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EXHIBIT 10.14
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of November 9, 1999
(this "Agreement"), is entered into by and between iBIZ TECHNOLOGY CORP., a
Florida corporation (the "Company"), and GLOBE UNITED HOLDINGS, INC., a British
Virgin Islands Corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are executing and delivering
this Agreement in reliance upon the exemptions from registration provided by
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), and/or Section 4(2) of the Securities Act;
WHEREAS, the Purchaser wishes to purchase, and the Company wishes to
issue and sell, for an aggregate purchase price of $600,000 upon the terms and
conditions of this Agreement, $600,000 aggregate principal amount (the
"Debentures") of the Company's 7% Convertible Debentures which Debentures shall
be in the form attached as Exhibit A, and warrants (the "Warrants") to purchase
100,000 shares of the Company's Common Stock, par value $.001 per share (the
"Common Stock"); and
WHEREAS, the Debentures are convertible into shares of the Company's
Common Stock on the terms set forth therein, and the Warrants (which shall be in
substantially the form attached as Exhibit B) may be exercised for the purchase
of Common Stock, on the terms set forth therein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
a. PURCHASE OF DEBENTURES. Purchaser hereby agrees to purchase
from the Company, and the Company hereby agrees to issue and sell to the
Purchaser, the Debentures and the Warrants for an aggregate purchase price
of $600,000 which shall be payable on the date hereof in next day funds.
b. CLOSINGS. The Debentures and Warrants to be purchased by
Purchaser hereunder, in definitive form, and in such denominations as
Purchaser or its representative, if any, may request upon at least
forty-eight
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hours' prior notice to the Company, shall be delivered by or on behalf of
the Company for the account of Purchaser, against payment by the Purchaser
of the aggregate purchase price of $600,000 therefor by wire transfer to
an account of the Company, all at the offices of Xxxxxx, Xxxxxxxxxx &
Karish, Xxx Xxxxxxx Xxxxx, 00' Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, New York
time on the date hereof, or at such other time and date as Purchasers or
their representative, if any, and the Company may agree upon in writing,
such date being referred to herein as the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION
The Purchaser represents and warrants to, and covenants and agrees
with, the Company as follows:
a. The Purchaser is (i) experienced in making investments of
the kind described in this Agreement and the related documents, (ii) able,
by reason of the business and financial experience of its management, to
protect its own interests in connection with the transactions described in
this Agreement and the related documents, and (iii) able to afford the
entire loss of its investment in the Debentures and Warrants.
b. All subsequent offers and sales of the Debentures and
Warrants and the Common Stock issuable upon conversion or exercise of, or
in lieu of interest payments on, the Debentures and Warrants, it shall
have purchased shall be made pursuant to an effective registration
statement under the Securities Act or pursuant to an applicable exemption
from such registration.
c. The Purchaser understands that the Debentures and the
Warrants are being offered and sold to it in reliance upon exemptions from
the registration requirements of the United States federal securities
laws, and that the Company is relying upon the truth and accuracy of the
Purchaser's representations and warranties, and the Purchaser's compliance
with its agreements, each as set forth herein, in order to determine the
availability of such exemptions and the eligibility of the Purchaser to
acquire the Debentures and the Warrants.
d. The Purchaser: (A) has been provided with sufficient
information with respect to the business of the Company and such documents
relating to the Company as the Purchaser has requested and Purchaser has
carefully reviewed the same including, without limitation, the Company's
Form 10-SB (the "Form 10") filed with the Securities and Exchange
Commission on October 13, 1999 (the "Commission"), (B) has been provided
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with such additional information with respect to the Company and its
business and financial condition as the Purchaser, or the Purchaser's
agent or attorney, has requested, and (C) has had access to management of
the Company and the opportunity to discuss the information provided by
management of the Company and any questions that the Purchaser had with
respect thereto have been answered to the full satisfaction of the
Purchaser.
e. The Purchaser has the requisite corporate power and
authority to enter into this Agreement and the registration rights
agreement, dated as of the date hereof, between the Company and the
Purchaser (the "Registration Rights Agreement").
f. This Agreement and the Registration Rights Agreement and
the transactions contemplated hereby and thereby, have been duly and
validly authorized by the Purchaser; and such agreements, when executed
and delivered by each of the Purchaser and the Company will each be a
valid and binding agreement of the Purchaser, enforceable in accordance
with their respective terms, except to the extent that enforcement of each
such agreement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter
in effect relating to creditors' rights generally and to general
principles of equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchaser that:
a. ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Florida. Each of the Company's subsidiaries, if any, is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction. Each of the Company and its subsidiaries, if any,
is duly qualified as a foreign corporation in all jurisdictions in which
the failure to so qualify would have a material adverse effect on the
Company and its subsidiaries taken as a whole. Schedule 3a lists all
subsidiaries of the Company and, except as noted therein, all of the
outstanding capital stock of all such subsidiaries is owned of record and
beneficially by the Company.
b. CAPITALIZATION. On the date hereof, the authorized capital
of the Company consists of 100,000,000 shares of Common Stock, par value
$.001 per share, of which 23,933,418 shares are issued and outstanding.
