UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 25, 2005
Endavo Media And Communications, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
001-16381 87-0642448
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(Commission File Number) (IRS Employer Identification No.)
50 West Broadway, Suite 400
Salt Lake City, Utah 84101
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(Address of principal executive offices, including zip code)
(801) 297-8500
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 3.02. Unregistered Sales of Equity Securities
On February 22, 2005, we entered into (and simultaneous completed the
transaction contemplated by) a Securities Purchase Agreement with the entities
listed below pursuant to which we issued $1,425,000 principal amount of 8%
Senior Secured Convertible Notes and related securities.
Aggregate Principal Additional Additional
Name Amount of Notes Warrants Investment Right "A" Investment Right "B"
Iroquois Capital L.P. $425,000 476,457 $425,000 $425.000
Abraham Nussbaum $100,000 112,107 $100,000 $100,000
Basso Multi-Strategy $100,000 112,107 $100,000 $100,000
Holding Fund, Ltd.
Double U Master Fund LP $100,000 112,107 $100,000 $100,000
Enable Growth Partners $150,000 168,161 $150,000 $150,000
LP
Nite Capital LP $300,000 336,332 $300,000 $300,000
Puritan LLC $100,000 112,107 $100,000 $100,000
TCMP3 Partners $150,000 168,161 $150,000 $150,000
TOTAL $1,425,000 1,597,529 $1,425,000 $1,425,000
The following summarizes the principal terms of the transaction:
8% Senior Secured Convertible Notes
Pursuant to the Securities Purchase Agreement, we sold to the investors listed
above a total of $1.425 million principal amount of 8% senior secured
convertible notes, together with warrants to purchase an aggregate of 1,597,529
shares of our common stock, and two series of additional investment rights
entitling the holders to purchase from us up to an additional $2.85 million of
8% senior secured convertible notes and warrants to purchase an aggregate of
3,195,058 shares of our common stock. This transaction was structured as a
private transaction exempt from registration under the Securities Act of 1933 in
reliance on an exemption under Section 4(2) and Regulation D thereof which will
result in gross proceeds to us of $1.425 million, or $4.275 million if both the
additional investment rights are exercised in full.
These notes will be senior to or pari passu with all our current and future
indebtedness and we will pledge all of our assets as collateral for the notes.
Additional terms of the 8% senior secured convertible notes include:
1. unless converted or redeemed as described below, the 8% senior secured
convertible notes are due on February 22, 2007.
2. 8% annual interest, payable semi-annually in arrears beginning June 30,
2005. The interest is payable either in cash or at our option (subject
to the satisfaction of certain conditions) in shares of our common
stock valued at 85% of the volume weighted average price of our common
stock for the 20 trading days prior to the payment date.
3. subject to certain exceptions, while the notes are outstanding, if we
issue equity or equity linked securities at a price lower than the
conversion price, then the conversion price of these notes will be
reduced to the same price. If we issue any variable priced equity
securities or variable price equity linked securities, then the
conversion price of these notes will be reduced to the lowest issue
price applied to those securities.
4. the notes are convertible at any time at the option of the holder into
shares of our common stock at a conversion price of $.892 per share
(which was 70% of the average closing market price of the common stock
on the OTC Bulletin Board for the 20 trading days prior to the closing
of the transaction).
5. If we do not achieve revenues of at least $4,000,000 for calendar year
2005, the conversion price of the notes will be adjusted to 85% of the
volume weighted average closing market price of the common stock on the
OTC Bulletin Board for the 20 trading days prior to the release of the
Calendar 2005 financial statements, but in no event higher that the
initial conversion price of $.892. The conversion price is also subject
to adjustment upon the occurrence of certain specified events,
including stock dividends and stock splits, pro rata distributions of
equity securities, evidences of indebtedness, rights or warrants to
purchase common stock or cash or any other asset, mergers or
consolidations, or certain issuances of common stock at a price below
the initial conversion price of $.892 per share, subject to adjustment
as set forth above.
6. the number of shares of our common stock acquired by any holder upon
conversion of the notes is limited to the extent necessary to ensure
that following the conversion the total number of shares of our common
stock beneficially owned by the holder does not exceed 9.999% of our
issued and outstanding common stock,
7. we can prepay all or any portion of the principal amount of the notes,
plus any accrued but unpaid interest at 115% of face amount, but only
if certain Equity Conditions are satisfied for underlying conversion
shares, including an effective registration. If we should elect to
prepay the notes, the holders will have ten (10) trading days to
convert the notes into shares of our common stock. If we elect to
prepay the notes, we must do so pro-rata amongst the holders.
Warrants to Purchase Common Stock
We also issued warrants to purchase up to 1,597,529 shares of its common stock.
The warrants are exercisable for five years from the date of issuance at an
exercise price of $1.27 per share, which was 100% of the average closing market
price of the common stock on the OTC Bulletin Board for the 20 trading days
prior to the closing of the transaction.
The conversion price is also subject to adjustment upon the occurrence of
certain specified events, including stock dividends and stock splits, pro rata
distributions of equity securities, evidences of indebtedness, rights or
warrants to purchase common stock or cash or any other asset, mergers or
consolidations, or certain issuances of common stock at a price below the
initial conversion price of $1.27 per share, subject to adjustment as set forth
above
The warrants include a "cashless exercise" feature, which permits the holder to
exercise the warrants by surrender of a portion of the warrants. The cashless
exercise feature is available to the holder, if at the time of exercise, there
is not in effect a registration statement covering the shares underlying the
warrants are registered. The number of shares of our common stock, which can be
issued upon the exercise of the warrants, is limited to the extent necessary to
ensure that following the exercise the total number of shares of our common
stock beneficially owned by the holder does not exceed 9.999% of our issued and
outstanding common stock.
Additional Investment Rights
We also issued two "additional investment rights" The additional investment
right "A" and an additional investment right "B", which each entitle the holders
to purchase up to an additional $1.425 million principal amount of 8% senior
secured convertible notes and warrants to purchase up to an additional 1,597,529
shares of our common stock beginning on the date of the registration of the
underlying shares of common stock and ending six months thereafter. The terms
and conditions of the securities contained in this additional investment right
will be identical to the initial notes and warrants. The terms of the additional
investment right "A" and an additional investment right "B" are otherwise
identical, except that we have the right to redeem (for no consideration) the
"A" right if the weighted average closing price of our common stock exceeds
$1.78 (200% of the original conversion price) for 20 consecutive trading days,
our common stock trades at least 75,000 shares a day during the period, and a
registration statement covering the shares issuable upon conversion is in
effect.
Registration of Common Stock
We have agreed to file a registration statement with the Securities and Exchange
Commission prior to April 25,2005, registering the shares of common stock
issuable upon the conversion of the notes, the exercise of the warrants, and the
shares related to the additional investment right if it is exercised in the
future. We have also granted the purchaser's piggy-back registration rights
under certain circumstances. If we fail to file the registration statement on a
timely basis, or if it is not declared effective by the Securities and Exchange
Commission within a maximum of 120 days from the filing date, we are required to
pay to the investors liquidated damages equal to 2.0% of the amount invested and
shall pay to the investors liquidated damages equal to 1.0% of the amount
invested for each subsequent 30-day period.
Exchange Rights
For the twenty four (24) month period after Closing, if we complete a private
equity or equity-linked financing, the holders of the notes may exchange the
notes at 100% of face value for the securities in such new financing, provided
that the exchange is in compliance with applicable securities laws.
Right of First Offer
So long as they hold any notes, the note holders will have the right of first
offer to purchase all or part of any private financing, subject to carve outs
for employee options plans, the issuance of stock for situations involving
strategic partnerships, acquisition candidates and underwritten public offerings
of at least $15 million consummated within 12 months after the Closing.
Change of Control
In the of a third party acquiring greater than 50% in voting rights in one or a
series of related transaction, the holders may elect to have the Notes redeemed
by us at 110% of face value plus all accrued interest and unpaid interest,
which, at our option, may be paid in cash or common stock.
Exemption from Registration
The securities issued in the private placement financing transaction were issued
without registration with the Commission, pursuant to Section 4(2) of the
Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. We
determined that this exemption was available because of the nature and limited
number of the purchasers. In making this determination, we relied in part upon
representations made by each purchaser.
Placement Agent Fees; Other Fees
We engaged H. C. Wainwright Co., Inc., as the exclusive placement agent in
connection with the private placement. Under our agreement with Wainwright we
paid them a cash fee of $128,250 (9% of the gross proceeds of the financing plus
a non-accountable cash allowance of 2% of the gross proceeds, less any legal
fees payable to counsel to the investors). We paid the investors $35,000 for the
legal fees they incurred in connection with this transaction. In addition, we
issued to Wainwright, warrants to purchase 239,630 shares of common stock at
$.89 and 239,630 shares of common stock at $1.27. The warrants have the same
terms as the warrants issued to the investors. In addition, we agreed to pay to
Wainwright, a cash fee of 8% of the aggregate consideration received by us from
the exercise of any warrants.
Further Information
The full terms and conditions of the financing are set forth in the note
purchase agreement for the convertible notes, the form of convertible debenture,
the form of common stock purchase warrant and the registration rights agreement,
each of which is filed as an exhibit with this current report and are
incorporated herein by reference.
We also issued a press release relating to the financing transaction on February
23, 2005, which is filed as an exhibit with this Current Report on Form 8-K and
is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
Exhibit No. Description
4.1 Form of 8.0% Senior Secured Convertible Note
4.2 Form of Warrant
10.1 Form of Securities Purchase Agreement for 8.0% Senior
Secured Convertible Notes
10.2 Form of Additional Investment Right "A"
10.3 Form of Additional Right "B"
10.4 Form of Security Agreement
99.1 Press Release dated February 23, 2005, regarding private
placement financing
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 25, 2005
ENDAVO MEDIA AND COMMUNICATIONS, INC.
(Registrant)
By: /s/ Paul D. Hamm
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Name: Paul D. Hamm
Title: President and Chief Executive Officer
List of Exhibits
Exhibit No. Description
4.1 Form of 8.0% Senior Secured Convertible Note
4.2 Form of Warrant
10.1 Form of Securities Purchase Agreement for 8.0% Senior
Secured Convertible Notes
10.2 Form of Additional Investment Right "A"
10.3 Form of Additional Right "B"
10.4 Form of Security Agreement
99.1 Press Release dated February 23, 2005, regarding private
placement financing
Exhibit 4.1
Form of 8.0% Senior Secured Convertible Note
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
No. [ ] $[ ] Date: February 22, 2005
ENDAVO MEDIA AND COMMUNICATIONS, INC.
8.0% SENIOR SECURED CONVERTIBLE NOTE DUE
February 22, 2007
THIS NOTE is one of a series of duly authorized and issued Notes of
Endavo Media and Communications, Inc., a Delaware corporation (the "Company"),
designated as its 8.0% Senior Secured Convertible Notes due February 22, 2007,
in the aggregate principal amount of up to $1,425,000 (the "Notes"), subject to
increase pursuant to the terms of a certain Additional Investment Right of even
date herewith.
FOR VALUE RECEIVED, the Company promises to pay to the order of
[Holder] or its registered assigns (the "Holder"), the principal sum of
[__________] $(__________), on February 22, 2007 (the "Maturity Date"), or such
earlier date as the Notes are required or permitted to be repaid as provided
hereunder, and to pay interest to the Holder on the unconverted and then
outstanding principal amount of this Note in accordance with the provisions
hereof. The principal amount of this Note may be increased as set forth in
Section 2(c) below. Notwithstanding the foregoing, the Company hereby
unconditionally promises to pay to the order of the Holder interest on any
principal or interest payable hereunder that shall not be paid in full when due,
whether at the time of any stated interest payment date or maturity or by
prepayment, acceleration or declaration or otherwise, for the period from and
including the due date of such payment to but excluding the date the same is
paid in full, at a rate of 18% per annum (but in no event in excess of the
maximum rate permitted under applicable law).
Interest payable under this Note shall be computed on the basis of a
year of 360 days and actual days elapsed (including the first day but excluding
the last day) occurring in the period for which interest is payable.
Payments of principal and interest shall be made in lawful money of the
United States of America to the Holder at its address as provided in Section 13
or by wire transfer to such account specified from time to time by the Holder
hereof for such purpose as provided in Section 13.
8. Definitions. In addition to the terms defined elsewhere in this Note, (a)
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Securities Purchase Agreement, dated as of February 22,
2005, among the Company and the Purchasers identified therein (the "Purchase
Agreement"), and (b) the following terms have the meanings indicated:
"Company Prepayment Price" for any Notes which shall be
subject to prepayment pursuant to Section 8(a), shall equal the sum of:
(i) the 115% of the principal amount of Notes to be prepaid, plus all
accrued and unpaid interest thereon, and (ii) all other amounts, costs,
expenses and liquidated damages due in respect of such Notes.
"Conversion Date" means the date a Conversion Notice is
delivered to the Company together with the Conversion Schedule pursuant
to Section 6(a).
"Conversion Notice" means a written notice in the form
attached hereto as Schedule 1.
"Conversion Price" means (i) at anytime prior to the Financial
Statement Announcement Date, the Fixed Conversion Price and (ii) at
anytime following the Financial Statement Announcement Date, (a) if the
revenues of the Company as set forth in the Financial Statements is
less than $4,000,000, then the Alternate Conversion Price or (b) if the
revenues of the Company as set forth in the Financial Statements is
greater than or equal to $4,000,000, the Fixed Conversion Price,
subject to adjustment from time to time pursuant to Section 13.
"Equity Conditions" means, with respect to a specified
issuance of Common Stock, that each of the following conditions is
satisfied: (i) the number of authorized but unissued and otherwise
unreserved shares of Common Stock is sufficient for such issuance; (ii)
such shares of Common Stock are registered for resale by the Holder and
may be sold by the Holders pursuant to an effective Registration
Statement covering the Underlying Shares or all such shares may be sold
without volume restrictions pursuant to Rule 144(k) under the
Securities Act; (iii) the Common Stock generally is listed or quoted
(and is not suspended from trading) on an Eligible Market and such
shares of Common Stock are approved for listing upon issuance; (iv)
such issuance would be permitted in full without violating Section 6(c)
hereof or the rules or regulations of any Trading Market; (v) no
Bankruptcy Event has occurred; (vi) the Company is not in default with
respect to any material obligation hereunder or under any other
Transaction Document; and (vii) no public announcement of a pending or
proposed Change of Control transaction has occurred that has not been
consummated.
"Event Equity Value" means 115% of the arithmetic average of
the VWAP of the Company's Common Stock for the five Trading Days
preceding the date of delivery of the notice requiring payment of the
Event Equity Value, provided that if the Company does not make such
required payment (together with any other payments, expenses and
liquidated damages then due and payable under the Transaction
Documents) when due or, in the event the Company disputes in good faith
the occurrence of the Triggering Event pursuant to which such notice
relates, does not instead deposit such required payment (together with
such other payments, expenses and liquidated damages then due) in
escrow with an independent third-party escrow agent within five Trading
Days of the date such required payment is due, then the Event Equity
Value shall be 115% of the greater of (a) the arithmetic average of the
VWAP of the Company's Common Stock for the five Trading Days preceding
the date of delivery of the notice requiring payment of the Event
Equity Value and (b) the arithmetic average of the VWAP of the
Company's Common Stock for the five Trading Days preceding the date on
which such required payment (together with such other payments,
expenses and liquidated damages) is paid in full.
"Original Issue Date" means the date of the first issuance of
any Notes, regardless of the number of transfers of any particular
Note.
"Triggering Event" means any of the following events: (a) the
Common Stock is not listed or quoted, or is suspended from trading, on
an Eligible Market for a period of five or more Trading Days (which
need not be consecutive Trading Days); (b) the Company fails for any
reason to deliver a certificate evidencing any Securities to a
Purchaser within five Trading Days after delivery of such certificate
is required pursuant to any Transaction Document or the exercise or
conversion rights of the Holders pursuant to any Transaction Document
are otherwise suspended for any reason; (c) the Company fails to have
available a sufficient number of authorized but unissued and otherwise
unreserved shares of Common Stock available to issue Underlying Shares
upon any exercise of the Note; (d) at any time after the Closing Date,
any Common Stock issuable pursuant to the Transaction Documents is not
listed on an Eligible Market; (e) the Company effects or publicly
announces its intention to effect any exchange, recapitalization or
other transaction that effectively requires or rewards physical
delivery of certificates evidencing the Common Stock; (f) except as
provided for under Section 6.1(h) of the Purchase Agreement, the
effectiveness of the Registration Statement lapses for any reason or
the Holder shall not be permitted to resell any Underlying Shares under
the Registration Statement, in either case, for five or more Trading
Days (which need not be consecutive Trading Days); (g) the Company
fails to make any cash payment required under the Transaction Documents
and such failure is not cured within five days after notice of such
default is first given to the Company by a Purchaser; or (h) the
Company defaults in the timely performance of any other obligation
under the Transaction Documents and such default continues uncured for
a period of 20 days after the date on which notice of such default is
first given to the Company by a Purchaser (it being understood that no
prior notice need be given in the case of a default that cannot
reasonably be cured within 20 days). Notwithstanding anything to the
contrary herein, no Triggering Event shall occur as a result of the
Company exercising its rights under Section 6.1(h) of the Purchase
Agreement.
9. Principal and Interest.
(a) The Company shall pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Note at the rate of 8.0% per
annum, payable semi-annually in arrears on each June 30 and December 31, except
if such date is not a Trading Day, in which case such interest shall be payable
on the next succeeding Trading Day (each, an "Interest Payment Date"). The first
Interest Payment Date shall be June 30, 2005.
(b) Subject to the conditions and limitations set forth below, the Company may
pay interest on this Note in (i) cash or (ii) shares of Common Stock. The
Company must deliver written notice to the Holder indicating the manner in which
it intends to pay interest at least 20 Trading Days prior to each Interest
Payment Date but the Company may indicate in any such notice that the election
contained therein shall continue for subsequent Interest Payment Dates until
revised. Failure to timely provide such written notice shall be deemed an
election by the Company to pay the amount of any interest in cash.
(c) Notwithstanding the foregoing, the Company may not pay interest by issuing
shares of Common Stock unless all of the Equity Conditions have been satisfied.
If the Company is required to pay interest in cash on any Interest Payment Date
but fails to make such interest payment, the Holder may (but shall not be
required to) treat such interest as if it had been added to the principal amount
of this Note as of such Interest Payment Date or accept any number of shares of
Common Stock in lieu of such interest payment.
(d) In the event that the Company elects to pay interest on any Interest Payment
Date in shares of Common Stock, the number of shares of Common Stock to be
issued to each Holder as such interest shall be (i) determined by dividing the
aggregate amount of interest then payable to such Holder by the Market Price as
of the applicable Interest Payment Date, and rounding up to the nearest whole
share and (ii) paid to such Holder in accordance with Section 2(e) below. The
term "Market Price" shall mean 85% of the arithmetic average of the VWAP of the
Company's Common Stock for the 20 Trading Days prior to the applicable Interest
Payment Date (including such date).
(e) In the event that any interest is paid in Common Stock, the Company shall on
such Interest Payment Date (i) issue and deliver to such Holder a certificate
free and clear of any restrictive legends, registered in the name of the Holder
or its designee, for the number of shares of Common Stock to which the Holder
shall be entitled or (ii) at all times after the Holder has notified the Company
that this clause (ii) shall apply, credit the number of shares of Common Stock
to which the Holder shall be entitled to the Holder's or its designee's balance
account with The Depository Trust Company through its Deposit Withdrawal Agent
Commission System.
10. Ranking and Covenants.
(a) Except as set forth in Schedule 3.1(dd) or as otherwise permitted in Section
4.10(a) of the Purchase Agreement (the "Existing Indebtedness"), no indebtedness
of the Company is senior to this Note in right of payment, whether with respect
to interest, damages or upon liquidation or dissolution or otherwise. Other than
the Existing Indebtedness and any renewal, refinancing or replacement thereof
that does not exceed the aggregate amount of the Existing Indebtedness and the
borrowing availability under the related credit or loan agreements on the date
hereof, the Company will not, and will not permit any Subsidiary to, directly or
indirectly, enter into, create, incur, assume or suffer to exist any
indebtedness of any kind, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom, that is senior in any respect to the Company's obligations under the
Notes, other than indebtedness secured by purchase money security interests
(which will be senior only as to the underlying assets covered thereby) and
indebtedness under capital lease obligations (which will be senior only as to
the assets covered thereby).
(b) So long as any Notes are outstanding, neither the Company nor any Subsidiary
shall, directly or indirectly, (i) redeem, purchase or otherwise acquire any
capital stock or set aside any monies for such a redemption, purchase or other
acquisition or (ii) issue any Floating Price Security (as defined in Section
11(d)(ii)) with a floor price below the Conversion Price.
(c) The Company covenants that it will at all times reserve and keep available
out of its authorized but unissued and otherwise unreserved Common Stock, solely
for the purpose of enabling it to issue Underlying Shares as required hereunder,
the number of Underlying Shares which are then issuable and deliverable upon the
conversion of (and otherwise in respect of) this entire Note (taking into
account the adjustments set forth in Section 13 and disregarding any limitations
set forth in Section 6(b)), free from preemptive rights or any other contingent
purchase rights of Persons other than the Holder. The Company covenants that all
Underlying Shares so issuable and deliverable shall, upon issuance in accordance
with the terms hereof, be duly and validly authorized and issued and fully paid
and nonassessable.
11. Registration of Notes. The Company shall register the Notes upon records to
be maintained by the Company for that purpose (the "Note Register") in the name
of each record holder thereof from time to time. The Company may deem and treat
the registered Holder of this Note as the absolute owner hereof for the purpose
of any conversion hereof or any payment of interest or principal hereon, and for
all other purposes, absent actual notice to the contrary.
12. Registration of Transfers and Exchanges. The Company shall register the
transfer of any portion of this Note in the Note Register upon surrender of this
Note to the Company at its address for notice set forth herein. Upon any such
registration or transfer, a new Note, in substantially the form of this Note
(any such new Note, a "New Note"), evidencing the portion of this Note so
transferred shall be issued to the transferee and a New Note evidencing the
remaining portion of this Note not so transferred, if any, shall be issued to
the transferring Holder. The acceptance of the New Note by the transferee
thereof shall be deemed the acceptance by such transferee of all of the rights
and obligations of a holder of a Note. This Note is exchangeable for an equal
aggregate principal amount of Notes of different authorized denominations, as
requested by the Holder surrendering the same. No service charge or other fee
will be imposed in connection with any such registration of transfer or
exchange. Notwithstanding anything herein to the contrary, the Company shall not
be required to (a) register more than an aggregate of five transfers and five
exchanges by the Holder and any direct or indirect transferees or assigns
thereof, in the aggregate, under this Section 5, other than transfers or
assignments to successors in interest to such Holder and (b) at any time prior
to the effectiveness of the Registration Statement, register any transfer to a
transferee unless the Holder certifies to the Company that such transferee is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
13. Conversion; Exchange.
(a) Conversion at the Option of the Holder. All or any portion of this Note
shall be convertible into shares of Common Stock (subject to the limitations set
forth in Sections 6(b) and (c)), at the option of the Holder, at any time and
from time to time from and after the Original Issue Date. The number of
Underlying Shares issuable upon any conversion hereunder shall equal the
outstanding principal amount of this Note to be converted, plus the amount of
any accrued but unpaid interest on this Note through the Conversion Date,
divided by the Conversion Price on the Conversion Date. The Holder shall effect
conversions under this Section 6(a) by delivering to the Company a Conversion
Notice together with a schedule in the form of Schedule 2 attached hereto (the
"Conversion Schedule"). If the Holder is converting less than all of the
principal amount of this Note, or if a conversion hereunder may not be effected
in full due to the application of Sections 6(b) and (c), the Company shall honor
such conversion to the extent permissible hereunder and shall promptly deliver
to the Holder a Conversion Schedule indicating the principal amount (and accrued
interest) which has not been converted.
(b) Certain Conversion Restrictions.
(i) Relating to the Number of Shares.
