accompanying number of Warrants (as described below) to purchase a number of
shares equal to the Warrant Amount (as defined below).
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(i)
Form
of Debenture.
The
Debenture shall be in the form annexed hereto as EXHIBIT
“A.”
(ii)
Form
Of Payment.
On or
before the Closing Date (as defined below), (i) Buyer shall pay the purchase
price for the Debenture and the Warrants to be issued and sold to it at the
Closing (as defined below) (the "PURCHASE PRICE") by wire transfer of
immediately available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of duly executed certificates
representing the Debenture (“Debenture Certificate”) having an aggregate initial
principal amount (the “Original Principal Amount”) equal to the Purchase Price
and the number of Warrants equal to the Warrant Amount, and (ii) the Company
shall deliver such Debenture Certificates and Warrants duly executed on behalf
of the Company, to such Buyer, against delivery of such Purchase Price.
(iii)
Closing
Date.
Subject
to the satisfaction or waiver of the terms and conditions of this Agreement,
the
"Closing" shall occur when subscriber funds representing the aggregate Original
Principal Amount of the Debenture being purchased by the Buyer are transmitted
by wire transfer of immediately available funds by the Buyer to the Company,
assuming that the Transaction Documents are signed by both parties prior to
or
within three (3) business days following such transmission. The date of the
Closing shall be referred to herein as the “Closing Date.” Unless otherwise
mutually agreed by the parties, the Closing shall occur not later than January
5, 2007. The Closing contemplated by this Agreement shall occur on the
applicable Closing Date at the offices of the Buyer, or at such other location
as may be agreed to by the parties.
(iv)
Warrants.
The
Debenture shall be accompanied by a number of Series A Warrants (the “SERIES A
WARRANTS”) equal to the Original Principal Amount of the Debenture being
purchased by the Buyer, divided by the Initial Conversion Price (as defined
in
the Debenture) (the “SERIES A WARRANT AMOUNT”). The Series A Warrants shall be
in the form of the Series A Warrant annexed hereto as EXHIBIT
“C-1,”
except
that the “Initial Exercise Price,” as defined therein, shall equal $1.00,
subject to adjustment therein.
The
Debenture shall be accompanied by a number of Series B Warrants (the “SERIES B
WARRANTS”) equal to the Original Principal Amount of the Debenture being
purchased by the Buyer, divided by twice the Initial Conversion Price (as
defined in the Debenture) (the “SERIES B WARRANT AMOUNT”). The Series B Warrants
shall be in the form of the Series B Warrant annexed hereto as EXHIBIT
“C-2,”
except
that the “Initial Exercise Price,” as defined therein, shall equal $0.10,
subject to adjustment therein. The Series A Warrants together with the Series
B
Warrants are collectively referred to herein as the “WARRANTS.”
The
Warrants shall contain Exercise Price adjustment provisions that are consistent
with the adjustment provisions afforded to the Conversion Price of the Debenture
in the Debenture and shall have a five (5) year term.
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"MARKET
PRICE," for any security as of any date, shall have the meaning ascribed to
it
in the applicable security.
(v)
Closing
Deliveries.
On the
Closing Date, the Company will deliver certificates representing the applicable
Debenture and Warrants to the Buyer and the Buyer will deliver the Purchase
Price to the Company. On the Closing Date, the Company will deliver a
certificate ("Closing Certificate") signed by its chief executive officer or
chief financial officer (i) representing the truth and accuracy of all the
representations and warranties made by the Company contained in this Agreement,
as of the applicable Closing Date, as if such representations and warranties
were made and given on all such dates, (ii) adopting the covenants and
conditions set forth in this Agreement in relation to the applicable Debenture
and Warrants, (iii) representing the timely compliance by the Company with
the
Company's registration requirements set forth in the Registration Rights
Agreement, and (iv) certifying that an Event of Default has not occurred. A
legal opinion in substantially the form of EXHIBIT
D
attached
hereto shall be delivered to Buyer at the Closing in relation to the Company,
the applicable Debenture, and the applicable Warrants ("Closing Legal Opinion").
2.
BUYER’S REPRESENTATIONS AND WARRANTIES.
Buyer
represents and warrants to the Company solely as to such Buyer
that:
(a)
INVESTMENT PURPOSE.
As of
the date hereof, the Buyer is purchasing the Debenture and the shares of Common
Stock issuable upon conversion of the Debenture or otherwise pursuant to the
Debenture and the other Transaction Documents (including, without limitation,
the Payment Shares) (such shares of Common Stock being collectively referred
to
herein as the “CONVERSION SHARES") and the Warrants and the shares of Common
Stock issuable upon exercise thereof (the "WARRANT SHARES" and, collectively
with the Debenture, Warrants and Conversion Shares, the "SECURITIES") for its
own account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration
under
the 1933 Act; PROVIDED, HOWEVER, that by making the representations herein,
the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time
in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act and applicable state securities laws.
(b)
ACCREDITED INVESTOR STATUS.
The
Buyer is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D (an "ACCREDITED INVESTOR").
(c)
RELIANCE ON EXEMPTIONS.
The
Buyer understands that the Securities are being offered and sold to it in
reliance upon specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and
the
eligibility of the Buyer to acquire the Securities.
4
(d)
INFORMATION.
The
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by the Buyer
or its advisors. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigation conducted by Buyer or any of its advisors
or
representatives shall modify, amend or affect Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below. The
Buyer
understands that its investment in the Securities involves a significant degree
of risk.
(e)
GOVERNMENTAL REVIEW.
The
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Securities.
(f)
TRANSFER OR RE-SALE.
The
Buyer understands that (i) except as provided in the Registration Rights
Agreement, the sale or re-sale of the Securities has not been and is not being
registered under the 1933 Act or any applicable state securities laws, and
the
Securities may not be transferred or resold unless (a) the Securities are sold
pursuant to an effective registration statement under the 1933 Act, (b) the
Buyer shall have delivered to the Company an opinion of counsel (which opinion
shall be in form, substance and scope reasonably satisfactory to counsel to
the
Company) to the effect that the Securities to be sold or transferred may be
sold
or transferred pursuant to an exemption from such registration, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("RULE 144") of the Buyer
who agrees to sell or otherwise transfer the Securities only in accordance
with
this Section 2(f) and who is an Accredited Investor, or (d) the Securities
are
sold pursuant to Rule 144 or Rule 144(k); and (ii) any sale of such Securities
made in reliance on Rule 144 or Rule 144(k) may be made only in accordance
with
the terms of said Rule. Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged as collateral in
connection with a BONA FIDE margin account or other lending
arrangement.
(g)
ORGANIZATION; AUTHORIZATION; ENFORCEMENT.
Buyer is
a _________duly organized, validly existing and in good standing under the
laws
of the jurisdiction in which it is organized. Buyer has all requisite power
and
authority to enter into and perform this Agreement and the Registration Rights
Agreement and to consummate the transactions contemplated hereby and thereby
in
accordance with the terms hereof and thereof. The execution and delivery of
this
Agreement and the Registration Rights Agreement have been duly and validly
authorized and no further consent or authorization of Buyer, its manager or
members is required. This Agreement has been duly executed and delivered on
behalf of the Buyer, and this Agreement constitutes, and upon execution and
delivery by the Buyer of the Registration Rights Agreement, such agreement
will
constitute, legal, valid and binding agreements of the Buyer enforceable in
accordance with their terms.
(h)
RESIDENCY. The
Buyer
is a _____________.
5
(i)
KNOWLEDGE AND EXPERIENCE.
Buyer
has such knowledge and experience in financial and business matters that it
is
capable of evaluating the merits and risks of the investment in the
Securities.
(j)
CERTAIN TRADING ACTIVITIES.
As of
the Closing Date the Buyer and its Affiliates have not entered into or effected
any "short sales" (as such term is defined in Rule 3b-3 of the 0000 Xxx) of
the
Common Stock or hedging transaction which established a net short position
with
respect to the Common Stock. For the purposes of this Agreement, an
"Affiliate"
of any
person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with
such
person or entity. Affiliate includes each subsidiary of the
Company.
3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to Buyer that, except as set forth on the
Company’s disclosure schedules or any update thereto prior to the Closing
Date:
(a)
ORGANIZATION AND QUALIFICATION.
The
Company and each of its Subsidiaries (as defined below), if any, is a
corporation duly organized, validly existing and in good standing under the
laws
of the jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
carry
on its business as and where now owned, leased, used, operated and conducted.
SCHEDULE 3(A) sets forth a list of all of the Subsidiaries of the Company and
the jurisdiction in which each is incorporated. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do business and
is in
good standing in every jurisdiction in which its ownership or use of property
or
the nature of the business conducted by it makes such qualification necessary
except where the failure to be so qualified or in good standing would not have
a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse
effect on (i) the Securities, (ii) the business, operations, assets, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as
a
whole, (iii) on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith or (iv) the authority
or
the ability of the Company to perform its obligation under this Agreement,
the
Registration Rights Agreement, the Debenture or the Warrants. "SUBSIDIARIES"
means any corporation or other organization, whether incorporated or
unincorporated, in which the Company owns, directly or indirectly, any equity
or
other ownership interest.
(b)
AUTHORIZATION; ENFORCEMENT.
