PREFERRED STOCK PURCHASE AGREEMENT

Exhibit (i)

PREFERRED STOCK PURCHASE AGREEMENT

This Preferred Stock Purchase Agreement (“ Agreement ”) is effective as of July 2, 2009 (“ Effective Date ”), by and among Cord Blood America, Inc. , a Florida corporation (“ Company ”), and Optimus Capital Partners, LLC, a Delaware limited liability company, doing business as Optimus Life Sciences Capital Partners, LLC (including its designees, successors and assigns, “ Investor ”).

RECITALS

A.

The parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue to Investor, and Investor shall purchase from the Company, from time to time as provided herein, up to $7,500,000.00 of shares of Series A Preferred Stock; and

B.

The offer and sale of the Securities provided for herein are being made without registration under the Act, in reliance upon the provisions of Section 4(2) of the Act, Regulation D promulgated under the Act, and such other exemptions from the registration requirements of the Act as may be available with respect to any or all of the purchases of Securities to be made hereunder.

AGREEMENT

NOW, THEREFORE, IN CONSIDERATION of the premises, the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, Company and Investor agree as follows:

ARTICLE 1
DEFINITIONS

1.1

Definitions .  In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Articles of Amendment, and (b) the following terms have the meanings indicated in this Section 1.1 :

“ Act ” means the Securities Act of 1933, as amended.

“ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Act.  With respect to Investor, without limitation, any Person owning, owned by, or under common ownership with Investor, and any investment fund or managed account that is managed on a discretionary basis by the same investment manager as Investor will  be deemed to be an Affiliate.

“ Agreement ” means this Preferred Stock Purchase Agreement.

 

1

 

 

“ Articles of Amendment ” means the Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company to be filed with the Florida Department of State,  in the form attached hereto as Exhibit B, to establish the new class of Preferred Stock.

“ Automatic Termination ” has the meaning set forth in Section 3.1 .

“ Change in Control ” has the meaning set forth within the definition of Strategic Transaction, below.

“ Closing ” means any one of (i) the Commitment Closing and (ii) each Tranche Closing.

“ Commitment Closing ” has the meaning set forth in Section 2.2(a) .

“ Common Shares ” includes the Fee Shares and any Warrant Shares.

“ Common Stock ” means the common stock, par value $0.0001 per share, of Company, and any replacement or substitute thereof, or any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

“ Company Termination ” has the meaning set forth in Section 3.2 .

“ Delisting Event ” means any time during the term of this Agreement, that the Company’s Common Stock is not listed for and actively trading on a Trading Market, or is suspended or delisted with respect to the trading of the shares of Common Stock on a Trading Market.

“ Disclosure Schedules ” means the Disclosure Schedules of the Company delivered concurrently herewith and attached hereto.

“ DWAC Shares ” means all Common Shares or other shares of Common Stock issued or issuable to Investor or any Affiliate, successor or assign of Investor, including without limitation any Warrant Shares, all of which shall be issued in electronic form, freely tradeable, without restriction on resale, and delivered by Company to any specified Deposit/Withdrawal at Custodian (DWAC) account with Depository Trust Company (DTC) under its Fast Automated Securities Transfer (FAST) Program, in accordance with irrevocable instructions issued to and countersigned by the Transfer Agent, in the form attached hereto as Exhibit C .

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Fee Shares ” means a non-refundable fee of $375,000.00 payable to Investor in cash or shares of Common Stock valued at 85% of the VWAP for the 5 Trading Days immediately preceding the date the initial Registration Statement is declared effective, unless no Registration Statement has been declared effective within 6 months of the Commitment Closing, in which case, if paid in shares of Common Stock, such shares

 

2

 

 

shall be valued at 85% of the VWAP for the 5 Trading Days immediately preceding the six month anniversary of the Commitment Closing.

“ GAAP ” means United States generally accepted accounting principles applied on a consistent basis during the periods involved.

“ Indebtedness ” means (a) any liabilities for borrowed money or amounts owed in excess of $500,000.00 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in excess of $500,000.00, 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 $500,000.00 due under leases required to be capitalized in accordance with GAAP.  