(A) Subject to Section 6(b)(i)(B), the number of shares of
Common Stock that may be acquired by a Holder upon any conversion of
Notes (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such conversion (or other
issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be aggregated with such
Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 4.999% (the "Threshold Percentage") or 9.999% (the "Maximum
Percentage") of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock
issuable upon such conversion). For such purposes, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery
of a Conversion Notice hereunder will constitute a representation by
the applicable Holder that it has evaluated the limitations set forth
in this Section 6(b)(i)(A) and has determined that issuance of the full
number of Underlying Shares issuable in respect of such Conversion
Notice does not violate the restrictions contained in this Section
6(b)(i)(A).
(B) Notwithstanding the provisions of Section 6(b)(i)(A),
written notice to the Company, the Holder shall have the right (x) at
any time and from time to time to reduce its Maximum Percentage
immediately upon notice to the Company in the event and only to the
extent that Section 16 of the Exchange Act or the rules promulgated
thereunder (or any successor statute or rules) is changed to reduce the
beneficial ownership percentage threshold thereunder to a percentage
less than 9.999% and (y) at any time and from time to time, to waive
the provisions of this Section insofar as they relate to the Threshold
Percentage or to increase or decrease its Threshold Percentage (but not
in excess of the Maximum Percentage) unless the Holder shall have, by
written instrument delivered to the Company, irrevocably waived its
rights to so increase or decrease its Threshold Percentage, but (i) any
such waiver, increase or decrease will not be effective until the 61st
day after such notice is delivered to the Company, and (ii) any such
waiver or increase or decrease will apply only to the Holder and not to
any other holder of Notes.
(c) Exchange Upon New Financing. (i) If at any time prior to the second
anniversary of the Closing Date, the Company enters into a transaction pursuant
to which it issues Common Stock or Common Stock Equivalents (a "New Financing"),
the Holder shall have the right (the "Exchange Right") within 5 Trading Days of
receipt of notice of such New Financing, to exchange the Notes for the Common
Stock or Common Stock Equivalents being issued in connection with such New
Financing.
(ii) To exercise this Exchange Right, the Holder shall deliver a notice
to the Company (the "Exchange Notice") within the 5 Trading Day period set forth
in clause (i) above and set forth the principal amount of the Notes being
exchanged (the "Exchange Amount"). On the closing of the New Financing (i) the
Company shall issue to the Holder an amount of the Common Stock or Common Stock
Equivalents issued at the New Financing that can be purchased for the Exchange
Amount, and (ii) cancel the principal amount of the Notes equal to the Exchange
Amount.
14. Mechanics of Conversion.
(a) Upon conversion of this Note, the Company shall promptly (but in no
event later than three Trading Days after the Conversion Date) issue or
cause to be issued and cause to be delivered to or upon the written
order of the Holder and in such name or names as the Holder may
designate a certificate for the Underlying Shares issuable upon such
conversion, free of restrictive legends unless a registration statement
covering the resale of the Underlying Shares and naming the Holder as a
selling stockholder thereunder is not then effective and such
Underlying Shares are not then freely transferable without volume
restrictions pursuant to Rule 144 under the Securities Act. The Holder,
or any Person so designated by the Holder to receive Underlying Shares,
shall be deemed to have become holder of record of such Underlying
Shares as of the Conversion Date. The Company shall, upon request of
the Holder, use its best efforts to deliver Underlying Shares hereunder
electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions.
(b) The Holder shall not be required to deliver the original Note in order
to effect a conversion hereunder. Execution and delivery of the
Conversion Notice shall have the same effect as cancellation of the
original Note and issuance of a New Note representing the remaining
outstanding principal amount. Upon surrender of this Note following one
or more partial conversions, the Company shall promptly deliver to the
Holder a New Note representing the remaining outstanding principal
amount.
(c) The Company's obligations to issue and deliver Underlying Shares upon
conversion of this Note in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to
any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any set-off, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach
by the Holder or any other Person of any obligation to the Company or
any violation or alleged violation of law by the Holder or any other
Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with the issuance of such Underlying Shares.
(d) If by the third Trading Day after a Conversion Date the Company fails
to deliver to the Holder such Underlying Shares in such amounts and in
the manner required pursuant to Section 7(a), then the Holder will have
the right to rescind such conversion.
(e) If by the third Trading Day after a Conversion Date the Company fails
to deliver to the Holder such Underlying Shares in such amounts and in
the manner required pursuant to Section 7(a), and if after such third
Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale
by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall
either (i) pay cash to such Purchaser in an amount equal to such
Purchaser's total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the "Buy-In Price"),
at which point the Company's obligation to deliver such certificate
(and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to such Purchaser a certificate or
certificates representing such Common Stock and pay cash to such
Purchaser in an amount equal to the excess (if any) of the Buy-In Price
over the product of (A) such number of shares of Common Stock, times
(B) the Closing Price on the date of the event giving rise to the
Company's obligation to deliver such certificate.
15. Prepayment.
(a) At any time following the first anniversary of the Original Issue Date,
upon delivery of a written notice to the Holder (a "Company Prepayment
Notice" and the date such notice is delivered by the Company, the
"Company Notice Date"), the Company shall be entitled to prepay all or
any portion of the outstanding principal amount of this Note plus any
accrued and unpaid interest thereon for an amount in cash equal to the
Company Prepayment Price. Notwithstanding anything to the contrary, the
Company shall only be entitled to deliver a Company Prepayment Notice
pursuant to the terms hereof if the Equity Conditions are satisfied
with respect to all shares of Common Stock issuable pursuant to the
Transaction Documents on the Company Notice Date. If any of the Equity
Conditions shall cease to be in effect during the period between the
Company Notice Date and the date the Company Prepayment Price is paid
in full, then the Holder subject to such prepayment may elect, by
written notice to the Company given at any time after any of the Equity
Conditions shall cease to be in effect, to invalidate ab initio such
optional prepayment, notwithstanding anything herein contained to the
contrary. The Holder may, within 10 Trading Days of its receipt of the
Company Prepayment Notice, convert any portion of the outstanding
principal amount of this Note and any accrued and unpaid interest
thereon subject to a Company Prepayment Notice. Once delivered, the
Company shall not be entitled to rescind a Company Prepayment Notice.
(b) The Company Prepayment Price shall be due on the 5th Trading Day
immediately following the Company Notice Date. Any such prepayment
shall be free of any claim of subordination. If any portion of the
Company Prepayment Price shall not be timely paid by the Company,
interest shall accrue thereon at the rate of 18% per annum (or the
maximum rate permitted by applicable law, whichever is less) until the
Company Prepayment Price plus all such interest is paid in full, which
payment shall constitute liquidated damages and not a penalty. In
addition, if any portion of the Company Prepayment Price remains unpaid
after such date, the Holder subject to such prepayment may elect by
written notice to the Company to invalidate ab initio such Company
Prepayment Notice with respect to the unpaid amount, notwithstanding
anything herein contained to the contrary and no interest shall be owed
to the Holder in respect thereof. If the Holder makes such an election,
the principal amount of this Note, together with the accrued and unpaid
interest thereon shall be reinstated with respect to such unpaid amount
and the Company shall no longer have any prepayment rights under this
Section 8.
(c) Notwithstanding anything to the contrary herein, the Company may not
elect a prepayment pursuant to Section 8(a)(i) unless the Company makes
such prepayment election to all of the Holders on a pro rata basis,
based on such Holders then outstanding principal amount of Notes.
16. Events of Default.
(a) "Event of Default" means any one of the following events (whatever the
reason and whether it shall be voluntary or involuntary or effected by
operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or
governmental body):
(i) (A) any default in the payment (free of any claim of subordination) of
any principal amount of the Notes, as and when the same becomes due and
payable (whether on a date specified for the payment of interest or the
date on which the obligations under the Note mature or by acceleration,
redemption, prepayment or otherwise) or (B) any default in the payment
(free of any claim of subordination) of interest or liquidated damages
in respect of any Notes, no later than the third day after such
interest or liquidated damages become due and payable (whether on a
date specified for the payment of interest or the date on which the
obligations under the Note mature or by acceleration, redemption,
prepayment or otherwise);
(ii) the Company or any Subsidiary defaults in any of its obligations under
any other note or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under
which there may be issued, or by which there may be secured or
evidenced, any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company or any
Subsidiary in an amount exceeding $1,000,000, whether such indebtedness
now exists or is hereafter created, and such default results in such
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable;
(iii) the occurrence of a Triggering Event;
(iv) the Company shall fail to observe or perform the repayment obligation
under Section 4.17 of the Purchase Agreement, and such failure shall
continue unremedied for a period of 10 Trading Days after the date on
which written notice of such default is first given to the Company by
the Holder; or
(v) the occurrence of a Bankruptcy Event.
(b) At any time or times following the occurrence of an Event of Default,
the Holder shall have the option to elect, by notice to the Company (an
"Event Notice"), to require the Company to repurchase all or any
portion of (i) the outstanding principal amount of this Note, at a
repurchase price equal to the greater of (A) 115% of such outstanding
principal amount, plus all accrued but unpaid interest thereon through
the date of payment, or (B) the Event Equity Value of the Underlying
Shares issuable upon conversion of such principal amount and all such
accrued but unpaid interest thereon, and (ii) any Underlying Shares
issued to such Holder upon conversion of Notes and then owned by the
Holder, at a price per share equal to the Event Equity Value of such
issuable and issued Underlying Shares. The aggregate amount payable
pursuant to the preceding sentence is referred to as the "Event Price."
The Company shall pay the Event Price to the Holder no later than the
third Trading Day following the date of delivery of the Event Notice,
and upon receipt thereof the Holder shall deliver this Note and
certificates evidencing any Underlying Shares so repurchased to the
Company (to the extent such certificates have been delivered to the
Holder).
(c) Upon the occurrence of any Bankruptcy Event, all amounts pursuant to
Section 10(b) shall immediately become due and payable in full in cash,
without any further action by the Holder.
(d) In connection with any Event of Default, the Holder need not provide
and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under
applicable law. Any such declaration may be rescinded and annulled by
the Holder at any time prior to payment hereunder. No such rescission
or annulment shall affect any subsequent Event of Default or impair any
right consequent thereto.
17. Charges, Taxes and Expenses. Issuance of certificates for Underlying
Shares upon conversion of (or otherwise in respect of) this Note shall
be made without charge to the Holder for any issue or transfer tax,
withholding tax, transfer agent fee or other incidental tax or expense
in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any
certificates for Underlying Shares or Notes in a name other than that
of the Holder. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this
Note or receiving Underlying Shares in respect hereof.
18. Certain Adjustments. The Conversion Price is subject to adjustment from
time to time as set forth in this Section 11.
(a) Stock Dividends and Splits. If the Company, at any time while this Note
is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is
payable in shares of Common Stock, (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, or (iii) combines
outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause
(i) of this Section 11(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clause
(ii) or (iii) of this Section 11(a) shall become effective immediately
after the effective date of such subdivision or combination.
(b) Pro Rata Distributions. If the Company, at any time while this Note is
outstanding, distributes to holders of Common Stock (i) evidences of
its indebtedness, (ii) any security (other than a distribution of
Common Stock covered by the preceding paragraph), (iii) rights or
warrants to subscribe for or purchase any security, or (iv) any other
asset (in each case, "Distributed Property"), then in each such case
the Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such
distribution shall be adjusted (effective on such record date) to equal
the product of such Conversion Price times a fraction of which the
denominator shall be the average of the Closing Prices for the five
Trading Days immediately prior to (but not including) such record date
and of which the numerator shall be such average less the then fair
market value of the Distributed Property distributed in respect of one
outstanding share of Common Stock, as determined by the Company's
independent certified public accountants that regularly examine the
financial statements of the Company, (an "Appraiser"). In such event,
the Holder, after receipt of the determination by the Appraiser, shall
have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case such fair market
value shall be deemed to equal the average of the values determined by
each of the Appraiser and such appraiser. As an alternative to the
foregoing adjustment to the Conversion Price, if the Holder elects to
convert all or any portion of this Note, at the request of the Holder
delivered before the 90th day after such record date, the Company will
deliver to such Holder, upon such conversion, within five Trading Days
after such request (or, if later, on the effective date of such
distribution), the Distributed Property that such Holder would have
been entitled to receive in respect of the Underlying Shares for which
this Note is being converted immediately prior to such record date.
(c) Fundamental Transactions. If, at any time while this Note is
outstanding, (i) the Company effects any merger or consolidation of the
Company with or into another Person where the Company is not the
surviving entity, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other
securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (other than as a
result of a subdivision or combination of shares of Common Stock
covered by Section 10(a) above) (in any such case, a "Fundamental
Transaction"), then the Holder shall have the right thereafter to
receive, upon conversion of this Note, the same amount and kind of
securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of the
number of Underlying Shares then issuable upon conversion in full of
this Note (the "Alternate Consideration"). The aggregate Conversion
Price for this Note will not be affected by any such Fundamental
Transaction, but the Company shall apportion such aggregate Conversion
Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice
as to the Alternate Consideration it receives upon any conversion of
this Note following such Fundamental Transaction. In the event of a
Fundamental Transaction, the Company or the successor or purchasing
Person, as the case may be, shall execute with the Holder a written
agreement providing that:
(x) this Note shall thereafter entitle the Holder to purchase
the Alternate Consideration in accordance with this section 10(c),
(y) in the case of any such successor or purchasing Person,
upon such consolidation, merger, statutory exchange, combination, sale
or conveyance such successor or purchasing Person shall be jointly and
severally liable with the Company for the performance of all of the
Company's obligations under this Note and the Purchase Agreement, and
(z) if registration or qualification is required under the
Exchange Act or applicable state law for the public resale by the
Holder of shares of stock and other securities so issuable upon
conversion of this Note, such registration or qualification shall be
completed prior to such reclassification, change, consolidation,
merger, statutory exchange, combination or sale.
If, in the case of any Fundamental Transaction, the Alternate
Consideration includes shares of stock, other securities, other property or
assets of a Person other than the Company or any such successor or purchasing
Person, as the case may be, in such Fundamental Transaction, then such written
agreement shall also be executed by such other Person and shall contain such
additional provisions to protect the interests of the Holder as the Board of
Directors of the Company shall reasonably consider necessary by reason of the
foregoing. At the Holder's request, any successor to the Company or surviving
entity in such Fundamental Transaction shall issue to the Holder a new Note
consistent with the foregoing provisions and evidencing the Holder's right to
purchase the Alternate Consideration for the aggregate Conversion Price upon
conversion thereof. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and
insuring that the Note (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
If any Fundamental Transaction constitutes or results in a Change of Control,
then at the request of the Holder delivered before the 90th day (or if not
practicable, such shorter period as may be possible in connection with such
Fundamental Transaction, after such Fundamental Transaction) the Company (or any
such successor or surviving entity) will purchase the Note from the Holder for a
purchase price, payable in cash within five Trading Days after such request (or,
if later, on the effective date of the Fundamental Transaction), equal to the
greater of (i) the Black-Scholes value (as determined by an investment banker
acceptable to each of the Company and the Majority in Interest) of the remaining
unconverted portion of this Note on the date of such request and (ii) 110% of
the principal amount of the Notes outstanding plus all accrued and unpaid
interest through the date of payment.
(d) Subsequent Equity Sales.
(i) If, at any time while this Note is outstanding, the Company or any
Subsidiary issues additional shares of Common Stock or
rights, warrants, options or other securities or debt convertible,
exercisable or exchangeable for shares of Common Stock or
otherwise entitling any Person to acquire shares of Common Stock
(collectively, "Common Stock Equivalents") at an effective
net price to the Company per share of Common Stock (the "Effective
Price") less than the Conversion Price (as adjusted
hereunder to such date), then the Conversion Price shall be
reduced to equal the Effective Price. For purposes of this
paragraph, in connection with any issuance of any Common Stock
Equivalents, (A) the maximum number of shares of Common Stock
potentially issuable at any time upon conversion, exercise or
exchange of such Common Stock Equivalents (the "Deemed
Number") shall be deemed to be outstanding upon issuance of such
Common Stock Equivalents, (B) the Effective Price applicable
to such Common Stock shall equal the minimum dollar value of
consideration payable to the Company to purchase such Common
Stock Equivalents and to convert, exercise or exchange them into
Common Stock (net of any discounts, fees, commissions and
other expenses), divided by the Deemed Number, and (C) no further
adjustment shall be made to the Conversion Price upon the
actual issuance of Common Stock upon conversion, exercise or exchange
of such Common Stock Equivalents.
(ii) If, at any time while this Note is outstanding, the Company or any
Subsidiary issues Common Stock Equivalents with an Effective Price or a
number of underlying shares that floats or resets or otherwise varies
or is subject to adjustment based (directly or indirectly) on market
prices of the Common Stock (a "Floating Price Security"), then for
purposes of applying the preceding paragraph in connection with any
subsequent conversion, the Effective Price will be determined
separately on each Conversion Date and will be deemed to equal the
lowest Effective Price at which any holder of such Floating Price
Security is entitled to acquire Common Stock on such Conversion Date
(regardless of whether any such holder actually acquires any shares on
such date).
(iii) Notwithstanding the foregoing, no adjustment will be made under this
paragraph (d) in respect of Excluded Stock.
(e) Calculations. All calculations under this Section 11 shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall
not include shares owned or held by or for the account of the Company,
and the disposition of any such shares shall be considered an issue or
sale of Common Stock.
(f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 11, the Company at its expense will promptly compute
such adjustment in accordance with the terms hereof and prepare and
deliver to the Holder a certificate describing in reasonable detail
such adjustment and the transactions giving rise thereto, including all
facts upon which such adjustment is based.
(g) Notice of Corporate Events. If the Company (i) declares a dividend or
any other distribution of cash, securities or other property in respect
of its Common Stock, including without limitation any granting of
rights or warrants to subscribe for or purchase any capital stock of
the Company or any Subsidiary, (ii) authorizes or approves, enters into
any agreement contemplating or solicits stockholder approval for any
Fundamental Transaction or (iii) authorizes the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then the
Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 20 Trading Days, or
if not practicable, such shorter period as may be permissible in such
case, prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or
vote with respect to such transaction, and the Company will take all
steps reasonably necessary in order to insure that the Holder is given
the practical opportunity to convert this Note prior to such time so as
to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein
shall not affect the validity of the corporate action required to be
described in such notice.
19. No Fractional Shares. The Company shall not issue or cause to be issued
fractional Underlying Shares on conversion of this Note. If any
fraction of an Underlying Share would, except for the provisions of
this Section 12, be issuable upon conversion of this Note, the number
of Underlying Shares to be issued will be rounded up to the nearest
whole share.
20. Notices. Any and all notices or other communications or deliveries
hereunder (including any Conversion Notice) shall be in writing and
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section 13 prior to
6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading
Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this
Section 13 on a day that is not a Trading Day or later than 6:30 p.m.
(New York City time) on any Trading Day, (iii) the Trading Day
following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to
whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company, to 50 West Broadway,
Suite 400, Salt Lake City, Utah 84101, facsimile: (801) 933-5640,
attention Paul Hamm, President with a copy to Paul Hamm, AlphaWest
Capital Partners, Suite 130, 10 Glenlake Parkway, Atlanta, GA 30328,
facsimile: (678) 623-5026 and Duane Morris LLP, 380 Lexington Avenue,
New York, NY 10168, facsimile: (212) 692-1020 or (ii) if to the Holder,
to the address or facsimile number appearing on the Company's
Noteholder records or such other address or facsimile number as the
Holder may provide to the Company in accordance with this Section 13.
21. Miscellaneous.
(a) This Note shall be binding on and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. The
Company shall not be permitted to assign this Note.
(b) Subject to Section 14(a), nothing in this Note shall be construed to
give to any person or corporation other than the Company and the Holder
any legal or equitable right, remedy or cause under this Note.
(C) ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH
PARTY AGREES THAT ALL LEGAL PROCEEDINGS CONCERNING THE INTERPRETATIONS,
ENFORCEMENT AND DEFENSE OF THE TRANSACTIONS CONTEMPLATED BY ANY OF THE
TRANSACTION DOCUMENTS (WHETHER BROUGHT AGAINST A PARTY HERETO OR ITS
RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, SHAREHOLDERS, EMPLOYEES OR
AGENTS) SHALL BE COMMENCED EXCLUSIVELY IN THE STATE AND FEDERAL COURTS
SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN. EACH PARTY
HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF
MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF
THIS NOTE), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION
OR PROCEEDING IS IMPROPER. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA
REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF
DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT
UNDER THIS NOTE AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED
HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTE OR ANY OF THE TRANSACTION DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. IF EITHER PARTY SHALL
COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY PROVISIONS OF THIS NOTE
OR ANY TRANSACTION DOCUMENT, THEN THE PREVAILING PARTY IN SUCH ACTION
OR PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS REASONABLE
ATTORNEYS FEES AND OTHER REASONABLE COSTS AND EXPENSES INCURRED WITH
THE INVESTIGATION, PREPARATION AND PROSECUTION OF SUCH ACTION OR
PROCEEDING.
(d) The headings herein are for convenience only, do not constitute a part
of this Note and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Note shall be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Note shall not in any way be
affected or impaired thereby and the parties will attempt in good faith
to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing,
shall incorporate such substitute provision in this Note.
(f) In the event of any stock split, subdivision, dividend or distribution
payable in shares of Common Stock (or other securities or rights
convertible into, or entitling the holder thereof to receive directly
or indirectly shares of Common Stock), combination or other similar
recapitalization or event occurring after the date hereof, each
reference in this Note to a price shall be amended to appropriately
account for such event.
(g) No provision of this Note may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and the
Majority in Interest or, or, in the case of a waiver, by the Majority
in Interest. No waiver of any default with respect to any provision,
condition or requirement of this Note shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default
or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed by a duly authorized officer as of the date first above indicated.
ENDAVO MEDIA AND COMMUNICATIONS, INC.
By
Name:
Title:
39
5516/75415-001 NYWORD/326015v6
5516/75415-001 NYWORD/326015v6
Schedule 1
FORM OF CONVERSION NOTICE
(To be executed by the registered Holder
in order to convert Note)
The undersigned hereby elects to convert the specified principal amount of 8.0%
Senior Secured Convertible Notes (the "Notes") into shares of common stock, no
par value (the "Common Stock"), of Endavo Media and Communications, Inc., a
Delaware corporation, according to the conditions hereof, as of the date written
below.
Date to Effect Conversion
Principal amount of Notes owned prior to conversion
Principal amount of Notes to be converted
(including accrued but unpaid interest thereon)
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Principal amount of Notes owned subsequent to Conversion
Name of Holder
By
Name:
Title:
Schedule 2
CONVERSION SCHEDULE
This Conversion Schedule reflects conversions of the 8.0% Senior Convertible
Notes issued by Endavo Media and Communications, Inc..
------------------------------------ ----------------------------------- ----------------------------------------------
Aggregate Principal Amount Remaining
Date of Conversion Amount of Conversion Subsequent to Conversion
------------------------------------ ----------------------------------- ----------------------------------------------
------------------------------------ ----------------------------------- ----------------------------------------------
------------------------------------ ----------------------------------- ----------------------------------------------
------------------------------------ ----------------------------------- ----------------------------------------------
------------------------------------ ----------------------------------- ----------------------------------------------
------------------------------------ ----------------------------------- ----------------------------------------------
------------------------------------ ----------------------------------- ----------------------------------------------
------------------------------------ ----------------------------------- ----------------------------------------------
------------------------------------ ----------------------------------- ----------------------------------------------
EXHIBIT 4.2
Form of Warrant
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
ENDAVO MEDIA AND COMMUNICATIONS, INC.
WARRANT1
Warrant No. [ ] Dated: February ___, 2005
Endavo Media and Communications, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, [Name of Holder] or its
registered assigns (the "Holder"), is entitled to purchase from the Company up
to a total of [________]2 shares of common stock, $0.001 par value per share
(the "Common Stock"), of the Company (each such share, a "Warrant Share" and all
such shares, the "Warrant Shares") at an exercise price equal to $1.274 per
share (as adjusted from time to time as provided in Section 9, the "Exercise
Price"), at any time and from time to time from and after the date hereof and
through and including the date that is five years from the date of issuance
hereof (the "Expiration Date"), and subject to the following terms and
conditions. This Warrant (this "Warrant") is one of a series of similar warrants
issued pursuant to that certain Securities Purchase Agreement, dated as of
February 22, 2005, by and among the Company and the Purchasers identified
therein (the "Purchase Agreement"). All such warrants are referred to herein,
collectively, as the "Warrants."
