SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of March
__, 2006 among CYBRA Corporation, a New York corporation (the "Company"), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in
Section 3.1(j).
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or
is under common control with a Person, as such terms are used in and
construed under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on
a discretionary basis by the same investment manager as such
Purchaser will be deemed to be an Affiliate of such Purchaser.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States or a
day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means subject to the provisions of Section 5.1,
the Business Day when all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers' obligations to pay the
Subscription Amount and (ii) the Company's obligations to deliver
the Securities have been satisfied or waived.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, no par
value per share, and any other class of securities into which such
securities may hereafter have been reclassified or changed into.
"Common Stock Equivalents" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
"Company Counsel" means Thomas G. Amon, Esq., 500 Fifth
Avenue, Suite 1650, New York, NY 10110, Fax: (212) 810-2427, email:
tamon@amonlaw.com.
"Conversion Price" shall have the meaning ascribed thereto in
the Debentures.
"Debentures" means the 8% Convertible Debentures due three
years after the issue date, subject to the terms therein to be
issued to the Purchasers hereunder in the form of Exhibit F.
"Disclosure Schedules" shall have the meaning ascribed to such
term in Section 3.1.
"Effective Date" means the date that the initial registration
statement filed by the Company pursuant to the Registration Rights
Agreement for the Registrable Securities is first declared effective
by the Commission.
"Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
"Escrow Agreement" shall mean the Escrow Agreement in
substantially the form of Exhibit E hereto executed and delivered
contemporaneously with this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exempt Issuance" means the issuance of (a) shares of Common
Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan unanimously adopted by the
Board of Directors of the Company or a majority of the members of a
committee of directors established for such purpose, (b) securities
upon the exercise of or conversion of any Securities issued
hereunder, convertible securities, options or warrants issued and
outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise
or conversion price of any such securities, (c) securities issued
pursuant to acquisitions or strategic transactions, provided any
such issuance shall only be to a non-affiliated Person which is,
itself or through its subsidiaries, an operating company in a
business synergistic with the business of the Company and in which
the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital or
to an entity whose primary business is investing in securities, and
(d) securities described on the Schedules hereto.
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"Fully-Diluted Outstanding Capital Stock" means the sum of (i)
the total number of then issued and outstanding shares of Common
Stock and all other classes of capital stock of the Company, plus
(ii) the total number of shares of all Common Stock and all other
classes of capital stock of the Company into which all then issued
and outstanding and fully-vested Common Stock Equivalents and other
securities are convertible, exchangeable or otherwise into other
classes of capital stock of the company may be converted,
exchangeable or otherwise.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"GM" means Grushko & Mittman, P.C., with offices located at
551 Fifth Avenue, Suite 1601, New York, NY 10176, Fax: (212)
697-3575, email: counslers@aol.com.
"Government Entity" shall have the meaning ascribed to such
term in Section 4.20.
"Intellectual Property Rights" shall have the meaning ascribed
to such term in Section 3.1(o).
"Legend Removal Date" shall have the meaning ascribed to such
term in Section 4.1(c).
"Liens" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"Listing Date" shall have the meaning ascribed to such term in
Section 4.12(c).
"Lock Up Agreement" shall have the meaning ascribed to such
term in Section 3.1(ss) in the form of Exhibit D.
"Material Adverse Effect" shall have the meaning assigned to
such term in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such
term in Section 3.1(m).
"Maximum Rate" shall have the meaning ascribed to such term in
Section 5.17.
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"Minimum Amount" shall have the meaning ascribed to such term
in Section 4.17.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"Pre-Notice" shall have the meaning ascribed to such term in
Section 4.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
"Purchaser Party" shall have the meaning ascribed to such term
in Section 4.11.
"Records" means all documents, books, records and other
information (including, without limitation, computer programs,
tapes, disks, punch cards, data processing software and related
property and rights) maintained with respect to the Company's
business.
"Registrable Securities" means (i) all of the shares of
Underlying Shares, (ii) all Warrant Shares, (iii) any securities
issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the
shares identified in clauses (i) and (ii) above and (iv) any
additional shares issuable in connection with any anti-dilution
provisions in the Debentures and Warrants (without giving effect to
any limitations on exercise set forth in the Debentures and
Warrants), but in no event less than the Required Minimum.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit B attached hereto.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by each
Purchaser as provided for in the Registration Rights Agreement.
"Required Minimum" means, as of any date, the maximum
aggregate number of shares of Common Stock then issued or
potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise or
conversion in full of all Warrants and Debentures, ignoring any
conversion or exercise limits set forth therein, and assuming that
the Conversion Price is at all times on and after the date of
determination 75% of the then Conversion Price on the Business Day
immediately prior to the date of determination.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.
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"Securities" means the Debentures, Underlying Shares, Warrants
and Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Short Sales" shall include all "short sales" as defined in
Rule 200 of Regulation SHO under the Exchange Act.
"Subscription Amount" means, as to each Purchaser, the
aggregate amount to be paid for Debentures and Warrants purchased
hereunder as specified below such Purchaser's name on the signature
page of this Agreement and next to the heading "Subscription
Amount", in United States Dollars and in immediately available
funds. The dollar amount of the Subscription Amount shall equal the
principal amount of the Debentures and shall be allocated entirely
to the acquisition cost of the Debentures.
"Subsequent Financing" shall have the meaning ascribed to such
term in Section 4.25.
"Subsequent Financing Notice" shall have the meaning ascribed
to such term in Section 4.25.
"Subsidiary" means any subsidiary of the Company as set forth
on Schedule 3.1(a).
"Trading Market" means, as applicable, the following markets
or exchanges on which the Common Stock is listed or quoted for
trading on the date in question: the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market, the Nasdaq
Capital Market or the OTC Bulletin Board.
"Transaction Documents" means this Agreement, the Debentures,
the Registration Rights Agreement, the Warrants, Escrow Agreement
and any other documents or agreements executed in connection with
the transactions contemplated hereunder.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Debentures.
"Variable Rate Transaction" shall have the meaning ascribed to
such term in Section 4.14.
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is
then listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg Financial L.P. (based
on a Business Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern
Time); (b) if the Common Stock is not then listed or quoted on a
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Trading Market and if prices for the Common Stock are then reported
in the "Pink Sheets" published by the Pink Sheets LLC (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported; or (c) in all other cases, the fair market value of a
share of Common Stock as determined by an independent appraiser
selected in good faith by the Purchasers and reasonably acceptable
to the Company.
"Warrants" means collectively the Common Stock purchase
warrants, in the form of Exhibit A delivered to the Purchasers at
the Closing in accordance with Section 2.2(a) hereof.