“ Liens ” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction in excess of $500,000.00.

“ Lock-Up Agreements ” means an agreement in the form attached as Exhibit D , executed by each of the Company’s officers, directors and beneficial owners of 10% or more of the Common Stock, precluding each such Person from participating in any sale of the Common Stock from the Tranche Notice Date thought the Tranche Closing Date.

“Material Adverse Effect” means w ould or could reasonably be expected to have (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) an adverse effect that would or could reasonably be expected to result in an economic loss to the Company in excess of $500,000.00; not counting for this purpose  the continuing future losses of the Company going forward which match the past historic loss trend of the Company, 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

“ Material Agreement ” includes any loan agreement, equity investment agreement or securities instrument concerning an amount in excess of $500,000.00, to which Company is a party, any agreement or instrument concerning an amount in excess of $500,000.00, to which Company and Investor or any Affiliate of Investor is a party, and any other material agreement listed, or required to be listed, on any of Company’s reports filed or required to be filed with the SEC, including without limitation Forms 10-K, 10-Q or 8-K.

“ Maximum Tranche Amount ” means, subject to the conditions of this Agreement, the Maximum Placement less the amount of any previously noticed and funded Tranches.

“ Maximum Placement ” means $7,500,000.00.

“ Officer’s Closing Certificate ” means a certificate in customary form reasonably acceptable to the Investor, executed by an authorized officer of the Company.

 

3

 

 

“ Opinion ” means an opinion from Company’s independent legal counsel, in the form attached as Exhibit E , or such other form as agreed upon by the parties, to be delivered in connection with the Commitment Closing and any Tranche Closing.

“ 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.

“ Preferred Shares ” means shares of Series A Preferred Stock of the Company provided for in the Articles of Amendment, to be issued to Investor pursuant to this Agreement.

“ Pricing Period ” means the five (5) Trading Days immediately prior to a Tranche Notice Date.

“ Prospectus ” has the meaning set forth in Section 4.1(gg)(iii) .

“ Tranche ” has the meaning set forth in Section 2.3 .

“ Tranche Amount ” means the amount of any individual put purchase, as specified by the Company, and shall not exceed the Maximum Tranche Amount.

“ Tranche Closing ” has the meaning set forth in Section 2.3(f) .

“ Tranche Closing Date ” has the meaning set forth in Section 2.3(f) .

“ Tranche Notice ” has the meaning set forth in Section 2.3(b) .

“ Tranche Notice Date ” has the meaning set forth in Section 2.3(b) .

“ Tranche Purchase Price ” has the meaning set forth in Section 2.3(b) and shall be specified in writing by the Company, and shall not exceed the average daily Trading Volume of the Company’s Common Stock on Trading Market during the Pricing Period.

“ Tranche Share Price ” means $10,000.00 per Preferred Share.

“ Tranche Shares ” means shares of Preferred Stock that are purchased by Investor pursuant to a Tranche.

“ Registration Statement ” means a valid, current and effective registration statement registering for sale the Common Shares, and except where the context otherwise requires, means the registration statement, as amended, including (i) all documents filed as a part thereof or incorporated by reference therein, and (ii) any information contained or incorporated by reference in a prospectus filed with the SEC in connection with such registration statement, to the extent such information is deemed under the Act to be part of the registration statement.

“ Regulation D ” means Regulation D promulgated under the Act.

 

4

 

 

“ Required Tranche Documents ” has the meaning set forth in Section 2.3(e) .

“ Rule 144 ” means Rule 144 promulgated by the SEC pursuant to the Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect.

“ SEC ” means the United States Securities and Exchange Commission.

“ Securities ” includes the Warrants, Common Shares, Warrant Shares issuable upon exercise of the Warrants, and Preferred Shares issuable pursuant to this Agreement.

