Exhibit 10.1
SECURITIES PURCHASE
AGREEMENT
This Securities Purchase Agreement
(this “Agreement”) is dated as of November 1, 2006
among Dreams, Inc., a Utah corporation (the “Company”),
and the purchaser identified on the signature page hereto
(“Purchaser”).
WHEREAS, subject to the terms and
conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), the Company desires to issue and
sell to Purchaser, and Purchaser desires to purchase from the
Company, certain securities of the Company as more fully described
in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of
the mutual covenants contained in this Agreement, and for other
good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and Purchaser agree as
follows:
ARTICLE I.
DEFINITIONS
Definitions. In addition to the
terms defined elsewhere in this Agreement, the following terms have
the meanings indicated:
“AFFILIATE” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 144 of the Securities Act. With respect to a Purchaser,
any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as Purchaser
will be deemed to be an Affiliate of Purchaser.
“BUSINESS DAY” means any
day other than Saturday, Sunday or other day on which commercial
banks in the City of Fort Lauderdale are authorized or required by
law to remain closed.
“CLOSING” means the
closing of the purchase and sale of the Shares pursuant to
Section 2.1.
“CLOSING DATE” means the
date of the Closing.
“COMMISSION” means the
Securities and Exchange Commission.
“COMMON STOCK” means the
common stock of the Company, no par value.
“COMPANY COUNSEL” means
Arnstein & Lehr LLP, counsel to the Company or such other
firm as may be counsel to the Company at the Closing.
“CONVERTIBLE SECURITIES”
means any stock or securities (other than Options) convertible into
or exercisable or exchangeable for Common Stock.
“EXCHANGE ACT” means the
Securities Exchange Act of 1934, as amended.
“LIEN” means any lien,
charge, claim, security interest, encumbrance, right of first
refusal or other restriction but not a restriction on
transferability under the Securities Act.
“LOSSES” means any and
all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation, costs of preparation and
reasonable attorneys’ fees.
“OPTIONS” means any
rights, warrants or options to subscribe for or purchase Common
Stock or Convertible Securities.
“MATERIAL ADVERSE
EFFECT” has the meaning set forth in
Section 3.1(b).
“PERSON” means any
individual, corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or any court or other federal, state, local or
other governmental authority or other entity of any
kind.
“PER SHARE PURCHASE
PRICE” means $0.065.
“PROCEEDING” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
“SHARES” means an
aggregate of 30,769,231 shares of Common Stock, which are being
issued and sold to the Purchaser at the Closing.
“SUBSIDIARY” means any
Person in which the Company, directly or indirectly, owns capital
stock or holds an equity or similar interest, but does not include
any Person as to which the Company does not hold a controlling
interest.
“TRANSACTION DOCUMENTS”
means this Agreement and any other documents or agreements executed
in connection with the transactions contemplated
hereunder.
ARTICLE II.
PURCHASE AND SALE
2.01 Closing. Subject to the terms
and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to Purchaser, and Purchaser shall
purchase from the Company, such number of Shares indicated below
Purchaser’s name on the signature page of this Agreement at
the Per Share Purchase Price. The Closing shall take place at the
offices of Arnstein & Lehr LLP immediately following the
execution hereof, or at such other location or time as the parties
may agree.
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2.02 Closing Deliveries.
(a) At the Closing, the Company
shall deliver or cause to be delivered to Purchaser the
following:
(i) one or more stock certificates,
free and clear of all restrictive and other legends (except as
expressly provided in Section 4.1(b) hereof), evidencing such
number of Shares equal to the number of Shares indicated below
Purchaser’s name on the signature page of this Agreement,
registered in the name of Purchaser;
(ii) a legal opinion of Company
Counsel, in the form of Exhibit A, executed by such counsel and
delivered to the Purchaser; and
(b) At the Closing, Purchaser shall
deliver or cause to be delivered an amount equal to$2,000,000, in
United States dollars and in immediately available funds, by wire
transfer to an account designated in writing to Purchaser by the
Company for such purpose.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties
of the Company. The Company hereby represents and warrants to the
Purchaser as follows:
(a) Subsidiaries. The Company has no
direct or indirect Subsidiaries other than those listed in Schedule
3.1(a). The Company owns, directly or indirectly, all of the
capital stock or comparable equity interests of each Subsidiary
free and clear of any Lien and all the issued and outstanding
shares of capital stock or comparable equity interest of each
Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights.
