|
EXHIBIT
3.1
|
|
|
|
|
|
|
|
AMENDED AND
RESTATED
|
|
COMMON STOCK AND
WARRANT
|
|
PURCHASE
AGREEMENT
|
|
|
|
|
|
for the purchase
of
|
|
31,405,304 Shares of
Common Stock
|
|
and Warrants to
Purchase 6,281,062 Shares of Common Stock
|
|
of
|
|
|
|
|
|
ADS MEDIA GROUP,
INC.
|
|
|
|
|
|
|
|
June 16,
2006
|
|
|
|
As Amended and
Restated on October 25, 2006
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 1 DEFINITIONS
|
1
|
|
|
1.1 Certain Definitions
|
1
|
|
|
1.2 Accounting Principles
|
5
|
|
|
1.3 Other Definitional Provisions; Construction
|
6
|
|
|
|
|
|
ARTICLE 2 ISSUE AND SALE OF COMMON STOCK AND
WARRANTS
|
6
|
|
|
2.1 Authorization and Issuance of the Common Stock
and Warrants
|
6
|
|
|
2.2 Allocation of Purchase Price
|
6
|
|
|
2.3 The Closing
|
6
|
|
|
|
|
|
ARTICLE 3 CONDITIONS
|
7
|
|
|
3.1 Conditions to Purchase of Securities
|
7
|
|
|
|
|
|
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND
|
|
|
|
PRINCIPAL SHAREHOLDERS
|
8
|
|
|
4.1 Representations and Warranties of the Company and
Principal Shareholders
|
8
|
|
|
4.2 Absolute Reliance on the Representations and
Warranties
|
14
|
|
|
|
|
|
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER
|
14
|
|
|
5.1 Purchase Entirely for Its Own Account
|
14
|
|
|
5.2 Disclosure of Information
|
14
|
|
|
5.3 Accredited and Sophisticated Investor; Investment
Experience
|
15
|
|
|
5.4 Restricted Securities
|
15
|
|
|
5.5 Legends
|
15
|
|
|
5.6 Survival of Purchaser Representations
|
15
|
|
|
|
|
|
ARTICLE 6 COVENANTS
|
16
|
|
|
6.1 Affirmative Covenants
|
16
|
|
|
6.2 Board Provisions
|
17
|
|
|
6.3 Right of First Offer
|
18
|
|
|
6.4 Negative Covenants
|
19
|
|
|
|
|
|
ARTICLE 7 REGISTRATION RIGHTS
|
20
|
|
|
7.1 Mandatory Registration
|
20
|
|
|
7.2 Piggyback Registration
|
20
|
|
|
7.3 Demand Registration Rights
|
21
|
|
|
7.4 Registration Procedures
|
22
|
|
|
7.5 Registration Expenses
|
24
|
|
|
7.6 Indemnification
|
24
|
|
|
7.7 Participation in Underwritten Registrations
|
25
|
|
|
7.8 Termination of Registration Rights
|
26
|
|
|
|
|
|
ARTICLE 8 MISCELLANEOUS
|
26
|
|
|
8.1 Successors and Assigns
|
26
|
|
|
8.2 Modifications and Amendments
|
26
|
|
|
8.3 No Implied Waivers; Cumulative Remedies; Writing
Required
|
26
|
|
|
8.4 Fees and Expenses
|
26
|
|
|
8.5 Reimbursement of Expenses - Enforcement and
Collection
|
27
|
|
|
8.6 Notices
|
27
|
|
|
8.7 Survival
|
27
|
|
|
8.8 Governing Law; Consent to Jurisdiction
|
27
|
|
|
8.9 Jury Trial Waiver
|
28
|
|
|
8.10 Remedies
|
28
|
|
|
8.11 Limitation of Liability
|
28
|
|
|
8.12 Severability
|
28
|
|
|
8.13 Headings
|
28
|
|
|
8.14 Counterparts
|
28
|
|
|
8.15 Integration
|
29
|
|
|
8.16 Independent Nature of Purchaser Obligations and
Rights
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMENDED AND
RESTATED
|
|
COMMON STOCK AND
WARRANT
|
|
PURCHASE
AGREEMENT
|
|
For the Purchase
of
|
|
31,405,304 Shares of
Common Stock and Warrants to Purchase
|
|
up to 6,281,062
Shares of Common Stock
|
|
|
|
THIS AMENDED AND RESTATED COMMON STOCK AND WARRANT PURCHASE
AGREEMENT (this " Agreement "), first dated 16 th
day of June, 2006, as amended and restated on October 25, 2006, is
by and among ADS Media Group, Inc., a Utah corporation (the "
Company "), Clark R. "Dub" Doyal and James D. "Jim" Schell
(each, a " Principal Shareholder " and collectively, the "
ADS Principal Shareholders "), Roaring Fork Capital SBIC,
L.P., a Delaware limited partnership (" Roaring Fork "), and
Charter ADS Media, L.P. (" Charter "), a Texas limited
partnership (each individually a " Purchaser " and
collectively, the " Purchasers "). Capitalized terms used
and not defined elsewhere in this Agreement are defined in
Article 1 hereof.