“ Strategic Transaction ” means and shall be deemed to have occurred at such time upon any of the following events:

(i)

a consolidation, merger or other business combination or event or transaction following which the holders of Common Stock immediately preceding such consolidation, merger, combination or event either (i) no longer hold a majority of the shares of Common Stock or (ii) no longer have the ability to elect a majority the board of directors of the Company (a “ Change in Control ”);

(ii)

the sale or transfer of all or a majority of the Company’s assets,  other than in the ordinary course of business; or

(iii)

a purchase, tender or exchange offer made to the holders of the outstanding shares of Common Stock.

“ Subsidiary ” means any Person the Company owns or controls, or in which the Company, directly or indirectly, owns a majority of the capital stock or similar interest that would be disclosable pursuant to Regulation S-K, Item 601(b)(21).

“ Termination Date ” means the earlier of (i) the date that is two  years after the Effective Date, or (ii) the Tranche Closing Date on which the sum of the aggregate Tranche Purchase Price for all Tranche Shares equals the Maximum Placement.

“ Termination Notice ” has the meaning as set forth in Section 3.2 .

“ Trading Market ” means the OTC Bulletin Board, the NASDAQ Capital Market, the NASDAQ Global Market, the NYSE Amex, or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

“ Trading Volume ” means the volume of shares of Common Stock that trade between 9:30 a.m. and 4:00 PM, New York City time, on any Trading Day, and shall expressly exclude any shares trading during any “after hours” trading.

“ Transaction Documents ” include this Agreement and the Exhibits hereto and thereto.

 

5

 

 

“ Transfer Agent ” means [____________________], or any successor transfer agent for the Common Stock.

“ VWAP ” means, for any date, the volume weighted average price, calculated based upon the ratio of the aggregate value of Common Stock traded on the Trading Market to the total volume of Common Stock traded on the Trading Market for such date (or the nearest preceding date).

“ Warrant Shares ” means the shares of Common Stock issuable upon exercise of the Warrants.

“ Warrants ” means the warrants issuable under this Agreement, in the form attached hereto as Exhibit A , to purchase shares of Common Shares equal in value to $10,125,000.00, with issuance contingent upon the proportional  “Tranche” of Preferred Stock to Investor as provided in Section 2.3 .

ARTICLE 2
PURCHASE AND SALE

2.1

Agreement to Purchase .  Subject to the terms and conditions herein and the satisfaction of the conditions to closing set forth in this Article 2 :

(a)

Investor hereby agrees to purchase such amounts of Preferred Shares as the Company may, in its sole and absolute discretion, from time to time elect to issue and sell to Investor according to one or more Tranches pursuant to Section 2.3 below;

(b)

The Company agrees to issue Fee Shares and Warrants to Investor pursuant to Sections 2.1(c) and 2.3(c) below; and

(c)

On the date that the Company’s initial Registration Statement is declared effective, the Company shall issue the Fee Shares to Investor.

2.2

Investment Commitment

(a)

Investment Commitment . The closing of this Agreement (the “ Commitment Closing ”) shall be deemed to occur when this Agreement has been duly executed by both Investor and the Company, and the other Conditions to the Commitment Closing set forth in Section 2.2(b) have been met.  

(b)

Conditions to Investment Commitment . As a condition precedent to the Commitment Closing, all of the following (the “ Conditions to Commitment Closing ”) shall have been satisfied prior to or concurrently with the Company’s execution and delivery of this Agreement:

(i)

the following documents shall have been delivered to Investor:  (A) this Agreement, executed by the Company; (B) a Secretary’s Certificate attaching (x) the resolutions of the Company’s board of directors authorizing this

 

6

 

 

Agreement and the Transaction Documents, and the transactions contemplated hereby and thereby, (y) a copy of the Company’s current Articles of Incorporation, as amended, and (z) a copy of the Company’s current Bylaws; (C) the Articles of Amendment executed by the Company and accepted by the Florida Department of State; (D) the Opinion; and (E) a copy of the press release announcing the transaction contemplated by this Agreement and Current Report on Form 8-K describing the transaction contemplated by this Agreement;

(ii)

there have been no material adverse changes in the Company's business prospects or financial condition since the date of the last balance sheet delivered to Investor, including but not limited to incurring material liabilities;

(iii)

the representations and warranties of the Company in this Agreement shall be true and correct in all material respects and the Company shall have delivered an Officer’s Closing Certificate, signed by an officer of the Company, to such effect to the best of the Officer’s knowledge, to be delivered to Investor; and

(iv)

Investor shall have received the Warrant, which shall be in the form as attached as Exhibit A , but shall initially provide that it is exercisable only concurrent with issuance of a Tranche Notice for Preferred Shares issued by the Company, and only then in an amount equal to 135.0% of the put price as provided for in Section 2.3 (c) .

