FILED
PURSUANT TO RULE NO. 424(b)(3)
REGISTRATION
NO. 333-125239
SUPPLEMENT
TO PROSPECTUS
DATED
FEBRUARY 26, 2007
NEOMEDIA
TECHNOLOGIES, INC.
UP
TO
54,000,000 SHARES OF COMMON STOCK
Attached
hereto and hereby made part of the prospectus are (i) the Company’s Current
Report on Form 8-K dated August 24, 2006, as filed with the
U.S. Securities and Exchange Commission on August 30, 2006, and (ii)
the Company’s Current Report on Form 8-K dated December 29, 2006, as filed
with the U.S. Securities and Exchange Commission on January 8, 2007.
Prospective investors in our common stock should carefully read each of these
documents and the related financial information prior to making any investment
decision.
__________________________
You
should only rely on the information provided in the prospectus, this prospectus
supplement or any additional supplement. We have not authorized anyone else
to
provide you with different information. The common stock is not being offered
in
any state where the offer is not permitted. You should not assume that the
information in the prospectus or this prospectus supplement or any additional
supplement is accurate as of any date other than the date on the front of those
documents.
__________________________
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of the prospectus or this prospectus supplement. Any representation
to
the contrary is a criminal offense.
__________________________
THE
DATE
OF THIS PROSPECTUS SUPPLEMENT IS FEBRUARY 26, 2007
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
__________________
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) of the
SECURITIES
EXCHANGE ACT OF 1934
__________________
Date
of
Report: August 24, 2006
NeoMedia
Technologies, Inc.
(Exact
Name of Registrant as Specified in Charter)
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Delaware
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0-21743
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36-3680347
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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2401
Second Street, Suite #600, Fort Myers,
Florida
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33901
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(Address
of principal executive offices)
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(Zip
code)
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| |
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Registrant's
telephone number, including area code:
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(239)
337-3434
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| |
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Not
Applicable
(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:
| o |
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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| o |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
| o |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|
| o |
Pre-commencement
communications pursuant to Rule 13c-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
|
Item
1.01 Entry Into a Material Definitive Agreement
On
August
24, 2006, NeoMedia Technologies, Inc., a Delaware corporation (the “Company”)
entered into a Securities Purchase Agreement (the “SPA”)
with
Cornell Capital Partners, LP, a Delaware limited partnership (the “Buyer”
and
together with the Company, the “Parties”).
Pursuant to the terms and subject to the conditions contained in the SPA, the
Company will issue and sell to the Buyer, and the Buyer shall purchase from
the
Company, Five Million Dollars ($5,000,000) of secured convertible debentures
(the “Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value $0.01
(the “Common
Stock”),
and
which was funded on August 24, 2006 for a total purchase price equal to Five
Million Dollars ($5,000,000).
Contemporaneously
with the execution and delivery of the SPA and the issuance by the Company
to
the Buyer of the Debentures, the Parties executed and delivered (i) an Investor
Registration Rights Agreement, pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act of 1933, as amended
and the rules and regulations promulgated there under and applicable state
securities laws and (ii) a Pledge and Security Agreement (the “Security
Agreement”),
pursuant to which the Company agreed to provide to Buyer a security interest
in
certain Pledged Collateral (as this term is defined in the Security Agreement)
to secure the Company’s obligations under the SPA, the Transaction Documents (as
such term is defined in the SPA), or any other obligations of the Company to
the
Buyer.
In
connection with the SPA, the Company also issued to the Buyer (a) a warrant
to
purchase twenty-five million (25,000,000) shares of the Company’s Common Stock,
exercisable for a period of five (5) years at an exercise price of Fifteen
Cents
($0.15) per share (the “A
Warrant”);
(b) a
warrant to purchase fifty million (50,000,000) shares of the Company’s Common
Stock, exercisable for a period of five (5) years at an exercise price of
Twenty-Five Cents ($0.25) per share (the “B
Warrant”);
(c) a
warrant to purchase fifty million (50,000,000) shares of the Company’s Common
Stock, exercisable for a period of five (5) years at an exercise price of Twenty
Cents ($0.20) per share (the “C
Warrant”);
and
(d) a warrant to purchase fifty million (50,000,000) shares of the Company’s
Common Stock, exercisable for a period of five (5) years at an exercise price
of
Five Cents ($0.05) per share (the “D
Warrant”,
and
together with the A Warrant, the B Warrant and the C Warrant, the “Warrants”).
The
Common Stock issuable under the Warrants shall have “piggy-back” and demand
registration rights.
Furthermore,
on August 24, 2006, the Company entered into four (4) amendment agreements
to
reprice certain warrants which had been previously issued by the Company to
the
Buyer. Pursuant to Amendment to Warrant No. CCP-002, the Parties amended a
certain warrant, dated March 30, 2005, to purchase 50,000,000 shares at an
exercise price of $0.20 to modify the warrant exercise price therein to $0.10
per share. Pursuant to Amendment to “A” Warrant No. CCP-001, the Parties amended
a certain “A” warrant, dated February 17, 2006, to purchase 20,000,000 shares at
an exercise price of $0.50 to modify the warrant exercise price therein to
$0.10
per share. Pursuant to Amendment to “B” Warrant No. CCP-002, the Parties amended
a certain “B” warrant, dated February 17, 2006, to purchase 25,000,000 shares at
an exercise price of $0.40 to modify the warrant exercise price therein to
$0.15
per share. Pursuant to Amendment to “C” Warrant No. CCP-003, the Parties amended
a certain “C” warrant, dated February 17, 2006, to purchase 30,000,000 shares at
an exercise price of $0.35 to modify the warrant exercise price therein to
$0.10
per share.
Item
3.02 Unregistered Sales of Equity Securities
See
Item
1.01 above.
Item
9.01 Financial Statements and Exhibits
(a) Not
applicable.
(b) Not
applicable.
(c) Not
applicable.
(d) Exhibits
No. Description:
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Exhibit
No.
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Item
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Exhibit
10.1
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Securities
Purchase Agreement, dated August 24, 2006, by and between the Company
and
Cornell Capital Partners, LP
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Provided
herewith
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Exhibit
10.2
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Investor
Registration Rights Agreement, dated August 24, 2006, by and between
the
Company and Cornell Capital Partners, LP
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Provided
herewith
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Exhibit
10.3
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Pledge
and Security Agreement, dated August 24, 2006, by and between the
Company
and Cornell Capital Partners, LP
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Provided
herewith
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Exhibit
10.4
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Secured
Convertible Debenture, dated August 24, 2006, issued by the Company
to
Cornell Capital Partners, LP
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Provided
herewith
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Exhibit
10.5
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Irrevocable
Transfer Agent Instructions, dated August 24, 2006, by and among
the
Company, Cornell Capital Partners, LP and American Stock Transfer
&
Trust Co.
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Provided
herewith
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Exhibit
10.6
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A
Warrant, dated August 24, 2006
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Provided
herewith
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Exhibit
10.7
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B
Warrant, dated August 24, 2006
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Provided
herewith
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Exhibit
10.8
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C
Warrant, dated August 24, 2006
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Provided
herewith
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Exhibit
10.9
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D
Warrant, dated August 24, 2006
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Provided
herewith
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Exhibit
10.10
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Amendment
to Warrant No. CCP-002, dated August 24, 2006, by and between the
Company
and Cornell Capital Partners, LP
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Provided
herewith
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Exhibit
10.11
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Amendment
to “A” Warrant No. CCP-001, dated August 24, 2006, by and between the
Company and Cornell Capital Partners, LP
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Provided
herewith
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Exhibit
10.12
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Amendment
to “B” Warrant No. CCP-002, dated August 24, 2006, by and between the
Company and Cornell Capital Partners, LP
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Provided
herewith
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Exhibit
10.13
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Amendment
to “C” Warrant No. CCP-003, dated August 24, 2006, by and between the
Company and Cornell Capital Partners, LP
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Provided
herewith
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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Date: August
28, 2006
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NEOMEDIA
TECHNOLGIES, INC.
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By: /s/
Charles T. Jensen
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Name: Charles
T. Jensen
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Its: Chief
Executive Officer and Director
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SECURITIES
PURCHASE AGREEMENT
THIS SECURITIES
PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of August 24, 2006, by and among NEOMEDIA
TECHNOLOGIES, INC.,
a
Delaware corporation (the “Company”),
and
the Buyers listed on Schedule I attached hereto (individually, a
“Buyer”
or
collectively “Buyers”).
