FINAL EXECUTION
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of August 19,
2008, by and among PNG Ventures, Inc., a Nevada corporation, with headquarters
located at 0000 Xxxx Xxxxxx, xxxxx 000, Xxxxxx, Xxxxx 00000 (the "COMPANY"), and
the investors listed on the Schedule of Buyers attached hereto (individually, a
"BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and Regulation
D ("REGULATION D") promulgated by the United States Securities and Exchange
Commission (the "SEC") under the 1933 Act.
B. The Company has authorized a new series of convertible notes of the
Company (the "NOTES"), which Notes shall be convertible into shares (as
converted, collectively, the "CONVERSION SHARES") of the Company's common stock,
$0.001 par value per share (the "COMMON STOCK"), in accordance with the terms of
the Notes.
C. Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) that aggregate principal
amount of Notes, in substantially the form attached hereto as EXHIBIT A, set
forth opposite such Buyer's name in column (3) on the Schedule of Buyers (which
aggregate amount for all Buyers shall be $3,188,235) and (ii) warrants, in
substantially the form attached hereto as EXHIBIT B (the "WARRANTS"), to acquire
that number of shares (as exercised, collectively, the "WARRANT SHARES") of
Common Stock set forth opposite such Buyer's name in column (4) on the Schedule
of Buyers.
D. The Notes, the Conversion Shares, the Warrants and the Warrant Shares,
are collectively are referred to herein as the "SECURITIES."
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) AMOUNT. Subject to the satisfaction (or waiver) of the conditions
set forth in Sections 6 and 7 below, the Company shall issue and sell to each
Buyer, and each Buyer severally, but not jointly, agrees to purchase from the
Company on the Closing Date (as defined below), a principal amount of Notes as
is set forth opposite such Buyer's name in column (3) on the Schedule of Buyers,
along with Warrants to acquire that number of Warrant Shares as is set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers.
(b) CLOSING. The closing (the "CLOSING") of the purchase of the Notes
and the Warrants by the Buyers shall occur at the offices of Fox Rothschild LLP,
000 Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000. The date and time of the
Closing (the "CLOSING DATE") shall be 10:00 a.m., New York City Time, on the
date hereof, subject to notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7 below
(or such later date as is mutually agreed to by the Company and each
Buyer).
(c) PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") of the
Notes and related Warrants to be purchased by each Buyer at the Closing shall be
equal to $1.00 for each $1.00 of principal amount of Notes being purchased by
such Buyer at the Closing. The Buyers and the Company agree that the Notes and
the Warrants constitute an "investment unit" for purposes of Section 1273(c)(2)
of the Internal Revenue Code of 1986, as amended (the "CODE"). The Buyers and
the Company mutually agree that the allocation of the issue price of such
investment unit between the Notes and the Warrants in accordance with Section
1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h) shall be an
aggregate amount of $197,389 allocated to the Warrants, and the balance of the
Purchase Price allocated to the Notes, and neither the Buyers nor the Company
shall take any position inconsistent with such allocation in any tax return or
in any judicial or administrative proceeding in respect of taxes.
(d) FORM OF PAYMENT. On the Closing Date, (i) each Buyer shall, subject
to the provisions set forth below in this Section 1(d), pay its aggregate
Purchase Price to the Company for the Notes and the Warrants to be issued and
sold to such Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions, and (ii) the
Company shall deliver to each Buyer the Notes (in the denominations as such
Buyer shall have requested prior to the Closing) which such Buyer is then
purchasing along with the Warrants (in the denominations as such Buyer shall
have requested prior to the Closing) such Buyer is purchasing, duly executed on
behalf of the Company and registered in the name of such Buyer or its designee.
The Company agrees that, at the Closing, the Buyer(s) shall, as a
dollar-for-dollar credit towards the Purchase Price: (x) withhold and reserve
the sum of $478,235.25 to be applied as Prepaid Interest under the Notes; (y)
withhold the further sum of $180,000 reflecting the application and receipt of a
prior interim advance made by the Buyer to the Company on August 15, 2008; and
(z) fund a reserve account in the sum of $1,000,000 with Fourth Third, LLC for
the benefit of the Company (the "RESERVE AMOUNT") to be applied against
regularly scheduled interest payments as they become due and payable under the
Company's outstanding Amended and Restated Credit Agreement with Fourth Third,
LLC. as in effect as of the Closing Date (the "FOURTH THIRD CREDIT AGREEMENT").
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
(a) ORGANIZATION; AUTHORITY. Such Buyer is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Buyer of the transactions contemplated by the Transaction Documents have been
duly authorized by all necessary corporate or similar action on the part of such
Buyer. Each Transaction Document to which it is a party has been duly executed
by such Buyer, and when delivered by such Buyer in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such Buyer,
enforceable against it in accordance with its terms, except: (i)
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as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(b) NO PUBLIC SALE OR DISTRIBUTION. Such Buyer is (i) acquiring the
Notes and the Warrants, (ii) upon conversion of the Notes will acquire the
Conversion Shares, and (iii) upon exercise of the Warrants will acquire the
Warrant Shares, in each case, for its own account and not with a view towards,
or for resale in connection with, the public sale or distribution thereof in a
manner that would violate the 1933 Act, except pursuant to sales registered or
exempted under the 1933 Act; PROVIDED, HOWEVER, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act. Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.
(c) INVESTOR STATUS. Such Buyer is an "accredited investor" as that term
is defined in Rule 501(a) of Regulation D.
(d) GENERAL SOLICITATION. Such Buyer is not purchasing the Securities as
a result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
(e) RELIANCE ON EXEMPTIONS. Such Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(f) INFORMATION. Such 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 such Buyer. Such 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 investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
herein. Such Buyer understands that its investment in the Securities involves a
high degree of risk and illiquidity. Such Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities. Buyer
acknowledges the risks of illiquidity and longer holding period under Rule 144
(as hereinafter defined), as a result of the Company recently having been a
shell company (as such term is defined under Rule 405 under the 1933 Act),
including, without limitations, risks related to illiquidity in the event that
the
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Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) under the 1933 Act.
(g) NO GOVERNMENTAL REVIEW. Such Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(h) TRANSFER OR RESALE. Such Buyer understands that except as provided
for in Section 4(q), the Securities have not been and are not being registered
under the 1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) such Buyer shall have delivered to the Company an opinion of
counsel, in a generally acceptable form, to the effect that such Securities to
be sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration, or (C) such Buyer provides the Company
with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act
(or, in each case, a successor rule thereto)(collectively, "RULE 144"); or some
other applicable exemption from registration under the 1933 Act or the rules and
regulations of the SEC thereunder, PROVIDED, HOWEVER, that the Securities may be
pledged in connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities and such pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Buyer effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document (as defined in Section
3(b)), including, without limitation, this Section 2(h).
(i) LEGENDS. Such Buyer understands that the certificates or other
instruments representing the Notes and the Warrants and, until such time as the
Conversion Shares and the Warrant Shares have been registered under the 1933
Act, as contemplated by Section 4(q) hereof, the stock certificates representing
the Conversion Shares and the Warrant Shares, shall bear any legend as required
by the "blue sky" laws of any state and a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of
such stock certificates):
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE][EXERCISABLE] HAVE BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT AND APPLICABLE STATE
SECURITIES
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LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
OR OTHER AVAILABLE EXEMPTION UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer, such holder provides the
Company with an opinion of counsel, in a generally acceptable form, to the
effect that such sale, assignment or transfer of the Securities may be made
without registration under the applicable requirements of the 1933 Act, or (iii)
such Securities are sold, assigned or transferred pursuant to Rule 144, or such
holder provides the Company with reasonable assurance that the Securities can be
sold, assigned or transferred pursuant to Rule 144 or Rule 144A.
