SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of March
20, 2007, by and among LOCATEPLUS HOLDINGS CORPORATION, a Delaware corporation
(the "Company"), and the Buyers listed on Schedule I attached hereto
(individually, a "Buyer" or collectively "Buyers").
WITNESSETH
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act");
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Buyer(s), as provided
herein, and the Buyer(s) shall purchase (i) up to Six Million Dollars
($6,000,000) of secured convertible debentures in the form attached hereto as
"Exhibit A" (the "Convertible Debentures"), which shall be convertible into
shares of the Company's common stock, par value $0.01 (the "Common Stock") (as
converted, the "Conversion Shares") in the respective amounts set in the column
labeled "Subscription Amount" set forth opposite each Buyer(s) name on Schedule
I, and (ii) warrants substantially in the form attached hereto as "Exhibit B"
(the "Warrants"), to acquire up to that number of additional shares of Common
Stock set forth opposite such Buyer's name in the Warrant table of Schedule I
(as exercised, the "Warrant Shares") of which Three Million Dollars ($3,000,000)
shall be funded within three (3) business day following the date hereof (the
"First Closing"), Two Million Dollars ($2,000,000) shall be funded on the date
the registration statement (the "Registration Statement") is filed, pursuant to
the Registration Rights Agreement dated the date hereof, with the SEC (the
"Second Closing"), and One Million Dollars ($1,000,000) shall be funded within
three (3) business days after the date the Registration Statement is declared
effective by the SEC (the "Third Closing") (individually referred to as a
"Closing" collectively referred to as the "Closings"), for a total purchase
price of up to Six Million Dollars ($6,000,000), (the "Purchase Price");
WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") pursuant to which the Company has agreed
to provide certain registration rights under the Securities Act and the rules
and regulations promulgated there under, and applicable state securities laws;
WHEREAS, the Convertible Debentures are secured by a security interest in all of
the assets of the Company and of each of the Company's subsidiaries as evidenced
by the security agreement of even date herewith (the "Security Document");
WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering Irrevocable Transfer Agent
Instructions (the "Irrevocable Transfer Agent Instructions"); and
WHEREAS, the Convertible Debentures, the Conversion Shares, the Warrants, and
the Warrants Shares collectively are referred to herein as the "Securities").
NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Buyer(s) hereby agree as
follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase of Convertible Debentures. Subject to the satisfaction (or
waiver) of the terms and conditions of this Agreement, each Buyer agrees,
severally and not jointly, to purchase at each Closing and the Company agrees to
sell and issue to each Buyer, severally and not jointly, at each Closing,
Convertible Debentures in amounts corresponding with the Subscription Amount set
forth opposite each Buyer's name on Schedule I hereto and the Warrants to
acquire up that number of Warrant Shares as set forth opposite such Buyer's name
in Warrant table on Schedule I .
(b) Closing Dates. The First Closing of the purchase and sale of the
Convertible Debentures and Warrants shall take place at 10:00 a.m. Eastern
Standard Time on the third (3rd) business day following the date hereof, subject
to notification of satisfaction of the conditions to the First Closing set forth
herein and in Sections 6 and 7 below (or such later date as is mutually agreed
to by the Company and the Buyer(s)) (the "First Closing Date"), the Second
Closing of the purchase and sale of the Convertible Debentures shall take place
at 4:00 p.m. Eastern Standard Time on the date the Registration Statement is
filed with the SEC, subject to notification of satisfaction of the conditions to
the Second Closing set forth herein and in Sections 6 and 7 below (or such later
date as is mutually agreed to by the Company and the Buyer(s)) (the "Second
Closing Date"), and the Third Closing of the purchase and sale of the
Convertible Debentures shall take place at 10:00 a.m. Eastern Standard Time on
the third (3rd) business day immediately following the date the Registration
Statement is declared effective by the SEC, subject to notification of
satisfaction of the conditions to the Third Closing set forth herein and in
Sections 6 and 7 below (or such earlier date as is mutually agreed to by the
Company and the Buyer(s)) (the "Third Closing Date") (collectively referred to a
the "Closing Dates"). The Closings shall occur on the respective Closing Dates
at the offices of Yorkville Advisors, LLC, 0000 Xxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxx Xxxx, Xxx Xxxxxx 00000 (or such other place as is mutually agreed to by
the Company and the Buyer(s)).
(c) Form of Payment. Subject to the satisfaction of the terms and
conditions of this Agreement, on each Closing Date, (i) the Buyers shall deliver
to the Company such aggregate proceeds for the Convertible Debentures and
Warrants to be issued and sold to such Buyer at such Closing, minus the fees to
be paid directly from the proceeds of such Closing as set forth herein, and (ii)
the Company shall deliver to each Buyer, Convertible Debentures and Warrants
which such Buyer is purchasing at such Closing in amounts indicated opposite
such Buyer's name on Schedule I, duly executed on behalf of the Company.
