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NOTE AND WARRANT PURCHASE
AGREEMENT
Dated as of February 28,
2006
by and among
INTERLINK GLOBAL CORP.
and
THE PURCHASERS LISTED ON EXHIBIT
A
NOTE AND WARRANT PURCHASE
AGREEMENT
This NOTE AND WARRANT PURCHASE AGREEMENT dated as
of February 28, 2006 (this " Agreement ") by and among
Interlink Global Corp., a Nevada corporation (the " Company
"), and each of the purchasers of the senior convertible promissory
notes of the Company whose names are set forth on Exhibit A
attached hereto (each a " Purchaser " and collectively, the
" Purchasers ").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES AND
WARRANTS
Section 1.1 Purchase and Sale of Notes and Warrants .
(a) Upon the
following terms and conditions, the Company shall issue and sell to
the Purchasers, and the Purchasers shall purchase from the Company,
(i) Series B 10% senior convertible promissory notes in the
aggregate principal amount of Eight Hundred and
Fifty Thousand Dollars ($850,000) ,
convertible into shares of the Company’s common stock, par
value $0.001 per share (the " Common Stock "), in
substantially the form attached hereto as Exhibit B (the "
Senior Notes "). The Company and the Purchasers are
executing and delivering this Agreement in accordance with and in
reliance upon the exemption from securities registration afforded
by Section 4(2) of the U.S. Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "
Securities Act "), including Regulation D (" Regulation
D "), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect
to any or all of the investments to be made hereunder.
(b) Upon the
following terms and conditions, the Purchasers shall be
issued:
(i) Series D Warrants, in substantially the form
attached hereto as Exhibit C (the " Series D Warrants
"), to purchase a number of shares of Common Stock equal to one
hundred percent (100%) of the number of Conversion Shares issuable
upon conversion of such Purchaser’s Senior Note at an
exercise price per share equal to the Warrant Price (as defined in
the Series D Warrants) and a term of Five (5) years following the
Closing Date;
(ii) Series E Warrants, in substantially the form
attached hereto as Exhibit D (the " Series E Warrants
"), to purchase a number of shares of Common Stock equal to one
hundred percent (100%) of the number of Conversion Shares issuable
upon conversion of such Purchaser’s Senior Note at an
exercise price per share equal to the Warrant Price (as defined in
the Series E Warrants) and a term of Seven (7) years following the
Effective Date (as defined in Section 1.4 hereof); and
(iii) Series F Warrants, in substantially the
form attached hereto as Exhibit E (the " Series F
Warrants "), to purchase a number of shares of Common Stock
equal to one hundred percent (100%) of the number of Conversion
Shares issuable upon conversion of such Purchaser’s Senior
Note at an exercise price per share equal to the Warrant Price (as
defined in the Series F Warrants) and a term of Ten (10) years
following the Effective Date (as defined in Section 1.4 hereof);
and
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The number of shares of Common Stock issuable
upon exercise of the Warrants issuable to each Purchaser is set
forth opposite such Purchaser’s name on Exhibit A
attached hereto.
Section 1.2 Purchase Price and Closing . Subject to the terms and
conditions hereof, the Company agrees to issue and sell to the
Purchasers and, in consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of
this Agreement, the Purchasers, severally but not jointly, agree to
purchase the Notes and Warrants for an aggregate purchase price
of Eight Hundred and Fifty Thousand Dollars
($850,000) (the " Purchase Price ").
The Notes and Warrants shall be sold and funded in one closing (the
" Closing ") which shall take place on or before February
28, 2006 (the " Closing Date "). At the Closing, the
purchase and sale of the Notes and Warrants to be acquired by the
Purchasers from the Company under this Agreement shall take place
the office of counsel for the Holders as set forth herein, at 10:00
a.m., New York time; provided , that all of the conditions
set forth in Article IV hereof and applicable to each Closing shall
have been fulfilled or waived in accordance herewith. Subject to
the terms and conditions of this Agreement, at each Closing the
Company shall deliver or cause to be delivered to each Purchaser
(x) its Notes for the principal amount set forth opposite the name
of such Purchaser on Exhibit A hereto and (y) the Warrants
to purchase such number of shares of Common Stock as is set forth
opposite the name of such Purchaser on Exhibit A attached
hereto. At each Closing, each Purchaser shall deliver its Purchase
Price by wire transfer of immediately available funds to an account
designated by the Company.
