SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
December 27, 2006, by and among Cross Atlantic Commodities, Inc., a
Nevada Corporation, with headquarters located at 0000 Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxx 00000 (the "Company"), and each of the purchasers set
forth on the signature pages hereto (the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act");
B. Buyers desire to purchase and the Company desires to issue
and sell, upon the terms and conditions set forth in this Agreement (i)
8% secured convertible notes of the Company, in the form attached
hereto as Exhibit "A", in the aggregate principal amount of One Million
Dollars ($1,000,000) (together with any note(s) issued in replacement
thereof or as a dividend thereon or otherwise with respect thereto in
accordance with the terms thereof, the "Notes"), convertible into
shares of common stock, par value $.001 per share, of the Company (the
"Common Stock"), upon the terms and subject to the limitations and
conditions set forth in such Notes and (ii) stock purchase warrants,
in the form attached hereto as Exhibit "B", to purchase an aggregate of
10,000,000 shares of Common Stock (the "Warrants").
C. Each Buyer wishes to purchase, upon the terms and conditions
stated in this Agreement, such principal amount of Notes and number of
Warrants as is set forth immediately below its name on the signature
pages hereto; and
D. Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, in the form attached hereto as Exhibit
"C" (the "Registration Rights Agreement"), pursuant to which the
Company has agreed to provide certain registration rights under the
1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW THEREFORE, the Company and each of the Buyers severally (and
not jointly) hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
a. Purchase of Notes and Warrants. On the Closing
Date (as defined below), the Company shall issue and sell to each Buyer
and each Buyer severally agrees to purchase from the Company such
principal amount of Notes and number of Warrants as is set forth
immediately below such Buyer's name on the signature pages hereto.
b. Form of Payment. On the Closing Date (as
defined below), (i) each Buyer shall pay the purchase price for the
Notes and the Warrants to be issued and sold to it at the Closing (as
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defined below) (the "Purchase Price") by wire transfer of immediately
available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of the Notes in the
principal amount equal to the Purchase Price and the number of Warrants
as is set forth immediately below such Buyer's name on the signature
pages hereto, and (ii) the Company shall deliver such Notes and
Warrants duly executed on behalf of the Company, to such Buyer, against
delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or
written waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, the date and time of the issuance and sale of the
Notes and the Warrants pursuant to this Agreement (the "Closing Date")
shall be 12:00 noon, Eastern Standard Time on December 27, 2006, or
such other mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the "Closing") shall occur on the
Closing Date at such location as may be agreed to by the parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer
severally (and not jointly) represents and warrants to the Company
solely as to such Buyer that:
a. Investment Purpose. As of the date hereof, the
Buyer is purchasing the Notes and the shares of Common Stock issuable
upon conversion of or otherwise pursuant to the Notes (including,
without limitation, such additional shares of Common Stock, if any, as
are issuable (i) on account of interest on the Notes, (ii) as a result
of the events described in Sections 1.3 and 1.4(g) of the Notes and
Section 2(c) of the Registration Rights Agreement or (iii) in payment
of the Standard Liquidated Damages Amount (as defined in Section 2(f)
below) pursuant to this Agreement, such shares of Common Stock being
collectively referred to herein as the "Conversion Shares") and the
Warrants and the shares of Common Stock issuable upon exercise thereof
(the "Warrant Shares" and, collectively with the Notes, Warrants and
Conversion Shares, the "Securities") for its own account and not with a
present view towards the public sale or distribution thereof, except
pursuant to sales registered or exempted from registration under the
1933 Act; provided, however, that by making the representations herein,
the Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of
Regulation D (an "Accredited Investor").
c. Reliance on Exemptions. The Buyer understands
that the Securities are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
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understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to
acquire the Securities.
d. Information. The Buyer and its advisors, if
any, have been, and for so long as the Notes and Warrants remain
outstanding will continue to be, furnished with all materials relating
to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which have been
requested by the Buyer or its advisors. The Buyer and its advisors, if
any, have been, and for so long as the Notes and Warrants remain
outstanding will continue to be, afforded the opportunity to ask
questions of the Company. Notwithstanding the foregoing, the Company
has not disclosed to the Buyer any material nonpublic information and
will not disclose such information unless such information is disclosed
to the public prior to or promptly following such disclosure to the
Buyer. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or
representatives shall modify, amend or affect Buyer's right to rely on
the Company's representations and warranties contained in Section 3
below. The Buyer understands that its investment in the Securities
involves a significant degree of risk. The Buyers are not aware of any
facts that may constitute a breach of any of the Company's
representations and warranties made herein.
e. Governmental Review. The Buyer understands that
no United States federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or
endorsement of the Securities.
f. Transfer or Re-sale. The Buyer understands that
(i) except as provided in the Registration Rights Agreement, the sale
or re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the
Securities may not be transferred unless (a) the Securities are sold
pursuant to an effective registration statement under the 1933 Act, (b)
the Buyer shall have delivered to the Company, at the cost of the
Company, an opinion of counsel that shall be in form, substance and
scope customary for opinions of counsel in comparable transactions to
the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration, which
opinion shall be accepted by the Company, (c) the Securities are sold
or transferred to an "affiliate" (as defined in Rule 144 promulgated
under the 1933 Act (or a successor rule) ("Rule 144")) of the Buyer who
agrees to sell or otherwise transfer the Securities only in accordance
with this Section 2(f) and who is an Accredited Investor, (d) the
Securities are sold pursuant to Rule 144, or (e) the Securities are
sold pursuant to Regulation S under the 1933 Act (or a successor rule)
("Regulation S"), and the Buyer shall have delivered to the Company, at
the cost of the Company, an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in corporate
transactions, which opinion shall be accepted by the Company; (ii) any
sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is
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not applicable, any re-sale of such 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 0000 Xxx)
may require compliance with some other exemption under the 1933 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 such
Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each
case, other than pursuant to the Registration Rights Agreement).
