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SECURITIES PURCHASE AGREEMENT

Purchase and Sale Agreement

SECURITIES PURCHASE AGREEMENT | Document Parties: XA, INC. | Vision  Opportunity  Master  Fund,  Ltd. You are currently viewing:
This Purchase and Sale Agreement involves

XA, INC. | Vision Opportunity Master Fund, Ltd.

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Title: SECURITIES PURCHASE AGREEMENT
Governing Law: New York     Date: 11/1/2006
Law Firm: Kramer Levin Naftalis Frankel LLP    

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Exhibit 10.6



















                                    XA, INC.



                          SECURITIES PURCHASE AGREEMENT







                             As of October 23, 2006




















<PAGE>

     THIS   SECURITIES   PURCHASE AGREEMENT, dated as of this 23th day of October,
2006 (this "AGREEMENT"), between XA, INC., a Nevada corporation (the "COMPANY"),
            ---------                                                  -------
and   Vision   Opportunity   Master   Fund,   Ltd.   (the   "PURCHASER").
                                                      ---------

                              W I T N E S S E T H:

     WHEREAS,   the   Company   has   previously   entered into a Securities Purchase
Agreement   on   August   8,   2006   (the   "PRIOR   CLOSING"   and the "PRIOR PURCHASE
                                        --------------             --------------
AGREEMENT"),   whereby   it   sold an aggregate of $1,250,000 in 11% Senior Secured
---------
Convertible   Promissory   Notes   (the   "PRIOR   NOTES")   and   175,000   warrants to
                                       ------------
purchase shares of its common stock at an exercise price of $1.10 per share (the
"PRIOR   WARRANTS"),   to five entities (the "PRIOR PURCHASERS") which Prior Notes
  ---------------                             ----------------
were   secured   by   a   Security   Agreement   (the "PRIOR SECURITY AGREEMENT"). The
                                                 ------------------------
shares   of   common   stock   which   the   Prior Notes were convertible into and the
shares   of   common   stock   which the Prior Warrants were convertible into and an
aggregate   of   1,000,000   additional   warrants   previously issued exercisable at
$0.30   per   share,(collectively   the   "PRIOR   UNDERLYING   SHARES"), were granted
                                       -------------------------
registration   rights   pursuant   to   a   Registration Rights Agreement (the "PRIOR
                                                                           -----
REGISTRATION   AGREEMENT");
-----------------------

     WHEREAS,   the   Company desires to issue to the Purchaser, and the Purchaser
desires   to   purchase   from the Company, the Securities (as such term is defined
below)   as   set   forth   below   (the   "OFFERING");   and
                                      --------

     WHEREAS,   certain   capitalized   terms used in this Agreement are defined in
Section   9.1   hereof;
------------

     NOW,   THEREFORE,   in consideration of the promises and mutual covenants and
agreements   hereinafter   contained,   and for good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree   as   follows:

     1.    SALE   AND   PURCHASE   OF   SECURITIES.

          1.1   Sale   and   Purchase   of   Securities.   Subject   to   the   terms and
               -----------------------------------
     conditions   of   this   Agreement, on the Closing Date (as defined in Section
                                                                          -------
     3.1   hereof),   the   Company shall issue, sell and deliver to the Purchaser,
     ---
     and   the   Purchaser   shall purchase from the Company for the Purchase Price
     (as   defined   in   Section   2.1   hereof) (i) 11% Senior Subordinated Secured
                       ------------
     Convertible   Promissory   Notes   in   the   aggregate   principal   amount   of
     $1,250,000   (the   "NOTES")   and   (ii)   warrants to purchase one hundred and
                        -----
     eighty-seven   thousand five hundred (187,500) shares (subject to adjustment
     as   described therein), of the Company's common stock, par value $0.001 per
     share   (the   "COMMON STOCK") at an exercise price of $1.10, and warrants to
                   ------------
      purchase one hundred thousand (100,000) shares at an exercise price of $.30
     per   share   (subject   to adjustment as described therein), of the Company's
     Common   Stock (each a "WARRANT" and collectively the "WARRANTS"). The Notes
                             -------                         --------
     and Warrants shall hereinafter sometimes be collectively referred to as the
     "SECURITIES."   The names, addresses and principal amount of Notes purchased
      ----------
     and   Warrants   received by the Purchaser shall be set forth on Schedule 1.1
                                                                    ------------
     hereto.