"Warrant Shares" means all of the shares of Common Stock
issuable upon exercise of the Warrants at all times.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, up to $2,500,000
of aggregate Subscription Amount. Each Purchaser shall deliver to the Company
via wire transfer or a certified check for immediately available funds equal to
their Subscription Amount and the Company shall deliver to each Purchaser their
respective Debentures and Warrants as determined pursuant to Section 2.2(a) and
the other items set forth in Section 2.2(a) issuable at the Closing. Upon
satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing
shall occur at the offices of GM, or such other location as the parties shall
mutually agree.
2.2 Deliveries.
a) On the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a legal opinion of Company Counsel, in the form of
Exhibit C attached hereto;
(iii) a Debenture with a principal amount equal to such
Purchaser's Subscription Amount, registered in the name
of such Purchaser;
(iv) a Warrant registered in the name of such Purchaser to
purchase shares of Common Stock in the amount and at the
prices set forth in Exhibit A;
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(v) the Registration Rights Agreement duly executed by the
Company;
(vi) the Escrow Agreement duly executed by the Company; and
(vii) duly executed lock-up agreements, in the form of Exhibit
D attached hereto, from each officer, director,
employee, consultant and advisor of the Company and from
each shareholder of the Company owning more than 5% of
the issued and outstanding shares of Common Stock (or
Common Stock Equivalents on a fully converted basis),
who are identified on Schedule 2.2(a).
b) On the Closing Date, each Purchaser shall deliver or cause to
be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount by wire transfer to
the account specified in the Escrow Agreement;
(iii) the Escrow Agreement duly executed by such Purchaser;
and
(iv) the Registration Rights Agreement duly executed by such
Purchaser.
2.3 Closing Conditions.
a) The obligations of the Company hereunder in connection with
the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects when made and on
the Closing Date of the representations and warranties
of the Purchasers contained herein;
(ii) all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to the
Closing Date shall have been performed; and
(iii) the delivery by the Purchasers of the items set forth in
Section 2.2(b) of this Agreement.
b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following
conditions being met:
(i) the Company shall have entered into agreements for the
purchase of $2,500,000 of principal amount of Debentures
hereunder;
(ii) the accuracy in all material respects on the Closing
Date of the representations and warranties of the
Company contained herein;
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(iii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date
shall have been performed;
(iv) the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;
(v) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof; and
(vi) from the date hereof to the Closing Date, there shall
not have been a banking moratorium declared either by
the United States or New York State authorities nor
shall there have occurred any material outbreak or
escalation of hostilities or other national or
international calamity of such magnitude in its effect
on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment
of each Purchaser, makes it impracticable or inadvisable
to purchase the Debentures and Warrants at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (the "Disclosure Schedules") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.
(a) Subsidiaries. All of the direct subsidiaries of the Company are
set forth on Schedule 3.1(a). The Company owns all of the capital stock or
other equity interests of each Subsidiary free and clear of any Liens, and
all the issued and outstanding shares of capital stock of each Subsidiary
are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase securities. If
the Company has no subsidiaries, then references in the Transaction
Documents to the Subsidiaries will be disregarded.
(b) Organization and Qualification. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing
as a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, could not have or reasonably be
expected to result in (i) a material adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material
adverse effect on the results of operations, assets, business, prospects
or financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company's ability to
perform in any material respect on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a "Material Adverse
Effect") and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail
such power and authority or qualification.
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(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company. Each
Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors'
rights generally and (ii) as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable remedies.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the other transactions contemplated thereby do not and will not: (i)
conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would
become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) conflict with or result in a
violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to
which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each
of clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.
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(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents.
(f) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents.
The Securities, when issued in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company. The
Company has reserved from its duly authorized capital stock a number of
shares of Common Stock at least equal to the Required Minimum on the date
hereof.
(g) Capitalization. The capitalization of the Company is as set
forth on Schedule 3.1(g). No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities or as set
forth on Schedule 3.1(g), there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible
into or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is
or may become bound to issue additional shares of Common Stock or Common
Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities
to any Person (other than the Purchasers) and will not result in a right
of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required
for the issuance and sale of the Securities. Except as disclosed in
Schedule 3.1(g), there are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company's capital stock to
which the Company is a party or, to the knowledge of the Company, between
or among any of the Company's stockholders. A complete list of
stockholders of record, with their shareholdings as of March 1, 2006, is
included in Schedule 3.1(g).
(h) Financial Statements. The audited financial statements of the
Company for the last three fiscal years ended December 31, 2003, 2004 and
2005 and unaudited statements for the most recent fiscal quarter if an
entire quarter has elapsed since December 31, 2005 and prior to the
Closing Date, are attached hereto as Schedule 3.1(h). Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the
periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and
fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
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(i) Material Changes. Since the date of the Company's most recent
financial statements, attached hereto as Schedule 3.1(h), (i) there has
been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company's financial statements pursuant to
GAAP, (iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash or
other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock and (v)
the Company has not issued any equity securities to any officer, director
or Affiliate, except pursuant to existing Company stock option plans.
(j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or
any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities or (ii) could, if
there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect.
(l) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is or has been in violation of any statute,
rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its
business except in each case as could not have a Material Adverse Effect.
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(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as listed on Schedule 3.1(m), except
where the failure to possess such permits could not have or reasonably be
expected to result in a Material Adverse Effect ("Material Permits"), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries
and Liens for the payment of federal, state or other taxes, the payment of
which is neither delinquent nor subject to penalties. Any real property
and facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases of which the
Company and the Subsidiaries are in compliance in all material respects.
(o) Intellectual Property.
(i) The term "Intellectual Property Rights" includes:
1. the name of the Company, all fictional business
names, trading names, registered and unregistered
trademarks, service marks, and applications
(collectively, "Marks");
2. all patents, patent applications, and inventions
and discoveries that may be patentable
(collectively, "Patents");
3. all copyrights in both published works and
published works (collectively, "Copyrights");
4. all rights in mask works (collectively, "Rights in
Mask Works"); and
5. all know-how, trade secrets, confidential
information, customer lists, software, technical
information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade
Secrets"); owned, used, or licensed by the Company
as licensee or licensor.
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(ii) Agreements. Schedule 3.1(o) contains a complete and
accurate list and summary description including any royalties
paid or received by the Company, of all contracts relating to
the Intellectual Property Rights to which the Company is a
party or by which the Company is bound, except for any license
implied by the sale of a product and perpetual, paid-up
licenses for commonly available software programs with a value
of less than $10,000 under which the Company is the licensee.