|
|
|
|
Recitals
|
|
|
|
A.
Roaring Fork entered into this Agreement on June 16, 2006, and
closing for its investment pursuant to the Agreement occurred on
June 20, 2006. Roaring Fork purchased 15,702,652 shares of Common
Stock and Warrants to purchase an additional 3,140,531 shares of
Common Stock, for consideration of $2,000,000.
|
|
|
|
B.
Charter has agreed to purchase all of the 15,702,652 shares of
Common Stock and Warrants to purchase an additional 3,140,531
shares of Common Stock that remain unsold pursuant to this
Agreement after closing of the Roaring Fork investment, for
consideration of $2,000,000.
|
|
|
|
C.
The parties have agreed to amend and restate the Agreement as
provided herein in order to authorize and facilitate the remaining
$2,000,000 investment, provide additional terms related to the
Charter investment, update deadlines for the occurrence of certain
events, and make minor corrections.
|
|
|
|
The parties hereto, in consideration of the premises and their
mutual covenants and agreements herein set forth and intending to
be legally bound hereby, covenant and agree as follows:
|
|
|
|
ARTICLE 1
|
|
|
|
DEFINITIONS
|
|
|
|
1.1
Certain Definitions . In addition to other words and terms
defined elsewhere in this Agreement, the following words and terms
have the meanings set forth below (and such meanings shall be
equally applicable to both the singular and plural form of the
terms defined, as the context may require):
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
" Affiliate " shall mean
with respect to any Person, any other Person that is directly or
indirectly controlling, controlled by or under common control with
such Person or entity or any of its Subsidiaries, and the term
"control" (including the terms "controlled by" and "under common
control with") shall mean having, directly or indirectly, the power
to direct or cause the direction of the management and policies of
a Person, whether through ownership of voting securities or by
contract or otherwise. The Principal Shareholders and their
Affiliates shall be deemed Affiliates of the Company for purposes
of this Agreement. Without limiting the foregoing, (i) the
ownership of ten percent (10%) or more of the voting securities of
a Person shall be deemed to constitute control and notwithstanding
anything to the contrary herein, and (ii) neither the Purchasers
nor any of their respective Affiliates shall be deemed to be
Affiliates of the Company by virtue of the transactions
contemplated in this Agreement.
|
|
" Agreement " shall mean
this Common Stock and Warrant Purchase Agreement, as the same may
be amended, restated, supplemented or otherwise modified from time
to time.
|
|
|
|
" Board " shall mean the
Board of Directors of ADS Media Group, Inc.
|
|
|
|
" Business " shall mean the
principal business of the Company as set forth in
Section 4.1(b) hereof and as such shall continue to be
conducted following the purchase and sale of the Common Stock and
Warrants hereby.
|
|
|
|
" Business Day " shall mean
any day other than a Saturday, Sunday or other day on which banking
institutions in Denver, Colorado are authorized or required by law
to close.
|
|
|
|
" Bylaws " shall mean the
Bylaws or analogous instrument governing operations, including all
amendments and supplements thereto.
|
|
|
|
" Charter Documents " shall
mean the articles of incorporation filed with the appropriate
Governmental Authorities, including all amendments and supplements
thereto.
|
|
|
|
" Charter " shall mean
Charter ADS Media, L.P., a Texas limited partnership.