22. Definitions. In addition to the terms defined elsewhere in this Warrant,
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Purchase Agreement.
23. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
24. Registration of Transfers. The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address specified herein. Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant. Notwithstanding anything herein to the contrary, the Company shall
not be required to (a) register more than an aggregate of five transfers and
five exchanges by the Holder and any direct or indirect transferees or assigns
thereof, in the aggregate, under this Section 3, other than transfers or
assignments to successors in interest to such Holder and (b) at any time prior
to the effectiveness of the Registration Statement, register any transfer to a
transferee unless the Holder certifies to the Company that such transferee is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
25. Exercise and Duration of Warrants.
(a) This Warrant shall be exercisable by the registered Holder at any time and
from time to time on or after the date hereof to and including the Expiration
Date. At 6:30 P.M., New York City time on the Expiration Date, the portion of
this Warrant not exercised prior thereto shall be and become void and of no
value. Notwithstanding anything to the contrary herein, the Expiration Date
shall be extended for each day following the Effective Date that the
Registration Statement is not effective.
(b) A Holder may exercise this Warrant by delivering to the Company (i) an
exercise notice, in the form attached hereto (the "Exercise Notice"),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised
(which may take the form of a "cashless exercise" if so indicated in the
Exercise Notice and if a "cashless exercise" may occur at such time pursuant to
this Section 10 below), and the date such items are delivered to the Company (as
determined in accordance with the notice provisions hereof) is an "Exercise
Date." The Holder shall not be required to deliver the original Warrant in order
to effect an exercise hereunder. Execution and delivery of the Exercise Notice
shall have the same effect as cancellation of the original Warrant and issuance
of a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares.
26. Delivery of Warrant Shares.
(a) Upon exercise of this Warrant, the Company shall promptly (but in no event
later than three Trading Days after the Exercise Date) issue or cause to be
issued and cause to be delivered to or upon the written order of the Holder and
in such name or names as the Holder may designate, a certificate for the Warrant
Shares issuable upon such exercise, free of restrictive legends unless a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective and the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144 under the Securities Act. The Holder, or any Person so designated by the
Holder to receive Warrant Shares, shall be deemed to have become holder of
record of such Warrant Shares as of the Exercise Date. The Company shall, upon
request of the Holder, use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions.
(b) This Warrant is exercisable, either in its entirety or, from time to time,
for a portion of the number of Warrant Shares. Upon surrender of this Warrant
following one or more partial exercises, the Company shall issue or cause to be
issued, at its expense, a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares.
(c) In addition to any other rights available to a Holder, if the Company fails
to deliver to the Holder a certificate representing Warrant Shares by the third
Trading Day after the date on which delivery of such certificate is required by
this Warrant, and if after such third Trading Day the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company shall,
within three Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company's obligation to
deliver such certificate.
(d) The Company's obligations to issue and deliver Warrant Shares in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any
other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of Warrant Shares. Nothing herein
shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.
27. Charges, Taxes and Expenses. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder or an Affiliate thereof. The Holder shall be responsible for all other
tax liability that may arise as a result of holding or transferring this Warrant
or receiving Warrant Shares upon exercise hereof.
28. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe.
29. Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable. The
Company will take all such action as may be necessary to assure that such shares
of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any securities exchange
or automated quotation system upon which the Common Stock may be listed.
30. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes
a distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.
(b) Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, distributes to holders of Common Stock (i) evidences of its
indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe for
or purchase any security, or (iv) any other asset (in each case, "Distributed
Property"), then in each such case the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution shall be adjusted (effective on such record date) to
equal the product of such Exercise Price times a fraction of which the
denominator shall be the average of the Closing Prices for the five Trading Days
immediately prior to (but not including) such record date and of which the
numerator shall be such average less the then fair market value of the
Distributed Property distributed in respect of one outstanding share of Common
Stock, as determined by the Company's independent certified public accountants
that regularly examine the financial statements of the Company, (an
"Appraiser"). In such event, the Holder, after receipt of the determination by
the Appraiser, shall have the right to select an additional appraiser (which
shall be a nationally recognized accounting firm), in which case such fair
market value shall be deemed to equal the average of the values determined by
each of the Appraiser and such appraiser. As an alternative to the foregoing
adjustment to the Exercise Price, if the Holder elects to exercise all or a
portion of this Warrant, at the request of the Holder delivered before the 90th
day after such record date, the Company will deliver to such Holder, within five
Trading Days after such request (or, if later, on the effective date of such
distribution), the Distributed Property that such Holder would have been
entitled to receive in respect of the Warrant Shares for which this Warrant is
being exercised immediately prior to such record date.
(c) Fundamental Transactions. If, at any time while this Warrant is outstanding,
(i) the Company effects any merger or consolidation of the Company with or into
another Person where the Company is not the surviving entity, (ii) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (iii) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (iv) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(other than as a result of a subdivision or combination of shares of Common
Stock covered by Section 9(a) above) (in any such case, a "Fundamental
Transaction"), then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the same amount and kind of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of the number of Warrant Shares then issuable upon
exercise in full of this Warrant (the "Alternate Consideration"). The aggregate
Exercise Price for this Warrant will not be affected by any such Fundamental
Transaction, but the Company shall apportion such aggregate Exercise Price among
the Alternate Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. In the event of a Fundamental
Transaction, the Company or the successor or purchasing Person, as the case may
be, shall execute with the Holder a written agreement providing that:
(x) this Warrant shall thereafter entitle the Holder to
purchase the Alternate Consideration in accordance with this section
9(c),
(y) in the case of any such successor or purchasing Person,
upon such consolidation, merger, statutory exchange, combination, sale
or conveyance such successor or purchasing Person shall be jointly and
severally liable with the Company for the performance of all of the
Company's obligations under this Warrant and the Purchase Agreement,
and
(z) if registration or qualification is required under the
Exchange Act or applicable state law for the public resale by the
Holder of shares of stock and other securities so issuable upon
exercise of this Warrant, such registration or qualification shall be
completed prior to such reclassification, change, consolidation,
merger, statutory exchange, combination or sale.
If, in the case of any Fundamental Transaction, the Alternate Consideration
includes shares of stock, other securities, other property or assets of a Person
other than the Company or any such successor or purchasing Person, as the case
may be, in such Fundamental Transaction, then such written agreement shall also
be executed by such other Person and shall contain such additional provisions to
protect the interests of the Holder as the Board of Directors of the Company
shall reasonably consider necessary by reason of the foregoing. At the Holder's
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder's right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (c) and insuring that the Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction. If any Fundamental Transaction
constitutes or results in a Change of Control, then at the request of the Holder
delivered before the 90th day after such Fundamental Transaction (or if not
practicable, such shorter period as may be possible in connection with such
Fundamental Transaction, after such Fundamental Transaction), the Company (or
any such successor or surviving entity) will purchase the Warrant from the
Holder for a purchase price, payable in cash within five Trading Days after such
request (or, if later, on the effective date of the Fundamental Transaction),
equal to the Black-Scholes value (as determined by an investment banker
acceptable to each of the Company and the Majority in Interest) of the remaining
unexercised portion of this Warrant on the date of such request.
(d) Subsequent Equity Sales.
(i) If, at any time while this Warrant is outstanding, the Company or any
Subsidiary issues additional shares of Common Stock or
rights, warrants, options or other securities or debt convertible,
exercisable or exchangeable for shares of Common Stock or
otherwise entitling any Person to acquire shares of Common Stock
(collectively, "Common Stock Equivalents") at an effective
net price to the Company per share of Common Stock (the "Effective
Price") less than the Exercise Price (as adjusted
hereunder to such date), then the Exercise Price shall be reduced to
equal the Effective Price. For purposes of this
paragraph, in connection with any issuance of any Common Stock
Equivalents, (A) the maximum number of shares of Common Stock
potentially issuable at any time upon conversion, exercise or
exchange of such Common Stock Equivalents (the "Deemed
Number") shall be deemed to be outstanding upon issuance of such
Common Stock Equivalents, (B) the Effective Price applicable
to such Common Stock shall equal the minimum dollar value of
consideration payable to the Company to purchase such Common
Stock Equivalents and to convert, exercise or exchange them into
Common Stock (net of any discounts, fees, commissions and
other expenses), divided by the Deemed Number, and (C) no further
adjustment shall be made to the Exercise Price upon the
actual issuance of Common Stock upon conversion, exercise or exchange
of such Common Stock Equivalents.
(ii) If, at any time while this Warrant is outstanding, the Company or any
Subsidiary issues Common Stock Equivalents with an Effective Price or a
number of underlying shares that floats or resets or otherwise varies
or is subject to adjustment based (directly or indirectly) on market
prices of the Common Stock (a "Floating Price Security"), then for
purposes of applying the preceding paragraph in connection with any
subsequent exercise, the Effective Price will be determined separately
on each Exercise Date and will be deemed to equal the lowest Effective
Price at which any holder of such Floating Price Security is entitled
to acquire Common Stock on such Exercise Date (regardless of whether
any such holder actually acquires any shares on such date).
(iii) Notwithstanding the foregoing, no adjustment will be made under this
paragraph (d) in respect of Excluded Stock.
(e) Number of Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to paragraphs (a), (b) or (d) of this Section,
the number of Warrant Shares that may be purchased upon exercise of
this Warrant shall be increased or decreased proportionately, so that
after such adjustment the aggregate Exercise Price payable hereunder
for the increased or decreased number of Warrant Shares shall be the
same as the aggregate Exercise Price in effect immediately prior to
such adjustment.
(f) Calculations. All calculations under this Section 9 shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall
not include shares owned or held by or for the account of the Company,
and the disposition of any such shares shall be considered an issue or
sale of Common Stock.
(g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will promptly compute
such adjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment, including a
statement of the adjusted Exercise Price and adjusted number or type of
Warrant Shares or other securities issuable upon exercise of this
Warrant (as applicable), describing the transactions giving rise to
such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly
deliver a copy of each such certificate to the Holder and to the
Company's Transfer Agent.
(h) Notice of Corporate Events. If the Company (i) declares a dividend or
any other distribution of cash, securities or other property in respect
of its Common Stock, including without limitation any granting of
rights or warrants to subscribe for or purchase any capital stock of
the Company or any Subsidiary, (ii) authorizes or approves, enters into
any agreement contemplating or solicits stockholder approval for any
Fundamental Transaction or (iii) authorizes the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then the
Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 20 calendar days, or
if not practicable, such shorter period as may be permissible in such
case, prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or
vote with respect to such transaction, and the Company will take all
steps reasonably necessary in order to insure that the Holder is given
the practical opportunity to exercise this Warrant prior to such time
so as to participate in or vote with respect to such transaction;
provided, however, that the failure to deliver such notice or any
defect therein shall not affect the validity of the corporate action
required to be described in such notice.
31. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds; provided, however, that if the
Registration Statement is not effective at the time of exercise, the
Holder may satisfy its obligation to pay the Exercise Price through a
"cashless exercise," in which event the Company shall issue to the
Holder the number of Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares t
o be issued to the Holder.
Y = the number of Warrant Shares with
respect to which this Warrant is
being exercised.
A = the arithmetic average of the
VWAP of the Company's Common Stock
for the five Trading Days immediately
prior to (but not including) the
Exercise Date.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act,
it is intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Purchase Agreement.
32. Limitation on Exercise. Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by a Holder
upon any exercise of Warrants (or otherwise in respect hereof) shall be limited
to the extent necessary to insure that, following such exercise (or other
issuance), the total number of shares of Common Stock then beneficially owned by
such Holder and its Affiliates and any other Persons whose beneficial ownership
of Common Stock would be aggregated with such Holder's for purposes of Section
13(d) of the Exchange Act, does not exceed 4.999% (the "Threshold Percentage")
or 9.999% (the "Maximum Percentage") of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery of an
Exercise Notice hereunder will constitute a representation by the Holder that it
has evaluated the limitations set forth in this paragraph and determined that
issuance of the full number of Warrant Shares requested in such Exercise Notice
is permitted under this paragraph. The Company's obligation to issue shares of
Common Stock in excess of the limitation referred to in this Section shall be
suspended (and shall not terminate or expire notwithstanding any contrary
provisions hereof) until such time, if any, as such shares of Common Stock may
be issued in compliance with such limitation. By written notice to the Company,
the Holder shall have the right (x) at any time and from time to time to reduce
its Maximum Percentage immediately upon notice to the Company in the event and
only to the extent that Section 16 of the Exchange Act or the rules promulgated
thereunder (or any successor statute or rules) is changed to reduce the
beneficial ownership percentage threshold thereunder to a percentage less than
9.999% and (y) at any time and from time to time, to waive the provisions of
this Section insofar as they relate to the Threshold Percentage or to increase
or decrease its Threshold Percentage (but not in excess of the Maximum
Percentage) unless the Holder shall have, by written instrument delivered to the
Company, irrevocably waived its rights to so increase or decrease its Threshold
Percentage, but (i) any such waiver, increase or decrease will not be effective
until the 61st day after such notice is delivered to the Company, and (ii) any
such waiver or increase or decrease will apply only to the Holder and not to any
other holder of Warrants.
33. Fractional Shares. The Company shall not be required to issue or cause to be
issued fractional Warrant Shares on the exercise of this Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon exercise of this Warrant, the number of Warrant Shares to be
issued will be rounded up to the nearest whole share. 34. Notices. Any and all
notices or other communications or deliveries hereunder (including without
limitation any Exercise Notice) shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the
next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section on
a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on
any Trading Day, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices or communications shall be as set forth in the Purchase Agreement.
35. Warrant Agent. The Company shall serve as warrant agent under this Warrant.
Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent.
Any corporation into which the Company or any new warrant agent may be merged or
any corporation resulting from any consolidation to which the Company or any new
warrant agent shall be a party or any corporation to which the Company or any
new warrant agent transfers substantially all of its corporate trust or
stockholders services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder's last address as shown on
the Warrant Register.
36. Miscellaneous.
(a) Subject to the restrictions on transfer set forth on the first page hereof,
this Warrant may be assigned by the Holder. This Warrant may not be assigned by
the Company except to a successor in the event of a Fundamental Transaction.
This Warrant shall be binding on and inure to the benefit of the parties hereto
and their respective successors and assigns. Subject to the preceding sentence,
nothing in this Warrant shall be construed to give to any Person other than the
Company and the Holder any legal or equitable right, remedy or cause of action
under this Warrant. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.
(b) The Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against impairment. Without limiting the generality of
the foregoing, the Company (i) will not increase the par value of any Warrant
Shares above the amount payable therefor on such exercise, (ii) will take all
such action as may be reasonably necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, and (iii) will not close its stockholder
books or records in any manner which interferes with the timely exercise of this
Warrant.
(C) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF. EACH PARTY AGREES THAT ALL LEGAL PROCEEDINGS CONCERNING THE
INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE TRANSACTIONS CONTEMPLATED BY ANY
OF THE TRANSACTION DOCUMENTS (WHETHER BROUGHT AGAINST A PARTY HERETO OR ITS
RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, SHAREHOLDERS, EMPLOYEES OR AGENTS)
SHALL BE COMMENCED EXCLUSIVELY IN THE STATE AND FEDERAL COURTS SITTING IN THE
CITY OF NEW YORK, BOROUGH OF MANHATTAN. EACH PARTY HERETO HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THIS
WARRANT), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR ANY
OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
IF EITHER PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY PROVISIONS
OF THIS WARRANT OR ANY TRANSACTION DOCUMENT, THEN THE PREVAILING PARTY IN SUCH
ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS REASONABLE
ATTORNEYS FEES AND OTHER REASONABLE COSTS AND EXPENSES INCURRED WITH THE
INVESTIGATION, PREPARATION AND PROSECUTION OF SUCH ACTION OR PROCEEDING.
(d) The headings herein are for convenience only, do not constitute a part of
this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In case any one or more of the provisions of this Warrant shall be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
(f) In the event of any stock split, subdivision, dividend or distribution
payable in shares of Common Stock (or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly shares
of Common Stock), combination or other similar recapitalization or event
occurring after the date hereof, each reference in this Warrant to a price shall
be amended to appropriately account for such event.
(g) No provision of this Warrant may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and the Majority
in Interest or, or, in the case of a waiver, by the Majority in Interest. No
waiver of any default with respect to any provision, condition or requirement of
this Warrant shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
FOOTNOTES:
--------
1 This warrant is the form of warrant that will also be
attached to the Additional Investment Rights.
2 100% warrant coverage based on the principal amount of the Notes divided by
the Fixed Conversion Price.
3 Insert Holder's pro rata portion of $1,250,000 based on such Holder's
investment in Initial Notes
4 Equal to principal amount of the Additional Notes divided by the Fixed
Conversion Price.
5 This provision will not be included in the Addition Investment Right B.
6 Insert Holder's pro rata portion of $1,250,000 based on such Holder's
investment in Initial Notes
7 Equal to principal amount of the Additional Notes divided by the Fixed
Conversion Price.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
ENDAVO MEDIA AND COMMUNICATIONS, INC.
By:
Name:
Title:
50
5516/75415-001 NYWORD/326016v6
5516/75415-001 NYWORD/326016v6
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To: ENDAVO MEDIA AND COMMUNICATIONS, INC.
The undersigned is the Holder of Warrant No. _______ (the "Warrant") issued by
Endavo Media and Communications, Inc., a Delaware
corporation (the "Company"). Capitalized terms used herein and not otherwise
defined have the respective meanings set forth in the
Warrant.
1. The Warrant is currently exercisable to purchase a total of ______________
Warrant Shares.
2. The undersigned Holder hereby exercises its right to purchase
_________________ Warrant Shares pursuant to the Warrant. 3. The Holder intends
that payment of the Exercise Price shall be made as (check one):
____ "Cash Exercise" under Section 10
____ "Cashless Exercise" under Section 10 (if permitted)
4. If the holder has elected a Cash Exercise, the holder shall pay the
sum of $____________ to the Company in accordance with
the terms of the Warrant.
5. Pursuant to this exercise, the Company shall deliver to the holder
_______________ Warrant Shares in accordance with the
terms of the Warrant.
6. Following this exercise, the Warrant shall be exercisable to purchase
a total of ______________ Warrant Shares.
Dated: , Name of Holder:
--------------------- -------
(Print)
By:
Name:
Title:
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Endavo Media and
Communications, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Endavo Media
and Communications, Inc. with full power of substitution in the premises.
Dated: ,
---------------------
(Signature must conform in all respects to name of holder as
specified on the face of the Warrant)
Address of Transferee
In the presence of:
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement is entered into and dated as of
February 22, 2005 (this "Agreement"), by and among Endavo Media and
Communications, Inc., a Delaware corporation (the "Company"), and each of the
purchasers identified on the signature pages hereto (each, a "Purchaser" and
collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933 (the
"Securities Act"), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, certain securities of the Company pursuant
to the terms set forth herein.
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 each Purchaser,
severally and not jointly, agree as follows:
37.
DEFINITIONS
(a) Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms shall have the meanings set forth in this Section 1.1:
"Additional Investment Rights" means, collectively, each
Additional Investment Right A and Additional Investment Right B issued and sold
under this Agreement.
"Additional Investment Right A" means, collectively, the
Additional Investment Rights issued and sold under this Agreement, in the form
of Exhibit A-1
"Additional Investment Right B" means, collectively, the
Additional Investment Rights issued and sold under this Agreement, in the form
of Exhibit A-2
"Additional Investment Right A Notes" means the 8.0% Senior
Secured Convertible Notes due on the 2nd anniversary of the issuance date
thereof with an aggregate principal face amount of up to $1,250,000 in the form
of Exhibit B-2 hereto issuable to the Purchasers upon exercise of each
Additional Investment Right A.
"Additional Investment Right B Notes" means the 8.0% Senior
Secured Convertible Notes due on the 2nd anniversary of the issuance date
thereof with an aggregate principal face amount of up to $1,250,000 in the form
of Exhibit B-3 hereto issuable to the Purchasers upon exercise of each
Additional Investment Right B.
"Additional Investment Right A Warrants" has the meaning set
forth in each Additional Investment Right A.
"Additional Investment Right B Warrants" has the meaning set
forth in each Additional Investment Right B.
"Additional Investment Right Warrants" means collectively the
Additional Investment Right A Warrants and Additional Investment Right B
Warrants.
"Additional Notes" means the collectively, the Additional
Investment Right A Notes and Additional Investment Right B
Notes.
"Alternate Conversion Price" means the lesser of (a) 85% of
the arithmetic average of the VWAP of the Closing Prices of the Common Stock for
the twenty (20) Trading Days preceding the Financial Statement Announcement Date
or (b) the Fixed Conversion Price.
"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 under 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 such Purchaser will be deemed to be an Affiliate of such
Purchaser.
"Bankruptcy Event" means any of the following events: (a) the
Company or any Subsidiary commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
relating to the Company or any Subsidiary thereof; (b) there is commenced
against the Company or any Subsidiary any such case or proceeding that is not
dismissed within 60 days after commencement; (c) the Company or any Subsidiary
is adjudicated insolvent or bankrupt or any order of relief or other order
approving any such case or proceeding is entered; (d) the Company or any
Subsidiary suffers any appointment of any custodian or the like for it or any
substantial part of its property that is not discharged or stayed within 60
days; (e) the Company or any Subsidiary makes a general assignment for the
benefit of creditors; (f) the Company or any Subsidiary fails to pay, or states
that it is unable to pay or is unable to pay, its debts generally as they become
due; (g) the Company or any Subsidiary calls a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its debts; or
(h) the Company or any Subsidiary, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of the
foregoing.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
"Change of Control" means the occurrence of any of the
following in one or a series of related transactions: (i) an acquisition after
the date hereof by an individual or legal entity or "group" (as described in
Rule 13d-5(b)(1) under the Exchange Act) of more than one-half of the voting
rights or equity interests in the Company; (ii) a replacement of more than
one-half of the members of the Company's board of directors that is not approved
by those individuals who are members of the board of directors on the date
hereof (or other directors previously approved by such individuals); (iii) a
merger or consolidation of the Company or any Subsidiary or a sale of more than
one-third of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Company's securities prior to the first such transaction continue
to hold at least two-thirds of the voting rights and equity interests in of the
surviving entity or acquirer of such assets; (iv) a recapitalization,
reorganization or other transaction involving the Company or any Subsidiary that
constitutes or results in a transfer of more than one-third of the voting rights
or equity interests in the Company; (v) consummation of a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Exchange Act with respect to the
Company, or (vi) the execution by the Company or its controlling shareholders of
an agreement providing for or reasonably likely to result in any of the
foregoing events.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means the date of the Closing.
"Closing Price" means, for any date, the price determined by
the first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on an Eligible Market or any other national securities
exchange, the closing bid price per share of the Common Stock for such date (or
the nearest preceding date) on the primary Eligible Market or exchange on which
the Common Stock is then listed or quoted; (b) if prices for the Common Stock
are then quoted on the OTC Bulletin Board, the closing bid price per share of
the Common Stock for such date (or the nearest preceding date) so quoted; (c) if
prices for the Common Stock are then reported in the "Pink Sheets" published by
the National Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by a majority in interest of the Purchasers.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $.001
per share, and any securities into which such common stock may hereafter be
reclassified.
"Common Stock Equivalents" means, collectively, Options and
Convertible Securities.
"Company Counsel" means Sonfield & Sonfield, counsel to the
Company.
"Conversion Price" means (i) at anytime prior to the Financial
Statement Announcement Date, the Fixed Conversion Price and (ii) at anytime
following the Financial Statement Announcement Date, (a) if the revenues of the
Company as set forth in the Financial Statements is less than $4,000,000, then
the Alternate Conversion Price or (b) if the revenues of the Company as set
forth in the Financial Statements is greater than or equal to $4,000,000, the
Fixed Conversion Price.
"Convertible Securities" means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for Common Stock.
"Effective Date" means the date that the Registration
Statement is first declared effective by the Commission.