<PAGE>

     2.    PURCHASE   PRICE.

          2.1   Purchase Price. The aggregate purchase price of the Securities to
               --------------
     be   purchased   pursuant   to Section 1.1 shall be $1,250,000, (the "PURCHASE
                                 -----------                             --------
     PRICE").
     -----

          2.2   Payment   of   the   Purchase   Price.   At the Closing (as defined in
               ---------------------------------
     Section   3.1   hereof),   the   Purchaser shall pay the Purchase Price by wire
     ------------
     transfer   of   immediately available funds or by such other method as may be
     reasonably   acceptable to the Company and the Purchaser, to such account of
     the   Company   as   shall have been designated in advance to the Purchaser by
     the   Company.   The   Company   may   pay   qualified   Broker   Dealers a selling
     concession,   with   the prior written consent of the Purchaser, of up to 10%
     (after   subtracting   the   $20,000   in due diligence fees (as provided below
     under Section 8.2(d), and up to $25,000 in legal fees) and an unaccountable
     expense allowance of up to 3% of gross proceeds received in connection with
     this   Offering.

     3.    CLOSING.

          3.1   Closing   Date.   The   closing   of   the   sale   and   purchase of the
               -------------
     Securities (the "CLOSING") shall take place on October __, 2006, or at such
                      -------
     other   time,   date   or   place   as   the   parties   hereto may mutually agree;
     provided,   that   all   conditions to the Closing set forth in this Agreement
     --------
     have   been   satisfied or waived by such date. The date on which the Closing
     is   held   is   referred   to   in this Agreement as the "CLOSING DATE." At the
                                                           ------------
     Closing   (i) the Company shall deliver, or cause to be delivered, the Notes
     and   Warrants, each executed by the Company and (ii) the documents referred
     to   in   Section   8   hereof.
             ----------

     4.   REPRESENTATIONS   AND   WARRANTIES   OF   THE   COMPANY.   The Company hereby
represents,   covenants   and warrants as of the date hereof and as of the Closing
Date   to   the   Purchaser,   acknowledging   that the Purchaser is relying upon the
accuracy and completeness of the representations and warranties set forth herein
to,   among   other   things,   ensure   that   registration   under   Section   5 of the
Securities   Act   is   not   required in connection with the sale of the Securities
hereby,   as   follows:

          4.1   Organization   and   Good   Standing;   Capitalization.
               --------------------------------------------------

          (a)   The   Company   (and   each   Subsidiary)   is duly organized, validly
     existing and in good standing under the laws of the state of Nevada and has
     the   corporate power and authority to own, lease and operate its properties
     and   assets   and   to   carry   on   its business as now conducted and as it is
     proposed to be conducted. The Company is in good standing under the laws of
     each   jurisdiction in which the conduct of its business or the ownership of
     its   properties   or   assets   requires   such qualification or authorization.

          (b)   All   the   outstanding shares of capital stock of the Company have
     been   duly   authorized,   and   are   validly   issued,   fully   paid   and
     non-assessable.   Except   as   disclosed   on   Schedule 4.1(b) (i) there is no
                                                 --------------
     option,   warrant,   call,   right,   commitment   or   other   agreement   of   any
     character   to which the Company is a party, (ii) there are no securities of
     the   Company outstanding which upon conversion or exchange, and (iii) there
     are   no   share   appreciation   rights,   or   other   similar   rights   based on
     securities   of the Company which, in the case of clause (i), (ii) or (iii),

<PAGE>

     would   require   the   issuance, sale or transfer of any additional shares of
     capital stock or other equity securities of the Company or other securities
     convertible into, exchangeable for or evidencing the right to subscribe for
     or   purchase share capital or other equity securities of the Company. Other
     than as contemplated by this Agreement or Transaction Documents (as defined
     in   Section   4.2),   the   Company is not a party to, nor is it aware of, any
         ------------
     voting   trust   or   other   voting,   stockholders   or   similar agreement with
     respect   to   any   of   the   securities   of   the   Company or of any agreement
     relating   to   the issuance, sale, redemption, transfer or other disposition
     of   the   shares   of   capital   stock   on   other   securities   of the Company.

          4.2   Authorization   of   Agreement; Enforceability. The Company has all
               --------------------------------------------
     requisite   corporate   power   and   authority   to   execute   and   deliver this
     Agreement   and   each other agreement, document, instrument and certificate,
     including,   but   not   limited   to, Waiver Agreements, the Bank Consent, the
     Notes,   Warrants,   Registration Rights Agreement and Security Agreement, to
     be   executed   by   the   Company   in   connection with the consummation of the
     transactions contemplated by this Agreement (collectively, the "TRANSACTION
                                                                     -----------
     DOCUMENTS"), and to perform fully its obligations hereunder and thereunder.
     ---------
     The   execution,   delivery   and performance by the Company of this Agreement
     and   the   Transaction   Documents have been duly authorized by all necessary
     corporate   action   on   the   part   of the Company and its stockholders. This
     Agreement   and each of the Transaction Documents have been duly and validly
      executed   and delivered by the Company and, assuming the due authorization,
     execution and delivery thereof by the Purchaser, this Agreement and each of
     the   Transaction   Documents   constitutes   the   legal,   valid   and   binding
     obligations   of   the Company, enforceable against the Company in accordance
     with   its   respective   terms, subject to applicable bankruptcy, insolvency,
     reorganization, moratorium and similar laws affecting creditors' rights and
     remedies generally and subject, as to enforceability, to general principles
     of   equity   (regardless of whether enforcement is sought in a proceeding at
     law   or   in   equity).