There are no outstanding and, to Company's knowledge, no
threatened disputes or disagreements with respect to any such
agreement.
(iii) Know-How Necessary for the Business. The Intellectual
Property Rights are all those necessary for the operation of
the Company's businesses as it is currently conducted or as
reflected in the business plan given to the Purchaser. The
Company is the owner of all right, title, and interest in and
to each of the Intellectual Property Rights, free and clear of
all liens, security interests, charges, encumbrances,
equities, and other adverse claims, and has the right to use
without payment to a third party all of the Intellectual
Property Rights. To the Company's knowledge, no employee of
the Company has entered into any contract that restricts or
limits in any way the scope or type of work in which the
employee may be engaged or requires the employee to transfer,
assign, or disclose information concerning his work to anyone
other than of the Company.
(iv) Know-How Necessary for the Business. Schedule 3.1(o)
contains a complete and accurate list and summary description
of all Patents. The Company is the owner of all right, title
and interest in and to each of the Patents, free and clear of
all liens, security interests, charges, encumbrances,
entities, and other adverse claims. All of the issued Patents
are currently in compliance with formal legal requirements
(including payment of filing, examination, and maintenance
fees and proofs of working or use), are valid and enforceable,
and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the Closing Date.
No patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To the
Company's knowledge, there is no potentially interfering
patent or patent application of any third party. No Patent is
infringed or, to the Company's knowledge, has been challenged
or threatened in any way. To the Company's knowledge, none of
the products manufactured and sold, nor any process or
know-how used, by the Company infringes or is alleged to
infringe any patent or other proprietary right of any other
Person. All products made, used, or sold under the Patents
have been marked with the proper patent notice.
13
(v) Trademarks. Schedule 3.1(o) contains a complete and
accurate list and summary description of all Marks. The
Company is the owner of all right, title, and interest in and
to each of the Marks, free and clear of all liens, security
interests. charges, encumbrances, equities, and other adverse
claims. All Marks that have been registered with the United
States Patent and Trademark Office are currently in compliance
with all formal legal requirements (including the timely
post-registration tiling of affidavits of use and
incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety days after the
Closing Date. No Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to the
Company's knowledge, no such action is threatened with respect
to any of the Marks. To the Company's knowledge, there is no
potentially interfering trademark or trademark application of
any third party. No Mark is infringed or, to the Company's
knowledge, has been challenged or threatened in any way. To
the Company's knowledge, none of the Marks used by the Company
infringes or is alleged to infringe any trade name, trademark,
or service mark of any third party. All products and materials
containing a Mark bear the proper federal registration notice
where permitted by law.
(vi) Copyrights. Schedule 3.1(o) contains a complete and
accurate list and summary description of all Copyrights. The
Company is the owner of all right, title, and interest in and
to each of the Copyrights, free and clear of all liens,
security interests, charges, encumbrances, equities, and other
adverse claims. All the Copyrights have been registered and
are currently in compliance with formal requirements, are
valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after
the date of Closing. No Copyright is infringed or, to the
Company's knowledge, has been challenged or threatened in any
way. To the Company's knowledge, none of the subject matter of
any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on
the work of a third party. All works encompassed by the
Copyrights have been marked with the proper copyright notice.
1. Trade Secrets. With respect to each Trade Secret, the
documentation relating to such Trade Secret is current,
accurate, and sufficient in detail and content to identify and
explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual. The
Company has taken all reasonable precautions to protect the
secrecy, confidentiality, and value of its Trade Secrets. The
Company has good title and an absolute (but not necessarily
exclusive) right to use the Trade Secrets. The Trade Secrets
are not part of the public knowledge or literature, and, to
the Company's knowledge, have not been used, divulged, or
appropriated either for the benefit of any Person (other the
Company) or to the detriment of the Company. No Trade Secret
is subject to any adverse claim or has been challenged or
threatened in any way.
14
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged. To the best of
Company's knowledge, such insurance contracts and policies are accurate
and complete. Neither the Company nor any 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 without a
significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set forth
in Schedule 3.1(q), none of the officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company are
presently a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to
or from, or otherwise requiring payments to or from any officer, director
or such employee or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
$60,000 other than (i) for payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls which the Company
believes is sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP 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..
(s) Certain Fees. Except as set forth on Schedule 3.1(s), no
brokerage or finder's fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by
or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated
by this Agreement.
(t) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby.
15
(u) Investment Company. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Securities, will not
be or be an Affiliate of, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended. The Company shall conduct
its business in a manner so that it will not become subject to the
Investment Company Act.
(v) Registration Rights. Other than each of the Purchasers, no
Person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company.
(w) Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company's Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company's issuance of the Securities and the
Purchasers' ownership of the Securities.
(x) Disclosure. The Company understands and confirms that the
Purchasers will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company. All disclosure
provided to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Disclosure Schedules to
this Agreement, furnished by or on behalf of the Company with respect to
the representations and warranties made herein are true and correct with
respect to such representations and warranties and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2
hereof.
(y) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions which integration would impair
the exemptions relied upon for the offer, sale and issuance of the
Securities.
16
(z) Solvency. Based on the financial condition of the Company as of
the Closing Date after giving effect to the receipt by the Company of the
proceeds from the sale of the Securities hereunder, (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to
be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii)
the Company's assets do not constitute unreasonably small capital to carry
on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the
Company, and projected capital requirements and capital availability
thereof; and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such
amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of
its debt).
(aa) Tax Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and each Subsidiary has filed all necessary
federal, state and foreign income and franchise tax returns and has paid
or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
(bb) No General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising. The Company
has offered the Securities for sale only to the Purchasers and certain
other "accredited investors" within the meaning of Rule 501 under the
Securities Act.
(cc) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed
to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision
of the Foreign Corrupt Practices Act of 1977, as amended.
(dd) Accountants. The Company's accountants are set forth on
Schedule 3.1(dd) of the Disclosure Schedule.
(ee) Indebtedness and Seniority. As of the date hereof, all
indebtedness and liens of the Company are as set forth on Schedule
3.1(ee). As of the Closing Date, no indebtedness or other equity of the
Company is senior to the Debentures in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise,
other than indebtedness secured by purchase money security interests
(which is senior only as to underlying assets covered thereby) and capital
lease obligations (which is senior only as to the property covered
thereby).
17
(ff) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by
the Company to arise, between the accountants and lawyers formerly or
presently employed by the Company and the Company is current with respect
to any fees owed to its accountants and lawyers.
(gg) Acknowledgment Regarding Purchasers' Purchase of Securities.
The Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby. The
Company further acknowledges that no Purchaser 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
advice given by any Purchaser or any of their respective representatives
or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Purchasers' purchase of
the Securities. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely on
the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(hh) Manufacturing and Marketing Rights. Except as set forth on
Schedule 3.1(hh), the Company has not granted rights to develop,
manufacture, produce, assemble, license, distribute, market, or sell its
products to any other Person and is not bound by any agreement that
affects the Company's exclusive right to develop, manufacture, produce,
assemble, license, distribute, market or sell its products.
(ii) Employees. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity
pending or, to the Company's knowledge, threatened with respect to the
Company. Except as set forth on Schedule 3.1(ii), the Company is not a
party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan, incentive plan, retirement agreement
or other employee compensation plan or agreement. Except as set forth on
Schedule 3.1(ii), the Company is not a party to any profit sharing plan.
To the Company's knowledge, no employee of the Company, nor any consultant
with whom the Company has contracted, is in violation of any term of any
employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by,
or to contract with, the Company because of the nature of the business to
be conducted by the Company; and to the Company's knowledge the continued
employment by the Company of its present employees, and the performance of
the Company's contracts with its independent contractors, will not result
in any such violation. The Company has not received any notice alleging
that any such violation has occurred. No employee of the Company has been
granted the right to continued employment by the Company or to any
material compensation following termination of employment with the
Company. The Company is not aware that any officer, key employee or group
of employees intends to terminate his, her or their employment with the
Company nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.
18
(jj) Obligations of Management. Except for the Company's Treasurer,
each officer and key employee of the Company is currently devoting
substantially all of his or her business time to the conduct of business
of the Company and the Company is not aware that any officer or key
employee of the Company is planning to work less than full time at the
Company in the future. No officer or key employee is the currently working
or, to the Company's knowledge, plans to work for a competitive
enterprise, whether or not such officer of key employee is or will be
compensated by such enterprise.
(kk) Environmental and Safety Laws. Except as set forth in Schedule
3.1(kk):
(i) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of
or liable under, any Environmental Law. The Company has no
basis to expect, nor has it or any other Person for whose
conduct it is or may be held to be responsible received, any
actual or threatened order, notice, or other communication
from (i) any governmental body or private citizen acting in
the public interest, or (ii) the current or prior owner or
operator of any facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or
of any actual or threatened obligation to undertake or bear
the cost of any environmental, health, and safety liabilities
with respect to any of the facilities or any other properties
or assets (whether real, personal, or mixed) in which the
Company has had an interest, or with respect to any property
or facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or
processed by the Company, or any other Person for whose
conduct it are or may be held responsible, or from which
Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(ii) There are no pending or, to the knowledge of the Company,
threatened claims, encumbrances, or other restrictions of any
nature, resulting from any environmental, health, and safety
liabilities or arising under or pursuant to any Environmental
Law, with respect to or affecting any of the facilities or any
other properties and assets (whether real, personal, or mixed)
in which the Company has or had an interest.
19
(iii) The Company has no knowledge of any basis to expect, nor
has it or any other Person for whose conduct it is or may be
held responsible, received, any citation, directive, inquiry,
notice, order, summons, warning, or other communication that
relates to Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any environmental,
health, and safety liabilities with respect to any of the
facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company had an interest, or
with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred,
imported, used, or processed by the Company, or any other
Person for whose conduct it is or may be held responsible,
have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(iv) Neither the Company nor any other Person for whose
conduct it is or may be held responsible, had any
environmental, health, and safety liabilities with respect to
the facilities or, to the knowledge of the Company, with
respect to any other properties and assets (whether real,
personal, or mixed) in which the Company (or any predecessor),
has or had an interest, or at any property geologically or
hydrologically adjoining the facilities or any such other
property or assets.
(v) There are no Hazardous Materials present on or in the
environment at the facilities or at any geologically or
hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage
tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or
any other part of the facilities or such adjoining property,
or incorporated into any structure therein or thereon. Neither
the Company nor any other Person for whose conduct it is or
may be held responsible, or to the knowledge of the Company,
any other Person, has permitted or conducted, or is aware of,
any hazardous activity conducted with respect to the
facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company has or had an
interest except in full compliance with all applicable
Environmental Laws.
(vi) There has been no release or, to the knowledge of the
Company, threat of release, of any Hazardous Materials at or
from the facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by
the facilities, or from or by any other properties and assets
(whether real, personal, or mixed) in which the Company has or
had an interest, or to the knowledge of the Company any
geologically or hydrologically adjoining property, whether by
the Company, or any other Person.
(vii) The Company has delivered to the Purchasers true and
complete copies and results of any reports, studies, analyses,
tests, or monitoring possessed or initiated by the Company
pertaining to Hazardous Materials in, on, or under the
facilities, or concerning compliance by the Company, or any
other Person for whose conduct they are or may be held
responsible, with Environmental Laws.
20
(viii) For the purpose of this Section, Hazardous Material
shall mean (i) materials which are listed or otherwise defined
as "hazardous" or "toxic" under any applicable federal, local
or stated and/or foreign laws and regulations that govern the
existence and/or remedy of contamination on property, the
protection of the environment from contamination, the control
of the hazardous wastes, or other activities involving
hazardous substances, including building materials or (b)
petroleum products or nuclear materials.
(ix) For the purpose of this Section 3.1(kk), "Environmental
Law" shall have the following meaning:
1. advising appropriate authorities, employees, and the
public intended or actual releases of pollutants or
hazardous substances or material, violations of
discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction
or construction, that could have significant impact on
the environment;
2. preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into
the environment;
3. reducing the quantities, preventing the release, or
minimizing the hazardous characterics of waste that are
generated;
4. assuring that products are designed, formulated,
packaged, and used so that they do not present
unreasonable risks to human health or the environment
when used or disposed of;
5. protecting resources, species or ecological amenities;
6. reducing to acceptable levels the risk inherent in the
transportation of hazardous substances, pollutants, oil
or other potentially harmful substances;
7. cleaning up pollutants that have been released,
preventing the threat of release or paying the costs of
such clean up or prevention; or
8. making responsible parties pay private parties, or
groups of them, for damages done to their health or to
the environment, or permitting self appointed
representatives of the public interest to recover for
injuries done to public assets.
21
(ll) Minute Books. The minute books of the Company made available to
the Purchasers contain an accurate and complete summary of all meetings of
directors and stockholders since the time of incorporation.
(mm) Lock Up. The parties identified on Schedule 3.1(mm) who are
officers, directors, and shareholders of the Company will enter into an
agreement restricting the sales of Common Stock in the form of Exhibit D
("Lock Up Agreement").