WITNESSETH
WHEREAS,
the
Company and the Buyer(s) are executing and delivering this Agreement in reliance
upon an exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”);
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Buyer(s), as provided herein,
and the Buyer(s) shall purchase up to Five Million Dollars ($5,000,000) of
secured convertible debentures (the “Convertible
Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value $0.01
(the “Common
Stock”)
(as
converted, the “Conversion
Shares”)
which
shall be funded two (2) business days prior to the date the registration
statement (the “Registration
Statement”)
is
filed, pursuant to the Investor Registration Rights Agreement dated the date
hereof, with the United States Securities and Exchange Commission (the
“SEC”)
(the
“Closing”)
(referred to as a “Closing”
collectively referred to as the “Closings”),
for a
total purchase price of up to Five Million Dollars ($5,000,000), (the
“Purchase
Price”)
in the
respective amounts set forth opposite each Buyer(s) name on Schedule I (the
“Subscription
Amount”);
and
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement (the
“Investor
Registration Rights Agreement”)
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated there under,
and applicable state securities laws; and
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the Company
and the Buyers are executing and delivering a Pledge and Security Agreement
(the
“Security
Agreement”)
pursuant to which the Company agreed to provide the Buyers a security interest
in Pledged Collateral (as this term is defined in the Security Agreement) to
secure the Company’s obligations under this Agreement, the Transaction
Documents, or any other obligations of the Company to the Buyer;
and
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering Irrevocable Transfer Agent Instructions
(the
“Irrevocable
Transfer Agent Instructions”)
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:
1. PURCHASE
AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase
of Convertible Debentures.
Subject
to the satisfaction (or waiver) of the terms and conditions of this Agreement,
each Buyer agrees, severally and not jointly, to purchase at each Closing and
the Company agrees to sell and issue to each Buyer, severally and not jointly,
at each Closing, Convertible Debentures in amounts corresponding with the
Subscription Amount set forth opposite each Buyer’s name on Schedule I hereto.
(b) Closing
Date.
The
Closing of the purchase and sale of the Convertible Debentures shall take place
at 10:00 a.m. Eastern Standard Time two (2) business days prior to the date
the
Registration Statement is filed with the SEC, subject to notification of
satisfaction of the conditions to the Closing set forth herein and in Sections
6
and 7 below (or such later date as is mutually agreed to by the Company and
the
Buyer(s)) (“Closing
Date”).
The
Closing shall occur on the Closing Date at the offices of Yorkville Advisors,
LLC, 3700 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 (or such
other place as is mutually agreed to by the Company and the Buyer(s)).
(c) Form
of Payment.
Subject
to the satisfaction of the terms and conditions of this Agreement, on the
Closing Date, (i) the Buyers shall deliver to the Company such aggregate
proceeds for the Convertible Debentures to be issued and sold to such Buyer(s),
minus the fees to be paid directly from the proceeds of the Closing as set
forth
herein, and (ii) the Company shall deliver to each Buyer, Convertible
Debentures which such Buyer(s) is purchasing in amounts indicated opposite
such
Buyer’s name on Schedule I, duly executed on behalf of the Company.
2. BUYER’S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer represents and warrants, severally and not jointly, that:
(a) Investment
Purpose.
Each
Buyer is acquiring the Convertible Debentures and, upon conversion of
Convertible Debentures, the Buyer will acquire the Conversion Shares then
issuable, for its own account for investment only and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the Securities Act;
provided, however, that by making the representations herein, such Buyer
reserves the right to dispose of the Conversion Shares at any time in accordance
with or pursuant to an effective registration statement covering such Conversion
Shares or an available exemption under the Securities Act.
(b) Accredited
Investor Status.
Each
Buyer is an “Accredited
Investor”
as
that
term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance
on Exemptions.
Each
Buyer understands that the Convertible Debentures are being offered and sold
to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire such
securities.
(d) Information.
Each
Buyer and its advisors (and his or, its counsel), if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and information he deemed material to making an informed investment
decision regarding his purchase of the Convertible Debentures and the Conversion
Shares, which have been requested by such Buyer. Each Buyer and its advisors,
if
any, have been afforded the opportunity to ask questions of the Company and
its
management. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer’s right to rely on the Company’s
representations and warranties contained in Section 3 below. Each Buyer
understands that its investment in the Convertible Debentures and the Conversion
Shares involves a high degree of risk. Each Buyer is in a position regarding
the
Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables such Buyer to obtain information from
the
Company in order to evaluate the merits and risks of this investment. Each
Buyer
has sought such accounting, legal and tax advice, as it has considered necessary
to make an informed investment decision with respect to its acquisition of
the
Convertible Debentures and the Conversion Shares.
(e) No
Governmental Review.
Each
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Convertible Debentures or the Conversion Shares, or the
fairness or suitability of the investment in the Convertible Debentures or
the
Conversion Shares, nor have such authorities passed upon or endorsed the merits
of the offering of the Convertible Debentures or the Conversion
Shares.
(f) Transfer
or Resale.
Each
Buyer understands that except as provided in the Investor Registration Rights
Agreement: (i) the Convertible Debentures have not been and are not being
registered under the Securities Act or any state securities laws, and may not
be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, or (B) such Buyer shall have delivered to the Company
an
opinion of counsel, in a generally acceptable form, to the effect that such
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration requirements; (ii)
any sale of such securities made in reliance on Rule 144 under the Securities
Act (or a successor rule thereto) (“Rule 144”)
may be
made only in accordance with the terms of Rule 144 and further, if Rule 144
is
not applicable, any resale of such securities under circumstances in which
the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the Securities
Act or any state securities laws or to comply with the terms and conditions
of
any exemption thereunder.
(g) Legends.
Each
Buyer understands that the certificates or other instruments representing the
Convertible Debentures and or the Conversion Shares shall bear a restrictive
legend in substantially the following form (and a stop -transfer order may
be
placed against transfer of such stock certificates):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
The
legend set forth above shall be removed and the Company within two (2) business
days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided
the
Conversion Shares are registered under the Securities Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the Securities Act.
(h) Authorization,
Enforcement.
This
Agreement has been duly and validly authorized, executed and delivered on behalf
of such Buyer and is a valid and binding agreement of such Buyer enforceable
in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
(i) Receipt
of Documents.
Each
Buyer and his or its counsel has received and read in their entirety: (i) this
Agreement and each representation, warranty and covenant set forth herein and
the Transaction Documents (as defined herein); (ii) all due diligence and other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company’s Form 10-KSB for
the fiscal year ended December 31, 2005; (iv) the Company’s Form 10-Q for the
fiscal quarter ended March 31, 2006 and June 30, 2006 (v) answers to all
questions each Buyer submitted to the Company regarding an investment in the
Company; and each Buyer has relied on the information contained therein and
has
not been furnished any other documents, literature, memorandum or
prospectus.
(j) Due
Formation of Corporate and Other Buyers.
If the
Buyer(s) is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Convertible Debentures
and
is not prohibited from doing so.
(k) No
Legal Advice From the Company.
Each
Buyer acknowledges, that it had the opportunity to review this Agreement and
the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. Each Buyer is relying solely on such counsel
and advisors and not on any statements or representations of the Company or
any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement
or
the securities laws of any jurisdiction.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants as of the date hereof to each of the Buyers
that, except as set forth in the SEC Documents (as defined herein) or in the
Disclosure Schedule attached hereto (the “Disclosure
Schedule”):
(a) Organization
and Qualification.
The
Company and its subsidiaries are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they
are
incorporated, and have the requisite corporate power to own their properties
and
to carry on their business as now being conducted. Each of the Company and
its
subsidiaries is duly qualified as a foreign corporation to do business and
is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a
whole.
(b) Authorization,
Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter
into and perform this Agreement, the Security Agreement, the Investor
Registration Rights Agreement, the Irrevocable Transfer Agent Agreement, the
Warrants, and any related agreements (collectively the “Transaction
Documents”)
and to
issue the Convertible Debentures and the Conversion Shares in accordance with
the terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance
of
the Convertible Debentures the Conversion Shares and the reservation for
issuance and the issuance of the Conversion Shares issuable upon conversion
or
exercise thereof, have been duly authorized by the Company’s Board of Directors
and no further consent or authorization is required by the Company, its Board
of
Directors or its stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited
by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies. The
authorized officer of the Company executing the Transaction Documents knows
of
no reason why the Company cannot file the registration statement as required
under the Investor Registration Rights Agreement or perform any of the Company’s
other obligations under such documents.
(c) Capitalization.
The
authorized capital stock of the Company consists of 5,000,000,000 shares of
Common Stock and 25,000,000,000 shares of Preferred Stock, par value $0.01
(“Preferred
Stock”)
of
which 641,279,245 shares
of
Common Stock and 22,000 shares of Preferred Stock are issued and outstanding.