|
|
|
|
" Closing " shall mean the
closing of each purchase and sale of the Common Stock and the
Warrants pursuant to this Agreement.
|
|
|
|
" Closing Date " shall mean
the Initial Closing Date and any Subsequent Closing Date (defined
herein), or any of them.
|
|
|
|
" Code " shall mean the
Internal Revenue Code of 1986, as amended.
|
|
|
|
" Common Stock " shall mean
the common stock, $.001 par value, of the Company. This Agreement
contemplates that, after Closing, the Company will execute a
reverse stock split of its common stock. All references in this
Agreement to a number of shares of Common Stock refer to the number
of shares of Common Stock prior to giving effect to the proposed
reverse stock split unless otherwise indicated.
|
|
|
|
" Company " shall have the
meaning assigned to such term in the introductory paragraph hereto,
except as provided otherwise in this Agreement.
|
|
|
|
2
|
|
|
|
|
|
" ERISA " shall mean the
Employee Retirement Income Security Act of 1974, as the same may
from time to time be amended, and the rules and regulations of any
governmental agency or authority, as from time to time in effect,
promulgated thereunder.
|
|
|
|
" Exchange Act " shall mean
the Securities Exchange Act of 1934, as amended.
|
|
|
|
" Final Investment Date "
shall mean November 30, 2006, the final date on which any Common
Stock or Warrants may be purchased under this Agreement unless the
Final Investment Date is extended by the Company with the consent
of the Purchaser.
|
|
|
|
" Fiscal Year " or "
fiscal year " shall mean each 12-month period ending on
December 31 of each year.
|
|
|
|
" Fully Diluted Common
Stock " shall mean the sum of (i) all Common Stock outstanding
immediately following Closing and (ii) all securities convertible
into or exercisable for Common Stock, as if exercised and converted
to the fullest extent of their terms; but (iii) excluding all
Common Stock or securities (including debt securities) convertible
into Common Stock that have been issued in breach of Section
6.4.
|
|
|
|
" Governmental Authorities
" shall mean any federal, state or municipal court or other
governmental department, commission, board, bureau, agency or
instrumentality, governmental or quasi-governmental, domestic or
foreign.
|
|
|
|
" Initial Closing Date "
shall mean June 20, 2006, the date of purchase and payment for
Common Stock and Warrants by Roaring Fork pursuant to this
Agreement.
|
|
|
|
" Investment Amount "
shall mean the amount paid or agreed to be paid for the Common
Stock and Warrants, as indicated below each Purchaser's
signature.
|
|
|
|
" IRS " shall mean the
Internal Revenue Service and any governmental body or agency
succeeding to the functions thereof.
|
|
|
|
" Laws " shall mean all
U.S. and foreign federal, state or local statutes, laws, rules,
regulations, ordinances, codes, policies, rules of common law, and
the like, now or hereafter in effect, including any judicial or
administrative interpretations thereof, and any judicial or
administrative orders, consents, decrees or judgments.
|
|
|
|
" Lien " shall mean any
security interest, pledge, bailment, mortgage, hypothecation, deed
of trust, conditional sales and title retention agreement
(including any lease in the nature thereof), charge, encumbrance or
other similar arrangement or interest in real or personal property,
whether such interest is based on common law, statute or
contract.
|
|
|
|
" Material Adverse Effect
" shall mean a material adverse effect on the business, properties,
assets, liabilities or condition (financial or otherwise) of the
Company, individually and/or taken as a whole.
|
|
|
|
3
|
|
|
|
|
|
|
|
" Options " shall mean
options issued pursuant to the Company's 2006 Stock Option and
Incentive Plan, subject to the restriction set forth in Section
6.4(b), and any options outstanding as of the Initial Closing
Date.
|
|
|
|
" Person " shall mean any
individual, partnership, limited partnership, corporation, limited
liability Company, association, joint stock company, trust, joint
venture, unincorporated organization or governmental entity or
department, agency or political subdivision thereof.
|
|
|
|
" Plan " shall mean any
employee benefit plan (within the meaning of Section 3(3) of
ERISA), established or maintained by the Company or any member of
the Controlled Group.
|
|
|
|
" Properties and
Facilities " shall have the meaning assigned to such term in
Section 4.1(r) hereof.