Section 1.3 Conversion Shares / Warrant Shares . The Company has
authorized and has reserved and covenants to continue to reserve,
free of preemptive rights and other similar contractual rights of
stockholders, a number of its authorized but unissued shares of
Common Stock equal to one hundred twenty percent (120%) of (a) the
aggregate number of shares of Common Stock to effect the conversion
of the Notes and any interest accrued and outstanding thereon and
exercise of the Warrants as of the Closing Date. Any shares of
Common Stock issuable upon conversion of the Notes and any interest
accrued and outstanding on the Notes are herein referred to as the
" Conversion Shares ". Any shares of Common Stock issuable upon
exercise of the Warrants (and such shares when issued) are herein
referred to as the " Warrant Shares ". The Notes, Warrants
and the Warrant Shares are sometimes collectively referred to
herein as the " Securities ".
ARTICLE II
REPRESENTATIONS AND
WARRANTIES
Section 2.1 Representations and Warranties of the Company . The
Company hereby represents and warrants to the Purchasers, as of the
date hereof and each Closing Date (except as set forth on the
Schedule of Exceptions attached hereto with each numbered Schedule
corresponding to the section number herein), as follows:
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(a) Organization, Good Standing and Power . The Company is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada and has the
requisite corporate power to own, lease and operate its properties
and assets and to conduct its business as it is now being
conducted. The Company does not have any Subsidiaries (as defined
in Section 2.1(g)) or own securities of any kind in any other
entity except as set forth on Schedule 2.1(g) hereto. The
Company and each such Subsidiary (as defined in Section 2.1(g)) is
duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a
Material Adverse Effect. For the purposes of this Agreement, "
Material Adverse Effect " means any material adverse effect
on the business, operations, properties, prospects, or financial
condition of the Company and its Subsidiaries and/or any condition,
circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to perform any
of its obligations under this Agreement in any material
respect.
(b) Authorization; Enforcement . The Company has the
requisite corporate power and authority to enter into and perform
this Agreement, the Notes, the Warrants, the Registration Rights
Agreement by and among the Company and the Purchasers, dated as of
the date hereof, substantially in the form of Exhibit F
attached hereto (the " Registration Rights Agreement "), and
the Irrevocable Transfer Agent Instructions (as defined in Section
3.16 hereof) (collectively, the " Transaction Documents ")
and to issue and sell the Securities in accordance with the terms
hereof. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action, and, except as set
forth on Schedule 2.1(b) , no further consent or
authorization of the Company, its Board of Directors or
stockholders is required. When executed and delivered by the
Company, each of the Transaction Documents shall constitute a valid
and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar
laws relating to, or affecting generally the enforcement of,
creditor’s rights and remedies or by other equitable
principles of general application.
(c) Capitalization . The authorized capital stock and the
issued and outstanding shares of capital stock of the Company as of
the Closing Date is set forth on Schedule 2.1(c) hereto. All of
the outstanding shares of the Common Stock and any other
outstanding security of the Company have been duly and validly
authorized. Except as set forth in this Agreement, the Commission
Documents (as defined in Section 2.1(f)) or as set forth on
Schedule 2.1(c) hereto, no shares of Common Stock or any
other security of the Company are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants,
scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company. Furthermore, except as
set forth in this Agreement and as set forth on Schedule
2.1(c) hereto, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of
capital stock of the Company. Except for customary transfer
restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as provided on Schedule
2.1(c) hereto, the Company is not a party to or bound by any
agreement or understanding granting registration or anti-dilution
rights to any person with respect to any of its equity or debt
securities. Except as set forth on Schedule 2.1(c) , the
Company is not a party to, and it has no knowledge of, any
agreement or understanding restricting the voting or transfer of
any shares of the capital stock of the Company.