(i) The
Company has all requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement, the Debenture and
the
Warrants and to consummate the transactions contemplated hereby and thereby
and
to issue the Securities, in accordance with the terms hereof and thereof, (ii)
except as otherwise set forth in SCHEDULE 3(B), the execution and delivery
of
this Agreement, the Registration Rights Agreement, the Debenture and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation, the issuance
of
the Debenture and the Warrants and the issuance and reservation for issuance
of
the Conversion Shares issuable upon conversion of or otherwise pursuant to
the
Debenture and the Warrant Shares issuable upon exercise of or otherwise pursuant
to the Warrants) have been duly authorized by the Company's Board of Directors
and no further consent or authorization of the Company, its Board of Directors,
or its stockholders is required, (iii) this Agreement has been duly executed
and
delivered by the Company, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Registration Rights Agreement,
the
Debenture and the Warrants, each of such agreements and instruments will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
6
(c)
CAPITALIZATION. As
of the
date hereof, the authorized capital stock of the Company is as set forth on
SCHEDULE 3(C). The authorized capital stock of the Company consists of
25,000,000 shares of Common Stock, of which approximately 9,114,157 shares
are
outstanding as of the date hereof and 10,000,000 shares of preferred stock,
par
value $.01 per share, of which none are outstanding as of the date hereof.
There
are no outstanding securities which are convertible into shares of Common Stock,
whether such conversion is currently exercisable or exercisable only upon some
future date or the occurrence of some event in the future, except as disclosed
on SCHEDULE 3(C). If any such securities are listed on the SCHEDULE 3(C), the
number or amount of each such outstanding convertible security and the
conversion terms are set forth in said SCHEDULE (3C). All of such outstanding
shares of capital stock set forth in SCHEDULE 3(C) are, or upon issuance will
be, duly authorized, validly issued, fully paid and nonassessable.
No
shares
of capital stock of the Company are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or encumbrances
imposed through the actions or failure to act of the Company. Except as
disclosed in SCHEDULE 3(C), as of the effective date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company or any of its Subsidiaries, or arrangements by which the
Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries, (ii) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act (except the Registration Rights Agreement) and (iii) there
are no anti-dilution or price adjustment provisions contained in any security
issued by the Company (or in any agreement providing rights to security holders)
that will be triggered by the issuance of the Debenture, the Warrants, the
Conversion Shares or Warrant Shares. The Company has furnished to the Buyer
true
and correct copies of the Company's Articles of Incorporation as in effect
on
the date hereof ("ARTICLES OF INCORPORATION"), the Company's By-laws, as in
effect on the date hereof (the "BY-LAWS"), and the terms of all securities
convertible into or exercisable for Common Stock of the Company and the material
rights of the holders thereof in respect thereto. In the event that the date
of
execution of this Agreement is not the Closing Date, the Company shall provide
the Buyer with a written update of this representation signed by the Company's
President and Chief Executive or Chief Financial Officer on behalf of the
Company as of the Closing Date. The issuance and sale of the Securities will
not
obligate the Company to issue shares of Common Stock or other securities to
any
Person (other than the Buyers) and will not result in a right of any holder
of
Company securities to adjust the exercise, conversion, exchange or reset price
under any of such securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for
the
issuance and sale of the Securities. There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.
7
(d)
ISSUANCE OF SHARES.
Upon
issuance upon conversion of the Debenture and upon exercise of the Warrants
in
accordance with their respective terms, and receipt of the exercise price
therefor, the Conversion Shares and Warrant Shares, along with any Payment
Shares or any other shares issued pursuant to the terms of the Transaction
Documents, will be validly issued, fully paid and non-assessable, and free
from
all taxes, liens, claims and encumbrances and shall not be subject to preemptive
rights or other similar rights of stockholders of the Company and will not
impose personal liability upon the holder thereof.
(e)
ACKNOWLEDGMENT OF DILUTION.
The
Company understands and acknowledges the potentially dilutive effect to the
Common Stock upon the issuance of the Conversion Shares upon conversion of
or
otherwise pursuant to the Debenture or upon issuance of the Warrant Shares
upon
exercise of or otherwise pursuant to the Warrants. The Company's directors
and
executive officers have studied and fully understand the nature of the
Securities being sold hereunder. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of or otherwise pursuant
to the Debenture and to issue Warrant Shares upon exercise of or otherwise
pursuant to the Warrants in accordance with this Agreement, the Debenture and
the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders
of
the Company. Taking the foregoing into account, the Company's Board of Directors
has determined, in its good faith business judgment, that the issuance of the
Securities hereunder and under the Debenture and the Warrants and the
consummation of the transactions contemplated hereby and thereby are in the
best
interest of the Company and its stockholders.
(f)
NO CONFLICTS.
The
execution, delivery and performance of each of the Transaction Documents by
the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Conversion Shares and Warrant Shares) will not (i) except
as
otherwise set forth in SCHEDULE 3(F), conflict with or result in a violation
of
any provision of the Certificate of Incorporation or By-laws, (ii) trigger
any
resets of conversion or exercise prices in other outstanding convertible
securities, warrants or options of the Company, (iii) trigger the issuance
of
securities by the Company to any third party, (iv) violate or conflict with,
or
result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its Subsidiaries is a party, or (v) result in
a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
(except, in the case of clauses (i), (iv) and (v) above, for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect).
Neither the Company nor any of its Subsidiaries is in violation of its
Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event
has
occurred which with notice or lapse of time or both could put the Company or
any
of its Subsidiaries in default) under, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action that would give
to others any rights of termination, amendment, acceleration or cancellation
of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or by which any property or assets of the Company or
any
of its Subsidiaries is bound or affected, except for possible defaults as would
not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being conducted,
and shall not be conducted so long as a Buyer owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity the
violation of which would have a Material Adverse Effect. Except as disclosed
in
SCHEDULE 3(F) or as specifically contemplated by this Agreement or as required
under the 1933 Act and any applicable state securities laws, the Company is
not
required to obtain any consent, authorization or order of, or make any filing
or
registration with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party in order for it
to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement, the Debenture or the Warrants in accordance
with
the terms hereof or thereof or to issue and sell the Debenture and Warrants
in
accordance with the terms hereof and to issue the Conversion Shares upon
conversion of or otherwise pursuant to the Debenture and the Warrant Shares
upon
exercise of or otherwise pursuant to the Warrants. Except as disclosed in
SCHEDULE 3(F), all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence
have
been obtained or effected on or prior to the date hereof. The Company is not
in
violation of the listing requirements of the Principal Market (as defined
herein) and does not reasonably anticipate that the Common Stock will be
delisted by the Principal Market in the foreseeable future. The Company and
its
Subsidiaries are unaware of any facts or circumstances which might give rise
to
any of the foregoing.
8
(g)
SEC DOCUMENTS; FINANCIAL STATEMENTS.
Except
as set forth on SCHEDULE 3(G), since at least December
31, 2005 the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
ACT")
(all of the foregoing filed prior to the date hereof and since at least December
31, 2005, and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits to such documents)
incorporated by reference therein, being hereinafter referred to herein as
the
"SEC DOCUMENTS"). For purposes of this agreement, “timely filed” shall mean that
the applicable document was filed (i) by its original due date under the 1934
Act, or, if a request for an extension was timely filed, (ii) by such extended
due date. The Company has delivered to Buyer true and complete copies of the
SEC
Documents, except for such exhibits and incorporated documents. As of their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, 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. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have
been
amended or updated in subsequent filings prior to the date hereof). As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with
respect thereto. Such financial statements have been prepared in accordance
with
United States generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects
the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to the date of the Company’s most
recent 10-QSB or 10-KSB and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in such financial statements,
which, individually or in the aggregate, are not material to the financial
condition or operating results of the Company.
9
(h)
ABSENCE OF CERTAIN CHANGES.
Except
for losses incurred in the ordinary course of business that have been publicly
disclosed prior to the date hereof or as set forth on SCHEDULE 3(H) hereof,
since the date of the Company’s most recent 10-QSB or 10-KSB, there has been no
material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, results
of
operations or prospects of the Company or any of its Subsidiaries. For purposes
of this Section 3(h), the terms "material adverse change" and "material adverse
development" shall exclude continuing losses that are consistent with the
Company's historical losses.
(i)
ABSENCE OF LITIGATION.
Except
as disclosed in SCHEDULE 3(I), to the knowledge of the Company or any of its
subsidiaries, there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company or
any
of its Subsidiaries, or their officers or directors in their capacity as such.
SCHEDULE 3(I) contains a complete list and summary description of any known
pending or threatened proceeding against or affecting the Company or any of
its
Subsidiaries, without regard to whether it, if adversely decided, would have
a
Material Adverse Effect. The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the
foregoing.
(j)
PATENTS, COPYRIGHTS, ETC. The
Company owns all right and title to the patents on SCHEDULE 3(J) hereof (the
“PATENTS”), free and clear of any liens or encumbrances. The Company has not
granted any licenses or rights to use any of the Patents to any third party.