(j) VALIDITY; ENFORCEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and shall constitute
the legal, valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with its terms, except as such enforceability may be limited
by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(k) NO CONFLICTS. The execution, delivery and performance by such Buyer
of this Agreement and the consummation by such Buyer of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of such Buyer or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to such Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
(l) RESIDENCY. Such Buyer is a resident of that jurisdiction specified
below its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
As an inducement to the Buyers to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company represents and
warrants to each of the Buyers that each and all of the following
representations and warranties (as modified by the disclosure schedules
delivered to the Buyers contemporaneously with the execution and delivery of
this Agreement (the "SCHEDULES")) are true and correct as of the date of this
Agreement. The
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Schedules shall be arranged by the Company in paragraphs corresponding to the
sections and subsections contained in this Article 3.
(a) ORGANIZATION AND QUALIFICATION. The Company and its "SUBSIDIARIES"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest) are entities duly organized and validly existing in good standing
under the laws of the jurisdiction in which they are formed, and have the
requisite power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign entity to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means any material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as whole, or on the
transactions contemplated hereby and the other Transaction Documents, or by the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents. The Company has no Subsidiaries,
except as set forth on SCHEDULE 3(a).
(b) AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the requisite
power and authority to enter into and perform its obligations under this
Agreement, the Notes, the Warrants, and the Irrevocable Transfer Agent
Instructions (as defined in Section 5(b)), and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "TRANSACTION DOCUMENTS") and
to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery 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 of the Notes, the reservation for
issuance and the issuance of the Conversion Shares issuable upon conversion of
the Notes, the issuance of the Warrants and the reservation for issuance and
issuance of the Warrant Shares issuable upon exercise of the Warrants, have been
duly authorized by the Company's Board of Directors and (other than the filing
with the SEC of a Form D and one or more Registration Statements in accordance
with the requirements of the registration rights provisions in this Agreement
and other than filings with "Blue Sky" authorities as required therein) no
further filing, consent, or authorization is required by the Company, its Board
of Directors or its stockholders. This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(c) ISSUANCE OF SECURITIES. The issuance of the Notes and the Warrants
are duly authorized and are free from all taxes, liens and charges with respect
to the issue thereof. As of the Closing, a number of shares of Common Stock
shall have been duly authorized and reserved for issuance which equals at least
130% of the sum of the maximum number of shares of
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Common Stock issuable (A) upon conversion of the Notes (assuming for purposes
hereof, that the Notes are convertible at the Conversion Price and without
taking into account any limitations on the conversion of the Notes set forth in
the Notes) and (B) upon exercise of the Warrants (without taking into account
any limitations on the exercise of the Warrants set forth in the Warrants). Upon
conversion in accordance with the Notes or exercise in accordance with the
Warrants, as the case may be, the Conversion Shares and the Warrant Shares,
respectively, will be validly issued, fully paid and nonassessable and free from
all preemptive or similar rights, taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. The offer and issuance by the Company of the Securities
is exempt from registration under the 1933 Act.
(d) NO CONFLICTS. The execution, delivery and performance 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 of the Notes, the Warrants, and the reservation for issuance of the
Conversion Shares and the Warrant Shares) will not (i) result in a violation of
the Articles of Incorporation or Bylaws (each as defined in Section 3(r)) of the
Company or any of its Subsidiaries or the terms of any capital stock of the
Company or any of its Subsidiaries; (ii) other than as set forth on SCHEDULE
3(d), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party; or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and the rules and regulations of the principal market, exchange or
quotation system (including the OTC Bulletin Board and the Pink sheets) upon
which the shares of the Company trade (the "PRINCIPAL MARKET") 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.
(e) CONSENTS. Other than as set forth on SCHEDULE 3(e), the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof (other
than (x) the filing with the SEC of a Form D or one or more Registration
Statements in accordance with the registration provisions of this Agreement and
(y) filings with "Blue Sky" authorities as required thereby. 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 Closing Date, and the Company and its Subsidiaries are unaware
of any facts or circumstances which might prevent the Company from obtaining or
effecting any of the registration, application or filings pursuant to the
preceding sentence. The Company is not in violation of the listing requirements
of the Principal Market and has no knowledge of any facts which would reasonably
lead to delisting or suspension of the Common Stock in the foreseeable future.
The Company is not in violation of the listing requirements of the Principal
Market and has no knowledge of any facts which would reasonably lead to
delisting or suspension of the Common Stock in the foreseeable future.
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(f) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES. The Company
acknowledges and agrees that each Buyer or any Person acting as an affiliate of
such Buyer, is acting solely in the capacity of an arm's length purchaser with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby and that no Buyer is: (i) an officer or director of the Company,
(ii) acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further represents to each Buyer
that the Company's decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.
(g) NO GENERAL SOLICITATION; PLACEMENT AGENT'S FEES. Neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim. The Company has not engaged the services of a placement
agent or other financial advisor in connection with the sale of the Securities.
(h) NO INTEGRATED OFFERING. Assuming the accuracy of the Buyer's
representations and warranties set forth in Article 2, neither the Company, its
Subsidiaries, any of their affiliates or any Person acting on 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 cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of: (i) the 1933 Act which would require the registration of any
such securities under the 1933 Act; or (ii) any applicable shareholder approval
provision of any Eligible Market on which any of the securities of the Company
are listed.
(i) DILUTIVE EFFECT. The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Notes, and the
number of Warrant Shares issuable upon exercise of the Warrants, will increase
in certain circumstances. The Company further acknowledges that its obligation
to issue Conversion Shares upon conversion of the Notes in accordance with this
Agreement and the Notes and its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement and the Warrants is,
in each case, absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.
(j) APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT. The Company
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation of the Company or
the laws of the jurisdiction of its formation which is or could become
applicable to any Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities and any Buyer's ownership of the Securities.
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The Company has not adopted a stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a change in
control of the Company.
(k) SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed in SCHEDULE
3(k), during the two (2) years prior to the date hereof, the Company (which, for
the avoidance of doubt, includes only PNG Ventures, Inc., a Nevada corporation,
and not any Subsidiary of the Company) has 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 all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC DOCUMENTS"). The Company has delivered to the Buyers or their
respective representatives, true, correct and complete copies of the SEC
Documents not available on the XXXXX system. 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 the light of the circumstances under
which they were made, not misleading, other than as may have been subsequently
restated or amended in an amended or subsequent report. 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
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 exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to each of the Buyers which
is not included in the SEC Documents, including, without limitation, information
referred to in Section 2(f) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.
(l) ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3(l),
since June 30, 2008 (the "Schedule 3(l) Date"), there has been no material
adverse change and no material adverse development in the business, assets,
properties, operations, condition (financial or otherwise), results of
operations or prospects of the Company or its Subsidiaries. Except as disclosed
in SCHEDULE 3(l), since the Schedule 3(l) Date, the Company has not (i) declared
or paid any dividends, (ii) sold any assets outside of its ordinary course of
business, or (iii) had capital expenditures, individually or in the aggregate,
in excess of $100,000. The Company has not taken any steps to seek protection
pursuant to any bankruptcy law nor does the Company have any knowledge or reason
to believe that its creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a
creditor to do so. The Company is not as of the date hereof, and after giving
effect to the transactions contemplated hereby to occur at the Closing, will not
be "Insolvent" (as defined below). For purposes of this
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Section 3(l), "INSOLVENT" means (i) the present fair saleable value of the
Company's assets is less than the amount required to pay the Company's total
Indebtedness (as defined in Section 3(s)), (ii) the Company is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
(m) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES.
Except as set forth on SCHEDULE 3(m), since the Schedule 3(l) Date, no event,
liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to the Company, that has caused or could
cause a Material Adverse Effect.