          4.3   No   Conflicts.   The   execution,   delivery   and performance of the
                -------------
     Transaction Documents by the Company and the consummation by the Company of
     the   transactions   contemplated   thereby,   do not and will not (i) conflict
     with   or   violate   any   provision   of the Company's and/or any Subsidiary's
     Articles   of   Incorporation   or   by-laws and any and all amendments thereto
     (collectively, the "INTERNAL DOCUMENTS"), (ii) conflict with, or constitute
                         ------------------
     a   default   (or   an   event   that with notice or lapse of time or both would
     become   a   default)   under,   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)   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.

          4.4   Subsidiaries,   Joint   Ventures,   Partnerships,   Etc.
               ---------------------------------------------------

          (a)   As   of   the   Closing   (i)   The Experiential Agency, Inc., (ii) XA
     Scenes,   Inc.,   (iii)   XA   Interactive,   Inc.,   and   (iv)   Fiori   XA,   Inc.
     (collectively the "SUBSIDIARIES") are the only subsidiaries of the Company.
                        ------------
     Each   Subsidiary is wholly owned by the Company, is duly organized, validly

<PAGE>

     existing   and   in   good   standing under the laws of the jurisdiction of its
     incorporation   with corporate power and corporate authority under such laws
     to   own,   lease   and   operate   its   properties   and conduct its business as
     currently   conducted; and is in good standing (if applicable) in each other
     jurisdiction   in which it owns or leases property of a nature, or transacts
     business of a type, that would make such qualification necessary other than
     such   qualifications   which   the   failure   to   have would not reasonably be
     expected   to   have   a   Material   Adverse   Effect.

          (b)   Neither   the Company nor its Subsidiaries is a party to any joint
     venture,   partnership   or   similar   arrangement   or   agreement.

          4.5   Consents   of Third Parties. None of the execution and delivery by
               --------------------------
     the   Company   of   this   Agreement   and   the Transaction Documents, the Bank
     Consent,   the   consummation   of   the   transactions   contemplated   hereby or
     thereby,   or compliance by the Company with any of the provisions hereof or
     thereof   will   (a) conflict with, or result in the breach of, any provision
     of   the   Certificate   of   Incorporation   or   Bylaws   of the Company (or any
     Subsidiary),   (b)   conflict   with,   violate,   result   in   the   breach   or
     termination   of,   or   constitute   a   default   or   give rise to any right of
     termination   or   acceleration   or   right   to   increase   the   obligations or
     otherwise   modify   the terms thereof under any Permit or Order to which the
     Company (or any Subsidiary) is a party or any Contract to which the Company
     or   its   Subsidiaries   is   bound   or   by   which   the   Company or any of its
     properties   or   assets   is   bound,   other   than such conflicts, violations,
     breaches,   defaults, termination or accelerations that would not reasonably
     be   expected   to have a Material Adverse Effect, (c) constitute a violation
     of   any   Law applicable to the Company (or any Subsidiary) or (d) result in
     the   creation   of any Lien upon the properties or assets of the Company (or
     any   Subsidiary).   No   consent,   waiver,   approval,   Order,   Permit   or
     authorization   of,   or   declaration or filing with, or notification to, any
     Person   or   Governmental Body is required on the part of the Company and/or
     its   Subsidiaries   in   connection   with   the execution and delivery of this
     Agreement,   and/or   the   Transaction   Documents,   or   the compliance by the
     Company   with   any   of   the   provisions   hereof   or   thereof.

           4.6   Authorization   of   Securities.
               -----------------------------

          (a)   On   the   Closing   Date,   the   issuance, sale, and delivery of the
     Securities   to   be   purchased   pursuant   to Section 1.1 will have been duly
                                                  -----------
     authorized   by all requisite action of the Company, and, when issued, sold,
     delivered   and   paid   for in accordance with this Agreement, the Securities
     will   be   validly   issued   and   outstanding,   with   no   personal   liability
     attaching   to   the   ownership   thereof.

          (b)   On   the   Closing Date, the issuance and delivery of the shares of
     Common   Stock to be delivered upon conversion of the Notes (the "CONVERSION
                                                                       ----------
     SHARES")   and   upon   exercise   of   the   Warrants   (the "WARRANT SHARES") in
     ------                                                   --------------
     accordance   with the terms thereof (collectively, the Conversion Shares and
     the   Warrants   Shares,   the   "UNDERLYING   SHARES")   will   have   been   duly
                                   ------------------
     authorized   by   all   requisite   action   of the Company and, when issued and
     delivered   in   accordance   with the terms of the Securities, the Underlying
     Shares   will   be   validly   issued   and   outstanding,   fully   paid   and
     non-assessable,   with   no   personal   liability   attaching   to the ownership
     thereof,   and   not subject to preemptive or any other similar rights of the
     stockholders   of   the   Company   or   others.