All of such outstanding shares have been validly issued and are fully paid
and
nonassessable. No shares of Common Stock are subject to preemptive rights or
any
other similar rights or any liens or encumbrances suffered or permitted by
the
Company. As of the date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights
to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any
of
their securities under the Securities Act (except pursuant to the Registration
Rights Agreement) and (iv) there are no outstanding registration statements
and
there are no outstanding comment letters from the SEC or any other regulatory
agency. There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Convertible
Debentures as described in this Agreement. The Company has furnished to the
Buyer true and correct copies of the Company’s Articles of Incorporation, as
amended and as in effect on the date hereof (the “Articles
of Incorporation”),
and
the Company’s By-laws, as in effect on the date hereof (the “By-laws”),
and
the terms of all securities convertible into or exercisable for Common Stock
and
the material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants.
(d) Issuance
of Securities.
The
Convertible Debentures are duly authorized and, upon issuance in accordance
with
the terms hereof, shall be duly issued, fully paid and nonassessable, are free
from all taxes, liens and charges with respect to the issue thereof. The
Conversion Shares issuable upon conversion of the Convertible Debentures have
been duly authorized and reserved for issuance. Upon conversion or exercise
in
accordance with the Convertible Debentures the Conversion Shares will be duly
issued, fully paid and nonassessable.
(e) 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
will
not (i) result in a violation of the Articles of Incorporation, any certificate
of designations of any outstanding series of preferred stock of the Company
or
the By-laws or (ii) conflict with or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of The National Association of
Securities Dealers Inc.’s OTC Bulletin Board on which the Common Stock is
quoted) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. Neither the Company nor its subsidiaries is in violation of any term
of or in default under its Articles of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree
or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act and
any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any
court or governmental agency in order for it to execute, deliver or perform
any
of its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected
on
or prior to the date hereof. The Company and its subsidiaries are unaware of
any
facts or circumstance, which might give rise to any of the
foregoing.
(f) SEC
Documents: Financial Statements.
Since
January 1, 2005, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”)
(all
of the foregoing filed prior to the date hereof or amended after the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein, being hereinafter referred
to
as the “SEC
Documents”).
The
Company has delivered to the Buyers or their representatives, or made available
through the SEC’s website at http://www.sec.gov., true and complete copies of
the SEC Documents. As of their respective dates, the financial statements of
the
Company disclosed in the SEC Documents (the “Financial
Statements”)
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such Financial
Statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and, fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in this Agreement, contains any untrue statement of a material
fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(g) 10(b)-5.
Neither
the Transaction Documents nor the SEC Documents include any untrue statements
of
material fact, nor do they omit to state any material fact required to be stated
therein necessary to make the statements made, in light of the circumstances
under which they were made, not misleading.
(h) Absence
of Litigation.
There
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would (i)
have
a material adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) have a material adverse effect on the business,
operations, properties, financial condition or results of operations of the
Company and its subsidiaries taken as a whole.
(i) Acknowledgment
Regarding Buyer’s Purchase of the Convertible Debentures.
The
Company acknowledges and agrees that the Buyer(s) 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 the
Buyer(s) is not acting as a financial advisor or fiduciary of the Company (or
in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer(s) or any of their
respective representatives or agents in connection with this Agreement and
the
transactions contemplated hereby is merely incidental to such Buyer’s purchase
of the Convertible Debentures or the Conversion Shares. The Company further
represents to the Buyer that the Company’s decision to enter into this Agreement
has been based solely on the independent evaluation by the Company and its
representatives.
(j) No
General Solicitation.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection
with
the offer or sale of the Convertible Debentures or the Conversion
Shares.
(k) No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security, under circumstances that would require
registration of the Convertible Debentures or the Conversion Shares under the
Securities Act or cause this offering of the Convertible Debentures or the
Conversion Shares to be integrated with prior offerings by the Company for
purposes of the Securities Act.
(l) Employee
Relations.
Neither
the Company nor any of its subsidiaries is involved in any labor dispute nor,
to
the knowledge of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company’s or its subsidiaries’ employees is a member of
a union and the Company and its subsidiaries believe that their relations with
their employees are good.
(m) Intellectual
Property Rights.
The
Company and its subsidiaries own or possess adequate rights or licenses to
use
all trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct
their
respective businesses as now conducted. The Company and its subsidiaries do
not
have any knowledge of any infringement by the Company or its subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other similar rights of others, and, to the knowledge of the Company there
is
no claim, action or proceeding being made or brought against, or to the
Company’s knowledge, being threatened against, the Company or its subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service mark registrations, trade secret
or other infringement; and the Company and its subsidiaries are unaware of
any
facts or circumstances which might give rise to any of the
foregoing.
(n) Environmental
Laws.
The
Company and its subsidiaries are (i) in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental
Laws”),
(ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license
or
approval.
(o) Title.
Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use
made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
(p) Insurance.
The
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company
nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such 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 at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(q) Regulatory
Permits.
The
Company and its subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(r) Internal
Accounting Controls.
The
Company and each of its 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, and (iii) the recorded amounts for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(s) No
Material Adverse Breaches, etc.
Neither
the Company nor any of its subsidiaries is subject to any charter, corporate
or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company’s officers has or is expected in the future
to have a material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
subsidiaries. Neither the Company nor any of its subsidiaries is in breach
of
any contract or agreement which breach, in the judgment of the Company’s
officers, has or is expected to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries.
(t) Tax
Status.
The
Company and each of its subsidiaries has made and filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that
the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has
paid
all taxes and other governmental assessments and charges that are material
in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
(u) Certain
Transactions.
Except
for arm’s length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors, or employees
of
the Company is presently a party to any transaction with the Company (other
than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the
knowledge of the Company, any corporation, partnership, trust or other entity
in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner.
(v) Fees
and Rights of First Refusal.
The
Company is not obligated to offer the securities offered hereunder on a right
of
first refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers, agents
or other third parties.
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts to timely satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form
D.
The
Company agrees to file a Form D with respect to the Conversion Shares as
required under Regulation D and to provide a copy thereof to each Buyer promptly
after such filing. The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary to qualify the
Conversion Shares, or obtain an exemption for the Conversion Shares for sale
to
the Buyers at the Closing pursuant to this Agreement under applicable securities
or “Blue Sky” laws of the states of the United States, and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date.
(c) Reporting
Status.
Until
the earlier of (i) the date as of which the Buyer(s) may sell all of the
Conversion Shares without restriction pursuant to Rule 144(k) promulgated under
the Securities Act (or successor thereto), or (ii) the date on which (A) the
Buyer(s) shall have sold all the Conversion Shares and (B) none of the
Convertible Debentures are outstanding (the “Registration
Period”),
the
Company shall file in a timely manner all reports required to be filed with
the
SEC pursuant to the Exchange Act and the regulations of the SEC thereunder,
and
the Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination.
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Convertible Debentures for
general corporate and working capital purposes.
(e) Reservation
of Shares.
The
Company shall take all action reasonably necessary to at all times have
authorized, and reserved for the purpose of issuance, such number of shares
of
Common Stock as shall be necessary to effect the issuance of the Conversion
Shares. If at any time the Company does not have available such shares of Common
Stock as shall from time to time be sufficient to effect the conversion of
all
of the Conversion Shares, the Company shall call and hold a special meeting
of
the shareholders within thirty (30) days of such occurrence, for the sole
purpose of increasing the number of shares authorized. The Company’s management
shall recommend to the shareholders to vote in favor of increasing the number
of
shares of Common Stock authorized. Management shall also vote all of its shares
in favor of increasing the number of authorized shares of Common
Stock.
(f) Listings
or Quotation.
The
Company shall promptly secure the listing or quotation of the Conversion Shares
upon each national securities exchange, automated quotation system or The
National Association of Securities Dealers Inc.’s Over-The-Counter Bulletin
Board (“OTCBB”)
or
other market, if any, upon which shares of Common Stock are then listed or
quoted (subject to official notice of issuance) and shall use its best efforts
to maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all Conversion Shares from time to time issuable under the
terms
of this Agreement. The Company shall maintain the Common Stock’s authorization
for quotation on the OTCBB.
(g) Fees
and Expenses.
(i) Each
of
the Company and the Buyer(s) shall pay all costs and expenses incurred by such
party in connection with the negotiation, investigation, preparation, execution
and delivery of the Transaction Documents.
On
the
date hereof the Company shall issue to the Buyer a warrant to purchase twenty
five million (25,000,000) shares of the Company’s Common Stock which shall be
exercisable for a period of five (5) years at an exercise price of Fifteen
Cents
($0.15) per share (collectively referred to as the “A”
Warrants”).
