Exhibit 99.2
PREFERRED STOCK PURCHASE
AGREEMENT
This Preferred Stock Purchase
Agreement (“ Agreement ”) is effective as of
July 23, 2009 (“ Effective Date ”), by and among
iceWEB, Inc., a Delaware corporation (“ Company
”), and Optimus Capital Partners, LLC, a Delaware limited
liability company, doing business as Optimus Technology Capital
Partners, LLC (including its permitted 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, for immediately available funds,
from time to time as provided herein, up to $3,000,000.00 of shares
of Series C Preferred Stock,
B. Investor
may receive from the Company, in payment of dividends due on said
Series C Preferred Stock purchased with immediately available
funds, up to an additional $1,000,000.00 of shares of Series C
Preferred Stock, for a total of $4,000,000.00 of Series C Preferred
Stock; and
C. 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 Certificate of Designations, and (b) the following terms have
the meanings indicated in this Section 1.1 :
“ Act ” means the
Securities Act of 1933, as amended.
“ Adjudicated to
Finality ” means the adjudication of a case, criminal or
civil, to the stage that the judgment or verdict of a court of
competent jurisdiction is final and not appealable
further.
“ 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
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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.
“ 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.
“ Certificate of
Designations ” means the certificate to be filed with the
Secretary of State of the State of Delaware, in the form attached
hereto as Exhibit B .
“ 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 $0.001 per share, of Company, and
any replacement or substitute therefor, 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 (other
than Borrowed Shares when first delivered), all of which shall be
issued in electronic form, without restriction on resale, and
delivered by Company to any specified Deposit/Withdrawal at
Custodian (DWAC) account with Depository Trust Company (DTC), 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 $150,000.00 payable to Investor in
cash or shares of Common Stock valued at 85% of the VWAP for the 5
Trading Days immediately preceding the first Tranche Closing, paid
at the first Tranche Closing; or, if the first Tranche
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Closing has not occurred within 6
months from the Effective Date, valued at 85% of the VWAP for the 5
Trading Days immediately preceding the Effective Date. On the
Effective Date, the Company will issue Fee Shares in such amount in
the name of Investor and deliver certificates to Company’s
counsel to be held by Company’s counsel in escrow for
Investor until the earlier of the first Tranche Closing or 6 months
following the Effective Date, at which time Company’s counsel
shall deliver the certificates to Investor, unless the
non-refundable fee is paid in cash prior to such time. If the VWAP
is higher or lower on the first Tranche Closing date than the
Effective Date, additional shares shall be issued by Company or
returned to Company, respectively. Company and Investor waive any
conflicts of interest arising from Company’s counsel acting
in this limited escrow capacity.
“ 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 $ $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 $100,000 due under leases required to be capitalized in
accordance with GAAP.
“ Knowledge ”
means the actual knowledge of Company and its executive officers
and directors, following reasonable investigation.
“ Liens ” means a
lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“ 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
Change ” means any
material adverse change to the financial condition, results of
operations, properties or liabilities of the Company, taken as a
whole, that is so substantial and adverse as to fundamentally
impair the value to the Investor of the Company and does not arise
from or relate to customers of the Company or changes in the
volumes or prices of sales or purchases by the Company. If the
Material Adverse Change arises from a liability of the Company
adjudicated in a court of competent jurisdiction, said adjudication
must be Adjudicated to Finality.
“Material Adverse
Effect ” means any
act or omission which results in a change to the financial
condition, results of operations, properties or liabilities of the
Company, taken as a whole, that is so substantial and adverse as to
fundamentally impair the value to the Investor of the Company and
does not arise from or relate to customers of the Company or
changes in the volumes or prices of sales or purchases by the
Company. If the Material Adverse Effect arises
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from a liability of the Company
adjudicated in a court of competent jurisdiction, said adjudication
must be Adjudicated to Finality.
“ Material Agreement
” includes any loan agreement, equity investment agreement or
securities instrument to which Company is a party, any agreement or
instrument 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.
“ Material Liabilities
” means Indebtedness not incurred in the ordinary course of
business.
“ Maximum Placement
” means $3,000,000.00, evidenced by 300 Preferred Shares,
which is exclusive of the up to 100 additional Preferred Shares
issued to Investor in payment of dividends owing for Preferred
Shares issued for disbursements of immediately available funds by
the Investor up to the Maximum Placement.
“ Officer’s Closing
Certificate ” means a certificate in customary form
reasonably acceptable to the Investor, executed by an authorized
officer of the Company.
“ 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 C Preferred Stock of the Company
provided for in the Certificate of Designations, to be issued to
Investor pursuant to this Agreement.
“ Prospectus ”
has the meaning set forth in Section 4.1 (hh)(i)
.
“ 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
Placement.
“ Tranche Closing
” has the meaning set forth in Section 2.3(e)
.
