SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of September
22, 2009, between Valcom, Inc., a Nevada corporation with headquarters located
at 2113A Gulf Boulevard, Indian Rocks Beach, FL 33785 (the "Company"), and Abex
Real Estate, Inc. (the "Purchaser").
WHEREAS, the Company has determined it to be in the best interest of the
Company to sell to the Purchaser shares of the Company's Common Stock (the
"Common Stock") and Series C Preferred Stock, containing those rights and
designations as set forth in Exhibit A (the "Preferred Stock") (collectively,
the "Securities") totaling an aggregate of fifty one percent (51%) of the
Company's common stock on a fully-diluted basis, in such amounts and with such
frequency as determined by the Purchaser and the Company for an aggregate
purchase price of Two Million ($2,000,000) Dollars;
WHEREAS, the Purchaser wishes to purchase the Securities, subject to and upon
the terms and conditions of this Agreement and acceptance of this Agreement by
the Company, on the terms and conditions referred to herein;
WHEREAS, the Purchaser will initially purchase 4,000,000 shares of the Common
Stock and 4,000,000 shares of the Preferred Stock on or before September 16,
2009, for an aggregate purchase price of $400,000 (the "First Closing"); and
WHEREAS, the Company and the Purchaser have determined that the Company may
sell the remaining Securities with such timing, frequency and in such
denominations as agreed upon by the Company and the Purchaser for an additional
aggregate purchase price of One Million Six Hundred Thousand ($1,600,000)
Dollars for a total investment by the Purchaser of Two Million ($2,000,000)
Dollars;
WHEREAS, the Company and the Purchaser are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration for offers and sales to accredited investors afforded, inter alia,
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"), and/or Section 4(2) of the 1933 Act; and
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings set forth in this Section 1.1:
"Acquiring Person" shall have the meaning ascribed to such term in Section 4.7.
"Action" shall have the meaning ascribed to such term in Section 3.1(j).
"Affiliate" means any officer, director or beneficial owner of at least 10% of
the Company's issued and outstanding common stock or 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 405 under the Securities Act.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except Saturday, Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or
other governmental action to close.
"Closing" means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.
"Closing Date" means the Trading 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 United States Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may
hereafter be 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
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
"Company Counsel" means Sichenzia Ross Friedman Ference LLP, with offices
located at 61 Broadway, 32nd Floor, New York, NY 10006.
"Discussion Time" shall have the meaning ascribed to such term in Section
3.2(f).
"Escrow Agent" means Company Counsel.
"Escrow Agreement" means the escrow agreement entered into prior to the date
hereof, by and among the Company and the Escrow Agent pursuant to which the
Purchasers, shall deposit Subscription Amounts with the Escrow Agent to be
applied to the transactions contemplated hereunder.
"Evaluation Date" shall have the meaning ascribed to such term in Section
3.1(r).
"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 duly adopted for such purpose, by a majority of the non-employee
members of the Board of Directors or a majority of the members of a committee
of non-employee directors established for such purpose, (b) securities upon the
exercise or exchange of or conversion of any Securities issued hereunder and/or
other securities exercisable or exchangeable for or convertible into shares of
Common Stock 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, exchange or
conversion price of such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a 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.
"GAAP" shall have the meaning ascribed to such term in Section 3.1(h).
"Indebtedness" shall have the meaning ascribed to such term in Section 3.1(aa).
"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.
"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).
"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 4.12(b).
"Preferred Stock" shall mean the Company designated Series C Preferred Stock.
"Pro Rata Portion" shall have the meaning ascribed to such term in Section
4.12(e).
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Required Approvals" shall have the meaning ascribed to such term in Section
3.1(e).
"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 conversion in full of the Preferred Stock, ignoring any conversion 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
Trading 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.
"SEC Reports" shall have the meaning ascribed to such term in Section 3.1(h).
"Securities" means the Common Stock and the Preferred Stock and the Underlying
Shares.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"Short Sales" means all "short sales" as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).
"Subscription Amount" means, as to the Purchaser, the aggregate amount to be
paid for the Securities 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.
"Subsequent Financing" shall have the meaning ascribed to such term in Section
4.13(a).
"Subsequent Financing Notice" shall have the meaning ascribed to such term in
Section 4.13(b).
"Subsidiary" means any subsidiary of the Company as set forth on Schedule
3.1(a) and shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date hereof.