Furthermore,
on the date hereof, the Company shall also issue to the Buyer a warrant to
purchase fifty million (50,000,000) shares of the Company’s Common Stock (the
“B”
Warrant”)
exercisable for a period of five (5) years at an exercise price of Twenty Five
Cents ($0.25) per share. Furthermore, on the date hereof the Company shall
issue
to the Buyer a warrant to purchase fifty million (50,000,000) shares of the
Company’s Common Stock (the “C”
Warrant”)
exercisable for a period of five (5) years at an exercise price of Twenty Cents
($0.20) per share. Furthermore, on the date hereof the Company shall issue
to
the Buyer a warrant to purchase fifty million (50,000,000) shares of the
Company’s Common Stock (the “D”
Warrant”)
exercisable for a period of five (5) years at an exercise price of Five Cents
($0.05) per share (The “A” Warrant, the “B” Warrant, the “C” Warrant, and the
“D” Warrant, are collectively referred to as the “Warrants.”)
The
shares of Common Stock issuable under the Warrants shall collectively be
referred to as the “Warrant
Shares”.
(ii) The
Warrant Shares shall have “piggy-back” and demand registration rights.
(h) Corporate
Existence.
So long
as any of the Convertible Debentures remain outstanding, the Company shall
not
directly or indirectly consummate any merger, reorganization, restructuring,
reverse stock split consolidation, sale of all or substantially all of the
Company’s assets or any similar transaction or related transactions (each such
transaction, an “Organizational
Change”)
unless, prior to the consummation an Organizational Change, the Company obtains
the written consent of each Buyer. In any such case, the Company will make
appropriate provision with respect to such holders’ rights and interests to
insure that the provisions of this Section 4(h) will thereafter be applicable
to
the Convertible Debentures.
(i) Transactions
With Affiliates.
So long
as any Convertible Debentures are outstanding, the Company shall not, and shall
cause each of its subsidiaries not to, enter into, amend, modify or supplement,
or permit any subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or any
subsidiary’s officers, directors, person who were officers or directors at any
time during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below)
or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a
five
percent (5%) or more beneficial interest (each a “Related
Party”),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any investment in an Affiliate of the Company, (c) any
agreement, transaction, commitment, or arrangement on an arms-length basis
on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, (d) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the disinterested
directors of the Company; for purposes hereof, any director who is also an
officer of the Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. “Affiliate”
for
purposes hereof means, with respect to any person or entity, another person
or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity,
or
(iv) shares common control with that person or entity. “Control”
or
“controls”
for
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity.
(j) Transfer
Agent.
The
Company covenants and agrees that, in the event that the Company’s agency
relationship with the transfer agent should be terminated for any reason prior
to a date which is two (2) years after the Closing Date, the Company shall
immediately appoint a new transfer agent and shall require that the new transfer
agent execute and agree to be bound by the terms of the Irrevocable Transfer
Agent Instructions (as defined herein).
(k) Restriction
on Issuance of the Capital Stock.
So long
as any Convertible Debentures are outstanding, the Company shall not, and with
respect to subsection (iii) herein shall cause its subsidiaries now existing
or
later created or acquired not to, without the prior written consent of the
Buyer(s), (i) issue or sell shares of Common Stock or Preferred Stock without
consideration or for a consideration per share less than the bid price of the
Common Stock determined immediately prior to its issuance, (ii) issue any
preferred stock, warrant, option, right, contract, call, or other security
or
instrument granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration less than such Common Stock’s Bid Price
determined immediately prior to it’s issuance, (iii) enter into any security
instrument granting the holder a security interest in any and all assets of
the
Company or any of its subsidiaries now existing or later created or acquired
or
(iv) file any registration statement on Form S-8.
(l) Neither
the Buyer(s) nor any of its affiliates have an open short position in the Common
Stock of the Company, and the Buyer(s) agrees that it shall not, and that it
will cause its affiliates not to, engage in any short sales of or hedging
transactions with respect to the Common Stock as long as any Convertible
Debentures shall remain outstanding.
(m) Rights
of First Refusal.
So
long
as any portion of Convertible Debentures are outstanding, if the Company intends
to raise additional capital by the issuance or sale of capital stock of the
Company, including without limitation shares of any class of common stock,
any
class of preferred stock, options, warrants or any other securities convertible
or exercisable into shares of common stock (whether the offering is conducted
by
the Company, underwriter, placement agent or any third party) the Company shall
be obligated to offer to the Buyers such issuance or sale of capital stock,
by
providing in writing the principal amount of capital it intends to raise and
outline of the material terms of such capital raise, prior to the offering
such
issuance or sale of capital stock to any third parties including, but not
limited to, current or former officers or directors, current or former
shareholders and/or investors of the obligor, underwriters, brokers, agents
or
other third parties. The Buyers shall have ten (10) business days from
receipt of such notice of the sale or issuance of capital stock to accept or
reject all or a portion of such capital raising offer.
(n) Lock
Up Agreements.
On the
date hereof, the Company shall obtain from each officer and director a lock
up
agreement in the form attached hereto as Exhibit
A.
5. TRANSFER
AGENT INSTRUCTIONS.
(a) The
Company shall issue the Irrevocable Transfer Agent Instructions to its transfer
agent irrevocably appointing David Gonzalez, Esq. as the Company’s agent for
purpose of having certificates issued, registered in the name of the Buyer(s)
or
its respective nominee(s), for the Conversion Shares representing such amounts
of Convertible Debentures as specified from time to time by the Buyer(s) to
the
Company upon conversion of the Convertible Debentures, for interest owed
pursuant to the Convertible Debenture, and for any and all Liquidated Damages
(as this term is defined in the Investor Registration Rights Agreement). David
Gonzalez, Esq. shall be paid a cash fee of Fifty Dollars ($50) for every
occasion they act pursuant to the Irrevocable Transfer Agent Instructions.
The
Company shall not change its transfer agent without the express written consent
of the Buyer(s), which may be withheld by the Buyer(s) in its sole discretion.
Prior to registration of the Conversion Shares under the Securities Act, all
such certificates shall bear the restrictive legend specified in Section 2(g)
of
this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and
stop
transfer instructions to give effect to Section 2(g) hereof (in the case of
the
Conversion Shares prior to registration of such shares under the Securities
Act)
will be given by the Company to its transfer agent and as long as the
registration statement relating to the Conversion Shares is effective, that
the
Conversion Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and
the
Investor Registration Rights Agreement. Nothing in this Section 5 shall affect
in any way the Buyer’s obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares. If the Buyer(s) provides
the
Company with an opinion of counsel, in form, scope and substance customary
for
opinions of counsel in comparable transactions to the effect that registration
of a resale by the Buyer(s) of any of the Conversion Shares is not required
under the Securities Act, the Company shall within two (2) business days
instruct its transfer agent to issue one or more certificates in such name
and
in such denominations as specified by the Buyer. The Company acknowledges that
a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees,
in
the event of a breach or threatened breach by the Company of the provisions
of
this Section 5, that the Buyer(s) shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss
and without any bond or other security being required.
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Convertible Debentures
to the Buyer(s) at the Closings is subject to the satisfaction, at or before
the
Closing Dates, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:
(a) Each
Buyer shall have executed the Transaction Documents and delivered them to the
Company.
(b) The
Buyer(s) shall have delivered to the Company the Purchase Price for Convertible
Debentures in respective amounts as set forth next to each Buyer as outlined
on
Schedule I attached hereto, minus any fees to be paid directly from the proceeds
the Closings as set forth herein, by wire transfer of immediately available
U.S.
funds pursuant to the wire instructions provided by the Company.
(c) The
representations and warranties of the Buyer(s) shall be true and correct in
all
material respects as of the date when made and as of the Closing Dates as though
made at that time (except for representations and warranties that speak as
of a
specific date), and the Buyer(s) shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Buyer(s)
at or
prior to the Closing Dates.
7. CONDITIONS
TO THE BUYER’S OBLIGATION TO PURCHASE.
(a) The
obligation of the Buyer(s) hereunder to purchase the Convertible Debentures
at
the Closing is subject to the satisfaction, at or before the First Closing
Date,
of each of the following conditions:
(i) The
Company shall have executed the Transaction Documents and delivered the same
to
the Buyer(s).
(ii) The
Common Stock shall be authorized for quotation on the OTCBB, trading in the
Common Stock shall not have been suspended for any reason, and all the
Conversion Shares issuable upon the conversion of the Convertible Debentures
shall be approved by the OTCBB.
(iii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.
(iv) The
Company shall certify, within two (2) business days after the Closing, that
it
will file the registration statement with the SEC in compliance with the rules
and regulations promulgated by the SEC for filing thereof.
(v) The
Company shall have executed and delivered to the Buyer(s) the Convertible
Debentures in the respective amounts set forth opposite each Buyer(s) name
on
Schedule I attached hereto.
(vi) The
Buyer(s) shall have received an opinion of counsel from Kirkpatrick &
Lockhart Nicholson Graham, LLP in a form satisfactory to the
Buyer(s).