"Eligible Market" means any of the New York Stock Exchange,
the American Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap
Market or OTC Bulletin Board.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Stock" means (A) any Common Stock issued, or Options
granted to, employees, officers, directors of or consultants or advisors to the
Company, in each case, pursuant to a stock-based plan duly approved by the
Company's board of directors; (B) Common Stock issued upon an exercise, a
conversion or an exchange of any Common Stock Equivalents described in Schedule
3.1(g) (provided that such exercise or conversion occurs in accordance with the
terms thereof, without amendment or modification); (C) securities issued in
connection with a joint venture or development agreement or strategic
partnership or similar agreement approved by the Company's board of directors, a
primary purpose of which is not to raise equity capital or (D) securities issued
in connection with a bona fide underwritten public offering of at least
$15,000,000 with a regionally recognized underwriter.
"Filing Date" means the 60th day following the Closing Date
with respect to the initial Registration Statement required to be filed
hereunder, and, with respect to any additional Registration Statements that may
be required pursuant to Section 6.1(g), the 15th day following the date on which
the Company first knows, or reasonably should have known, that such additional
Registration Statement is required under such Section.
"Financial Statement Announcement Date" means the date on
which the Company shall publicly release its Financial Statements.
"Financial Statements" means audited financial statements on a
consolidated, consisting of balance sheets and statements of income and retained
earnings and cash flows, setting forth in comparative form in each case the
figures for the calendar year commencing January 1, 2005 and ending December 31,
2005, which financial statements shall be prepared in accordance with the
generally accepted accounting principles of the United States, consistently
applied by an independent certified public accounting firm of regional standing
or otherwise acceptable to the Purchasers
"Fixed Conversion Price" means $0.892 per share.
"Initial Notes" means the 8.0% Senior Secured Convertible
Notes due on the 2nd anniversary of the Closing Date with an aggregate principal
face amount of $1,250,000 issued by the Company to the Purchasers hereunder in
the form of Exhibit B-1 hereto.
"Losses" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including without limitation costs
of preparation of legal action and reasonable attorneys' fees.
"Majority in Interest" means Purchasers holding at least a
50.1% of the principal amount of the Notes on the Closing
Date.
"Notes" means the Initial Notes and the Additional Notes.
"Options" means any rights, warrants or options to subscribe,
directly or indirectly for or purchase Common Stock or Convertible Securities
(taking into account all Additional Notes and Additional Investment Right
Warrants and that can be issued under the Transaction Documents).
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"Post-Effective Amendment" means a post-effective amendment to
the Registration Statement.
"Post-Effective Amendment Filing Deadline" means the 15th
Trading Day after the Registration Statement ceases to be effective pursuant to
applicable securities laws due to the passage of time or the occurrence of an
event requiring the Company to file a Post-Effective Amendment.
"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.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus including post effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Purchaser Counsel" means Proskauer Rose LLP, counsel to
Iroquois Capital, L.P.
"Registrable Securities" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction Documents,
together with any securities issued or issuable upon any stock split, dividend
or other distribution, recapitalization or similar event with respect to the
foregoing.
"Registration Statement" means the initial registration
statement required to be filed under Article VI and any additional registration
statements contemplated by Section 6.1(g), including (in each case) the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Required Effectiveness Date" means (i) with respect to the
initial Registration Statement required to be filed under Article VI hereof, the
90th day following the Closing Date, or in the event the initial Registration
Statement shall be reviewed by the Commission, the 120th day following the
Closing Date and (ii) with respect to any additional Registration Statements
that may be required pursuant to Section 6.1(g), the 45th day following the date
on which the Company first knows, or reasonably should have known, that such
additional Registration Statement is required under such Section
"Rule 144," "Rule 415," and "Rule 424" means Rule 144, Rule
415 and Rule 424, respectively, promulgated by the Commission pursuant to the
Securities Act, as such Rules may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities" means the Notes, the Additional Investment
Rights, the Warrants, Additional Investment Right Warrants and the Underlying
Shares issued or issuable (as applicable) to the applicable Purchaser pursuant
to the Transaction Documents.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement dated as of
the Closing Date, among the Company and the Purchasers substantially in the form
of Exhibit G.
"Subsidiary" means any subsidiary of the Company that is
required to be listed in Schedule 3.1(a).
"Trading Day" means (a) any day on which the Common Stock is
listed or quoted and traded on its primary Trading Market, or (b) if the Common
Stock is not then listed or quoted and traded on any Trading Market, then any
Business Day.
"Trading Market" means OTC Bulletin Board or any other
national securities exchange, market or trading or quotation facility on which
the Common Stock is then listed or quoted.
"Transaction Documents" means this Agreement, the Additional
Investment Rights, the Notes, the Warrants, Additional Investment Right
Warrants, the Security Agreement, the Transfer Agent Instructions and any other
documents or agreements executed or delivered in connection with the
transactions contemplated hereby.
"Transfer Agent Instructions" means the Company's transfer
agent instructions in the form of Exhibit C.
"Underlying Shares" means the shares of Common Stock issuable
(i) upon conversion of, and as payment of interest on, the Initial Notes, (ii)
upon exercise of the Warrants, (iii) upon conversion of, and as payment of
interest on, the Additional Notes issued upon exercise of the Additional
Investment Rights, (iv) upon exercise of the Additional Investment Right
Warrants issued upon exercise of the Additional Investment Rights, and (v) in
satisfaction of any other obligation of the Company to issue shares of Common
Stock pursuant to the Transaction Documents, and in each case, any securities
issued in exchange for or in respect of such securities.
"VWAP" means on any particular Trading Day or for any
particular period the volume weighted average trading price per share of Common
Stock on such date or for such period on an Eligible Market as reported by
Bloomberg L.P., or any successor performing similar functions.
"Warrants" means the Common Stock purchase warrants in the
form of Exhibit D.
38.
PURCHASE AND SALE
(a) Closing. Subject to the terms and conditions set
forth in this Agreement, at the Closing, the Company
shall issue and sell to the Purchasers, and the
Purchasers shall, severally and not jointly, purchase
from the Company, the Initial Notes, Warrants and the
Additional Investment Rights for an aggregate
purchase price of $1,250,000. The Closing shall take
place at the offices of Purchaser Counsel or at such
other location or time as the parties may agree.
(b) Closing Deliveries.
(i) At the Closing, the Company shall deliver or cause to
be delivered to each Purchaser the following:
a) this Agreement duly executed by the Company;
b) an Initial Note, registered in the name of such
Purchaser, in the principal amount indicated below
such Purchaser's name on the signature page of this
Agreement under the heading "Initial Note Principal
Amount";
c) an Additional Investment Right A, registered in the
name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire (A) such
principal amount of Additional Investment Right A
Notes indicated below such Purchaser's name on the
signature page of this Agreement under the heading
"Additional Investment Right A - Additional Notes" on
the terms set forth therein and (B) Additional
Investment Right A Warrants pursuant to which such
Purchaser shall have the right to acquire such number
of shares of Common Stock of the Company indicated
below such Purchaser's name on the signature page of
this Agreement under the heading "Additional
Investment Right A - Additional Investment Right A
Warrant Shares" on the terms set forth therein;
d) an Additional Investment Right B, registered in the
name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire (A) such
principal amount of Additional Investment Right B
Notes indicated below such Purchaser's name on the
signature page of this Agreement under the heading
"Additional Investment Right B - Additional Notes" on
the terms set forth therein and (B) Additional
Investment Right B Warrants pursuant to which such
Purchaser shall have the right to acquire such number
of shares of Common Stock of the Company indicated
below such Purchaser's name on the signature page of
this Agreement under the heading "Additional
Investment Right B - Additional Investment Right B
Warrant Shares" on the terms set forth therein;
e) a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right
to acquire such number of Underlying Shares indicated
below such Purchaser's name on the signature page of
this Agreement under the heading "Warrant Shares".
f) the legal opinion of Company Counsel, in the form of
Exhibit E, executed by such counsel and delivered to
the Purchasers; g) the Transfer Agent Instructions
duly executed by the Company and acknowledged by the
Company's transfer agent;
the Security Agreement executed by the Company;
h) a certificate from a duly authorized officer
certifying on behalf of the Company that each of the
conditions set forth in Section 5.1 has been
satisfied; and
i) any other document reasonably requested by the
Purchasers or Purchaser Counsel. (ii) At the Closing,
each Purchaser shall deliver or cause to be delivered
to the Company the following:
a) the purchase price indicated below such Purchaser's
name on the signature page of this Agreement, in
United States dollars and in immediately available
funds, by wire transfer to an account designated in
writing by the Company for such purpose; and
b) this Agreement duly executed by such Purchaser
the Security Agreement executed by such Purchaser; and
the Pledge Agreement executed by such Purchaser.
39.
REPRESENTATIONS AND WARRANTIES
(a) Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to the Purchasers:
(i) Subsidiaries. The Company does not directly or indirectly control or
own any interest in any other corporation, partnership, joint venture
or other business association or entity (a "Subsidiary"), other than
those listed in Schedule 3.1(a). Except as disclosed in Schedule
3.1(a), the Company owns, directly or indirectly, all of the capital
stock of each Subsidiary free and clear of any lien, charge, claim,
security interest, encumbrance, right of first refusal or other
restriction (collectively, "Liens"), and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights.
(ii) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise
------------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use
its properties and assets and to carry on its business as
currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such 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,
prospects, business or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii)
adversely impair the Company's ability to perform fully on a
timely basis its obligations under any Transaction Document (any of
(i), (ii) or (iii), a "Material Adverse Effect").
(iii) 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 hereunder and thereunder 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,
its Board of Directors or its stockholders. Each
Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and
binding obligation of the Company enforceable against the
Company in accordance with its terms, except that such enforceability
may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights in
general. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its certificate or articles of
incorporation, by-laws or other organizational or
charter documents.
(iv) 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 do not and will
not (i) conflict with or violate any provision of the
Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a
default) under, 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; except
as do not, individually or in the aggregate, have or
are reasonably be expected to result in a Material Adverse Effect.
(v) Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company
of the Transaction Documents, other than the filing with the Commission
of the Registration Statement, the application(s) to each Trading
Market for the listing of the Underlying Shares for trading thereon in
the time and manner required thereby, and applicable Blue Sky filings
(collectively, the "Required Approvals").
(vi) Issuance of the Securities. The Securities have been duly authorized.
The Notes have been, and the Underlying Shares or
other securities issuable upon conversion of the Notes, when so
issued in accordance with the terms of the Notes will be,
validly issued. The Notes are, and the Underlying Shares or other
securities issuable upon conversion of the Notes, when so
issued in accordance with the terms of the Notes, will be fully paid
and nonassessable and free of preemptive or similar
rights. The Initial Notes have been, the Additional Notes shall be,
and the Underlying Shares or other securities issuable
upon conversion of the Notes, when so issued in accordance with the
terms of the Notes will be, issued in compliance with
applicable securities laws, rules and regulations. The Company has
reserved from its duly authorized capital stock the
maximum number of shares of Common Stock to be issued to the
applicable Purchasers upon conversion or exercise of the Notes
(assuming the Notes will be converted at the Fixed Conversion Price),
Additional Investment Rights, Warrants or issuable
pursuant to the other Transaction Documents.
(vii) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company is set
--------------
forth in Schedule 3.1(g). No securities of the Company are entitled
to preemptive or similar rights, and no Person has any
---------------
right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the
purchase and sale of the Securities and except as
disclosed in Schedule 3.1(g), 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 exchangeable
for, or giving any Person any right to subscribe for or acquire, any
shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. The issue and sale of the
Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the
Purchasers) 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.
(viii) 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 15(d)
thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively
referred to herein as the "SEC Reports" and, together with the
Schedules to this Agreement, the "Disclosure Materials") on a
timely basis or has received a valid extension of such time of filing
and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to the
Purchasers a copy of all SEC Reports filed within the 10
days preceding the date hereof. 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 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 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.
(ix) Material Changes. 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 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 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) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to
existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential
treatment of information.
(x) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the
----------
knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county,
local or foreign) (collectively, an "Action") which (i) adversely
affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities
or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor
any director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation
by the Commission involving the Company or any current
or former director or officer of the Company. 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 at any time within the three years preceding the Closing Date.
(xi) Labor Relations. No material labor dispute exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of the
Company.
(xii) 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
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 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
relating to taxes, environmental protection, occupational health and
safety, product quality and safety and employment and
labor matters, except in each case as does not, individually or in
the aggregate, have or reasonably be expected to result
in a Material Adverse Effect.
(xiii) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not,
individually or in the aggregate, have or result in a Material Adverse
Effect ("Material Permits"), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(xiv) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned
---------------
by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal
property owned by them that is material to the business of the Company
and the Subsidiaries, in each case free and clear of
all Liens, except for Liens as do not materially affect the value of
such property and do not materially interfere with the
use made and proposed to be made of such property by the Company and
the Subsidiaries. Any real property and facilities held
under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the
Company and the Subsidiaries are in compliance except where such
failure to comply could not, individually or in the
aggregate, have or result in a Material Adverse Effect.
(xv) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications,
----------------------
trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are
necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect (collectively,
the "Intellectual Property Rights"). Neither the
Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To
the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement
by another Person of any of the Intellectual Property
Rights.
(xvi) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which
the Company and the Subsidiaries are engaged. Neither the Company nor
any Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in cost.
(xvii) Transactions With Affiliates and Employees. Except as set forth in SEC
Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary
(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.
(xviii) Internal Accounting Controls. The Company and the Subsidiaries maintain
a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(xix) Solvency. Based on the financial condition of the Company as of the
Closing Date and after giving effect to the
--------
transactions contemplated by the Transaction Documents, (i) the
Company's fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the
Company's existing debts and other liabilities (including
known contingent liabilities) as they mature; (ii) the Company's
assets do not constitute unreasonably small capital to
carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the
business conducted by the Company, and projected
capital requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses
of the cash, would be sufficient to pay all amounts on or in respect
of its debt when such amounts are required to be paid.
The Company does not intend to incur debts beyond its ability to pay
such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).
(xx) Certain Fees. Except as described in Schedule 3.1(t), 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.
The Purchasers shall have no obligation with
respect to any fees or with respect to any claims 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. The Company shall
indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their respective
Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as
such fees and expenses are incurred.
(xxi) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market and no
shareholder approval is required for the Company to fulfill its
obligations under the Transaction Documents.
(xxii) Form SB-2 Eligibility. The Company is eligible to register the resale
of its Common Stock for resale by the Purchasers under Form SB-2
promulgated under the Securities Act.
(xxiii) Listing and Maintenance Requirements. The Company has not, in the two
years preceding the date hereof, received notice (written or oral) from
any Eligible Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Eligible Market. The
Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing
and maintenance requirements.
(xxiv) Registration Rights. Except as described in Schedule 3.1(x), the
Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of
the Company registered with the Commission or any other governmental
authority that have not been satisfied.
(xxv) Application of Takeover Protections. 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 Company's Certificate
of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
Documents, including without limitation the Company's issuance of the
Securities and the Purchasers' ownership of the Securities.
(xxvi) Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided any of the
----------
Purchasers or their agents or counsel with any information that
constitutes or might constitute material, non-public
information. The Company understands and confirms that the Purchasers
will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure
provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct in all material respects and do not
contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which
they were made, not misleading.
(xxvii) No Violation. The issuance and sale of the Securities contemplated
hereby does not conflict with or violate any rules or regulations of
the Trading Market.
(xxviii) Acknowledgment Regarding Purchasers' Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm's length purchaser with respect to
this Agreement and the transactions contemplated hereby. The Company
further acknowledges that no Purchaser is acting as a financial advisor
or fiduciary of the Company or any other Purchaser (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of
their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental
to such Purchaser's purchase of the Securities. The Company further
represents to each Purchaser that the Company's decision to enter into
this Agreement has been based solely on the independent evaluation of
the Company and its representatives.
(xxix) Investment Company. The Company is not, and is not an Affiliate of, an
investment company within the meaning of the Investment Company Act of
1940, as amended.
(xxx) Seniority. Except as set forth on Schedule 3.1(dd), as of the date of
this Agreement, no indebtedness of the Company is senior to the Notes
in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise.
(xxxi) Sarbanes-Oxley Act. The Company is in compliance with applicable
requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder in effect as of
the date of this Agreement, except where such noncompliance could not
be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(b) Representations and Warranties of the Purchasers. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and
warrants to the Company as follows:
(i) Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws
-----------------------
of the jurisdiction of its organization with the requisite corporate,
limited liability company or partnership power and
authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution,
delivery and performance by such Purchaser of this Agreement
have been duly authorized by all necessary corporate or limited
liability company action on the part of such Purchaser.
This Agreement has been duly executed by such Purchaser and, when
delivered by such Purchaser in accordance with terms
hereof, will constitutes the valid and legally binding obligation of
such Purchaser, enforceable against it in accordance
with its terms.
(ii) Investment Intent. Such Purchaser is acquiring the Securities for
investment purposes only and not with a view to or for distributing or
reselling such Securities or any part thereof, without prejudice,
however, to such Purchaser's right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with
applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business.
(iii) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it exercises the Additional Investment Right it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities
Act. Such Purchaser is not a registered broker-dealer under Section 15
of the Exchange Act.
(iv) Experience of such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(v) General Solicitation. Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(vi) Certain Trading Limitations. From [February 2, 2005] to the date of
the 8-K Filing or the issuance of the press release
---------------------------
pursuant to Section 4.8, each Purchaser agrees that it has not and
will not enter into any Short Sales. For purposes of
this Section 3.2(f), a "Short Sale" by a Purchaser means a sale of
Common Stock that is marked as a short sale and that is
--------------
executed at a time when such Purchaser has no equivalent offsetting
long position in the Common Stock. For purposes of
determining whether a Purchaser has an equivalent offsetting long
position in the Common Stock, all Common Stock and all
Common Stock that would be issuable upon conversion or exercise in
full of all Options then held by such Purchaser (assuming
that such Options were then fully convertible or exercisable,
notwithstanding any provisions to the contrary, and giving
effect to any conversion or exercise price adjustments scheduled to
take effect in the future) shall be deemed to be held
long by such Purchaser.
The Company acknowledges and agrees that each Purchaser does not make
and has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
40.
OTHER AGREEMENTS OF THE PARTIES
(a) Transfer Restrictions.
(i) The Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant
to an available exemption from the registration requirements of the
Securities Act, and in compliance with any applicable
state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as
otherwise set forth herein, the Company may require the
transferor to provide to the Company an opinion of counsel selected
by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the
effect that such transfer does not require registration
under the Securities Act. Notwithstanding the foregoing, the Company
hereby consents to and agrees to register on the books
of the Company and with its transfer agent, without any such legal
opinion, any transfer of Securities by a Purchaser to an
Affiliate of such Purchaser, provided that the transferee certifies to
the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement.
(ii) The Purchasers agree to the imprinting, except as otherwise permitted
by Section 4.1(c), the following legend on any certificate evidencing
Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE
OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.
(iii) The Company shall use its reasonable best efforts to ensure that
certificates evidencing Securities shall not be required to
contain the legend set forth in Section 4.1(b) or any other legend (i)
while a Registration Statement covering the resale of
such Securities is effective under the Securities Act, or (ii)
following any sale of such Securities pursuant to Rule 144,
or (iii) if such Securities are eligible for sale under Rule 144(k),
or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the
Commission). The Company shall cause its counsel to issue the legal
opinion included in the Transfer Agent Instructions to
the Company's transfer agent on the Effective Date. Following the
Effective Date or at such earlier time as a legend is no
longer required for certain Securities, the Company will no later
than five Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a
legended certificate representing such Securities, deliver or
cause to be delivered to such Purchaser a certificate representing
such Securities that is free from all restrictive and
other legends. The Company may not make any notation on its records
or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in
Section 4.1(b). For so long as any Purchaser owns
Securities, the Company will not effect or publicly announce its
intention to effect any exchange, recapitalization or other
transaction that effectively requires or rewards physical delivery of
certificates evidencing the Common Stock.
(iv) The Company acknowledges and agrees that a Purchaser may from time to
time pledge or grant a security interest in some or
all of the Securities in connection with a bona fide margin agreement
or other loan or financing arrangement secured by the
Securities and, if required under the terms of such agreement, loan or
arrangement, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties. Such a pledge
or transfer would not be subject to approval of the
Company and no legal opinion of the pledgee, secured party or pledgor
shall be required in connection therewith. Further,
no notice shall be required of such pledge. At the appropriate
Purchaser's expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge
or transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of
selling stockholders thereunder.
(b) Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities (including the Underlying Shares) will result in
dilution of the outstanding shares of Common Stock, which dilution may
be substantial under certain market conditions. The Company further
acknowledges that its obligations under the Transaction Documents,
including without limitation its obligation to issue the Securities
(including the Underlying Shares) pursuant to the Transaction
Documents, are unconditional and absolute and not subject to any right
of set off, counterclaim, delay or reduction, regardless of the effect
of any such dilution or any claim that the Company may have against any
Purchaser.
(c) Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to use its reasonable best efforts to timely file
(or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the
date hereof pursuant to the Exchange Act. Upon the request of any
Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has
complied with the preceding sentence. As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to
such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with paragraph (c) of Rule 144 such
information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request to
satisfy the provisions of Rule 144 applicable to the issuer of
securities relating to transactions for the sale of securities pursuant
to Rule 144.
(d) Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that
would require the registration under the Securities Act of the sale of
the Securities to the Purchasers or that would be integrated with the
offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
(e) Reservation and Listing of Securities.
(i) The Company shall maintain a reserve from its duly authorized shares of
Common Stock for issuance pursuant to the Transaction Documents in such
amount as may be required to fulfill its obligations in full under the
Transaction Documents.
(ii) The Company shall (i) in the time and manner required by each Trading
Market, prepare and file with such Trading Market an additional shares
listing application covering all of the shares of Common Stock issued
or issuable under the Transaction Documents, (ii) take all steps
necessary to cause such shares of Common Stock to be approved for
listing on each Trading Market as soon as possible thereafter, (iii)
provide to the Purchasers evidence of such listing, and (iv) maintain
the listing of such Common Stock on each such Trading Market or another
Eligible Market.
(iii) In the case of a breach by the Company of Section 4.5(a), in addition
to the other remedies available to the Purchasers, the
Purchasers shall have the right to require the Company to either: (i)
use its best efforts to obtain the required
shareholder approval necessary to permit the issuance of such shares
of Common Stock as soon as is possible, but in any
event not later than the 60th day after such notice, or (ii) within
five Trading Days after delivery of a written notice,
pay cash to such Purchaser, as liquidated damages and not as a
penalty, in an amount equal to the number of shares of Common
Stock not issuable by the Company times 115% of the average Closing
Price over the five Trading Days immediately prior to
the date of such notice or, if greater, the five Trading Days
immediately prior to the date of payment (the "Cash Amount").
If the exercising or converting Purchaser elects the first option
under the preceding sentence and the Company fails to
obtain the required shareholder approval on or prior to the 60th day
after such notice, then within three Trading Days after
such 60th day, the Company shall pay the Cash Amount to such
Purchaser, as liquidated damages and not as penalty.
(f) Subsequent Placements.
(a) From the date hereof until the Effective Date, the Company will not,
directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option
to purchase or other disposition of) any of its or the Subsidiaries'
equity or equity equivalent securities, including without limitation
any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into
or exchangeable or exercisable for Common Stock or Common Stock
Equivalents (any such offer, sale, grant, disposition or announcement
being referred to as a "Subsequent Placement").
(b) From the Effective Date until 30 Trading Days after the Effective Date
(the "Blockout Period"), the Company will not, directly or indirectly,
effect any Subsequent Placement except as set forth in Section 4.6(e).
(c) The Blockout Period set forth in Section 4.6(b) above shall be extended
for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, (ii) the
Registration Statement is not effective, or (iii) the prospectus
included in the Registration Statement may not be used by the
Purchasers for the resale of Registrable Securities thereunder.
(d) From the end of the Effective Date until the earlier of (i) the one
year anniversary thereof or (ii) the date on which no principal amount
of the Notes shall be outstanding, the Company will not, directly or
indirectly, effect any Subsequent Placement unless the Company shall
have first complied with this Section 4.6(d).