"Trading Day" means a day on which the principal Trading Market is open for
trading.
"Trading Market" means 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 Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.
"Transaction Documents" means this Agreement, the Escrow Agreement, all
exhibits and schedules thereto and hereto and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
"Transfer Agent" means Continental Stock Transfer, the current transfer agent
of the Company, with a mailing address of 17 Battery Place, New York, NY 10004
and a facsimile number of 212-509-5150, and any successor transfer agent of the
Company.
"Underlying Shares" means the shares of Common Stock issued and issuable upon
conversion or redemption of the Preferred Stock
"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 for trading as reported by Bloomberg L.P.
(based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)); (b) if the OTC Bulletin Board is not a Trading Market, the
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
listed or quoted for trading on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the "Pink Sheets" published by Pink OTC
Markets, Inc. (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 (d) 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 of a majority in interest of the Securities then outstanding
and reasonably acceptable to the Company, the fees and expenses of which shall
be paid by the Company.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. The Closing shall take place in multiple stages: (i) On or
about September 16, 2009, upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and the Purchaser,
agrees to purchase, up to an aggregate of 4,000,000 shares of Common Stock and
4,000,000 shares of Preferred Stock (collectively, the "First Tranche
Securities") for an aggregate purchase price of $400,000 (the "First
Closing"); (ii) Subsequent to the First Closing, upon the terms and subject to
the conditions set forth herein, the Company agrees to sell, and the Purchaser
agrees to purchase, additional Securities which, when totaled with the First
Tranche Securities, would cause the Purchaser to be the beneficial holder of
51% of the Company's issued and outstanding common stock on a fully-diluted
basis, as of the date of the final tranche of funding (the "Purchaser's Target
Ownership") for an aggregate purchase price of One Million Six Hundred Thousand
($1,600,000) Dollars (the "Subsequent Closings") for a total purchase price of
Two Million ($2,000,000) Dollars. The timing, frequency and denominations of
the Subsequent Closings will be determined by the Company and the Purchaser.
The Purchaser shall deliver to the Company via wire transfer or a certified
check of immediately available funds equal to the purchase price of the
respective Securities and the Company shall deliver to the Purchaser
certificates, duly registered in the name of the Purchase, representing the
respective shares of the Company's Common Stock and Preferred Stock, as
determined pursuant to Section 2.1, and the Company and the Purchaser shall
deliver the other items set forth in Section 2.1 deliverable at the Closing.
Upon satisfaction of the covenants and conditions set forth in Sections 2.1 and
2.2, the Closing shall occur at the offices of Company Counsel or such other
location as the parties shall mutually agree.
Deliveries.
(a) On or prior to the First Closing, the Company shall deliver or
cause to be delivered to the Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a certificate, duly registered in the name of the
Purchase,representing an aggregate of 4,000,000 shares
of the Company's Common Stock;
(iii) a certificate, duly registered in the name of the
Purchase, representing an aggregate of 4,000,000 shares
of the Company's Preferred Stock;
(iv) the Escrow Agreement, duly executed by the Company
(b) On or prior to the First Closing, the Purchaser delivered or
cause to be delivered to the Company the following:
(i) This Agreement, duly executed by the Purchaser;
(ii) The Subscription Amount of $400,000, by wire transfer to
the account as specified in writing by the Company;
(iii) The Escrow Agreement
(c) On or prior to the Subsequent Closings, the Company shall
deliver or cause to be delivered to the Purchaser the following
(i) a certificate, duly registered in the name of the
Purchase, representing the pro rata amount of Common
stock of the Purchaser's Target Ownership in proportion
to such funding;
(ii) a certificate, duly registered in the name of the
Purchase, representing an representing the pro rata
amount of Preferred Stock of the Purchaser's Target
ownership in proportion to such funding
(iii) The Escrow Agreement, duly executed by the Company
(d) On or prior to the Subsequent Closings, the Purchaser shall
deliver or cause to be delivered to the Company the following:
(i) the Subscription Amount by wire transfer to the account
as specified in writing by the Company;
(ii) the Escrow Agreement, duly executed by the Purchaser;
2.2 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 on the Closing
Date of the representations and warranties of the
Purchasers contained herein;
(ii) all obligations, covenants and agreements of the
Purchaser required to be performed at or prior to the
Closing Date shall have been performed; and
(iii) the delivery by the Purchaser of the items set forth in
Section 2.1 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 accuracy in all material respects when made and on
the Closing Date of the representations and warranties
of the Company contained herein;
(ii) all obligations, covenants and agreements of the
Company required to be performed at or prior to the
Closing Date shall have been performed;
(iii) the delivery by the Company of the items set forth in
Section 2.2 of this Agreement;
(iv) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof;
(v) from the date hereof to the Closing Date, trading in
the Common Stock shall not have been suspended by the
Commission or the Company's principal Trading Market
(except for any suspension of trading of limited
duration agreed to by the Company, which suspension
shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities
generally as reported by Bloomberg L.P. shall not have
been suspended or limited, or minimum prices shall not
have been established on securities whose trades are
reported by such service, or on any Trading Market, nor
shall a banking moratorium have been declared either by
the United States or New York State authorities nor
shall there have occurred any material outbreak or
escalation of hostilities or ther 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 the Purchaser, makes it impracticable or inadvisable
to purchase the Securities at the Closing; and
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or otherwise made herein to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations
and warranties to the Purchaser:
(a) Subsidiaries. All of the direct and indirect subsidiaries of
the Company are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of 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, all other
references to the Subsidiaries or any of them in the Transaction Documents
shall be disregarded.