Schedule 3b sets forth all of the options, warrants and convertible
securities of the Company, and any other rights to acquire securities of
the Company (collectively, the "Derivative Securities") which are
outstanding on the date hereof, including in each case (i) the name and
class of such Derivative Securities, (ii) the issue date of such
Derivative Securities, (iii) the number of
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shares of Common Stock of the Company into which such Derivative
Securities are convertible as of the date hereof, (iv) the conversion or
exercise price or prices of such Derivative Securities as of the date
hereof, (v) the expiration date of any conversion or exercise rights held
by the owners of such Derivative Securities and (vi) any registration
rights associated with such Derivative Securities. Schedule 3b also sets
forth all registration rights associated with the Common Stock.
c. CONCERNING THE COMMON STOCK AND THE WARRANTS. The
Debentures and Warrants, and Common Stock issuable upon conversion of, or
in lieu of interest payments on, the Debentures, and upon exercise of the
Warrants so issued, when issued, shall be duly and validly issued, fully
paid and non-assessable, will not be subject to preemptive rights and will
not subject the holder thereof to personal liability by reason of being
such a holder. There are currently no preemptive rights of any stockholder
of the Company, as such, to acquire the Debentures or the Warrants, or the
Common Stock issuable to the Purchaser pursuant to the terms of the
Debentures or the Warrants.
d. REPORTING COMPANY STATUS. After the Company's Form 10 is
declared effective by the Commission, the Company will file reports with
the Commission pursuant to Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Common Stock is listed and
traded on the OTC Bulletin Board ("OTC"), and the Company is not aware of
any pending or contemplated action or proceeding of any kind to suspend
the trading of the Common Stock.
e. AUTHORIZED SHARES. The Company has available a sufficient
number of authorized and unissued shares of Common Stock as may be
necessary to effect the conversion of the Debentures and the exercise of
the Warrants. The Company understands and acknowledges the potentially
dilutive effect to the Common Stock of the issuance of shares of Common
Stock upon the conversion of the Debentures and the exercise of the
Warrants. The Company further acknowledges that its obligation to issue
shares of Common Stock upon conversion of the Debentures and upon exercise
of the Warrants is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of any
case under 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"). In the
event the Company becomes a debtor under the Bankruptcy Code, the Company
hereby waives to the fullest extent permitted any rights to relief it may
have under 11 U.S.C. Section 362 in respect of the conversion of the
Debentures and the exercise of the Warrants. At the direction of
Purchaser, the Company agrees, without cost or expense to the Purchaser,
to take or consent to any and all action necessary to effectuate relief
under 11 U.S.C. Section 362.
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f. LEGALITY. The Company has the requisite corporate power and
authority to enter into this Agreement and the Registration Rights
Agreement, and to issue and deliver the Debentures, the Warrants and the
Common Stock issuable upon conversion of, or in lieu of interest payments
on the Debentures and the exercise of the Warrants.
g. TRANSACTION AGREEMENTS. This Agreement, the Registration
Rights Agreement, the Debentures and the Warrants (collectively, the
"Primary Documents"), and the transactions contemplated hereby and
thereby, have been duly and validly authorized by the Company; this
Agreement has been duly executed and delivered by the Company and this
Agreement is, and the other Primary Documents, when executed and delivered
by the Company, will each be, a valid and binding agreement of the
Company, enforceable in accordance with their respective terms, except to
the extent that enforcement of each of the Primary Documents may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity.
h. NON-CONTRAVENTION. The execution and delivery of this
Agreement and each of the other Primary Documents, and the consummation by
the Company of the transactions contemplated by this Agreement and each of
the other Primary Documents, does not and will not conflict with or result
in a breach by the Company of any of the terms or provisions of, or
constitute a default under, the Articles of Incorporation or By-laws of
the Company, or any indenture, mortgage, deed of trust or other agreement
or instrument to which the Company or any of its subsidiaries is a party
or by which they or any of their properties or assets are bound, or any
existing applicable law, rule, or regulation or any applicable decree,
judgment or order of any court or United States or foreign federal or
state regulatory body, administrative agency, or any other governmental
body having jurisdiction over the Company, its subsidiaries, or any of
their properties or assets. Except as set forth on Schedule 3(h), neither
the filing of the registration statement required to be filed by the
Company pursuant to the Registration Rights Agreement nor the offering or
sale of the Debentures or the Warrants as contemplated by this Agreement
gives rise to any rights, other than those which have been waived or
satisfied on or prior to the date hereof, for or relating to the
registration of any shares of the Common Stock. Schedule 3(h)(1) hereto
lists all material agreements and instruments to which the Company or any
of its subsidiaries is a party or by which any of their properties or
assets are bound.