(n) CONDUCT OF BUSINESS; REGULATORY PERMITS. Neither the Company nor its
Subsidiaries is in violation of any term of or in default under any certificate
of designations of any outstanding series of preferred stock of the Company, its
Articles of Incorporation or Bylaws or their organizational charter or
certificate of incorporation or bylaws, respectively. Other than as set forth on
SCHEDULE 3(n), neither the Company nor any of its Subsidiaries is in violation
of any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or its Subsidiaries, and neither the Company nor any
of its Subsidiaries will conduct its business in violation of any of the
foregoing, except for possible violations which would not, individually or in
the aggregate, have a Material Adverse Effect. Except as set forth on SCHEDULE
3(n), the Company and its Subsidiaries possess all certificates, authorizations
and permits issued by the appropriate regulatory authorities necessary to
conduct their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
(o) 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 of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
(p) XXXXXXXX-XXXXX ACT. The Company is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof.
(q) TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 3(q),
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
ordinary course services as employees,
-10-
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, 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.
(r) EQUITY CAPITALIZATION. As of the date hereof, the authorized, issued
and outstanding capital stock of the Company and shares reserved for issuance is
set forth on SCHEDULE 3(r). All of such shares set forth on SCHEDULE 3(r) have
been, or upon issuance will be, validly issued and are fully paid and
non-assessable. Except as disclosed in SCHEDULE 3(r): (i) none of the Company's
share capital is subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional share capital of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become
bound; (iv) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Company or any of its Subsidiaries; (v) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act ; (vi) there are
no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities; (viii) there are no outstanding securities or
instruments of the Company that contain: (A) anti-dilution or similar provisions
that will be triggered by the issuance of any securities of the Company; or (B)
anti-dilution or similar provisions that could result in a reduction of an
exercise price, conversion price or increase in the number of shares issuable
upon the exercise or conversion of a convertible instrument in the case of the
issuance of any securities by the Company (other than standard anti-dilution
adjustments in the case of a stock dividend, recapitalization, forward or
reverse split or business combination); (ix) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan
or agreement; and (x) the Company and its Subsidiaries have no liabilities or
obligations required to be disclosed in the SEC Documents but not so disclosed
in the SEC Documents, other than those incurred in the ordinary course of the
Company's or its Subsidiaries' respective businesses and which, individually or
in the aggregate, do not or would not have a Material Adverse Effect. SCHEDULE
3(r) contains a schedule of all outstanding registration rights granted by the
Company which are still in effect, as well as true and correct copies of any
agreements containing registration rights granted by the Company. The
Secretary's Certificate in substantially the form attached hereto as Exhibit E
contains true, correct and complete copies of
-11-
the Company's Articles of Incorporation, as amended and as in effect on the date
hereof (the "ARTICLES OF INCORPORATION"), and the Company's Bylaws, as amended
and as in effect on the date hereof (the "BYLAWS").
(s) INDEBTEDNESS AND OTHER CONTRACTS. Except as disclosed in SCHEDULE
3(s), neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness, (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, 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(s) 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, (H) all amounts for which the Company is
responsible to repurchase or redeem any of its existing securities; and (I) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (H) 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.
(t) ABSENCE OF LITIGATION. Except as set forth in SCHEDULE 3(t), there
is not now, nor has there been in the last three years, any action, suit,
proceeding, inquiry or investigation
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before or by any court, public board, government agency (including the SEC),
self-regulatory organization or body pending or, to the knowledge of the
Company, involving, threatened against or affecting the Company, the Common
Stock or, to the best of the Company's knowledge, any of the Company's
Subsidiaries or any of the Company's or its Subsidiaries' officers, directors,
consultants or agents.
(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 been refused any
insurance coverage sought or applied for and 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) EMPLOYEE RELATIONS. Neither Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union.
The Company and its Subsidiaries believe that their relations with their
employees are good. No executive officer of the Company or any of its
Subsidiaries has notified the Company or any such Subsidiary that such officer
intends to leave the Company or any such Subsidiary or otherwise terminate such
officer's employment with the Company or any such Subsidiary. No executive
officer of the Company or any of its Subsidiaries, to the knowledge of the
Company or any such Subsidiary, is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any such
Subsidiary to any liability with respect to any of the foregoing matters. The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
(w) TITLE. 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 (other than any lien, encumbrance or defect disclosed under Section 3(s)
of this Agreement or Schedule 3(s) attached hereto) except such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(x) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service
-13-
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights ("INTELLECTUAL PROPERTY RIGHTS") necessary to
conduct their respective businesses as now conducted. Except as set forth in
SCHEDULE 3(x), none of the Company's Intellectual Property Rights have expired
or terminated, or are expected to expire or terminate, within three (3) years
from the date of this Agreement. The Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of Intellectual Property Rights
of others. There is no claim, action or proceeding being made or brought, or to
the knowledge of the Company, being threatened, against the Company or its
Subsidiaries regarding its Intellectual Property Rights. The Company is unaware
of any facts or circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
(y) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "ENVIRONMENTAL LAWS" means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(z) SUBSIDIARY RIGHTS. Except as set forth in SCHEDULE 3(z), the Company
or one of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital stock of its Subsidiaries as owned by the Company or such
Subsidiary.
(aa) INVESTMENT COMPANY. The Company is not an "investment company," a
company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
(bb) TAX STATUS. The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) 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 (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to
-14-
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.
(cc) INTERNAL ACCOUNTING AND DISCLOSURE CONTROLS. The Company maintains
disclosure controls and procedures (as such term is defined in Rule 13a-15 under
the 0000 Xxx) that are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the 1934
Act is recorded, processed, summarized and reported, within the time periods
specified in the rules and forms of the SEC, including, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files or furnishes under the
1934 Act is accumulated and communicated to the Company's management, including
its principal executive officer or officers and its principal financial officer
or officers, as appropriate, to allow timely decisions regarding required
disclosure.
(dd) OFF BALANCE SHEET ARRANGEMENTS. There is no transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in its 1934 Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(ee) RANKING OF NOTES. Except with respect to the "SENIOR DEBT" (as
defined in the Notes) and as set forth on SCHEDULE (ee), no Indebtedness of the
Company will rank senior to or PARI PASSU with the Notes in right of payment,
whether with respect of payment of principal, interest, damages or upon
liquidation or dissolution or otherwise.
(ff) FORM S-1 ELIGIBILITY. The Company is eligible to register the
Conversion Shares and the Warrant Shares for resale by the Buyers using Form S-1
promulgated under the 1933 Act.
(gg) TRANSFER TAXES. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold to each Buyer
hereunder will be, or will have been, fully paid or provided for by the Company,
and all laws imposing such taxes will be or will have been complied with.
(hh) MANIPULATION OF PRICE. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities (except for customary placement
fees payable in connection with this transaction), or (iii) paid or agreed to
pay to any person any compensation for soliciting another to purchase any other
securities of the Company (except for customary placement fees payable in
connection with this transaction).
(ii) ACKNOWLEDGEMENT REGARDING BUYERS' TRADING ACTIVITY. It is
understood and acknowledged by the Company that (i) none of the Buyers have been
asked to agree, nor has any Buyer agreed, to desist from purchasing or selling,
long and/or short, securities of the Company,
-15-
or "derivative" securities based on securities issued by the Company or to hold
the Securities for any specified term; (ii) any Buyer, and counter parties in
"derivative" transactions to which any such Buyer is a party, directly or
indirectly, presently may have a "short" position in the Common Stock, and (iii)
each Buyer shall not be deemed to have any affiliation with or control over any
arm's length counter-party in any "derivative" transaction. The Company further
understands and acknowledges that (a) one or more Buyers may engage in hedging
and/or trading activities at various times during the period that the Securities
are outstanding, including, without limitation, during the periods that the
value of the Conversion Shares and the Warrant Shares deliverable with respect
to Securities are being determined and (b) such hedging and/or trading
activities, if any, can reduce the value of the existing stockholders' equity
interest in the Company both at and after the time the hedging and/or trading
activities are being conducted. The Company acknowledges that such
aforementioned hedging and/or trading activities do not constitute a breach of
this Agreement, the Notes, the Warrants or any of the documents executed in
connection herewith.
(jj) U.S. REAL PROPERTY HOLDING CORPORATION. The Company is not, nor has
ever been, a U.S. real property holding corporation within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended, and the Company
shall so certify upon Buyer's request.