<PAGE>

          4.7   Certain   Waivers.
               ----------------

          (a)   The   Waiver   of Rights Agreement (the "WAIVER AGREEMENT") entered
                                                      ----------------
     into   as   of July 17, 2006, effective as of June 30, 2006, and extended via
     email   on   August   3,   2006,   to   August   9,   2006,   by   Alpha   Capital
      Aktiengesellschaft,   Stonestreet   Limited   Partnership,   Whalehaven   Funds
     Limited,   Greenwich   Growth   Fund Limited and Genesis Microcap Inc. (each a
     "PRIOR NOTE CREDITOR" and collectively the "PRIOR NOTE CREDITORS") in favor
      -------------------                         --------------------
     of the Company is a valid and binding agreement, duly executed, enforceable
     against the Company and each Note Creditor in accordance with its terms and
     is   in   full   force   and effect. To the best of the Company's knowledge, no
     action   has   been   brought   or   is   contemplated to be brought changing the
     enforcement   of   the   Waiver   Agreement.   The   executed Waiver Agreement is
     attached   hereto   as   Schedule   4.7(a).

           (b)   The   Waiver   of   Rights Agreement (the "SECOND WAIVER AGREEMENT")
                                                              ------ ---------
     entered into as of September 13, 2006, by the Prior Note Creditors in favor
                                                    --------------------
     of the Company is a valid and binding agreement, duly executed, enforceable
     against the Company and each Note Creditor in accordance with its terms and
     is   in   full   force   and effect. To the best of the Company's knowledge, no
     action   has   been   brought   or   is   contemplated to be brought changing the
     enforcement   of   the   Second   Waiver   Agreement. The executed Second Waiver
     Agreement   is   attached   hereto   as   Schedule   4.78(b).

          4.8   Capitalization.   Schedule   4.8   hereto   sets   forth in detail all
               --------------    -------------
     outstanding securities of the Company (including the terms, the holders and
     the   amounts   thereof).   Other than as disclosed in Schedule 4.8, (i) there
                                                         ------------
     are   no   outstanding   securities   of the Company or any of its Subsidiaries
     which   contain any preemptive, redemption or similar provisions, nor is any
     holder   of   securities   of   the   Company   or   any   Subsidiary   entitled   to
     preemptive   or similar rights arising out of any agreement or understanding
     with   the   Company   or   any   Subsidiary by virtue of any of the Transaction
     Documents,   and   there   are   no   contracts,   commitments, understandings or
     arrangements   by   which   the   Company   or any of its Subsidiaries is or may
     become   bound   to   redeem   a   security   of   the   Company   or   any   of   its
     Subsidiaries;   (ii) the Company does not have any stock appreciation rights
     or   "phantom   stock"   plans or agreements or any similar plan or agreement;
     and   (iii)   there   are   no   outstanding options, warrants, script rights to
     subscribe to, calls or commitments of any character whatsoever relating to,
     or   securities,   except   as   a   result   of   the   purchase   and   sale of the
     Transaction   Securities,   or   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
     secur-ities   or   rights   convertible   or exchangeable into shares of Common
     Stock.

          4.9   SEC   Reports;   Financial   Statements.   The   Company has filed all
               ------------------------------------
      reports   required   to   be   filed   by   it   under   the Securities Act and the
     Exchange   Act,   including pursuant to Section 13(a) or Section 15(d) of the
     Exchange   Act,   for   the   one   (1)   year preceding the date hereof (or such
     shorter   period   as   the Company was required by law to file such material)
     (the   foregoing   materials,   including   the   exhibits   thereto,   being
     collectively   referred   to   herein   as   the   "SEC   REPORTS").   As   of their
                                                    ------------
     respective   dates,   the   SEC Reports complied in all material respects with
     the   requirements   of the Securities Act and the Exchange Act and the rules
     and   regulations   of   the Commission promulgated thereunder, as applicable,
     and   none of the SEC Reports, when filed, contained any untrue statement of

<PAGE>

     a   material   fact or omitted to state a material fact required to be stated
     therein   or   necessary in order to make the statements therein, in light of
     the   circumstances under which they were made, not misleading. All material
     agreements   to   which   the   Company   is a party or to which the property or
     assets   of   the   Company are subject have been filed as exhibits to the SEC
      Reports   to   the   extent   required. The financial statements of the Company
     included in the SEC Reports comply in all material respects with applicable
     accounting   requirements   and   the   rules and regulations of the Commission
     with   respect   thereto   as   in effect at the time of filing. Such financial
     statements   have   been   prepared   in   accordance   with   generally   accepted
     accounting   principles   applied   on   a   consistent basis during the periods
     involved   ("GAAP"),   except as may be otherwise specified in such financial
                 ----
     statements   or   the   notes   thereto   and   except   that   unaudited financial
     statements   may   not   contain   all   footnotes   required by GAAP, and fairly
     present   in all material respects the financial position of the Company and
     its   consolidated   subsidiaries   as   of   and   for the dates thereof and the
     results   of   operations and cash flows for the periods then ended, subject,
     in   the case of unaudited statements, to normal, immaterial, year-end audit
     adjustments.   Additionally, since the adoption of the Sarbanes-Oxley Act of
     2002   (the   "NEW ACT") and to the extent that the Company is subject to the
                  -------
     New   Act,   the Company has complied in all material respects with the laws,
     rules   and   regulation   under   the   New   Act.