(b) Organization and Qualification. he 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, 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 nor 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 condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a
material adverse effect on the Company's ability to perform in any material
respect on a timely basis its obligations under any Transaction Document (any
of (i), (ii) or (iii), a "Material Adverse Effect") and no Proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing or seeking
to revoke, limit or curtail such power and authority or qualification.
(c) Authorization; Enforcement. 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 hereunder and thereunder. The execution and delivery of each
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required
by the Company, the Board of Directors or the Company's stockholders in
connection therewith other than in connection with the Required Approvals.
Each Transaction Document to which it is a party has been (or upon delivery
will have been) duly executed by the Company and, when delivered in accordance
with the terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company 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.
(d) No Conflicts. The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Securities
and the consummation by it to which it is a party of the other transactions
contemplated hereby and 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,
(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) subject to the Required Approvals,
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.
(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, other than: (i) the filings required pursuant to Section 4.6 of this
Agreement, (ii) the filing with the Commission of the Registration Statement,
(iii) the notice and/or application(s) to each applicable Trading Market for
the issuance and sale of the Securities and the listing of the Underlying
Shares for trading thereon in the time and manner required thereby, (iv) the
filing of Form D with the Commission and such filings as are required to be
made under applicable state securities laws (collectively, the "Required
Approvals").
(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 Underlying Shares,
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 other than restrictions on transfer provided for in the
Transaction Documents. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance of the Underlying
Shares 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), which Schedule 3.1(g) shall also include the number
of shares of Common Stock owned beneficially, and of record, by Affiliates of
the Company as of the date hereof. The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act, other
than pursuant to the exercise of employee stock options under the Company's
stock option plans, those issuance found on Schdule A the issuance of shares of
Common Stock to employees pursuant to the Company's employee stock purchase
plans and pursuant to the conversion and/or exercise of Common Stock
Equivalents outstanding as of the date of the most recently filed periodic
report under the Exchange Act. 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, there are no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable 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 any of 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 or others is required
for the issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company's capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company's stockholders.
(h) SEC Reports; Financial Statements. Except as disclosed on
Schedule 3.1 (h)The Company has filed all reports, schedules, forms, statements
and other documents required to be filed by the Company under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the "SEC Reports")
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension.
As of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act, as
applicable, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
Company has never been an issuer subject to Rule 144(i) under the Securities
Act. The financial statements of the Company included in the SEC Reports comply
in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time
of filing. 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 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.
(i) Material Changes; Undisclosed Events, Liabilities or
Developments. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in a
subsequent SEC Report filed prior to the date hereof: (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 or disclosed in filings
made with the Commission, (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.
The Company does not have pending before the Commission any request for
confidential treatment of information. Except for the issuance of the
Securities contemplated by this Agreement or as set forth on Schedule 3.1(i),
no event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties,
operations or financial condition, that would be required to be disclosed by
the Company under applicable securities laws at the time this representation is
made or deemed made that has not been publicly disclosed at least 1 Trading Day
prior to the date that this representation is made.
(j) Litigation. Except as disclosed on Schedule 3.1 (j), 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. The Commission has not issued any stop
order or other order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or the Securities
Act.