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(d) Issuance of Securities . The Notes and the Warrants to
be issued at each Closing have been duly authorized by all
necessary corporate action and, when paid for or issued in
accordance with the terms hereof, the Notes shall be validly issued
and outstanding, free and clear of all liens, encumbrances and
rights of refusal of any kind. When the Conversion Shares and
Warrant Shares are issued and paid for in accordance with the terms
of this Agreement and as set forth in the Notes and Warrants, such
shares will be duly authorized by all necessary corporate action
and validly issued and outstanding, fully paid and nonassessable,
free and clear of all liens, encumbrances and rights of refusal of
any kind and the holders shall be entitled to all rights accorded
to a holder of Common Stock.
(e) No
Conflicts . The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the
Company of its obligations under the Notes and the consummation by
the Company of the transactions contemplated hereby and thereby,
and the issuance of the Securities as contemplated hereby, do not
and will not (i) violate or conflict with any provision of the
Company’s Articles of Incorporation (the " Articles ") or
Bylaws (the " Bylaws "), each as amended to date, or any
Subsidiary’s comparable charter documents, (ii) conflict
with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries’ respective properties
or assets are bound, or (iii) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment
or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any of its
Subsidiaries are bound or affected, except, in all cases, for such
conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect (other than violations
pursuant to clauses (i) or (iii) (with respect to federal and state
securities laws)). Neither the Company nor any of its Subsidiaries
is required under federal, state, foreign or local law, rule or
regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its
obligations under the Transaction Documents or issue and sell the
Securities in accordance with the terms hereof (other than any
filings, consents and approvals which may be required to be made by
the Company under applicable state and federal securities laws,
rules or regulations or any registration provisions provided in the
Registration Rights Agreement).
(f) Commission Documents, Financial Statements . The Common
Stock of the Company is currently listed on the Pink Sheets and
will be registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the " Exchange Act
"), and the Company will have timely filed all reports, schedules,
forms, statements and other documents required to be filed by it
with the Commission pursuant to the reporting requirements of the
Exchange Act (all of the foregoing including filings incorporated
by reference therein being referred to herein as the "
Commission Documents "). Any form 10-QSB and Form 10-KSB
filings to be made by the Company will 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, not misleading. As of their respective dates, the
financial statements of the Company included in the Commission
Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have
been prepared in accordance with generally accepted accounting
principles (" GAAP ") applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly
present in all material respects the financial position of the
Company and its Subsidiaries as of 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 year-end
audit adjustments).
Page5
(g) Subsidiaries . Schedule 2.1(g) hereto sets forth
each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each
person’s ownership of the outstanding stock or other
interests of such Subsidiary. For the purposes of this Agreement, "
Subsidiary " shall mean any corporation or other entity of
which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently)
for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the
Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been
duly authorized and validly issued, and are fully paid and
nonassessable. Except as set forth on Schedule 2.1(g)
hereto, there are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or
binding upon any Subsidiary for the purchase or acquisition of any
shares of capital stock of any Subsidiary or any other securities
convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company
nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares
of the capital stock of any Subsidiary or any convertible
securities, rights, warrants or options of the type described in
the preceding sentence except as set forth on Schedule
2.1(g) hereto. Neither the Company nor any Subsidiary is party
to, nor has any knowledge of, any agreement restricting the voting
or transfer of any shares of the capital stock of any
Subsidiary.
(h) No
Material Adverse Change . Since June 30, 2005, the Company
has not experienced or suffered any Material Adverse Effect, except
as disclosed on Schedule 2.1(h) hereto.
(i) No
Undisclosed Liabilities . Except as disclosed on
Schedule 2.1(i) hereto, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or
losses (whether liquidated or unliquidated, secured or unsecured,
absolute, accrued, contingent or otherwise) other than those
incurred in the ordinary course of the Company’s or its
Subsidiaries respective businesses or which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse
Effect.