(i) The Company shall deliver to each Purchaser a written notice (the
"Offer") of any proposed or intended issuance or sale or
exchange of the securities being offered (the "Offered Securities")
in a Subsequent Placement, which Offer shall (w)
identify and describe the Offered Securities, (x) describe the price
and other terms upon which they are to be issued, sold
or exchanged, and the number or amount of the Offered Securities to
be issued, sold or exchanged, (y) identify the Persons
or entities to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (z) offer to
issue and sell to or exchange with each Purchaser (A) a pro rata
portion of the Offered Securities based on such Purchaser's
pro rata portion of the aggregate principal amount of the Notes
purchased hereunder (the "Basic Amount"), and (B) with
respect to each Purchaser that elects to purchase its Basic Amount,
any additional portion of the Offered Securities
attributable to the Basic Amounts of other Purchasers as such
Purchaser shall indicate it will purchase or acquire should
the other Purchasers subscribe for less than their Basic Amounts (the
"Undersubscription Amount").
(ii) To accept an Offer, in whole or in part, a Purchaser must deliver a
written notice to the Company prior to the end of the
ten (10) Trading Day period of the Offer, setting forth the portion
of the Purchaser's Basic Amount that such Purchaser
elects to purchase and, if such Purchaser shall elect to purchase
all of its Basic Amount, the Undersubscription Amount, if
any, that such Purchaser elects to purchase (in either case, the
"Notice of Acceptance"). If the Basic Amounts subscribed
for by all Purchasers are less than the total of all of the Basic
Amounts, then each Purchaser who has set forth an
Undersubcription Amount in its Notice of Acceptance shall be entitled
to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed for;
provided, however, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all the
Basic Amounts and the Basic Amounts subscribed for (the
"Available Undersubscription Amount"), each Purchaser who has
subscribed for any Undersubscription Amount shall be entitled
to purchase on that portion of the Available Undersubscription Amount
as the Basic Amount of such Purchaser bears to the
total Basic Amounts of all Purchasers that have subscribed for
Undersubscription Amounts, subject to rounding by the Board
of Directors to the extent its deems reasonably necessary.
(iii) The Company shall have five (5) Trading Days from the expiration of the
period set forth in Section 4.6(d)(ii) above to issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Purchasers (the "Refused
Securities"), but only to the offerees described in the Offer and only
upon terms and conditions (including, without limitation, unit prices
and interest rates) that are not more favorable to the acquiring Person
or Persons or less favorable to the Company than those set forth in the
Offer.
(iv) In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and
on the terms specified in Section 4.6(d)(iii) above), then each
Purchaser may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that
shall be not less than the number or amount of the Offered Securities
that the Purchaser elected to purchase pursuant to
Section 4.6(d)(ii) above multiplied by a fraction, (i) the numerator
of which shall be the number or amount of Offered
Securities the Company actually proposes to issue, sell or exchange
(including Offered Securities to be issued or sold to
Purchasers pursuant to Section 4.6(c)(ii) above prior to such
reduction) and (ii) the denominator of which shall be the
original amount of the Offered Securities. In the event that any
Purchaser so elects to reduce the number or amount of
Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such
securities have again been offered to the Purchasers in
accordance with Section 4.6(d)(i) above.
(v) Upon the closing of the issuance, sale or exchange of all or less than
all of the Refused Securities, the Purchasers shall acquire from the
Company, and the Company shall issue to the Purchasers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4.6(d)(iv) above if the Purchasers have so
elected, upon the terms and conditions specified in the Offer. The
purchase by the Purchasers of any Offered Securities is subject in all
cases to the preparation, execution and delivery by the Company and the
Purchasers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Purchasers and
their respective counsel.
(vi) Any Offered Securities not acquired by the Purchasers or other persons
in accordance with Section 4.6(d)(iii) above may not be issued, sold or
exchanged until they are again offered to the Purchasers under the
procedures specified in this Agreement.
(e) The restrictions contained in paragraphs (a), (b) and (d) of this
Section 4.6 shall not apply to Excluded Stock.
(g) Conversion and Exercise Procedures. The form of Exercise Notice
included in the Additional Investment Rights, Warrants and Additional
Investment Right Warrants and the form of Holder Conversion Notice
included in the Notes set forth the totality of the procedures required
by the Purchasers in order to exercise the Additional Investment
Rights, Warrants, Additional Investment Right Warrants or convert the
Notes. No additional legal opinion or other information or instructions
shall be necessary to enable the Purchasers to exercise their
Additional Investment Rights or convert their Notes. The Company shall
honor exercises of the Additional Investment Rights, Warrants,
Additional Investment Right Warrants and conversions of the Notes and
shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents.
(h) Securities Laws Disclosure; Publicity. On or before 8:30 a.m., New York
time, on February 23, 2005, the Company shall issue a press release
acceptable to the Purchasers disclosing all material terms of the
transactions contemplated hereby. Within two Trading Days of the
Closing Date, the Company shall file a Current Report on Form 8-K with
the Commission (the "8-K Filing") describing the terms of the
transactions contemplated by the Transaction Documents and including as
exhibits to such Current Report on Form 8-K this Agreement and the form
of Notes and Additional Investment Rights, in the form required by the
Exchange Act. Thereafter, the Company shall use its reasonable best
efforts to timely file any filings and notices required by the
Commission or applicable law with respect to the transactions
contemplated hereby and provide copies thereof to the Purchasers
promptly after filing. The Company shall, at least two Trading Days
prior to the filing or dissemination of any disclosure required by this
paragraph, provide a copy thereof to the Purchasers for their review.
The Company and the Purchasers shall consult with each other in issuing
any press releases or otherwise making public statements or filings and
other communications with the Commission or any regulatory agency or
Trading Market with respect to the transactions contemplated hereby,
and neither party shall issue any such press release or otherwise make
any such public statement, filing or other communication without the
prior consent of the other, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement, filing or other
communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of such Purchaser,
except to the extent such disclosure (but not any disclosure as to the
controlling Persons thereof) is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers
with prior notice of such disclosure. The Company shall not, and shall
cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents not to, provide any Purchaser
with any material nonpublic information regarding the Company or any of
its Subsidiaries from and after the filing of the 8-K Filing without
the express written consent of such Purchaser. In the event of a breach
of the foregoing covenant by the Company, any of its Subsidiaries, or
any of its or their respective officers, directors, employees and
agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Purchaser shall have the right to require the
Company to make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material nonpublic
information. No Purchaser shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors,
employees, shareholders or agents for any such disclosure. Subject to
the foregoing, neither the Company nor any Purchaser shall issue any
press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of any Purchaser, to make
any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law
and regulations (provided that in the case of clause (i) each Purchaser
shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release). Each press
release disseminated during the 12 months prior to the Closing Date did
not at the time of release contain any untrue statement of a material
fact or omit 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.
(i) Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for (i) the repayment of all debt of the
Company outstanding to UTFC Financing Solutions, LLC and (ii) working
capital purposes and not for the satisfaction of any portion of the
Company's debt (other than (a) payments set forth in subsection (i)
above and (b) payment of trade payables and accrued expenses in the
ordinary course of the Company's business and prior practices), to
redeem any Company equity or equity-equivalent securities or to settle
any outstanding litigation.
Indebtedness.
At any time after the date of this Agreement, neither the Company nor any
Subsidiary of the Company shall incur indebtedness, liabilities or obligations
that are senior to the Notes in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise.
The provisions of this Section 4.10 shall terminate and be of no further force
or effect upon the conversion or indefeasible repayment in full of the Notes and
all accrued interest thereon and any and all expenses or liabilities relating
thereto.
Repayment of Notes. Each of the parties hereto agrees that all repayments
of the Notes (including any accrued interest thereon) by the Company
(other than by conversion of the Notes) will be paid pro rata to the
holders thereof based upon the principal amount then outstanding to
each of such parties.
No Impairment. At all times after the date hereof, the Company will not
take or permit any action, or cause or permit any subsidiary to take or
permit any action that impairs or adversely affects the rights of the
Purchasers under the Agreement or the Notes.
Fundamental Changes. In addition to any other rights provided by law or set
forth herein, from and after the date of this Agreement and for so long
as any Notes remain outstanding, the Company shall not without first
obtaining the approval (by vote or written consent, as provided by law)
of the holders of a majority of the outstanding principal face amount
of the Notes:
purchase, redeem (other than pursuant to equity incentive agreements with
non-officer employees giving the Company the right to repurchase shares upon the
termination of services) or set aside any sums for the purchase or redemption
of, or declare or pay any dividend (including a dividend payable in stock of the
Company) or make any other distribution with respect to, any shares of capital
stock or any other securities that are convertible into or exercisable for such
stock;
change the nature of the Company's business to any business which is
fundamentally distinct and separate from the business currently conducted by the
Company; or
cause or permit any subsidiary of the Company directly or indirectly to take any
actions described in clauses (a) through (b) above, other than issuing
securities to the Company.
(j) Indemnification.
(i) If any Purchaser or any of its Affiliates or any officer, director,
partner, controlling person, employee or agent of a
Purchaser or any of its Affiliates (a "Related Person") becomes
involved in any capacity in any Proceeding brought by or
against any Person in connection with or as a result of the
transactions contemplated by the Transaction Documents, the
Company will indemnify and hold harmless such Purchaser or Related
Person for its reasonable legal and other expenses
(including the costs of any investigation, preparation and travel)
and for any Losses incurred in connection therewith, as
such expenses or Losses are incurred, excluding only Losses that
result directly from such Purchaser's or Related Person's
gross negligence or willful misconduct. In addition, the Company
shall indemnify and hold harmless each Purchaser and
Related Person from and against any and all Losses, as incurred,
arising out of or relating to any breach by the Company of
any of the representations, warranties or covenants made by the
Company in this Agreement orany other Transaction Document
or any allegation by a third party that, if true, would constitute
such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed
by Section 6.4(c) below. The indemnification
obligations of the Company under this paragraph shall be in addition
to any liability that the Company may otherwise have
and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the
Purchasers and any such Related Persons. If the Company breaches its
obligations under any Transaction Document, then, in
addition to any other liabilities the Company may have under any
Transaction Document or applicable law, the Company shall
pay or reimburse the Purchasers on demand for all costs of collection
and enforcement (including reasonable attorneys fees
and expenses). Without limiting the generality of the foregoing, the
Company specifically agrees to reimburse the
Purchasers on demand for all costs of enforcing the indemnification
obligations in this paragraph.
(k) Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person"
under any shareholders rights plan or similar plan or arrangement in
effect or hereafter adopted by the Company, or that any Purchaser could
be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Underlying Shares under the Transaction Documents
or under any other agreement between the Company and the Purchasers.
(l) Delivery of Certificates. In addition to any other rights available to
a Purchaser, if the Company fails to deliver to such Purchaser a
certificate representing Common Stock on the date on which delivery of
such certificate is required by any Transaction Document, and if after
such date such Purchaser purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale
by such Purchaser of the shares that the Purchaser anticipated
receiving from the Company (a "Buy-In"), then the Company shall, within
three Trading Days after such Purchaser's request and in such
Purchaser's discretion, either (i) pay cash to such Purchaser in an
amount equal to such Purchaser's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased (the "Buy-In Price"), at which point the Company's obligation
to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to such
Purchaser a certificate or certificates representing such Common Stock
and pay cash to such Purchaser in an amount equal to the excess (if
any) of the Buy-In Price over the product of (A) such number of shares
of Common Stock, times (B) the Closing Price on the date of the event
giving rise to the Company's obligation to deliver such certificate.
(m) Repayment of Indebtedness. Immediately upon consummation of the
transactions contemplated by the Transaction Documents, the Company
shall pay all amounts owing by the Company to UTFC Financing Solutions,
LLC.
41. CONDITIONS
(a) Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is
subject to the satisfaction or waiver by such Purchaser, at or before
the Closing, of each of the following conditions:
(i) Representations and Warranties. The representations and warranties of
the Company contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing as though made
on and as of such date, except those representations and warranties
that speak as of a specific date, in which case such representations
and warranties shall be true and correct as of such date;
(ii) Performance. The Company and each other Purchaser shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Closing;
(iii) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(iv) Adverse Changes. Since the date of execution of this Agreement, no
event or series of events shall have occurred that reasonably would be
expected to have or result in a Material Adverse Effect; and
(v) No Suspensions of Trading in Common Stock; Listing. Trading in the
Common Stock shall not have been suspended by the Commission or any
Trading Market (except for any suspensions of trading of not more than
one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the date of execution of this
Agreement, and the Common Stock shall have been at all times since such
date listed for trading on an Eligible Market.
(b) Conditions Precedent to the Obligations of the Company. The obligation
of the Company to sell Securities at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of
each of the following conditions:
(i) Representations and Warranties. The representations and warranties of
the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date
as though made on and as of such date;
(ii) Performance. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Purchasers at or prior to the
Closing; and
(iii) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.
42.
REGISTRATION RIGHTS
(a) Shelf Registration.
(i) As promptly as possible, and in any event on or prior to the Filing
Date, the Company shall prepare and file with the Commission a "shelf"
Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to
Rule 415. The Registration Statement shall be on Form SB-2 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form SB-2, in which case such registration shall be on
another appropriate form in accordance herewith as the Purchasers may
consent) and shall contain (except if otherwise directed by the
Purchasers) the "Plan of Distribution", substantially as attached
hereto as Exhibit F.
(ii) The Company shall use its best efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as
possible after the filing thereof, but in any event prior to the
Required Effectiveness Date, and shall use its best efforts to keep the
Registration Statement continuously effective under the Securities Act
until the Registrable Securities can be sold under Rule 144(k) or such
earlier date when all Registrable Securities covered by such
Registration Statement have been sold publicly (the "Effectiveness
Period").
(iii) The Company shall notify each Purchaser in writing promptly (and in any
event within one business day) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(iv) As promptly as possible, and in any event no later than the
Post-Effective Amendment Filing Deadline, the Company shall prepare and
file with the Commission a Post-Effective Amendment. The Company shall
use its best efforts to cause the Post-Effective Amendment to be
declared effective by the Commission as promptly as possible after the
filing thereof, but in any event prior to the fifteenth Trading Day
after the Post-Effective Amendment Filing Deadline. The Company shall
notify each Purchaser in writing promptly (and in any event within one
business day) after receiving notification from the Commission that the
Post-Effective Amendment has been declared effective.
(v) If: (i) any Registration Statement is not filed on or prior to the
Filing Date (if the Company files such Registration
Statement without affording the Purchasers the opportunity to review
and comment on the same as required by Section 6.2(a)
hereof, the Company shall not be deemed to have satisfied this clause
(i)), or (ii) a Post-Effective Amendment is not filed
on or prior to the Post-Effective Amendment Filing Deadline or is not
declared effective on or prior to the fifteenth
Trading Day after the Post-Effective Amendment Filing Deadline; or
(iii) the-Company fails to file with the Commission a
request for acceleration in accordance with Rule 461 promulgated under
the Securities Act, within ten Trading Days afterthe
date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that a Registration
Statement will not be "reviewed," or will not be subject to further
review, or (iv) the Company fails to respond to any
comments made by the Commission within ten Trading Days after the
receipt of such comments, except if such comments relate
to the financials statements of the Company or other accounting
related issues, in which case, such response period shallbe
no longer than fifteen Trading Days or (v) a Registration Statement
filed hereunder is not declared effective by the
Commission by the Required Effectiveness Date, or (vi) after a
Registration Statement is filed with and declared effective
by the Commission, such Registration Statement ceases to be effective
as to all Registrable Securities to which it is
required to relate (other than the requirement of the Company to
file a Post-Effective Amendment and for such
Post-Effective Amendment to be declared effective) at any time prior
to the expiration of the Effectiveness Period without
being succeeded within ten Trading Days by an amendment to such
Registration Statement or by a subsequent Registration
Statement filed with and declared effective by the Commission, or
(vii) an amendment to a Registration Statement is not
filed by the Company with the Commission within ten Trading Days
after the Commission's having notified the Company that
such amendment is required in order for such Registration Statement
to be declared effective, or (viii) the Common Stock is
not listed or quoted, or is suspended from trading on an Eligible
Market for a period of three Trading Days (which need not
be consecutive Trading Days), or (ix) the exercise rights of the
Purchasers pursuant to the Additional Investment Rightsare
suspended for any reason (any such failure or breach being referred to
as an "Event," and for purposes of clause (i), (ii),
(v) or (ix) the date on which such Event occurs, or for purposes of
clause (iii) the date on which such five Trading Day
period is exceeded, or for purposes of clauses (iv), (vi) or (vii) the
date which such ten Trading Day-period is exceeded,
or for purposes of clause (viii) the date on which such three Trading
Day period is exceeded, being referred to as "'Event
Date"), then: (x) on each such Event Date the Company shall pay to
each Purchaser an amount in cash, as liquidated damages
and not as a penalty, equal to 2% of the aggregate purchase price paid
by such Purchaser pursuant to the PurchaseAgreement;
and (y) on each monthly anniversary of each such Event Date thereof
(if the applicable Event shall not have been cured by
such date) until the applicable Event is cured, the Company shall pay
to each Purchaser an amount in cash, as liquidated
damages and not as a penalty, equal to 1% of the aggregate purchase
price paid by such Purchaser pursuant to the Purchase
Agreement. If the Company fails to pay any liquidated damages
pursuant to this Section in full within seven days after the
date payable, the Company will pay interest thereon at a rate of 18%
per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Purchaser, accruing
daily from the date such liquidated damages are dueuntil
such amounts, plus all such interest thereon, are paid in full.
(vi) The Company shall not, prior to the Effective Date of the Registration
Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities.
(vii) If the Company issues to the Purchasers any Common Stock pursuant to
the Transaction Documents that are not included in the initial
Registration Statement, then the Company shall file an additional
Registration Statement covering such number of shares of Common Stock
on or prior to the Filing Date and shall use it best efforts, but in no
event later than the Required Filing Date, to cause such additional
Registration Statement to become effective by the Commission.
(viii) Notwithstanding anything in this Agreement to the contrary, after 60
consecutive Trading Days of continuous effectiveness of
the initial Registration Statement filed and declared effective
pursuant to this Agreement, the Company may, by written
notice to the Purchasers, suspend sales under a Registration Statement
after the Effective Date thereof and/or require that
the Purchasers immediately cease the sale of shares of Common Stock
pursuant thereto and/or defer the filing of any
subsequent Registration Statement if the Company is engaged in a
material merger, acquisition or sale and the Board of
Directors determines in good faith, by appropriate resolutions, that,
as a result of such activity, (A) it would be
materially detrimental to the Company (other than as relating
solely to the price of the Common Stock) to file a
Registration Statement at such time and (B) it is in the best
interests of the Company to defer proceeding with such
registration at such time. Upon receipt of such notice, each
Purchaser shall immediately discontinue any sales of
Registrable Securities pursuant to such registration until such
Purchaser has received copies of a supplemented or amended
Prospectus or until such Purchaser is advised in writing by the Company
that the then-current Prospectus may be used and has
received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such
Prospectus. In no event, however, shall this right be exercised to
suspend sales beyond the period during which (in the good
faith determination of the Company's Board of Directors) the failure
to require such suspension would be materially
detrimental to the Company. The Company's rights under this Section
6(h) may be exercised for a period of no more than 20
days in any twelve-month period, of which no more than 7 days may be
consecutive. Immediately after the end of any
suspension period under this Section 6(e), the Company shall take all
necessary actions (including filing any required
supplemental prospectus) to restore the effectiveness of the
applicable Registration Statement and the ability of the
Purchasers to publicly resell their Registrable Securities pursuant to
such effective Registration Statement.
(b) Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(i) Not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment
or supplement thereto (including any document that would be incorporated
or deemed to be incorporated therein by reference),
the Company shall (i) furnish to the Purchasers and Purchaser Counsel
copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of
such Purchasers and Purchaser Counsel, and (ii) cause its officers and
directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel, to conduct
a reasonable investigation within the meaning of the Securities Act.
The Company shall not file a Registration Statement or
any such Prospectus or any amendments or supplements thereto to which
Purchasers holding a majority of the Registrable
Securities shall reasonably object.
(ii) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration
Statement and the Prospectus used in connection therewith as may be
necessary to keep the Registration Statement
continuously effective as to the applicable Registrable Securities
for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to
Rule 424; (iii) respond as promptly as reasonably
possible, and in any event within ten days, except if such comments
relate to the financials statements of the Company or
other accounting related issues, in which case, such response period
shall be no longer than fifteen Trading Days, to any
comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as
reasonably possible provide the Purchasers true and complete copies
of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods
of disposition by the Purchasers thereof set forth in
the Registration Statement as so amended or in such Prospectus as so
supplemented
(iii) Notify the Purchasers of Registrable Securities to be sold and the
Purchaser Counsel as promptly as reasonably possible, and
(if requested by any such Person) confirm such notice in writing no
later than one Trading Day thereafter, of any of the
following events: (i) the Commission notifies the Company whether
there will be a "review" of any Registration Statement;
(ii) the Commission comments in writing on any Registration Statement
(in which case the Company shall deliver to each
Purchaser a copy of such comments and of all written responses
thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or
any other Federal or state governmental authority
requests any amendment or supplement to any Registration Statement or
Prospectus or requests additional information related
thereto; (v) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates
any Proceedings for that purpose; (vi) the Company receives notice of
any suspension of the qualification or exemption from
qualification of any Registrable Securities for sale in any
jurisdiction, or the initiation or threat of any Proceeding for
such purpose; or (vii) the financial statements included or incorporated
by reference in any Registration Statement become
ineligible for inclusion or incorporation therein or any statement made
in any Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference
is untrue in any material respect or any revision to
a Registration Statement, Prospectus or other document is required so
that it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(iv) Use its best efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for
sale in any jurisdiction, as soon as possible.
(v) Furnish to each Purchaser and Purchaser Counsel, without charge, at
least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(vi) Promptly deliver to each Purchaser and Purchaser Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including
each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request. The Company hereby consents to the
use of such Prospectus and each amendment or supplement thereto by each
of the selling Purchasers in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment
or supplement thereto.
(vii) (i) In the time and manner required by each Trading Market, prepare and
file with such Trading Market an additional shares listing application
covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for
listing on each Trading Market as soon as possible thereafter; (iii)
provide to the Purchasers evidence of such listing; and (iv) maintain
the listing of such Registrable Securities on each such Trading Market
or another Eligible Market.
(viii) Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Purchasers
and Purchaser Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions within the United States as any
Purchaser requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions
of the Registrable Securities covered by a Registration Statement.
(ix) Cooperate with the Purchasers to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by this Agreement,
of all restrictive legends, and to enable such Registrable Securities
to be in such denominations and registered in such names as any such
Purchasers may request.
(x) Upon the occurrence of any event described in Section 6.2(c)(vii), as
promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or
a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other
required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(xi) Cooperate with any due diligence investigation undertaken by the
Purchasers in connection with the sale of Registrable Securities,
including, without limitation, by making available any documents and
information; provided that the Company will not deliver or make
available to any Purchaser material, nonpublic information unless such
Purchaser specifically requests in advance to receive material,
nonpublic information in writing.
(xii) Comply with all applicable rules and regulations of the Commission.
(c) Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without
limitation (a) all registration and filing fees and expenses, including
without limitation those related to filings with the Commission, any
Trading Market and in connection with applicable state securities or
Blue Sky laws, (b) printing expenses (including without limitation
expenses of printing certificates for Registrable Securities and of
printing prospectuses requested by the Purchasers), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of counsel
for the Company and up to $5,000 for the Purchaser Counsel, (e) fees
and expenses of all other Persons retained by the Company in connection
with the consummation of the transactions contemplated by this
Agreement, and (f) all listing fees to be paid by the Company to the
Trading Market.
(d) Indemnification.
