EXHIBIT 99.1
NOTE AND WARRANT PURCHASE
AGREEMENT
DATED AS OF NOVEMBER 30, 2005
BY AND AMONG
IN TOUCH MEDIA GROUP, INC.
AND
THE PURCHASERS LISTED ON EXHIBIT A
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TABLE OF CONTENTS
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ARTICLE I
Purchase and Sale of Notes and
Warrants.......................................................1
Section 1.1
Purchase and Sale of Notes and
Warrants.............................................1
Section 1.2
Purchase Price and
Closing..........................................................2
Section 1.3
Conversion Shares / Warrant
Shares..................................................2
ARTICLE II
Representations and
Warranties................................................................2
Section 2.1
Representations and Warranties of the
Company.......................................2
Section 2.2
Representations and Warranties of the
Purchasers...................................12
ARTICLE III
Covenants....................................................................................15
Section 3.1
Securities
Compliance..............................................................16
Section 3.2
Registration and
Listing...........................................................15
Section 3.3
Inspection
Rights..................................................................15
Section 3.4
Compliance with
Laws...............................................................16
Section 3.5
Keeping of Records and Books of
Account............................................16
Section 3.6
Reporting
Requirements.............................................................16
Section 3.7
Other
Agreements...................................................................16
Section 3.8
Use of
Proceeds....................................................................17
Section 3.9
Reporting
Status...................................................................17
Section 3.10
Disclosure of
Transaction..........................................................17
Section 3.11
Disclosure of Material
Information.................................................18
Section 3.12
Pledge of
Securities...............................................................18
Section 3.13
Amendments.........................................................................18
Section 3.14
Distributions......................................................................18
Section 3.15
Reservation of
Shares..............................................................18
Section 3.16
Transfer Agent
Instructions........................................................18
Section 3.17
Disposition of
Assets..............................................................19
Section 3.18
Form SB-2
Eligibility..............................................................19
Section 3.19
Restrictions on Certain Issuances of
Securities....................................19
Section 3.20
Increase in Authorized Shares of Common
Stock......................................19
Section 3.21
Acquisition of
Assets..............................................................20
Section 3.22
Subsequent
Financings..............................................................20
ARTICLE IV
Conditions...................................................................................21
Section 4.1
Conditions Precedent to the Obligation of the Company to Close and
to
Sell the
Securities................................................................21
Section 4.2
Conditions Precedent to the Obligation of the Purchasers to Close
and to
Purchase the
Securities............................................................21
Section 4.3
Conditions Precedent to the Obligation of the Purchasers to Close
and to
Purchase the
Notes.................................................................23
ARTICLE V
Certificate
Legend...........................................................................24
Section 5.1
Legend.............................................................................25
ARTICLE VI
Indemnification..............................................................................26
Section 6.1
General
Indemnity..................................................................26
Section 6.2
Indemnification
Procedure..........................................................26
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ARTICLE VII
Miscellaneous................................................................................27
Section 7.1
Fees and
Expenses..................................................................27
Section 7.2
Specific Performance; Consent to Jurisdiction;
Venue...............................27
Section 7.3
Entire Agreement;
Amendment........................................................28
Section 7.4
Notices............................................................................28
Section 7.5
Waivers............................................................................29
Section 7.6
Headings...........................................................................29
Section 7.7
Successors and
Assigns.............................................................29
Section 7.8
No
Third Party
Beneficiaries.......................................................29
Section 7.9
Governing
Law......................................................................29
Section 7.10
Survival...........................................................................29
Section 7.11
Counterparts.......................................................................30
Section 7.12
Publicity..........................................................................30
Section 7.13
Severability.......................................................................30
Section 7.14
Further
Assurances.................................................................30
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NOTE AND WARRANT PURCHASE AGREEMENT
PAGE ii
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NOTE AND WARRANT PURCHASE AGREEMENT
This NOTE AND WARRANT PURCHASE AGREEMENT dated as of November 30,
2005
(this "Agreement") by and among In Touch
Media Group, Inc., a Florida
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 A 9% senior convertible
promissory notes in the aggregate principal
amount of One Million Dollars ($1,000,000),
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 A Warrants, in substantially the form attached
hereto as Exhibit C (the "Series A 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 A Warrants) and a term of
Five
(5) years following the Closing Date;
(ii) Series B Warrants, in substantially the form attached
hereto as Exhibit D (the "Series B 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 B Warrants) and a term of
Seven
(7) years following the Effective Date (as defined in Section
1.4
hereof); and
(iii) Series C Warrants, in substantially the form attached
hereto as Exhibit E (the "Series C 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
<PAGE>
the Series B Warrants) and a term of Ten (10) years following
the
Effective Date (as defined in Section 1.4 hereof); and
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 One Million
Dollars ($1,000,000) (the "Purchase
Price"). The Notes and Warrants shall be
sold and funded in one closing (the
"Closing") which shall take place on or
before November 30, 2005 (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:
(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 Florida
NOTE AND WARRANT PURCHASE AGREEMENT
PAGE 2
<PAGE>
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
NOTE AND WARRANT PURCHASE AGREEMENT
PAGE 3
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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.
(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 OTC:BB
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
NOTE AND WARRANT PURCHASE AGREEMENT
PAGE 4
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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).
(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.
NOTE AND WARRANT PURCHASE AGREEMENT
PAGE 5
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(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
NOTE AND WARRANT PURCHASE AGREEMENT
PAGE 6
<PAGE>
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.
(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,
NOTE AND WARRANT PURCHASE AGREEMENT
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<PAGE>
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.
(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.
NOTE AND WARRANT PURCHASE AGREEMENT
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<PAGE>
(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;
NOTE AND WARRANT PURCHASE AGREEMENT
PAGE 9
<PAGE>
(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
NOTE AND WARRANT PURCHASE AGREEMENT
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<PAGE>
(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 obligation