Page6
(j) No
Undisclosed Events or Circumstances . Since June 30, 2005,
except as disclosed on Schedule 2.1(j) hereto, no event or
circumstance has occurred or exists with respect to the Company or
its Subsidiaries or their respective businesses, properties,
prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly
announced or disclosed.
(k) Indebtedness . Schedule 2.1(k) hereto 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" shall mean (a) 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), (b) 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 (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the
present value of any lease payments in excess of $25,000 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.
(l) Title
to Assets . Each of the Company and the Subsidiaries has
good and valid title to all of its real and personal property
reflected in the Commission Documents, free and clear of any
mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those indicated on Schedule 2.1(l)
hereto or such that, individually or in the aggregate, do not cause
a Material Adverse Effect. Any leases of the Company and each of
its Subsidiaries are valid and subsisting and in full force and
effect.
(m) Actions
Pending . There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other
proceeding pending or, to the knowledge of the Company, threatened
against the Company or any Subsidiary which questions the validity
of this Agreement or any of the other Transaction Documents or any
of the transactions contemplated hereby or thereby or any action
taken or to be taken pursuant hereto or thereto. Except as set
forth in the Commission Documents or on Schedule 2.1(m) hereto,
there is no action, suit, claim, investigation, arbitration,
alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against or
involving the Company, any Subsidiary or any of their respective
properties or assets, which individually or in the aggregate, would
reasonably be expected, if adversely determined, to have a Material
Adverse Effect. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any
Subsidiary or any officers or directors of the Company or
Subsidiary in their capacities as such, which individually or in
the aggregate, could reasonably be expected to have a Material
Adverse Effect.
(n) Compliance with Law . The business of the Company and
the Subsidiaries has been and is presently being conducted in
accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except as set
forth in the Commission Documents or on Schedule 2.1(n) hereto
or such that, individually or in the aggregate, the noncompliance
therewith could not reasonably be expected to have a Material
Adverse Effect. The Company and each of its Subsidiaries have all
franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct
of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals,
individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.
Page7
(o) Taxes . The Company and each of the Subsidiaries has
accurately prepared and filed all federal, state and other tax
returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are
reflected in the financial statements of the Company and the
Subsidiaries for all current taxes and other charges to which the
Company or any Subsidiary is subject and which are not currently
due and payable. Except as disclosed on Schedule 2.1(o) hereto
or in the Commission Documents, none of the federal income tax
returns of the Company or any Subsidiary have been audited by the
Internal Revenue Service. The Company has no knowledge of any
additional assessments, adjustments or contingent tax liability
(whether federal or state) of any nature whatsoever, whether
pending or threatened against the Company or any Subsidiary for any
period, nor of any basis for any such assessment, adjustment or
contingency.
(p) Certain
Fees . Except as set forth on Schedule 2.1(p) hereto,
the Company has not employed any broker or finder or incurred any
liability for any brokerage or investment banking fees,
commissions, finders’ structuring fees, financial advisory
fees or other similar fees in connection with the Transaction
Documents.
(q) Disclosure . Except for the transactions contemplated by
this Agreement, 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 constitutes or
might constitute material, nonpublic information. To the best of
the Company’s knowledge, neither this Agreement or the
Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchasers by or on behalf of the
Company or any Subsidiary in connection with the transactions
contemplated by this Agreement contain any untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business . Except as set forth on
Schedule 2.1(r) hereto, the Company and each of the Subsidiaries
owns or possesses the rights to all patents, trademarks, domain
names (whether or not registered) and any patentable improvements
or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade
names, copyrights, licenses and authorizations which are necessary
for the conduct of its business as now conducted without any
conflict with the rights of others.
(s) Environmental Compliance . To the best knowledge of the
Company, except as set forth on Schedule 2.1(s) hereto or in
the Commission Documents, the Company and each of its Subsidiaries
have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar
authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws.