Notwithstanding the foregoing or anything else contained herein to the
contrary, the Securities may be pledged as collateral in connection
with a bona fide margin account or other lending arrangement. In the
event that the Company does not accept the opinion of counsel provided
by the Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144 or Regulation S, within
three (3) business days of delivery of the opinion to the Company, the
Company shall pay to the Buyer liquidated damages of three percent (3%)
of the outstanding amount of the Notes per month plus accrued and
unpaid interest on the Notes, prorated for partial months, in cash or
shares at the option of the Company ("Standard Liquidated Damages
Amount"). If the Company elects to be pay the Standard Liquidated
Damages Amount in shares of Common Stock, such shares shall be issued
at the Conversion Price (as defined in the Notes) at the time of
payment.
g. Legends. The Buyer understands that the Notes
and the Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the 1933 Act as contemplated
by the Registration Rights Agreement or otherwise may be sold pursuant
to Rule 144 or Regulation S without any restriction as to the number of
securities as of a particular date that can then be immediately sold,
the Conversion Shares and Warrant Shares may bear a restrictive legend
in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such Securities):
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended. The securities may not be sold, transferred or
assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion
of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, that
registration is not required under said Act or unless sold
pursuant to Rule 144 or Regulation S under said Act."
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by applicable
state securities laws, (a) such Security is registered for sale under
an effective registration statement filed under the 1933 Act or
otherwise may be sold pursuant to Rule 144 or Regulation S without any
restriction as to the number of securities as of a particular date that
can then be immediately sold, or (b) such holder provides the Company
with an opinion of counsel, in form, substance and scope customary for
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opinions of counsel in comparable transactions, to the effect that a
public sale or transfer of such Security may be made without
registration under the 1933 Act, which opinion shall be accepted by the
Company so that the sale or transfer is effected or (c) such holder
provides the Company with reasonable assurances that such Security can
be sold pursuant to Rule 144 or Regulation S. The Buyer agrees to sell
all Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any.
h. Authorization; Enforcement. This Agreement and
the Registration Rights Agreement have been duly and validly
authorized. This Agreement has been duly executed and delivered on
behalf of the Buyer, and this Agreement constitutes, and upon execution
and delivery by the Buyer of the Registration Rights Agreement, such
agreement will constitute, valid and binding agreements of the Buyer
enforceable in accordance with their terms.
i. Residency. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the
signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and
each of its Subsidiaries (as defined below), if any, is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated, with full power and
authority (corporate and other) to own, lease, use and operate its
properties and to carry on its business as and where now owned, leased,
used, operated and conducted. Schedule 3(a) sets forth a list of all
of the Subsidiaries of the Company and the jurisdiction in which each
is incorporated. The Company and each of its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or
in good standing would not have a Material Adverse Effect. "Material
Adverse Effect" means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company or
its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be entered
into in connection herewith. "Subsidiaries" means any corporation or
other organization, whether incorporated or unincorporated, in which
the Company owns, directly or indirectly, any equity or other ownership
interest.
b. Authorization; Enforcement. (i) The Company has
all requisite corporate power and authority to enter into and perform
this Agreement, the Registration Rights Agreement, the Notes and the
Warrants and to consummate the transactions contemplated hereby and
thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement,
the Registration Rights Agreement, the Notes and the Warrants by the
Company and the consummation by it of the transactions contemplated
hereby and thereby (including without limitation, the issuance of the
Notes and the Warrants and the issuance and reservation for issuance of
the Conversion Shares and Warrant Shares issuable upon conversion or
exercise thereof) have been duly authorized by the Company's Board of
Directors and no further consent or authorization of the Company, its
Board of Directors, or its shareholders is required, (iii) this
Agreement has been duly executed and delivered by the Company by its
authorized representative, and such authorized representative is the
true and official representative with authority to sign this Agreement
and the other documents executed in connection herewith and bind the
Company accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Registration Rights
Agreement, the Notes and the Warrants, each of such instruments will
constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
c. Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of (i) 25,000,000
shares of Common Stock, of which 20,549,200 shares are issued and
outstanding, no shares are reserved for issuance pursuant to the
Company's stock option plans, no shares are reserved for issuance
pursuant to securities (other than the Notes and the Warrants)
exercisable for, or convertible into or exchangeable for shares of
Common Stock and 4,450,800 shares are reserved for issuance upon
conversion of the Notes and the Additional Notes (as defined in Section
4(l)) and exercise of the Warrants (subject to adjustment pursuant to
the Company's covenant set forth in Section 4(h) below); and (ii) no
shares of preferred stock. All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly issued,
fully paid and nonassessable. No shares of capital stock of the
Company are subject to preemptive rights or any other similar rights of
the shareholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as
disclosed in Schedule 3(c), as of the effective date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for any shares of capital stock of the Company or any of
its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Subsidiaries, (ii) there are
no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights
Agreement) and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered
by the issuance of the Notes, the Warrants, the Conversion Shares or
Warrant Shares. The Company has furnished to the Buyer true and
correct copies of the Company's Certificate of Incorporation as in
effect on the date hereof ("Certificate of Incorporation"), the
Company's By-laws, as in effect on the date hereof (the "By-laws"), and
the terms of all securities convertible into or exercisable for Common
Stock of the Company and the material rights of the holders thereof in
respect thereto. The Company shall provide the Buyer with a written
update of this representation signed by the Company's Chief Executive
or Chief Financial Officer on behalf of the Company as of the Closing
Date.