|
|
|
|
" Property " shall mean,
as to any Person, all types of real, personal, tangible, intangible
or mixed property owned by such Person whether or not included in
the most recent balance sheet of such Person and its subsidiaries
under GAAP.
|
|
|
|
" Proprietary Rights "
shall mean all patents, trademarks, trade names, service marks,
copyrights, inventions, production methods, licenses, formulas,
know-how, trade secrets and good will related to any of the
foregoing, regardless of whether such are registered with any
Governmental Authorities, including applications therefor.
|
|
|
|
" Purchase Documents "
shall mean this Agreement (including all schedules attached to the
Agreement) and the Warrants as any or all of the foregoing may be
supplemented or amended from time to time.
|
|
|
|
" Purchaser " shall have
the meaning assigned to such term in the introductory paragraph
hereto.
|
|
|
|
" Registrable Securities "
shall mean the shares of Common Stock purchased by the Purchasers,
the shares of the Underlying Common Stock, and any shares issued or
issuable upon any stock split, dividend or other distribution,
recapitalization or similar event, or any exercise price adjustment
with respect to the Underlying Common Stock.
|
|
|
|
" Roaring Fork " shall
mean Roaring Fork Capital SBIC, L.P., a Purchaser, which is managed
by Roaring Fork Capital Management, LLC.
|
|
|
|
" SBA Compliance Agreement
" means the SBA Compliance Agreement between the Company and
Roaring Fork dated as of May 22, 2006.
|
|
|
|
" SEC " means the U.S.
Securities and Exchange Commission.
|
|
|
|
" Securities Act " shall
mean the Securities Act of 1933, as amended.
|
|
|
|
" Subsequent Closing Date
" shall mean the date of purchase and payment for Common Stock and
Warrants by any Purchaser after the Initial Closing Date (but in no
event later than the Final
|
|
|
|
4
|
|
|
|
|
|
|
|
Investment Date) pursuant to this Agreement; provided, that if
no additional investors purchase and pay for the Common Stock and
Warrants on Subsequent Closing Date(s) as provided herein, the
Initial Closing Date shall be substituted for the Subsequent
Closing Date(s) in determining Roaring Fork's rights under this
Agreement for all purposes except Section 6.2(d).
|
|
|
|
" Subsidiary " of any
corporation shall mean any other corporation or limited liability
company of which the outstanding capital stock possessing a
majority of voting power in the election of directors (otherwise
than as the result of a default) is owned or controlled by such
corporation directly or indirectly through Subsidiaries.
|
|
|
|
" Trading Day " means (i) a
day on which the Common Stock is traded on a Trading Market (other
than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a
day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which
the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding to its functions of
reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii)
hereof, then Trading Day shall mean a Business Day.
|
|
|
|
" Trading Market " means
whichever of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ National Market, the NASDAQ Capital Market or
OTC Bulletin Board on which the Common Stock is listed or quoted
for trading on the date in question.
|
|
|
|
" Transaction Documents "
shall have the meaning assigned to such term in Section
4.1(f) hereof.
|
|
|
|
" Transactions " shall
mean the purchase of the Common Stock and the Warrants as
contemplated by this Agreement, the Warrants, certificates for the
Common Stock and all other agreements contemplated hereby and
thereby.
|
|
|
|
" Underlying Common Stock
" shall mean the Common Stock issued or issuable upon exercise of
the Warrants (it being understood that exercise of the Warrant
shall include exercise pursuant to either Section 1(a) of the
Warrant or exercise of the conversion right pursuant to Section
1(b) of the Warrant), and (c) any equity securities issued or
issuable with respect to the securities referred to in
clauses (a) and (b) above by way of stock dividend or stock
split or in connection with a combination of shares,
recapitalization, merger, consolidation or other
reorganization.
|
|
|
|
" Warrants " shall have
the meaning assigned to such term in Section 2.1 hereof.
|
|
|
|
1.2 Accounting
Principles . The character or amount of any asset, liability,
capital account or reserve and of any item of income or expense to
be determined, and any consolidation or other accounting
computation to be made, and the construction of any definition
containing a financial term, pursuant to this Agreement shall be
determined or made in accordance with generally accepted accounting
principles in the United States of America consistently applied ("
GAAP ").
|
|
|
|
5
|
|
|
|
|
|
1.3
Other Definitional Provisions; Construction . Whenever the
context so requires, neuter gender includes the masculine and
feminine, the singular number includes the plural and vice versa.