(nn) Accounts Receivable. All accounts receivable of the Company and
its Subsidiaries that are reflected on the Company's balance sheet or
interim balance sheet or on the accounting records of the Company and its
Subsidiaries as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from
sales actually made or services actually performed in the ordinary course
of business. Unless paid prior to the Closing Date, the Accounts
Receivable are or will be as of the Closing Date current and collectible
net of the respective reserves shown on the balance sheet or interim
balance sheet or on the accounting records of the Company and its
Subsidiaries as of the Closing Date (which reserves are adequate and
calculated consistent with past practice and, in the case of the reserve
as of the Closing Date, will not represent a greater percentage of the
Accounts Receivable as of the Closing Date than the reserve reflected in
the interim balance sheet represented of the Accounts Receivable reflected
therein and will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging). Subject to
such reserves, each of the Accounts Receivable either has been or will be
collected in full without any set-off, within ninety days after the day on
which it must becomes due and payable. There is no contest, claim, or
right of set-off, other than returns in the ordinary course of business,
under any agreement and/or contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Schedule 3.1(nn) contains a complete and accurate list of all Accounts
Receivable as of the date of the interim balance sheet, which list sets
forth the aging of such Accounts Receivable.
(oo) Inventory. All inventory of the Company and the Subsidiaries,
whether or not reflected in the balance sheet or interim balance sheet,
consists of a quality and quantity usable and salable in the ordinary
course of business, except for obsolete items and items of below standard
quality, all of which have been written off or written down to net
realizable value in the balance sheet or interim balance sheet or on the
accounting records of the Company and the Subsidiaries as of the Closing
Date, as the case may be. All inventories not written off have been priced
at the lower of cost or market on the last in, first out basis. The
quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable
in the present circumstances of the Company and the Subsidiaries.
(pp) Employee Benefits: Except as set forth on Schedule 3.1(pp), the
Company has no plans which are subject to ERISA. "ERISA" means the
Employee Retirement Income Security Act of 1974 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
22
(qq) Returns and Complaints. The Company has received no customer
complaints concerning its products and/or services, nor has it had any of
its products returned by a purchaser thereof, other than minor,
nonrecurring warranty or similar problems occurring in the normal course
of its business.
(rr) Material Agreements. Schedule 3.1(rr) sets forth all agreements
of the Company that would otherwise be required to be filed with the
Commission pursuant to the Exchange Act, if the Company were subject to
the reporting requirements of the Exchange Act.
(ss) Subsidiary Representations. All of the representations,
warranties and disclosure described in Article III of this Agreement are
hereby made by the Company with respect to each of the Subsidiaries. All
such disclosure is made on the Schedules hereto with respect to the
Subsidiaries.
(tt) Valuation. The Company represents that the initial Conversion
Price of $0.50 on the Closing Date is equal to $5,800,000 divided by the
Fully Diluted Outstanding Capital Stock as of immediately prior to the
Closing. The Company further represents that the value of the Fully
Diluted Outstanding Capital Stock immediately after the Closing, at a per
share value of $0.50 will be $8,300,000.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate or similar action on the part
of such Purchaser. Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser
in accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
23
(b) Own Account. Such Purchaser understands that the Securities are
"restricted securities" and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities
as principal for its own account and not with a view to or for
distributing or reselling such Securities or any part thereof in violation
of the Securities Act or any applicable state securities law, has no
present intention of distributing any of such Securities in violation of
the Securities Act or any applicable state securities law and has no
arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not
limiting such Purchaser's right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal
and state securities laws) in violation of the Securities Act or any
applicable state securities law. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such
Purchaser does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it exercises any Warrants or converts any Debentures it will be
either: (i) an "accredited investor" as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a "qualified
institutional buyer" as defined in Rule 144A(a) under the Securities Act.
Such Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(f) Short Sales. For the period of time commencing upon the
execution of this Agreement and ending one year after the Effective Date
the Purchaser and its Affiliates will not enter into or effect any Short
Sales of the Common Stock or hedging transaction which establish a net
short position with respect to the Common Stock.
(g) Reliance. The Purchasers acknowledge that the Company will be
relying on the foregoing representations and warranties in making a
determination as to the availability of federal and state securities laws
exemptions. The Company acknowledges and agrees that each Purchaser does
not make or has not made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set
forth in this Section 3.2.
24
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to
the Company or to an affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be
bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Securities in the
following form:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE [EXERCISABLE] [CONVERTIBLE] HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the
Securities to a financial institution that is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and who agrees to be bound
by the provisions of this Agreement and the Registration Rights Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties.
Such a pledge or transfer would not be subject to approval of the Company
and no legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice
shall be required of such pledge. At the appropriate Purchaser's expense,
the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in
connection with a pledge or transfer of the Securities.
25
(c) Certificates evidencing the Underlying Shares and Warrant Shares
shall not contain any legend (including the legend set forth in Section
4.1(b) hereof): (i) following any sale of such shares pursuant to a
registration statement (including the Registration Statement) covering the
resale of such security, or (ii) following any sale of such shares
pursuant to Rule 144, or (iii) if such shares are eligible for sale under
Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company shall
cause its counsel to issue a legal opinion to the Company's transfer agent
promptly after the Effective Date if required by the Company's transfer
agent to effect the removal of the legend hereunder. If all or any portion
of a Debenture is converted or a Warrant is exercised at a time when there
is an effective Registration Statement to cover the resale of such shares
including, if the Securities are subject to registration pursuant to the
Registration Rights Agreement, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders thereunder, or if such Underlying Shares
and Warrant Shares may be sold under Rule 144(k) or if such legend is not
otherwise required under applicable requirements of the Securities Act
(including judicial interpretations thereof) then such shares shall be
issued free of all legends. The Company agrees that following the
Effective Date or at such time as such legend is no longer required under
this Section 4.1(c), it will, no later than three Business Days following
the delivery by a Purchaser to the Company or the Company's transfer agent
of a certificate representing such shares, as applicable, issued with a
restrictive legend (such third Business Day, the "Legend Removal Date"),
deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section. Certificates for
Securities subject to legend removal hereunder shall be transmitted by the
transfer agent of the Company to the Purchasers by crediting the account
of the Purchaser's prime broker with the Depository Trust Company System,
if applicable.
(d) If after the date hereof the Company becomes subject to the
reporting requirements of the Exchange Act, in addition to such
Purchaser's other available remedies, the Company shall pay to a
Purchaser, in cash, as partial liquidated damages and not as a penalty,
for each $1,000 of Underlying Shares and Warrant Shares (based on the VWAP
of the Common Stock on the date such Securities are submitted to the
Company's transfer agent) delivered for removal of the restrictive legend
and subject to Section 4.1(c), $10 per Business Day (increasing to $20 per
Business Day 5 Business Days after such damages have begun to accrue) for
each Business Day after the Legend Removal Date until such certificate is
delivered without a legend. Nothing herein shall limit such Purchaser's
right to pursue actual damages for the Company's failure to deliver
certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.