          4.10   Material Changes. Since December 31, 2005, (i) there has been no
                ----------------
     event,   occurrence   or development that has had or that could reasonably be
     expected   to   result in a Material Adverse Effect, (ii) the Company has not
     incurred   any material liabilities (contingent or otherwise) other than (A)
     trade   payables   and   accrued   expenses   incurred in the ordinary course of
     business   consistent with past practice and (B) liabilities not required to
     be   reflected   in   the   Company's   financial statements pursuant to GAAP or
     required   to   be   disclosed   in filings made with the Commission, (iii) the
     Company   has   not   altered   its method of accounting or the identity of its
     auditors, (iv) the Company has not declared or made payment or distribution
     of any dividend or distribution of cash or other property to its holders of
     Common   Stock   or purchased, redeemed or made any agreements to purchase or
     redeem   any   shares of its capital stock and (v) the Company has not issued
     any   equity   securities   to   any   officer,   director   or   Affiliate, except
     pursuant   to   existing   Company   stock   option   plans.

          4.11   No   Undisclosed   Liabilities. Other than as disclosed in the SEC
                ----------------------------
     Reports,   neither   the   Company   nor   its   Subsidiaries has any liabilities
     (whether   accrued, absolute, contingent or otherwise, and whether due or to
     become   due or asserted or unasserted), except (a) liabilities provided for
     in   the   Financial   Statements (other than liabilities which, in accordance
     with   GAAP,   need   not be disclosed), (b) liabilities disclosed on Schedule
                                                                        --------
     4.11 hereto and (c) liabilities incurred in the ordinary course of business
     ----
      which   do   not   materially   exceed   historic   levels.

          4.12   Absence   of   Certain   Developments.   In   the   ordinary course of
                ----------------------------------
     business   or   in   the   context   of   the   Transactions   contemplated in this
     Agreement   and   the   Transaction   Documents:

          (a)   there   has not been any Material Adverse Change nor has any event
     occurred   which   could   result   in   any   Material   Adverse   Change;

<PAGE>

          (b) there has not been any declaration, setting a record date, setting
     aside   or authorizing the payment of, any dividend or other distribution in
     respect   of   any shares of capital stock of the Company or its Subsidiaries
     or   any   repurchase,   redemption or other acquisition by the Company or its
     Subsidiaries,   of   any   of the outstanding shares of capital stock or other
     securities   of,   or   other   ownership   interest   in,   the   Company   or   its
     Subsidiaries;

          (c)   there has not been any transfer, issue, sale or other disposition
     by   the   Company   of any shares of capital stock or other securities of the
     Company   or   its   Subsidiaries   or any grant of options, warrants, calls or
     other   rights to purchase or otherwise acquire shares of such capital stock
     or   such   other   securities;

          (d)   neither   the Company nor its Subsidiaries has (i) awarded or paid
     any   bonuses   to   employees or representatives of the Company, (ii) entered
     into any employment, deferred compensation, severance or similar agreements
     (nor   amended   any   such   agreement),   other than in the ordinary course of
     business;

          (e)   neither   the   Company   nor   its   Subsidiaries has made any loans,
     advances   (other   than advances to officers and employees of the Company or
     its   Subsidiaries   which   advances   are   made   in   the   ordinary   course of
     business),   or   capital   contributions to, or investments in, any Person or
     paid   any   fees   or expenses to any Affiliate of the Company other than its
     Subsidiaries;

          (f)   neither   the   Company   nor   its   Subsidiaries   has transferred or
     granted   any rights under any Contracts or licenses, used by the Company in
     its   business;

           (g) there has not been any damage, destruction or loss, whether or not
     covered by insurance, with respect to the property or assets of the Company
     or   its Subsidiaries having a replacement cost of more than $10,000 for any
     single   loss   or   $20,000   for   all   such   losses;

          (h) neither the Company nor its Subsidiaries has mortgaged, pledged or
     subjected   to   any   Lien   any   of   its assets, or acquired any assets for a
     purchase   price   in   excess   of $10,000 in the aggregate or sold, assigned,
     transferred,   conveyed,   leased   or otherwise disposed of any assets of the
     Company   or   its   Subsidiaries for a sale price in excess of $10,000 in the
     aggregate   except   for   assets   acquired   or   sold,   assigned, transferred,
     conveyed,   leased   or   otherwise   disposed   of   in   the   ordinary course of
     business;