d. Issuance of Shares. The Conversion Shares and
Warrant Shares are duly authorized and reserved for issuance and, upon
conversion of the Notes and exercise of the Warrants in accordance with
their respective terms, will be validly issued, fully paid and non-
assessable, and free from all taxes, liens, claims and encumbrances
with respect to the issue thereof and shall not be subject to
preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder thereof.
e. Acknowledgment of Dilution. The Company
understands and acknowledges the potentially dilutive effect to the
Common Stock upon the issuance of the Conversion Shares and Warrant
Shares upon conversion of the Note or exercise of the Warrants. The
Company further acknowledges that its obligation to issue Conversion
Shares and Warrant Shares upon conversion of the Notes or exercise of
the Warrants in accordance with this Agreement, the Notes and the
Warrants is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
shareholders of the Company.
f. No Conflicts. The execution, delivery and
performance of this Agreement, the Registration Rights Agreement, the
Notes and the Warrants by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of
Incorporation or By-laws or (ii) violate or conflict with, or result in
a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and regulations of any self-
regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries
is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse
Effect). Neither the Company nor any of its Subsidiaries is in
violation of its Certificate of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its
Subsidiaries is in default (and no event has occurred which with notice
or lapse of time or both could put the Company or any of its
Subsidiaries in default) under, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action that
would give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party or by which any property
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or assets of the Company or any of its Subsidiaries is bound or
affected, except for possible defaults as would not, individually or in
the aggregate, have a Material Adverse Effect. The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as a Buyer owns any of the Securities,
in violation of any law, ordinance or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities laws,
the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court,
governmental agency, regulatory agency, self regulatory organization or
stock market or any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration
Rights Agreement, the Notes or the Warrants in accordance with the
terms hereof or thereof or to issue and sell the Notes and Warrants in
accordance with the terms hereof and to issue the Conversion Shares
upon conversion of the Notes and the Warrant Shares upon exercise of
the Warrants. Except as disclosed in Schedule 3(f), all consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company is
not in violation of the listing requirements of the Over-the-Counter
Bulletin Board (the "OTCBB") and does not reasonably anticipate that
the Common Stock will be delisted by the OTCBB in the foreseeable
future. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
g. SEC Documents; Financial Statements. Except as
disclosed in Schedule 3(g), the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act") (all of
the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
(other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the "SEC Documents").
The Company has delivered to each Buyer true and complete copies of the
SEC Documents, except for such exhibits and incorporated documents. As
of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to
be amended or updated under applicable law (except for such statements
as have been amended or updated in subsequent filings prior the date
hereof). As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with United
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States generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present
in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents, the
Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to
December 27, 2006 and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such
financial statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the
Company.
h. Absence of Certain Changes. Except as set forth
on Schedule 3(h), since December 27, 2006, there has been no material
adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its
Subsidiaries.
i. Absence of Litigation. Except as set forth on
Schedule 3(i), there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of
the Company or any of its Subsidiaries, threatened against or affecting
the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect.
Schedule 3(i) contains a complete list and summary description of any
pending or, to the knowledge of the Company, threatened proceeding
against or affecting the Company or any of its Subsidiaries, without
regard to whether it would have a Material Adverse Effect. The Company
and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
j. Patents, Copyrights, etc. The Company and each
of its Subsidiaries owns or possesses the requisite licenses or rights
to use all patents, patent applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark applications, service
marks, service names, trade names and copyrights ("Intellectual
Property") necessary to enable it to conduct its business as now
operated (and, except as set forth in Schedule 3(j) hereof, to the best
of the Company's knowledge, as presently contemplated to be operated in
the future); there is no claim or action by any person pertaining to,
or proceeding pending, or to the Company's knowledge threatened, which
challenges the right of the Company or of a Subsidiary with respect to
any Intellectual Property necessary to enable it to conduct its
business as now operated (and, except as set forth in Schedule 3(j)
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hereof, to the best of the Company's knowledge, as presently
contemplated to be operated in the future); to the best of the
Company's knowledge, the Company's or its Subsidiaries' current and
intended products, services and processes do not infringe on any
Intellectual Property or other rights held by any person; and the
Company is unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and each of its Subsidiaries have
taken reasonable security measures to protect the secrecy,
confidentiality and value of their Intellectual Property.