(i) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold
------------------------------
harmless each Purchaser, the officers, directors, partners, members,
agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any
failure to perform under a margin call of Common Stock),
investment advisors and employees of each of them, each Person who
controls any such Purchaser (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, partners, members, agents
and employees of each such controlling Person, to the fullest extent
permitted by applicable law, from and against any and
all Losses, as incurred, arising out of or relating to any untrue or
alleged untrue statement of a material fact contained
in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the
case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but
only to the extent, that (i) such untrue statements, alleged untrue
statements, omissions or alleged omissions are based
solely upon information regarding such Purchaser furnished in writing
to the Company by such Purchaser expressly for use
therein, or to the extent that such information relates to such
Purchaser or such Purchaser's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Purchaser expressly for
use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or
(ii) in the case of an occurrence of an event of the type specified in
Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated
or defective and prior to the receipt by such Purchaser of the Advice
contemplated in Section 6.5. The Company shall notify
the Purchasers promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(ii) Indemnification by Purchasers. Each Purchaser shall, severally and
not jointly, indemnify and hold harmless the Company,
-----------------------------
its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and
against all Losses (as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or
review) arising solely out of any untrue statement of a
material fact contained in the Registration Statement, any Prospectus,
or any form of prospectus, or in any amendment or
supplement thereto, or arising solely out of any omission of a material
fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading to the extent,
but only to the extent, that such untrue statement
or omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for
inclusion in such Registration Statement or such Prospectus or to the
extent that (i) such untrue statements or omissions
are based solely upon information regarding such Purchaser furnished in
writing to the Company by such Purchaser expressly
for use therein, or to the extent that such information relates to such
Purchaser or such Purchaser's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Purchaser expressly for
use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or
(ii) in the case of an occurrence of an event of the type specified in
Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated
or defective and prior to the receipt by such Purchaser of the Advice
contemplated in Section 6.5. In no event shall the
liability of any selling Purchaser hereunder be greater in amount than
the dollar amount of the net proceeds received by
such Purchaser upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(iii) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to
--------------------------------------
indemnity hereunder (an "Indemnified Party"), such Indemnified Party
shall promptly notify the Person from whom indemnity is
sought (the "Indemnifying Party") in writing, and the Indemnifying
Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party
and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further
review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ one separate counsel
at the expense of the Indemnifying Party, the Indemnifying Party shall not have
the right to assume the defense thereof and such counsel shall be at the expense
of the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(iv) Contribution. If a claim for indemnification under Section 6.4(a) or
(b) is unavailable to an Indemnified Party (by reason
------------
of public policy or otherwise), then each Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as
a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party
and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of
a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information
supplied by, such Indemnifying Party or Indemnified
Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable
attorneys' or other reasonable fees or expenses incurred by
such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses
if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6.4(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 6.4(d), no Purchaser
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Purchaser from the sale
of the Registrable Securities subject to the Proceeding exceeds the amount of
any damages that such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
(e) Dispositions. Each Purchaser agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration Statement.
Each Purchaser further agrees that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Sections 6.2(c)(v), (vi) or
(vii), such Purchaser will discontinue disposition of such Registrable
Securities under the Registration Statement until such Purchaser's receipt of
the copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 6.2(j), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
(f) No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Purchasers in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
(g) Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within five days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
43. MISCELLANEOUS
(a) Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).
(b) Fees and Expenses. At the Closing, the Company shall pay to Iroquois
Capital, L.P. an aggregate of $35,000, of which amount $10,000 has been
previously paid by the Company, for their legal fees and expenses incurred in
connection with the preparation and negotiation of this Agreement. In lieu of
the foregoing remaining payment, Iroquois Capital, L.P. may retain such amount
at the Closing. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
any Securities.
(c) Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
(d) Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (ii) the Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Agreement later than 6:30 p.m. (New York City time) on any date and earlier
than 11:59 p.m. (New York City time) on such date, (iii) the Trading Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Company: Endavo Media and communications, Inc.
50 West Broadway
Suite 400
Salt Lake City, Utah 84101
Attn: Paul Hamm, President
Fax: (801) 933-5640
With a copy to: Paul Hamm
AlphaWest Capital Partners
Suite 130
10 Glenlake Parkway
Atlanta, GA 30328
Fax: (678) 623-5026
and
Sonfield & Sonfield
Attorneys at Law
770 South Post Oak Lane
Houston, Texas 77056
Fax: (713) 877-1547
Attn: Robert L. Sonfield, Jr.
If to the Purchasers:
To the address set
forth under such
Purchaser's name on
the signature pages
attached hereto.
or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
(e) Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Purchasers under Article VI and
that does not directly or indirectly affect the rights of other Purchasers may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.
(f) Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers." Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.
(h) No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except that each Related Person is an intended third party beneficiary
of Section 4.14 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
(i) Governing Law; Venue; Waiver of Jury Trial. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF. EACH PARTY AGREES THAT ALL LEGAL PROCEEDINGS CONCERNING THE
INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE TRANSACTIONS CONTEMPLATED BY ANY
OF THE TRANSACTION DOCUMENTS (WHETHER BROUGHT AGAINST A PARTY HERETO OR ITS
RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, SHAREHOLDERS, EMPLOYEES OR AGENTS)
SHALL BE COMMENCED EXCLUSIVELY IN THE STATE AND FEDERAL COURTS SITTING IN THE
CITY OF NEW YORK, BOROUGH OF MANHATTAN. EACH PARTY HERETO HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THIS
AGREEMENT), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
IF EITHER PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY PROVISIONS
OF THIS AGREEMENT OR ANY TRANSACTION DOCUMENT, THEN THE PREVAILING PARTY IN SUCH
ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS REASONABLE
ATTORNEYS FEES AND OTHER REASONABLE COSTS AND EXPENSES INCURRED WITH THE
INVESTIGATION, PREPARATION AND PROSECUTION OF SUCH ACTION OR PROCEEDING.
(j) Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise and/or
conversion of the Securities, as applicable.
(k) Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
(l) Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
(m) Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
(n) Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
(o) Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages (other than special,
consequential or punitive damages), each of the Purchasers and the Company will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
(p) Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to the Additional Investment
Rights or any Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
(q) Usury. To the extent it may lawfully do so, the Company hereby agrees not to
insist upon or plead or in any manner whatsoever claim, and will resist any and
all efforts to be compelled to take the benefit or advantage of, usury laws
wherever enacted, now or at any time hereafter in force, in connection with any
claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate of interest applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.
(r) Independent Nature of Purchasers' Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance of the obligations of any other Purchaser under any
Transaction Document. The decision of each Purchaser to purchase Notes pursuant
to this Agreement has been made by such Purchaser independently of any other
Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or of the Subsidiary which may have been made or given
by any other Purchaser or by any agent or employee of any other Purchaser, and
no Purchaser or any of its agents or employees shall have any liability to any
other Purchaser (or any other person) relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no other
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment hereunder. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser represents
that it has been represented by its own separate legal counsel in its review and
negotiations of this Agreement and the Transaction Documents and that Proskauer
Rose LLP represents only Iroquois Capital, L.P. in connection with this
Agreement and the Transaction Documents.
(s) Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in this Agreement to a number of shares or a price per share shall be
amended to appropriately account for such event.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
ENDAVO MEDIA AND COMMUNICATIONS, INC.
By: ____________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS FOLLOW.]
PURCHASER:
IROQUOIS CAPITAL, L.P.
By:
--------------
Name:
Title:
Purchase Price: $[ ]
Initial Note Principal Amount - ______
Warrant Shares: ______
Additional Investment Right A -
Additional Notes: ______
Additional Investment Right A -
Warrant Shares: ______
Additional Investment Right B-
Additional Notes: ______
Additional Investment Right B -
Warrant Shares: ______
Address for Notice:
IROQUOIS CAPITAL, L.P.
641 Lexington Avenue
26th Floor
New York, NY 10022
Facsimile No.: (212) 207-3452
Attn.: Josh Silverman
With a copy to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036-8299
Facsimile No.: (212) 969-2900
Attn: Adam J. Kansler, Esq.
PURCHASER:
-----------------------------------
By:
----------------------------------------------------
Name:
Title:
Purchase Price: $[ ]
Initial Note Principal Amount - ______
Warrant Shares: ______
Additional Investment Right A -
Additional Notes: ______
Additional Investment Right A -
Warrant Shares: ______
Additional Investment Right B-
Additional Notes: ______
Additional Investment Right B -
Warrant Shares: ______
Address for Notice:
Exhibits:
A-1. Form of Additional Investment Right A
A-2. Form of Additional Investment Right B
B-1. Form of Initial Note
B-2. Form of Additional Investment Right A Note
B-3. Form of Additional Investment Right B Note
C. Transfer Agent Instructions
D. Form of Warrant
5. Opinion of Company Counsel
6. Plan of Distribution
7. Form of Security Agreement
EXHIBIT 10.2
Form of Additional Investment Right "A"
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
ENDAVO MEDIA AND COMMUNICATIONS, INC.
ADDITIONAL INVESTMENT RIGHT
Additional Investment Right No. [ ] Dated: February __, 2005
Endavo Media and Communications, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, [Name of Holder] or its
registered assigns (the "Holder"), is entitled to purchase from the Company (a)
up to a total of [$_________]3 in principal amount of 8.0% senior secured
convertible notes due February __, 2007 of the Company in the form attached as
Exhibit A hereto (each such note, an "Additional Note" and all such notes, the
"Additional Notes") and (b) only as part of and in connection with the purchase
of the Additional Notes, warrants (the "Additional Investment Right Warrants")
in the form attached hereto as Exhibit B to acquire up to [________]4 shares of
Common Stock, at any time or from time to time from and after Closing Date and
through and including the date occurring on the 6-month anniversary of the
Effective Date (the "Expiration Date"), and subject to the following terms and
conditions. This Additional Investment Right (this "Additional Investment
Right") is one of a series of similar additional investment rights issued
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and among the Company and the Purchasers identified therein (the
"Purchase Agreement"). All such additional investment rights are referred to
herein, collectively, as the "Additional Investment Rights."
44. Definitions. In addition to the terms defined elsewhere in this Additional
Investment Right, capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Purchase Agreement.
45. Registration of Additional Investment Right. The Company shall register this
Additional Investment Right, upon records to be maintained by the Company for
that purpose (the "Additional Investment Right Register"), in the name of the
record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Additional Investment Right as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.
46. Registration of Transfers. The Company shall register the assignment and
transfer of any portion of this Additional Investment Right in the Additional
Investment Right Register, upon surrender of this Additional Investment Right,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein. Upon any such registration or transfer,
a new additional investment right to purchase Additional Notes, in substantially
the form of this Additional Investment Right (any such new additional investment
right, a "New Additional Investment Right"), evidencing the portion of this
Additional Investment Right so transferred shall be issued to the transferee and
a New Additional Investment Right evidencing the remaining portion of this
Additional Investment Right not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Additional Investment Right by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of an Additional Investment Right.
Notwithstanding anything herein to the contrary, the Company shall not be
required to (a) register more than an aggregate of five transfers and five
exchanges by the Holder and any direct or indirect transferees or assigns
thereof, in the aggregate, under this Section 3, other than transfers or
assignments to successors in interest to such Holder and (b) at any time prior
to the effectiveness of the Registration Statement, any register transfer to a
transferee unless the Holder certifies to the Company that such transferee is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
47. Exercise and Duration of Additional Investment Right.
(a) This Additional Investment Right shall be exercisable by the registered
Holder at any time or from time to time on or after the Effective Date to and
including the Expiration Date. At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Additional Investment Right not exercised
prior thereto shall be void and of no further force and effect.
(b) The Holder may exercise this Additional Investment Right by delivering to
the Company (i) an exercise notice, in the form attached hereto (the "Exercise
Notice"), appropriately completed and duly signed and (ii) payment of the
principal amount of the Additional Notes as to which this Additional Investment
Right is being exercised (the "Exercise Price"). The date such items are
delivered to the Company (as determined in accordance with the notice provisions
hereof) is an "Exercise Date." The Holder shall not be required to deliver the
original Additional Investment Right in order to effect an exercise hereunder.
Execution and delivery of the Exercise Notice shall have the same effect as
cancellation of the original Additional Investment Right and issuance of a New
Additional Investment Right evidencing the right to purchase the remaining
number of Additional Notes and Additional Investment Right Warrants.
(c) The Additonal Note issued upon the exercise of this Additional Investment
Right shall have a conversion price equal to the Fixed Conversion Price (the
"AIR Conversion Price").
48. Delivery of Additional Notes and Additional Investment Right Warrants.
(a) Upon exercise of this Additional Investment Right, the Company shall
promptly (but in no event later than three Trading Days after the Exercise Date)
issue or cause to be issued and cause to be delivered to or upon the written
order of the Holder and in such name or names as the Holder may designate, (i) a
certificate for the Additional Notes and Additional Investment Right Warrants
issuable upon such exercise, free of restrictive legends unless a registration
statement covering the resale of the Underlying Shares to be issued thereunder,
as the case may be, and naming the Holder as a selling stockholder thereunder is
not then effective and the Additional Notes or Additional Investment Right
Warrants, or the Underlying Shares associated therewith, are not freely
transferable without volume restrictions pursuant to Rule 144 under the
Securities Act, (ii) the legal opinions of Company Counsel, substantially in the
form of Exhibit E to the Purchase Agreement, executed by such counsel and
delivered to the Holders relating to the Additional Notes and Additional
Investment Right Warrants, and (iii) a certificate from an officer of the
Company that each of the representations and warranties of the Company set forth
in Section 3.1 of the Purchase Agreement are true and correct as of the date
when made and as of the Exercise Date as though made on and as of such date,
except for such representations and warranties that speak as of a certain date,
and in such shall have been true and correct as of such date, and each of the
other conditions set forth in Section 5.1 of the Purchase Agreement have been
satisfied as of the Exercise Date. The Holder, or, subject to Section 3, any
Person so designated by the Holder to receive Additional Notes or Additional
Investment Right Warrants, shall be deemed to have become holder of record of
such Additional Notes or Additional Investment Right Warrants as of the Exercise
Date. The Company shall, upon request of the Holder and if the Notes meet the
requirements therefore, use its best efforts to deliver Additional Notes
hereunder electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions.
(b) This Additional Investment Right is exercisable, either in its entirety or,
from time to time, for a portion of the number of Additional Notes and
Additional Investment Right Warrants. Upon surrender of this Additional
Investment Right following one or more partial exercises, the Company shall
issue or cause to be issued, at its expense, a New Additional Investment Right
evidencing the right to purchase the remaining number of Additional Notes and
Additional Investment Right Warrants.
(c) In addition to any other rights available to a Holder, if the Company fails
to deliver to the Holder a certificate representing the Underlying Shares
issuable upon conversion of the Additional Notes or the exercise of the
Additional Investment Right Warrants on the date on which delivery of such
certificate is required by this Additional Investment Right, an Additional Note
or any Additional Investment Right Warrant, and if after such date the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Common Stock that the
Holder anticipated receiving from the Company (a "Buy-In"), then the Company
shall, within three Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company's obligation to
deliver such certificate.
(d) The Company's obligations to issue and deliver Additional Notes and
Additional Investment Right Warrants in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, or any set-off, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder or any other Person of any obligation
to the Company or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of Additional Notes and Additional Investment Right Warrants. Nothing
herein shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing Additional Notes upon
exercise of the Additional Investment Right as required pursuant to the terms
hereof.
49. Charges, Taxes and Expenses. Issuance and delivery of certificates for
Additional Notes and Additional Investment Right Warrants upon exercise of this
Additional Investment Right shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company. The Holder shall be responsible
for all other tax liability that may arise as a result of holding or
transferring this Additional Investment Right or receiving Additional Notes and
Additional Investment Right Warrants upon exercise hereof.
50. Replacement of Additional Investment Right. If this Additional Investment
Right is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation hereof, or
in lieu of and substitution for this Additional Investment Right, a New
Additional Investment Right, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested.
51. Reservation of Common Stock. The Company covenants that it will at all times
reserve and keep available out of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Common
Stock issuable upon conversion of Additional Notes and Additional Investment
Right Warrants as therein provided. The Company covenants that all Additional
Notes and Additional Investment Right Warrants so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable. The Company will take all such action as may be
necessary to assure that any shares of Common Stock issuable upon conversion of
the Additional Notes and exercise of the Additional Investment Right Warrants
may be issued as provided therein without violation of any applicable law or
regulation, or of any requirements of any securities exchange or automated
quotation system upon which the Common Stock may be listed.
52. Certain Adjustments. The AIR Conversion Price and other terms of the
Additional Notes issuable upon exercise of this Additional Investment Right
shall be subject to adjustment from time to time as set forth in the Initial
Notes issued by the Company on the date hereof pursuant to the Purchase
Agreement. The exercise price and other terms of the Additional Investment Right
Warrants issuable upon exercise of this Additional Investment Right shall be
subject to adjustment from time to time as set forth in the Warrants issued by
the Company on the date hereof pursuant to the Purchase Agreement. At least 30
days prior to any such event (or if not practicable, as soon as possible) or
transaction involving a Fundamental Transaction (as defined in the Additional
Note) or otherwise potentially giving rise to an adjustment or modification of
the terms and provisions of the Additional Note, the Company will give the
Holder notice thereof of the date of the transaction and the effect thereof on
the terms of the Additional Notes, provided, that failure to provide such notice
shall not invalidate any such corporate action. The Company will use its best
efforts to take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Additional Investment
Right prior to the time of such event or transaction.
53. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds to the Company in the manner specified by the
Company in the Purchase Agreement.
54. Call Right.
(a) Subject to the provisions of this Section 11, if after the date hereof (i)
the Closing Price of the Company's Common Stock on the OTC Bulletin Board or
other Eligible Market is equal to or above $1.7484 per share (as adjusted for
any stock splits, stock combinations, stock dividends and other similar events)
(the "Threshold Price") for each of twenty (20) consecutive Trading Days and
(ii) the Common Stock trades at least 75,000 shares per day during such twenty
Trading Day period, then the Company shall have the right, but not the
obligation (the "Call Right"), on thirty (30) days prior written notice to the
Holder, to redeem any unexercised portion of this Additional Investment Right
for which an Exercise Notice has not yet been delivered (the "Call Amount").
(b) To exercise this Call Right, the Company shall deliver to the Holder an
irrevocable written notice (a "Call Notice"), indicating the Call Amount. The
date that the Company delivers the Call Notice to the Holder shall be referred
to as the "Call Date." Within thirty (30) days of receipt of the Call Notice,
and provided that the Holder is permitted to exercise this Additional Investment
Right pursuant to Section 4(a) above, the Holder may exercise this Additional
Investment Right in whole or in part in accordance with Section 4(b) above. Any
portion of the Call Amount that is not exercised by 6:30 p.m. (New York City
time) on the thirtieth (30th) day following the date of receipt of the Call
Notice (the "Redemption Date") shall be cancelled without payment by the
Company. Any unexercised portion of this Additional Investment Right to which
the Call Notice does not pertain (the "Remaining Portion") will be unaffected by
such Call Notice. The Company covenants and agrees that it will honor any
Exercise Notice with respect to the Call Amount that is tendered to the Company
from the time of delivery of the Call Notice through and including 6:30 p.m.
(New York City time) on the Redemption Date.
(c) Notwithstanding anything to the contrary set forth in this Additional
Investment Right, the Company may not deliver a Call Notice or require the
cancellation of any unexercised Call Amount (and any Call Notice will be void),
unless from the beginning of the twenty (20) consecutive Trading Days used to
determine whether the Common Stock has achieved the Threshold Price through the
date on which the Holder exercises the Call Amount (the "Call Period") (i) the
Company shall have honored in accordance with the terms of this Additional
Investment Right any Exercise Notice delivered by 6:30 p.m. (New York City time)
on the Call Date, and (ii) the Registration Statement shall be effective as to
the Underlying Shares and the prospectus thereunder available for use by the
Holder for the resale of the Underlying Shares.5
55. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall
be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
Trading Day, (ii) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (iii) the Trading Day following
the date of deposit with a nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The address and facsimile numbers for such notices or communications
shall be as set forth in the Purchase Agreement.
56. Miscellaneous.
(a) Subject to the restrictions on transfer set forth on the first page hereof,
this Additional Investment Right may be assigned by the Holder. This Additional
Investment Right may not be assigned by the Company except to a successor in the
event of a Fundamental Transaction (as defined in the Additional Note). This
Additional Investment Right shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Additional Investment Right shall be
construed to give to any Person other than the Company and the Holder any legal
or equitable right, remedy or cause of action under this Additional Investment
Right. This Additional Investment Right may be amended only in writing signed by
the Company and the Holder, their respective successors or permitted assigns.
(b) The Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Additional Investment
Right, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
(C) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS ADDITIONAL
INVESTMENT RIGHT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY AGREES THAT ALL LEGAL
PROCEEDINGS CONCERNING THE INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE
TRANSACTIONS CONTEMPLATED BY ANY OF THE TRANSACTION DOCUMENTS (WHETHER BROUGHT
AGAINST A PARTY HERETO OR ITS RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS,
SHAREHOLDERS, EMPLOYEES OR AGENTS) SHALL BE COMMENCED EXCLUSIVELY IN THE STATE
AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN. EACH
PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH
ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT
TO THE ENFORCEMENT OF ANY OF THIS ADDITIONAL INVESTMENT RIGHT), AND HEREBY
IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING,
ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH
COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS
BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF
VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF
DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
ADDITIONAL INVESTMENT RIGHT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS ADDITIONAL INVESTMENT RIGHT
OR ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. IF EITHER PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY
PROVISIONS OF THIS ADDITIONAL INVESTMENT RIGHT OR ANY TRANSACTION DOCUMENT, THEN
THE PREVAILING PARTY IN SUCH ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE
OTHER PARTY FOR ITS REASONABLE ATTORNEYS FEES AND OTHER REASONABLE COSTS AND
EXPENSES INCURRED WITH THE INVESTIGATION, PREPARATION AND PROSECUTION OF SUCH
ACTION OR PROCEEDING.
(d) The headings herein are for convenience only, do not constitute a part of
this Additional Investment Right and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Additional Investment
Right shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Additional
Investment Right shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Additional
Investment Right.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Additional Investment
Right to be duly executed by its authorized officer as of the date first
indicated above.
ENDAVO MEDIA AND COMMUNICATIONS, INC.
By:
Name:
Title:
98
5516/75415-001 NYWORD/328604v1
5516/75415-001 NYWORD/328604v1
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase $______________
principal amount of Additional Notes under the foregoing Additional Investment
Right)
To: Endavo Media and Communications, Inc.
The undersigned is the Holder of Additional Investment Right No. _______
the "Additional Investment Right") issued by Endavo Media
and Communications, Inc., a Delaware corporation (the "Company"). Capitalized
terms used herein and not otherwise defined have the
respective meanings set forth in the Additional Investment Right.
1. The Additional Investment Right is currently exercisable to purchase a
total of $______________ principal amount of
Additional Notes.
2. The undersigned Holder hereby exercises its right to purchase
_________________ $______________ principal amount of
Additional Notes pursuant to the Additional Investment Right.
3. The Holder shall pay the sum of $____________ to the Company in
accordance with the terms of the Additional Investment Right.
4. Pursuant to this exercise, the Company shall deliver to the Holder
$______________ principal amount of Additional Notes and
Additional Investment Right Warrants exercisable for __________ shares
of Common Stock in accordance with the terms of the
Additional Investment Right.
5. Following this exercise, the Additional Investment Right shall be
exercisable to purchase a total of $______________
principal amount of Additional Notes and Additional Investment Right
Warrants exercisable for ____________ shares of Common
Stock.
Dated: , Name of Holder:
--------------------- -------
(Print)
By:
Name:
Title:
(Signature must conform in all respects to name of
holder as specified on the face of the Additional
Investment Right)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Additional Investment Right]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Additional Investment Right to purchase $______________ principal amount of
Additional Notes and Additional Investment Right Warrants exercisable for
__________ shares of Common Stock of Endavo Media and Communications, Inc. to
which the within Additional Investment Right relates and appoints
________________ attorney to transfer said right on the books of Endavo Media
and Communications, Inc. with full power of substitution in the premises.
Dated: ,
---------------------
(Signature must conform in all respects to name of holder as
specified on the face of the Additional Investment Right)
Address of Transferee
In the presence of:
EXHIBIT 10.3
Form of Additional Investment Right "B"
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
ENDAVO MEDIA AND COMMUNICATIONS, INC.