(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. None of the Company's or its Subsidiaries' employees is a member of a
union that relates to such employee's relationship with the Company or such
Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No executive officer,
to the knowledge of the Company, is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant in favor of any third party,
and the continued employment of each such executive officer does not subject
the Company or any of its Subsidiaries to any liability with respect to any of
the foregoing matters. The Company and its Subsidiaries are in compliance with
all U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have 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 and all such laws that affect
the environment, except in each case as could not have or reasonably be
expected to result in a Material Adverse Effect.
(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 described in the SEC Reports, except where the failure
to possess such permits could not 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. he Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them 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 with which the Company and the Subsidiaries
are in compliance.
(o) Patents and Trademarks. he Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions,
copyrights, licenses and other intellectual property rights and similar rights
as described in the SEC Reports as necessary or material for use in connection
with their respective businesses and which the failure to so have could have a
Material Adverse Effect (collectively, the "Intellectual Property Rights").
Neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of the Intellectual Property Rights used by the Company or
any Subsidiary violates or infringes upon the rights of any Person. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do so could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(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, including, but not limited to,
directors and officers insurance coverage at least equal to the aggregate
Subscription Amount. 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 the SEC Reports, none of the officers or directors of the Company and, to
the knowledge of the Company, none of the employees of the Company is 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 $120,000 other than for: (i) payment of
salary or consulting fees for services rendered, (ii) reimbursement for
expenses incurred on behalf of the Company and (iii) other employee benefits,
including stock option agreements under any stock option plan of the Company.
(r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which
are applicable to it as of the Closing Date. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that: (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
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. The Company has established disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Commission's rules and forms. The Company's
certifying officers have evaluated the effectiveness of the Company's
disclosure controls and procedures as of the end of the period covered by the
Company's most recently filed periodic report under the Exchange Act (such
date, the "Evaluation Date"). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the Company's internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
(s) Certain Fees. 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 the Transaction Documents.
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 the Transaction Documents.
(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. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.
(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 of 1940, as amended.
(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) Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Company received any notification that the Commission
is contemplating terminating such registration. The Company has not, in the 12
months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
(x) Application of Takeover Protections. The Company and the 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.
(y) Disclosure. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information
that it believes constitutes or might constitute material, non-public
information. The Company understands and confirms that the Purchasers will
rely on the foregoing representation in effecting transactions in securities of
the Company. All disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, is
true and correct and does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement taken as a whole do not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made and when 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.
(z) 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 (i) the Securities Act which would require the registration of
any such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any of the
securities of the Company are listed or designated.
(aa) Solvency. Based on the consolidated 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: Schedule
3.1(aa) sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments. For the purposes of this Agreement, "Indebtedness"
means (x) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the ordinary course of
business), (y) all guaranties, endorsements and other contingent obligations in
respect of indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (z) the present value of any lease payments in
excess of $50,000 due under leases required to be capitalized in accordance
with GAAP. Neither the Company nor any Subsidiary is in default with respect
to any Indebtedness.
(bb) 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.
(cc) 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.
(dd) 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.
(ee) Accountants. The Company's accounting firm is set forth on
Schedule 3.1(ee) of the Disclosure Schedules. To the knowledge and belief of
the Company, such accounting firm: (i) is a registered public accounting firm
as required by the Exchange Act and (ii) shall express its opinion with respect
to the financial statements to be included in the Company's Annual Report for
the year ending September 30, 2008.
(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 Company and 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 which could affect the Company's
ability to perform any of its obligations under any of the Transaction
Documents.
(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 thereby. 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 the
Transaction Documents and the transactions contemplated thereby and any advice
given by any Purchaser or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Purchasers' purchase of the Securities.
The Company further represents to the Purchaser that the Company's decision to
enter into this Agreement and the other Transaction Documents has been based
solely on the independent evaluation of the transactions contemplated hereby by
the Company and its representatives.
(hh) Acknowledgment Regarding Purchasers' Trading Activity.