(kk) NO ADDITIONAL AGREEMENTS. The Company does not have any agreement
or understanding with any Buyer with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.
(ll) BANK HOLDING COMPANY ACT. Neither the Company nor any of its
Subsidiaries or affiliates is subject to the Bank Holding Company Act of 1956,
as amended (the "BHCA") and to regulation by the Board of Governors of the
Federal Reserve System (the "FEDERAL RESERVE"). Neither the Company nor any of
its Subsidiaries or affiliates owns or controls, directly or indirectly, five
percent or more of the outstanding shares of any class of voting securities or
twenty-five percent (25%) or more of the total equity of a bank or any entity
that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.
(mm) 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 or could reasonably be expected to
constitute material, nonpublic information. 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 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
-16-
circumstances under which they are 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 the 1934 Act and the rules and
regulations promulgated thereunder , requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.
4. COVENANTS.
(a) COMMERCIALLY REASONABLE EFFORTS. Each party shall use commercially
reasonable efforts timely to satisfy each of the conditions to be satisfied by
it as provided in Sections 6 and 7 of this Agreement.
(b) FORM D AND BLUE SKY. 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 each 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 in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers 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 the Buyers on or prior to the Closing
Date. The Company shall make all filings and reports relating to the offer and
sale of the Securities required under applicable securities or "Blue Sky" laws
of the states of the United States following the Closing Date.
(c) REPORTING STATUS. Until the date on which all of the Buyers and
their permitted assignees shall have sold all the Common Stock, the Conversion
Shares, and Warrant Shares and none of the Notes or Warrants is outstanding (the
"REPORTING PERIOD"), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would otherwise permit such
termination.
(d) USE OF PROCEEDS. The Company hereby agrees that the proceeds from
the sale of the Securities shall be used solely for the payment of the Prepaid
Interest (as defined in the Note), to fund the Reserve Amount in an amount of $1
million, to pay approximately $580,000 of the principal balance owed by the
Company's under its outstanding Indebtedness to Black Forest International, LLC,
and for general corporate purposes, including general and administrative
expenses, , and not for (i) the repayment of the principal amount under any
other outstanding Indebtedness of the Company or any of its Subsidiaries, (ii)
the redemption or repurchase of any of its or its Subsidiaries' equity
securities, or (iii) the settlement of any claims, actions or proceedings
against the Company or any of its Subsidiaries.
(e) FINANCIAL INFORMATION. The Company agrees to send the following to
each Buyer during the Reporting Period (i) unless filed with the SEC through
XXXXX and available to the public through the XXXXX system, within one "Business
Day" (as defined below), after the filing thereof with the SEC, a copy of all
Annual Reports on Form 10-K, any interim reports or any consolidated balance
sheets, income statements, stockholders' equity statements and/or cash flow
statements for any period other than annual, any Current Reports on Form 8-K and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act,
-17-
(ii) within one day after the release thereof, copies of all press releases
issued by the Company or any of its Subsidiaries, and (iii) copies of any
notices and other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof
to the stockholders. As used herein, "BUSINESS DAY" means any day other than
Saturday, Sunday or other day on which commercial banks in The City of New York
are authorized or required by law to remain closed.
(f) LISTING. The Company shall promptly secure the listing of no less
than 130% of all of the Common Shares, Conversion Shares and Warrant Shares (the
"REGISTRABLE SECURITIES") upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed (subject to
official notice of issuance) and shall maintain such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stocks' authorization for
quotation on the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
(g) FEES. The Company shall reimburse Castlerigg Master Investments Ltd.
("Castlerigg") (a Buyer) or its designee(s) (in addition to any other expense
amounts paid to any Buyer prior to the date of this Agreement) for all
reasonable costs and expenses incurred in connection with the transactions
contemplated by the Transaction Documents (including all reasonable legal fees
and disbursements in connection therewith, documentation and implementation of
the transactions contemplated by the Transaction Documents and due diligence in
connection therewith), which amounts shall be withheld by such Buyer from its
Purchase Price at the Closing. The Company shall be responsible for the payment
of any placement agent's fees, financial advisory fees, or broker's commissions
(other than for Persons engaged by any Buyer) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment.
(h) PLEDGE OF SECURITIES. The Company acknowledges and agrees that the
Securities may be pledged by a Buyer in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, Section 2(h) hereof;
provided that an Investor and its pledge shall be required to comply with the
provisions of Section 2(h) hereof in order to effect a sale, transfer or
assignment of securities to such pledge. The Company hereby agrees to execute
and deliver such documentation as a pledgee of the Securities may reasonably
request in connection with a pledge of the Securities to such pledgee by a
Buyer.
(i) DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION. On or
before 8:00 a.m., New York City time, on the first Business Day following the
date of this Agreement, the Company shall issue a press release and file a
Current Report on Form 8-K describing, among
-18-
other things, the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this Agreement (and all
schedules to this Agreement), the form of Notes and the form of Warrant)
(including all attachments, the "8-K FILING"). Any material non-public
information provided by the Company to any Buyer in connection with this
transaction, shall be included by the Company within the aforementioned Form 8-K
or otherwise make publicly available. Following the date upon which the Buyer
notifies the Company that it shall no longer be in a position to receive and
hold non-public information, the Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide any Buyer with any material, nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing of
the 8-K Filing with the SEC without the express written consent of such Buyer.
If a Buyer has, or believes it has, thereafter received any such material,
nonpublic information regarding the Company or any of its Subsidiaries, it shall
provide the Company with written notice thereof. The Company shall, within two
(2) Trading Days of receipt of such notice, make public disclosure of such
material, nonpublic information. In the event of a breach of the foregoing
covenant by the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, a Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have any
liability to the Company, its Subsidiaries, or any of its or their respective
officers, directors, employees, stockholders or agents for any such disclosure.
Subject to the foregoing, neither the Company, its Subsidiaries nor any Buyer
shall issue any press releases 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 any Buyer, to make any press release
or other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filings and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Without the
prior written consent of any applicable Buyer, neither the Company nor any of
its Subsidiaries or affiliates shall disclose the name of such Buyer in any
filing, announcement, release or otherwise.
(j) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS So long as any Notes
are outstanding, the Company shall not, directly or indirectly, redeem, or
declare or pay any cash dividend or distribution on, the Common Stock without
the prior express written consent of the holders of Notes representing not less
than a majority of the aggregate principal amount of the then outstanding Notes.
(k) ADDITIONAL NOTES; VARIABLE SECURITIES; DILUTIVE ISSUANCES. For so
long as any Notes or Warrants remain outstanding, the Company shall not, in any
manner, issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary after
issuance with the market price of the Common Stock, including by way of one or
more reset(s) to any fixed price, unless the conversion, exchange or exercise
price of any such security cannot be less than the then applicable Conversion
Price (as defined in the Notes) with respect to
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the Common Stock into which any Note is convertible or the then applicable
Exercise Price (as defined in the Warrants) with respect to the Common Stock
into which any Warrant is exercisable. For purposes of clarification, this does
not prohibit the issuance of securities with customary "weighted average" or
"full ratchet" anti-dilution adjustments which adjust a fixed conversion or
exercise price of securities sold by the Company in the future. For so long as
any Notes or Warrants remain outstanding, the Company shall not, in any manner,
enter into or effect any Dilutive Issuance (as defined in the Notes) if the
effect of such Dilutive Issuance is to cause the Company to be required to issue
upon conversion of any Notes or exercise of any Warrant any shares of Common
Stock in excess of that number of shares of Common Stock which the Company may
issue upon conversion of the Notes and exercise of the Warrants without
breaching the Company's obligations under the rules or regulations of the
Principal Market or any applicable "Eligible Market" on which the Company's
Common Stock is then traded or on which the Company has applied for listing.
"ELIGIBLE MARKET" means any of the of The New York Stock Exchange, the American
Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market, The
NASDAQ Capital Market or OTC Bulletin Board or the Pink Sheets.