(b) Organization and Qualification.
Except as set forth on Schedule 3.1(b), each of the Company and the
Subsidiaries is an entity duly 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 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 do 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, individually or in the aggregate,
(i) adversely affect the legality, validity or enforceability
of any Transaction Document, (ii) have or result in a material
adverse effect on the results of operations, assets, business,
financial condition or prospects of the Company and the
Subsidiaries, taken as a whole on a consolidated basis, or
(iii) adversely impair the Company’s ability to perform
fully on a timely basis its obligations under any of the
Transaction Documents (any of (i), (ii) or (iii), a
“Material Adverse Effect”).
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(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 and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and 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, or its
Board of Directors. Each of the Transaction Documents has been (or
upon delivery will be) duly executed by the Company and is, or 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.
(d) No Conflicts. The execution,
delivery and performance of the Transaction Documents by the
Company and the consummation by the Company of the transactions
contemplated hereby and 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, (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 and the rules and regulations of any
self-regulatory organization to which the Company or its Shares are
subject), or by which any property or asset of the Company or a
Subsidiary is bound or affected.
(e) Issuance of the Shares. The
Shares are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens
and shall not be subject to preemptive rights or similar rights of
shareholders.
(f) Capitalization. The number of
shares and type of all authorized, issued and outstanding capital
stock, Options and other Shares of the Company (whether or not
presently convertible into or exercisable or exchangeable for
shares of capital stock of the Company) is set forth in Schedule
3.1(f). All outstanding shares of capital stock are duly
authorized, validly issued, fully paid. Except as disclosed in
Schedule 3.1(f), 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 exercisable or exchangeable for, or giving any
Person any
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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 or rights convertible or exchangeable into shares of
Common Stock. There are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders). The issue and
sale of the Shares will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the
Purchaser) 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.
(g) SEC Reports; Financial
Statements. The Company has filed all reports required to be filed
by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding
the date hereof (the foregoing materials (together with any
materials filed by the Company under the Exchange Act, whether or
not required) being collectively referred to herein as the
“SEC Reports” and, together with this Agreement and the
Schedules to this Agreement, the “Disclosure
Materials”) except as set forth on Schedule 3.1(g). 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, and none of the SEC Reports, when filed,
contained any untrue statement of 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 the light of the
circumstances under which they were made, not misleading. 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 United States
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 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. All material agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the
Company or any Subsidiary are subject are included as part of or
specifically identified in the SEC Reports.
(h) Material Changes. Since the date
of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports or in
Schedule 3.1(h), (i) there has been no event, occurrence or
development that, to the Company’s knowledge, individually or
in the aggregate, has had or that would result in a Material
Adverse Effect, (ii) the Company has not incurred any
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,
except
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as disclosed in its SEC Reports, (iv) the
Company has not declared or made any dividend or distribution of
cash or other property to its shareholders 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 or director.
(i) Absence of Litigation. There is
no action, suit, claim, proceeding, inquiry or, to the
Company’s knowledge, investigation before or by any court,
public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries that
could, individually or in the aggregate, have a Material Adverse
Effect.
(j) Compliance. 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 written notice of a claim that it is in default
under or that it is in violation of, any indenture, 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 in violation of any statute, rule or
regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to
taxes, environmental protection, occupational health and safety,
product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have
or result in a Material Adverse Effect.
(k) Title to Assets. The Company and
the Subsidiaries have good and m