All
of
the Company’s material patents, patent applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights ("INTELLECTUAL PROPERTY") are set
forth in SCHEDULE 3(J) hereof. The
Company and each of its Subsidiaries owns or possesses the requisite licenses
or
rights to use all Intellectual Property necessary to enable it to conduct its
business as now operated, including but not limited to the intellectual property
set forth in SCHEDULE 3(J) hereof (and, except as otherwise set forth in
SCHEDULE 3(J) hereof, to the best of the Company's knowledge, as presently
contemplated to be operated in the future), except for such licenses or rights
the failure of which to own or possess would not, individually or in the
aggregate, have a Material Adverse Effect; there is no claim or action by any
person pertaining to, or proceeding pending, or to the Company's knowledge
threatened, which challenges the right of the Company or of a Subsidiary with
respect to any Intellectual Property necessary to enable it to conduct its
business as now operated (and, except as otherwise set forth in SCHEDULE 3(J)
hereof, to the best of the Company's knowledge, as presently contemplated to
be
operated in the future), except for actions or claims which, if adversely
decided, would not have a Material Adverse Effect; to the best of the Company's
knowledge, the Company's or its Subsidiaries' current and intended products,
services and processes do not infringe on any Intellectual Property or other
rights held by any person, and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and
each of its Subsidiaries have taken reasonable security measures to protect
the
secrecy, confidentiality and value of their Intellectual Property. The Company
has Existing Liens on its Intellectual Property as detailed in SCHEDULE 3(J)
hereof.
10
(k)
NO MATERIALLY ADVERSE CONTRACTS, ETC.
Neither
the Company nor any of its Subsidiaries is subject to any charter, corporate
or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is reasonably likely
in
the future to have a Material Adverse Effect. Neither the Company nor any of
its
Subsidiaries is a party to any contract or agreement which in the judgment
of
the Company's officers has or is reasonably likely to have a Material Adverse
Effect.
(l)
TAX STATUS.
Except
as set forth on SCHEDULE 3(L), the Company and each of its Subsidiaries has
made
or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries
has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to
be
due on such returns, reports and declarations, except those being contested
in
good faith and has set aside on its books provisions reasonably adequate for
the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to the statute of limitations relating
to
the assessment or collection of any foreign, federal, state or local tax. Except
as set forth on SCHEDULE 3(L), none of the Company's tax returns is presently
being audited by any taxing authority.
(m)
CERTAIN TRANSACTIONS.
Except
as set forth on SCHEDULE 3(M) and except for arm's length transactions pursuant
to which the Company or any of its Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than the Company or any of
its
Subsidiaries could obtain from third parties and other than the grant of stock
options disclosed on SCHEDULE 3(C), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real
or personal property to or from, or otherwise requiring payments to or from
any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
11
(n)
DISCLOSURE.
To the
best of the Company’s knowledge, all information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided
to
the Buyer pursuant to Section 2(d) hereof and otherwise in connection with
the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order
to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred
or
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which
has
not been publicly announced or disclosed but under applicable law, rule or
regulation, requires public disclosure or announcement by the Company (assuming
for this purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company
under
the 1933 Act).
(o)
ACKNOWLEDGMENT REGARDING BUYER’S PURCHASE OF SECURITIES.
The
Company acknowledges and agrees that the Buyer is acting solely in the capacity
of arm's length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that Buyer is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and
that
any statement made by Buyer or any of its respective representatives or agents
in connection with this Agreement and the transactions contemplated hereby
is
not advice or a recommendation and is merely incidental to the Buyer’s purchase
of the Securities and has not been relied upon by the Company, its officers
or
directors in any way. The Company further represents to Buyer that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
(p)
NO INTEGRATED OFFERING.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would require
registration under the 1933 Act of the issuance of the Securities to the Buyer.
The issuance of the Securities to the Buyer will not be integrated with any
other issuance of the Company's securities (past, current or future) for
purposes of any stockholder approval provisions applicable to the Company or
its
securities.
(q) NO
BROKERS.
Other
than as set forth on SCHEDULE 3(Q), the Company has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees
or
similar payments relating to this Agreement or the transactions contemplated
hereby. The
Company shall indemnify and hold harmless each of Buyer, its employees,
officers, directors, agents, and partners, and their respective Affiliates,
from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees.
12
(r) PERMITS;
COMPLIANCE.
The
Company and each of its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted
(collectively, the "COMPANY PERMITS"), except where the failure to so possess
any such Company Permits would not have a Material Adverse Effect, and there
is
no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits. To the best of the
Company's knowledge, neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Since December 31, 2005, neither the Company nor any of its Subsidiaries has
received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations
would
not have a Material Adverse Effect.
(s) ENVIRONMENTAL
MATTERS.
(i)
Except as set forth in SCHEDULE 3(S), there are, to the Company's knowledge,
with respect to the Company or any of its Subsidiaries or any predecessor of
the
Company, no past or present violations of Environmental Laws (as defined below),
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980
or similar federal, state, local or foreign laws and neither the Company nor
any
of its Subsidiaries has received any notice with respect to any of the
foregoing, nor is any action pending or, to the Company's knowledge, threatened
in connection with any of the foregoing. The term "ENVIRONMENTAL LAWS" means
all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, "HAZARDOUS MATERIALS") into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials,
as
well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
(ii)
Other than those that are or were stored, used or disposed of in compliance
with
applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company's
or any of its Subsidiaries' business.
13
(iii)
Except as set forth in SCHEDULE 3(S), there are no underground storage tanks
on
or under any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
(t) TITLE
TO PROPERTY.
The
Company and its Subsidiaries have good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
them which is material to the business of the Company and its Subsidiaries,
in
each case free and clear of all liens, encumbrances and defects except such
as
are described in SCHEDULE 3(T) or such as would not have a Material Adverse
Effect. Any real property and facilities held under lease by the Company and
its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as would not have a Material Adverse Effect.
(u) INSURANCE.
The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company
nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and 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.
(v) INTERNAL
ACCOUNTING CONTROLS.
The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient, in the judgment of the Company's board of directors, to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(w) FOREIGN
CORRUPT PRACTICES.
Neither
the Company, nor any of its Subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or any Subsidiary
has,
in the course of his actions for, or on behalf of, the Company, used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
14
(x) SOLVENCY.
The
Company, after giving effect to the transactions contemplated by this Agreement,
is solvent (except as of September 30, 2006 the Company’s liabilities exceeded
its assets and after the Closing the Company’s liabilities will continue to
exceed its assets) and currently the Company has no information that would
lead
it to reasonably conclude that the Company would not have the ability to, nor
does it intend to take any action that would impair its ability to, pay its
debts from time to time incurred in connection therewith as such debts mature.
Except as disclosed in SCHEDULE 3(X), the Company did not receive a qualified
opinion from its auditors with respect to its most recent fiscal year end and
does not anticipate or know of any basis upon which its auditors might issue
a
qualified opinion in respect of its current fiscal year.
(y) NO
INVESTMENT COMPANY.
The
Company is not, and upon the issuance and sale of the Securities as contemplated
by this Agreement will not be an "investment company" required to be registered
under the Investment Company Act of 1940 (an "INVESTMENT COMPANY"). The Company
is not controlled by an Investment Company.
(z) NO
MARKET MANIPULATION.
The
Company has not taken, and will not take, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of the Common Stock of the Company
to
facilitate the sale or resale of the Securities or affect the price at which
the
Securities may be issued or resold.
(aa) STOP
TRANSFER.
The
Securities, when issued, will be restricted securities. The Company will not
issue any stop transfer order or other order impeding the sale, resale or
delivery of any of the Securities, except as may be required by any applicable
federal or state securities laws and unless contemporaneous notice of such
instruction is given to the Buyer.
(bb)
NO
UNDISCLOSED LIABILITIES.
The
Company has no liabilities or obligations which are material, individually
or in
the aggregate, other than those incurred in the ordinary course of the Company's
businesses which have been disclosed in the Company’s public filings and which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect other than as set forth in SCHEDULE 3(BB).
(cc)
NO
UNDISCLOSED EVENTS OR CIRCUMSTANCES.
Other
than events or circumstances which have been disclosed in the Company’s public
filings, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been
so
publicly announced or disclosed in the Reports.
(dd)
NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company, including but not limited to
disputes or conflicts over payment owed to such accountants and lawyers.
Attached hereto as SCHEDULE DD are signed letters from the Company’s current
accounting firm (the “Accountant Letter”) and outside law firm (the “Law Firm
Letter”) attesting to the facts in the immediately preceding sentence.
15
(ee)
COMPANY ACKNOWLEDGMENT.
The
Company hereby acknowledges that the Buyer may elect to hold the Debenture
and
the Warrants for various periods of time, as permitted by the terms of the
Transaction Documents and the Company further acknowledges that Investor has
made no representations or warranties, either written or oral, as to how long
the Securities will be held by Buyer or regarding Investor’s trading history or
investment strategies.
(ff) DISCLOSURE.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Buyers or their agents or counsel with any information
that
constitutes material, nonpublic information concerning the Company or its
Subsidiaries other than the existence of the transactions contemplated by this
Agreement or the other Transaction Documents. The Company understands and
confirms that each of the Buyers will rely on the foregoing representations
in
effecting transactions in securities of the Company. All disclosure provided
to
the Buyers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf
of
the Company is true and correct and does not contain any untrue statement of
a
material fact or omit to state any material fact necessary in order to make
the
statements made therein, in the light of the circumstances under which they
were
made, not misleading. Each press release issued by the Company or any of its
Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred
or
information exists with respect to the Company or any of its Subsidiaries or
its
or their business, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure
or
announcement by the Company but which has not been so publicly announced or
disclosed.