“ Tranche Closing Date
” has the meaning set forth in Section 2.3(e)
.
“ 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.
“ Tranche Share Price
” means $10,000.00 per Preferred Share.
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“ 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.
“ Required Tranche
Documents ” has the meaning set forth in Section
2.3(c) .
“ 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 ”
means the Warrants, Common Shares and Preferred Shares issuable
pursuant to this Agreement.
“ Short Sale ”
has the meaning set forth in Rule 200(a) under Regulation SHO
promulgated by the SEC, as such Rule may be amended from time to
time.
“ 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 of 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, or any substantial portion 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 all 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 one year 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.
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“ Termination Notice
” has the meaning as set forth in Section 3.2
.
“ Trading Day ”
means any day on which the Common Stock is traded on the Trading
Market; provided that “ Trading Day ” shall not
include any day on which the Common Stock is scheduled to trade on
such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of
trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such
exchange or market, then during the hour ending at 4:00 p.m.,
New York time).
“ Trading Market
” means the OTC Bulletin Board, the NASDAQ Capital Market,
the NASDAQ Global Market, the NYSE Amex, the New York Stock
Exchange, or any successor to any of the foregoing, whichever is at
the time the principal trading exchange or market for the Common
Stock.
“ Transaction Documents
” include this Agreement and the Exhibits hereto and
thereto.
“ Transfer Agent
” means Olde Monmouth Stock Transfer Co., Inc. , or
any successor transfer agent for the Common Stock.
“ Use of Proceeds
Certificate ” means a certificate in the form attached as
Exhibit G, signed by an officer of the Company, setting forth how
the Tranche Purchase Price will be applied by the
Company.
“ 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. Pending the Registration Statement effective time,
Borrowed Shares, as that term is defined in the Stock Loan
Agreement, may be substituted for Warrant Shares with respect to
satisfying any conditions or obligations of this
Agreement.
“ Warrants ”
means the warrants issuable under this Agreement, in the form
attached hereto as Exhibit A , to purchase Common Shares up
to $4,050,000.00 in value.
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; and
(b) The
Company agrees to issue Fee Shares and Warrants to Investor
pursuant to Section 2.5 below.
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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 as to (x) the resolutions of the
Company’s board of directors authorizing this Agreement and
the Transaction Documents, and the transactions contemplated hereby
and thereby, (y) a copy of the Company’s current Certificate
of Incorporation as amended, and (z) a copy of the Company’s
current Bylaws; (C) the Certificate of Designations executed by the
Company and accepted by the Secretary of State of Delaware; and (F)
a copy of the press release announcing the transactions
contemplated by this Agreement and Current Report on Form 8-K
describing the transaction contemplated by this Agreement and
attaching a complete form of this Agreement including
exhibits;
(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; and
(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
Investor;
(iv) Company’s
counsel shall have received, in escrow, the Fee Shares and a
Warrant to purchase $4,050,000.00 in Common Stock; a copy of the
Escrow Agreement pursuant to which Company’s counsel holds
this escrow is attached as Exhibit I; and
(v) Investor
shall have entered into Stock Loan Agreements with a lending
stockholder of the Company who is a party thereto (“
Lending Stockholder ”) in the form attached hereto as
Exhibit H (“ Stock Loan Agreement ”), and
received the Borrowed Shares (as defined in the Stock Loan
Agreement) pursuant thereto.
(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.
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2.3
Tranches to Investor
(a)
Procedure to Elect a Tranche . Subject to 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 any Trading Day via facsimile or electronic mail, with
confirming copy by overnight carrier. A Tranche Notice delivered on
a non-Trading Day or after 9:30 a.m. Eastern Time on a Trading Day
shall be deemed to be delivered on the following Trading
Day.
(c)
Issuance of Warrants . On each Tranche Notice Date, the
Company shall issue a Warrant, 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, 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 2 years, or 4 years if the exercise price is below
the closing sale price of the Common Stock on the Tranche Notice
Date.
