EXHIBIT 10.1
SECURITIES PURCHASE
AGREEMENT
THIS SECURITIES PURCHASE
AGREEMENT (the “
Agreement ”), is dated as of July 12, 2005, by
and among i2 Telecom International, Inc., a Washington corporation,
with headquarters located at 1200 Abernathy Road, Suite 1800,
Atlanta, Georgia 30328 (the “ Company ”), and
the investors listed on the Schedule of Buyers (the “
Schedule of Buyers ”) attached hereto (individually, a
“ Buyer ” and collectively, the “
Buyers ”).
WHEREAS :
A. The Company has authorized a new
series of convertible preferred stock of the Company, the terms of
which are set forth in the certificate of designations for such
series (the “ Certificate of Designations ”)
substantially in the form attached hereto as Exhibit A
(together with any convertible preferred shares issued in
replacement thereof in accordance with the terms thereof, the
“ Preferred Shares ”). The Preferred Shares
shall be convertible into shares of the Company’s common
stock, no par value per share (the “ Common Stock
”) (as converted, the “ Conversion Shares
”), in accordance with the terms of the Certificate of
Designations.
B. Each Buyer wishes to purchase,
and the Company wishes to sell, upon the terms and conditions
stated in this Agreement: (i) that aggregate number of
Preferred Shares set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers; and (ii) a warrant,
substantially in the form attached hereto as Exhibit B
(collectively, the “ Warrants ”), to acquire
that number of shares of Common Stock set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers (as
exercised, collectively, the “ Warrant Shares
”).
C. The Company and each Buyer is
executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by
Section 4(2) of the Securities Act of 1933, as amended (the
“ 1933 Act ”), and Rule 506 of Regulation D
(“ Regulation D ”) as promulgated by the United
States Securities and Exchange Commission (the “ SEC
”) under the 1933 Act to the extent necessary to issue the
Preferred Shares, the Conversion Shares, the Warrants and the
Warrant Shares.
D. Contemporaneously with the
execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit C (the
“ Registration Rights Agreement ”), pursuant to
which the Company will agree to provide certain registration rights
with respect to the Registrable Securities (as defined in the
Registration Rights Agreement) under the 1933 Act, the rules and
regulations promulgated thereunder, and applicable state securities
laws.
E. The Preferred Shares, the
Conversion Shares, the Warrants and the Warrant Shares collectively
are referred to herein as the “ Securities
”.
NOW, THEREFORE
, the Company and each Buyer hereby
agree as follows:
1. PURCHASE AND SALE
OF PREFERRED SHARES AND WARRANTS.
(a) Preferred Shares and
Warrants . Subject to the satisfaction or waiver of the
conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to each Buyer, and each Buyer severally, but not
jointly, agrees to purchase from the Company on the Closing Date
(as hereinafter defined), the number of Preferred Shares as is set
forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers and the Warrant to acquire that number of
Warrant Shares set forth opposite such Buyer’s name in column
(4) on the Schedule of Buyers (the “ Closing
”).
(b) Closing . The Closing
shall occur on the Closing Date at the office of Rogers &
Hardin LLP, 229 Peachtree Street, NE, 2700 International Tower,
Atlanta, Georgia 30303.
(c) Purchase Price . The
purchase price for each Buyer (the “ Purchase Price
”) of the Preferred Shares and related Warrants to be
purchased by each such Buyer at the Closing shall be equal to One
Thousand Dollars ($1,000) for each Preferred Share and related
Warrants being purchased by such Buyer at the Closing.
(d) Closing Date . The date
and time of the Closing (the “ Closing Date ”)
shall be 10:00 a.m., Atlanta Time, on the date of this Agreement,
subject to notification of satisfaction or waiver of the conditions
to the Closing set forth in Sections 6 and 7 below (or such later
date as is mutually agreed to by the Company and each
Buyer).