ADDITIONAL INVESTMENT RIGHT
Additional Investment Right No. [ ] Dated: February __, 2005
Endavo Media and Communications, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, [Name of Holder] or its
registered assigns (the "Holder"), is entitled to purchase from the Company (a)
up to a total of [$_________]6 in principal amount of 8.0% senior secured
convertible notes due February __, 2007 of the Company in the form attached as
Exhibit A hereto (each such note, an "Additional Note" and all such notes, the
"Additional Notes") and (b) only as part of and in connection with the purchase
of the Additional Notes, warrants (the "Additional Investment Right Warrants")
in the form attached hereto as Exhibit B to acquire up to [________]7 shares of
Common Stock, at any time or from time to time from and after Closing Date and
through and including the date occurring on the 6-month anniversary of the
Effective Date (the "Expiration Date"), and subject to the following terms and
conditions. This Additional Investment Right (this "Additional Investment
Right") is one of a series of similar additional investment rights issued
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and among the Company and the Purchasers identified therein (the
"Purchase Agreement"). All such additional investment rights are referred to
herein, collectively, as the "Additional Investment Rights."
57. Definitions. In addition to the terms defined elsewhere in this Additional
Investment Right, capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the Purchase Agreement.
58. Registration of Additional Investment Right. The Company shall register this
Additional Investment Right, upon records to be maintained by the Company for
that purpose (the "Additional Investment Right Register"), in the name of the
record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Additional Investment Right as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.
59. Registration of Transfers. The Company shall register the assignment and
transfer of any portion of this Additional Investment Right in the Additional
Investment Right Register, upon surrender of this Additional Investment Right,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein. Upon any such registration or transfer,
a new additional investment right to purchase Additional Notes, in substantially
the form of this Additional Investment Right (any such new additional investment
right, a "New Additional Investment Right"), evidencing the portion of this
Additional Investment Right so transferred shall be issued to the transferee and
a New Additional Investment Right evidencing the remaining portion of this
Additional Investment Right not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Additional Investment Right by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of an Additional Investment Right.
Notwithstanding anything herein to the contrary, the Company shall not be
required to (a) register more than an aggregate of five transfers and five
exchanges by the Holder and any direct or indirect transferees or assigns
thereof, in the aggregate, under this Section 3, other than transfers or
assignments to successors in interest to such Holder and (b) at any time prior
to the effectiveness of the Registration Statement, any register transfer to a
transferee unless the Holder certifies to the Company that such transferee is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
60. Exercise and Duration of Additional Investment Right.
(a) This Additional Investment Right shall be exercisable by the registered
Holder at any time or from time to time on or after the Effective Date to and
including the Expiration Date. At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Additional Investment Right not exercised
prior thereto shall be void and of no further force and effect.
(b) The Holder may exercise this Additional Investment Right by delivering to
the Company (i) an exercise notice, in the form attached hereto (the "Exercise
Notice"), appropriately completed and duly signed and (ii) payment of the
principal amount of the Additional Notes as to which this Additional Investment
Right is being exercised (the "Exercise Price"). The date such items are
delivered to the Company (as determined in accordance with the notice provisions
hereof) is an "Exercise Date." The Holder shall not be required to deliver the
original Additional Investment Right in order to effect an exercise hereunder.
Execution and delivery of the Exercise Notice shall have the same effect as
cancellation of the original Additional Investment Right and issuance of a New
Additional Investment Right evidencing the right to purchase the remaining
number of Additional Notes and Additional Investment Right Warrants.
(c) The Additonal Note issued upon the exercise of this Additional Investment
Right shall have a conversion price equal to the Fixed Conversion Price (the
"AIR Conversion Price").
61. Delivery of Additional Notes and Additional Investment Right Warrants.
(a) Upon exercise of this Additional Investment Right, the Company shall
promptly (but in no event later than three Trading Days after the Exercise Date)
issue or cause to be issued and cause to be delivered to or upon the written
order of the Holder and in such name or names as the Holder may designate, (i) a
certificate for the Additional Notes and Additional Investment Right Warrants
issuable upon such exercise, free of restrictive legends unless a registration
statement covering the resale of the Underlying Shares to be issued thereunder,
as the case may be, and naming the Holder as a selling stockholder thereunder is
not then effective and the Additional Notes or Additional Investment Right
Warrants, or the Underlying Shares associated therewith, are not freely
transferable without volume restrictions pursuant to Rule 144 under the
Securities Act, (ii) the legal opinions of Company Counsel, substantially in the
form of Exhibit E to the Purchase Agreement, executed by such counsel and
delivered to the Holders relating to the Additional Notes and Additional
Investment Right Warrants, and (iii) a certificate from an officer of the
Company that each of the representations and warranties of the Company set forth
in Section 3.1 of the Purchase Agreement are true and correct as of the date
when made and as of the Exercise Date as though made on and as of such date,
except for such representations and warranties that speak as of a certain date,
and in such shall have been true and correct as of such date, and each of the
other conditions set forth in Section 5.1 of the Purchase Agreement have been
satisfied as of the Exercise Date. The Holder, or, subject to Section 3, any
Person so designated by the Holder to receive Additional Notes or Additional
Investment Right Warrants, shall be deemed to have become holder of record of
such Additional Notes or Additional Investment Right Warrants as of the Exercise
Date. The Company shall, upon request of the Holder and if the Notes meet the
requirements therefore, use its best efforts to deliver Additional Notes
hereunder electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions.
(b) This Additional Investment Right is exercisable, either in its entirety or,
from time to time, for a portion of the number of Additional Notes and
Additional Investment Right Warrants. Upon surrender of this Additional
Investment Right following one or more partial exercises, the Company shall
issue or cause to be issued, at its expense, a New Additional Investment Right
evidencing the right to purchase the remaining number of Additional Notes and
Additional Investment Right Warrants.
(c) In addition to any other rights available to a Holder, if the Company fails
to deliver to the Holder a certificate representing the Underlying Shares
issuable upon conversion of the Additional Notes or the exercise of the
Additional Investment Right Warrants on the date on which delivery of such
certificate is required by this Additional Investment Right, an Additional Note
or any Additional Investment Right Warrant, and if after such date the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Common Stock that the
Holder anticipated receiving from the Company (a "Buy-In"), then the Company
shall, within three Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company's obligation to
deliver such certificate.
(d) The Company's obligations to issue and deliver Additional Notes and
Additional Investment Right Warrants in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, or any set-off, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder or any other Person of any obligation
to the Company or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of Additional Notes and Additional Investment Right Warrants. Nothing
herein shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing Additional Notes upon
exercise of the Additional Investment Right as required pursuant to the terms
hereof.
62. Charges, Taxes and Expenses. Issuance and delivery of certificates for
Additional Notes and Additional Investment Right Warrants upon exercise of this
Additional Investment Right shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company. The Holder shall be responsible
for all other tax liability that may arise as a result of holding or
transferring this Additional Investment Right or receiving Additional Notes and
Additional Investment Right Warrants upon exercise hereof.
63. Replacement of Additional Investment Right. If this Additional Investment
Right is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation hereof, or
in lieu of and substitution for this Additional Investment Right, a New
Additional Investment Right, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested.
64. Reservation of Common Stock. The Company covenants that it will at all times
reserve and keep available out of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Common
Stock issuable upon conversion of Additional Notes and Additional Investment
Right Warrants as therein provided. The Company covenants that all Additional
Notes and Additional Investment Right Warrants so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable. The Company will take all such action as may be
necessary to assure that any shares of Common Stock issuable upon conversion of
the Additional Notes and exercise of the Additional Investment Right Warrants
may be issued as provided therein without violation of any applicable law or
regulation, or of any requirements of any securities exchange or automated
quotation system upon which the Common Stock may be listed.
65. Certain Adjustments. The AIR Conversion Price and other terms of the
Additional Notes issuable upon exercise of this Additional Investment Right
shall be subject to adjustment from time to time as set forth in the Initial
Notes issued by the Company on the date hereof pursuant to the Purchase
Agreement. The exercise price and other terms of the Additional Investment Right
Warrants issuable upon exercise of this Additional Investment Right shall be
subject to adjustment from time to time as set forth in the Warrants issued by
the Company on the date hereof pursuant to the Purchase Agreement. At least 30
days prior to any such event (or if not practicable, as soon as possible) or
transaction involving a Fundamental Transaction (as defined in the Additional
Note) or otherwise potentially giving rise to an adjustment or modification of
the terms and provisions of the Additional Note, the Company will give the
Holder notice thereof of the date of the transaction and the effect thereof on
the terms of the Additional Notes, provided, that failure to provide such notice
shall not invalidate any such corporate action. The Company will use its best
efforts to take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Additional Investment
Right prior to the time of such event or transaction.
66. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds to the Company in the manner specified by the
Company in the Purchase Agreement.
67. [Reserved.]
68. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall
be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
Trading Day, (ii) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (iii) the Trading Day following
the date of deposit with a nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The address and facsimile numbers for such notices or communications
shall be as set forth in the Purchase Agreement.
69. Miscellaneous.
(a) Subject to the restrictions on transfer set forth on the first page hereof,
this Additional Investment Right may be assigned by the Holder. This Additional
Investment Right may not be assigned by the Company except to a successor in the
event of a Fundamental Transaction (as defined in the Additional Note). This
Additional Investment Right shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Additional Investment Right shall be
construed to give to any Person other than the Company and the Holder any legal
or equitable right, remedy or cause of action under this Additional Investment
Right. This Additional Investment Right may be amended only in writing signed by
the Company and the Holder, their respective successors or permitted assigns.
(b) The Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Additional Investment
Right, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
(C) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS ADDITIONAL
INVESTMENT RIGHT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY AGREES THAT ALL LEGAL
PROCEEDINGS CONCERNING THE INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE
TRANSACTIONS CONTEMPLATED BY ANY OF THE TRANSACTION DOCUMENTS (WHETHER BROUGHT
AGAINST A PARTY HERETO OR ITS RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS,
SHAREHOLDERS, EMPLOYEES OR AGENTS) SHALL BE COMMENCED EXCLUSIVELY IN THE STATE
AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN. EACH
PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH
ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT
TO THE ENFORCEMENT OF ANY OF THIS ADDITIONAL INVESTMENT RIGHT), AND HEREBY
IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING,
ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH
COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS
BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF
VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF
DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
ADDITIONAL INVESTMENT RIGHT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS ADDITIONAL INVESTMENT RIGHT
OR ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. IF EITHER PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY
PROVISIONS OF THIS ADDITIONAL INVESTMENT RIGHT OR ANY TRANSACTION DOCUMENT, THEN
THE PREVAILING PARTY IN SUCH ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE
OTHER PARTY FOR ITS REASONABLE ATTORNEYS FEES AND OTHER REASONABLE COSTS AND
EXPENSES INCURRED WITH THE INVESTIGATION, PREPARATION AND PROSECUTION OF SUCH
ACTION OR PROCEEDING.
(d) The headings herein are for convenience only, do not constitute a part of
this Additional Investment Right and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Additional Investment
Right shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Additional
Investment Right shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Additional
Investment Right.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Additional Investment
Right to be duly executed by its authorized officer as of the date first
indicated above.
ENDAVO MEDIA AND COMMUNICATIONS, INC.
By:
Name:
Title:
5516/75415-001 NYWORD/326797v5
5516/75415-001 NYWORD/326797v5
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase $______________
principal amount of Additional Notes under the foregoing Additional Investment
Right)
To: Endavo Media and Communications, Inc.
The undersigned is the Holder of Additional Investment Right No. _______ (the
"Additional Investment Right") issued by Endavo Media
and Communications, Inc., a Delaware corporation (the "Company"). Capitalized
terms used herein and not otherwise defined have the
respective meanings set forth in the Additional Investment Right.
1. The Additional Investment Right is currently exercisable to purchase a
total of $______________ principal amount of Additional Notes.
2. The undersigned Holder hereby exercises its right to purchase
_________________ $______________ principal amount of Additional Notes
pursuant to the Additional Investment Right.
3. The Holder shall pay the sum of $____________ to the Company in
accordance with the terms of the Additional Investment Right. 4.
Pursuant to this exercise, the Company shall deliver to the Holder
$______________ principal amount of Additional Notes and
Additional Investment Right Warrants exercisable for __________ shares
of Common Stock in accordance with the terms of the Additional
Investment Right.
5. Following this exercise, the Additional Investment Right shall be
exercisable to purchase a total of $______________ principal amount of
Additional Notes and Additional Investment Right Warrants exercisable
for ____________ shares of Common Stock.
Dated: , Name of Holder:
--------------------- -------
(Print)
By:
Name:
Title:
(Signature must conform in all respects to name of
holder as specified on the face of the Additional
Investment Right)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Additional Investment Right]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Additional Investment Right to purchase $______________ principal amount of
Additional Notes and Additional Investment Right Warrants exercisable for
__________ shares of Common Stock of Endavo Media and Communications, Inc. to
which the within Additional Investment Right relates and appoints
________________ attorney to transfer said right on the books of Endavo Media
and Communications, Inc. with full power of substitution in the premises.
Dated: ,
---------------------
(Signature must conform in all respects to name of holder as
specified on the face of the Additional Investment Right)
Address of Transferee
In the presence of:
Exhibit 10.4
FORM OF SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of February 22, 2005 (the "Agreement") is
by and among Endavo Media and Communications, Inc., a corporation duly
organized and validly existing under the laws of the State of Delaware (the
"Company"), the Purchasers identified on the signature pages hereto (each,
a "Purchaser" and collectively, the "Purchasers") and Iroquois Capital,
L.P., as agent for the Purchasers (in such capacity, together with its
successors in such capacity, the "Agent").
The Company and each of the Purchasers are parties to a Securities Purchase
Agreement dated as of February 22, 2005 (as modified and supplemented and
in effect from time to time, the "Purchase Agreement"), that provides,
subject to the terms and conditions thereof, for the issuance and sale by
the Company to each of the Purchasers, severally and not jointly, Notes,
Warrants and Additional Investment Rights as more fully described in the
Purchase Agreement.
To induce each of the Purchasers to enter into the Purchase Agreement, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company has agreed to pledge and grant a
security interest in the Collateral (as hereinafter defined) as security
for the Secured Obligations (as hereinafter defined). Accordingly, the
parties hereto agree as follows:
Section 1. Definitions. Each capitalized term used herein and not
otherwise defined shall have the meaning assigned to such
term in the Purchase Agreement. In addition, as used herein:
"Accounts" shall have the meaning ascribed thereto in Section 3(d) hereof.
"Business" shall mean the businesses from time to time, now or hereafter,
conducted by the Company and its Subsidiaries.
"Collateral" shall have the meaning ascribed thereto in Section 3 hereof.
"Copyright Collateral" shall mean all Copyrights, whether now owned or
hereafter acquired by the Company, that are associated with the Business.
"Copyrights" shall mean all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation,
all renewals and extensions thereof, the right to recover for all past,
present and future infringements thereof, and all other rights of any kind
whatsoever accruing thereunder or pertaining thereto.
"Documents" shall have the meaning ascribed thereto in Section 3(j) hereof.
"Equipment" shall have the meaning ascribed thereto in Section 3(h) hereof.
"Event of Default" shall have the meaning ascribed thereto in Section 8 of
the Notes.
"Excluded Collateral" shall mean the assets listed on Annex 2 hereto.
"Instruments" shall have the meaning ascribed thereto in Section 3(e)
hereof.
"Intellectual Property" shall mean, collectively, all Copyright Collateral,
all Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information,
know-how and trade secrets used or useful in the Business; (b) all licenses
or user or other agreements granted to the Company with respect to any of
the foregoing, in each case whether now or hereafter owned or used
including, without limitation, the licenses or other agreements with
respect to the Copyright Collateral, the Patent Collateral or the Trademark
Collateral; (c) all customer lists, identification of suppliers, data,
plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, manuals, materials standards, processing standards, catalogs,
computer and automatic machinery software and programs, and the like
pertaining to the operation by the Company of the Business; (d) all sales
data and other information relating to sales now or hereafter collected
and/or maintained by the Company that pertain to the Business; (e) all
accounting information which pertains to the Business and all media in
which or on which any of the information or knowledge or data or records
which pertain to the Business may be recorded or stored and all computer
programs used for the compilation or printout of such information,
knowledge, records or data; (f) all licenses, consents, permits, variances,
certifications and approvals of governmental agencies now or hereafter held
by the Company pertaining to the operation by the Company and its
Subsidiaries of the Business; and (g) all causes of action, claims and
warranties now or hereafter owned or acquired by the Company in respect of
any of the items listed above.
"Inventory" shall have the meaning ascribed thereto in Section 3(f) hereof.
"Issuers" shall mean, collectively, the respective entities identified on
Annex 1 hereto, and all other entities formed by the Company or entities in
which the Company owns or acquires any capital stock or similar interest.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of
any jurisdiction).
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and other
like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Patent Collateral" shall mean all Patents, whether now owned or hereafter
acquired by the Company that are associated with the Business.
"Patents" shall mean all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties,
damages and payments now or hereafter due and/or payable under and with
respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, the right to sue for past, present
and future infringements thereof, and all rights corresponding thereto
throughout the world.
"Permitted Indebtedness" shall mean the Company's indebtedness, liabilities
and obligations existing on the date hereof and any future capitalized
leases, purchase money indebtedness and the Notes.
"Permitted Liens" shall mean (i) the Company's existing Liens as disclosed
in the Current SEC Report or Annex 5 hereto, (ii) the security interests
created by this Agreement and the Pledge Agreement, (iii) Liens of local or
state authorities for franchise, real estate or other like taxes, (iv)
statutory Liens of landlords and liens of carriers, warehousemen, bailees,
mechanics, materialmen and other like Liens imposed by law, created in the
ordinary course of business and for amounts not yet due, (v) tax Liens not
yet due and payable and (vi) existing Liens which do not materially affect
the value of the Company's property and do not materially interfere with
the use made and proposed to be made of such property by the Company and
the Subsidiaries.
"Pledged Stock" shall have the meaning ascribed thereto in Section 3(a)
hereof.
"Real Estate" shall have the meaning ascribed thereto in Section 3(l)
hereof.
"Secured Obligations" shall mean, collectively, (a) the principal of and
interest on the Notes issued or issuable (as applicable) by the Company and
held by the applicable Purchaser and all other amounts from time to time
owing to such Purchasers by the Company under the Purchase Agreement and
the Notes and (b) all obligations of the Company to such Purchasers
thereunder.
"Stock Collateral" shall mean, collectively, the Collateral described in
clauses (a) through (c) of Section 3 hereof and the proceeds of and to any
such property and, to the extent related to any such property or such
proceeds, all books, correspondence, credit files, records, invoices and
other papers.
"Trademark Collateral" shall mean all Trademarks, whether now owned or
hereafter acquired by the Company, that are associated with the Business.
Notwithstanding the foregoing, the Trademark Collateral does not and shall
not include any Trademark which would be rendered invalid, abandoned, void
or unenforceable by reason of its being included as part of the Trademark
Collateral.
"Trademarks" shall mean all trade names, trademarks and service marks,
logos, trademark and service mark registrations, and applications for
trademark and service mark registrations, including, without limitation,
all renewals of trademark and service mark registrations, all rights
corresponding thereto throughout the world, the right to recover for all
past, present and future infringements thereof, all other rights of any
kind whatsoever accruing thereunder or pertaining thereto, together, in
each case, with the product lines and goodwill of the business connected
with the use of, and symbolized by, each such trade name, trademark and
service mark.
"Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial Code
as in effect in the State of New York from time to time.
Section 2. Representations and Warranties. The Company represents and
warrants to each of the Purchasers that:
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a. the Company is the sole beneficial owner of the Collateral and no
Lien exists or will exist upon any Collateral at any time
(and, with respect to the Stock Collateral, no
right or option to acquire the same exists in favor of any
other Person), except for Permitted Liens and
the pledge and security interest in favor of each of the
Purchasers created or provided for herein which
pledge and security interest constitutes a first priority
perfected pledge and security interest in and to
all of the Collateral (except such Collateral as may be
subject to a Permitted Lien, in which case, a
second priority perfected security interest), assuming
applicable financing statements are been duly
and properly filed (other than Intellectual Property
registered or otherwise located outside of the
United States of America);
b. the Pledged Stock directly or indirectly owned by the
Company in the entities identified in Annex 1 hereto
is, and all other Pledged Stock, whether issued now
or in the future, will be, duly authorized, validly
issued, fully paid and nonassessable, free and clear
of all Liens other than Permitted Liens and none of
such Pledged Stock is or will be subject to any
contractual restriction, preemptive and similar
rights, or any restriction under the charter or
by-laws of the respective Issuers of such Pledged
Stock, upon the transfer of such Pledged Stock
(except for any such restriction contained herein);
c. the Pledged Stock directly or indirectly owned by the
Company in the entities identified in Annex 1 hereto
constitutes all of the issued and outstanding shares
of capital stock of any class of such Issuers
beneficially owned by the Company on the date hereof
(whether or not registered in the name of the
Company) and said Annex 1 correctly identifies, as at
the date hereof, the respective Issuers of such
Pledged Stock;
d. the Company owns and possesses the right to use, and
has done nothing to authorize or enable any other
Person to use, all of its Copyrights, Patents and
Trademarks, and all registrations of its material
Copyrights, Patents and Trademarks are valid and in
full force and effect. Except as may be set forth in
said Annex 3, the Company owns and possesses the
right to use all material Copyrights, Patents and
Trademarks, necessary for the operation of the
Business;
e. to the Company's knowledge, (i) except as set forth
in Annex 3 hereto, there is no violation by others of
any right of the Company with respect to any material
Copyrights, Patents or Trademarks, respectively, and
(ii) the Company is not, in connection with the
Business, infringing in any respect upon any
Copyrights, Patents or Trademarks of any other
Person; and no proceedings have been instituted or
are pending against the Company or, to the Company's
knowledge, threatened, and no claim against the
Company has been received by the Company, alleging
any such violation, except as may be set forth in
said Annex 3;
f. the Company does not own any material Trademarks
registered in the United States of America to which
the last sentence of the definition of Trademark
Collateral applies; and
Section 3. Collateral. As collateral security for the prompt
payment in full when due (whether at stated maturity, by
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acceleration or otherwise) of the Secured
Obligations, the Company hereby pledges, grants, assigns,
hypothecates and transfers to the Agent on behalf
of the Purchasers as hereinafter provided, a security
interest in and Lien upon all of the Company's
right, title and interest in, to and under all personal
property and other assets of the Company, whether
now owned or hereafter acquired by or arising in favor of
the Company, whether now existing or hereafter
coming into existence, whether owned or consigned by or to
the Company, or leased from or to the Company and
regardless of wherever located, except for the Excluded
Collateral, (all being collectively referred to
herein as "Collateral") including:
a. the Company's direct or indirect ownership interest
in the respective shares of capital stock of the
Issuers and all other shares of capital stock of
whatever class of the Issuers, now or hereafter owned
by the Company, together with in each case the
certificates evidencing the same (collectively, the
"Pledged Stock");
b. all shares, securities, moneys or property
representing a dividend on any of the Pledged Stock,
or representing a distribution or return of capital
upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other
like change of the Pledged Stock or otherwise
received in exchange therefor, and any subscription
warrants, rights or options issued to the holders of,
or otherwise in respect of, the Pledged Stock;
c. without affecting the obligations of the Company
under any provision prohibiting such action hereunder
or under the Purchase Agreement or the Notes, in the
event of any consolidation or merger in which any
Issuer is not the surviving corporation, all shares
of each class of the capital stock of the successor
corporation (unless such successor corporation is the
Company itself) formed by or resulting from such
consolidation or merger (the Pledged Stock, together
with all other certificates, shares, securities,
properties or moneys as may from time to time be
pledged hereunder pursuant to clause (a) or (b) above
and this clause (c) being herein collectively called
the "Stock Collateral");
d. all accounts and general intangibles (each as defined
in the Uniform Commercial Code) of the Company
constituting any right to the payment of money,
including (but not limited to) all moneys due and to
become due to the Company in respect of any loans or
advances for the purchase price of Inventory or
Equipment or other goods sold or leased or for
services rendered, all moneys due and to become due
to the Company under any guarantee (including a
letter of credit) of the purchase price of Inventory
or Equipment sold by the Company and all tax refunds
(such accounts, general intangibles and moneys due
and to become due being herein called collectively
"Accounts");
e. all instruments, chattel paper or letters of credit
(each as defined in the Uniform Commercial Code) of
the Company evidencing, representing, arising from or
existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the
Accounts, including (but not limited to) promissory
notes, drafts, bills of exchange and trade
acceptances (herein collectively called
"Instruments");
f. all inventory (as defined in the Uniform Commercial
Code) of the Company and all goods obtained by the
Company in exchange for such inventory (herein
collectively called "Inventory");
g. all Intellectual Property and all other accounts or
general intangibles of the Company not constituting
Intellectual Property or Accounts;
h. all equipment (as defined in the Uniform Commercial
Code) of the Company (herein collectively called
"Equipment");
i. each contract and other agreement of the Company
relating to the sale or other disposition of
Inventory or Equipment;
j. all documents of title (as defined in the Uniform
Commercial Code) or other receipts of the Company
covering, evidencing or representing Inventory or
Equipment (herein collectively called "Documents");
k. all rights, claims and benefits of the Company
against any Person arising out of, relating to or in
connection with Inventory or Equipment purchased by
the Company, including, without limitation, any such
rights, claims or benefits against any Person storing
or transporting such Inventory or Equipment;
l. all estates in land together with all improvements
and other structures now or hereafter situated
thereon, together with all rights, privileges,
tenements, hereditaments, appurtenances, easements,
including, but not limited to, rights and easements
for access and egress and utility connections, and
other rights now or hereafter appurtenant thereto
("Real Estate");
m. all other tangible or intangible property of the
Company, including, without limitation, all proceeds,
products and accessions of and to any of the property
of the Company described in clauses (a) through (l)
above in this Section 3 (including, without
limitation, any proceeds of insurance thereon), and,
to the extent related to any property described in
said clauses or such proceeds, products and
accessions, all books, correspondence, credit files,
records, invoices and other papers, including without
limitation all tapes, cards, computer runs and other
papers and documents in the possession or under the
control of the Company or any computer bureau or
service company from time to time acting for the
Company.