The words "hereof" "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as
a whole and not in any particular provision of this agreement, and
references to section, article, annex, schedule, exhibit and like
references are references to this Agreement unless otherwise
specified. References in this Agreement to any Persons shall
include such Persons' successors and permitted assigns.
|
|
|
|
ARTICLE 2
|
|
|
|
ISSUE AND SALE OF
COMMON STOCK AND WARRANTS
|
|
|
|
2.1 Authorization
and Issuance of the Common Stock and Warrants . The Company has
duly authorized an offering of its securities (the "
Offering ") of up to 31,405,304 shares of Common Stock and
Warrants to purchase up to 6,281,062 shares of Common Stock
exercisable at $.16 per share (the " Warrants "), to be
substantially in the form of the Warrant attached hereto as
Exhibit A for a purchase price of $4,000,000 if the maximum
amount is sold. This Agreement was originally entered into on June
16, 2006, for the purpose of Roaring Fork subscribing in the
Offering through the Roaring Fork Closing Date in an aggregate
amount of $2,000,000 for 15,702,652 shares of common stock and
Warrants to purchase an additional 3,140,531 shares at $.16 per
share. Subject to the terms and conditions of this Agreement,
Charter ADS Media, L.P. (" Charter "), will purchase for
$2,000,000 the remaining unsubscribed portion of the offering
(comprising 15,702,652 shares of common stock and Warrants to
purchase an additional 3,140,531 shares at $.16 per share). It is
expressly understood and agreed that Charter's investment made
pursuant to this Section 2.1 shall not give rise to any " Right
of First Offer " granted to Roaring Fork or any other Purchaser
in Section 6.3 of the Agreement. In no event will the aggregate
gross proceeds from this Offering exceed $4,000,000 or continue
beyond the Final Investment Date, unless the consent of the
Purchasers is obtained.
|
|
|
|
2.2 Allocation of
Purchase Price . Subject to the terms and conditions and in
reliance upon the representations, warranties and agreements set
forth herein, the Company shall (1) sell to Roaring Fork for
$2,000,000 invested in the Company, and Roaring Fork shall purchase
from the Company, 15,702,652 shares of Common Stock for $1,998,000,
and Warrants to purchase up to 1,570,265 shares of Common Stock
exercisable at $.16 per share for $2,000, and (2) sell to Charter
for $2,000,000 invested in the Company, and Charter shall purchase
from the Company, 15,702,652 shares of Common Stock for $1,998,000,
and Warrants to purchase up to 1,570,265 shares of Common Stock
exercisable at $.16 per share for $2,000.
|
|
|
|
2.3 The Closing
. Delivery of and payment for the Shares of Common Stock and
Warrants sold to Roaring Fork was initially made on June 20, 2006.
Delivery of and payment for the Shares of Common Stock and Warrants
to be sold to additional investors will be made on one or more
Subsequent Closing Dates at such place and date as may be mutually
agreeable to the Company and each Purchaser, but no later than the
Final Investment Date. Delivery of the Common Stock and Warrants
shall be made to each Purchaser against payment of the Investment
Amount therefor, by check or by wire transfer of immediately
available funds in the manner agreed to by the Company and each
Purchaser. The Common Stock and the Warrants shall be issued in
name of the Purchaser.
|
|
|
|
|
|
6
|
|
|
|
ARTICLE 3
|
|
|
|
CONDITIONS
|
|
|
|
3.1
Conditions to Purchase of Securities . The obligation of
each Purchaser to purchase and pay for the Common Stock and
Warrants is subject to the satisfaction, prior to or at the
Closing, of the following conditions at the time of its respective
purchase:
|
|
|
|
(a)
Representations and Warranties True . The representations
and warranties contained in Article 4 hereof shall be
true and correct in all material respects at and as of each Closing
Date as though then made, except to the extent of changes caused by
the transactions expressly contemplated herein.
|
|
|
|
(b)
Material Adverse Change . Except as described in the SEC
Reports, there will have been no material adverse change in the
business of the Company since December 31, 2005.