(vii) The
Company shall have provided to the Buyer(s) a certificate of good standing
from
the secretary of state from the state in which the Company is
incorporated.
(viii) The
Company shall have filed a form UCC-1 or such other forms as may be required
to
perfect the Buyer’s interest in the Pledged Property as detailed in the Pledge
and Security Agreement dated the date hereof and provided proof of such filing
to the Buyer(s).
(ix) The
Company shall have provided to the Buyer an acknowledgement, to the satisfaction
of the Buyer, from the Company’s independent certified public accountants as to
its ability to provide all consents required in order to file a registration
statement in connection with this transaction.
(x) The
Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Convertible
Debentures, shares of Common Stock to effect the conversion of all of the
Conversion Shares then outstanding.
(xi) The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to
the Buyer, shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(xii) The
Company will, within thirty (30) days after the Closing, deliver to the Buyer
one hundred percent (100%) of the stock of each foreign subsidiary of the
Company, and stock powers for each executed in blank to perfect Buyer’s security
interest.
8. INDEMNIFICATION.
(a) In
consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder, and
in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
each
other holder of the Convertible Debentures and the Conversion Shares, and all
of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Buyer
Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action
for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified
Liabilities”),
incurred by the Buyer Indemnitees or any of them as a result of, or arising
out
of, or relating to (a) any misrepresentation or breach of any representation
or
warranty made by the Company in this Agreement, the Convertible Debentures
or
the Investor Registration Rights Agreement or any other certificate, instrument
or document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement, or the
Investor Registration Rights Agreement or any other certificate, instrument
or
document contemplated hereby or thereby, or (c) any cause of action, suit or
claim brought or made against such Indemnitee and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement
or
any other instrument, document or agreement executed pursuant hereto by any
of
the parties hereto, any transaction financed or to be financed in whole or
in
part, directly or indirectly, with the proceeds of the issuance of the
Convertible Debentures or the status of the Buyer or holder of the Convertible
Debentures the Conversion Shares, as a Buyer of Convertible Debentures in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution
to
the payment and satisfaction of each of the Indemnified Liabilities, which
is
permissible under applicable law.
(b) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Buyer’s other obligations under this Agreement, the Buyer
shall defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company
Indemnitees”)
from
and against any and all Indemnified Liabilities incurred by the Indemnitees
or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, instrument or document contemplated hereby or
thereby executed by the Buyer, (b) any breach of any covenant, agreement or
obligation of the Buyer(s) contained in this Agreement, the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer, or (c) any cause of
action, suit or claim brought or made against such Company Indemnitee based
on
material misrepresentations or due to a material breach and arising out of
or
resulting from the execution, delivery, performance or enforcement of this
Agreement, the Investor Registration Rights Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the parties hereto.
To
the extent that the foregoing undertaking by each Buyer may be unenforceable
for
any reason, each Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
9. GOVERNING
LAW: MISCELLANEOUS.
(a) Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New Jersey without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in Hudson
County, New Jersey, and expressly consent to the jurisdiction and venue of
the
Superior Court of New Jersey, sitting in Hudson County and the United States
District Court for the District of New Jersey sitting in Newark, New Jersey
for
the adjudication of any civil action asserted pursuant to this
Paragraph.
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
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.
In
the event any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause four (4) additional original executed
signature pages to be physically delivered to the other party within five (5)
days of the execution and delivery hereof.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement, Amendments.
This
Agreement supersedes all other prior oral or written agreements between the
Buyer(s), the Company, their affiliates and persons acting on their behalf
with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
(f) Notices.
Any
notices, consents, waivers, or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to the Company, to:
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Neomedia
Technologies, Inc.
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| |
2201
Second Street, Suite #600
|
| |
Fort
Myers, FL 33901
|
| |
Attention:
Charles T. Jensen, President
|
| |
Telephone: (239)
337-3434
|
| |
Facsimile: (239)
337-3668
|
| |
|
|
With
a copy to:
|
Kirkpatrick
& Lockhart Nicholson Graham LLP
|
| |
201
South Biscayne Boulevard - Suite 2000
|
| |
Miami,
FL 33131-2399
|
| |
Attention: Clayton
E. Parker, Esq.
|
| |
Telephone: (305)
539-3300
|
| |
Facsimile: (305)
358-7095
|
| |
|
| |
|
If
to the
Buyer(s), to its address and facsimile number on Schedule I, with copies to
the
Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5)
days’ prior written notice to the other party of any change in address or
facsimile number.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. Neither the Company nor any Buyer
shall
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto.
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) Survival.
Unless
this Agreement is terminated under Section 9(l), the representations and
warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing
for
a period of two (2) years following the date on which the Convertible Debentures
are converted in full. The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Publicity.
The
Company and the Buyer(s) shall have the right to approve, before issuance any
press release or any other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that the Company
shall
be entitled, without the prior approval of the Buyer(s), to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company shall
use
its best efforts to consult the Buyer(s) in connection with any such press
release or other public disclosure prior to its release and Buyer(s) shall
be
provided with a copy thereof upon release thereof).
(k) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(l) Termination.
In the
event that the First Closing shall not have occurred with respect to the Buyers
on or before five (5) business days from the date hereof due to the Company’s or
the Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
above (and the non-breaching party’s failure to waive such unsatisfied
condition(s)), the non-breaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on
such
date without liability of any party to any other party; provided, however,
that
if this Agreement is terminated by the Company pursuant to this Section 9(l),
the Company shall remain obligated to reimburse the Buyer(s) for the fees and
expenses of Yorkville Advisors LLC described in Section 4(g) above.
(m) Brokerage.
The
Company represents that no broker, agent, finder or other party has been
retained by it in connection with the transactions contemplated hereby and
that
no other fee or commission has been agreed by the Company to be paid for or
on
account of the transactions contemplated hereby.
(n) No
Strict Construction.
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.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
Buyers and the Company have caused this Securities Purchase Agreement to be
duly
executed as of the date first written above.
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
| |
|
| |
By:/s/
Charles T. Jensen
|
| |
Name:
Charles T. Jensen
|
| |
Title:
President & Chief Executive Officer
|
| |
|
SCHEDULE
I
SCHEDULE
OF BUYERS
|
Name
|
|
Signature
|
|
Address/Facsimile
Number
of Buyer
|
|
Amount
of Subscription
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Cornell
Capital Partners, LP
|
|
By: Yorkville
Advisors, LLC
|
|
101
Hudson Street - Suite 3700
|
|
$4,000,000
|
| |
|
Its: General
Partner
|
|
Jersey
City, NJ 07303
|
|
|
| |
|
|
|
Facsimile: (201)
985-8266
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|
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| |
|
|
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|
|
| |
|
By:___________________
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|
|
|
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| |
|
Name: Mark
Angelo
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|
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| |
|
Its: Portfolio
Manager
|
|
|
|
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| |
|
|
|
|
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|
|
With
a copy to:
|
|
David
Gonzalez, Esq.
|
|
101
Hudson Street - Suite 3700
|
|
|
| |
|
|
|
Jersey
City, NJ 07302
|
|
|
| |
|
|
|
Facsimile:
(201) 985-8266
|
|
|
| |
|
|
|
|
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| |
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|
|
|
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|
DISCLOSURE
SCHEDULE
EXHIBIT
A
LOCK
UP AGREEMENT
The
undersigned hereby agrees that for a period commencing on August ___, 2006
and
expiring on the date thirty (30) days after the date that all amounts owed
to
Cornell Capital Partners, LP (the “Investor”),
under
the Secured Convertible Debentures issued to the Investor pursuant to the
Securities Purchase Agreement between Neomedia Technologies, Inc. (the
“Company”)
and
the Investor dated August ___, 2006 have been paid (the “Lock-up
Period”),
he,
she or it will not, directly or indirectly, without the prior written consent
of
the Investor, issue, offer, agree or offer to sell, sell, grant an option for
the purchase or sale of, transfer, pledge, assign, hypothecate, distribute
or
otherwise encumber or dispose of any securities of the Company, including common
stock or options, rights, warrants or other securities underlying, convertible
into, exchangeable or exercisable for or evidencing any right to purchase or
subscribe for any common stock (whether or not beneficially owned by the
undersigned), or any beneficial interest therein (collectively, the
“Securities”)
except
in accordance with the volume limitations set forth in Rule 144(e) of the
General Rules and Regulations under the Securities Act of 1933, as
amended.
In
order
to enable the aforesaid covenants to be enforced, the undersigned hereby
consents to the placing of legends and/or stop-transfer orders with the transfer
agent of the Company’s securities with respect to any of the Securities
registered in the name of the undersigned or beneficially owned by the
undersigned, and the undersigned hereby confirms the undersigned’s investment in
the Company.