Notwithstanding anything to the contrary set forth above, the types or items of
Collateral described above shall not include any rights or interests in any
contract, lease, permit, license, charter or license agreement covering real or
personal property, as such, if under the terms of such contract, lease, permit,
license, charter or license agreement, or applicable law with respect thereto,
the valid grant of a security interest or Lien therein to Agent is prohibited
and such prohibition has not been or is not waived or the consent of the other
party to such contract, lease, permit, license, charter or license agreement has
not been or is not otherwise obtained or under applicable law such prohibition
cannot be waived, provided that the foregoing exclusion shall in no way be
construed (a) to apply if any such prohibition is ineffective or unenforceable
under Sections 9-406, 9-407, 9-408 or 9-409 of the UCC or other applicable law
or (b) so as to limit, impair or otherwise affect Agent's unconditional
continuing security interests in and Liens upon any rights or interests of the
Company in or to monies due or to become due under any such contract, lease,
permit, license, charter or license agreement (including any Accounts).
Section 4. Further Assurances; Remedies. In furtherance of
the grant of the pledge and security interest
pursuant to Section 3 hereof, the Company hereby
agrees with the Agent and each of the Purchasers as
follows:
4.01 Delivery and Other Perfection. The Company shall:
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a. if any of the above-described shares, securities, monies or
property required to be pledged by the Company under clauses
(a), (b) and (c) of Section 3 hereof are received by
the Company, forthwith either (x) transfer and deliver
to the Agent such shares or securities so received
by the Company (together with the certificates for any
such shares and securities duly endorsed in blank
or accompanied by undated stock powers duly executed in
blank) all of which thereafter shall be held by the
Agent, pursuant to the terms of this Agreement, as part
of the Collateral or (y) take such other action as
the Agent shall reasonably deem necessary or appropriate
to duly record the Lien created hereunder in such
shares, securities, monies or property referred to in
said clauses (a), (b) and (c) of Section 3;
b. deliver and pledge to the Agent, at the Agent's
request, any and all Instruments, endorsed and/or
accompanied by such instruments of assignment and
transfer in such form and substance as the Agent may
request; provided, that so long as no Event of
Default shall have occurred and be continuing, the
Company may retain for collection in the ordinary
course any Instruments received by it in the ordinary
course of business;
c. give, execute, deliver, file and/or record any financing statement,
notice, instrument, document, agreement or other papers
that may be necessary or desirable (in the
reasonable judgment of the Agent) to create, preserve, perfect
or validate any security interest granted
pursuant hereto or to enable the Agent to exercise and enforce
their rights hereunder with respect to such
security interest, including, without limitation, causing any
or all of the Stock Collateral to be transferred
of record into the name of the Agent or its nominee (and
the Agent agrees that if any Stock Collateral is
transferred into its name or the name of its nominee, the
Agent will thereafter promptly give to the Company
copies of any notices and communications received by it
with respect to the Stock Collateral), provided
that notices to account debtors in respect of any Accounts
or Instruments shall be subject to the provisions
of Section 4.09 below;
d. upon the acquisition after the date hereof by the
Company of any Equipment covered by a certificate of
title or ownership cause the Agent to be listed as
the lienholder on such certificate of title and
within 120 days of the acquisition thereof deliver
evidence of the same to the Agent;
e. keep accurate books and records relating to the
Collateral, and stamp or otherwise mark such books
and records in such manner as the Agent may
reasonably require in order to reflect the security
interests granted by this Agreement;
f. furnish to the Agent from time to time (but, unless
an Event of Default shall have occurred and be
continuing, no more frequently than quarterly)
statements and schedules further identifying and
describing the Copyright Collateral, the Patent
Collateral and the Trademark Collateral,
respectively, and such other reports in connection
with the Copyright Collateral, the Patent Collateral
and the Trademark Collateral, as the Agent may
reasonably request, all in reasonable detail;
g. permit representatives of the Agent, upon reasonable
notice, at any time during normal business hours to
inspect and make abstracts from its books and records
pertaining to the Collateral, and permit
representatives of the Agent to be present at the
Company's place of business to receive copies of all
communications and remittances relating to the
Collateral, and forward copies of any notices or
communications by the Company with respect to the
Collateral, all in such manner as the Agent may
reasonably require; and
h. upon the occurrence and during the continuance of any
Event of Default, upon request of the Agent, promptly
notify each account debtor in respect of any Accounts
or Instruments that such Collateral has been assigned
to the Agent hereunder, and that any payments due or
to become due in respect of such Collateral are to be
made directly to the Agent.
4.02 Other Financing Statements and Liens. Except with respect to
Permitted Indebtedness, without the prior written consent of the
Agent, the Company shall not file or suffer to be on file, or
authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Agent is not named as the
sole secured party for the benefit of each of the Purchasers.
4.03 Preservation of Rights. The Agent shall not be required to take
steps necessary to preserve any rights against prior
-----------------------
parties to any of the Collateral.
4.04 Special Provisions Relating to Certain Collateral.
a. Stock Collateral.
(1) The Company will cause the Stock Collateral
to constitute at all times 100% of the total
number of shares of each class of capital
stock of each Issuer then outstanding that
is owned directly or indirectly by the
Company.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all
voting, consensual and other powers of
ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms
of this Agreement, the Purchase Agreement, the Notes or
any other instrument or agreement
referred to herein or therein, provided that the Company agrees
that it will not vote the Stock Collateral
in any manner that is inconsistent with the terms of
this Agreement, the Purchase Agreement,
the Notes or any such other instrument or agreement; and
the Agent shall execute and deliver to
the Company or cause to be executed and delivered to the
Company all such proxies, powers of
attorney, dividend and other orders, and all such instruments,
without recourse, as the Company may
reasonably request for the purpose of enabling the Company to
exercise the rights and powers
which it is entitled to exercise pursuant to this Section
4.04(a)(2).
(3) Unless and until an Event of Default has
occurred and is continuing, the Company
shall be entitled to receive and retain any
dividends on the Stock Collateral paid in
cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the
Agent exercises any available right to
declare any Secured Obligations due and payable or seeks or
pursues any other relief or remedy
available to it under applicable law or under this Agreement,
the Purchase Agreement, the Notes or any
other agreement relating to such Secured Obligations, all
dividends and other distributions on
the Stock Collateral shall be paid directly to the Agent and
retained by it as part of the Stock
Collateral, subject to the terms of this Agreement, and, if
the Agent shall so request in writing,
the Company agrees to execute and deliver to the Agent
appropriate additional dividend,
distribution and other orders and documents to that end, provided
that if such Event of Default is cured,
any such dividend or distribution theretofore paid to the
Agent shall, upon request of the Company
(except to the extent theretofore applied to the Secured
Obligations) be returned by the Agent to
the Company.
b. Intellectual Property.
(1) For the purpose of enabling the Agent to exercise rights and
remedies under Section 4.05 hereof at such time as the Agent
shall be lawfully entitled to exercise
such rights and remedies, and for no other purpose, the
Company hereby grants to the Agent,
to the extent assignable, an irrevocable, non-exclusive
license (exercisable without payment
of royalty or other compensation to the Company) to use,
assign, license or sublicense any
of the Intellectual Property (other than the Trademark
Collateral or goodwill associated
therewith) now owned or hereafter acquired by the Company,
wherever the same may be located,
including in such license reasonable access to all media in
which any of the licensed items may be
recorded or stored and to all computer programs used for
the compilation or printout thereof.
(2) Notwithstanding anything contained herein to the contrary, so
long as no Event of Default shall have occurred and be
continuing, the Company will be
permitted to exploit, use, enjoy, protect, license, sublicense,
assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the
ordinary course of the business of the
Company. In furtherance of the foregoing, unless an Event
of Default shall have occurred and is
continuing, the Agent shall from time to time, upon the
request of the Company, execute and
deliver any instruments, certificates or other documents, in
the form so requested, which the Company
shall have certified are appropriate (in its judgment) to
allow it to take any action permitted
above (including relinquishment of the license provided
pursuant to clause (1) immediately above
as to any specific Intellectual Property). Further, upon
the payment in full of all of the Secured
Obligations or earlier expiration of this Agreement or
release of the Collateral, the Agent shall
grant back to the Company the license granted pursuant
to clause (1) immediately above. The
exercise of rights and remedies under Section 4.05 hereof by
the Agent shall not terminate the rights of
the holders of any licenses or sublicenses theretofore
granted by the Company in accordance with
the first sentence of this clause (2).
4.05 Events of Default, etc. During the period during which an Event of
Default shall have occurred and be continuing:
-----------------------
a. the Company shall, at the request of the Agent,
assemble the Collateral owned by it at such place or
places, reasonably convenient to both the Agent and
the Company, designated in its request;
b. the Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of
the Collateral and may extend the time of payment,
arrange for payment in installments, or otherwise
modify the terms of, any of the Collateral;
c. the Agent shall have all of the rights and remedies
with respect to the Collateral of a secured party
under the Uniform Commercial Code (whether or not
said Code is in effect in the jurisdiction where the
rights and remedies are asserted) and such additional
rights and remedies to which a secured party is
entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be
asserted, including, without limitation, the right,
to the maximum extent permitted by law, to exercise
all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Agent were the
sole and absolute owner thereof (and the Company
agrees to take all such action as may be appropriate
to give effect to such right);
d. the Agent in its discretion may, in its name or in
the name of the Company or otherwise, demand, sue
for, collect or receive any money or property at any
time payable or receivable on account of or in
exchange for any of the Collateral, but shall be
under no obligation to do so; and
e. the Agent may, upon 10 Business Days, prior written notice to
the Company of the time and place, with respect to the
Collateral or any part thereof which shall then be
or shall thereafter come into the possession, custody or
control of the Agent, or any of its respective
agents, sell, lease, assign or otherwise dispose of all or
any of such Collateral, at such place or places
as the Agent deems best, and for cash or on credit or for
future delivery (without thereby assuming any
credit risk), at public or private sale, without demand of
performance or notice of intention to effect any
such disposition or of time or place thereof (except such
notice as is required above or by applicable
statute and cannot be waived) and the Agent or anyone else may
be the purchaser, lessee, assignee or recipient
of any or all of the Collateral so disposed of at any
public sale (or, to the extent permitted by
law, at any private sale), and thereafter hold the same
absolutely, free from any claim or right of
whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Company, any
such demand, notice or right and equity being hereby
expressly waived and released. In the event of
any sale, assignment, or other disposition of any of the
Trademark Collateral, the goodwill of the
Business connected with and symbolized by the Trademark
Collateral subject to such disposition shall be
included, and the Company shall supply to the Agent or its
designee, for inclusion in such sale, assignment
or other disposition, all Intellectual Property relating
to such Trademark Collateral. The Agent may,
without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or
place to which the same may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.05, including by virtue of the exercise of the license granted to the Agent in
Section 4.04(b)(1) hereof, shall be applied in accordance with Section 4.09
hereof.
The Company recognizes that, by reason of certain prohibitions contained in
the Securities Act of 1933, as amended, and applicable state securities
laws, the Agent may be compelled, with respect to any sale of all or any
part of the Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Company acknowledges that any such private sales to an unrelated third
party in an arm's length transaction may be at prices and on terms less
favorable to the Agent than those obtainable through a public sale without
such restrictions, and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Agent shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the respective Issuer thereof to
register it for public sale.
4.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 4.05
hereof are insufficient to cover the costs and expenses of such
realization and the payment in full of the Secured Obligations,
the Company shall remain liable for any deficiency.
4.07 Removals, etc. Without at least 30 days' prior written notice to
the Agent, the Company shall not (i) maintain any of its books or
records with respect to the Collateral at any office or maintain
its chief executive office or its principal place of business at
any place, or permit any Inventory or Equipment to be located
anywhere other than at the address indicated for the Company in
Section 7.4 of the Purchase Agreement or at one of the locations
identified in Annex 4 hereto or in transit from one of such
locations to another or (ii) change its corporate name, or the
name under which it does business, from the name shown on the
signature page hereto.
4.08 Private Sale. The Agent shall incur no liability as a result of
the sale of the Collateral, or any part thereof, at any private
sale to an unrelated third party in an arm's length transaction
pursuant to Section 4.05 hereof conducted in a commercially
reasonable manner. The Company hereby waives any claims against
the Agent arising by reason of the fact that the price at which
the Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale or
was less than the aggregate amount of the Secured Obligations,
even if the Agent accepts the first offer received and does not
offer the Collateral to more than one offeree.
4.09 Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other
realization of all or any part of the Collateral pursuant hereto,
and any other cash at the time held by the Agent under this
Section 4, shall be applied by the Agent:
First, to the payment of the costs and expenses of such collection, sale or
other realization, including reasonable out-of-pocket costs and expenses of
the Agent and the fees and expenses of its agents and counsel, and all
expenses, and advances made or incurred by the Agent in connection
therewith;
Next, to the payment in full of the Secured Obligations in each case
equally and ratably in accordance with the respective amounts thereof then
due and owing to each of the Purchasers; and
Finally, to the payment to the Company, or its successors or assigns, or as
a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of the Company or any issuer of or obligor on any of the
Collateral.
4.10 Attorney-in-Fact. Without limiting any rights or powers granted by
this Agreement to the Agent while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance
of any Event of Default, the Agent is hereby appointed the
attorney-in-fact of the Company for the purpose of carrying out
the provisions of this Section 4 and taking any action and
executing any instruments which the Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, so long as the
Purchasers shall be entitled under this Section 4 to make
collections in respect of the Collateral, the Agent shall have the
right and power to receive, endorse and collect all checks made
payable to the order of the Company representing any dividend,
payment, or other distribution in respect of the Collateral or any
part thereof and to give full discharge for the same.
4.11 Perfection. (i) Prior to or concurrently with the execution and
delivery of this Agreement, the Company shall file or deliver to
Agent for filing such financing statements and other documents in
such offices as the Agent may request to perfect the security
interests granted by Section 3 of this Agreement, and (ii) at any
time requested by the Agent, the Company shall deliver to the
Agent all share certificates of capital stock directly or
indirectly owned by the Company in the entities identified in
Annex 1 hereto, accompanied by undated stock powers duly executed
in blank.
4.12 Termination. When all Secured Obligations shall have been paid in
full under the Purchase Agreement, this Agreement shall terminate,
and the Agent shall forthwith cause to be assigned, transferred
and delivered, against receipt but without any recourse, warranty
or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of the Company and
to be released and cancelled all licenses and rights referred to
in Section 4.04(b)(1) hereof. The Agent shall also execute and
deliver to the Company upon such termination such Uniform
Commercial Code termination statements, certificates for
terminating the Liens on the Motor Vehicles and such other
documentation as shall be reasonably requested by the Company to
effect the termination and release of the Liens on the Collateral.
4.13 Expenses. The Company agrees to pay to the Agent all out-of-pocket
expenses (including reasonable expenses for legal services of
every kind) of, or incident to, the enforcement of any of the
provisions of this Section 4, or performance by the Agent of any
obligations of the Company in respect of the Collateral which the
Company has failed or refused to perform upon reasonable notice,
or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the
Collateral, and for the care of the Collateral and defending or
asserting rights and claims of the Agent in respect thereof, by
litigation or otherwise, including expenses of insurance, and all
such expenses shall be Secured Obligations to the Agent secured
under Section 3 hereof.
4.14 Further Assurances. The Company agrees that, from time to time
upon the written request of the Agent, the Company will execute
and deliver such further documents and do such other acts and
things as the Agent may reasonably request in order fully to
effect the purposes of this Agreement.
4.15 Indemnity. Each of the Purchasers hereby jointly and severally
covenants and agrees to reimburse, indemnify and hold the Agent
harmless from and against any and all claims, actions, judgments,
damages, losses, liabilities, costs, transfer or other taxes, and
expenses (including, without limitation, reasonable attorneys'
fees and expenses) incurred or suffered without any bad faith or
willful misconduct by the Agent, arising out of or incident to
this Agreement or the administration of the Agent's duties
hereunder, or resulting from its actions or inactions as Agent.
Section 5. Miscellaneous.
5.01 No Waiver. No failure on the part of the Agent or any of its
agents to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise by the Agent or any of its agents of any right, power or
remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. The remedies
herein are cumulative and are not exclusive of any remedies
provided by law.
5.02 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.
-------------
5.03 Notices. All notices, requests, consents and demands hereunder
shall be in writing and facsimile (facsimile confirmation
required) or delivered to the intended recipient at its address or
telex number specified pursuant to Section 7.4 of the Purchase
Agreement and shall be deemed to have been given at the times
specified in said Section 7.4.
5.04 Waivers, etc. The terms of this Agreement may be waived, altered
or amended only by an instrument in writing duly executed by the
Company and the Agent. Any such amendment or waiver shall be
binding upon each of the Purchasers and the Company.
5.05 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of
the Company and each of the Purchasers (provided, however, that
the Company shall not assign or transfer its rights hereunder
without the prior written consent of the Agent).
5.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one and the
same instrument and any of the parties hereto may execute this
Agreement by signing any such counterpart.
5.07 Agent. Each Purchaser agrees to appoint Iroquois Capital, L.P. as
its Agent for purposes of this Agreement. The Agent may employ
agents and attorneys-in-fact in connection herewith and shall not
be responsible for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it in good faith.
5.08 Severability. If any provision hereof is invalid and unenforceable
in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in
favor of the Purchasers in order to carry out the intentions of
the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
5516/75415-001 NYWORD/326797v5 Signature Page to Security Agreement
5516/75415-001 NYWORD/326797v5 Signature Page to Pledge Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed as of the day and year first above written.
COMPANY: ENDAVO MEDIA AND
COMMUNICATIONS, INC.
By: ______________________________
Name:
Title:
AGENT: IROQUOIS CAPITAL, L.P.
By: ______________________________
Name:
Title:
PURCHASERS: IROQUOIS CAPITAL, L.P.
By: ______________________________
Name:
Title:
PURCHASERS: __________________________________________
By: ______________________________
Name:
Title:
1
5516/75415-001 NYWORD/326797v5
5516/75415-001 NYWORD/326797v5
ANNEX 1
ENTITIES IN WHICH THE COMPANY IS PLEDGING ITS CAPITAL STOCK
Approximate
Entity Percentage Interest
None.
1
5516/75415-001 NYWORD/326797v5
5516/75415-001 NYWORD/326797v5
ANNEX 2
EXCLUDED COLLATERAL
5516/75415-001 NYWORD/326797v5
5516/75415-001 NYWORD/326797v5
ANNEX 3
EXCEPTIONS FOR COPYRIGHTS, PATENTS AND TRADEMARKS
None.
ANNEX 4
LIST OF LOCATIONS
50 West Broadway
Suite 1100
Salt Lake City, Utah 84101
ANNEX 5
EXISTING LIENS
See Attached. List.
Exhibit 99.1
Press Release dated February 23, 2005, regarding private placement financing
Endavo Announces Completion of Convertible Debt Financing Package
$3.825 Million Facility Provides Capital for EcoSystem Launch and Expansion
Plans
Salt Lake City, UT --(BUSINESS WIRE) -- Feb. 23, 2005-- Endavo Media and
Communications, Inc. (OTC BB: EDVO NEWS) announced today
that the company has received definitive agreements to complete a $3.825
million financing package, beginning with the initial sale
of $1.275 million of secured convertible debt. The offering was led by H.C.
Wainwright & Co., Inc. of New York and funded by a group
of institutional and accredited investors.
Endavo will utilize the new convertible debt facility for general working
capital purposes, to retire certain debts and for capital expenditures, as the
company accelerates its planned launch of the first national IP Multicast
network that will support the Endavo EcoSystem, an open-standard distribution
and transaction management engine that enables IP delivery of digital
entertainment, data and voice products to existing network service providers and
broadband communities across the country.
Under the terms of the private offering and definitive agreements, the company
will issue $1.275 million principal amount of secured convertible notes and two
series of additional investment rights entitling the holders to purchase up to
an additional $2.55 million principal amount of secured convertible notes. The
convertible notes accrue interest at the rate of 8% per annum, are payable
semi-annually at the option of the company in cash or shares of the company's
common stock, and are convertible into shares of common stock at a fixed price
of $.892 per share. In addition, the company will issue five-year warrants to
purchase shares of common stock at a price of $1.27. The company has also agreed
to issue additional warrants upon the completion of the additional investment
rights. The company is required to file a registration statement providing for
the resale of the shares issuable upon the conversion of the notes.
"This financing package will allow us to execute on near-term content expansion
opportunities and distribution opportunities that we are aggressively pursuing
in Utah and the surrounding region," stated Paul D. Hamm, Endavo CEO. "And, we
are very excited to simultaneously accelerate our plans to launch the Endavo
Ecosystem over the national MPLS network, a digital marketplace that will serve
our distribution partners in the Western Region and allow us to rapidly expand
our marketing and distribution into other areas of the country."
The securities sold in this private placement were sold pursuant to Regulation D
under the Securities Act. Neither the underlying common stock nor the warrants
have been registered and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements. This
press release does not constitute an offer to sell or a solicitation of an offer
to buy shares or warrants of the company and is being issued under Rule 135c of
the Securities Act.
About Endavo Media and Communications, Inc.
Endavo Media and Communications, Inc. provides managed IP delivery solutions for
digital entertainment, data and voice products over a national IP Multicast
fiber network and over any last-mile broadband medium (fiber, copper, wireless).
Using a open-standard distribution and systems support engine to track and
manage transactions individually from start to finish, Endavo allows existing
Service Providers and broadband communities to access a digital marketplace of
IP-based content and services from multiple suppliers, facilitating immediate
product expansion and a migration path to next-generation IP networks and
content. For more information, visit http://www.endavo.com.
Forward-looking statements in this release regarding Endavo Media and
Communications, Inc. are made pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that
such forward-looking statements involve risks and uncertainties, including,
without limitation, continued acceptance of the company's products, increased
levels of competition, new products and technological changes, the company's
dependence upon third-party suppliers, intellectual property rights, and other
risks detailed from time to time in the company's periodic reports filed with
the Securities and Exchange Commission.