(l) CORPORATE EXISTENCE. So long as any Buyer beneficially owns any
Securities, the Company shall not be party to any Fundamental Transaction (as
defined in the Notes) unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the
Warrants.
(m) INCURRENCE OF LIENS. So long as any Notes are outstanding, the
Company shall not, directly or indirectly, allow or suffer to exist any Lien,
other than Permitted Liens (as defined in the Notes), upon any property or
assets (including accounts and contract rights) owned by the Company.
(n) RESERVATION OF SHARES. So long as any Buyer owns any Notes or
Warrants, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than 130% of the
sum of the number of shares of Common Stock issuable (i) upon conversion of the
Notes, and (ii) upon exercise of the Warrants then outstanding (without taking
into account any limitations on the conversion of the Notes or exercise of the
Warrants set forth in the Notes and Warrants, respectively).
(o) CONDUCT OF BUSINESS. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(p) ADDITIONAL ISSUANCES OF SECURITIES.
(i) For purposes of this Section 4(p), the following definitions
shall apply.
(1) "CONVERTIBLE SECURITIES" means any stock or
securities (other than Options) convertible into or exercisable or
exchangeable for shares of Common Stock.
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(2) "OPTIONS" means any rights, warrants or options to
subscribe for or purchase shares of Common Stock or Convertible Securities.
(3) "COMMON STOCK EQUIVALENTS" means, collectively,
Options and Convertible Securities.
(4) "SUBSEQUENT PLACEMENT" means, the offer, sale,
grant any option to purchase, or otherwise dispose of (or announcement of
any offer, sale, grant or any option to purchase or other disposition of)
any of the Company's or its Subsidiaries' debt, equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for shares
of Common Stock or Common Stock Equivalents.
(ii) From the date hereof until the later of (i) the second
anniversary of the Closing Date; or (ii) the end of the period during which at
least twenty (20%) percent of the Notes remain outstanding, the Company will
not, directly or indirectly, effect any Subsequent Placement unless the Company
shall have first complied with this Section 4(p)(ii).
(1) The Company shall deliver to each Buyer an
irrevocable written notice (the "OFFER NOTICE") of any proposed or intended
issuance or sale or exchange (the "OFFER") of the securities being offered
(the "OFFERED SECURITIES") in a Subsequent Placement, which Offer Notice
shall (w) identify and describe the Offered Securities, (x) describe the
price and other terms upon which they are to be issued, sold or exchanged,
and the number or amount of the Offered Securities to be issued, sold or
exchanged, (y) identify the persons or entities (if known) to which or with
which the Offered Securities are to be offered, issued, sold or exchanged
and (z) offer to issue and sell to or exchange with such Buyers all of the
Offered Securities, allocated among such Buyers at identical terms and
prices as provided in the Offer Notice (a) based on such Buyer's pro rata
portion of the aggregate principal amount of Notes purchased hereunder (the
"BASIC AMOUNT"), and (b) with respect to each Buyer that elects to purchase
its Basic Amount, any additional portion of the Offered Securities
attributable to the Basic Amounts of other Buyers as such Buyer shall
indicate it will purchase or acquire should the other Buyers subscribe for
less than their Basic Amounts (the "UNDERSUBSCRIPTION AMOUNT"), or with a
statement from the Buyers that it will waive any rights to subscribe for
any portion of the Undersubscription Amount, which process shall be
repeated until the Buyers shall have an opportunity to subscribe for or
waive the right to receive any remaining Undersubscription Amount.
(2) To accept an Offer, in whole or in part, such Buyer
must deliver a written notice to the Company prior to the end of the tenth
(10th) Business Day after such Buyer's receipt of the Offer Notice (the
"OFFER PERIOD"), setting forth the portion of such Buyer's Basic Amount
that such Buyer elects to purchase and, if such Buyer shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any,
that such Buyer elects to purchase (in either case, the "NOTICE OF
ACCEPTANCE"). If the Basic Amounts subscribed for by all Buyers are less
than the total of all of the Basic Amounts, then each Buyer who has set
forth an Undersubscription Amount in its Notice
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of Acceptance shall be entitled to purchase, in addition to the Basic
Amounts subscribed for, the Undersubscription Amount it has subscribed for;
provided, however, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all the Basic Amounts and the
Basic Amounts subscribed for (the "AVAILABLE UNDERSUBSCRIPTION AMOUNT"),
each Buyer who has subscribed for any Undersubscription Amount shall be
entitled to purchase only that portion of the Available Undersubscription
Amount as the Basic Amount of such Buyer bears to the total Basic Amounts
of all Buyers that have subscribed for Undersubscription Amounts, subject
to rounding by the Company to the extent its deems reasonably necessary.
Notwithstanding anything to the contrary contained herein, if the Company
desires to modify or amend the terms and conditions of the Offer prior to
the expiration of the Offer Period, the Company may deliver to the Buyers a
new Offer Notice (which period shall be deemed to have replaced and
restated the prior Offer Notice) and the Offer Period shall expire on the
tenth (10th) Business Day after such Buyer's receipt of such new Offer
Notice.
(3) The Company shall have five (5) Business Days from
the later of: (i) the expiration of the Offer Period above; or (ii) upon
the written consent of the Buyer, such longer period for which the Offered
Securities are being offered to third parties as part of the Subsequent
Placement, to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by
the Buyers (the "REFUSED SECURITIES"), but only to the offerees described
in the Offer Notice (if so described therein) and only upon terms and
conditions (including, without limitation, unit prices and interest rates)
that are not more favorable to the acquiring person or persons or less
favorable to the Company than those set forth in the Offer Notice and, if
the Company's Securities are traded on a Principal Market, to publicly
announce (a) the execution of such Subsequent Placement Agreement, and (b)
either (x) the consummation of the transactions contemplated by such
Subsequent Placement Agreement or (y) the termination of such Subsequent
Placement Agreement, which shall be filed with the SEC on a Current Report
on Form 8-K with such Subsequent Placement Agreement and any documents
contemplated therein filed as exhibits thereto.
(4) In the event the Company shall propose to sell less
than all the Refused Securities (any such sale to be in the manner and on
the terms specified in Section 4(p)(ii)(3) above), then each Buyer may, at
its sole option and in its sole discretion, reduce the number or amount of
the Offered Securities specified in its Notice of Acceptance to an amount
that shall be not less than the number or amount of the Offered Securities
that such Buyer elected to purchase pursuant to Section 4(p)(ii)(2) above
multiplied by a fraction, (i) the numerator of which shall be the number or
amount of Offered Securities the Company actually proposes to issue, sell
or exchange (including Offered Securities to be issued or sold to Buyers
pursuant to Section 4(p)(ii)(3) above prior to such reduction) and (ii) the
denominator of which shall be the original amount of the Offered
Securities. In the event that any Buyer so elects to reduce the number or
amount of Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced number or
amount of the Offered Securities unless and until such securities have
again been offered to the Buyers in accordance with Section 4(p)(ii)(1)
above.
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(5) Upon the closing of the issuance, sale or exchange
of all or less than all of the Refused Securities, the Buyers shall acquire
from the Company, and the Company shall issue to the Buyers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4(p)(ii)(3) above if the Buyers have so
elected, upon the terms and conditions specified in the Offer. The purchase
by the Buyers of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Buyers of a
purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Buyers and their respective
counsel.
(6) Any Offered Securities not acquired by the Buyers
or other persons in accordance with Section 4(p)(ii)(3) above may not be
issued, sold or exchanged until they are again offered to the Buyers under
the procedures specified in this Agreement.
(7) The Company and the Buyers agree that if any Buyer
elects to participate in the Offer, neither the agreement regarding the
Subsequent Placement (the "SUBSEQUENT PLACEMENT AGREEMENT") with respect to
such Offer nor any other transaction documents related thereto
(collectively, the "SUBSEQUENT PLACEMENT DOCUMENTS") shall include any term
or provisions whereby any Buyer shall be required to agree to any
restrictions in trading as to any securities of the Company owned by such
Buyer prior to such Subsequent Placement.