i. APPROVALS. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization,
stock exchange or market or the stockholders of the Company is required to
be
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obtained by the Company for the entry into or the performance of this
Agreement and the other Primary Documents.
j. SEC FILINGS. None of the reports or documents filed by the
Company with the Commission contained, at the time they were filed, any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein, or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. However, at the time of filing the Form 10, interim financial
statements for the nine month period ended July 31, 1999 had been prepared
internally by the Company and not reviewed by the Company's outside
accounting firm ("Unreviewed Financials"). Prior to the effectiveness of
the Form 10, the Unreviewed Financials may undergo significant revisions
and the Form 10 itself may also undergo significant revisions as a result
of SEC comments and review.
k. STABILIZATION. Neither the Company, nor, to the knowledge
of the Company, any of its affiliates, has taken or may take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock.
1. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Company's public filings with the Commission, since the filing of the Form
10, there has been no material adverse change nor any material adverse
development in the business, properties, operations, financial condition,
prospects, outstanding securities or results of operations of the Company.
m. FULL DISCLOSURE. There is no fact known to the Company that
has not been disclosed in writing to the Purchaser (i) that could
reasonably be expected to have an adverse effect upon the condition
(financial or otherwise) or the earnings, business affairs, properties or
assets of the Company or (ii) that could reasonably be expected to
materially and adversely affect the ability of the Company to perform the
obligations set forth in the Primary Documents.
n. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company
has good and marketable title to all of its material properties and
assets, both real and personal, and has good title to all its leasehold
interests, in each case subject only to mortgages, pledges, liens,
security interests, conditional sale agreements, encumbrances or charges
created in the ordinary course of business.
o. PATENTS AND OTHER PROPRIETARY RIGHTS. The Company has
sufficient title and ownership of all patents, trademarks, service marks,
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trade names, internet domain names, copyrights, trade secrets,
information, proprietary rights and processes necessary for the conduct of
its business as now conducted and as proposed to be conducted, and such
business does not and would not conflict with or constitute an
infringement on the rights of others.
p. PERMITS. The Company has all franchises, permits, licenses
and any similar authority necessary for the conduct of its business as now
conducted, the lack of which would materially and adversely affect the
business or financial condition of the Company. The Company is not in
default in any respect under any of such franchises, permits, licenses or
similar authority.
q. ABSENCE OF LITIGATION. Except as disclosed in the Company's
public filings with the Commission, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body
pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or any of its subsidiaries, in
which an unfavorable decision, ruling or finding would have an adverse
effect on the properties, business, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a
whole, or the transactions contemplated by the Primary Documents, or which
would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, the Primary
Documents.
r. NO DEFAULT. Each of the Company and its subsidiaries is not
in default in the performance or observance of any obligation, covenant or
condition contained in any indenture, mortgage, deed of trust or other
instrument or agreement to which it is a party or by which it or its
property may be bound which default could result in a material adverse
effect on the Company.
s. TRANSACTIONS WITH AFFILIATES. Except as disclosed in the
Company's public filings with the Commission, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors or affiliates that, had they existed on the date the
Form 10 was filed, would have been required to be disclosed in the
Company's Form 10.
t. EMPLOYMENT MATTERS. The Company is in compliance in all
respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company would have any
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liability; the Company has not incurred and does not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which would cause the loss of such qualification.
u. INSURANCE. The Company maintains property and casualty,
general liability, personal injury and other similar types of insurance
that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from,
and has no knowledge of any threat by, any insurer (that has issued any
insurance policy to the Company) that such insurer intends to deny
coverage under or cancel, discontinue or not renew any insurance policy
covering the Company or any of its Subsidiaries presently in force.
v. TAXES. All applicable tax returns required to be filed by
the Company and each of its subsidiaries have been prepared and filed in
compliance with all applicable laws, or if not yet filed have been granted
extensions of the filing dates which extensions have not expired, and all
taxes, assessments, fees and other governmental charges upon the Company,
its subsidiaries, or upon any of their respective properties, income or
franchises, shown in such returns and on assessments received by the
Company or its subsidiaries to be due and payable have been paid, or
adequate reserves therefor have been set up if any of such taxes are being
contested in good faith; or if any of such tax returns have not been filed
or if any such taxes have not been paid or so reserved for, the failure to
so file or to pay would not in the aggregate have a material adverse
effect on the business or financial condition of the Company and its
subsidiaries, taken as a whole. The Company is disputing certain tax
penalties and interest thereon as set forth on Schedule 3v hereto.
w. FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any
of its directors, officers or other employees has (i) used any Company
funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to any political activity; (ii) made any
direct or indirect unlawful payment of Company funds to any foreign or
domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977,
as amended; or (iv) made any bribe, rebate, payoff, influence payment,
kickback or other similar payment to any person.