Dated:
_______________, 2006
Signature
____________________________________
Name:
____________________________________
Address:
City,
State, Zip
Code:
___________________________________
Print
Social Security Number
or
Taxpayer I.D. Number
INVESTOR
REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT
(this
“Agreement”),
dated
as of August 24, 2006, by and among NEOMEDIA
TECHNOLOGIES, INC.,
a
Delaware corporation (the “Company”),
and
the undersigned investors listed on Schedule I attached hereto (each, an
“Investor”
and
collectively, the “Investors”).
WHEREAS:
A. In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “Securities
Purchase Agreement”),
the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Investors secured
convertible debentures (the “Convertible
Debentures”)
which
shall be convertible into that number of shares of the Company’s common stock,
par value $0.01 per share (the “Common
Stock”),
pursuant to the terms of the Securities Purchase Agreement for an aggregate
purchase price of up to Five Million Dollars ($5,000,000). Capitalized
terms not defined herein shall have the meaning ascribed to them in the
Securities Purchase Agreement.
B. To
induce
the Investors to execute and deliver the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “Securities
Act”),
and
applicable state securities laws.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and the Investors hereby agree as
follows:
1. DEFINITIONS.
As
used
in this Agreement, the following terms shall have the following
meanings:
(a) “Person”
means
a
corporation, a limited liability company, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
(b) “Register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the Securities Act and pursuant
to Rule 415 under the Securities Act or any successor rule providing for
offering securities on a continuous or delayed basis (“Rule
415”),
and
the declaration or ordering of effectiveness of such Registration Statement(s)
by the United States Securities and Exchange Commission (the “SEC”).
(c) “Registrable
Securities”
means
the shares of Common Stock issuable to the Investors upon conversion of the
Convertible Debentures pursuant to the Securities Purchase Agreement and the
Warrant Shares, as this term is defined in the Securities Purchase
Agreement.
(d) “Registration
Statement”
means
a
registration statement under the Securities Act which covers the Registrable
Securities.
2. REGISTRATION.
(a) Subject
to the terms and conditions of this Agreement, the Company shall prepare and
file, no later than thirty (30) days from the date hereof (the “Scheduled
Filing Deadline”),
with
the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is
then
eligible, on Form S-3) under the Securities Act (the “Initial
Registration Statement”)
for
the resale by the Investors of the Registrable Securities, which includes at
least 76,277,650 shares of Common Stock to be issued upon conversion of the
Convertible Debentures as well as one hundred seventy five million (175,000,000)
Warrant Shares. The Company shall cause the Registration Statement to remain
effective until all of the Registrable Securities have been sold. Prior to
the
filing of the Registration Statement with the SEC, the Company shall furnish
a
copy of the Initial Registration Statement to the Investors for their review
and
comment. The Investors shall furnish comments on the Initial Registration
Statement to the Company within twenty-four (24) hours of the receipt thereof
from the Company.
(b) Effectiveness
of the Initial Registration Statement.
The
Company shall use its best efforts (i) to have the Initial Registration
Statement declared effective by the SEC no later than ninety (90) days from
the
date hereof (the “Scheduled
Effective Deadline”)
and
(ii) to insure that the Initial Registration Statement and any subsequent
Registration Statement remains in effect until all of the Registrable Securities
have been sold, subject to the terms and conditions of this
Agreement.
(c) Failure
to File or Obtain Effectiveness of the Registration Statement.
In the
event the Registration Statement is not filed by the Scheduled Filing Deadline
or is not declared effective by the SEC on or before the Scheduled Effective
Date, or if after the Registration Statement has been declared effective by
the
SEC, sales cannot be made pursuant to the Registration Statement (whether
because of a failure to keep the Registration Statement effective, failure
to
disclose such information as is necessary for sales to be made pursuant to
the
Registration Statement, failure to register sufficient shares of Common Stock
or
otherwise) then as partial relief for the damages to any holder of Registrable
Securities by reason of any such delay in or reduction of its ability to sell
the underlying shares of Common Stock (which remedy shall not be exclusive
of
any other remedies at law or in equity), the Company will pay as liquidated
damages (the “Liquidated
Damages”)
to the
holder, at the holder’s option, either a cash amount or shares of the Company’s
Common Stock within three (3) business days, after demand therefore, equal
to
two percent (2%) of the liquidated value of the Convertible Debentures
outstanding as Liquidated Damages for each thirty (30) day period after the
Scheduled Filing Deadline or the Scheduled Effective Date as the case may be.
Notwithstanding anything herein to the contrary, in no event shall Liquidated
Damages exceed twenty percent (20%) of the aggregate Purchase Price for all
Investors.
(d) Liquidated
Damages.
The
Company and the Investor hereto acknowledge and agree that the sums payable
under subsection 2(c) above shall constitute liquidated damages and not
penalties and are in addition to all other rights of the Investor, including
the
right to call a default. The parties further acknowledge that (i) the amount
of
loss or damages likely to be incurred is incapable or is difficult to precisely
estimate, (ii) the amounts specified in such subsections bear a reasonable
relationship to, and are not plainly or grossly disproportionate to, the
probable loss likely to be incurred in connection with any failure by the
Company to obtain or maintain the effectiveness of a Registration Statement,
(iii) one of the reasons for the Company and the Investor reaching an agreement
as to such amounts was the uncertainty and cost of litigation regarding the
question of actual damages, and (iv) the Company and the Investor are
sophisticated business parties and have been represented by sophisticated and
able legal counsel and negotiated this Agreement at arm’s length.
3. RELATED
OBLIGATIONS.
(a) The
Company shall keep the Registration Statement effective pursuant to
Rule 415 at all times until the date on which the Investor shall have sold
all the Registrable Securities covered by such Registration Statement (the
“Registration
Period”),
which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any 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 light of the circumstances in
which
they were made, not misleading.
(b) The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the Securities Act, as
may
be necessary to keep such Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the provisions
of
the Securities Act with respect to the disposition of all Registrable Securities
of the Company covered by such Registration Statement until such time as all
of
such Registrable Securities shall have been disposed of in accordance with
the
intended methods of disposition by the seller or sellers thereof as set forth
in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company’s filing a
report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
the
Company shall incorporate such report by reference into the Registration
Statement, if applicable, or shall file such amendments or supplements with
the
SEC on the same day on which the Exchange Act report is filed which created
the
requirement for the Company to amend or supplement the Registration Statement.
(c) The
Company shall furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge, (i) at least one (1) copy of
such
Registration Statement as declared effective by the SEC and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference, all exhibits and each preliminary prospectus,
(ii) ten (10) copies of the final prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number
of
copies as such Investor may reasonably request) and (iii) such other documents
as such Investor may reasonably request from time to time in order to facilitate
the disposition of the Registrable Securities owned by such
Investor.
(d) The
Company shall use its best efforts to (i) register and qualify the Registrable
Securities covered by a Registration Statement under such other securities
or
“blue sky” laws of such jurisdictions in the United States as any Investor
reasonably requests, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not
be
required in connection therewith or as a condition thereto to (w) make any
change to its articles of incorporation or by-laws, (x) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but
for
this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “blue sky” laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
(e) As
promptly as practicable after becoming aware of such event or development,
the
Company shall notify each Investor in writing of the happening of any event
as a
result of which the prospectus included in a Registration Statement, as then
in
effect, includes an untrue statement of a material fact or omission to state
a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material,
nonpublic information), and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor. The Company
shall also promptly notify each Investor in writing (i) when a prospectus or
any
prospectus supplement or post-effective amendment has been filed, and when
a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness), (ii) of any request by the
SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company’s reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(f) The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction within the United States of America and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension
at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) At
the
reasonable request of any Investor, the Company shall furnish to such Investor,
on the date of the effectiveness of the Registration Statement and thereafter
from time to time on such dates as an Investor may reasonably request (i) a
letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
and (ii) an opinion, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement, in form, scope and substance as
is
customarily given in an underwritten public offering, addressed to the
Investors.
(h) The
Company shall make available for inspection by (i) any Investor and
(ii) one (1) firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”)
all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the “Records”),
as
shall be reasonably deemed necessary by each Inspector, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree,
and
each Investor hereby agrees, to hold in strict confidence and shall not make
any
disclosure (except to an Investor) or use any Record or other information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of
such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the Securities Act, (b)
the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction,
or
(c) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement
of
which the Inspector and the Investor has knowledge. Each Investor agrees that
it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
(i) The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure
of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor’s
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
(j) The
Company shall use its best efforts either to cause all the Registrable
Securities covered by a Registration Statement (i) to be listed on each
securities exchange on which securities of the same class or series issued
by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii) the
inclusion for quotation on the National Association of Securities Dealers,
Inc.