(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, and no default shall have occurred under this
Agreement, or any other agreement with Investor, or Investor
Affiliate, or any other financial agreement or agreement for
borrowed funds of the Company and the Company shall deliver an
Officer’s Closing Certificate, signed by an officer of the
Company, to such effect to Investor;
(iii) there have
been no Material Adverse Changes in the Company’s business
prospects or financial condition since the Commitment Closing,
including but not limited to incurring Material
Liabilities;
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(iv) the Company
is not, and will not be as a result of the applicable Tranche, in
default of any Material Agreement;
(v) 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 of Investor), that
seek to enjoin or prohibit the transactions contemplated by this
Agreement. For purposes of this paragraph (g), no proceeding shall
be deemed pending or threatened unless one of the parties has
received written notification thereof prior to the applicable
Closing Date;
(vi) all 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
Common Shares;
(ix) 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;
(x) 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;
(xi) Pursuant to
the terms of the Stock Loan Agreement, Investor shall have Borrowed
Shares equal to at least 150% of the Tranche Purchase Price
available to be issued to it;
(xii) The number of
Borrowed Shares in such amount as may be required to fulfill the
Company’s obligations pursuant to the Transaction Documents
and any outstanding agreements with Investor and any Investor
Affiliate, through the date of the pending Tranche Notice, shall
have been delivered by Lending Stockholder (as that term is defined
in the Stock Loan Agreement) in certificated security form, to any
broker/dealer specified by Investor or Investor Affiliate, and
actually converted into DWAC Shares in a specified DWAC account
with DTC such that Investor or Investor Affiliate is able to sell
said Borrowed Shares not later than the at that Tranche Notice
Date; and
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(xiii) the aggregate number of
Warrant Shares issuable upon exercise of the Warrant issued at that
Tranche Notice Date, aggregated with all other shares of Common
Stock deemed beneficially owned or controlled by the Investor or
its Affiliates, including without limitation any Borrowed Shares,
would not result in the Investor beneficially owning or controlling
more than 9.99% of all Common Stock outstanding on the Tranche
Notice Date, as determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated
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;
(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 Tranche Purchase Price will be applied by the
Company;
(iv) all Warrant
Shares shall have been delivered pursuant to any Exercise Notice
delivered to Company prior to any Tranche Closing Date;
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(d) 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 7 Trading 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. Subject to all conditions to closing on any Tranche, in
the first Tranche Closing Investor shall purchase not less than
fifteen (15) Preferred Shares.
(g)
Limitation on Investor’s Obligation to Purchase .
Notwithstanding anything herein to the contrary, in the event (i)
the closing price of the Common Stock 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
Closing Date or (ii) the aggregate Securities to be received by
Investor would cause its beneficial ownership or control to exceed
9.99% of the
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total outstanding shares of Common
Stock, Investor may, at its option, and without penalty, decline to
purchase the applicable Tranche Shares on the Tranche Closing
Date.
(h)
Fee Share Closing . Simultaneously with the first Tranche
Closing, the Fee Shares shall be delivered to Investor.
(i)
Borrowed Shares . As of the Effective Date, the Company is
not FAST eligible through DTC, but will use reasonable best efforts
to become so as soon as practicable. However, provided that
sufficient Borrowed Shares are delivered as provided above, Company
may put Tranches to Investor irrespective of the FAST requirements
of paragraph 1.1 of the Warrant.
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:
(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 (i) an SEC enforcement action
Adjudicated to Finality, or (ii) a civil judgment or criminal
conviction for fraud or misrepresentation Adjudicated to Finality,
or for any other offense that, if prosecuted criminally, would
constitute a felony under applicable law with said offense having
been Adjudicated to Finality;
(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 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, and if the proceeding is
involuntary, a period of ninety (90) days has elapsed from the
filing of the involuntary petition without same having been
dismissed;
(d) the
Company is in default of any loan agreement, equity investment
agreement or instrument, or any other Material Agreement, following
written notice of said default and reasonable opportunity to cure
of not less than ninety (90) days, with a cure not having been
effectuated during the cure period;
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(e) the
Company is in default of any material provision of any agreement
with the Investor, or Investor Affiliate, following written notice
of said default and reasonable opportunity to cure of not less than
ninety (90) days, with a cure not having been effectuated during
the cure period;
(f) upon
the occurrence of a Strategic Transaction;
(g) the
Company has breached any material covenant in this Agreement,
following written notice of said breach and reasonable opportunity
to cure of not less than ninety (90) days, with a cure not having
been effectuated during the cure period; 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 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, and as applicable covenants with,
Investor:
(a)
Subsidiaries . All of the direct and indirect subsidiaries
of the Company are set forth on Schedule 4.1(a) . Except as
disclosed on Schedule 4.1(a), the Company owns, directly or
indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any Liens, and all 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
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qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not have or reasonably be expected to result in
(i) a Material Adverse Effect on the legality, validity or
enforceability of any Transaction Document, (ii) a Material Adverse
Effect on the results of operations, assets, business, prospects or
financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) a Material Adverse Effect on the Company’s
ability to perform in any material respect on a timely basis its
obligations under any Transaction Document and no proceeding has
been Adjudicated to Finality 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 thereunder. 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 Certificate of
Designations. 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 . Except as disclosed in Schedule 4.1(d), 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 default (or an event that with notice or lapse of time
or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) conflict with or result
in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected, or (iv) conflict with or violate
the terms of any agreement by which the Company or any Subsidiary
is bound or to which any 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.
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(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 Certificate of
Designations.
(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) . 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, scrip 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. The issuance and sale of
the Securities will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than
Investor) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange, or reset
price under such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. No further approval or
authorization of