k. No Materially Adverse Contracts, Etc. Neither
the Company nor any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company's officers has
or is expected in the future to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers
has or is expected to have a Material Adverse Effect.
l. Tax Status. Except as set forth on Schedule
3(l), the Company and each of its Subsidiaries has made or filed all
federal, state and foreign income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its
Subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) and has paid all
taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any
such claim. The Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any
foreign, federal, state or local tax. Except as set forth on Schedule
3(l), none of the Company's tax returns is presently being audited by
any taxing authority.
m. Certain Transactions. Except as set forth on
Schedule 3(m) and except for arm's length transactions pursuant to
which the Company or any of its Subsidiaries makes payments in the
ordinary course of business upon terms no less favorable than the
Company or any of its Subsidiaries could obtain from third parties and
other than the grant of stock options disclosed on Schedule 3(c), none
of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the
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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.
n. Disclosure. All information relating to or
concerning the Company or any of its Subsidiaries set forth in this
Agreement and provided to the Buyers pursuant to Section 2(d) hereof
and otherwise in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has
occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company's reports filed under the
1934 Act are being incorporated into an effective registration
statement filed by the Company under the 1933 Act).
o. Acknowledgment Regarding Buyers' Purchase of
Securities. The Company acknowledges and agrees that the Buyers are
acting solely in the capacity of arm's length purchasers with respect
to this Agreement and the transactions contemplated hereby. The
Company further acknowledges that no Buyer is 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 statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and
is merely incidental to the Buyers' 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 of the Company and its representatives.
p. No Integrated Offering. Neither the Company,
nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales in any
security or solicited any offers to buy any security under
circumstances that would require registration under the 1933 Act of the
issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance
of the Company's securities (past, current or future) for purposes of
any shareholder approval provisions applicable to the Company or its
securities.
q. No Brokers. Except as set forth in Schedule
3(q), the Company has taken no action which would give rise to any
claim by any person for brokerage commissions, transaction fees or
similar payments relating to this Agreement or the transactions
contemplated hereby.
12
r. Permits; Compliance. The Company and each of
its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now
being conducted (collectively, the "Company Permits"), and there is no
action pending or, to the knowledge of the Company, threatened
regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or
in default or violation of, any of the Company Permits, except for any
such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. Since December 27, 2006, neither the Company nor any of its
Subsidiaries has received any notification with respect to possible
conflicts, defaults or violations of applicable laws, except for
notices relating to possible conflicts, defaults or violations, which
conflicts, defaults or violations would not have a Material Adverse
Effect.
s. Environmental Matters.
(i) Except as set forth in Schedule 3(s),
there are, to the Company's knowledge, with respect to the Company or
any of its Subsidiaries or any predecessor of the Company, no past or
present violations of Environmental Laws (as defined below), releases
of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar federal,
state, local or foreign laws and neither the Company nor any of its
Subsidiaries has received any notice with respect to any of the
foregoing, nor is any action pending or, to the Company's knowledge,
threatened in connection with any of the foregoing. The term
"Environmental Laws" means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous Materials")
into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were
stored, used or disposed of in compliance with applicable law, no
Hazardous Materials are contained on or about any real property
currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any
real property previously owned, leased or used by the Company or any of
13
its Subsidiaries during the period the property was owned, leased or
used by the Company or any of its Subsidiaries, except in the normal
course of the Company's or any of its Subsidiaries' business.
(iii) Except as set forth in Schedule 3(s),
there are no underground storage tanks on or under any real property
owned, leased or used by the Company or any of its Subsidiaries that
are not in compliance with applicable law.
t. Title to Property. The Company and its
Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned
by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances
and defects except such as are described in Schedule 3(t) or such as
would not have a Material Adverse Effect. Any real property and
facilities held under lease by the Company and its Subsidiaries are
held by them under valid, subsisting and enforceable leases with such
exceptions as would not have a Material Adverse Effect.
u. Insurance. The Company and each of its
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged.
Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost
that would not have a Material Adverse Effect. The Company has
provided to Buyer true and correct copies of all policies relating to
directors' and officers' liability coverage, errors and omissions
coverage, and commercial general liability coverage.
v. Internal Accounting Controls. The Company and
each of its Subsidiaries maintain a system of internal accounting
controls sufficient, in the judgment of the Company's board of
directors, to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
w. Foreign Corrupt Practices. Neither the Company,
nor any of its Subsidiaries, nor any director, officer, agent, employee
or other person acting on behalf of the Company or any Subsidiary has,
in the course of his actions for, or on behalf of, the Company, used
any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity; made any
14
direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of
1977, as amended, or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic
government official or employee.
x. Solvency. The Company (after giving effect to
the transactions contemplated by this Agreement) is solvent (i.e., its
assets have a fair market value in excess of the amount required to pay
its probable liabilities on its existing debts as they become absolute
and matured) and currently the Company has no information that would
lead it to reasonably conclude that the Company would not, after giving
effect to the transaction contemplated by this Agreement, have the
ability to, nor does it intend to take any action that would impair its
ability to, pay its debts from time to time incurred in connection
therewith as such debts mature. The Company did not receive a
qualified opinion from its auditors with respect to its most recent
fiscal year end and, after giving effect to the transactions
contemplated by this Agreement, does not anticipate or know of any
basis upon which its auditors might issue a qualified opinion in
respect of its current fiscal year.
y. No Investment Company. The Company is not, and
upon the issuance and sale of the Securities as contemplated by this
Agreement will not be an "investment company" required to be registered
under the Investment Company Act of 1940 (an "Investment Company").