"Environmental Laws" shall mean all applicable laws relating to the
protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges,
releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials
or wastes, whether solid, liquid or gaseous in nature, into the
air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, material
or wastes, whether solid, liquid or gaseous in nature. To the best
of the Company’s knowledge, the Company has all necessary
governmental approvals required under all Environmental Laws as
necessary for the Company’s business or the business of any
of its subsidiaries. To the best of the Company’s knowledge,
the Company and each of its subsidiaries are also in compliance
with all other limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed under
all Environmental Laws. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect,
there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting
the Company or its Subsidiaries that violate or may violate any
Environmental Law after the Closing Date or that may give rise to
any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or
related to the manufacture, processing, distribution, use,
treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous
substance.
Page8
(t) Books
and Records; Internal Accounting Controls . The records and
documents of the Company and its Subsidiaries accurately reflect in
all material respects the information relating to the business of
the Company and the Subsidiaries, the location and collection of
their assets, and the nature of all transactions giving rise to the
obligations or accounts receivable of the Company or any
Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment
of the Company’s board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate actions are taken
with respect to any differences.
(u) Material Agreements . Except for the Transaction
Documents (with respect to clause (i) only), as disclosed in the
Commission Documents or as set forth on Schedule 2.1(u) hereto,
or as would not be reasonably likely to have a Material Adverse
Effect, (i) the Company and each of its Subsidiaries have performed
all obligations required to be performed by them to date under any
written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, filed or required to be filed with
the Commission (the " Material Agreements "), (ii) neither
the Company nor any of its Subsidiaries has received any notice of
default under any Material Agreement and, (iii) to the best of the
Company’s knowledge, neither the Company nor any of its
Subsidiaries is in default under any Material Agreement now in
effect.
Page9
(v) Transactions with Affiliates . Except as set forth
on Schedule 2.1(v) hereto and in the Commission Documents,
there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other
continuing transactions between (a) the Company, any Subsidiary or
any of their respective customers or suppliers on the one hand, and
(b) on the other hand, any officer, employee, consultant or
director of the Company, or any of its Subsidiaries, or any person
owning at least 5% of the outstanding capital stock of the Company
or any Subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee,
consultant, director or stockholder, or a member of the immediate
family of such officer, employee, consultant, director or
stockholder which, in each case, is required to be disclosed in the
Commission Documents or in the Company’s most recently filed
definitive proxy statement on Schedule 14A, that is not so
disclosed in the Commission Documents or in such proxy
statement.
(w) Securities Act of 1933 . Based in material part upon the
representations herein of the Purchasers, the Company has complied
and will comply with all applicable federal and state securities
laws in connection with the offer, issuance and sale of the
Securities hereunder. Neither the Company nor anyone acting on its
behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy any of the Securities or similar securities
to, or solicit offers with respect thereto from, or enter into any
negotiations relating thereto with, any person, or has taken or
will take any action so as to bring the issuance and sale of any of
the Securities under the registration provisions of the Securities
Act and applicable state securities laws, and neither the Company
nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of any of the
Securities.
(x) Employees . Neither the Company nor any Subsidiary has
any collective bargaining arrangements or agreements covering any
of its employees, except as set forth on Schedule 2.1(x)
hereto. Except as set forth on Schedule 2.1(x) hereto,
neither the Company nor any Subsidiary has any employment contract,
agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement,
or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or
engaged by the Company or such Subsidiary required to be disclosed
in the Commission Documents that is not so disclosed. No officer,
consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, has terminated
or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or
any Subsidiary.