(d) Establishment of Deposit Account, Dominion Account Agreements. Within
ten (10) days of the date hereof, the Company, the Buyer, and each
applicable bank or other depository institution shall enter into Deposit Account
Agreements (as defined in the Security Documents) with respect to each of the
Company's Deposit Accounts (as defined in the Security Documents) providing
dominion and control over such accounts to the Buyer such that upon notice by
the Buyer to such bank or other depository institution of the occurrence of an
Event of Default (as defined in the Convertible Debentures) all actions under
such account shall be taken solely at the Buyer's direction.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(a) Investment Purpose. Each Buyer is acquiring the Securities for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, such Buyer reserves the right to dispose
of the Securities at any time in accordance with or pursuant to an effective
registration statement covering such Securities or an available exemption under
the Securities Act. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.
(b) Accredited Investor Status. Each Buyer is an "Accredited Investor" as
that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. Each 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.
(d) Information. Each Buyer and its advisors (and his or, its counsel), if
any, have been furnished with all materials relating to the business, finances
and operations of the Company and information he deemed material to making an
informed investment decision regarding his purchase of the Securities, which
have been requested by such Buyer. Each Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and its
management. 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 in Section 3 below. Each Buyer
understands that its investment in the Securities involves a high degree of
risk. Each Buyer is in a position regarding the Company, which, based upon
employment, family relationship or economic bargaining power, enabled and
enables such Buyer to obtain information from the Company in order to evaluate
the merits and risks of this investment. Each 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.
(e) No Governmental Review. Each 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.
(f) Transfer or Resale. Each Buyer understands that except as provided in
the Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the Securities 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 requirements, or (C)
such Buyer provides the Company with reasonable assurances (in the form of
seller and broker representation letters) that such Securities can be sold,
assigned or transferred pursuant to Rule 144, Rule 144(k), or Rule 144A
promulgated under the Securities Act, as amended (or a successor rule thereto)
(collectively, "Rule 144"), in each case following the applicable holding period
set forth therein; (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder.
(g) Legends. Each Buyer agrees to the imprinting, so long as is required by
this Section 2(g), of a restrictive legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
Certificates evidencing the Conversion Shares or Warrant Shares shall not
contain any legend (including the legend set forth above), (i) while a
registration statement (including the
Registration Statement) covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Conversion Shares or Warrant
Shares pursuant to Rule 144, (iii) if such Conversion Shares or Warrant Shares
are eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the SEC). The Company
shall cause its counsel to issue a legal opinion to the Company's transfer agent
promptly after the effective date (the "Effective Date") of a Registration
Statement if required by the Company's transfer agent to effect the removal of
the legend hereunder. If all or any portion of the Convertible Debentures or
Warrants are exercised by a Buyer that is not an Affiliate of the Company (a
"Non-Affiliated Buyer") at a time when there is an effective registration
statement to cover the resale of the Conversion Shares or the Warrant Shares,
such Conversion Shares or Warrant Shares shall be issued free of all legends.
The Company agrees that following the Effective Date or at such time as such
legend is no longer required under this Section 2(g), it will, no later than
three (3) Trading Days following the delivery by a Non-Affiliated Buyer to the
Company or the Company's transfer agent of a certificate representing Conversion
Shares or Warrant Shares, as the case may be, issued with a restrictive legend
(such third Trading Day, the "Legend Removal Date"), deliver or cause to be
delivered to such Non-Affiliated Buyer a certificate representing such shares
that is free from all restrictive and other legends. The Company may not make
any notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section.
Each Buyer acknowledges that the Company's agreement hereunder to remove all
legends from Conversion Shares or Warrant Shares is not an affirmative statement
or representation that such Conversion Shares or Warrant Shares are freely
tradable. Each Buyer, severally and not jointly with the other Buyers, agrees
that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 3(g) is predicated upon the Company's
reliance that the buyer will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein.
(h) Authorization, Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(i) Receipt of Documents. Each Buyer and his or its counsel has received
and read in their entirety: (i) this Agreement and each representation,
warranty and covenant set forth herein and the Transaction Documents (as defined
herein); (ii) all due diligence and other information necessary to verify the
accuracy and completeness of such representations, warranties and covenants;
(iii) the Company's Form 10-KSB for the fiscal year ended December 31, 2005;
(iv) the Company's Form 10-QSB for the fiscal quarter ended September 30, 2006
and (v) answers to all questions each Buyer submitted to the Company regarding
an investment in the Company; and each Buyer has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.