The Company is not controlled by an Investment Company.
z. Breach of Representations and Warranties by the
Company. If the Company breaches any of the representations or
warranties set forth in this Section 3, and in addition to any other
remedies available to the Buyers pursuant to this Agreement, the
Company shall pay to the Buyer the Standard Liquidated Damages Amount
in cash or in shares of Common Stock at the option of the Company,
until such breach is cured. If the Company elects to pay the Standard
Liquidated Damages Amounts in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.
4. COVENANTS.
a. Best Efforts. The parties shall use their best
efforts to satisfy timely each of the conditions described in Section 6
and 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to
file a Form D with respect to the Securities as required under
Regulation D and to provide a copy thereof to 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 for sale to the Buyers at the applicable closing
pursuant to this Agreement under applicable securities or "blue sky"
15
laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so
taken to each Buyer on or prior to the Closing Date.
c. Reporting Status; Eligibility to Use Form S-3,
Form SB-2 or Form S-1. The Company's Common Stock is registered under
Section 12(g) of the 1934 Act. The Company represents and warrants
that, at the time of the filing of registration statement on Form SB-2
covering the resale of the Conversion Shares and the Warrant Shares, it
will meet the requirements for the use of Form S-3, Form SB-2 or Form
S-1 for registration of the sale by the Buyer of the Registrable
Securities (as defined in the Registration Rights Agreement). So long
as the Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act
or the rules and regulations thereunder would permit such termination.
The Company further agrees to file all reports required to be filed by
the Company with the SEC in a timely manner so as to become eligible,
and thereafter to maintain its eligibility, if any, for the use of Form
S-3. The Company shall issue a press release and file a Form 8-K
describing the material terms of the transaction contemplated hereby as
soon as practicable following the Closing Date but in no event more
than three (3) business days of the Closing Date, which press release
shall be subject to prior review by the Buyers. The Company agrees
that such press release shall not disclose the name of the Buyers
unless expressly consented to in writing by the Buyers or unless
required by applicable law or regulation, and then only to the extent
of such requirement.
d. Use of Proceeds. The Company shall use the
proceeds from the sale of the Notes and the Warrants in the manner set
forth in Schedule 4(d) attached hereto and made a part hereof and shall
not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other
person (except in connection with its currently existing direct or
indirect Subsidiaries)
e. Future Offerings. The Company will not
negotiate or contract with any party to obtain additional equity
financing (including debt financing with an equity component) that
involves (A) the issuance of Common Stock at a discount to the market
price of the Common Stock on the date of issuance (taking into account
the value of any warrants or options to acquire Common Stock issued in
connection therewith) or (B) the issuance of convertible securities
that are convertible into an indeterminate number of shares of Common
Stock or (C) the issuance of warrants during the period (the "Lock-up
Period") beginning on the Closing Date and ending on the date the
Registration Statement (as defined in the Registration Rights
Agreement) is declared effective. In addition, subject to the
exceptions described below, the Company will not conduct any equity
financing (including debt with an equity component) ("Future
Offerings") during the period beginning on the Closing Date and ending
eighteen (18) months after the end of the Lock-up Period unless it
16
shall have first delivered to each Buyer, at least twenty (20) business
days prior to the closing of such Future Offering, written notice
describing the proposed Future Offering, including the terms and
conditions thereof and proposed definitive documentation to be entered
into in connection therewith, and providing each Buyer an option during
the fifteen (15) day period following delivery of such notice to
purchase its pro rata share (based on the ratio that the aggregate
principal amount of Notes purchased by it hereunder bears to the
aggregate principal amount of Notes purchased hereunder) of the
securities being offered in the Future Offering on the same terms as
contemplated by such Future Offering (the limitations referred to in
this sentence and the preceding sentence are collectively referred to
as the "Capital Raising Limitations"). In the event the terms and
conditions of a proposed Future Offering are amended in any respect
after delivery of the notice to the Buyers concerning the proposed
Future Offering, the Company shall deliver a new notice to each Buyer
describing the amended terms and conditions of the proposed Future
Offering and each Buyer thereafter shall have an option during the
fifteen (15) day period following delivery of such new notice to
purchase its pro rata share of the securities being offered on the same
terms as contemplated by such proposed Future Offering, as amended.