Notwithstanding anything in this Agreement or elsewhere herein to the contrary,
it is understood and acknowledged by the Company that: (i) none of the
Purchasers has been asked to agree by the Company, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or "derivative" securities based on securities issued by the
Company or to hold the Securities for any specified term, (ii) past or future
open market or other transactions by any Purchaser, specifically including,
without limitation, Short Sales or "derivative" transactions, before or after
the closing of this or future private placement transactions, may negatively
impact the market price of the Company's publicly-traded securities, (iii) any
Purchaser, and counter-parties in "derivative" transactions to which any such
Purchaser is a party, directly or indirectly, may presently have a "short"
position in the Common Stock and (iv) the Purchaser shall not be deemed to have
any affiliation with or control over any arm's length counter-party in any
"derivative" transaction. The Company further understands and acknowledges
that (y) one or more Purchasers may engage in hedging activities at various
times during the period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and (z) such
hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time that the
hedging activities are being conducted. The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.
(ii) Regulation M Compliance. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company's placement agent in connection with the
placement of the Securities.
(jj) Reserved.
(kk) Reserved.
(ll) Stock Option Plans. Each stock option granted by the Company
under the Company's stock option plan was granted (i) in accordance with the
terms of the Company's stock option plan and (ii) with an exercise price at
least equal to the fair market value of the Common Stock on the date such stock
option would be considered granted under GAAP and applicable law. No stock
option granted under the Company's stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no Company
policy or practice to knowingly grant, stock options prior to, or otherwise
knowingly coordinate the grant of stock options with, the release or other
public announcement of material information regarding the Company or its
Subsidiaries or their financial results or prospects.
3.2 Representations and Warranties of the Purchasers. The Purchaser, for itself
and for no other Purchaser, hereby 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 hereunder and thereunder. The execution and delivery of the
Transaction Documents and performance by such Purchaser of the transactions
contemplated by the Transaction Documents 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.
(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 direct or indirect arrangement or
understandings with any other persons to distribute or 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.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, 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 and Confidentiality Prior To The Date Hereof. Other
than consummating the transactions contemplated hereunder, such Purchaser has
not directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with such Purchaser, executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing from the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder
until the date hereof ("Discussion Time"). Notwithstanding the foregoing, in
the case of a Purchaser that is a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of such Purchaser's assets
and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser's
assets, the representation set forth above shall only apply with respect to the
portion of assets managed by the portfolio manager that made the investment
decision to purchase the Securities covered by this Agreement. Other than to
other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any actions, with
respect to the identification of the availability of, or securing of, available
shares to borrow in order to effect short sales or similar transactions in the
future.
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 the Registration Rights
Agreement and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is required
by this Section 4.1, of a legend on any of the Securities in the following
form:
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAS NOT 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT 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, 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.
Certificates evidencing the Securities shall not contain any legend (including
the legend set forth in Section 4.1(b) hereof): (i) while a registration
statement covering the resale of such security is effective under the
Securities Act, (ii) following any sale of such Securities pursuant to Rule
144, (iii) if such Securities are eligible for sale under Rule 144, without the
requirement for the Company to be in compliance with the current public
information required under Rule 144 as to such Securities and without volume or
manner-of-sale restrictions 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 Transfer Agent
promptly after the Effective Date if required by the Transfer Agent to effect
the removal of the legend hereunder. If all or any of the Preferred Stock is
converted at a time when there is an effective registration statement to cover
the resale of the Securities, or if such Securities may be sold under Rule 144,
without the requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Securities and without
volume or manner-of-sale restrictions or if such legend is not otherwise
required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission) then such Securities shall be issued free of all legends. The
Company agrees that at such time as such legend is no longer required under
this Section 4.1(c), it will, no later than three Trading Days following the
delivery by a Purchaser to the Company or the Transfer Agent of a certificate
representing Securities, as applicable, issued with a restrictive legend (such
third Trading 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 the Transfer Agent that enlarge the
restrictions on transfer set forth in this Section 4. Certificates for
Securities subject to legend removal hereunder shall be transmitted by the
Transfer Agent to the Purchaser by crediting the account of the Purchaser's
prime broker with the Depository Trust Company System as directed by such
Purchaser.
(c) 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 (based on the VWAP of
the Common Stock on the date such Securities are submitted to the Transfer
Agent) delivered for removal of the restrictive legend and subject to Section
4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading
Days after such damages have begun to accrue) for each Trading 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.
(d) The Purchaser agrees that such Purchaser will sell any
Securities pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a Registration
Statement, they will be sold in compliance with the plan of distribution set
forth therein, and acknowledges 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 upon this understanding.
3.2 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
Securities 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; Public Information.