(gg)
ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR
EVENTS.
To the
Company’s knowledge, none of the following has occurred during the past five (5)
years with respect to a Company Control Person (as defined below):
(i)
A
petition under the federal bankruptcy laws or any state insolvency law was
filed
by or against, or a receiver, fiscal agent or similar officer was appointed
by a
court for the business or property of such Company Control Person, or any
partnership in which he was a general partner at or within two years before
the
time of such filing, or any corporation or business association of which he
was
an executive officer at or within two years before the time of such
filing;
(ii)
Such
Company Control Person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic violations and
other
minor offenses);
(iii)
Such Company Control Person was the subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting, the following activities:
16
(A)
acting, as an investment advisor, underwriter, broker or dealer in securities,
or as an affiliated person, director or employee of any investment company,
bank, savings and loan association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool
operator, floor broker, any other Person regulated by the Commodity Futures
Trading Commission (“CFTC”) or engaging in or continuing any conduct or practice
in connection with such activity;
(B)
engaging in any type of business practice; or
(C)
engaging in any activity in connection with the purchase or sale of any security
or commodity or in connection with any violation of federal or state securities
laws or federal commodities laws;
(iv)
Such
Company Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of
such Company Control Person to engage in any activity described in paragraph
(3)
of this item, or to be associated with Persons engaged in any such activity;
or
(v)
Such
Company Control Person was found by a court of competent jurisdiction in a
civil
action or by the CFTC or SEC to have violated any federal or state securities
law, and the judgment in such civil action or finding by the CFTC or SEC has
not
been subsequently reversed, suspended, or vacated.
For
purposes hereof, “Company Control Person” means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Xxxxxxx 00 xx xxx 0000
Xxx.
(xx) DTC
STATUS.
The
Company's transfer agent is a participant in and the Common Stock is eligible
for transfer pursuant to the Depository Trust Company Automated Securities
Transfer Program. The name, address, telephone number, fax number, contact
person and email address of the Company transfer agent is set forth on SCHEDULE
3(HH) hereto.
(ii) XXXXXXXX-XXXXX;
INTERNAL ACCOUNTING CONTROLS.
The
Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 which are applicable to it as of the Closing Date.
17
(jj) SENIORITY.
Except
as set forth on SCHEDULE 3(JJ), as of the Closing Date, no indebtedness or
other
equity of the Company is senior to the Debenture in right of payment, whether
with respect to interest or upon liquidation or dissolution, or otherwise,
other
than indebtedness secured by purchase money security interests (which is senior
only as to underlying assets covered thereby) and capital lease obligations
(which is senior only as to the property covered thereby).
(kk) REGISTRATION
RIGHTS. Except
as
set forth in the SEC Reports and on SCHEDULE 3(KK) hereto, other than each
of
the Buyers,
no
Person has any right to cause the Company to effect the registration under
the
Securities Act of any securities of the Company.
(ll) TRANSACTIONS
WITH AFFILIATES. Except
as
set forth in the SEC Documents filed at least ten days prior to the date hereof
and other than the grant of stock options disclosed on SCHEDULE 3(LL), none
of
the officers, directors or employees of the Company or any of its Subsidiaries
is presently a party to any transaction with the Company or any of its
Subsidiaries (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 Company or any of
its
Subsidiaries, 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.
(mm) INDEBTEDNESS
AND OTHER CONTRACTS. Except
as
disclosed in SCHEDULE
3(MM),
neither
the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
(as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument would result in a Material Adverse Effect,
(iii) 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 (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of
the
Company's officers, has or is expected to have a Material Adverse Effect.
SCHEDULE
3(MM)
provides
a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) "Indebtedness" of
any
Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services including (without limitation) “Capital Leases” in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and
other
similar instruments, (D) 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, (E) 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), (F)
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, (G) all
indebtedness referred to in clauses (A) through (F) 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, charge, 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 (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
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.
18
4. COVENANTS.
(a) BEST
EFFORTS.
The
parties shall use their best efforts to satisfy timely each of the conditions
described in Sections 7 and 8 of this Agreement.
(b) FORM
D; BLUE SKY LAWS.
The
Company agrees to file a Form D with respect to the Securities as required
under
Regulation D and to provide a copy thereof to Buyer promptly after such filing.
The Company shall, on or before the Closing Date, take such action as the
Company shall reasonably determine is necessary to qualify the Securities for
sale to the Buyer at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to Buyer on or prior to the Closing Date.
(c) REPORTING
STATUS.
The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as any Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act (“1934 Act Filings”), and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or
the
rules and regulations thereunder would permit such termination.
(d) USE
OF PROCEEDS.
The
Company shall use the proceeds from the sale of the Debenture and the Warrants
in the manner set forth in SCHEDULE 4(D) attached hereto and made a part hereof
and shall not use such proceeds to pay down its corporate debt, except for
trade
payables and normal business expenses in the ordinary course of business. None
of the proceeds of the offering shall be used to repay any debt or obligation
to
any officer, director or manager of the Company, or any of their affiliates,
for
a period of at least one year from the Closing Date. The
Company shall use $450,000 of the proceeds of the Offering to partially repay,
by not later than by January 12, 2007, the 10% Promissory Notes of Xxxx X.
Xxxxx
and Xxxxxx Xxxxxx originally due March 15, 2007, to the extent of $450,000.
19
(e) REGISTRATION
LIMITATIONS; RIGHT OF PARTICIPATION.
(i)
Lock
up of Registration.
Except
for the registration statements required in the Registration Rights Agreement,
from the date hereof until 180 days after the Effective Date (as that term
is
defined in the Registration Rights Agreement), neither the Company nor any
Subsidiary shall file a registration statement registering the sale or resale
of
shares of Common Stock, including but not limited to shares of Common Stock
issuable upon the conversion or exercise of Common Stock Equivalents;
provided,
however,
the 180
day period set forth in this Section 4(e)(i) shall be extended for the number
of
Trading Days during such period in which (i) trading in the Common Stock is
suspended by any Trading Market, or (ii) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of
the
Underlying Shares.
(ii) Capital
Raising Limitations.
During
the period that any Debenture remains outstanding (the “Limitation Period”), the
Company shall not issue or sell, or agree to issue or sell Variable Equity
Securities (as defined below), or any securities of the Company pursuant to
an
Equity Line (as defined below) structure or format or any securities of the
Company in exchange for goods or services, without obtaining the prior written
approval of the Buyer, with the exception of any such agreements, transactions
or Equity Lines existing as of the date hereof.
For
purposes hereof, an “Equity Line” shall mean a transaction involving a written
agreement between the Company and an investor or underwriter whereby the Company
has the right to “put” its securities to the investor or underwriter over an
agreed period of time and at an agreed price or price formula. For purposes
hereof, the following shall be collectively referred to herein as, the “Variable
Equity Securities”: (A) any debt or equity securities which are convertible
into, exercisable or exchangeable for, or carry the right to receive additional
shares of Common Stock either (1) at any conversion, exercise or exchange rate
or other price that is based upon and/or varies with the trading prices of
or
quotations for Common Stock at any time after the initial issuance of such
debt
or equity security, or (2) with a fixed conversion, exercise or exchange price
that is subject to being reset at some future date at any time after the initial
issuance of such debt or equity security due to a change in the market price
of
the Company’s Common Stock since date of initial issuance, or (B) any debenture
or preferred stock that is accompanied by a number of warrants greater than
the
original principal amount, divided by the Market Price at the time of closing
of
such debenture or preferred stock, or (C) any common stock that is sold at
a
discount to the market price at the time of closing that is greater than 30%,
or
(D) any common stock that is accompanied by a number of warrants greater than
the number of shares of common stock sold by the Company. For purposes of the
above, the “Market Price” at time of closing shall mean the Market Price, as
defined in the Debenture.
(iii) Buyer’s
Right of Participation in Future Financings.
(A)
From
the date hereof and during the period that any portion of the Debenture is
outstanding, upon any financing by the Company or any of its subsidiaries (each,
a “Subsequent
Financing”)
of
Common Stock or Common Stock Equivalents (as defined in Section 1(a)), excluding
any securities issued pursuant to the Offering described in this Agreement,
each
Buyer shall have the right, subject to Section 4(e)(iii)(E), to participate
in
up to the Buyer’s Participation Maximum (as defined below) of the Subsequent
Financing.
20
(B)
At
least five (5) Trading Days prior to the closing of the Subsequent Financing,
the Company shall deliver to each Buyer a written notice of its intention to
effect a Subsequent Financing (an “Advance Notice of Financing”), which Advance
Notice of Financing shall ask such Buyer if it wants to review the details
of
such financing (such additional notice, a “Subsequent
Financing Notice”).
Upon
the request of a Buyer, and only upon a request by such Buyer, for a Subsequent
Financing Notice, the Company shall promptly, but no later than one (1) Trading
Day after such request, deliver a Subsequent Financing Notice to such Buyer.
The
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Financing is proposed to be
effected, and attached to which shall be a term sheet or similar document
relating thereto.