(j) Due Formation of Corporate and Other Buyers. If the Buyer(s) is a
corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Securities and is not prohibited from doing
so.
(k) No Legal Advice from the Company. Each Buyer acknowledges, that it had
the opportunity to review this Agreement and the transactions contemplated by
this Agreement with his or its own legal counsel and investment and tax
advisors. Each Buyer is relying solely on such counsel and advisors and not on
any statements or representations of the Company or any of its representatives
or agents for legal, tax or investment advice with respect to this investment,
the transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth under the corresponding section of the Disclosure Schedules
which Disclosure Schedules shall be deemed a part hereof and to qualify any
representation or warranty otherwise made herein to the extent of such
disclosure, the Company hereby makes the representations and warranties set
forth below to each Buyer:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
subsidiary free and clear of any liens, and all the issued and outstanding
shares of capital stock of each subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities.
(b) Organization and Qualification. The Company and its subsidiaries are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power 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 corporation to do business and is in good standing in every
jurisdiction in which 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 (i) a material adverse effect
on the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the subsidiaries, taken as
a whole, or (iii) a material adverse effect on the Company's ability to perform
in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and no
proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or
qualification
(c) Authorization, Enforcement, Compliance with Other Instruments. (i) The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Convertible Debentures, the
Warrants, the Security
Document, the Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions, 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, (ii) the execution and delivery of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Securities, the reservation for issuance and the issuance of the
Conversion Shares, and the reservation for issuance and the issuance of the
Warrant Shares, have been duly authorized by the Company's Board of Directors
and no further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their 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 creditors' rights and remedies. The
authorized officer of the Company executing the Transaction Documents knows of
no reason why the Company cannot file the Registration Statement as required
under the Registration Rights Agreement or perform any of the Company's other
obligations under the Transaction Documents.
(d) Capitalization. The authorized capital stock of the Company consists of
25,000,000 shares of Common Stock of which 10,275,057 shares of Common Stock are
issued and outstanding. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. Except as disclosed in Schedule
3(d): (i) none of the Company's capital stock 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
capital stock 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 capital stock 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
capital stock 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 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
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; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (vii) the
Company does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement; and (viii) 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. The Company has furnished to the Buyers true,
correct and complete copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's Bylaws, as amended and as in effect on the
date hereof (the "Bylaws"), and the terms of all securities convertible into, or
exercisable or exchangeable for, shares of Common Stock and the material rights
of the holders thereof in respect thereto. No further approval or authorization
of any stockholder, the Board of Directors of the Company or others is required
for the issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company's capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company's stockholders.
(e) Issuance of Securities. The issuance of the Convertible Debentures and
the Warrants is duly authorized and free from all taxes, liens and charges with
respect to the issue thereof. Upon conversion in accordance with the terms of
the Convertible Debentures or exercise in accordance with the Warrants, as the
case may be, the Conversion Shares and Warrant Shares, respectively, when issued
will be validly issued, fully paid and nonassessable, free from all taxes, liens
and charges with respect to the issue thereof. The Company has reserved from
its duly authorized capital stock the appropriate number of shares of Common
Stock as set forth in this Agreement.
(f) 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 Convertible Debentures and the Warrants, and reservation for
issuance and issuance of the Conversion Shares and the Warrant Shares) will not
(i) result in a violation of any certificate of incorporation, certificate of
formation, any certificate of designations or other constituent documents of the
Company or any of its subsidiaries, any capital stock of the Company or any of
its subsidiaries or bylaws of the Company or any of its subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) in any respect 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 foreign, federal and state
securities laws and regulations and the rules and regulations of the National
Association of Securities Dealers Inc.'s OTC Bulletin Board) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected; except in the case of
each of clauses (ii) and (iii), such as could not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted in violation of
any material law, ordinance, or regulation of any governmental entity. Except
as specifically contemplated by this Agreement and as required under the
Securities Act and any applicable state securities laws, the Company is not
required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the Registration Rights
Agreement in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof.
(g) SEC Documents; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), for the two years preceding the date hereof (or such shorter period as
the Company was required by law or regulation to file such material) (all of the
foregoing filed prior to the date hereof or amended after the date hereof and
all exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred to as
the "SEC Documents") on timely basis or has received a valid extension of such
time of filing and has filed any such SEC Document prior to the expiration of
any such extension. The Company has delivered to the Buyers or their
representatives, or made available through the SEC's website at
xxxx://xxx.xxx.xxx., true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange 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. 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 the Buyers in connection
with the transaction contemplated hereby which is not included in the SEC
Documents, including, without limitation, information referred to in Section
2(i) 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 and
not misleading.