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x. INTERNAL CONTROLS. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
y. INVESTMENT COMPANY ACT. The Company is not conducting, and
will not conduct, its business in a manner which would cause it to become,
an "investment company," as defined in Section 3(a) of the Investment
Company Act of 1940, as amended.
z. BROKERAGE FEES. Other than an amount equal to $60,000
payable by the Company as a placement fee, the Company has not incurred
any liability for any consulting fees or agent's commissions in connection
with the offer and sale of the transactions contemplated by this
Agreement.
aa. PRIVATE OFFERING. Subject to the accuracy of the
Purchaser's representations and warranties set forth in Section 2 hereof,
(i) the offer, sale and issuance of the Debentures and the Warrants, (ii)
the issuance of Common Stock in lieu of interest payments on the
Debentures and the Warrants and (iii) the conversion and/or exercise of
such securities into shares of Common Stock, each as contemplated by this
Agreement, are exempt from the registration requirements of the Securities
Act. The Company agrees that neither the Company nor anyone acting on its
behalf will offer any of the Debentures and the Warrants, or any similar
securities for issuance or sale, or solicit any offer to acquire any of
the same from anyone so as to render the issuance and sale of such
securities subject to the registration requirements of the Securities Act.
The Company has not offered or sold the Debentures or the Warrants by any
form of general solicitation or general advertising, as such terms are
used in Rule 502(c) under the Securities Act.
bb. FULL DISCLOSURE. The representations and warranties of the
Company set forth in this Agreement (and the schedules thereto) do not
contain, any untrue statement of a material fact or omit any material fact
necessary to make the statements contained herein, in light of the
circumstances under which they were made, not misleading.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
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a. TRANSFER RESTRICTIONS. The Purchaser acknowledges that,
except as provided in the Registration Rights Agreement, (1) none of the
Debentures, the Warrants or the Common Stock issuable upon conversion of,
or in lieu of interest payments on, the Debentures or upon exercise of the
Warrants, have been, or are being, registered under the Securities Act,
and such securities may not be transferred unless (A) subsequently
registered thereunder or (B) they are transferred pursuant to an exemption
from such registration; and (2) any sale of the Debentures, the Warrants
or the Common Stock issuable upon conversion or exchange thereof (the
"Securities") made in reliance upon Rule 144 under the Securities Act may
be made only in accordance with the terms of said Rule. The provisions of
Section 4(a) and 4(b) hereof, together with the rights of the Purchaser
under this Agreement and the other Primary Documents, shall be binding
upon any subsequent transferee of the Debentures and the Warrants.
b. RESTRICTIVE LEGEND. The Purchaser acknowledges and agrees
that, until such time as the Securities shall have been registered under
the Securities Act or the Purchaser demonstrates to the reasonable
satisfaction of the Company that such registration shall no longer be
required, such Securities shall bear a restrictive legend in substantially
the following form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION SHALL NO LONGER BE REQUIRED.
c. FILINGS. The Company undertakes and agrees that it will
make all required filings in connection with the sale of the Securities to
the Purchaser as required by United States laws and regulations, or by any
domestic securities exchange or trading market, and if applicable, the
filing of a notice on Form D (at such time and in such manner as required
by the Rules and Regulations of the Commission), and to provide copies
thereof to the Purchaser promptly after such filing or filings.
d. NASDAQ LISTING. The Company undertakes and agrees that it
will file an application with the NASDAQ market within 30 days after
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meeting the criteria required by the NASD Bylaws for listing to list the
Company's Common Stock (including, but not limited to, all of the shares
of Common Stock issuable upon conversion of, or in lieu of interest
payments on, the Debentures, and upon exercise of the Warrants) on the
NASDAQ Small-Cap Market. The Company further agrees and covenants that,
once the Company's Common Stock becomes listed on the NASDAQ Small-Cap
Market it will not seek to have the trading of its Common Stock through
the NASDAQ Small-Cap Market suspended or terminated, will use its best
efforts to maintain its eligibility for trading on the NASDAQ Small-Cap
Market (including, the filing of a listing application with NASDAQ to list
all of the shares of Common Stock issuable upon conversion of, or in lieu
of interest payments on, the Debentures and upon the exercise of the
Warrants) and, if such trading of its Common Stock is suspended or
terminated, will use its best efforts to requalify its Common Stock or
otherwise cause such trading to resume.
e. REPORTING STATUS. So long as the Purchaser beneficially
owns any of the Securities or any Debentures and any shares of Common
Stock issuable upon conversion thereof (collectively with the Securities,
the "Collective Securities"), the Company shall timely file all reports
required to be filed with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act and shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act
or the rules and regulations thereunder would permit such termination.
f. STATE SECURITIES FILINGS. The Company shall from time to
time promptly take such action as the Purchaser or any of its
representatives, if applicable, may request to qualify the Collective
Securities for offering and sale under the securities laws (other than
United States federal securities laws) of the jurisdictions in the United
States as shall be so identified to the Company, and to comply with such
laws so as to permit the continuance of sales therein.
g. USE OF PROCEEDS. The Company will use all of the net
proceeds from the issuance of the Debentures and the Warrants to make
investments in the Company's subsidiaries and for working capital.
h. RESERVATION OF COMMON STOCK. The Company will at all times
have authorized and reserved for the purpose of issuance a sufficient
number of shares of Common Stock to provide for the conversion of the
Debentures and the exercise of the Warrants. The Company will use its best
efforts at all times to maintain a number of shares of Common Stock so
reserved for issuance that is no less than two (2) times the maximum
number that could be issuable upon the conversion of the Debentures and
the exercise in full of the Warrants.