(C)
Any
Buyer desiring to participate in such Subsequent Financing must provide written
notice to the Company by not later than 5:30 p.m. (New York City time) on the
fifth (5th)
Trading
Day after such Buyer has received the Advance Notice of Financing that the
Buyer
is willing to participate in the Subsequent Financing, the amount of the Buyer’s
participation, and that the Buyer has such funds ready, willing, and available
for investment on the terms set forth in the Subsequent Financing Notice. If
the
Company receives no notice from a Buyer as of such fifth (5th)
Trading
Day, such Buyer shall be deemed to have notified the Company that it does not
elect to participate.
(D)
If by
5:30 p.m. (New York City time) on the fifth (5th) Trading
Day after all of the requesting Buyers have received the Advance Notice of
Financing, notifications by the Buyers of their willingness to participate
in
the Subsequent Financing (or to cause their designees to participate) is, in
the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice.
(E)
If by
5:30 p.m. (New York City time) on the fifth (5th)
Trading
Day after all of the Buyers have received the Advance Notice of Financing,
the
Company receives responses to a Subsequent Financing Notice from Buyers seeking
to purchase more than the aggregate amount of the Subsequent Financing, each
such Buyer shall have the right to purchase up to (the “Buyer’s Participation
Maximum”) (a) their Pro Rata Portion (as defined below) of the Subsequent
Financing, plus (b) a pro rata amount (based upon the relative amount of the
participating Buyers’ respective Pro Rata Portions) of the aggregate of the
unused Pro Rata Portions of the other Buyers. For purposes hereof, “Pro
Rata Portion”
shall
mean the ratio of (x) the Subscription Amount of Securities purchased on the
Closing Date by a Buyer participating under this Section 4(e)(iii)(E) and (y)
the sum of the aggregate Subscription Amounts of Securities purchased on the
Closing Date by all Buyers participating under this Section
4(e)(iii)(E).
21
(F)
The
Company must provide the Buyers with a second Subsequent Financing Notice,
and
the Buyers will again have the right of participation set forth above in this
Section 4(e)(iii)(E), if the Subsequent Financing subject to the initial
Subsequent Financing Notice is not consummated for any reason on the terms
set
forth in such Subsequent Financing Notice within 60 Trading Days after the
date
of the initial Subsequent Financing Notice.
(G)
Notwithstanding the foregoing, Section 4(e) shall not apply in respect of an
Exempt Issuance or (ii) an underwritten public offering of Common
Stock.
(iv)
Injunctive Relief. The
Company acknowledges that a breach by it of its obligations under this
Subsection 4(e) will cause irreparable harm to Buyer, by vitiating the intent
and purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Subsecton 4(e) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that
Buyer
shall be entitled, in addition to all other available remedies in law or in
equity, to an injunction or injunctions to prevent or cure any breaches of
the
provisions of this Subsection 4(e) and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss
and
without any bond or other security being required. Specifically, the Buyer
shall
be entitled to injunctive relief to cause the court to rescind any financing
or
financings between the Company and a third party that are in violation of this
Subsection 4(e).
(v) Most
Favored Nation (MFN) Securities Exchange Provision. From
the
date hereof until the date when such Buyer holds less than 20% in principal
amount of Debentures originally purchased by such Buyer hereunder, if the
Company effects a Subsequent Financing, each Buyer may elect, in its sole
discretion, to exchange all or some of the Debentures then held by such Buyer
for any securities or units issued in a Subsequent Financing on a $1.00 for
$1.00 basis based on the outstanding principal amount of such Debentures, along
with any accrued but unpaid interest, liquidated damages and other amounts
owing
thereon, and the effective price at which such securities were sold in such
Subsequent Financing; provided,
however,
that
this Section 4(e)(v) shall not apply with respect to (i) an Exempt Issuance
or
(ii) an underwritten public offering of Common Stock. The Company shall provide
each Buyer with notice of any such Subsequent Financing in the manner set forth
in Section 4(e)(v), provided that following such an exchange, the Holder shall
retain all of its Warrants.
(f)
SECURITIES
LAWS DISCLOSURE; PUBLICITY. The
Company shall, by 8:30 a.m. New York City time on December 27, 2006, issue
a
Current Report on Form 8-K, disclosing the material terms of the transactions
contemplated hereby and including the Transaction Documents as exhibits thereto.
The Company and each Buyer shall consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and neither
the Company nor any Buyer shall issue any such press release or otherwise make
any such public statement without the prior consent of the Company, with respect
to any press release of any Buyer, or without the prior consent of each Buyer,
with respect to any press release of the Company, which consent shall not
unreasonably be withheld or delayed, except if such disclosure is required
by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication. Notwithstanding
the
foregoing, the Company shall not publicly disclose the name of any Buyer, or
include the name of any Buyer in any filing with the Commission or any
regulatory agency or any market or exchange, without the prior written consent
of such Buyer, except (i) as required by federal securities law in connection
with (A) any registration statement contemplated by the Registration Rights
Agreement and (B) the filing of final Transaction Documents (including signature
pages thereto) with the SEC and
(ii)
to the extent such disclosure is required by law or regulations of the Principal
Market, in which case the Company shall provide the Buyers with prior notice
of
such disclosure permitted under this subclause (ii).
22
(g) FINANCIAL
INFORMATION.
The
Company agrees to send, or make available via public filings on the internet,
the following reports to Buyer until Buyer transfers, assigns, or sells all
of
the Securities: (i) within ten (10) days after the filing with the SEC, a copy
of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and any
Current Reports on Form 8-K; (ii) within one (1) day after release, copies
of
all press releases issued by the Company or any of its Subsidiaries; and (iii)
contemporaneously with the making available or giving to the stockholders of
the
Company, copies of any notices or other information the Company makes available
or gives to such stockholders.
(h) AUTHORIZATION
AND RESERVATION OF SHARES.
(i)
Authorization
and Reservation Requirements.
The
Company represents that it has 25,000,000 authorized shares and covenants that
it will initially reserve (the “INITIAL SHARE RESERVATION”) from its authorized
and unissued Common Stock a number of shares of Common Stock equal to at least
one and one-half (1.5) times the Original Principal Amount of the Debenture,
divided by the Conversion Price in effect on the date of the Initial Share
Reservation, free from preemptive rights, to provide for the issuance of Common
Stock upon the conversion of the Debenture and shall initially reserve an
additional number of shares equal to the Warrant Amount, free from preemptive
rights, to provide for the issuance of Common Stock upon the exercise of the
Warrants. The Company further covenants that, beginning on the date hereof,
and
continuing throughout the period the conversion right exists, the Company shall
at all times have authorized, and reserved (the “ONGOING SHARE RESERVATION
REQUIREMENT”) for the purpose of issuance, a sufficient number of shares of
Common Stock to provide for the full conversion or exercise of the outstanding
portion of the Debenture and Warrants and issuance of the Conversion Shares
and
Warrant Shares in connection therewith (based on the Conversion Price (as
defined in the Debenture) in effect from time to time and the Exercise Price
of
the Warrants in effect from time to time). The Company shall not reduce the
number of shares of Common Stock reserved for issuance upon conversion of or
otherwise pursuant to the Debenture and exercise of or otherwise pursuant to
the
Warrants without the consent of Buyer. The Company shall use its best efforts
at
all times to maintain the number of shares of Common Stock so reserved for
issuance at no less than 100% of the number that is then actually issuable
upon
full conversion of the Debenture (based on the Conversion Price (as defined
in
the Debenture) in effect from time to time) and full exercise of the Warrants
(based on the Exercise Price of the Warrants in effect from time to time).
(ii)
Stockholder
Approval.
If at
any time the number of shares of Common Stock authorized and reserved for
issuance is below the number of Conversion Shares issued and issuable upon
conversion of or otherwise pursuant to the Debenture (based on the Conversion
Price (as defined in the Debenture) in effect from time to time) and Warrant
Shares issued or issuable upon exercise of or otherwise pursuant to the Warrants
(based on the Exercise Price of the Warrants in effect from time to time),
together with the Payment Shares and any other shares of Common Stock issued
or
issuable pursuant to the terms of the Transaction Documents, the Company will
promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of stockholders to authorize additional shares to meet the Company's
obligations under this Section 4(h), in the case of an insufficient number
of
authorized shares, and using its best efforts to obtain stockholder approval
of
an increase in such authorized number of shares.
23
(i)
REGISTRATION
OF TITLE TO PATENTS.
Within
fifteen (15) days of Closing, the Company shall have filed all necessary
documents with the United States Patent and Trademark Office (the “PTO”) in
order to reflect the Company as the sole duly registered owner of its Patents
(as defined herein) on the PTO’s public records.
(j) LISTING.
The
Company shall use its best efforts to promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange
or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and, so long as any Buyer owns
any of the Securities, shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Conversion Shares from time to
time issuable upon conversion of or otherwise pursuant to the Debenture and
all
Warrant Shares from time to time issuable upon exercise of or otherwise pursuant
to the Warrants. The Company will use its best efforts to obtain and, so long
as
any Buyer owns any of the Securities, maintain the listing and trading of its
Common Stock on the over the counter Bulletin Board (“OTC-BB”), the Nasdaq
National Market (the "NNM"), the Nasdaq SmallCap Market (the "NASDAQ SMALLCAP"),
the New York Stock Exchange ("NYSE"), or the American Stock Exchange
("AMEX")(whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock is referred to herein as the "PRINCIPAL
MARKET"), and will comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the National Association
of
Securities Dealers ("NASD") and such exchanges, as applicable. The Company
shall
promptly provide to Buyer copies of any notices it receives from the PRINCIPAL
MARKET and any other exchanges or quotation systems on which the Common Stock
is
then listed regarding the continued eligibility of the Common Stock for listing
on such exchanges and quotation systems.