(a) If the Common Stock is not registered under Section 12(b) or
12(g) of the Exchange Act on the date hereof, the Company agrees to cause the
Common Stock to be registered under Section 12(g) of the Exchange Act on or
before the 60th calendar day following the date hereof. Until the Purchaser no
longer owns Securities, the Company covenants to maintain the registration of
the Common Stock under Section 12(b) or 12(g) of the Exchange Act and 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, if the Company is not required to file reports pursuant to the
Exchange Act, it 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. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, to the extent required from time to time to enable such
Person to sell such Securities without registration under the Securities Act
within the requirements of the exemption 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 to the Purchasers 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 such that it
would require shareholder approval prior to the closing of such other
transaction unless shareholder approval is obtained before the closing of such
subsequent transaction.
4.5 Conversion. The the form of Notice of Conversion included in the
Preferred Stock set forth the totality of the procedures required of the
Purchasers in order to convert the Preferred Stock. No additional legal
opinion, other information or instructions shall be required of the Purchasers
to convert the Preferred Stock. The Company shall honor conversions of the
Preferred Stock and shall deliver Underlying Shares in accordance with the
terms, conditions and time periods set forth in the Transaction Documents.
4.6 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
(New York City time) on the fourth Trading Day immediately following the date
hereof, issue a Current Report on Form 8-K, disclosing the material terms of
the transactions contemplated hereby, and including the Transaction Documents
as exhibits thereto. The Company and the Purchaser shall consult with each
other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release nor 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 the Purchaser, with respect to any
press release of the Company, which consent shall not unreasonably be withheld
or delayed, 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: (a) as required by federal securities law in connection the filing of
final Transaction Documents (including signature pages thereto) with the
Commission and (b) 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 this clause (b).
4.7 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an "Acquiring Person" under any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or similar anti-takeover 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.
4.8 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, 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 the Purchaser shall be relying on the
foregoing covenant in effecting transactions in securities of the Company.
4.9 Use of Proceeds. Except as set forth on Schedule 4.9 attached hereto,
the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds for: (a)
the satisfaction of any portion of the Company's debt (other than payment of
trade payables in the ordinary course of the Company's business and prior
practices), (b) the redemption of any Common Stock or Common Stock Equivalents
or (c) the settlement of any outstanding litigation.
4.10 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 then 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
on such date, then the Board of Directors 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 Minimum at such time, as soon as possible and in any event
not later than the 75th day after such date.
4.11 Short Sales and Confidentiality After The Date Hereof. The
Purchaser, severally and not jointly with the other Purchasers, covenants that
neither it, nor any Affiliate acting on its behalf or pursuant to any
understanding with it, will execute any Short Sales during the period
commencing with the Discussion Time and ending at such time the transactions
contemplated by this Agreement are first publicly announced as described in
Section 4.6. The Purchaser, severally and not jointly with the other
Purchasers, covenants that until such time as the transactions contemplated by
this Agreement are publicly disclosed by the Company as described in Section
4.6, such Purchaser will maintain the confidentiality of the existence and
terms of this transaction and the information included in the Transaction
Documents and the Disclosure Schedules. Notwithstanding the foregoing, no
Purchaser makes any representation, warranty or covenant hereby that it will
not engage in Short Sales in the securities of the Company after the time that
the transactions contemplated by this Agreement are first publicly announced as
described in Section 4.6. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.
4.12 Board of Directors. Upon the First Closing, the Purchaser will be
entitled to appoint Patrick Willemsen to the Company's board of directors.
Upon the funding of a total of Two Million ($2,000,000) Dollars by the
Purchaser to the Company, the Purchaser will be entitled to appoint Michael
Vredegoor as director to the Company's board of directors
4.13 Anti-Dilution. Commencing on the date the Purchaser has funded an
aggregate of Two Million ($2,000,000) Dollars, the Company will issue an equal
amount of "cashless" warrants with a strike price of $0.05 as the number of
total shares that the purchaser has acquired. These warrants can be exercised
if the total shareholding of the purchaser is below 51% and only up to an
amount where the total shareholding of the purchaser is 51% of all stock. For
purposes of this Section 4.13, the issuance of warrants or options to purchase
shares of Common Stock by the Company will not trigger any rights of the
Purchaser hereunder until such time when the warrants or options are exercised,
as the case may be.
ARTICLE V.
MISCELLANEOUS
5.1 Reserved.
5.2 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 September 30, 2009; provided, however, that such termination will not
affect the right of any party to sue for any breach by the other party (or
parties).