(e) Form of Payment . On the
Closing Date, each Buyer shall pay the Purchase Price to the
Company for the Preferred Shares and Warrants to be issued and sold
to such Buyer on the Closing Date by wire transfer of immediately
available funds in accordance with the Company’s written wire
instructions. Also on the Closing Date, the Company shall deliver
via facsimile or e-mail to each Buyer a copy of the certificates
evidencing the Preferred Shares and Warrants which such Buyer is
then purchasing hereunder, duly executed on behalf of the Company
and registered in the name of such Buyer or its designee. No later
than two (2) Business Days (as defined in Section 4(d))
following the Closing Date, the Company shall cause to be delivered
to each Buyer the original certificates for the Preferred Shares
and Warrants which such Buyer is purchasing hereunder.
2. BUYER’S REPRESENTATIONS
AND WARRANTIES. Each Buyer represents and warrants with respect
to only itself that:
(a) No Public Sale or
Distribution . Such Buyer is: (i) acquiring the Preferred
Shares and Warrants and (ii) upon conversion of the Preferred
Shares and exercise of the Warrants will acquire the Conversion
Shares issuable upon conversion of the Preferred Shares and the
Warrant Shares issuable upon exercise of the Warrants, for its own
account and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided ,
however , that by making the representations herein, such
Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such
Buyer is acquiring the Securities hereunder in the ordinary course
of its business. Such Buyer presently does not have any agreement
or understanding, directly or indirectly, with any Person (as
defined in Section 3(r)) to distribute any of the
Securities.
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(b) Accredited Investor
Status . Such Buyer is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions .
Such Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of,
and such Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such
Buyer set forth herein in order to determine the availability of
such exemptions and the eligibility of such Buyer to acquire the
Securities. Such Buyer has not been formed solely for the purpose
of acquiring the Securities. Such Buyer is not a registered
broker-dealer under Section 15 of the Securities Exchange Act
of 1934, as amended (the “ 1934 Act
”).
(d) Information . Such Buyer
and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors,
if any, or its representatives shall modify, amend or affect such
Buyer’s right to rely on the Company’s representations
and warranties contained herein.
(e) No Governmental Review .
Such Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on
or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor
have such authorities passed upon or endorsed the merits of the
offering of the Securities.
(f) Authorization; Validity;
Enforcement . This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and
delivered on behalf of such Buyer and constitute the legal, valid
and binding obligations of such Buyer enforceable against such
Buyer in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or to
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights
and remedies.
(g) Residency . Such Buyer is
a resident of that country or state specified below its address on
the Schedule of Buyers.
(h) Organization . If such
Buyer is not an individual, then such Buyer is validly existing and
in good standing under the laws of the jurisdiction of its
organization, and has the requisite power and authorization to
execute and deliver this Agreement and to consummate the
transaction contemplated hereby.
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3. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY. Except as set forth on the section of the
disclosure schedules (each a “ Schedule ”)
attached hereto which correspond to the subsection hereunder, the
Company represents and warrants to each of the Buyers
that:
(a) Organization and
Qualification . Except as disclosed in Schedule 3(a) ,
the Company and its “ Subsidiaries ” (which for
purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns at least 10% of the capital stock or
holds a comparable equity or similar interest) are entities duly
organized and validly existing in good standing under the laws of
the jurisdiction in which they are organized, and have the
requisite corporate or other power and authorization to own their
properties and to carry on their business as now being conducted.
Except as disclosed in Schedule 3(a) , each of the
Company and its Subsidiaries is duly qualified as a foreign entity
to do business and is in good standing in every jurisdiction in
which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing
could not reasonably be expected to have a Material Adverse Effect.
As used in this Agreement, “ Material Adverse Effect
” means any material adverse effect on the business,
properties, assets, operations, results of operations or condition
(financial or otherwise) of the Company and its Subsidiaries, taken
as a whole, or on the transactions contemplated hereby and the
other Transaction Documents (as defined in Section 3(b)) or by
the agreements and instruments to be entered into in connection
herewith or therewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents.
The Company has no Subsidiaries except as disclosed in Schedule
3(a) .