(y) Absence
of Certain Developments . Except as set forth in the
Commission Documents or provided on Schedule 2.1(y) hereto,
since June 30, 2005, neither the Company nor any Subsidiary
has:
(i) issued any
stock, bonds or other corporate securities or any right, options or
warrants with respect thereto;
Page10
(ii) borrowed
any amount in excess of $100,000 or incurred or become subject to
any other liabilities in excess of $100,000 (absolute or
contingent) except current liabilities incurred in the ordinary
course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business
during the comparable portion of its prior fiscal year, as adjusted
to reflect the current nature and volume of the business of the
Company and its Subsidiaries;
(iii) discharged or satisfied any lien or encumbrance in excess of
$100,000 or paid any obligation or liability (absolute or
contingent) in excess of $100,000, other than current liabilities
paid in the ordinary course of business;
(iv) declared
or made any payment or distribution of cash or other property to
stockholders with respect to its stock, or purchased or redeemed,
or made any agreements so to purchase or redeem, any shares of its
capital stock, in each case in excess of $50,000 individually or
$100,000 in the aggregate;
(v) sold,
assigned or transferred any other tangible assets, or canceled any
debts or claims, in each case in excess of $100,000, except in the
ordinary course of business;
(vi) sold,
assigned or transferred any patent rights, trademarks, trade names,
copyrights, trade secrets or other intangible assets or
intellectual property rights in excess of $100,000, or disclosed
any proprietary confidential information to any person except to
customers in the ordinary course of business or to the Purchasers
or their representatives;
(vii) suffered
any material losses or waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of
any material amount of prospective business;
(viii) made
any changes in employee compensation except in the ordinary course
of business and consistent with past practices;
(ix) made
capital expenditures or commitments therefor that aggregate in
excess of $100,000;
(x) entered
into any material transaction, whether or not in the ordinary
course of business;
(xi) made
charitable contributions or pledges in excess of
$10,000;
(xii) suffered
any material damage, destruction or casualty loss, whether or not
covered by insurance;
(xiii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment;
or
Page11
(xiv) entered
into an agreement, written or otherwise, to take any of the
foregoing actions.
(z) Public
Utility Holding Company Act and Investment Company Act
Status . The Company is not a "holding company" or a "public
utility company" as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended. The Company is not, and as
a result of and immediately upon the Closing will not be, an
"investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940,
as amended.
(aa) ERISA . No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the
Company or any of its Subsidiaries which is or would be materially
adverse to the Company and its Subsidiaries. The execution and
delivery of this Agreement and the issuance and sale of the
Securities will not involve any transaction which is subject to the
prohibitions of Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or in connection with
which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended, provided that, if any of
the Purchasers, or any person or entity that owns a beneficial
interest in any of the Purchasers, is an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA) with respect to
which the Company is a "party in interest" (within the meaning of
Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and
408(e) of ERISA, if applicable, are met. As used in this Section
2.1(aa), the term "Plan" shall mean an "employee pension benefit
plan" (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have
been made, by the Company or any Subsidiary or by any trade or
business, whether or not incorporated, which, together with the
Company or any Subsidiary, is under common control, as described in
Section 414(b) or (c) of the Code.
(bb) Independent Nature of Purchasers . The Company
acknowledges that the obligations of each Purchaser under the
Transaction Documents are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of
any other Purchaser under the Transaction Documents. The Company
acknowledges that the decision of each Purchaser to purchase
Securities pursuant to this Agreement has been made by such
Purchaser independently of any other purchase and independently of
any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities,
results of operations, condition (financial or otherwise) or
prospects of the Company or of its Subsidiaries which may have made
or given by any other Purchaser or by any agent or employee of any
other Purchaser, and no Purchaser or any of its agents or employees
shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information, materials,
statements or opinions. The Company acknowledges that nothing
contained herein, or in any Transaction Document, and no action
taken by any Purchaser pursuant hereto or 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 Company acknowledges that for
reasons of administrative convenience only, the Transaction
Documents have been prepared by counsel for one of the Purchasers
and such counsel does not represent all of the Purchasers but only
such Purchaser and the other Purchasers have retained their own
individual counsel with respect to the transactions contemplated
hereby. The Company acknowledges that it has elected to
provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers. The Company
acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Purchasers are
in any way acting in concert or as a group with respect to the
Transaction Documents or the transactions contemplated hereby or
thereby.