26
(e) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company's reliance that the Purchaser has sold or will
imminently sell any Securities pursuant to either the registration
requirements of the Securities Act, including compliance with applicable
prospectus delivery requirements, or an exemption therefrom.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares and Warrant Shares pursuant to the Transaction Documents, are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.
4.3 Furnishing of Information. If after the date hereof the Company
becomes subject to the reporting requirements of the Exchange Act and as long as
any Purchaser owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. As long as any Purchaser owns Securities and the Company is
subject to the reporting requirement of the Exchange Act, the Company will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchasers to sell the
Securities under Rule 144. As long as any Purchaser owns Securities and the
Company is subject to the reporting requirement of the Exchange Act, the Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
4.4 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
27
4.5 Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the
Debentures set forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
the Underlying Shares and Warrant Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents.
4.6 Securities Laws Disclosure; Publicity. The Company and each Purchaser
shall consult with each other in issuing any press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with the registration
statement contemplated by the Registration Rights Agreement and (ii) to the
extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under subclause (i) or (ii).
4.7 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.8 Non-Public Information. If at any time the Company becomes subject to
the reporting provisions of the Exchange Act, the Company covenants and agrees
that neither it nor any other Person acting on its behalf will provide any
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
4.9 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for the purposes set forth on Schedule 4.9 attached
hereto, and not for the satisfaction of any portion of the Company's
indebtedness (other than as shown on Schedule 4.9 and payment of trade payables
in the ordinary course of the Company's business and consistent with prior
practices) nor to redeem any Common Stock or Common Stock Equivalents or to
settle any outstanding litigation.
28
4.10 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.
4.11 Indemnification of Purchasers. Subject to the provisions of this
Section 4.11, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser
Party. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by a Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party's breach of any of
the representations, warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.
29
4.12 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents
in such amount as may be required to fulfill its obligations in full under
the Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than the Required
Minimum, then the Board of Directors of the Company shall use commercially
reasonable efforts to amend the Company's certificate or articles of
incorporation to increase the number of authorized but unissued shares of
Common Stock to at least the Required Minimmum at such time, as soon as
possible and in any event not later than the 75th day after such date.
(c) The Company shall, not later than ten days after the Effective
Date: (i) in the time and manner required by a Trading Market, prepare and
file with such Trading Market an additional shares listing application
covering a number of shares of Common Stock at least equal to the
Registrable Securities on the date of such application, (ii) take all
steps necessary to cause such Registrable Securities to be approved for
listing and actually listed on the Trading Market as soon as possible
thereafter but in no event later than fifty-five days after the Effective
Date ("Listing Date"), (iii) provide to the Purchasers evidence of such
listing, and (iv) maintain the listing of such Registrable Securities on
any date at least equal to the Required Minimum on such date on such
Trading Market or another Trading Market. In the event the shares of
Common Stock described above are not timely listed by the Listing Date, or
if the listing is not continuously maintained for two years after the
Listing Date (each a "Listing Default"), then in addition to any other
rights the Purchasers may have hereunder or under applicable law, on the
first day of a Listing Default and on each monthly anniversary of each
such Listing Default date (if the applicable Listing Default shall not
have been cured by such date) until the applicable Listing Default is
cured, the Company shall pay to each Purchaser an amount in cash, as
partial liquidated damages and not as a penalty, equal to 1.5% of the
aggregate purchase price paid by such Purchaser pursuant to this Agreement
for any Registrable Securities then held by such Purchaser. If the Company
fails to pay any partial liquidated damages pursuant to this Section in
full within seven days after the date payable, the Company will pay
interest thereon at a rate of 18% per annum (or such lesser maximum amount
that is permitted to be paid by applicable law) to the Purchaser, accruing
daily from the date such partial liquidated damages are due until such
amounts, plus all such interest thereon, are paid in full. The partial
liquidated damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of a Listing
Default.
30
4.13 Reporting Requirements. Until the time the Company becomes subject to
the reporting provisions of the Exchange Act, the Company shall furnish to each
Purchaser that holds Debentures and/or Undderlying Shares purchased for at least
$250,000, the following:
(a) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, audited financial
statements of the Company as at the end of such fiscal year and related
statements of income and expenses for such fiscal year, all in reasonable
detail and in scope to the Purchaser, prepared in accordance with GAAP,
with the opinion of an independent certified public accountant reasonably
acceptable to the Purchaser as evidenced by the prior written consent of
the Purchaser;
(b) As soon as available and in any event within forth-five (45)
days after the end of the sixth (6th) month of the Company's fiscal year,
reviewed financial statements of the Company as at the end of such six
month period and related statements of income and expenses for such
period, all in reasonable detail and scope to Purchaser, prepared in
accordance with GAAP, and prepared by an independent certified public
accountant reasonably acceptable to the Purchaser as evidenced by the
prior written consent of the Purchaser;
(c) As soon as available and in any event within thirty (30) days
after the end of each fiscal quarter, quarterly financial statements
prepared by the Company and other information reasonably requested by the
Purchaser;
(d) As soon as available and in any event within fifteen (15) days
after the end of each month, monthly reports containing information on the
Company's sales and other information reasonably requested by the
Purchaser;
(e) As soon as available and in any event not less than thirty (30)
days prior to the commencement of each fiscal year, a detailed annual
budget and strategic plan for the Company's business for such fiscal year,
which shall have been approved by the Company's Board of Directors;
(f) As soon as possible and in any event within five (5) days after
the Purchasers notify the Company of the occurrence of each Event of
Default, a statement of an authorized officer of the Company setting forth
the nature and period of existence of such Event of Default and the action
which the Company has taken and proposes to take with respect thereto;
(g) Promptly after the sending or filing thereof, copies of all
reports, if any, which the Company sends to any of its shareholders, and
copies of all reports and registration statements, if any, which the
Company files with the Commission or any Trading Market;
(h) Promptly after the filing or receiving thereof, copies of all
reports and notices, if any, which the Company files under ERISA, with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation or
the U.S. Department of Labor or which the Company receives from any of
such Persons;
31
(i) Promptly upon determination by the Company's Chief Executive
Officer of the need for the Company or Board of Directors to obtain
additional financing, all information concerning such determination if, as
and when available;
(j) Information concerning offers or solicitations, and the terms
and conditions thereof, for additional equity financing, given to the
Purchaser not less than 30 days prior to the entering into of such
financial arrangement; and
(k) Such other information respecting the condition or operations,
financial or otherwise, of the Company as the Purchasers may from time to
time reasonably request.