(h) 10(b)-5. The SEC Documents do not include any untrue statements of
material fact, nor do they omit to state any material fact required to be stated
therein necessary to make the statements made, in light of the circumstances
under which they were made, not misleading.
(i) Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company's subsidiaries, wherein an unfavorable
decision, ruling or finding would (i) have a Material Adverse Effect.
(j) Acknowledgment Regarding Buyer's Purchase of the Convertible Debentures.
The Company acknowledges and agrees that each Buyer is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that each
Buyer is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by each Buyer or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer's purchase
of the Securities. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.
(k) No General Solicitation. 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 under the Securities Act) in connection with the offer or sale of
the Securities.
(l) No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Securities under the
Securities Act or cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act.
(m) Employee Relations. Neither the Company nor any of its subsidiaries is
involved in any labor dispute or, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.
(n) Intellectual Property Rights. The Company and its subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. The Company and its subsidiaries do not have any knowledge of any
infringement by the Company or its subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service xxxx registrations, trade secret or other similar rights of
others, and, to the knowledge of the Company there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
(o) Environmental Laws. The Company and its subsidiaries are (i) in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (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.
(p) Title. All real property and facilities held under lease by the Company
and its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as 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.
(q) Insurance. The Company and each of its subsidiaries is 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 materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
(r) Regulatory Permits. The Company and its subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, 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.
(s) Internal Accounting Controls. The Company and each of its subsidiaries
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
and (iii) the recorded amounts for assets are compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(t) No Material Adverse Breaches, etc. Neither the Company nor any of its
subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is
expected in the future to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Neither the Company nor any of its
subsidiaries is in breach of any contract or agreement which breach, in the
judgment of the Company's officers, has or is expected to have a Material
Adverse Effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries.
(u) Tax Status. The Company and each of its subsidiaries has made and filed
all federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.
(v) Certain Transactions. Except for arm's length transactions pursuant to
which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties and other
than the grant of stock options disclosed in the SEC Documents, none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(w) Fees and Rights of First Refusal. The Company is not obligated to offer
the securities offered hereunder on a right of first refusal basis or otherwise
to any third parties including, but not limited to, current or former
shareholders of the Company, underwriters, brokers, agents or other third
parties.
(x) Investment Company. The Company is not, and is not an affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
(y) Registration Rights. Other than each of the Buyers, no Person has any
right to cause the Company to effect the registration under the Securities Act
of any securities of the Company. There are no outstanding registration
statements not yet declared
effective and there are no outstanding comment letters from the SEC or any other
regulatory agency.
(z) Private Placement. Assuming the accuracy of the Buyers' representations
and warranties set forth in Section 2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company to the
Buyers as contemplated hereby. The issuance and sale of the Securities hereunder
does not contravene the rules and regulations of the Primary Market.
(aa) Listing and Maintenance Requirements. The Company's Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to terminate, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act nor has the Company received any notification that the
SEC is contemplating terminating such registration. The Company has not, in the
twelve (12) months preceding the date hereof, received notice from any Primary
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Primary Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(bb) 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, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company's placement agent in connection with the
placement of the Securities.
(cc) Dilutive Effect. The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Convertible
Debentures and the 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 Convertible
Debentures in accordance with this Agreement and the Convertible Debentures and
its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants, in each case, is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts to timely satisfy
each of the conditions to be satisfied by it as provided in Sections 6 and 7 of
this Agreement.
(b) Form D. 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 to qualify the
Securities, or obtain an exemption for 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, and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date.
(c) Reporting Status. Until the earlier of (i) the date as of which the
Buyer(s) may sell all of the Securities without restriction pursuant to Rule
144(k) promulgated under the Securities Act (or successor thereto), or (ii) the
date on which (A) the Buyers shall have sold all the Securities and (B) none of
the Convertible Debentures or Warrants are outstanding (the "Registration
Period"), the Company shall file in a timely manner all reports required to be
filed with the SEC pursuant to the Exchange Act and the regulations of the SEC
thereunder, and the Company shall not terminate its status as an issuer required
to file reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale of the
Convertible Debentures for general corporate and working capital purposes.