(c)

Investor’s Obligation to Purchase . Subject to the prior satisfaction of all conditions set forth in this Agreement, following the Investor’s receipt of a validly delivered Tranche Notice, the Investor shall be required to purchase from the Company a number of Tranche Shares equal to the permitted Tranche Share Amount, in the manner described below.

2.3

Tranches to Investor

(a)

Procedure to Elect a Tranche . Subject to the Maximum Tranche Amount, the Maximum Placement and the other conditions and limitations set forth in this Agreement, at any time beginning on the Effective Date, the Company may, in its sole and absolute discretion, elect to exercise one or more tranches of puts (each a “ Tranche ”) according to the following procedure, provided that each subsequent Tranche Notice Date (defined below) after the first Tranche Notice Date shall be no sooner than five (5) Trading Days following the preceding Tranche Notice Date:

(b)

Delivery of Tranche Notice . The Company shall deliver an irrevocable written notice (the “ Tranche Notice ”) the form of which is attached hereto as Exhibit F (the date of such Tranche Notice being the “ Tranche Notice Date ”), to Investor stating that the Company shall exercise a Tranche and stating the number of Preferred Shares which the Company will sell to Investor at the Tranche Share Price, and the aggregate purchase price for such Tranche (the “ Tranche Purchase Price ”).  A Tranche Notice may be delivered by the Company to Investor before 9:30 a.m. Eastern time on

 

7

 

 

any Trading Day via facsimile or electronic mail, with confirming copy by overnight carrier.

(c)

Issuance of Warrants .  On each Tranche Notice Date, the Company shall issue a replacement Warrant, in the form attached hereto as Exhibit A , amending and replacing a portion of the initial Warrant issued on the Commitment Closing , to acquire that portion of Warrant Shares equal in value to 135.0% of the Tranche Purchase Price for such Tranche, at an exercise price equal to the closing bid price for the Common Stock on the Trading Day immediately preceding the Tranche Notice Date.  Each Warrant shall have a term of 5 years.

(d)

Conditions Precedent to the Right of the Company to Deliver a Tranche Notice .  The right of the Company to deliver a Tranche Notice is subject to the satisfaction, on the date of delivery of such Tranche Notice, of each of the following conditions:

(i)

the Common Stock shall be listed for and actively trading on a Trading Market, and to the Company’s knowledge there is no notice of any suspension or delisting with respect the trading of the shares of Common Stock on such market or exchange;

(ii)

the representations and warranties of the Company set forth in this Agreement are true and correct in all material respects as if made on such date, subject to such changes which have occurred in the ordinary course of the orderly operation of the Company’s business, and no default shall have occurred under this Agreement, or any other agreement with Investor, or Investor Affiliate, or with respect to any other financial agreement or agreement for borrowed funds of the Company in excess of $500,000.00, and the Company shall deliver an Officer’s Closing Certificate, signed by an officer of the Company, to such effect to Investor;

(iii)

there has  been no decrease in the Company’s revenues on a quarterly basis, as compared to the quarterly revenues for the same quarter for the prior fiscal year, in excess of 35%;   

(iv)

the Company is not, and will not be as a result of the applicable Tranche, be in default of any Material Agreement;

(v)

Except for possible restrictions on resale under applicable securities laws, there is not then in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained, nor is there any pending or threatened proceeding or investigation which may have the effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement; no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits the transactions contemplated by this Agreement, and no actions, suits or proceedings shall be in progress, pending or threatened by any person (other than Investor or any affiliate

 

8

 

 

of Investor), that seek to enjoin or prohibit the transactions contemplated by this Agreement. For purposes of this paragraph (v), no proceeding shall be deemed pending or threatened unless one of the parties has received written notification thereof prior to the applicable Tranche Closing Date;

(vi)

all previously-issued Common Shares are DWAC Shares, are DTC eligible and can be immediately converted into electronic form without restriction on resale;

(vii)

Company is in compliance with all reporting requirements in order to maintain listing on its then current Trading Market;

(viii)

Company has a current, valid and effective Registration Statement for the resale of all previously-issued Common Shares, and all Warrant Shares issuable pursuant to the Warrant issued on such date.