4.14 Subsequent Equity Sales. From the date hereof until such time as no
Purchaser holds any of the Debentures, the Company shall be prohibited from
effecting or entering into an agreement to effect any subsequent equity sale
involving a "Variable Rate Transaction". The term "Variable Rate Transaction"
shall mean a transaction in which the Company issues or sells (i) any debt or
equity securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or (B)
with a conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock or
(ii) enters into any agreement, including, but not limited to, an equity line of
credit, whereby the Company may sell securities at a future determined price.
4.15 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
4.16 Accountants. Until the time the Company becomes subject to the
reporting provisions of the Exchange Act, the Company shall promptly give the
Purchaser notice of any change in the firm of independent certified public
accountants utilized by the Company.
4.17 Access to Records. Until the time the Company becomes subject to the
reporting provisions of the Exchange Act, the Company shall provide each
Purchaser that holds Debentures and/or Underlying Shares purchased hereunder for
at least $250,000 ("Minimum Amount") and/or any of its duly authorized
representatives, attorneys or accountants access to any and all records at the
premises of the Company where such records are kept, such access being afforded
without charge, but only upon reasonable request stating the purpose of such
request and during normal business hours. Each such Purchaser making such
request agrees to request to execute a confidentiality agreement or similar
document reasonably requested by the Company.
32
4.18 Board of Directors. The Company shall have elected and in place a
duly elected Board of Directors consisting of five directors and provide each
Purchaser that holds the Minimum Amount with "observer" status and until the
time the Company becomes subject to the reporting provisions of the Exchange
Act, the right to attend all meetings of the Board of Directors of the Company
and to obtain copies of all minutes from and notices regarding such meetings, as
well as copies of all correspondence to members of the Board of Directors,
subject to reasonable limitations in order to maintain the attorney-client
privilege and confidentiality, including with respect to transactions involving
such Purchaser. Until the sooner of the Effective Date or until the Purchasers,
in the aggregate, hold less than the Minimum Amount, the Purchasers shall be
entitled to appoint two members to the Company's Board of Directors which shall
consist of five directors. The initial appointees to the Board of Directors are
set forth on Schedule 4.18. The Purchaser appointed directors shall be given all
the benefits, compensation, indemnification, insurance and other rights
available to the other directors of the Company.
4.19 Maintenance of Property. The Company shall keep all of its property,
which is necessary or useful to the conduct of its business, in good working
order and condition, ordinary wear and tear excepted.
4.20 Litigation. Until the time the Company becomes subject to the
reporting provisions of the Exchange Act, the Company shall promptly give the
Purchasers notice in writing of all litigation and of all proceedings before any
court, tribunal or Government Entity (as defined below) affecting the Company or
any Subsidiary, except litigation proceedings which, if adversely determined,
would not have a Material Adverse Effect. A "Government Entity" means the United
States of America, any state, any political subdivision of a state and any
agency or instrumentality of the United States of America or any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
4.21 Preservation of Corporate Existence. The Company shall preserve and
maintain its corporate existence, rights, privileges and franchises in the
jurisdiction of its incorporation, and qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
necessary in view of its business or operations and where the failure to qualify
or remain qualified might reasonably have a Material Adverse Effect upon the
financial condition, business or operations of the Company and its Subsidiaries
taken as a whole.
4.22 Key Man Life Insurance. Until less than the Minimum Amount is held by
the Purchasers, the Company shall purchase for the benefit of the Purchasers and
keep in force a "key man" life insurance policy on the life of Harold Brand, or
his successor as Chief Executive Officer of the Company, which policy shall be
no less than the purchase price of the Securities outstanding from time to time
and be payable to the Purchasers as beneficiaries in amounts equal to each such
Purchaser's amount of Securities held from time to time. Such payment, if ever,
shall not be deemed payment for redemption of the Securities.
33
4.23 Finders. The Company on the one hand, and each Purchaser (for himself
only) on the other hand, agrees to indemnify the other against and hold the
other harmless from any and all liabilities to any persons claiming brokerage
commissions or similar fees other than the one or more persons or entities
identified on Schedule 4.23 hereto, (each a "Finder") on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby and
arising out of such party's actions. Anything in this Agreement to the contrary
notwithstanding, each Purchaser is providing indemnification only for such
Purchaser's own actions and not for any action of any other Purchaser. Each
Purchaser's liability hereunder is several and not joint. The Company agrees
that it will pay the Finders the fees set forth on Schedule 4.23 hereto.
4.24 Anti-Dilution. Other than the Exempt Issuances, until the sooner of
(i) three years after the Closing Date, or (ii) the Common Stock has a closing
bid price of not less than 200% of the Conversion Price on a Trading Market for
twenty consecutive Trading Days after the Effective Date with average daily
trading value of not less than $150,000 per day during such twenty Trading Days,
if the Company shall offer, issue or agree to issue any Common Stock or
securities convertible into or exercisable for shares of Common Stock (or modify
any of the foregoing which may be outstanding) to any person or entity at a
price per share of Common Stock which shall be less than the Conversion Price at
which Underlying Shares were issued without the consent of each Purchaser
holding Underlying Shares, then the Company shall issue, for each such occasion,
additional shares of Common Stock to each Purchaser so that the average per
share purchase price of the shares of Common Stock issued to the Purchaser (of
only the Underlying Shares still owned by the Purchaser) is equal to such other
lower price per share. The delivery to the Purchaser of the additional shares of
Common Stock shall be not later than the closing date of the transaction giving
rise to the requirement to issue additional shares of Common Stock. The
Purchaser is granted the registration rights described in the Registration
Rights Agreement in relation to such additional shares of Common Stock except
that the Filing Date and Effectiveness Date vis-a-vis such additional common
shares shall be, respectively, the forty-fifth (45th) and ninetieth (90th) date
after the closing date giving rise to the requirement to issue the additional
shares of Common Stock. For purposes of the issuance and adjustment described in
this paragraph, the issuance of any security of the Company carrying the right
to convert such security into shares of Common Stock or of any warrant, right or
option to purchase Common Stock shall result in the issuance of the additional
shares of Common Stock upon the sooner of the agreement to or actual issuance of
such convertible security, warrant, right or option and again at any time upon
any subsequent issuances of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price lower than the per
share purchase price or warrant exercise price in effect upon such issuance. The
rights of the Purchaser set forth in this section are in addition to any other
rights the Purchaser has pursuant to this Agreement, and any other Transaction
Document.