          (i)   neither   the   Company   nor   its   Subsidiaries   has   canceled   or
     compromised   any   debt   or   claim,   or   amended,   canceled,   terminated,
     relinquished,   waived   or   released   any   Contract   or right, except in the
     ordinary   course   of   business   consistent   with   past   practice and which,
     individually   or   in the aggregate, would not be material to the Company or
      its   Subsidiaries;

          (j)   neither   the   Company   nor   its Subsidiaries has made any binding
     commitment   to   make   any   capital   expenditures   or   capital   additions or
     betterments   in excess of $20,000 individually or $50,000 in the aggregate;

          (k)   neither   the Company nor its Subsidiaries has incurred any debts,
     obligations   or   liabilities,   whether due or to become due, except current

<PAGE>

     liabilities   incurred   in   the   ordinary   course of business, none of which
     current   liabilities   (individually   or in the aggregate) could result in a
     Material   Adverse   Change;

          (l)   neither   the   Company   nor   its Subsidiaries has entered into any
     transaction   other   than   in the ordinary course of business except for (in
     the   case   of   the   Company)   this   Agreement;

          (m) neither the Company nor its Subsidiaries has encountered any labor
     difficulties   or   labor   union   organizing   activities;

          (n)   neither   the   Company nor its Subsidiaries has made any change in
     the   accounting   principles,   methods   or   practices   followed   by   it   or
     depreciation   or   amortization   policies   or   rates   theretofore   adopted;

          (o)   neither   the   Company   nor   its Subsidiaries has disclosed to any
     Person   any   material   trade secrets except for disclosures made to Persons
     subject   to   valid   and   enforceable   confidentiality   agreements;

          (p)   neither   the   Company   nor   its   Subsidiaries   has   suffered   or
     experienced   any   change   in the relationship or course of dealings between
     the Company and/or its Subsidiaries and any of their suppliers or customers
     which   supply   goods   or   services   to   the   Company or its Subsidiaries or
      purchase   goods   or   services from the Company and or its Subsidiaries; and

          (q)   neither the Company nor its Subsidiaries has made any payment to,
     or   received   any   payment   from, or made or received any investment in, or
     entered   into   any transaction or series of related transactions (including
     without   limitation,   the   purchase,   sale,   exchange   or   lease of assets,
     property   or   services,   or   the   making   of   a loan or guarantee) with any
     Affiliate   in each case, in excess of $10,000 or its equivalent (other than
     any   transactions between or among the Company and its Subsidiaries) (each,
     an   "AFFILIATE   TRANSACTION").
          ----------------------

          4.13   Taxes.   The   Company   and   its   Subsidiaries   have filed all Tax
                -----
     returns (including statements of estimated Taxes owed) and reports required
     to   be filed within the applicable periods (subject to extensions) for such
     filings   and   have   paid all Taxes required to be paid, and has established
     adequate   reserves   (net   of   estimated   Tax payments already made) for the
     payment   of   all   Taxes   payable in respect of the period subsequent to the
     last   periods   covered   by   such   returns.   No deficiencies for any Tax are
     currently   assessed   against the Company or any Subsidiary. There is no Tax
     Lien,   whether   imposed   by   any   federal, state or local taxing authority,
     outstanding   against   the   assets, properties or business of the Company or
     its   Subsidiaries other than Liens for Taxes which are not yet due. Neither
     the   Company nor its Subsidiaries has executed any waiver of the statute of
     limitations   on   the   assessment   or   collection of any Tax or governmental
     charge.   The   Company and its Subsidiaries have properly charged, collected
     and   paid   all   applicable   stamp, sales, use and other similar Taxes on or
     before   the   Closing   Date.

          4.14   Real   Property.   The   Company   currently   has (i) leased certain
                --------------
     locations   for   office   space   and   all material leases, and (ii) owns real
     property,   all   of which leases and real property are listed (including the
     terms   of   such   leases)   on   Schedule   4.14.
                                   --------------

<PAGE>

          4.15   Tangible   Personal   Property;   Assets.   All   material   items   of
                -------------------------------------
     personal   property   and   assets   owned   or   leased   by   the Company and its
     Subsidiaries   are   in   good   operating   condition,   normal   wear   and   tear
     excepted.