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i. SALES OF ADDITIONAL SHARES. The Company shall not, directly
or indirectly, without the prior written consent of the Purchaser, offer,
sell, offer to sell, contract to sell or otherwise dispose of any shares
of its capital stock or any security or other instrument convertible into
or exchangeable for shares of Common Stock, in each case for a period
commencing on the date hereof and ending on the earlier of (i) one hundred
eighty (180) days after the date on which a registration statement
relating to Common Stock issuable upon conversion of any of the Warrants
and the Debentures, is declared effective by the Securities and Exchange
Commission or (ii) the date on which Purchaser shall have converted all of
the Debentures into Common Stock (the "Lock-Up Period"), except that the
Company (i) may issue securities for the aggregate consideration of at
least $7.5 million in connection with a bona fide, firm commitment,
underwritten public offering under the Securities Act; and (ii) may issue
shares of Common Stock upon the exercise or conversion of currently
outstanding options, warrants and other convertible securities; (iii) may
issue options to purchase up to 1,000,000 shares of its Common Stock to
its directors, officers and employees in connection with its existing
stock option plans. In addition, the Company agrees that it will not cause
any shares of its capital stock that are issued in connection with a
transaction of the type contemplated by such clause (or upon the
conversion or exercise of other securities that are issued in connection
with such transaction) or that were issued in connection with any
financing, acquisition or other transaction that occurred prior to the
date of this agreement to be covered by a registration statement that is
declared effective by the Commission until the later to occur of (A) the
expiration of the Lock-Up Period or (B) the registration statement filed
by the Company pursuant to its obligations under the Registration Rights
Agreement has been effective under the Securities Act for a period of at
least one-hundred and eighty (180) days.
j. RIGHT OF FIRST REFUSAL. Subject to Section 4(i), if during
the 18 month period following the Lock-Up Period the Company shall desire
to sell, offer to sell, contract to sell or otherwise dispose of any
shares of its capital stock or any security or other instrument
convertible into or exchangeable for shares of Common Stock (collectively,
the "Offered Securities") to a prospective investor (the "Prospective
Investor"), the Company shall notify (the "Offer Notice") the Purchasers
in accordance with Section 11 hereof of the terms (the "Third Party
Terms") on which the Company proposes to sell, contract to sell or
otherwise dispose of the Offered Securities to the Prospective Investor.
If, within the 5 business day period following the Purchaser's receipt of
the Offer Notice, the Purchaser desires to purchase all and not less than
all of the Offered Securities on the Third Party Terms, the Company shall
be required to sell the Offered Securities (or any portion thereof so
desired by the Purchasers) to the Purchaser and the
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Company shall not be permitted to sell such Offered Securities to the
Prospective Investor.
k. ADDITIONAL REGISTRATION STATEMENTS. At any time during the
period ending on the first date that follows a period of 180 consecutive
days following the effectiveness of the Registration Statement (as defined
in the Registration Rights Agreement) during which there has been no
Blackout Event (as defined in the Registration Rights Agreement) relating
to such Registration Statement, the Company agrees that it will not cause
any registration statement (other than the Registration Statement) to be
declared effective by the Commission.
l. STOCKHOLDER APPROVAL. The Company agrees to use its best
efforts (including obtaining any vote of its stockholders required by
applicable law or Nasdaq Bylaws) to authorize and approve the issuance of
the Common Stock issuable upon conversion of the Debentures and upon
exercise of the Warrants, to the extent that such conversion or issuance
results in the issuance of 20% or more of the Company's outstanding Common
Stock; provided, however, that the failure to obtain any such stockholder
approval shall not limit any of Purchaser's rights hereunder or pursuant
to any Primary Document.
m. OWNERSHIP. At no time shall the Purchaser (including its
officers, directors and affiliates) maintain in the aggregate beneficial
ownership (as defined for purposes of Section 16 of the Securities
Exchange Act of 1934, as amended) of shares of Common Stock in excess of
4.9% of the Company's outstanding Common Stock unless the Purchaser gives
the Company at least sixty-one days notice that it intends to increase its
ownership percentage.
n. RETURN OF DEBENTURES ON CONVERSION AND WARRANTS ON
Exercise. (i) Upon any conversion by Purchaser of less than all of the
aggregate principal amount of Debentures then outstanding, the Company
shall issue and deliver to Purchaser within three (3) days of the
Conversion Date (as defined herein), a new certificate or certificates
for, as applicable, the total principal amount of Debentures which
Purchaser has not yet elected to convert (with the number of and
denomination of such new certificate(s) designated by Purchaser).