The foregoing sentence shall apply to successive amendments to the
terms and conditions of any proposed Future Offering. The Capital
Raising Limitations shall not apply to any transaction involving (i)
issuances of securities in a firm commitment underwritten public
offering (excluding a continuous offering pursuant to Rule 415 under
the 0000 Xxx) or (ii) issuances of securities as consideration for a
merger, consolidation or purchase of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of which is
not to raise equity capital), or in connection with the disposition or
acquisition of a business, product or license by the Company. The
Capital Raising Limitations also shall not apply to the issuance of
securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date
hereof or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or
restricted stock plan approved by the shareholders of the Company.
f. Expenses. At the Closing, the Company shall
reimburse Buyers for expenses incurred by them in connection with the
negotiation, preparation, execution, delivery and performance of this
Agreement and the other agreements to be executed in connection
herewith ("Documents"), including, without limitation, reasonable
attorneys' and consultants' fees and expenses, transfer agent fees,
fees for stock quotation services, fees relating to any amendments or
modifications of the Documents or any consents or waivers of provisions
in the Documents, fees for the preparation of opinions of counsel,
escrow fees, and costs of restructuring the transactions contemplated
by the Documents. When possible, the Company must pay these fees
directly, otherwise the Company must make immediate payment for
reimbursement to the Buyers for all fees and expenses immediately upon
written notice by the Buyer or the submission of an invoice by the
17
Buyer Notwithstanding anything herein to the contrary, the Company's
obligation to reimburse Buyers' expenses shall not exceed $10,000 in
the aggregate.
g. Financial Information. The Company agrees to
send or make available the following reports to each Buyer until such
Buyer transfers, assigns, or sells all of the Securities: (i) within
ten (10) days after the filing with the SEC, a copy of its Annual
Report on Form 10-KSB its Quarterly Reports on Form 10-QSB and any
Current Reports on Form 8-K; (ii) within one (1) day after release,
copies of all press releases issued by the Company or any of its
Subsidiaries; and (iii) contemporaneously with the making available or
giving to the shareholders of the Company, copies of any notices or
other information the Company makes available or gives to such
shareholders.
h. Authorization and Reservation of Shares. The
Company shall at all times have authorized, and reserved for the
purpose of issuance, a sufficient number of shares of Common Stock to
provide for the full conversion or exercise of the outstanding Notes
and Warrants and issuance of the Conversion Shares and Warrant Shares
in connection therewith (based on the Conversion Price of the Notes or
Exercise Price of the Warrants in effect from time to time) and as
otherwise required by the Notes. The Company shall not reduce the
number of shares of Common Stock reserved for issuance upon conversion
of Notes and exercise of the Warrants without the consent of each
Buyer. The Company shall at all times maintain the number of shares of
Common Stock so reserved for issuance at an amount ("Reserved Amount")
equal to the number that is then actually issuable upon full conversion
of the Notes and Additional Notes and upon exercise of the Warrants and
the Additional Warrants (based on the Conversion Price of the Notes or
the Exercise Price of the Warrants in effect from time to time). If at
any time the number of shares of Common Stock authorized and reserved
for issuance ("Authorized and Reserved Shares") is below the Reserved
Amount, the Company will promptly take all corporate action necessary
to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of shareholders to
authorize additional shares to meet the Company's obligations under
this Section 4(h), in the case of an insufficient number of authorized
shares, obtain shareholder approval of an increase in such authorized
number of shares, and voting the management shares of the Company in
favor of an increase in the authorized shares of the Company to ensure
that the number of authorized shares is sufficient to meet the Reserved
Amount. If the Company fails to obtain such shareholder approval
within thirty (30) days following the date on which the number of
Reserved Amount exceeds the Authorized and Reserved Shares, the Company
shall pay to the Borrower the Standard Liquidated Damages Amount, in
cash or in shares of Common Stock at the option of the Buyer. If the
Buyer elects to be paid the Standard Liquidated Damages Amount in
shares of Common Stock, such shares shall be issued at the Conversion
Price at the time of payment. In order to ensure that the Company has
authorized a sufficient amount of shares to meet the Reserved Amount at
all times, the Company must deliver to the Buyer at the end of every
month a list detailing (1) the current amount of shares authorized by
18
the Company and reserved for the Buyer; and (2) amount of shares
issuable upon conversion of the Notes and upon exercise of the Warrants
and as payment of interest accrued on the Notes for one year. If the
Company fails to provide such list within five (5) business days of the
end of each month, the Company shall pay the Standard Liquidated
Damages Amount, in cash or in shares of Common Stock at the option of
the Buyer, until the list is delivered. If the Buyer elects to be paid
the Standard Liquidated Damages Amount in shares of Common Stock, such
shares shall be issued at the Conversion Price at the time of payment.
i. Listing. The Company shall promptly secure the
listing of the Conversion Shares and Warrant Shares upon each national
securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of
issuance) and, so long as any Buyer owns any of the Securities, shall
maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Conversion Shares and Warrant Shares from
time to time issuable upon conversion of the Notes or exercise of the
Warrants. The Company will obtain and, so long as any Buyer owns any
of the Securities, maintain the listing and trading of its Common Stock
on the OTCBB or any equivalent replacement exchange, the Nasdaq
National Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq
SmallCap"), the New York Stock Exchange ("NYSE"), or the American Stock
Exchange ("AMEX") and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of
the National Association of Securities Dealers ("NASD") and such
exchanges, as applicable. The Company shall promptly provide to each
Buyer copies of any notices it receives from the OTCBB and any other
exchanges or quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing on
such exchanges and quotation systems.