(b) Authorization; Enforcement;
Validity . The Company has the requisite corporate power and
authority to enter into and perform its obligations under this
Agreement, the Certificate of Designations, the Registration Rights
Agreement, the Warrants, and each of the other agreements entered
into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the “
Transaction Documents ”) and to issue the Securities
in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby
and thereby, including, without limitation, the issuance of the
Preferred Shares and the Warrants and the reservation for issuance
and the issuance of the Conversion Shares and the Warrant Shares
issuable upon conversion or exercise of the Preferred Shares and
the Warrants, respectively, have been duly authorized by the
Company’s Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or
its shareholders, except as may be disclosed in Schedule
3(b) . This Agreement and the other Transaction Documents of
even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of
the Company enforceable against the Company in accordance with
their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies. As of the Closing, the
Transaction Documents dated after the date hereof and required to
have been executed and delivered with respect to the Closing shall
have been duly executed and delivered by the Company, and shall
constitute the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of applicable
creditor’s rights and remedies. As of the Closing,
the
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Certificate of Designations in the form attached
as Exhibit A shall have been filed on or prior to the
Closing Date with the Secretary of State of the State of Washington
and shall be in full force and effect, enforceable against the
Company in accordance with its terms and shall not have been
amended.
(c) Issuance of Securities .
The Preferred Shares and Warrants are duly authorized and, upon
issuance in accordance with the terms hereof, shall be validly
issued, free from all taxes, liens and charges with respect to the
issue thereof, and the Preferred Shares shall be entitled to the
rights and preferences as set forth in the Certificate of
Designations. As of the Closing, a number of shares of Common Stock
shall have been duly authorized and reserved for issuance which
equals 100% of the maximum number of shares of Common Stock
issuable upon conversion or exercise of the Preferred Shares and
Warrants to be issued hereunder. Upon conversion or exercise in
accordance with the Preferred Shares or the Warrants, as the case
may be, the Conversion Shares and the Warrant Shares, respectively,
will be validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof,
with the holders being entitled to all rights accorded to a holder
of Common Stock. Assuming the accuracy of each of the
representations and warranties of Buyer contained in
Section 2, the issuance by the Company of the Securities is
exempt from registration under the 1933 Act.
(d) No Conflicts . Except as
disclosed in Schedule 3(d) , 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 (including, without limitation, the issuance of the
Preferred Shares and Warrants and reservation for issuance and
issuance of the Conversion Shares and the Warrant Shares) will not:
(i) result in a violation of the Company’s Articles of
Incorporation, as amended and as in effect on the date hereof
(together with any certificate of designations of rights and
preferences of any outstanding series of preferred stock of the
Company, the “ Articles of Incorporation ”), or
the Company’s Bylaws, as amended and as in effect on the date
hereof (the “ Bylaws ”); (ii) conflict
with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to
which the Company or any of its Subsidiaries is a party; or
(iii) result in a violation of any law, rule, regulation,
order, judgment or decree, as may be applicable to the Company or
any of its Subsidiaries, or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected.
(e) Consents . Except as
disclosed in Schedule 3(e) , all consents, authorizations,
orders, filings and registrations which the Company is required as
of the Closing Date to obtain to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents
in accordance with their terms have been obtained or effected on or
prior to the Closing Date. The Company and its Subsidiaries are
unaware of any facts or circumstances which might reasonably be
expected to prevent the Company from obtaining or effecting any of
the foregoing.
(f) Acknowledgment Regarding
Buyer’s Purchase of Securities . The Company acknowledges
and agrees that each Buyer is acting solely in the capacity of
arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and
that no Buyer is an officer or director of the Company. The Company
further acknowledges that no Buyer is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the
transactions
5
contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such
Buyer’s purchase of the Securities. The Company further
represents to each Buyer that the Company’s decision to enter
into the Transaction Documents has been based solely on the
independent evaluation by the Company and its
representatives.
(g) No General Solicitation;
Placement Agent’s Fees . Neither the Company, nor any of
its affiliates, nor any Person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer
or sale of the Securities. The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory
fees, or brokers’ commissions (other than for persons engaged
by any Buyer or its investment advisor) relating to or arising out
of the transactions contemplated hereby. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney’s fees and
out-of-pocket expenses) arising in connection with any such
claim.