(e) Reservation of Shares. On the date hereof, the Company shall initially
reserve 14,000,000 shares of Common Stock for issuance to the Buyers upon
conversions of the Convertible Dentures or exercise of the Warrants
(collectively, the "Initial Share Reserve"). The Company represents that it has
sufficient authorized and unissued shares of Common Stock available to create
the Initial Share Reserve after considering all other commitments that may
require the issuance of Common Stock. After the Company increases its
authorized Common Stock in accordance with Section 4(r) hereof, the Company
shall promptly increase the Initial Share Reserve to a total share reserve of
100,000,000 shares for issuance upon conversions of the Convertible Debentures
and exercise of the Warrants (collectively, the "Share Reserve"). The Company
shall take all action reasonably necessary to at all times have authorized, and
reserved for the purpose of issuance, such number of shares of Common Stock as
shall be necessary to effect the full conversion of the Convertible Debentures
and the full exercise of the Warrants. If at any time the Share Reserve is
insufficient to effect the full conversion of the Convertible Debentures or the
full exercise of the Warrants, the Company shall increase the Share Reserve
accordingly. If the Company does not have sufficient authorized and unissued
shares of Common Stock available to increase the Share Reserve, the Company
shall call and hold a special meeting of the shareholders within seventy five
(75) days of such occurrence, for the sole purpose of increasing the number of
shares authorized. The Company's management shall recommend to the shareholders
to vote in favor of increasing the number of shares of Common Stock authorized.
Management shall also vote all of its shares in favor of increasing the number
of authorized shares of Common Stock.
(f) Listings or Quotation. The Company's Common Stock shall be listed or
quoted for trading on any of (a) the American Stock Exchange, (b) New York Stock
Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e)
the Nasdaq OTC Bulletin Board ("OTCBB") (each, a "Primary Market"). The Company
shall promptly secure the listing of all of the Registrable Securities (as
defined in the Registration Rights Agreement)
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.
(g) Fees and Expenses.
(i) Each of the Company and the Buyer(s) shall pay all costs and expenses
incurred by such party in connection with the negotiation, investigation,
preparation, execution and delivery of the Transaction Documents. The Company
shall pay Yorkville Advisors, LLC a fee equal to five percent (5%) of the
Purchase Price which shall be paid pro rata directly from the gross proceeds of
each Closing.
(ii) The Company shall pay a structuring and due diligence fee to Yorkville
Advisors, LLC of Twenty Thousand Dollars ($20,000), of which Ten Thousand
Dollars ($10,000) has been paid and the remaining Ten Thousand Dollars ($10,000)
shall be paid directly from the proceeds of the First Closing.
(h) Corporate Existence. So long as any of the Convertible Debentures
remain outstanding, the Company shall not directly or indirectly consummate any
merger, reorganization, restructuring, reverse stock split consolidation, sale
of all or substantially all of the Company's assets or any similar transaction
or related transactions (each such transaction, an "Organizational Change")
unless, prior to the consummation an Organizational Change, the Company obtains
the written consent of each Buyer. In any such case, the Company will make
appropriate provision with respect to such holders' rights and interests to
insure that the provisions of this Section 4(h) will thereafter be applicable to
the Convertible Debentures.
(i) Transactions With Affiliates. So long as any Convertible Debentures are
outstanding, the Company shall not, and shall cause each of its subsidiaries not
to, enter into, amend, modify or supplement, or permit any subsidiary to enter
into, amend, modify or supplement any agreement, transaction, commitment, or
arrangement with any of its or any subsidiary's officers, directors, person who
were officers or directors at any time during the previous two (2) years,
stockholders who beneficially own five percent (5%) or more of the Common Stock,
or Affiliates (as defined below) or with any individual related by blood,
marriage, or adoption to any such individual or with any entity in which any
such entity or individual owns a five percent (5%) or more beneficial interest
(each a "Related Party"), except for (a) customary employment arrangements and
benefit programs on reasonable terms, (b) any investment in an Affiliate of the
Company, (c) any agreement, transaction, commitment, or arrangement on an
arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, (d) any agreement,
transaction, commitment, or arrangement which is approved by a majority of the
disinterested directors of the Company; for purposes hereof, any director who is
also an officer of the Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a ten percent (10%) or more equity interest in that person or entity,
(ii) has ten percent (10%) or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "Control" or
"controls" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
(j) Transfer Agent. The Company covenants and agrees that, in the event
that the Company's agency relationship with the transfer agent should be
terminated for any reason prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the new transfer agent execute and agree to be bound by the
terms of the Irrevocable Transfer Agent Instructions (as defined herein).
(k) Restriction on Issuance of the Capital Stock. So long as any Convertible
Debentures are outstanding, except with respect to shares of stock issued upon
the exercise of options and warrants outstanding on the date hereof, the Company
shall not, without the prior written consent of the Buyer(s), (i) issue or sell
shares of Common Stock or Preferred Stock without consideration or for a
consideration per share less than the bid price of the Common Stock determined
immediately prior to its issuance, (ii) issue any preferred stock, warrant,
option, right, contract, call, or other security or instrument granting the
holder thereof the right to acquire Common Stock without consideration or for a
consideration less than such Common Stock's Bid Price determined immediately
prior to it's issuance, (iii) enter into any security instrument granting the
holder a security interest in any and all assets of the Company, or (iv) file
any registration statement on Form S-8.