(8) Notwithstanding anything to the contrary in this
Section 4(p) and unless otherwise agreed to by the Buyers, the Company
shall either confirm in writing to the Buyers that the transaction with
respect to the Subsequent Placement has been abandoned or shall publicly
disclose on or before the closing thereof its intention to issue the
Offered Securities, in either case in such a manner such that the Buyers
will not be in possession of material non-public information, by the
fifteenth (15th) Business Day following delivery of the Offer Notice. If by
the fifteenth (15th) Business Day following delivery of the Offer Notice no
public disclosure regarding a transaction with respect to the Offered
Securities has been made, and no notice regarding the abandonment of such
transaction has been received by the Buyers, such transaction shall be
deemed to have been abandoned and the Buyers shall not be deemed to be in
possession of any material, non-public information with respect to the
Company. Should the Company decide to pursue such transaction with respect
to the Offered Securities, the Company shall provide each Buyer with
another Offer Notice and each Buyer will again have the right of
participation set forth in this Section 4(p)(ii). The Company shall not be
permitted to deliver more than one such Offer Notice to the Buyers in any
60 day period.
(iii) The restrictions contained in subsection (ii) of this
Section 4(p) shall not apply in connection with the issuance of any Excluded
Securities (as defined in the Notes).
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(q) PIGGY-BACK REGISTRATIONS.
(i) If at any time the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities (other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee or
director benefit plans), then the Company shall send to each Buyer written
notice of such determination and, if within twenty days after receipt of such
notice, any such Holder shall so request in writing, the Company shall include
in such registration statement 130% of the number of shares of Common Stock that
constitute the "Registrable Securities" (as hereafter defined) as such holder
requests to be registered, subject to customary underwriter cutbacks applicable
to all holders of registration rights on a pro rata basis (along with other
holders of piggyback registration rights with respect to the Company); PROVIDED,
that (A) the Company shall not be required to register any Registrable
Securities pursuant to this Section 4(q) that are (I) eligible for resale under
Rule 144 without the requirement to be in compliance with Rule 144(c)(1) and
otherwise without restriction or limitation pursuant to Rule 144, or (II) that
are the subject of a then effective registration statement and (B) if at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to such Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities pursuant to this
Section 4(q) in connection with such registration (but not from its obligation
to pay expenses in accordance with Section 4(q) hereof), and (ii) in the case of
a determination to delay registering, shall be permitted to delay registering
any Registrable Securities being registered pursuant to this Section 4(q) for
the same period as the delay in registering such other securities. For the
purposes of this Section 4(q), the term "REGISTRABLE SECURITIES" shall mean (i)
all shares of Common Stock issued or issuable upon conversion of the Notes; and
(ii) all shares of Common Stock issued or issuable upon exercise of the
Warrants; including any shares of Common Stock that may be issued or issuable as
a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, without regard to any limitations on conversion
and/or redemption of the Notes or exercise of the Warrants..
(ii) REGISTRATION EXPENSES. All fees and expenses incident to the
Company's performance of or compliance with its obligations under this Agreement
(excluding any underwriting discounts and selling commissions, but including all
legal fees and expenses of legal counsel for any Buyer) shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with any Trading Market on which the Common Stock is then
listed for trading, (B) in compliance with applicable state securities or Blue
Sky laws (including, without limitation, fees and disbursements of counsel for
the Company in connection with Blue Sky qualifications or exemptions of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as requested by
the Holders) and
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(C) with respect to any filing that may be required to be made by any broker
through which a Holder intends to make sales of Registrable Securities with the
Corporate Financing Department of Financial Industry Regulatory Authority, Inc.
("FINRA") pursuant to FINRA Rule 2710(b)(10)(A)(i), so long as the broker is
receiving no more than a customary brokerage commission in connection with such
sale, (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is reasonably requested by the Holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and the Buyer, (v) Securities Act liability insurance,
if the Company so desires such insurance, and (vi) fees and expenses of all
other Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Section. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Section (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit and the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder. In no event shall
the Company be responsible for any broker or similar commissions of any Holder.
(iii) REGISTRATION PROCEDURES. Whenever it is obligated to
register any Registrable Securities pursuant to this Agreement, the Company
shall:
(A) prepare and file with the Commission a Registration Statement
with respect to the Registrable Securities in the manner set forth in Section
4(q) hereof and use its reasonable best efforts to cause such Registration
Statement to become effective as promptly as possible and to remain effective
until the earlier of (i) the sale of all shares of Registrable Securities
covered thereby, (ii) the availability under Rule 144(c)(1) for each Buyer to
immediately, freely resell without restriction all Registrable Securities
covered thereby, or (iii) two (2) years from the date of this Agreement;
(B) permit one legal counsel designated by Buyers to review and
comment upon a Registration Statement at least five (5) Business Days prior to
its filing with the Commission, and all amendments and supplements to all
Registration Statements, and reimburse the Buyers for the cost of such legal
counsel. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or supplement thereto
without the prior approval of such legal counsel, which consent shall not be
unreasonably withheld. The Company shall furnish to such legal counsel, without
charge, (i) copies of any correspondence from the Commission or the staff of the
Commission to the Company or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the
Commission, one copy of any Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference, if requested;
(C) prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary to
keep such Registration Statement effective for the period specified in Section
4(q)(iii)(A) above and to comply with
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the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities covered by such Registration Statement in accordance with
the intended method of disposition set forth in such Registration Statement for
such period;
(D) furnish to each Buyer such number of copies of the
Registration Statement and the prospectus included therein (including each
preliminary prospectus) as such person may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities
covered by such Registration Statement;
(E) use its reasonable best efforts to register or qualify the
Registrable Securities covered by such Registration Statement under the state
securities laws of such jurisdictions as any Buyer shall reasonably request;
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(F) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering;
(G) immediately notify each Buyer at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event as a result of which the prospectus contained in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required or necessary to be
stated therein in order to make the statements contained therein not misleading
in light of the circumstances under which they were made. The Company will use
reasonable efforts to amend or supplement such prospectus in order to cause such
prospectus not to include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made;
(H) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statements as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such Registration Statement;
(I) use its reasonable best efforts to list the Registrable
Securities covered by such Registration Statement on each exchange or automated
quotation system on which similar securities issued by the Company are then
listed (with the listing application being made at the time of the filing of
such Registration Statement or as soon thereafter as is reasonably practicable);
(J) notify each Buyer of any threat by the Commission or state
securities commission to undertake a stop order with respect to sales under the
Registration Statement; and
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(K) cooperate in the timely removal of any restrictive legends
from the shares of Registrable Securities in connection with the resale of such
shares covered by an effective Registration Statement.
(iv) INDEMNIFICATION.
(A) The Company agrees to indemnify, to the extent permitted by
law, each Buyer, such Buyer's respective partners, officers, directors,
underwriters and each Person who controls any Buyer (within the meaning of the
0000 Xxx) against all actual losses, claims, damages, liabilities and expenses
(but not lost profits) caused by (i) any untrue statement of or alleged untrue
statement of material fact contained in the Registration Statement, prospectus
or preliminary prospectus or any amendment or supplement thereto, (ii) any
omission of or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any state securities law in connection with the offering covered
by such registration statement ("VIOLATIONS"); provided, however, that the
indemnity agreement contained in this Section 4(q)(iv) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company, which consent
shall not be unreasonably withheld, nor shall the Company be liable for any
loss, claim, damage, liability or action to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in conformity with
information furnished to the Company by such Buyer, partner, officer, director,
underwriter or controlling person of such Buyer.