(k) CORPORATE
EXISTENCE.
So long
as a Buyer beneficially owns any portion of the Debenture or Warrants, the
Company shall maintain its corporate existence in good standing and remain
a
“Reporting Issuer” (defined as a Company which files periodic reports under the
Exchange Act)..
(l) NO
INTEGRATION.
The
Company shall not make any offers or sales of any security (other than the
Securities) under circumstances that would require registration of the
Securities being offered or sold hereunder under the 1933 Act or cause the
offering of the Securities to be integrated with any other offering of
securities by the Company for the purpose of any stockholder approval provision
applicable to the Company or its securities.
24
(m) LIMITATION
ON SALE OR DISPOSITION OF INTELLECTUAL PROPERTY.
So long
as any Debenture remain outstanding, the Company shall have any obligation
under
the Debenture or so long as any of the Warrants remain outstanding, the
Corporation shall not sell, convey, dispose of, spin off or assign any or all
of
its Intellectual Property (including but not limited to the Intellectual
Property set forth in SCHEDULE 3(J) hereof), or the rights to receive proceeds
from patent licensing agreements, patent infringement litigation or other
litigation related to such intellectual property (collectively, the
“INTELLECTUAL PROPERTY RIGHTS”), in each case without Buyer’s written consent,
provided that the Company may, without the Buyer’s Written Consent, enter into
one or more licensing agreements with respect to its Intellectual Property
so
long as such agreements are not with any affiliate (as such term is defined
in
Rule 501(b) of Regulation D) of the Company or with any relative of, or entity
controlled by, or any entity 10% or more of which is owned by, any officer,
director, employee or former employee of the Company so long as such licensing
agreements exceed $5 million per calendar year, provided, further, that the
Company shall not be subject to the restrictions of this Section 4(m) if the
cash consideration received by the Company in exchange for such Intellectual
Property Rights exceeds $50 million.
(n) LIMITATION
ON RATE OF ISSUANCE OF SHARES. The
parties agree that, if by virtue of this AGREEMENT, or by virtue of any other
agreement between the parties, Holder becomes entitled to receive from the
Company a number of shares of common stock of the Company (collectively,
“Issuable Securities”), such that the sum of (1) the number of shares of Common
Stock of the Company beneficially owned by HOLDER and any applicable affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Debenture, the
unexercised Warrants or the unexercised or unconverted portion of any other
security of HOLDER subject to a limitation on conversion or exercise analogous
to the limitations contained herein)(collectively, the “Beneficially Owned
Shares”) and (2) the number Issuable Securities described above, with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of
the
outstanding shares of Common Stock (the “4.99% BENEFICIAL OWNERSHIP
LIMITATION”), then the Company shall immediately deliver to Holder the number of
shares of Common Stock of the Company, that can be issued without exceeding
the
4.99% Beneficial Ownership Limitation.
For
purposes of the proviso to the immediately preceding sentence, (i) beneficial
ownership shall be determined by the Holder in accordance with Section 13(d)
of
the Exchange Act and Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso to the immediately preceding sentence, and
PROVIDED THAT the 4.99% Beneficial Ownership Limitation shall be conclusively
satisfied if the applicable notice from Holder includes a signed representation
by the Holder that the issuance of the shares in such notice will not violate
the 4.99% Beneficial Ownership Limitation, and the Company shall not be entitled
to require additional documentation of such satisfaction.
The
parties agree that, in the event that the Company receives any tender offer
or
any offer to enter into a merger with another entity whereby the Company shall
not be the surviving entity (an “Offer”), or in the event the Company is issuing
Default Shares (as defined in the Debenture) to the Buyer, then “4.99%” shall be
automatically revised immediately after such offer to read “9.99%” each place it
occurs in the first two paragraphs of this Section 4(n) above. Notwithstanding
the above, Holder shall retain the option to either exercise or not exercise
its
option(s) to acquire Common Stock pursuant to the terms hereof after an Offer.
In addition, the 4.99% Beneficial Ownership Limitation provisions of this
Section 7(a)(ii) may be waived by such Holder, at the election of such Holder,
upon not less than 61 days’ prior notice to the Company, to change the 4.99%
Beneficial Ownership Limitation to 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares
of
Common Stock upon conversion of the Debenture held by the Holder or upon
exercise of a Warrant held by the Holder, as applicable, and the provisions
of
this Section 4(n) shall continue to apply. The limitations on conversion set
forth in this subsection are referred to as the “Beneficial Ownership
Limitation.” Upon such a change by a Holder of the Beneficial Ownership
Limitation from such 4.99% Beneficial Ownership Limitation to such 9.99%
limitation, the Beneficial Ownership Limitation may not be further waived by
such Holder.
25
The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 4(c) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such limitation.
Maximum
Exercise of Rights. In the event the Buyer notifies the Company that the
exercise of the rights described herein or in the Warrants, or the issuance
of
Payment Shares or other shares of Common Stock issuable to the Holder under
the
terms of the Transaction Documents (collectively, “Issuable Shares”) would
result in the issuance of an amount of common stock of the Company that would
exceed the maximum amount that may be issued to a Buyer calculated in the manner
described in Section 4(n) of this Agreement, then the issuance of such
additional shares of common stock of the Company to such Buyer will be deferred
in whole or in part until such time as such Buyer is able to beneficially own
such common stock without exceeding the maximum amount set forth calculated
in
the manner described in herein. The determination of when such common stock
may
be issued shall be made by each Buyer as to only such Buyer.
(o) APPOINTMENT
OF DIRECTORS.
(In
the
event that the Company has not added two independent board members (in addition
to the number of members on the board as of the Closing Date, and not including
any board member nominated by the Buyer) by September 30, 2007 (the “Company
Added Board Members”), then the Buyer, at its option, may recommend a number of
additional nominees for the Company’s Board of Directors anytime thereafter
equal to two (2) minus the number of Company Added Board Members that were
added
before September 30, 2007. In addition, if any Event of Default (as defined
in
the Debenture) remains uncured for an aggregate of thirty (30) days or more,
the
Buyer, at its option, may recommend one nominee for the Company’s Board of
Directors, if any Event of Default remains uncured for an aggregate of sixty
(60) days or more, the Buyer, at its option, may recommend a second nominee
for
the Company’s Board of Directors, and if any Event of Default remains uncured
for an aggregate of ninety (90) days or more, the Buyer, at its option, may
recommend an additional number of nominees to the Company’s Board of Directors,
such that the Buyer’s nominees shall constitute a majority of the Company’s
Board of Directors (each nominee nominated by the Buyer pursuant to this
Subsection shall be referred to singularly as a “Buyer’s Nominee” and
collectively as the “Buyer’s Nominees”). The Company agrees that its Board of
Directors, or the Nominating Committee of the Board, as applicable, shall
appoint as members of the Company’s Board of Directors the Buyer’s Nominee’s
required pursuant to the this subsection. After such appointment, the Company
and its Board of Directors shall use their best efforts to obtain shareholder
ratification of the appointment of the Buyer’s Nominees at the next shareholder
meeting.
26
(p) EQUAL
TREATMENT OF BUYERS.
No
consideration shall be offered or paid to any person to amend or consent to
a
waiver or modification of any provision of any of the Transaction Agreements
unless the same consideration is also offered to all of the parties to the
Transaction Agreements.
(q) LEGAL
AND DUE DILIGENCE FEES.
The
Company shall pay to BridgePointe Master Fund Ltd. (the “Lead Investor”) a cash
fee of $10,000 at closing as reimbursement for legal services rendered by its
attorneys in connection with this Agreement and the purchase and sale of the
Debentures and Warrants and as reimbursement for due diligence expenses. The
Lead Investor may withhold such amount out of the Purchase Price for its
Debenture.
(r) [INTENTIONALLY
LEFT BLANK].
(s) LIMITED
STANDSTILL.
The
Company will deliver to the Buyers on or before the Closing Date and enforce
the
provisions of irrevocable standstill agreements ("Limited Standstill
Agreements") in the form annexed hereto as EXHIBIT
E
with the
parties identified on SCHEDULE 4(s) hereto.
(t) NON-PUBLIC
INFORMATION. The
Company covenants and agrees that from and after the date hereof, neither it
nor
any other Person acting on its behalf will provide any Buyer or its agents
or
counsel with any information that the Company believes constitutes material
non-public information, unless prior thereto such Buyer shall have executed
a
written agreement regarding the confidentiality and use of such information.
The
Company understands and confirms that each Buyer shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.
(u)
ADDITIONAL
REGISTRATION STATEMENTS. Until
the Effective Date (as defined in the Registration Rights Agreement), the
Company will not file a registration statement under the 1933 Act relating
to
securities that are not the Securities.
27
(v) TRANSACTIONS
WITH AFFILIATES. So
long
as any Debenture or Warrant is outstanding, the Company shall not, and shall
cause each of its Subsidiaries not to, enter into, amend, modify or supplement,
or permit any Subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or any
Subsidiary’s officers, directors, person who were officers or directors at any
time during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below)
or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a
five
percent (5%) or more beneficial interest (each a “Related Party”), except for
customary employment arrangements and benefit programs on reasonable terms.