(ii) Upon any partial exercise by Purchaser of Warrants, the
Company shall issue and deliver to Purchaser within three (3) days of the
date on which such Warrants are exercised, a new Warrant or Warrants
representing the number of adjusted shares of Common Stock covered
thereby, in accordance with the terms thereof.
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o. REPLACEMENT DEBENTURES AND STOCK PURCHASE WARRANTS. (i) The
certificate(s) representing the Debentures held by Purchaser shall be
exchangeable, at the option of Purchaser, at any time and from time to
time at the office of Company, for certificates with different
denominations representing, as applicable, an equal aggregate principal
amount of Debentures, as requested by Purchaser upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
(ii) The Warrants will be exchangeable, at the option of
Purchaser, at any time and from time to time at the office of the Company,
for other Warrants of different denominations entitling the holder thereof
to purchase in the aggregate the same number of shares of Common Stock as
are purchasable under such Warrants. No service charge will be made for
such transfer or exchange.
p. DIVIDENDS OR DISTRIBUTIONS; PURCHASES OF EQUITY SECURITIES.
So long as any portion of the Warrants or the Debentures remain
outstanding, the Company agrees that it shall not (a) declare or pay any
dividends or make any distributions to any holder or holders of Common
Stock, or (b) purchase or otherwise acquire for value, directly or
indirectly, any shares of Common Stock or equity security of the Company.
q. NO SENIOR INDEBTEDNESS. Other than indebtedness relating to
a credit line in the aggregate principal amount not in excess of
$1,000,000, until the expiration of the Lock-up Period, the Company agrees
that neither the Company nor any direct or indirect subsidiary of the
Company shall create, incur, assume, guarantee, secure or in any manner
become liable in respect of any indebtedness, or permit any liens, claims
or encumbrances to exist against the Company or any direct or indirect
subsidiary of the Company or any of their assets, unless junior to the
Debentures in all respects.
r. NO AMENDMENT OF CURRENTLY OUTSTANDING DEBENTURES. So long
as any portion of the Debentures or the Warrants remain outstanding, the
Company covenants and agrees that the Company shall not, without the
consent of the Purchaser, amend any of the terms of any currently
outstanding debentures.
5. TRANSFER AGENT INSTRUCTIONS
a. The Company warrants that no instruction, other than the
instructions referred to in this Section 5 hereof prior to the
registration and sale under the Securities Act of the Common Stock
issuable upon conversion of the Debentures or upon exercise of the
Warrants, will be given by the Company to the transfer agent and that the
shares of Common Stock issuable upon conversion of, or in lieu of interest
payments on, the Debentures or upon
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exercise of the Warrants, shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement and applicable law. Nothing
in this Section shall affect in any way the Purchaser's obligations and
agreement to comply with all applicable securities laws upon resale of the
Collective Securities. If the Purchaser provides the Company with an
opinion of counsel that registration of a resale by the Purchaser of any
of the Collective Securities in accordance with Section 4(a) of this
Agreement is not required under the Securities Act, the Company shall
permit the transfer of the Collective Securities and, in the case of the
Common Stock, promptly instruct the Company's transfer agent to issue one
or more certificates for Common Stock without legend in such names and in
such denominations as specified by the Purchaser.
b. Purchaser shall exercise its right to convert the
Debentures or to exercise the Warrants, by faxing an executed and
completed Notice of Conversion or Form of Election to Purchase, as
applicable, to the Company, and delivering within three (3) business days
thereafter, the original Notice of Conversion (and the related original
certificates representing the Debentures) or Form of Election to Purchase
(and the related original Warrants) to the Company by hand delivery or by
express courier, duly endorsed. Each date on which a Notice of Conversion
or Form of Election to Purchase is faxed in accordance with the provisions
hereof shall be deemed a "Conversion Date." The Company will transmit the
certificates representing the Common Stock issuable upon conversion of any
Debentures or upon exercise of any Warrants (together with the
certificates representing the Debentures not so converted or the Warrants
not so exercised) to the Purchaser via express courier as soon as
practicable, but in all events no later than three (3) business days of
the Conversion Date relating to Debentures or Warrants (each such delivery
date, together with the Interest Delivery Date referred to in paragraph c
below, is referred to herein as a "Delivery Date"). For purposes of this
Agreement, any conversion of the Debentures or the exercise of the
Warrants shall be deemed to have been made immediately prior to the close
of business on the Conversion Date.
c. The Company will transmit the certificates representing the
Common Stock issuable in lieu of any dividends payable on any Debentures,
to the Purchaser via express courier as soon as practicable, but in all
events no later than three (3) business days after the interest (or
dividend) payment date applicable to which such Common Stock is delivered
(the "Interest Delivery Date").