|
|
|
|
(c)
Closing Documents . The Company shall have delivered or
ordered to be delivered to the Purchaser all of the following
documents in form and substance satisfactory to the Purchaser:
|
|
|
|
(i) one
or more certificates representing the aggregate number of shares of
the Common Stock purchased by each Purchaser, such certificates to
bear a restrictive legend in compliance with the Securities
Act;
|
|
|
|
(ii) one
or more Warrants to purchase the aggregate number of shares
purchased by each Purchaser, duly completed and executed by the
Company;
|
|
|
|
(iii) a
copy of the Charter Documents and Bylaws of the Company and each of
its Subsidiaries, certified by the Secretary of the Company as of
each Closing Date;
|
|
|
|
(iv) copies
of the resolutions duly adopted by the Board authorizing the
execution, delivery and performance by the Company of this
Agreement and each of the other agreements, instruments and
documents contemplated hereby to which the Company is a party, and
the consummation of all of the other Transactions, certified as of
each Closing Date by the president or secretary of the Company;
|
|
|
|
(v) a
certificate dated as of each Closing Date from the Principal
Shareholders, as officers of the Company, stating that the
conditions specified in this Section 4.1 have been
fully satisfied or waived by each Purchaser with respect to its
respective purchase;
|
|
|
|
(vi) with
respect to Roaring Fork's purchase, the SBA Compliance Agreement,
duly completed and executed by the Company; and
|
|
|
|
(vii)proxies
from the current directors, who together own more than 50% of the
currently outstanding Common Stock, irrevocably granting Roaring
Fork authority to vote the directors' shares in favor of the
reverse stock split provided for in Section 6.2(c); and
|
|
|
|
(viii) copies
of cancelled promissory notes and other documentation evidencing
the conversion of all notes and all accrued salaries listed in
Schedule 3.1(c)(viii); and
|
|
|
|
(ix) such
other documents relating to the Transactions contemplated by this
Agreement that a Purchaser may reasonably request.
|
|
|
|
(b)
Proceedings . All proceedings taken or required to be taken
in connection with the transactions contemplated hereby to be
consummated at or prior to the Closing and all documents incident
thereto will be satisfactory in form and substance to the
Purchaser.
|
|
|
|
ARTICLE 4
|
|
|
|
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
PRINCIPAL
SHAREHOLDERS
|
|
|
|
4.1 Representations
and Warranties of the Company and Principal Shareholders .
Unless the context requires otherwise, all references to the
"Company" shall include each of the Company's Subsidiaries, unless
the context requires otherwise. As a material inducement to the
Purchasers to enter into this Agreement and purchase the Common
Stock and the Warrants, the Company and each Principal Shareholder,
jointly and severally, hereby represent and warrant to the
Purchasers (but only with respect to the individual Closing in
which that Purchaser makes its investment) as follows:
|
|
|
|
(a)
Organization and Power . The Company is duly organized,
validly existing and in good standing under the laws of its state
of organization. The Company has all requisite corporate or other
organizational power and authority and all material licenses,
permits, approvals and authorizations necessary to own and operate
its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the
Transactions, and is qualified to do business in every jurisdiction
where the failure to so qualify might reasonably be expected to
have a Material Adverse Effect. The Company has its principal place
of business in San Antonio, Texas. The copies of the Charter
Documents and Bylaws of the Company that have been furnished to the
Purchasers reflect all amendments made thereto at any time prior to
the date of this Agreement and are correct and complete.
|
|
|
|
(b)
Principal Business . The Company is primarily engaged in
providing turnkey direct marketing support services, with an
emphasis on alternate i.e. door to door delivery (the "
Business ").
|
|
|
|
(c)
SEC Reports; Financial Statements . Except as set forth on Schedule 4.1(c), 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 15(d) thereof reports filed on Form 10-KSB, Form 10-QSB,
and Form 8-K, for the twelve months preceding the date hereof (or
such shorter period as the Company was required by law to file such
reports) (the foregoing materials being collectively referred to
herein as the " SEC Reports " and, together with the
Schedules to this Agreement (if any), the " Disclosure
Materials ") on a timely basis or has timely filed a valid
extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. Attached as
Schedule 4.1(c) is a list of all filings made by the Company
with the SEC since January 1, 2002. 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 SEC 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 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 SEC
with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved, 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. The Company's Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and the Company has taken no
action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under
the Exchange Act nor has the Company received any notification that
the SEC is contemplating terminating such registration.