(B) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party), and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(C) If the indemnification provided for in this Section 4(q)(iv)
is held by a court of competent jurisdiction to be unavailable to the Buyer with
respect to any losses, claims, damages or liabilities referred to herein, the
Company, in lieu of indemnifying such indemnified party thereunder, shall to the
extent permitted by applicable law contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the
indemnifying
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party on the one hand and of the indemnified party on the other in connection
with the violation(s) that resulted in such loss, claim, damage or liability, as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that in no event
shall the Buyer be responsible for any amounts hereunder, with the exception of
a possible set-off against amounts otherwise due the Buyer as an indemnification
or contribution claim; and in that event, the Buyer's entitlement to
contribution shall not be subject to set-off in any amount to exceed the net
proceeds from the offering received by such Buyer.
(D) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
Company also agrees to make such provisions as are reasonably requested by any
indemnified party for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
(v) PENALTY PROVISIONS. If the Company breaches or otherwise
fails to perform any of its obligations under Section 4(q) above (a
"Registration Breach"), then as partial relief for the damages to any Buyer by
reason of any such Registration Breach (which remedy shall not be exclusive of
any other remedies available at law or in equity), the Company shall pay to each
holder of Registrable Securities an amount in cash equal to two percent (2.0%)
of the aggregate Purchase Price of such Buyer's Registrable Securities as of the
date of such Registration Breach and thereafter an additional amount in cash
equal to two percent (2.0%) of the aggregate Purchase Price of such Buyer's
Registrable Securities for each period of thirty days after the day of a
Registration Breach (pro rated for periods totaling less than thirty days) until
such Registration Breach is cured.
(vi) ASSIGNMENT OF REGISTRATION RIGHTS; ASSUMPTION OF
REGISTRATION RIGHTS.
(A) The registration rights under Section 4(q) of this Agreement
shall be automatically assignable by the Buyer to any transferee of all or any
portion of such Buyer's Registrable Securities if: (i) the Buyer agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment; (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the transferee or assignee is restricted under the 1933 Act or applicable
state securities laws; (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance with
the applicable requirements of this Agreement, if any.
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(B) In conjunction with, and as a condition precedent to the
consummation of any "Fundamental Transaction" (as such term is defined in the
Note), the registration obligations of the Company as identified in this
Agreement, shall be assumed by the acquiring company or the Person that assumes
control of the Company, in manner, form and substance acceptable to the Buyer.
(r) PUBLIC INFORMATION.
(i) If the Common Stock is listed on an Eligible Market other
than the Principal Market (the "NEW PRINCIPAL MARKET") and the issuance of the
Conversion Shares or Warrant Shares as contemplated under the Transaction
Documents would exceed that number of shares of Common Stock which the Company
may issue without breaching the Company's obligations under the rules or
regulations of the New Principal Market, then the Company shall obtain the
approval of its stockholders as required by the applicable rules of the New
Principal Market for issuances of the Conversion Shares and Warrant Shares in
excess of such amount. At such time, the Company shall provide each stockholder
entitled to vote at a special or annual meeting of stockholders of the Company
(the "STOCKHOLDER MEETING"), which shall be promptly called and held not later
than 75 days after the earlier of (i) the New Principal Market indication of and
(ii) the Company becoming aware of, any limitation imposed by the New Principal
Market on the issuance of Conversion Shares, Warrant Shares or Common Shares
(the "STOCKHOLDER MEETING DEADLINE"), a proxy statement, substantially in the
form which has been previously prepared by counsel to the Company and reviewed
by the Buyers and counsel to the Buyers, at the expense of the Company,
soliciting each such stockholder's affirmative vote at the Stockholder Meeting
for approval of resolutions providing for the Company's issuance of all of the
Securities as described in the Transaction Documents in accordance with
applicable law and the rules and regulations of the New Principal Market and
such affirmative approval being referred to herein as the "STOCKHOLDER
APPROVAL"), and the Company shall use its reasonable best efforts to (i) solicit
its stockholders' approval of such resolutions and to (ii) cause the Board of
Directors of the Company to recommend to the stockholders that they approve such
resolutions. The Company shall be obligated to use its reasonable best efforts
to obtain the Stockholder Approval by the Stockholder Meeting Deadline. If,
despite the Company's reasonable best efforts the Stockholder Approval is not
obtained on or prior to the Stockholder Meeting Deadline, the Company shall
cause an additional Stockholder Meeting to be held every six (6) months
thereafter until such Stockholder Approval is obtained or the Notes and the
Warrants are no longer outstanding.
(s) CLOSING DOCUMENTS. On or prior to fourteen (14) calendar days after
the Closing Date, the Company agrees to deliver, or cause to be delivered, to
each Buyer and Fox Rothschild LLP executed copies of the Transaction Documents,
Securities and any other document required to be delivered to any party pursuant
to Section 7 hereof.
(t) INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities to the Buyer in a manner that would require the registration
under the 1933 Act of the sale of the Securities to the Buyer or that would be
integrated with the offer or sale of the Securities to the Buyers for purposes
of the rules and regulations of any Eligible Market on which any of the
securities of the Company are listed
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or designated such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before
the closing of such subsequent transaction.
(u) INVESTORS' RIGHTS. At the Closing, the Company shall appoint to its
Board of Directors two (2) individuals nominated by the Buyer(s). At the
Closing, the Company shall deliver to the Buyer(s) any and all documents and
instruments, effective as of the Closing, which may be necessary to effect the
provisions of this Section 4(u) including, without limitation, amended and
restated Articles of Incorporation and/or By Laws of the Company consistent with
the foregoing.
(v) STATE QUALIFICATIONS. Within no more that ten (10) Business Days
after Closing, the Company shall deliver to such Buyer a certificate evidencing
the Company's qualification as a foreign corporation and good standing issued by
the Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts business.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) REGISTER. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to each holder of Securities), a register for the Notes and the Warrants
in which the Company shall record the name and address of the Person in whose
name the Notes and the Warrants have been issued (including the name and address
of each transferee), the principal amount of Notes held by such Person, the
number of Conversion Shares issuable upon conversion of the Notes and Warrant
Shares issuable upon exercise of the Warrants held by such Person. The Company
shall keep the register open and available at all times during business hours
for inspection of any Buyer or its legal representatives.
(b) TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its then current transfer agent, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at The Depository Trust Company ("DTC"), provided that the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer Program and the
Common Stock issuable upon conversion of the Note and/or exercise of the
Warrants, whichever is applicable, is eligible for public resale under the 1933
Act, registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon conversion of the Notes or exercise of
the Warrants in the form of EXHIBIT C attached hereto (the "IRREVOCABLE TRANSFER
AGENT INSTRUCTIONS"). The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and
stop transfer instructions to give effect to Section 2(g) hereof, will be given
by the Company to its transfer agent with respect to the Securities, and that
the Securities shall otherwise be freely transferable on the books and records
of the Company, as applicable, and to the extent provided in this Agreement and
the other Transaction Documents. If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Buyer to effect such
sale, transfer or assignment. In the event that such sale, assignment or
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transfer involves Conversion Shares or Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or pursuant to Rule
144, the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that a Buyer shall be entitled,
in addition to all other available remedies, to seek an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Notes and
the related Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(ii) Such Buyer and each other Buyer shall have delivered to the
Company the Purchase Price for the Notes and the related WARRANTS being
purchased by such Buyer at the Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such 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 such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Notes and the
related Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:
(i) The Company shall have executed and delivered to such Buyer
(A) each of the Transaction Documents and (B) the Notes (in such denominations
as such Buyer shall have requested prior to the Closing) and the related
Warrants (in such denominations as such Buyer shall have requested prior to the
Closing) being purchased by such Buyer at the Closing pursuant to this
Agreement;
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(ii) Such Buyer shall have received the opinion of Xxxxxxx Xxxx
LLP, the Company's outside counsel, dated as of the Closing Date, in
substantially the form of EXHIBIT D attached hereto;
(iii) [INTENTIONALLY OMITTED];
(iv) The Company and the Fourth Third, LLC shall have entered
into an amendment to the Fourth Third Credit Agreement with the Company, to
establish, maintain and administer the Reserve Amount in a manner reasonably
acceptable to Buyer, and in the form attached hereto as Exhibit H;
(v) The Company shall have delivered to such Buyer a copy of the
Irrevocable Transfer Agent Instructions, in the form of EXHIBIT C attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(vi) The Company shall have delivered to such Buyer a letter from
the Company's transfer agent certifying the number of shares of Common Stock
outstanding as of a date within five days of the Closing Date.