d. In lieu of delivering physical certificates representing
the Common Stock issuable upon the conversion of, or in lieu of interest
payments (or dividends) on, the Debentures, or upon the exercise of the
Warrants,
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provided the Company's transfer agent is participating in the Depositary
Trust Company ("DTC") Fast Automated Securities Transfer program, on the
written request of the Purchaser, who shall have previously instructed the
Purchaser's prime broker to confirm such request to the Company's transfer
agent, the Company shall cause its transfer agent to electronically
transmit such Common Stock to the Purchaser by crediting the account of
the Purchaser's prime broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system no later than the applicable Delivery Date.
e. The Company understands that a delay in the issuance of
Common Stock beyond the applicable Delivery Date could result in an
economic loss to the Purchaser. As compensation to the Purchaser for such
loss, the Company agrees to pay to the Purchaser for late issuance of
Common Stock upon conversion of, or in lieu of interest payments (or
dividend payments) on, the Debentures, or upon exercise of the Warrants,
the sum of $1,000 per day for each (i) 10,000 shares of Common Stock
purchased upon the exercise of Warrants, or (ii) 10,000 shares of Common
Stock purchased upon conversion of Debentures. The Company shall pay any
payments that are payable to the Purchaser pursuant to this Section 5 in
immediately available funds upon demand. Nothing herein shall limit the
Purchaser's right to pursue actual damages for the Company's failure to so
issue and deliver Common Stock to the Purchaser. Furthermore, in addition
to any other remedies which may be available to the Purchaser, in the
event that the Company fails for any reason to effect delivery of such
Common Stock within five (5) business days after the relevant Delivery
Date, the Purchaser will be entitled to revoke the relevant Notice of
Conversion or Form of Election to Purchase by delivering a notice to such
effect to the Company, whereupon the Company and the Purchaser shall each
be restored to their respective positions immediately prior to delivery of
such Notice of Conversion or Form of Election to Purchase. For purposes of
this Section 5, "business day" shall mean any day in which the financial
markets of New York are officially open for the conduct of business
therein.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE DEBENTURES AND
WARRANTS
The Purchaser understands that the Company's obligation to issue the
Debentures and the Warrants on the Closing Date to the Purchaser pursuant to
this Agreement is conditioned upon:
a. The accuracy on the Closing Date of the representations and
warranties of the Purchaser contained in this Agreement as if made on the
Closing Date and the performance by the Purchasers on or before the
Closing Date of all covenants and agreements of the Purchasers required to
be performed on or before the Closing Date.
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b. The absence or inapplicability of any and all laws, rules
or regulations prohibiting or restricting the transactions contemplated
hereby, or requiring any consent or approval which
shall not have been obtained.
7. CONDITIONS TO THE PURCHASERS' OBLIGATION TO PURCHASE THE DEBENTURES
AND THE WARRANTS
The Company understands that the Purchaser's obligation to purchase
the Debentures and the Warrants on the Closing Date is conditioned upon:
a. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the
Closing Date, and the performance by the Company on or before the Closing
Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date.
b. On the Closing Date, the Purchaser shall have received an
opinion of counsel for the Company, dated the Closing Date, in
substantially the form as attached in Exhibit D.
c. The Company shall have executed and delivered to the
Purchaser (i) a signed counterpart to the Registration Rights Agreement,
(ii) the Debentures and (iii) the Warrants.
d. On the Closing Date, the Purchaser shall have received a
certificate executed by the President or the Chairman of the Company and
by the Chief Financial Officer of the Company, stating that all of the
representations and warranties of the Company set forth in this Agreement
are accurate as of the Closing Date and that the Company has performed all
of its covenants and agreements required to be performed under this
Agreement on or before the Closing Date.
e. On the Closing Date, the Purchaser shall have received from
the Company such other certificates and documents as it or its
representatives, if applicable, shall reasonably request, and all
proceedings taken by the Company in connection with the Primary Documents
contemplated by this Agreement and the other Primary Documents and all
documents and papers relating to such Primary Documents shall be
satisfactory to the Purchaser.
f. On or prior to the Closing Date, there shall not have
occurred any of the following: (i) a suspension or material limitation in
the trading of securities generally on the New York Stock Exchange, NASDAQ
or
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the NASDAQ Bulletin Board; (ii) a general moratorium on commercial banking
activities in New York declared by the applicable banking authorities;
(iii) the outbreak or escalation of hostilities involving the United
States, or the declaration by the United States of a national emergency or
war; or (iv) a change in international, political, financial or economic
conditions, if the effect of any such event, in the judgment of the
Purchasers, makes it impracticable or inadvisable to proceed with the
purchase of the Debentures and the Warrants on the terms and in the manner
contemplated in this Agreement and in the other Primary Documents.
g. The Company shall have delivered to the Purchaser
reimbursement of the Purchaser's out-of-pocket costs and expenses incurred
in connection with the transactions contemplated by this Agreement
(including fees and disbursements of the Purchaser's legal counsel in an
amount not to exceed $22,500).