|
|
|
|
(d)
Capitalization and Related Matters . As of each Closing Date
and immediately thereafter, the authorized capital stock of the
Company and the shares of stock that are issued, outstanding and
reserved for issuance upon exercise of warrants and Options and
exercise of the Warrants issued hereunder (after giving effect to
anti-dilution adjustments) are as set forth on the
Capitalization Schedule and Addendum attached hereto. As of
each Closing Date, the Company will not have outstanding any
capital stock or securities convertible or exchangeable for any
shares of its capital stock except as set forth in the
Capitalization Schedule, and will not have outstanding any rights
or options to subscribe for or to purchase its capital stock or any
stock or securities convertible into or exchangeable for its
capital stock, except as set forth in the Capitalization Schedule.
As of each Closing Date, the Company will not be subject to any
obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock, except as set
forth herein and the Charter Documents, respectively, as in effect
on the date hereof. As of the Closing, all of the outstanding
shares of the Company's capital stock will be validly issued, fully
paid and nonassessable. Except as set forth on the
Capitalization Schedule and Addendum , there are no
statutory or contractual stockholders' preemptive rights or notices
with respect to the issuance of the Common Stock and Warrants
hereunder. Subject to and based on the accuracy of all
representations made by all Purchasers in this Offering, the
Company has not violated any applicable federal or state securities
laws in connection with the offer, sale or issuance of any of its
capital stock, and the offer, sale and issuance of the Common Stock
and Warrants hereunder do not require registration under the
Securities Act or any applicable state securities laws.
|
|
|
|
(e)
Subsidiaries . Except as set forth on Schedule 4.1(e), the
Company does not own, or hold any rights to acquire, any shares of
stock or any other security or interest in any other Person. The
Company has no Subsidiaries except as set forth on Schedule
4.1(e).
|
|
|
|
(f)
Authorization; No Breach . The execution, delivery and
performance of the Purchase Documents, the proxies from current
directors contemplated by subsection 3.1(c)(vii), and the SBA
Compliance Agreement (collectively, the " Transaction
Documents "), and the consummation of the Transactions have
been duly authorized by the Company and the Principal Shareholders.
Except as set forth on Schedule 4.1(f), the execution and delivery
by the Company of the Transaction Documents and the consummation of
the Transactions do not and will not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in the creation of
any Lien upon any of the Company's capital stock or assets pursuant
to, (iv) give any third party the right to accelerate any
obligation under, (v) result in a violation of, or
(vi) require any authorization, consent, approval, exemption
or other action by or notice to any Governmental Authority or
Person pursuant to, the Charter Documents of the Company, or any
law, statute, rule or regulation to which the Company is subject,
or any agreement, instrument, order, judgment or decree to which
the Company is a party or to which it or its assets are
subject.
|
|
|
|
(g)
Enforceability . This Agreement constitutes, and each of the
other Transaction Documents when duly executed and delivered by the
Company and the Principal Shareholders will constitute, legal,
valid and binding obligations of the Company and the Principal
Shareholders enforceable in accordance with their respective
terms.
|
|
|
|
(h)
No Material Adverse Change . Except as disclosed in Schedule
4.1(h), since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed
in the SEC Reports, (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 liabilities (contingent or otherwise) other than (A)
trade payables, accrued expenses and other liabilities 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 any dividend or
distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock, and (v) except as set forth on
Schedule 4.1(h), the Company has not issued any equity securities
to any officer, director or Affiliate. The Company does not have
pending before the SEC any request for confidential treatment of
information.
|
|
|
|
(i)
Litigation . Except as described in the SEC Reports, the
Company has not received notice of the filing of any actions, suits
or proceedings at law or in equity or by or before any arbitrator
or any Governmental Authority (collectively, " Lawsuits ")
now pending nor, to the best knowledge of the Company's management
after due inquiry, have any Lawsuits been threatened against or
filed by or affecting the Company or against any of its directors
or officers or the Principal Shareholders relating to the
businesses, assets or rights of the Company.