(ix)

Investor shall have timely received the Fee Shares, all Warrant Shares issuable pursuant to any Exercise Notice delivered to Company prior to such date, and the Warrant issuable on such date in accordance with Section 2.3(c);

(x)

Company has a sufficient number of duly authorized shares of Common Stock for issuance in such amount as may be required to fulfill its obligations pursuant to the Transaction Documents and any outstanding agreements with Investor and any Investor Affiliate;

(xi)

Company has provided notice of its delivery of the Tranche Notice to all signatories of a Lock-Up Agreement as required under the Lock-Up Agreement; and

(xii)

the number of Common Shares owned by Investor and the number of Common Shares issuable upon exercise of the Warrant issuable on such date and any then-outstanding and unexerised Warrants delivered with prior Tranches, when aggregated with any other securities owned by Investor and its Affiliates,  would not result in beneficial ownership by Investor and its Affiliates of more than 9.99% of the outstanding shares of Common Stock of the Company, unless such condition is waived by Investor in writing.  For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act, and Rule 13d-3 thereunder.

(e)

Documents Required to be Delivered as Conditions to Closing of any Tranche . The Closing of any Tranche and Investor’s obligations hereunder shall additionally be conditioned upon the delivery to Investor of each of the following (the “ Required Tranche Documents ”) on or before the applicable Tranche Closing Date:

(i)

a number of Preferred Shares equal to the Tranche Share Amount shall have been delivered to Investor or an account specified by Investor for the Tranche Shares;

 

9

 

 

(ii)

the following documents:  Opinion, Officer’s Certificate and Lock-Up Agreements;

(iii)

a “Use of Proceeds” certificate, signed by an officer of the Company, and setting forth how the Aggregate Tranche Price will be applied by the Company, said application of proceeds to be at the sole discretion of the Company;

(iv)

all required Warrant Shares shall have been timely delivered pursuant to any Exercise Notice delivered to Company; and

(v)

all documents, instruments and other writings required to be delivered by the Company to Investor on or before the Tranche Closing Date pursuant to any provision of this Agreement in order to implement and effect the transactions contemplated herein.

(f)

Mechanics of Tranche Closing . Each of the Company and Investor shall deliver all documents, instruments and writings required to be delivered by either of them pursuant to Section 2.3(e) of this Agreement at or prior to each closing. Subject to such delivery and the satisfaction of the conditions set forth in Section 2.3(d) , the closing of the purchase by Investor of Shares shall occur by 5:00 PM, New York City Time, on the date which is 10 Trading Days following the Tranche Notice Date at the offices of Investor (each a “ Tranche Closing Date ”).  On each or before each Tranche Closing Date, Investor shall deliver to the Company the Tranche Purchase Price to be paid for such Tranche Shares. The closing (each a “ Tranche Closing ”) for each Tranche shall occur on the date that both (i) the Company has delivered to Investor all Required Tranche Documents, and (ii) Investor has delivered to the Company such Tranche Purchase Price, if applicable.

(g)

Limitation on Investor’s Obligation to Purchase .  Notwithstanding anything herein to the contrary, in the event the closing price of the Common Stock on any day during the 9 Trading Days following the Tranche Notice, falls below 75% of the average of the closing bid price in the 9 Trading Days prior to the Tranche Notice Date, Investor may, at its option, and without penalty, decline to purchase the applicable Tranche Shares on the Tranche Closing Date.