(vii) The Common Stock (I) shall be designated for quotation or
listed on the Principal Market and (II) shall not have been suspended, as of the
Closing Date, by the SEC or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have been
threatened, as of the Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market, if applicable;
(viii) The Company shall have delivered to such Buyer a
certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in such entity's jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction, as of a date
within ten days of the Closing Date;
(ix) Intentionally Omitted.;
(x) The Company shall have delivered to such Buyer a certified
copy of the Articles of Incorporation as certified by the Secretary of State of
the State of Nevada reasonably proximate to the Closing Date;
(xi) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted
by the Company's Board of Directors in a form reasonably acceptable to such
Buyer, (ii) the Articles of Incorporation and (iii) the Bylaws, each as in
effect at the Closing, in the form attached hereto as EXHIBIT E;
(xii) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all respects with the covenants, agreements and
-32-
conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the Closing Date. Such Buyer shall
have received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer in the form attached
hereto as EXHIBIT F;
(xiii) The Company shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities;
(xiv) The Buyers shall have completed a satisfactory due
diligence review, in their sole and complete discretion, of among others, the
Company's assets, financial condition, results of operations, management,
operations, finances and prospects;
(xv) Within six (6) Business Days prior to the Closing, the
Company shall have delivered or caused to be delivered to each Buyer (A)
certified 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 and the results of searches for any tax lien and judgment
lien filed against such Person or its property, which results, except as
otherwise agreed to in writing by the Buyers shall not show any such Liens
except Permitted Liens;
(xvi) The Company shall have appointed to its Board of Directors
upon the Closing two individuals nominated by the Buyer(s); and
(xvii) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.
8. TERMINATION. In the event that the Closing shall not have occurred with
respect to a Buyer on or before five (5) business days from the date hereof due
to the Company's or such Buyer's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the non-breaching party's failure to waive such
unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
PROVIDED, HOWEVER, this if this Agreement is terminated pursuant to this Section
8, the Company shall remain obligated to reimburse the non-breaching Buyers for
the expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, County of New York, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit,
-33-
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) COUNTERPARTS. This Agreement may be executed in two or more
identical 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; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(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 is prohibited by
law or otherwise determined to be invalid or unenforceable by a court of
competent jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the broadest extent
that it would be valid and enforceable, and the invalidity or unenforceability
of such provision shall not affect the validity of the remaining provisions of
this Agreement so long as this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
Transaction Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement, the
other Transaction Documents and the instruments referenced herein and therein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable hereunder, and any amendment to this
Agreement made in conformity with the provisions of this Section 9(e) shall be
binding on
-34-
all Buyers and holders of Securities, as applicable. No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the applicable Securities then
outstanding. 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
Documents unless the same consideration also is offered to all of the parties to
the Transaction Documents, holders of Notes or holders of the Warrants, as the
case may be. The Company has not, directly or indirectly, made any agreements
with any Buyers relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the Transaction
Documents. Without limiting the foregoing, the Company confirms that, except as
set forth in this Agreement, no Buyer has made any commitment or promise or has
any other obligation to provide any financing to the Company or otherwise.
(f) NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company,
PNG Ventures, Inc.
0000 Xxxx Xxxxxx; Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Attention: Xxxxx Xxxxxx, CEO
With a copy (for informational purposes only) to:
Xxxxxxx Xxxx LLP
0000 Xxxxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxx Xxxx, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,
ith a copy (for informational purposes only) to:
Fox Rothschild LLP
000 Xxxx Xxxxxx, xxxxx 0000
Xxx Xxxx, XX 00000
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Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Warrants. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable hereunder, including by way of a
Fundamental Transaction (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the
Warrants). A Buyer may assign some or all of its rights hereunder in connection
with transfer of any of its Securities without the consent of the Company, in
which event such assignee shall be deemed to be a Buyer hereunder with respect
to such assigned rights.
(h) NO 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.
(i) SURVIVAL. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
9 shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) 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
any 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.
(k) INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, including the indemnification provisions under Section 4(q), the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of the Securities and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the
foregoing Persons' agents or other representatives (including, without
limitation, those retained in
-36-
connection with the transactions contemplated by this Agreement) (collectively,
the "INDEMNITEES") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "INDEMNIFIED
LIABILITIES"), incurred by any Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, (iii) any disclosure made by such Buyer pursuant to Section
4(i), or (iv) the status of such Buyer or holder of the Securities as an
investor in the Company pursuant to the transactions contemplated by the
Transaction Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The indemnification
provided in this section 9(k) shall be in addition to, and not in lieu of, the
indemnification provided for in Section 4(q) of this Agreement.
(l) 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.
(m) REMEDIES. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.
(n) PAYMENT SET ASIDE. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other
-37-
Person under any law (including, without limitation, any bankruptcy law,
foreign, state or federal law, common law or equitable cause of action), then to
the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
(o) INDIVIDUAL BUYER. Notwithstanding anything in this agreement to the
contrary, or any references to "Buyers" herein, the Buyer whose name appears on
the signature page hereof acknowledges and the Company confirms that such Buyer
is the only Buyer party to the transactions contemplated by this Agreement.
[SIGNATURE PAGE FOLLOWS]
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EXECUTION PAGE - SPA
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
COMPANY:
PNG VENTURES, INC.
By: /s/ Xxxxx Xxxxxx
------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
EXECUTION PAGE - SPA
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
BUYER:
CASTLERIGG PNG INVESTMENTS LLC
BY: CASTLERIGG MASTER INVESTMENTS LTD., ITS
SOLE MEMBER
BY: XXXXXXX ASSET MANAGEMENT CORP., ITS
INVESTMENT MANAGER
By: /s/ Xxxxxxx Xxxxx
------------------------------
Name: Xxxxxxx Xxxxx
Title: Senior Managing Director
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5)
AGGREGATE
PRINCIPAL AGGREGATE NUMBER LEGAL REPRESENTATIVE'S
ADDRESS AND FACSIMILE AMOUNT OF ADDRESS AND FACSIMILE NUMBER
BUYER NUMBER OF NOTES WARRANTS
-------------------------------------------------------------------------------------------------------------------------
CASTLERIGG PNG c/o Sandell Asset
INVESTMENTS LLC Management $3,188,235 797,059 Fox Rothschild LLP
00 Xxxx 00xx Xx 100 Park Avenue, Suite 0000
00xx Xxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxx Xxxx, XX 00000 Attention: Xxxxxxx Xxxxx
Fax: (000) 000-0000 Facsimile: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (215( 000-0000
Attn: Xxxxxxx Xxxxxxx/Cem
Hacioglu
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Total principal Total Warrants to be
amount of issued: 797,059
Notes:
$3,188,235
EXHIBITS
Exhibit A Form of Notes
Exhibit B Form of Warrants
Exhibit C Irrevocable Transfer Agent Instructions
Exhibit D Form of Company Opinion of Counsel
Exhibit E Form of Secretary's Certificate
Exhibit F Form of Officer's Certificate
Exhibit G Intentionally Omitted
Exhibit H Amendment to Fourth Third Credit Agreement
SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(d) No Conflicts
Schedule 3(e) Consents
Schedule 3(g) No General Solicitation; Placement Agent's Fees
Schedule 3(k) SEC Documents; Financial Statements
Schedule 3(l) Absence of Certain Changes
Schedule 3(m) No Undisclosed Events
Schedule 3(n) Conduct of Business; Regulatory Permits
Schedule 3(q) Transactions with Affiliates
Schedule 3(r) Equity Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(t) Absence of Litigation
Schedule 3(x) Intellectual Property Rights
Schedule 3(z) Subsidiary Rights
Schedule 3(ee) Ranking of Notes