4.25 Participation in Future Financing.
(a) From the Closing Date until the date that is the 24 month
anniversary of the date hereof, upon any financing by the Company or any
of its Subsidiaries of Common Stock or Common Stock Equivalents (a
"Subsequent Financing"), each Purchaser shall have the right to
participate in up to an amount of the Subsequent Financing equal to 100%
of the Subsequent Financing (the "Participation Maximum").
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(b) At least thirty Business Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Purchaser a
written notice of its intention to effect a Subsequent Financing
("Pre-Notice"), which Pre-Notice shall ask such Purchaser if it wants to
review the details of such financing (such additional notice, a
"Subsequent Financing Notice"). Upon the request of a Purchaser, and only
upon a request by such Purchaser, for a Subsequent Financing Notice, the
Company shall promptly, but no later than ten Business Days after such
request, deliver a Subsequent Financing Notice to such Purchaser. The
Subsequent Financing Notice shall describe in reasonable detail the
proposed terms of such Subsequent Financing, the amount of proceeds
intended to be raised thereunder, the Person with whom such Subsequent
Financing is proposed to be effected, and attached to which shall be a
term sheet or similar document relating thereto.
(c) Any Purchaser desiring to participate in such Subsequent
Financing must provide written notice to the Company by not later than
5:30 p.m. (New York City time) on the 5th Business Day after all of the
Purchasers have received the Pre-Notice that the Purchaser is willing to
participate in the Subsequent Financing, the amount of the Purchaser's
participation, and that the Purchaser has such funds ready, willing, and
available for investment on the terms set forth in the Subsequent
Financing Notice. If the Company receives no notice from a Purchaser as of
such 5th Business Day, such Purchaser shall be deemed to have notified the
Company that it does not elect to participate.
(d) If by 5:30 p.m. (New York City time) on the 5th Business Day
after all of the Purchasers have received the Pre-Notice, notifications by
the Purchasers of their willingness to participate in the Subsequent
Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then
the Company may effect the remaining portion of such Subsequent Financing
on the terms and to the Persons set forth in the Subsequent Financing
Notice.
(e) If by 5:30 p.m. (New York City time) on the 5th Business Day
after all of the Purchasers have received the Pre-Notice, the Company
receives responses to a Subsequent Financing Notice from Purchasers
seeking to purchase more than the aggregate amount of the Participation
Maximum, each such Purchaser shall have the right to purchase the greater
of (a) their Pro Rata Portion (as defined below) of the Participation
Maximum and (b) the difference between the Participation Maximum and the
aggregate amount of participation by all other Purchasers. "Pro Rata
Portion" is the ratio of (x) the Subscription Amount of Debentures
purchased on the Closing Date by a Purchaser participating under this
Section 4.25 and (y) the sum of the aggregate Subscription Amounts of
Securities purchased on the Closing Date by all Purchasers participating
under this Section 4.25.
(f) The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.25, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on substantially the same terms as set forth in
such Subsequent Financing Notice within 60 Business Days after the date of
the initial Subsequent Financing Notice.
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(g) Notwithstanding the foregoing, this Section 4.25 shall not apply
in respect of an Exempt Issuance.
4.26 Other Registration Statements. Until the Registration Statement has
been effective for ninety days or until Debentures are no longer outstanding,
whichever is sooner, the Company will not file any registration statement with
any Government Entity nor allow any such other registration statement to become
effective for the resale of any Common Stock or Common Stock Equivalent.
4.27 Public Relations. The Company will allocate and issue an amount of
Common Stock equal to 3.88% of the Fully Diluted Outstanding Common Stock as of
immediately following the Closing and not less than $216,000 for public
relations and stockholder relations.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before March
31, 2006; provided, however, that no such termination will affect the right of
any party to sue for any breach by the other party (or parties).
5.2 Fees and Expenses. The Company shall deliver, prior to the Closing, a
completed and executed copy of the Closing Statement, attached hereto as Annex
A. Except as expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all transfer agent fees, stamp taxes and
other taxes and duties levied in connection with the delivery of any Securities.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Business Day or later than 5:30 p.m. (New York City time) on any
Business Day, (c) the second Business Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.
36
5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each affected Purchaser. Any Purchaser may
assign any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the Purchasers and provided, further, that until
the Effective Date, no Purchaser shall transfer Securities representing less
than $50,000 of aggregate Purchase Price (unless such Purchaser is transferring
all of the Securities owned by such Purchaser).
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The parties hereby waive all
rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
37
5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.
5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefore, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of an exercise of a Warrant, the Purchaser
shall be required to return any shares of Common Stock subject to any such
rescinded conversion or exercise notice.
38
5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefore, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess shall be
applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.
39
5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. GM does not
represent all of the Purchasers. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.
5.19 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
5.20 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
(Signature Pages Follow)
40
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
CYBRA CORPORATION Address for Notice:
-------------------
By:_______________________________ One Executive Boulevard
Name: Harold Brand Yonkers, NY 10701-6804
Title: President Fax: (914) 963-6699
Email: hbrand@cybra.com
With a copy to (which shall not constitute notice):
Thomas G. Amon, Esq.
500 Fifth Avenue, Suite 1650
New York, NY 10110
Fax: (212) 810-2427
Email: tamon@amonlaw.com
As to Section 4.26 only:
10% Shareholders
- ----------------------------------------
Harold Brand
- ----------------------------------------
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER SIGNATURE PAGES TO CYBRA CORPORATION
SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Purchaser:
Signature of Authorized Signatory of Purchaser: ___________________________
Name of Authorized Signatory: _____________________________________________
Title of Authorized Signatory: ____________________________________________
Email Address of Purchaser:________________________________________________
Address for Notice to Purchaser:
Address for Delivery of Securities for Purchaser (if not same as above):
Subscription Amount: $________________
Warrant Shares: ______________________
Taxpayer Identification Number: ________________________
[SIGNATURE PAGES CONTINUE]
42
Annex A
CLOSING STATEMENT
Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $2,500,000 of Debentures and
Warrants from CYBRA Corporation, a New York corporation (the "Company"). All
funds will be wired into an escrow account maintained at Grushko & Mittman, P.C.
All funds will be disbursed in accordance with this Closing Statement.
Disbursement Date: March ___, 2006
________________________________________________________________________________
I. PURCHASE PRICE
Gross Proceeds to be Received in Escrow $2,500,000.00
II. DISBURSEMENTS
Finder's Fee $
$
Grushko & Mittman P.C. (legal fees) $25,000.00
Thomas G. Amon, Esq. (legal fees) $
$
Total Amount Disbursed: $
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