Page12
(cc) No
Integrated Offering . Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that
would cause the offering of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for
purposes of the Securities Act which would prevent the Company from
selling the Securities pursuant to Regulation D and Rule 506
thereof under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the
Company or any of its affiliates or subsidiaries take any action or
steps that would cause the offering of the Securities to be
integrated with other offerings. The Company does not have any
registration statement pending before the Commission or currently
under the Commission’s review and except as set forth on
Schedule 2.1(cc) hereto, since June 1, 2005, the Company has not
offered or sold any of its equity securities or debt securities
convertible into shares of Common Stock.
(dd) Sarbanes-Oxley Act . The Company is in compliance
with the applicable provisions of the Sarbanes-Oxley Act of 2002
(the " Sarbanes-Oxley Act "), and the rules and regulations
promulgated thereunder, that are effective and intends to comply
with other applicable provisions of the Sarbanes-Oxley Act, and the
rules and regulations promulgated thereunder, upon the
effectiveness of such provisions.
(ee) Dilutive Effect . The Company understands and
acknowledges that its obligation to issue Conversion Shares upon
conversion of the Notes in accordance with this Agreement and the
Notes and its obligations to issue the Warrant Shares upon the
exercise of the Warrants in accordance with this Agreement and the
Warrants, is, in each case, absolute and unconditional regardless
of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company.
(ff) DTC
Status . Except as set forth on Schedule 2.1(ff) hereto,
the Company’s transfer agent is a participant in and the
Common Stock is eligible for transfer pursuant to the Depository
Trust Company Automated Securities Transfer Program. The name,
address, telephone number, fax number, contact person and email of
the Company transfer agent is set forth on Schedule 2.1(ff)
hereto.
(gg) Acknowledgement Regarding Purchasers’ Trading
Activity . The Company understands and acknowledges that,
one or more Purchasers may engage in hedging activities at various
times during the period that the Securities are
outstanding.
Section 2.2 Representations and Warranties of the Purchasers . Each
of the Purchasers hereby represents and warrants to the Company
with respect solely to itself and not with respect to any other
Purchaser as follows as of the date hereof and as of each Closing
Date:
Page13
(a) Organization and Standing of the Purchasers . If the
Purchaser is an entity, such Purchaser is a corporation, limited
liability company or partnership duly incorporated or organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
(b) Authorization and Power . Each Purchaser has the
requisite power and authority to enter into and perform the
Transaction Documents and to purchase the Securities being sold to
it hereunder. The execution, delivery and performance of the
Transaction Documents by each Purchaser and the consummation by it
of the transactions contemplated hereby have been duly authorized
by all necessary corporate or partnership action, and no further
consent or authorization of such Purchaser or its Board of
Directors, stockholders, or partners, as the case may be, is
required. When executed and delivered by the Purchasers, the other
Transaction Documents shall constitute valid and binding
obligations of each Purchaser enforceable against such Purchaser in
accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, conservatorship, receivership or similar
laws relating to, or affecting generally the enforcement of,
creditor’s rights and remedies or by other equitable
principles of general application.
(c) No
Conflict . The execution, delivery and performance of the
Transaction Documents by the Purchaser and the consummation by the
Purchaser of the transactions contemplated thereby and hereby do
not and will not (i) violate any provision of the Purchaser’s
charter or organizational documents, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of,
any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the
Purchaser is a party or by which the Purchaser’s respective
properties or assets are bound, or (iii) result in a violation of
any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Purchaser or by which any
property or asset of the Purchaser are bound or affected, except,
in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state securities laws) above,
except, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not,
individually or in the aggregate, materially and adversely affect
the Purchaser’s ability to perform its obligations under the
Transaction Documents.
(d) Acquisition for Investment . Each Purchaser is
purchasing the Securities solely for its own account and not with a
view to or for sale in connection with distribution. Each Purchaser
does not have a present intention to sell any of the Securities,
nor a present
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