8. INDEMNIFICATION
A. Indemnification of Purchaser by the Company.
The Company hereby agrees to indemnify and hold harmless the
Purchaser, its affiliates and their respective officers, directors, partners,
shareholders, employees and members (collectively, the "Buyer Indemnitees"),
from and against any and all losses, claims, damages, judgments, penalties,
liabilities and deficiencies (collectively, "Losses"), and agrees to reimburse
the Buyer Indemnitees for all out-of-pocket expenses (including the fees and
expenses of legal counsel), in each case promptly as incurred by the Buyer
Indemnitees and to the extent arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this Agreement;
or
2. any failure by the Company to perform any of its covenants,
agreements, undertakings or obligations set forth in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this Agreement.
B. Indemnification of the Company by Purchaser.
Purchaser hereby agrees to indemnify and hold harmless the Company,
its affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
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(including the fees and expenses of legal counsel), to the extent arising out of
or in connection with any breach of any of Purchaser's representations or
warranties contained in this Agreement, the annexes, schedules or exhibits
hereto or any instrument, agreement or certificate entered into or delivered by
Purchaser pursuant to this Agreement.
C. Third Party Claims. Promptly after receipt by either party hereto
seeking indemnification pursuant to this Section 8 (an "Indemnified Party") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Section 8 is being sought (the "Indemnifying Party") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party and the Indemnifying
Party reasonably shall have concluded that representation of the Indemnified
Party by the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal counsel to the
Indemnified Party, potentially differing interests between such parties in the
conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying Party shall not,
in connection with any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party (which consent shall
not unreasonably be withheld), settle or compromise any Claim or consent to the
entry of any judgment that does not include an unconditional release of the
Indemnified Party from all liabilities with respect to such Claim or judgment.
D. Other Claims.
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In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
9. EXPENSES
The Company covenants and agrees with the Purchaser that the Company
will pay or cause to be paid the following: (a) the fees, disbursements and
expenses of the Purchaser's counsel in connection with the issuance of the
Collective Securities payable on the Closing Date, (b) all expenses in
connection with registration or qualification of the Collective Securities for
offering and sale under state securities laws as provided in Section 4(f)
hereof, and (c) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section, including the fees and disbursements of the Company's counsel,
accountants and other professional advisors, if any. If the Company fails to
satisfy its obligations or to satisfy any condition set forth in this Agreement,
as a result of which the Collective Securities are not delivered to the
Purchaser on the terms and conditions set forth herein, the Company shall
reimburse the Purchaser for any out-of-pocket expenses incurred in making
preparations for the purchase, sale and delivery of the Collective Securities
not so delivered.
10. GOVERNING LAW; MISCELLANEOUS
This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York, without regard to principles of conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement or any of the transactions contemplated
hereby, and hereby waives, to the maximum extent permitted by law, any
objection, including any objections based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. This Agreement may be
signed in one or more counterparts, each of which shall be deemed an original.
The headings of this Agreement are for convenience of reference only and shall
not form part of, or affect the interpretation of this Agreement. This Agreement
and each of the Primary Documents have been entered into freely by each of the
parties, following consultation with their respective counsel, and shall be
interpreted fairly in accordance with its respective terms, without any
construction in favor of or against either party. If any provision of this
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Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or unenforceability of this
Agreement in any other jurisdiction. This Agreement shall inure to the benefit
of, and be binding upon the successors and assigns of each of the parties
hereto, including any transferees of the Warrants and the Debentures. This
Agreement may be amended only by an instrument in writing signed by the party to
be charged with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
11. NOTICES
Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
COMPANY: IBiz Technology Corp
0000 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Att.: Xxxxxxx X. Xxxxxxxxx, President
Tel.: 000-000-0000
Fax: 000-000-0000
WITH A COPY TO:
Xxxxxxx & Xxxxxxx
Xxx Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Att: Xxxxxx Xxxxxxxxxx, Esq.
Tel.: 000-000-0000
Fax: 000-000-0000
PURCHASER: Akara Building
Wickhams Cay #1
Road Town Tortola
British Virgin Islands
WITH A COPY TO:
Xxxxxx Xxxxxxxxxx & Karish
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One Xxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxx, Esq.
Tel.: (000)000-0000
Fax: (000)000-0000
12. SURVIVAL
The agreements, covenants representations and warranties of the
Company and the Purchaser shall survive the execution and delivery of this
Agreement and the delivery of the Securities hereunder.
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IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by each of the undersigned.
iBIZ TECHNOLOGY CORP
By:________________________
Xxxxxxx Xxxxxxxx
President
[PURCHASER]
By:________________________
Name:___________________
Title: Authorized Person
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EXHIBIT INDEX
EXHIBIT A FORM OF DEBENTURE
EXHIBIT B FORM OF WARRANTS
EXHIBIT C FORM OF REGISTRATION RIGHTS
AGREEMENT
EXHIBIT D OPINION OF COUNSEL
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