          4.16   Intangible   Property.   The   Company and its Subsidiaries own, or
                --------------------
     possess   adequate   rights   or   licenses to use all trademarks, trade names,
     service   marks,   service mark registrations, service names, patents, patent
     rights,   copyrights,   inventions,   licenses,   approvals,   governmental
     authorizations,   trade   secrets   and   rights   necessary   to   conduct   their
     respective   businesses as now conducted, the lack of which could reasonably
     be   expected   to   have   a   Material   Adverse   Effect.   The   Company and its
     Subsidiaries   do   not have any knowledge of any infringement by the Company
     or   its   Subsidiaries   of   trademarks,   trade   name rights, patents, patent
     rights,   copyrights,   inventions,   licenses,   service names, service marks,
     service   mark   registrations,   trade   secrets   or   other   similar rights of
     others, or of any such development of similar or identical trade secrets or
     technical information by others and no claim, action or proceeding has been
     made or brought against, or to the Company's knowledge, has been threatened
     against,   the   Company or its Subsidiaries regarding trademarks, trade name
     rights,   patents,   patent rights, inventions, copyrights, licenses, service
     names,   service   marks,   service mark registrations, trade secrets or other
      infringement,   except   where such infringement, claim, action or proceeding
     would   not   reasonably   be   expected   to have either individually or in the
     aggregate   a   Material   Adverse   Effect.   None   of the Company's employees,
     officers,   or   consultants   are   obligated   under   any   contract (including
     licenses,   covenants,   or commitments of any nature) or other agreement, or
     subject   to   any   judgment, decree, or order of any court or administrative
     agency, that would interfere with the use of such employee's, officer's, or
     consultant's   commercially   reasonable   efforts to promote the interests of
     the   Company   or   that   would   conflict   with   the   Company's   business   as
     conducted. Neither the execution nor delivery of the Transaction Documents,
     nor   the   carrying   on   of   the   Company's business by the employees of the
     Company,   nor the conduct of the Company's business, will, to the Company's
     knowledge, conflict with or result in a breach of the terms, conditions, or
     provisions   of,   or   constitute a default under, any contract, covenant, or
     instrument   under   which any of such employees, officers or consultants are
     now   obligated.

          4.17   Material   Contracts.
                 -------------------

          Other   than   as   set forth on Schedule 4.17, or otherwise disclosed in
                                        -------------
     the   Company's   Securities   and Exchange Commission filings (a) neither the
     Company   nor   its   Subsidiaries   nor   any of their respective properties or
     assets   is a party to or bound by any (i) Contract not made in the ordinary
     course   of business, or involving a commitment or payment by the Company or
     any   Subsidiary in excess of $10,000 or, in the Company's belief, otherwise
     material   to the business of the Company or its Subsidiaries, (ii) Contract
     among   members or granting a right of first refusal or for a partnership or
     a   joint   venture   or   for   the acquisition, sale or lease of any assets or
     share   capital of the Company or any other Person or involving a sharing of
     profits,   (iii)   mortgage,   pledge,   conditional   sales   contract, security
     agreement,   factoring   agreement   or other similar Contract with respect to
     any   real or tangible personal property of the Company or its Subsidiaries,
     (iv)   loan   agreement,   credit   agreement,   promissory   note,   guarantee,
     subordination   agreement,   letter   of   credit   or any other similar type of
     Contract,   (v)   Contract   with   any   Governmental Body outside the ordinary
     course of business, (vi) Contract with respect to the discharge, storage or
     removal   of hazardous materials or (vii) binding commitment or agreement to
     enter   into   any   of   the   foregoing.

<PAGE>

          (b)   (i)   Each   of   the Contracts listed on Schedule 4.17 is valid and
                                                      -------------
     enforceable   against the Company or its Subsidiaries in accordance with its
     terms,   subject   to   applicable   bankruptcy,   insolvency,   reorganization,
     moratorium   and   similar   laws   affecting   creditors'   rights   and remedies
     generally   and   subject,   as   to   enforceability,   to general principles of
     equity   (regardless of whether enforcement is sought in a proceeding at law
     or   in   equity),   and   there   is   no   default   under any Contract listed on
     Schedule   4.17   by   the   Company   or   any   of   its   Subsidiaries or, to the
     --------------
     knowledge   of   the   Company, by any other party thereto, which is likely to
     have   a   Material   Adverse   Effect, and no event has occurred that with the
     lapse of time or the giving of notice or both would constitute a default by
     the   Company   thereunder which is likely to have a Material Adverse Effect.

               (ii)   No   previous   or   current   party   to any Contract has given
          written   notice   to the Company or any Subsidiary of, or made a claim,
           verbal   or   written,   with respect to any breach or default thereunder
          and   the   Company   has   no   knowledge   of   any notice of or claim with
          respect   to   any   such   breach   or   default other than such notices or
          claims   with   respect to any such breaches or defaults that would not,
          either   individually   or   in   the aggregate, be reasonably expected to
          have   a   Material   Adverse   Effect.

          (c)   With   respect   to the Contracts listed on Schedule 4.17 that were
                                                         -------------
     assigned   to   the Company or any Subsidiary by a third party, all necessary
     consents   to   such   assignment   have been obtained other than such contents
      which   the   failure   to   obtain   would not be reasonably expected to have a
     Material   Adverse   Effect.