j. Corporate Existence. So long as a Buyer
beneficially owns any Notes or Warrants, the Company shall maintain its
corporate existence and shall not sell all or substantially all of the
Company's assets, except in the event of a merger or consolidation or
sale of all or substantially all of the Company's assets, where the
surviving or successor entity in such transaction (i) assumes the
Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly
traded corporation whose Common Stock is listed for trading on the
OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
k. No Integration. The Company shall not make any
offers or sales of any security (other than the Securities) under
circumstances that would require registration of the Securities being
offered or sold hereunder under the 1933 Act or cause the offering of
the Securities to be integrated with any other offering of securities
by the Company for the purpose of any stockholder approval provision
applicable to the Company or its securities.
l. Subsequent Investment. The Company and the
Buyers agree that, upon the declaration of effectiveness of the
Registration Statement to be filed pursuant to the Registration Rights
19
Agreement (the "Effective Date"), the Buyers shall purchase additional
notes (the "Additional Notes") in the aggregate principal amount of
Four Hundred Thousand Dollars ($400,000), for an aggregate purchase
price of Four Hundred Thousand Dollars ($400,000), with the closing of
such purchase to occur within five (5) days of the Effective Date;
provided, however, that the obligation of each Buyer to purchase the
Additional Notes is subject to the satisfaction, at or before the
closing of such purchase and sale, of the conditions set forth in
Section 7; and, provided, further, that there shall not have been a
Material Adverse Effect as of such effective date. The terms of the
Additional Notes shall be identical to the terms of the Notes to be
issued on the Closing Date. The Common Stock underlying the Additional
Notes shall be Registrable Securities (as defined in the Registration
Rights Agreement) and shall be included in the Registration Statement
to be filed pursuant to the Registration Rights Agreement.
m. Key Man Insurance. The Company shall use its
best efforts to obtain, on or before five (5) business days from the
date hereof, key man life insurance on all of the Company's officers
and division heads.
n. Breach of Covenants. If the Company breaches
any of the covenants set forth in this Section 4, and in addition to
any other remedies available to the Buyers pursuant to this Agreement,
the Company shall pay to the Buyers the Standard Liquidated Damages
Amount, in cash or in shares of Common Stock at the option of the
Company, until such breach is cured. If the Company elects to pay the
Standard Liquidated Damages Amount in shares, such shares shall be
issued at the Conversion Price at the time of payment.
o. Trading Activities. Neither the Buyers nor
their affiliates has an open short position in the common stock of the
Company and the Buyers agree that they shall not, and that they will
cause their affiliates not to, engage in any short sales of or hedging
transactions with respect to the common stock of the Company.
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent to issue certificates,
registered in the name of each Buyer or its nominee, for the Conversion
Shares and Warrant Shares in such amounts as specified from time to
time by each Buyer to the Company upon conversion of the Notes or
exercise of the Warrants in accordance with the terms thereof (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of
the Conversion Shares and Warrant Shares under the 1933 Act or the date
on which the Conversion Shares and Warrant Shares may be sold pursuant
to Rule 144 without any restriction as to the number of Securities as
of a particular date that can then be immediately sold, all such
certificates shall bear the restrictive legend specified in Section
2(g) of this Agreement. 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(f) hereof (in the case of the Conversion Shares and Warrant Shares,
prior to registration of the Conversion Shares and Warrant Shares under
the 1933 Act or the date on which the Conversion Shares and Warrant
20
Shares may be sold pursuant to Rule 144 without any restriction as to
the number of Securities as of a particular date that can then be
immediately sold), 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 Registration Rights Agreement. Nothing in this
Section shall affect in any way the Buyer's obligations and agreement
set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the
Securities. If a Buyer provides the Company, at the cost of the
Company, with (i) an opinion of counsel in form, substance and scope
customary for opinions in comparable transactions, to the effect that a
public sale or transfer of such Securities may be made without
registration under the 1933 Act and such sale or transfer is effected
or (ii) the Buyer provides reasonable assurances that the Securities
can be sold pursuant to Rule 144, the Company shall permit the
transfer, and, in the case of the Conversion Shares and Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates,
free from restrictive legend, in such name and in such denominations as
specified by such Buyer. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Buyers,
by vitiating the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Section 5 may be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyers shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate transfer, without the
necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Notes and
Warrants to a Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date of each of the following conditions thereto,
provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion:
a. The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement, and delivered the same
to the Company.
b. The applicable Buyer shall have delivered the
Purchase Price in accordance with Section 1(b) above.
c. The representations and warranties of the
applicable Buyer shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made at that
time (except for representations and warranties that speak as of a
specific date), and the applicable Buyer shall have performed,
satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the
Closing Date.