(h) No Integrated Offering .
None of the Company, its Subsidiaries, any of their affiliates, and
any Person acting on their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy
any security, under circumstances that would require registration
of any of the Securities under the 1933 Act or cause this offering
of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable shareholder
approval provisions, including, without limitation, under the rules
and regulations of any market, exchange or automated quotation
system on which any of the securities of the Company are listed or
designated. None of the Company, its Subsidiaries, their affiliates
and any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require
registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other
offerings.
(i) Dilutive Effect . The
Company understands and acknowledges that the number of Conversion
Shares issuable upon conversion of the Preferred Shares and the
Warrant Shares issuable upon exercise of the Warrants will increase
in certain circumstances. The Company further acknowledges that,
subject to the terms and conditions of the Transaction Documents,
its obligation to issue Conversion Shares upon conversion of the
Preferred Shares in accordance with this Agreement and the
Certificate of Designations and its obligation to issue the Warrant
Shares upon exercise of the Warrants in accordance with this
Agreement and the Warrants is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other shareholders of the
Company.
(j) Application of Takeover
Protections; Rights Agreement . The Company and its Board of
Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the
Articles of Incorporation or the laws of the state of its
incorporation which is or could become applicable to any Buyer as a
result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities. The
Company has not adopted a shareholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of
Common Stock or a change in control of the Company.
6
(k) SEC Documents; Financial
Statements . Except as disclosed in Schedule 3(k) ,
since December 31, 2004, the Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of
the 1934 Act (all of the foregoing filed prior to the date hereof
and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the “ SEC Documents
”). The Company has delivered to the Buyers or their
respective representatives true, correct and complete copies of the
SEC Documents not available on the EDGAR system. Except as
disclosed in Schedule 3(k) , as of their respective dates,
the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and
none of the SEC Documents, at the time they were filed with the
SEC, 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. Except as
disclosed in Schedule 3(k) , as of their respective dates,
the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Except as disclosed in
Schedule 3(k) , such financial statements have been prepared
in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). No other information
provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents contains any untrue statement of a
material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the
circumstance under which they are or were made and, taken together
with the information set forth in the SEC Documents, not
misleading.
(l) Absence of Certain
Changes . Except as disclosed in Schedule 3(l) , since
December 31, 2004, there has been no material adverse change
and no material adverse development in the business, properties,
operations, condition (financial or otherwise), results of
operations or prospects of the Company or its Subsidiaries. Except
as disclosed in Schedule 3(l ), since December 31,
2004, the Company has not: (i) declared or paid any dividends;
(ii) sold any assets, individually or in the aggregate, in
excess of $50,000 outside of the ordinary course of business; or
(iii) had capital expenditures, individually or in the
aggregate, in excess of $500,000. The Company has not taken any
steps to seek protection pursuant to any bankruptcy law nor does
the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or
any actual knowledge of any fact which would reasonably lead a
creditor to do so.
(m) No Undisclosed Events,
Liabilities, Developments or Circumstances . Except as
disclosed in Schedule 3(m) , no event, liability,
development or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, prospects,
operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws on a
registration statement on Form S-1 filed with the SEC relating to
an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
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(n) Conduct of Business;
Regulatory Permits . Except as disclosed in Schedule
3(n) , neither the Company nor its Subsidiaries is in violation
of any term of or in default under its articles of incorporation,
any certificate of designations of rights and preferences of any
outstanding series of preferred stock of the Company or bylaws or
their organizational charter or bylaws, respectively (except, with
respect to the Subsidiaries, for violations that could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect). Except as disclosed in Schedule
3(n) , neither the Company nor any of its Subsidiaries is in
violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries
will conduct its business in violation of any of the foregoing,
except for possible violations which could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect. Except as disclosed in Schedule 3(n) , the Company
and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any such Subsidiary has received any notice
of proceedings relating to the revocation or modification of any
such certificate, authorization or permit.