OTC Bulletin Board for such Registrable Securities. The Company shall pay all
fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and, to the extent applicable, to facilitate the timely preparation
and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Investors may reasonably request and registered in such names as
the
Investors may request.
(l) The
Company shall use its best efforts to cause the Registrable Securities covered
by the applicable Registration Statement to be registered with or approved
by
such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.
(m) The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of
Rule 158 under the Securities Act) covering a twelve (12) month period beginning
not later than the first day of the Company’s fiscal quarter next following the
effective date of the Registration Statement.
(n) The
Company shall otherwise use its best efforts to comply with all applicable
rules
and regulations of the SEC in connection with any registration
hereunder.
(o) Within
two (2) business days after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent
for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit
A.
(p) The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of Registrable Securities pursuant
to a
Registration Statement.
4. OBLIGATIONS
OF THE INVESTORS.
Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or receipt
of
notice that no supplement or amendment is required. Notwithstanding anything
to
the contrary, the Company shall cause its transfer agent to deliver unlegended
certificates for shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an Investor has
entered into a contract for sale prior to the Investor’s receipt of a notice
from the Company of the happening of any event of the kind described in Section
3(f) or the first sentence of 3(e) and for which the Investor has not yet
settled.
5. EXPENSES
OF REGISTRATION.
All
expenses incurred in connection with registrations, filings or qualifications
pursuant to Sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers, legal and accounting fees shall
be
paid by the Company.
6. INDEMNIFICATION.
With
respect to Registrable Securities which are included in a Registration Statement
under this Agreement:
(a) To
the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, the directors, officers, partners,
employees, agents, representatives of, and each Person, if any, who controls
any
Investor within the meaning of the Securities Act or the Exchange Act (each,
an
“Indemnified
Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
expenses, joint or several (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified
Damages”),
to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon: (i) any untrue statement or alleged untrue statement of
a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue
Sky Filing”),
or
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation there under
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the foregoing clauses (i) through (iii)
being, collectively, “Violations”).
The
Company shall reimburse the Investors and each such controlling person promptly
as such expenses are incurred and are due and payable, for any legal fees or
disbursements or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (y) shall not
be
available to the extent such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company, if such prospectus was timely made available by the Company pursuant
to
Section 3(c); and (z) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9
hereof.
(b) In
connection with a Registration Statement, each Investor agrees to severally
and
not jointly indemnify, hold harmless and defend, to the same extent and in
the
same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers, employees, representatives, or agents and each Person,
if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (each an “Indemnified
Party”),
against any Claim or Indemnified Damages to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim or Indemnified Damages arise out of or is based upon any Violation,
in each case to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6(d), such Investor will reimburse any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only
that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds
to
such Investor as a result of the sale of Registrable Securities pursuant to
such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
prospectus was corrected and such new prospectus was delivered to each Investor
prior to such Investor’s use of the prospectus to which the Claim
relates.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any
indemnifying party under this Section 6, deliver to the indemnifying party
a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses of
not
more than one (1) counsel for such Indemnified Person or Indemnified Party
to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by
such
counsel in such proceeding. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for
any
settlement of any action, claim or proceeding effected without its prior written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of
a
release from all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter
for
which indemnification has been made. The failure to deliver written notice
to
the indemnifying party within a reasonable time of the commencement of any
such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
(d) The
indemnification required by this Section 6 shall be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.
(e) The
indemnity agreements contained herein shall be in addition to (i) any cause
of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that: (i) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by
such seller from the sale of such Registrable Securities.
8. REPORTS
UNDER THE EXCHANGE ACT.
With
a
view to making available to the Investors the benefits of Rule 144 promulgated
under the Securities Act or any similar rule or regulation of the SEC that
may
at any time permit the Investors to sell securities of the Company to the public
without registration (“Rule
144”)
the
Company agrees to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act so long as the Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company’s obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other documents as are
required by the applicable provisions of Rule 144; and
(c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied with
the reporting requirements of Rule 144, the Securities Act and the Exchange
Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the Investors to sell
such
securities pursuant to Rule 144 without registration.
9. AMENDMENT
OF REGISTRATION RIGHTS.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors
who
then hold at least two-thirds (2/3) of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 9 shall be binding upon
each Investor and the Company. No such amendment shall be effective to the
extent that it applies to fewer than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend
or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
10. MISCELLANEOUS.
(a) A
Person
is deemed to be a holder of Registrable Securities whenever such Person owns
or
is deemed to own of record such Registrable Securities or owns the right to
receive the Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two (2) or more Persons with respect
to
the same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
|
If
to the Company, to:
|
Neomedia
Technologies, Inc.
|
| |
2201
Second Street, Suite #600
|
| |
Fort
Myers, FL 33901
|
| |
Attention:
Charles T. Jensen, President
|
| |
Telephone: (239)
337-3434
|
| |
Facsimile: (239)
337-3668
|
| |
|
|
With
Copy to:
|
Kirkpatrick
& Lockhart Nicholson Graham LLP
|
| |
201
South Biscayne Boulevard - Suite 2000
|
| |
Miami,
FL 33131-2399
|
| |
Attention: Clayton
E. Parker, Esq.
|
| |
Telephone: (305)
539-3300
|
| |
Facsimile: (305)
358-7095
|
| |
|
If
to an
Investor, to its address and facsimile number on the Schedule of Investors
attached hereto, with copies to such Investor’s representatives as set forth on
the Schedule of Investors or to such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to
the
effectiveness of such change. Written confirmation of receipt (A) given by
the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
(d) The
laws
of the State of Delaware shall govern all issues concerning the relative rights
of the Company and the Investors as its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction
of the Superior Courts of the State of New Jersey, sitting in Hudson County,
New
Jersey and federal courts for the District of New Jersey sitting Newark, New
Jersey, for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
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
to
such party at the address for such 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. If any provision of
this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(e) This
Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase
Agreement and related documents including the Convertible Debenture and the
Pledge and Security Agreement dated the date hereof (the “Security
Agreement”)
and
the Warrants constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred
to
herein and therein. This Agreement, the Irrevocable Transfer Agent Instructions,
the Securities Purchase Agreement and related documents including the
Convertible Debenture, and the Security Agreement supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
(f) This
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
(g) The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(h) This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
(i) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
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.
(j) This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
IN
WITNESS WHEREOF,
the
parties have caused this Investor Registration Rights Agreement to be duly
executed as of day and year first above written.
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
| |
|
| |
By:/s/
Charles T. Jensen
|
| |
Name:
Charles T. Jensen
|
| |
Title:
President & Chief Executive Officer
|
| |
|
SCHEDULE
I
SCHEDULE
OF INVESTORS
|
Name
|
|
Signature
|
|
Address/Facsimile
Number
of Investors
|
| |
|
|
|
|
| |
|
|
|
|
|
Cornell
Capital Partners, LP
|
|
By: Yorkville
Advisors, LLC
|
|
101
Hudson Street - Suite 3700
|
| |
|
Its: General
Partner
|
|
Jersey
City, NJ 07303
|
| |
|
|
|
Facsimile: (201)
985-8266
|
| |
|
|
|
|
| |
|
By:
_____________________
|
|
|
| |
|
Name: Mark
Angelo
|
|
|
| |
|
Its: Portfolio
Manager
|
|
|
| |
|
|
|
|
|
With
a copy to:
|
|
David
Gonzalez, Esq.
|
|
101
Hudson Street - Suite 3700
|
| |
|
|
|
Jersey
City, NJ 07302
|
| |
|
|
|
Facsimile:
(201) 985-8266
|
| |
|
|
|
|
EXHIBIT
A
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
Attention:
| |
Re:
|
NEOMEDIA
TECHNOLOGIES, INC.
|
Ladies
and Gentlemen:
We
are
counsel to Neomedia Technologies, Inc., a Delaware corporation (the
“Company”),
and
have represented the Company in connection with that certain Securities Purchase
Agreement (the “Securities
Purchase Agreement”)
entered into by and among the Company and the investors named therein
(collectively, the “Investors”)
pursuant to which the Company issued to the Investors shares of its Common
Stock, par value $0.01 per share (the “Common
Stock”).
Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Investors (the “Investor
Registration Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement) under
the Securities Act of 1933, as amended (the “Securities
Act”).
In
connection with the Company’s obligations under the Registration Rights
Agreement, on ____________ ____, the Company filed a Registration Statement
on
Form ________ (File No. 333-_____________) (the “Registration
Statement”)
with
the Securities and Exchange SEC (the “SEC”)
relating to the Registrable Securities which names each of the Investors as
a
selling stockholder there under.
In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the Securities Act at [ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC
and
the Registrable Securities are available for resale under the Securities Act
pursuant to the Registration Statement.