          4.18   Employee Benefits. Except as set forth on Schedule 4.18, neither
                -----------------                          -------------
     the   Company   nor   any   of   its   Subsidiaries   has in effect any employment
     agreements,   consulting   agreements,   deferred   compensation,   pension   or
     retirement   agreements   or arrangements, bonus, incentive or profit-sharing
     plans   or   arrangements,   or   labor   or   collective   bargaining agreements,
     written   or oral. The Company and its Subsidiaries are in compliance in all
     material   respects   with all applicable Laws relating to labor, employment,
     fair   employment   practices,   terms and conditions of employment, and wages
     and   hours.

          4.19   Employees.
                ---------

          (a)   No   key   executive   Employee,   group of Employees nor independent
     contractors   of   the Company or its Subsidiaries has any plans to terminate
     his   or   her   employment   or   relationship   as   an   Employee or independent
     contractor   with   the   Company   or   its   Subsidiaries.

          (b)   To the best of the Company's knowledge, no key executive Employee
     or   any   other Employee of the Company or its Subsidiaries is a party to or
     is   otherwise   bound   by   any   agreement or arrangement (including, without
     limitation,   confidentiality   agreements,   non-competition   agreements,
     licenses,   covenants,   or   commitments   of   any   nature), or subject to any
     judgment,   decree,   or   Order   of   any court or Governmental Body, (i) that
     would   conflict   with   such employee's obligation diligently to promote and
     further   the interest of the Company or its Subsidiaries or (ii) that would
     conflict with the Company's (or its Subsidiaries) business as now conducted
     or   as   proposed   to   be   conducted.

<PAGE>

          (c)   Schedule   4.19(c)   sets forth a list of each of the key executive
               ----------------
     Employees   of   the   Company   who   have   entered   into   an employment and/or
     confidentiality   agreement   with   the   Company.

          4.20 Litigation. Other than is set forth on Schedule 4.20, there is no
               ----------                              -------------
     action,   suit,   inquiry,   notice   of violation, proceeding or investigation
     pending   or,   to the knowledge of the Company, currently threatened against
     or   affecting   the   Company,   any   Subsidiary   or   any   of their respective
     properties   before   or   by   any   court,   arbitrator,   governmental   or
     administrative   agency and/or regulatory authority (federal, state, county,
     local   or foreign), (collectively, an "ACTION") which does and/or could (i)
                                            ------
     adversely affects or challenges the legality, validity or enforceability of
     any   of   the   Transaction Documents and/or the Transaction Securities or to
     consummate   the   transactions contemplated hereby or thereby or (ii) could,
     if   there   were   an unfavorable decision, have or reasonably be expected to
     result   in,   either   individually   or   in the aggregate, a Material Adverse
     Effect.   The   Commission   has   not   issued   any   stop   order or other order
     suspending   the   effectiveness   of   any registration statement filed by the
     Company or any Subsidiary under the Exchange Act or the Securities Act. The
     foregoing   includes, without limitation, actions, pending or threatened (or
     any basis therefor known to the Company), involving the prior employment of
     any   of the Company's employees, their use in connection with the Company's
     business   of   any information or techniques allegedly proprietary to any of
     their   former   employers,   or   their   obligations under any agreements with
     prior employers. The Company is not a party or subject to the provisions of
     any order, writ, injunction, judgment, or decree of any court or government
     agency   or   instrumentality.

          4.21   Compliance   with   Laws;   Permits.   Neither   the   Company nor any
                --------------------------------
     Subsidiary   (i)   is   in   default under or in violation of (and no event has
     occurred   that   has   not   been waived that, with notice or lapse of time or
     both,   would   result   in a default by the Company or any Subsidiary under),
     nor has the Company or any Subsidiary received notice of a claim that it is
     in   default   under   or that it is in violation of, any indenture, mortgage,
     decree,   lease, license, loan or credit agreement or any other agreement or
     instrument   to   which it is a party or by which it or any of its properties
     is   bound   (whether or not such default or violation has been waived), (ii)
     is in violation of any order of any court, arbitrator or governmental body,
     or   (iii) is or has been in violation of any statute, rule or regulation of
     any   governmental   authority,   including   without   limitation   all foreign,
     federal,   state   and   local   laws applicable to its business, except in the
     case   of   clauses   (i),   (ii)   and   (iii) as would not result in a Material
     Adverse   Effect.   Neither   the   Company   nor   any   of   the Subsidiaries has
     received   any written notice of any violation of or noncompliance with, any
     federal,   state,   local or foreign laws, ordinances, regulations and orders
     (including, without limitation, those relating to environmental protection,
     occupational   safety   and health, federal securities laws, equal employment
     opportunity, consumer protection, credit reporting, "truth-in-lending", and
     warranties   and   trade   practices)   applicable   to   its   business or to the
     business   of any Subsidiary, the violation of, or noncompliance


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