“Affiliate” for purposes hereof means, with respect to any person or entity,
another person or entity that, directly or indirectly, (i) has a ten percent
(10%) or more equity interest in that person or entity, (ii) has ten percent
(10%) or more common ownership with that person or entity, (iii) controls that
person or entity, or (iv) shares common control with that person or entity.
“Control” or “controls” for purposes hereof means that a person or entity has
the power, direct or indirect, to conduct or govern the policies of another
person or entity.
(w) [INTENTIONALLY
LEFT BLANK].
5.
SENIOR DEBT; LIMITATIONS
ON ENCUMBRANCE OF PATENTS.
The
Borrower hereby represents that there are no liens or encumbrances on the
Patents (as defined below). The
Company agrees that from the Issue Date of the Debentures through the date
that
all of the Debentures have been paid in full or converted in full (the “Covered
Period”), the Company shall not enter
into, create, incur, assume or suffer to exist any
mortgage, lien, pledge, charge, security interest or other encumbrance
(collectively, “Liens”) upon or in the Patents (as defined below) owned by the
Company or any of its Subsidiaries and shall not assign or transfer any interest
in the Patents owned by the Company or any of its Subsidiaries.
In the
event that the Company attempts to place any Lien or Liens on the Patents or
attempts to assign or transfer any interest in the Patents during the Covered
Period, the Buyer shall have the right to apply for an injunction in the U.S.
District Court for the Northern District of Georgia to prevent such Lien or
transfer. Before
entering into any future debt with a third party, the Company shall first obtain
a subordination agreement, satisfactory to Buyer, from the proposed debt holder.
For
purposes hereof, "Patents"
means
all domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods,
techniques, processes, proprietary information, technology, know-how, formulae,
rights of publicity and other general intangibles of like nature, now existing
or hereafter acquired (including, without limitation, all domestic and foreign
letters patent, design patents, utility patents, industrial designs, inventions,
trade secrets, ideas, concepts, methods, techniques, processes, proprietary
information, technology, know-how and formulae described in Schedule
3(J)
hereof),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office, or in any similar office or agency of the United
States or any other country or any political subdivision thereof), and all
reissues, divisions, continuations, continuations in part and extensions or
renewals thereof, in each case owned by the Company or an of its
Subsidiaries.
6.
LEGENDS.
(a)
The
Conversion Shares and the Warrant Shares, together with any other shares of
Common Stock that are issued or issuable pursuant to the Transaction Documents
shall be referred to herein as the “Issued Common Shares.” Certificates
evidencing the Issued Common Shares shall not contain any legend restricting
the
transfer thereof (including the legend set forth in Section 2(e) of the
Debenture): (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 Issued Common Shares pursuant
to Rule 144, or (iii) if such Issued Common Shares are eligible for sale under
Rule 144(k), 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) (collectively, the
“Unrestricted Conditions”). The Company shall cause its counsel to issue a legal
opinion to the Company’s transfer agent promptly after the Effective Date if
required by the Company’s transfer agent to effect the issuance of Issued Common
Shares without a restrictive legend or removal of the legend hereunder. If
the
Unrestricted Conditions are met at the time of issuance of Issued Common Shares,
then such Issued Common Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as the Unrestricted
Conditions are met or such legend is otherwise no longer required under this
Section 6(b), it will, no later than three Trading Days following the delivery
by a Buyer to the Company or the Company’s transfer agent of a certificate
representing Issued Common Shares, as applicable, issued with a restrictive
legend (such third Trading Day, the “Legend
Removal Date”),
deliver or cause to be delivered to such Buyer a certificate representing such
shares that is free from all restrictive and other legends.
28
(b)
Each
Buyer, severally and not jointly with the other Buyers, agrees that the removal
of the restrictive legend from certificates representing Securities as set
forth
in this Section 6 is predicated upon the Company’s reliance that the Buyer will
sell any Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an
exemption therefrom, and that if Securities are sold pursuant to a Registration
Statement, they will be sold in compliance with the plan of distribution set
forth therein.
7. CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Debenture and Warrants
to a Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion:
(a)
The
Buyer shall have executed each of the Transaction Documents, and delivered
the
same to the Company.
(b)
The
Buyer shall have delivered the applicable Purchase Price in accordance with
Section 1(b) above.
(c)
The
representations and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the applicable Closing
Date
as though made at that time (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be
true
and correct as of such date), and the Buyer shall have performed, satisfied
and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
29
(d)
No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or
in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
8. CONDITIONS
TO BUYER'S OBLIGATION TO PURCHASE.
The
obligation of Buyer hereunder to purchase the Debenture and Warrants at each
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for such Buyer's
sole benefit and may be waived by such Buyer at any time in its sole
discretion:
(a)
The
Company shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Buyer.
(b)
The
Company shall have delivered to such Buyer the duly executed Debenture and
Warrants in accordance with Section 1 above.
(c)
The
representations and warranties of the Company contained in this Agreement,
as
modified by the Exhibits and Schedules hereto, shall be true and correct in
all
material respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and warranties that speak as
of a
specific date, which representations and warranties shall be true and correct
as
of such date) and the Company shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Company at
or
prior to the Closing Date. The Buyer shall have received a certificate or
certificates, executed by the President and Chief Executive Officer of the
Company, dated as of the applicable Closing Date, to the foregoing effect and
as
to such other matters as may be reasonably requested by such Buyer including,
but not limited to certificates with respect to the Company's Certificate of
Incorporation, By-laws and Board of Directors' resolutions relating to the
transactions contemplated hereby.
(d)
No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or
in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
(e)
Trading in the Common Stock on the PRINCIPAL MARKET shall not have been
suspended by the SEC or the Nasdaq and, within two (2) business days of the
Closing, the Company will make application to the PRINCIPAL MARKET, if legally
required by Nasdaq, to have the Conversion Shares and the Warrant Shares
authorized for quotation.
30
(f)
The
Buyer shall have received an opinion of the Company's counsel, dated as of
the
Closing Date, in form, scope and substance reasonably satisfactory to the Buyer
and in substantially the same form as EXHIBIT
D
attached
hereto.
(g)
The
Buyer shall have received a Closing Certificate described in Section 1(b)(v)
above, dated as of the Closing Date.
(h)
The
Company shall have delivered to the Buyer an executed Accountant Letter and
an
executed Law Firm Letter, as described in Section 3(dd) hereof.
(i)
Within
one (1) Business Day prior to the Closing, the Company shall have delivered
or
caused to be delivered to each Buyer (A) true copies of UCC search results,
listing all effective financing statements which name as debtor the Company
or
any of its Subsidiaries filed in the prior five years to perfect an interest
in
any assets thereof, together with copies of such financing statements, and
the
results of searches for any tax lien and judgment lien filed against such Person
or its property.
(j)
The
Buyer shall have received a fully executed waiver letter, in the form attached
hereto as EXHIBIT_F,
from
Xxxx X. Xxxxx and Xxxxxx Xxxxxx, as holders of promissory notes in the amount
of
$700,000, more or less, due from Biometrx, Inc. on or about March 15, 2007
(such
notes, together with any other notes from Biometrx held by either such holder,
are referred to herein as the “Xxxxx-Xxxxxx Notes”).
(k)
The
Buyer shall have received a fully executed Consent and Waiver, in substantially
the form of EXHIBIT
G
hereto,
from the holders of $1,600,000 principal amount of Convertible Notes (the
“$1,600,000 Notes”) of the Company issued on or about June 29, 2006 and due 24
months thereafter, issued to the individuals/entities listed on Schedule A
to
such Consent and Waiver.
(l)
The
Buyer shall have received a fully executed Assignment of U.S. Patent evidencing
the assignment of U.S. Patent # 6,042,005 from Incredible Card Corp. to
bioMETRX, Inc., and documentation evidencing Incredible Card Corp. as the
rightful owner of said patent at the time of such assignment.
9. GOVERNING
LAW; MISCELLANEOUS.
(a)
GOVERNING LAW; ARBITRATION. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York. Any controversy or claim arising out of or
related to the Debenture or the breach thereof, shall be settled by binding
arbitration in New York, New York in accordance with the Expedited Procedures
(Rules 53-57) of the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”). A proceeding shall be commenced upon written demand by the
Company or Buyer to the other. The arbitrator(s) shall enter a judgment by
default against any party, which fails or refuses to appear in any properly
noticed arbitration proceeding. The proceeding shall be conducted by one (1)
arbitrator, unless the amount alleged to be in dispute exceeds two hundred
fifty
thousand dollars ($250,000), in which case three (3) arbitrators shall preside.
The arbitrator(s) will be chosen by the parties from a list provided by the
AAA,
and if the parties are unable to agree within ten (10) days, the AAA shall
select the arbitrator(s). The arbitrators must be experts in securities law
and
financial transactions. The arbitrators shall assess costs and expenses of
the
arbitration, including all attorneys’ and experts’ fees, as the arbitrators
believe is appropriate in light of the merits of the parties’ respective
positions in the issues in dispute. Each party submits irrevocably to the
jurisdiction of any state court sitting in New York, New York or to the United
States District Court sitting in New York, New York for purposes of enforcement
of any discovery order, judgment or award in connection with such arbitration.