5.3 Fees and Expenses. 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 to the Purchasers.
5.4 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.
5.5 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 Trading Day, (b) the next Trading 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 Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (c) the second (2nd) Trading 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.
5.6 Amendments; Waivers. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived provision 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
any party to exercise any right hereunder in any manner impair the exercise of
any such right.
5.7 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.
5.8 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 the Purchaser (other than by merger). 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
that such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction Documents that
apply to the "Purchasers."
5.9 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 herein.
5.10 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 Florida, 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 Hillsborough County, State of Florida, and each party hereby
irrevocably consents and submits to the exclusive jurisdiction of said courts
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 or defense that it is not subject to the personal jurisdiction of any
such court, that such suit, action or proceeding is improper, or is an
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 other manner permitted by law. 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 reasonable attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.11 Survival. The representations and warranties contained herein
shall survive the Closing and the delivery of the Securities for the applicable
statute of limitations.
5.12 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 or by e-mail delivery of a ".pdf" format
data file, 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 or ".pdf" signature page were an original
thereof.
5.13 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
5.14 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other 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, that in the case of a rescission of a conversion of
a the Preferred Stock, the Purchaser shall be required to return any shares of
Common Stock subject to any such rescinded conversion notice.
5.15 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 (in the case of mutilation), or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction. The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs (including
customary indemnity) associated with the issuance of such replacement
Securities.
5.16 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 contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
5.17 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.
5.18 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.
5.19 Independent Nature of Purchasers' Obligations and Rights. The
obligations of the 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 or non-performance of the
obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other 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. The 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. The Purchaser has been represented
by its own separate legal counsel in their review and negotiation of the
Transaction Documents.
5.20 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.
5.21 Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
5.22 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. In addition, each and every reference to share prices in any
Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.
5.23 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES
FOREVER TRIAL BY JURY.
(Signature Pages Follow)
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.
VALCOM, INC.
By: /s/ Vince Vellardita
- -------------------------
Name: Vince Vellardita
Title: Chief Executive Officer
Address for Notice:
Valcom, Inc.
2113A Gulf Boulevard
Indian Rocks Beach, FL 33785
Attn: Vince Vellardita, CEO
Telephone No.: (727) 953-9778
Telecopier No.: (727) 953-9779
ABEX REAL ESTATE, INC.
By:_____________________
Name:
Title: Chief Executive Officer
Address for Notice:
Schedule 3.1 (a)
Subsidiaries
a. My Family TV (wholly-owned subsidiary)
b. Valencia Entertainment (wholly-owned subsidiary)
c. Sun Investment Services, LLC (51% owned subsidiary, 49% Florida
Opportunities, Inc.)
Schedule 3.1(g)
Capitalization Table Attached
Schedule 3.1(h)
SEC Reporting
a. Re-filing current 10Q for June 30, 2009 - filed 8K dated 8/27/09 -
Non-Reliance on Financial Statements
b. Change in auditors - filed 8K dated 8/12/09. Former auditor Moore
& Associates barred SEC reporting work. New auditor Seale and Beers,
PCAOB qualified.
c. The Company is required to re-audit 2008 due to change in auditors
d. The Company will re-file 1st and 2nd Qtr. 2009 10Q's due to change
in accounting for the Faith TV acquisition to write-off the assets
of the acquisition.
Schedule 3.1(i)
Material Changes
(See also Schedule 3.1(h) above - The Company is restating the acquisition
accounting for Faith TV to write-off the assets of the acquisition since no
independent evaluation was done on the purchase price of the acquisition and no
audit was performed on the acquired company.)
Schedule 3.1(j)
None.
Schedule 3.1(aa)
Indebtedness
a. See financial statement for current unsecured indebtedness
b. Secured Debt:
1. Faith TV acquisition - $450,000 note - balance to be negotiated
at pay-off
2. Omnireliant Holdings - $100,000 convertible note - filed 8K
dated 1/9/09
3. Bay-Gulf Partners, LLC - $100,000 convertible note
4. Bay-Gulf Homes, LLC - $40,000 convertible note
5. Charming Movers - $50,000 note
Schedule 3.1(ee)
Accountants - New accounting firm, 8K 8/12/09 - Seale and Beers, CPA's, 6490
West Desert Inn Rd, Las Vegas, NV 89146, Tel. 702.253.7492
Schedule 4.9
Use of Proceeds:
Debt retirement related to the purchase of Faith TV