(l) Neither the Buyer(s) nor any of its affiliates have an open short
position in the Common Stock of the Company, and the Buyer(s) agrees that it
shall not, and that it will cause its affiliates not to, engage in any short
sales of or hedging transactions with respect to the Common Stock as long as any
Convertible Debentures shall remain outstanding.
(m) Rights of First Negotiation. For a period of 18 months from the date
hereof, if the Company intends to raise additional capital by the issuance or
sale of capital stock of the Company, including without limitation shares of any
class of common stock, any class of preferred stock, options, warrants or any
other securities convertible or exercisable into shares of common stock (whether
the offering is conducted by the Company, underwriter, placement agent or any
third party) the Company shall be obligated to offer to the Buyers such issuance
or sale of capital stock, by providing in writing the principal amount of
capital it intends to raise and outline of the material terms of such capital
raise, prior to the offering such issuance or sale of capital stock to any
third parties including, but not limited to, current or former officers or
directors, current or former shareholders and/or investors of the obligor,
underwriters, brokers, agents or other third parties. The Buyers shall have
five (5) business days from receipt of such notice of the sale or issuance of
capital stock to accept or reject all or a portion of such capital raising
offer.
(n) Lock Up Agreements. On the date hereof, the Company shall obtain from
each officer and director, who is the beneficial owner of an amount of shares
equal
to one percent (1%) or more of the Company's outstanding Common Stock as of the
date hereof, a lock up agreement in the form attached hereto as Exhibit C.
(o) Additional Registration Statements. Until the effective date of the
initial Registration Statement, the Company will not file a registration
statement under the Securities Act relating to securities that are not the
Securities.
(p) Review of Public Disclosures. All SEC filings (including, without
limitation, all filings required under the Exchange Act, which include Forms
10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and other public disclosures made by
the Company, including, without limitation, all press releases, investor
relations materials, and scripts of analysts meetings and calls, shall be
reviewed and approved for release by the Company's attorneys and, if containing
financial information, the Company's independent certified public accountants.
(q) Disclosure of Transaction. Within four Business Day following the date
of this Agreement, the Company shall file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the Exchange Act and attaching the material
Transaction Documents (including, without limitation, this Agreement, the form
of the Convertible Debenture, the form of Warrant and the form of the
Registration Rights Agreement) as exhibits to such filing.
(r) Increase Authorized. The Company shall use its best efforts to
effectuate an increase of its authorized Common Stock to an amount sufficient to
accommodate the Share Reserve in full compliance with applicable laws within
seventy five (75) days of the date hereof.
(s) First Priority Lien. The Company shall promptly enter into a payoff
and settlement agreement ("Payoff Agreement") with Dutchess Private Equities
Fund, L.P. and Dutchess Private Equities Fund, II, LP (collectively, "Dutchess")
in a form reasonably acceptable to the Buyer, pursuant to which Dutchess shall
agree to relinquish any and all rights to any lien on, or security interest in
any assets of the Company and authorizing the Company to file termination
statements for any UCC filings relating to the forgoing.
(t) UCC-3 Termination Statements. Within three (3) Business Days of the
First Closing Date, the Company shall file, or cause to be filed, UCC-3
Termination Statements with respect to all liens recorded by Laurus Master Fund
Ltd., Boston Financial and Equity Corp., and Duthcess, and deliver proof of such
filings to the Buyer.
(u) The Company shall use its best efforts to obtain a subordination
agreement, in a form reasonably satisfactory to the Buyer, with Xxxxxxxx
Properties LLC.
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall issue the Irrevocable Transfer Agent Instructions to
its transfer agent, and any subsequent transfer agent, irrevocably appointing
Xxxxx Xxxxxxxx, Esq. as the Company's agent for purpose instructing its transfer
agent to issue
certificates or credit shares to the applicable balance accounts at The Deposity
Trust Company ("DTC"), registered in the name of each Buyer or its respective
nominee(s), for the Conversion Shares and the Warrant Shares issued upon
conversion of the Convertible Debentures or exercise of the Warrants as
specified from time to time by each Buyer to the Company upon conversion of the
Convertible Debentures or exercise of the Warrants. The Company shall not
change its transfer agent without the express written consent of the Buyers,
which may be withheld by the Buyers in their sole discretion. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(g) hereof (in the case of the Conversion Shares or
Warrant Shares prior to registration of such shares under the Securities Act)
will be given by the Company to its transfer agent, and that the Securities
shall otherwise be freely transferable on the books and records of the Company
as 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 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 and, with
respect to any transfer, shall permit the transfer. In the event that such
sale, assignment or 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. Nothing in this Section 5 shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of Conversion Shares. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Buyer by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Buyer(s) shall be entitled, in addition to all other available remedies, to an
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 Convertible
Debentures to the Buyer(s) at the Closings is subject to the satisfaction, at or
before the Closing Dates, 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:
(a) Each Buyer shall have executed the Transaction Documents and delivered
them to the Company.