(o) Foreign Corrupt Practices
. Neither the Company, nor any of its Subsidiaries, nor any
director, officer, agent, employee or other Person acting on behalf
of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company: (i) used any
corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity;
(ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; (iii) violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
(iv) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
(p) Transactions With
Affiliates . Except as disclosed in the SEC Documents or in
Schedule 3(p) , none of the officers, directors or employees
of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any such officer, director or employee or, to the knowledge of
the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial
interest or is an officer, director, trustee or partner.
(q) Equity Capitalization .
As of the date hereof, the authorized capital stock of the Company
consists of: (i) 100,000,000 shares of Common Stock, of which
as of the date hereof 37,748,977 are issued and outstanding (none
of which are treasury shares), 10,000,000 shares are reserved for
issuance pursuant to the Company’s stock incentive plan and
22,757,921 shares are reserved for issuance pursuant to securities
(other than the aforementioned options, the Preferred Shares and
the Warrants) exercisable or exchangeable for, or convertible into,
shares of Common Stock; and (ii) 5,000,000 shares of preferred
stock, (I) 100,000 shares of such preferred
8
stock are designated as Preferred Stock Series
A-1 with a stated value of $100.00 per share, of which as of the
date hereof no shares are issued and outstanding, (II) 100,000
shares of such preferred stock are designated as Preferred Stock
Series A-2 with a stated value of $100.00 per share, of which as of
the date hereof no shares are issued and outstanding, (III) 600,000
shares of such preferred stock are designated as Preferred Stock
Series B with no stated value, of which as of the date hereof no
shares are issued and outstanding, (IV) 100,000 shares of such
preferred stock are designated as Preferred Stock Series C with no
stated value, of which as of the date hereof no shares are issued
and outstanding, (V) 10,000 shares of such preferred stock are
designated as Preferred Stock Series D with a stated value of
$1,000.00 per share (the “ Preferred Stock Series D
”), of which as of the date hereof 4,175 shares are issued
and outstanding; and (VI) 10,000 shares of such preferred stock are
designated as Series E Preferred Stock with a stated value of
$1,000 per share, of which as of the date hereof no shares are
issued and outstanding (except such Preferred Shares that are to be
issued at the Closing). All of such outstanding shares have been,
or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 3(q) :
(A) no shares of the Company’s capital stock are subject
to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company; (B) there
are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, or exercisable or
exchangeable for, any shares of capital stock of the Company or any
of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or
may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into,
or exercisable or exchangeable for, any shares of capital stock of
the Company or any of its Subsidiaries; (C) there are no
outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing
Indebtedness (as defined in Section 3(r)) of the Company or
any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (D) there are no
financing statements securing obligations in any material amounts,
either singly or in the aggregate, filed in connection with the
Company; (E) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (F) there are no
outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions,
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; (G) there are no securities or instruments
containing anti-dilution, pre-emptive or similar provisions that
will be triggered by the issuance of the Securities; (H) the
Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan
or agreement; and (I) the Company and its Subsidiaries have no
liabilities or obligations required to be disclosed in the SEC
Documents (as defined herein) but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the
Company’s or its Subsidiaries’ respective businesses
and which, individually or in the aggregate, do not or could not
reasonably be expected to have a Material Adverse Effect. The
Company has furnished to the Buyer true, correct and complete
copies of the Articles of Incorporation, Bylaws and the terms of
all securities convertible into, or exercisable or exchangeable
for, Common Stock and the material rights of the holders thereof in
respect thereto.
9
(r) Indebtedness and Other
Contracts . Except as disclosed in Schedule 3(r) ,
neither the Company nor any of its Subsidiaries: (i) has any
outstanding Indebtedness; (ii) is a party to any contract,
agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or
instrument could reasonably be expected to result in a Material
Adverse Effect; (iii) is in violation of any term of or in
default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults could not
reasonably be expected to result, individually or in the aggregate,
in a Material Adverse Effect; or (iv) is a party to any
contract, agree