|
|
|
|
(j)
Compliance with Laws . The Company is not in violation of
any applicable Law in any material respect. The Company is not in
default with respect to any judgment, order, writ, injunction,
decree, rule or regulation of any Governmental Authority. There is
no investigation, enforcement action or regulatory action pending
or threatened against or affecting the Company by any Governmental
Authority. There is no remedial or other corrective action that the
Company is required to take to remain in compliance with any
judgment, order, writ, injunction or decree of any Governmental
Authority or to maintain any material permits, approvals or
licenses granted by any Governmental Authority in full force and
effect. During the past five (5) years, none of the officers,
directors or management of the Company have been arrested or
convicted of any material crime nor have any of them been bankrupt
or an officer or director of a bankrupt company.
|
|
|
|
(k)
Transactions With Affiliates and Employees . Except as set
forth in Schedule 4.1(k) , none of the officers or directors
of the Company or the Principal Shareholders and, to the knowledge
of the Company, none of the employees of the Company is presently a
party to any transaction with the Company (other than for services
as employees, officers and 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
officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner.
|
|
|
|
(l)
Controls and Procedures . The Company has established
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that material
information relating to the company is made known to the certifying
officers by others within those entities, particularly during the
period in which the Company's form 10-KSB or 10-QSB, as the case
may be, is being prepared. The Company's certifying officers have
evaluated the effectiveness of the Company's controls and
procedures in accordance with Item 307 of Regulation S-B under the
Exchange Act for the Company's most recently ended fiscal quarter
or fiscal year-end (such date, the " Evaluation Date "). The
Company presented in its most recently filed Form 10-KSB or Form
10-QSB the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date.
|
|
|
|
(m)
Certain Fees . The Company has an arrangement with First
Continental Capital, L.P. for investment banking and other
services. Copies of any agreements evidencing this arrangement have
been provided to the Purchasers. Except for any payments that may
be due to First Continental Capital, L.P. pursuant to that
arrangement, no brokerage or finder's fees or commissions are or
will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this
Agreement, including any Subsequent Closings. The Purchasers shall
have no obligation with respect to any fees or with respect to any
claims (other than such fees or commissions owed by a Purchaser
pursuant to written agreements executed by a Purchaser which fees
or commissions shall be the sole responsibility of such Purchaser)
made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
|
|
|
|
(n)
Application of Takeover Protections . The Company has 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 Company's Charter
Documents, or the laws of its state of incorporation that is or
could become applicable to the Purchaser as a result of the
Purchaser and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including
without limitation the Company's issuance of the Common Stock, the
Warrants and the Underlying Common Stock and the Purchaser's
ownership of the Common Stock, the Warrants, and the Underlying
Common Stock.
|
|
|
|
(o)
Taxes . Except as set forth on Schedule 4.1(o) , the
Company has filed or caused to be filed all Federal, state and
local tax returns that are required to be filed by it, and has paid
or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, including payroll
taxes.
|
|
|
|
(p)
Labor and Employment . The Company is and each of its Plans
are in compliance in all material respects with those provisions of
ERISA, the Code, the Age Discrimination in Employment Act, and the
regulations and published interpretations thereunder which are
applicable to the Company or any such Plan. The Company is in
compliance in all material respects with all labor and employment
laws, rules, regulations and requirements of all applicable
domestic and foreign jurisdictions. There are no pending or
threatened labor disputes, work stoppages or strikes.
|
|
|
|
(q)
Properties; Security Interests . Except as set forth in
Schedule 4.1(q) , the Company has good and marketable title
to, or valid leasehold interests in, all of the material assets and
properties used or useful by the Company in the Business
(collectively, the " Properties and Facilities") . All of
the Properties and Facilities are in good repair, working order and
condition and all such assets and properties are, except as set
forth in the SEC Reports. The Properties and Facilities constitute
all of the material assets, properties and rights of any type used
in or necessary for the conduct of the Business.
|
|
|
|
(r)
Intellectual Property . The Company has good title and
ownership of, or has sufficient rights to, all trademarks, service
marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes and patents,
including without limitation the Proprietary Rights (collectively,
the " Intellectual Property ") used in or necessary for its
business as now conducted or as proposed to be conducted.
Schedule 4.1(r) attached hereto contains a complete and
accurate list of all outstanding options, licenses, or agreements
of any kind r
|
|