(b) The Buyer(s) shall have delivered to the Company the Purchase Price for
the Convertible Debentures and Warrants in the respective amounts as set forth
next to each Buyer as set forth on Schedule I attached hereto, minus any fees to
be paid directly from the proceeds the Closings as set forth herein, by wire
transfer of immediately available U.S. funds pursuant to the wire instructions
provided by the Company.
(c) The representations and warranties of the Buyer(s) shall be true and
correct in all material respects as of the date when made and as of the Closing
Dates as though made at that time (except for representations and warranties
that speak as of a specific date), and the Buyer(s) shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Buyer(s) at or prior to the Closing Dates.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
(a) The obligation of the Buyer(s) hereunder to purchase the Convertible
Debentures at the First Closing is subject to the satisfaction, at or before the
First Closing Date, of each of the following conditions:
(i) The Company shall have executed the Transaction Documents and delivered
the same to the Buyers.
(ii) The Common Stock shall be authorized for quotation or trading on the
Primary Market, trading in the Common Stock shall not have been suspended for
any reason, and all the Conversion Shares issuable upon the conversion of the
Convertible Debentures shall be approved for listing or trading on the Primary
Market.
(iii) The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
First 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 material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the First Closing Date
(iv) The Company shall have executed and delivered to the Buyer(s) the
Convertible Debentures and Warrants in the respective amounts set forth opposite
each Buyer's name on Schedule I attached hereto.
(v) The Buyers shall have received an opinion of counsel from counsel to the
Company in a form satisfactory to the Buyers.
(vi) The Company shall have provided to the Buyers a true copy of a
certificate of good standing evidencing the formation and good standing of the
Company from the secretary of state (or comparable office) from the jurisdiction
in which the Company is incorporated, as of a date within 10 days of the First
Closing Date.
(vii) The Company shall have delivered to the Buyers a certificate, executed
by the Secretary of the Company and dated as of the First Closing Date, as
to (i) the resolutions consistent with Section 3(c) as adopted by the Company's
Board of Directors in a form reasonably acceptable to such Buyer, (ii) the
Certificate of Incorporation and (iii) the Bylaws, each as in effect at the
First Closing.
(viii) The Company shall have filed a form UCC-1 or such other forms as may
be required to perfect the Buyer's interest in the Pledged Property as detailed
in the Security Agreement dated the date hereof and provided proof of such
filing to the Buyer(s).
(ix) The Company shall have provided to the Buyer an acknowledgement, to the
satisfaction of the Buyer, from the Company's independent certified public
accountants as to its ability to provide all consents required in order to file
a registration statement in connection with this transaction.
(x) The Company shall have created the Initial Share Reserve.
(xi) The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(xii) The Company and Dutchess shall have entered into the Payoff Agreement
and the Company shall have satisfied all conditions precedent to Dutchess'
obligations to relinquish any and all rights to any lien on, or security
interest in any assets of the Company except for the payment of the First
Payment (as defined in the Payoff Agreement).
(b) The obligation of the Buyer(s) hereunder to accept the Convertible
Debentures at the Second Closing is subject to the satisfaction, at or before
the Second Closing Date, of each of the following conditions:
(i) The Common Stock shall be authorized for quotation or trading on the
Primary Market, trading in the Common Stock shall not have been suspended for
any reason, and all the Conversion Shares issuable upon the conversion of the
Convertible Debentures shall be approved for listing or trading on the Primary
Market.
(ii) The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Second 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 material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Second Closing Date.
(iii) The Company shall have executed and delivered to the Buyers the
Convertible Debentures in the respective amounts set forth opposite each Buyers
name on Schedule I attached hereto.
(iv) The Company shall have filed, or certify that it will file on the
Second Closing Date, the Registration Statement with the SEC materially in
compliance with the rules and regulations promulgated by the SEC for filing
thereof.
(v) The Company shall have filed a proxy statement with the SEC, materially
in compliance with the rules and regulations promulgated by the SEC for filing
thereof, to effectuate an increase of its authorized Common Stock.
(vi) The Company shall have certified, in a certificate executed by two
officers of the Company and dated as of the Second Closing Date, that all
conditions to the Second Closing have been satisfied.