The award of the arbitrator(s) shall be final and binding upon the parties
and
may be enforced in any court having jurisdiction. The arbitration shall be
held
in such place as set by the arbitrator(s) in accordance with Rule 55. With
respect to any arbitration proceeding in accordance with this section, the
prevailing party’s reasonable attorney’s fees and expenses shall be borne by the
non-prevailing party.
31
Although
the parties, as expressed above, agree that all claims, including claims that
are equitable in nature, for example specific performance, shall initially
be
prosecuted in the binding arbitration procedure outlined above, if the
arbitration panel dismisses or otherwise fails to entertain any or all of the
equitable claims asserted by reason of the fact that it lacks jurisdiction,
power and/or authority to consider such claims and/or direct the remedy
requested, then, in only that event, will the parties have the right to initiate
litigation respecting such equitable claims or remedies. The forum for such
equitable relief shall be in either a state or federal court sitting in New
York, New York. Each party waives any right to a trial by jury, assuming such
right exists in an equitable proceeding, and irrevocably submits to the
jurisdiction of said New York court. New York law shall govern both the
proceeding as well as the interpretation and construction of this Agreement
and
the transaction as a whole.
(b) COUNTERPARTS;
SIGNATURES BY FACSIMILE.
This
Agreement may be executed in one or more counterparts, all of which 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.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
(c) HEADINGS.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) SEVERABILITY.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(e) ENTIRE
AGREEMENT; AMENDMENTS.
This
Agreement and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein and
supersede all previous communication, representation, or Agreements whether
oral
or written, between the parties with respect to the matters covered herein.
Except as specifically set forth herein or therein, neither the Company nor
the
Buyer makes any representation, warranty, covenant or undertaking with respect
to such matters. The Agreement may not be orally modified. Only a modification
in writing, signed authorized representatives of both parties will be
enforceable. The parties waive the right to rely on any oral representations
made by the other party, whether in the past or in the future, regarding the
subject matter of the Agreement, the instruments referenced herein or any other
dealings between the parties related to investments or potential investments
into the Company or any securities transactions or potential securities
transactions with the Company.
32
(f) Independent
Nature of Buyers’ Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under
any
Transaction Document. Nothing contained herein or in any Transaction Document,
and no action taken by any Buyer pursuant thereto, shall be deemed to constitute
the Buyers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Buyers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Buyer shall be entitled to
independently protect and enforce its rights, including without limitation,
the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose. Each Buyer has been represented by
its
own separate legal counsel in their review and negotiation of the Transaction
Documents.
(g) NOTICES.
Any
notices required or permitted to be given under the terms of this Agreement
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed
in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If
to the
Company, to:
Attn:
Xxxx Xxxxxx
bioMETRX,
Inc.
000
Xxxxx
Xxxxxxxx
Xxxxx
000
Xxxxxxx,
XX 00000
Phone:
000-000-0000
Fax:
000-000-0000
With
copy
to:
Xxxx
X.
Xxxxxxxxx, Esq.
Xxxxxx
& Xxxxxxxxx LLP
000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx
Xxxx, XX 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
33
If
to a
Buyer: To the address set forth immediately below such
Buyer's
name on the signature pages hereto.
Each
party shall provide notice to the other party of any change in
address.
(h) SUCCESSORS
AND ASSIGNS.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. Neither the Company nor any Buyer shall assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, subject to Section 2(f),
Buyer may assign its rights hereunder to any person that purchases Securities
in
a private transaction from a Buyer or to any of its "affiliates," as that term
is defined under the 1934 Act, without the consent of the Company; PROVIDED,
HOWEVER, that prior to any assignment of its rights hereunder to a person (other
than an affiliate) that purchases any Debenture or Warrants from such Buyer
in a
private transaction such Buyer shall provide the Company with written notice
of
its intention to sell some or all of the Debenture or Warrants, which notice
shall disclose the proposed purchase price for such Debenture or Warrants,
and
the Company shall have the option, during the ten (10) business day period
following such notice, to purchase all, but not less than all, of such Debenture
and/or Warrants at the proposed purchase price, after which period the Buyer
shall be free to sell the Debenture and/or Warrants to a third party at such
proposed purchase price.
(i) THIRD
PARTY BENEFICIARIES.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(j) SURVIVAL.
The
representations and warranties of the parties hereto contained in this Agreement
shall survive the Closing hereunder for a period of one (1) year after each
Closing contemplated by this Agreement notwithstanding any due diligence
investigation conducted by or on behalf of the Buyer.
(k) INDEMNIFICATION.
The
Company (the “INDEMNIFYING PARTY”) agrees to indemnify and hold harmless the
Buyer and all its officers, directors, employees, agents, members and managers
(the “INDEMNIFIED PARTY”) for loss or damage arising as a result of or related
to any breach or alleged breach by the Company of any of its representations,
warranties and covenants set forth in Sections 3 and 4 hereof or any of its
covenants and obligations under this Agreement or the Registration Rights
Agreement, including advancement of expenses as they are incurred with respect
to claims by third parties.
Promptly
after receipt of notice of the commencement of any action against an Indemnified
Party, such Indemnified Party shall notify the Indemnifying Party in writing
of
the commencement thereof and the basis hereunder upon which a claim for
indemnification is asserted, but the failure to do so shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent the
Indemnifying Party is materially prejudiced by such failure. In the event of
the
commencement of any such action, the Indemnifying Party shall be entitled to
participate therein and to assume the defense thereof with counsel satisfactory
to the Indemnified Party, and, after notice from the Indemnifying Party to
the
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party shall not be liable to the Indemnified Party hereunder for
any legal expenses (including attorneys' fees) subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the Indemnified
Party and the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the Indemnifying Party or
if
the interests of the Indemnified Party reasonably may be deemed to conflict
with
the interests of the Indemnifying Party, the Indemnified Party shall have the
right to select one separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the Indemnifying Party as incurred.
34
As
to
cases in which the Indemnifying Party has assumed and is providing the defense
for the Indemnified Party, the control of such defense shall be vested in the
Indemnifying Party; provided that the consent of the Indemnified Party shall
be
required prior to any settlement of such case or action, which consent shall
not
be unreasonably withheld. As to any action, the party which is controlling
such
action shall provide to the other party reasonable information (including
reasonable advance notice of all proceedings and depositions in respect thereto)
regarding the conduct of the action and the right to attend all proceedings
and
depositions in respect thereto through its agents and attorneys, and the right
to discuss the action with counsel for the party controlling such action.
(l)
PUBLICITY.
The
Company and the Buyer shall have the right to review a reasonable period of
time
before issuance of any press releases, filings with the SEC, NASD or any stock
exchange or interdealer quotation system, or any other public statements with
respect to the transactions contemplated hereby; PROVIDED, HOWEVER, that the
Company shall be entitled, without the prior approval of the Buyer, to make
any
press release or public filings with respect to such transactions as is required
by applicable law and regulations (although the Buyer shall be consulted by
the
Company in connection with any such press release prior to its release and
shall
be provided with a copy thereof and be given an opportunity to comment
thereon).
(m) FURTHER
ASSURANCES.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(n) NO
STRICT CONSTRUCTION.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
(o)
LIQUIDATED DAMAGES. The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due
and
payable shall have been canceled.
35
(p) REMEDIES.
The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to Buyer, by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for a breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that Buyer shall be entitled,
in
addition to all other available remedies in law or in equity, to an injunction
or injunctions to prevent or cure any breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions of this
Agreement, without the necessity of showing economic loss and without any bond
or other security being required.
Section
10. Number
of Shares and Purchase Price.
Buyer
subscribes for a Debenture in the Original Principal Amount of $
("Subscription Amount") against payment by wire transfer in the amount of the
Subscription Amount.
The
undersigned acknowledges that this Agreement and the subscription represented
hereby shall not be effective unless accepted by the Company as indicated
below.
[INTENTIONALLY
LEFT BLANK]
36
IN
WITNESS WHEREOF, the undersigned Buyer does represent and certify under penalty
of perjury that the foregoing statements are true and correct and that Buyer
by
the following signature(s) executed this Agreement.
Dated
this 28th
day of
December, 2006.
Your
Signature
|
PRINT
EXACT NAME IN WHICH YOU WANT
|
|
THE
SECURITIES TO BE REGISTERED
|
DELIVERY
INSTRUCTIONS:
|
||
Name:
Please Print
|
Please
type or print address where your security is to be
delivered
|
|
ATTN.:___________________________________________
|
||
Title/Representative
Capacity (if applicable)
|
||
|
||
Name
of Company You Represent (if applicable)
|
Street Address | |
|
|
|
Place
of Execution of this Agreement
|
City, State or Province, Country, Offshore Postal Code | |
|
|
__________________________________________________
Phone
Number (For Federal Express) and Fax Number (re: Notice)
WITH
A
COPY TO:
Please
type or print address where copies are to be delivered
ATTN.:____________________________________________
__________________________________________________
Xxxxxx
Xxxxxxx
__________________________________________________
City,
State or Province, Country, Offshore Postal Code
__________________________________________________
Phone
Number (For Federal Express) and Fax Number (re: Notice)
THIS
AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF $_________
ON
THE ___DAY
OF
DECEMBER, 2006.
bioMETRX,
INC.
|
||
By:________________________________
|
||
Print
Name: Xxxx Xxxxxx
|
||
Title:
Chief Executive Officer
|
37