21
d. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory organization
having authority over the matters contemplated hereby which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Notes and
Warrants at the Closing is subject to the satisfaction, at or before
the Closing Date of each of the following conditions, provided that
these conditions are for such Buyer's sole benefit and may be waived by
such Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement
and the Registration Rights Agreement, and delivered the same to the
Buyer.
b. The Company shall have delivered to such Buyer
duly executed Notes (in such denominations as the Buyer shall request)
and Warrants in accordance with Section 1(b) above.
c. The Irrevocable Transfer Agent Instructions, in
form and substance satisfactory to a majority-in-interest of the
Buyers, shall have been delivered to and acknowledged in writing by the
Company's Transfer Agent.
d. The representations and warranties of the
Company shall be true and correct in all material respects as of the
date when made and as of the Closing Date as though made at such time
(except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with
by the Company at or prior to the Closing Date. The Buyer shall have
received a certificate or certificates, executed by the chief executive
officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by
such Buyer including, but not limited to certificates with respect to
the Company's Certificate of Incorporation, By-laws and Board of
Directors' resolutions relating to the transactions contemplated
hereby.
e. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory organization
having authority over the matters contemplated hereby which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
22
f. No event shall have occurred which could
reasonably be expected to have a Material Adverse Effect on the
Company.
g. The Conversion Shares and Warrant Shares shall
have been authorized for quotation on the OTCBB and trading in the
Common Stock on the OTCBB shall not have been suspended by the SEC or
the OTCBB.
h. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer and in substantially the
same form as Exhibit "D" attached hereto.
i. The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the Closing
Date.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. THIS AGREEMENT SHALL BE
ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT
A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH
JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT
PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE
RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS' FEES,
INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.
b. Counterparts; Signatures by Facsimile. This
Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and
the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party. This
Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are
for convenience of reference only and shall not form part of, or affect
the interpretation of, this Agreement.
23
d. Severability. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative
to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision
hereof which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
e. Entire Agreement; Amendments. This Agreement
and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither the
Company nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the majority in interest of the Buyers.
f. Notices. Any notices required or permitted to
be given under the terms of this Agreement shall be sent by certified
or registered mail (return receipt requested) or delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile and shall be effective five days after being placed in the
mail, if mailed by regular United States mail, or upon receipt, if
delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
Cross Atlantic Commodities, Inc.
0000 Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: [ ]
With a copy to:
Xxxxxx & Xxxxxx, LLP
000 Xxxxx 0, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
With copy to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
24
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each party shall provide notice to the other party of any change
in address.
g. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
successors and assigns. Neither the Company nor any Buyer shall assign
this Agreement or any rights or obligations hereunder without the prior
written consent of the other. Notwithstanding the foregoing, subject
to Section 2(f), any Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from a Buyer
or to any of its "affiliates," as that term is defined under the 1934
Act, without the consent of the Company.
h. 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. The representations and warranties of
the Company and the agreements and covenants set forth in Sections 3,
4, 5 and 8 shall survive the closing hereunder notwithstanding any due
diligence investigation conducted by or on behalf of the Buyers. The
Company agrees to indemnify and hold harmless each of the Buyers and
all their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach by
the Company of any of its representations, warranties and covenants set
forth in Sections 3 and 4 hereof or any of its covenants and
obligations under this Agreement or the Registration Rights Agreement,
including advancement of expenses as they are incurred.
j. Publicity. The Company, and each of the Buyers
shall have the right to review a reasonable period of time before
issuance of any press releases, SEC, OTCBB or NASD filings, or any
other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without
the prior approval of each of the Buyers, to make any press release or
SEC, OTCBB (or other applicable trading market) or NASD filings with
respect to such transactions as is required by applicable law and
regulations (although each of the Buyers shall be consulted by the
Company in connection with any such press release prior to its release
and shall be provided with a copy thereof and be given an opportunity
to comment thereon).
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.
25
l. No Strict Construction. The language used in
this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction
will be applied against any party.
m. Remedies. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm
to the Buyers 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 Agreement will
be inadequate and agrees, in the event of a breach or threatened breach
by the Company of the provisions of this Agreement, that the Buyers
shall be entitled, in addition to all other available remedies at law
or in equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach
of this Agreement and to enforce specifically the terms and provisions
hereof, without the necessity of showing economic loss and without any
bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
IN WITNESS WHEREOF, the undersigned Buyers and the Company have
caused this Agreement to be duly executed as of the date first above
written.
CROSS ATLANTIC COMMODITIES, INC.
/s/ Xxxxxxx Enemaerke
-------------------------------
Xxxxxxx Enemaerke
Chief Executive Officer and President
AJW PARTNERS, LLC
By: SMS Group, LLC
/s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: Delaware
ADDRESS: 0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes:
Number of Warrants:
Aggregate Purchase Price:
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
/s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: Cayman Islands
ADDRESS: AJW Offshore, Ltd.
X.X. Xxx 00000 XXX
Xxxxx Xxxxxx, Xxxxxx Island, B.W.I.
27
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes:
Number of Warrants:
Aggregate Purchase Price:
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
/s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: New York
ADDRESS: 0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes:
Number of Warrants:
Aggregate Purchase Price:
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLP
/s/ Xxxxx X. Xxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxx
Manager
RESIDENCE: New York
ADDRESS: 0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Notes:
Number of Warrants:
Aggregate Purchase Price:
27