(c) The obligation of the Buyers hereunder to accept the Convertible
Debentures at the Third Closing is subject to the satisfaction, at or before the
Third Closing Date, of each of the following conditions:
(i) The Common Stock shall be authorized for quotation or trading on the
Primary Market, trading in the Common Stock shall not have been suspended for
any reason, and all the Conversion Shares issuable upon the conversion of the
Convertible Debentures shall be approved for listing or trading on the Primary
Market.
(ii) The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Third 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 material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Third Closing Date.
(iii) The Company shall have executed and delivered to the Buyers the
Convertible Debentures in the respective amounts set forth opposite each Buyers
name on Schedule I attached hereto.
(iv) The Registration Statement shall have been declared effective by the
SEC.
(v) The Company shall have filed its certificate of amendment to its
certificate of incorporation increasing its authorized Common Stock in
accordance with Section 4(r) hereof and created the Share Reserve in accordance
with Section 4(e) hereof.
(vi) The Company shall have certified, in a certificate executed by two
officers of the Company and dated as of the Third Closing Date, that all
conditions to the Third Closing have been satisfied.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of this Agreement
and acquiring the Convertible Debentures and the Conversion Shares hereunder,
and in addition to all of the Company's other obligations under this Agreement,
the Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
each other holder of the Convertible Debentures and the Conversion Shares, and
all of their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Buyer 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 Buyer 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 the Buyer
Indemnitees or any of them 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 this Agreement, the Convertible Debentures or the other 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 this Agreement, or the other 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 Buyer Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the parties hereto, any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Convertible Debentures or the status of the Buyer or
holder of the Convertible Debentures the Conversion Shares, as a Buyer of
Convertible Debentures in the Company. 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.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Buyer's other obligations under this
Agreement, the Buyer shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all Indemnified Liabilities incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, instrument or document contemplated hereby or
thereby executed by the Buyer, (b) any breach of any covenant, agreement or
obligation of the Buyer(s) contained in this Agreement, the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby executed by the Buyer, or (c) any cause of action, suit or claim
brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement, the
Transaction Documents or any other instrument, document or agreement
executed pursuant hereto by any of the parties hereto. To the extent that the
foregoing undertaking by each Buyer may be unenforceable for any reason, each
Buyer shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities, which is permissible under applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to the
principles of conflict of laws. The parties further agree that any action
between them shall be heard in Xxxxxx County, New Jersey, and expressly consent
to the jurisdiction and venue of the Superior Court of New Jersey, sitting in
Xxxxxx County and the United States District Court for the District of New
Jersey sitting in Newark, New Jersey for the adjudication of any civil action
asserted pursuant to this Paragraph.
(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. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
(4) additional original executed signature pages to be physically delivered to
the other party within five (5) days of the execution and delivery hereof.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement, Amendments. This Agreement supersedes all other prior
oral or written agreements between the Buyer(s), the Company, their affiliates
and persons acting on their behalf with respect to the matters discussed herein,
and this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
(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 confirmation of receipt, when sent by facsimile;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery 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, to: LocatePLUS Holdings Corporation
000 Xxxxxxxx Xxxxxx, Xxxxx 000X
Xxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone:
Facsimile:
With a copy to: Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer(s), to its address and facsimile number on Schedule I, with
copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto.
(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 9(l), the
representations and warranties of the Company and the Buyer(s) contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive the
Closing for a period of two (2) years following the date on which the
Convertible Debentures are converted in full. The Buyer(s) shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
(j) Publicity. The Company and the Buyer(s) shall have the right to
approve, before issuance any press release or any other public statement with
respect to the transactions contemplated hereby made by any party; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyer(s), to issue any press release or other public disclosure with respect to
such transactions required under applicable securities or other laws or
regulations (the Company shall use its best efforts to consult the Buyer(s) in
connection with any such press release or other public disclosure prior to its
release and Buyer(s) shall be provided with a copy thereof upon release
thereof).
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In the event that the First Closing shall not have
occurred with respect to the Buyers on or before five (5) business days from the
date hereof due to the Company's or the 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, that if this Agreement is terminated by the
Company pursuant to this Section 9(l), the Company shall remain obligated to
reimburse the Buyer(s) for the fees and expenses of Yorkville Advisors LLC
described in Section 4(g) above.
(m) Brokerage. The Company represents that no broker, agent, finder or
other party has been retained by it in connection with the transactions
contemplated hereby and that no other fee or commission has been agreed by the
Company to be paid for or on account of the transactions contemplated hereby.
(n) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
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:
LOCATEPLUS HOLDINGS CORPORATION
By: /s/ Xxx X. Xxxxxxxxx
Name: Xxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
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.
BUYERS:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: Investment Manager
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Its: Portfolio Manager