2.4

Maximum Placement .  Investor shall not be obligated to purchase any additional Tranche Shares once the aggregate Tranche Purchase Price paid by Investor equals the Maximum Placement.

ARTICLE 3
TERMINATION

3.1

Automatic Termination .  This Agreement and the Company’s right to initiate subsequent Tranches to Investor under this Agreement shall terminate permanently (each, an “Automatic Termination”) upon the occurrence of any of the following:

 

10

 

 

(a)

if, at any time, either the Company or any director or executive officer of the Company has engaged in a transaction or conduct related to the Company that has resulted in an SEC, civil judgment or criminal conviction for fraud or misrepresentation;

(b)

on any date after a Delisting Event that lasts for an aggregate of 20 Trading Days during any calendar year;

(c)

if at any time the Company has filed for and/or is subject to as a debtor any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors instituted by or against the Company or any subsidiary of the Company;

(d)

the Company is in default any other Material Agreement;

(e)

the Company is in default of any material provision of any agreement with the Investor, or Investor Affiliate;

(f)

so long as any Preferred Shares are outstanding, the Company effects or publicly announces its intention to create an equity security senior to the Series A Preferred Stock;

(g)

the Company has breached any material covenant in this Agreement; and

(h)

on the Termination Date.

3.2

Company Termination .  The Company may terminate (a “ Company Termination ”) this Agreement and its right to initiate future Tranches by providing 30 days advanced written notice (“ Termination Notice ”) to Investor, by facsimile or electronic mail and overnight courier, at any time.

3.3

Effect of Termination .  The termination of this Agreement will have no effect on any Common Shares, Preferred Shares, Warrants issued, outstanding and exercisable under the terms of this Agreement, or DWAC Shares previously issued or delivered, or on any rights of any holder thereof.  Notwithstanding any other provision, all fees paid to Investor or its counsel are non-refundable.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES

4.1

Representations and Warranties of the Company .  Except as set forth under the corresponding section of the Disclosure Schedules which Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the representations and warranties set forth below to Investor:

(a)

Subsidiaries .  All of the direct and indirect subsidiaries of the Company are set forth on Schedule 4.1(a) .  The Company owns, directly or indirectly, all

 

11

 

 

of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are duly authorized, validly issued, fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  If the Company has no subsidiaries, then references in the Transaction Documents to the Subsidiaries will be disregarded.

(b)

Organization and Qualification .  Each of the Company and the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in 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 or there under.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby or thereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company other than the filing of the Articles of Amendment.  Each of the Transaction Documents has been (or upon delivery will be) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and general principles of equity.  Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, by-laws or other organizational or charter documents except where such violation could not, individually or in the aggregate, constitute a Material Adverse Effect.

(d)

No Conflicts .  The execution, delivery and performance of the Transaction Documents by the Company, the issuance and sale of the Securities and the consummation by the Company of the other transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, result in the creation of any material Lien upon any of the properties or assets of the Company or any

 

12

 

 

Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other material understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any material property or asset of the Company or a Subsidiary is bound or affected, or (iv) conflict with or violate the terms of any material agreement by which the Company or any Subsidiary is bound or to which any material property or asset of the Company or any 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 .  Neither the Company nor any Subsidiary is 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 the filing of the Articles of Amendment.

(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.  The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Securities at least equal to the number of Securities which could be issued pursuant to the terms of this Agreement.

(g)

Capitalization .  The capitalization of the Company is as described in the Company’s most recent periodic report filed with the SEC.  The Company has not issued any capital stock since such filing other than as set forth on Schedule 3.1(g) , that in the aggregate equals more then 20% of the existing outstanding capital of the Company at this date, excluding for this calculation shares issued in connection with the acquisition of additional businesses or companies.  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 and as set forth on Schedule 3.1(g) , there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or securities convertible into or exercisable for shares of Common Stock (excluding for this purpose, key employee and consultant stock bonus and stock option plans which provide in the aggregate for the issuance of new shares equal to no more then 18% of the currently outstanding shares under such plans).  The issuance and sale of the

 

13

 

 

Securities will not obligate the Company to issue shares of Common Stock or other securities