Very
truly yours,
[Law
Firm]
By:________________________
cc: [LIST
NAMES OF INVESTORS]
PLEDGE
AND SECURITY
AGREEMENT
THIS
PLEDGE AND SECURITY AGREEMENT
(the
“Agreement”), is
entered into and made effective as of August 24, 2006, by and between
NEOMEDIA
TECHNOLOGIES, INC., a
Delaware corporation with its principal place of business located at 2201 Second
Street, Suite #600, Fort Myers, FL 33901 (the “Company”),
and
the BUYER(S)
(the
“Secured
Party”)
listed
on Schedule I attached to the Securities Purchase Agreement (the “Securities
Purchase Agreement”)
dated
the date hereof between the Company and the Secured Party.
WHEREAS,
the
Company shall issue and sell to the Secured Party, as provided in the Securities
Purchase Agreement of even date herewith between the Company and the Secured
Party (the “Securities
Purchase Agreement”),
and
the Secured Party shall purchase up to Five Million Dollars ($5,000,000) of
secured convertible debentures (the “Convertible
Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value $0.01
(the “Common
Stock”)
(as
converted, the “Conversion
Shares”)
in the
respective amounts set forth opposite each Buyer(s) name on Schedule I
attached to the Securities Purchase Agreement;
WHEREAS,
to
induce
the Secured Party to enter into the transaction contemplated by the Securities
Purchase Agreement, the Convertible Debentures, the Investor Registration Rights
Agreement of even date herewith between the Company and the Secured Party (the
“Investor
Registration Rights Agreement”),
the
Irrevocable Transfer Agent Instructions among the Company, the Secured Party,
American Stock Transfer & Trust Co., and David Gonzalez, Esq. (the
“Transfer
Agent Instructions”)
and
the Warrants, as defined in the Securities Purchase Agreement (collectively
referred to as the “Transaction
Documents”),
the
Company hereby grants to the Secured Party a security interest in and to the
pledged property identified on Exhibit
A
hereto
(collectively referred to as the “Pledged
Property”)
until
the satisfaction of the Obligations, as defined herein below.
NOW,
THEREFORE, in
consideration of the promises and the mutual covenants herein contained, and
for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE
1.
DEFINITIONS
AND INTERPRETATIONS
Section
1.1. Recitals.
The
above
recitals are true and correct and are incorporated herein, in their entirety,
by
this reference.
Section
1.2. Interpretations.
Nothing
herein expressed or implied is intended or shall be construed to confer upon
any
person other than the Secured Party any right, remedy or claim under or by
reason hereof.
Section
1.3. Obligations
Secured.
The
obligations secured hereby are any and all obligations of the Company now
existing or hereinafter incurred to the Secured Party, whether oral or written
and whether arising before, on or after the date hereof including, without
limitation, those obligations of the Company to the Secured Party under this
Agreement, the Transaction Documents, and any other amounts now or hereafter
owed to the Secured Party by the Company thereunder or hereunder (collectively,
the “Obligations”).
ARTICLE
2.
PLEDGED
PROPERTY, ADMINISTRATION OF COLLATERAL
AND
TERMINATION OF SECURITY INTEREST
Section
2.1. Pledged
Property.
(a) Company
hereby pledges to the Secured Party, and creates in the Secured Party for its
benefit, a security interest for such time until the Obligations are paid in
full, in and to all of the property of the Company as set forth in Exhibit “A”
attached
hereto and the products thereof and the proceeds of all such items
(collectively, the “Pledged
Property”):
(b) Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge, file, record and deliver to the Secured Party any
documents reasonably requested by the Secured Party, including one hundred
percent (100%) of the stock of each U.S. subsidiary of the Company, and stock
powers executed in blank to perfect its security interest in the Pledged
Property. Within thirty (30) days after the execution of this Agreement, the
Company shall deliver to the Secured Party one hundred percent (100%) of the
stock of each foreign subsidiary of the Company, and stock powers executed
in
blank to perfect its security interest in the Pledged Property. Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge and deliver to the Secured Party such documents and
instruments, including, without limitation, financing statements, certificates,
affidavits and forms as may, in the Secured Party’s reasonable judgment, be
necessary to effectuate, complete or perfect, or to continue and preserve,
the
security interest of the Secured Party in the Pledged Property, and the Secured
Party shall hold such documents and instruments as secured party, subject to
the
terms and conditions contained herein.
Section
2.2. Rights;
Interests; Etc.
(a) So
long
as no Event of Default (as hereinafter defined) shall have occurred and be
continuing:
(i) the
Company shall be entitled to exercise any and all rights pertaining to the
Pledged Property or any part thereof for any purpose not inconsistent with
the
terms hereof; and
(ii) the
Company shall be entitled to receive and retain any and all payments paid or
made in respect of the Pledged Property.
(b) Upon
the
occurrence and during the continuance of an Event of Default:
(i) All
rights of the Company to exercise the rights which it would otherwise be
entitled to exercise pursuant to Section 2.2(a)(i) hereof and to
receive payments which it would otherwise be authorized to receive and retain
pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all such
rights shall thereupon become vested in the Secured Party who shall thereupon
have the sole right to exercise such rights and to receive and hold as Pledged
Property such payments; provided,
however,
that if
the Secured Party shall become entitled and shall elect to exercise its right
to
realize on the Pledged Property pursuant to Article 5 hereof, then all cash
sums received by the Secured Party, or held by Company for the benefit of the
Secured Party and paid over pursuant to Section 2.2(b)(ii) hereof,
shall be applied against any outstanding Obligations; and
(ii) All
interest, dividends, income and other payments and distributions which are
received by the Company contrary to the provisions of
Section 2.2(b)(i) hereof shall be received in trust for the benefit of
the Secured Party, shall be segregated from other property of the Company and
shall be forthwith paid over to the Secured Party; or
(iii) The
Secured Party in its sole discretion shall be authorized to sell
any
or all of the Pledged Property at public or private sale in order to recoup
all
of the outstanding principal plus accrued interest owed pursuant to the
Convertible Debenture as described herein
(c) An
“Event
of Default”
shall
be deemed to have occurred under this Agreement upon an Event of Default under
the Convertible Debentures.
ARTICLE
3.
ATTORNEY-IN-FACT;
PERFORMANCE
Section
3.1. Secured
Party Appointed Attorney-In-Fact.
Upon
the
occurrence of an Event of Default, the Company hereby appoints the Secured
Party
as its attorney-in-fact, with full authority in the place and stead of the
Company and in the name of the Company or otherwise, from time to time in the
Secured Party’s discretion to take any action and to execute any instrument
which the Secured Party may reasonably deem necessary to accomplish the purposes
of this Agreement, including, without limitation, to receive and collect all
instruments made payable to the Company representing any payments in respect
of
the Pledged Property or any part thereof and to give full discharge for the
same. The Secured Party may demand, collect, receipt for, settle, compromise,
adjust, sue for, foreclose, or realize on the Pledged Property as and when
the
Secured Party may determine. To facilitate collection, the Secured Party may
notify account debtors and obligors on any Pledged Property to make payments
directly to the Secured Party.
Section
3.2. Secured
Party May Perform.
If
the
Company fails to perform any agreement contained herein, the Secured Party,
at
its option, may itself perform, or cause performance of, such agreement, and
the
expenses of the Secured Party incurred in connection therewith shall be included
in the Obligations secured hereby and payable by the Company under
Section 8.3.
ARTICLE
4.
REPRESENTATIONS
AND WARRANTIES
Section
4.1. Authorization;
Enforceability.
Each
of
the parties hereto represents and warrants that it has taken all action
necessary to authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby; and upon execution and delivery,
this
Agreement shall constitute a valid and binding obligation of the respective
party, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors’ rights or by the principles governing the
availability of equitable remedies.
Section
4.2. Ownership
of Pledged Property.
The
Company warrants and represents that it is the legal and beneficial owner of
the
Pledged Property free and clear of any lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement.
ARTICLE
5.
DEFAULT;
REMEDIES; SUBSTITUTE COLLATERAL
Section
5.1. Default
and Remedies.
(a) If
an
Event of Default occurs, then in each such case the Secured Party may declare
the Obligations to be due and payable immediately, by a notice in writing to
the
Company, and upon any such declaration, the Obligations shall become immediately
due and payable.
(b) Upon
the
occurrence of an Event of Default, the Secured Party shall: (i) be entitled
to receive all distributions with respect to the Pledged Property, (ii) to
cause the Pledged Property to be transferred into the name of the Secured Party
or its nominee, (iii) to dispose of the Pledged Property, and (iv) to
realize upon any and all rights in the Pledged Property then held by the Secured
Party.
Section
5.2. Method
of Realizing Upon the Pledged Property: Other Remedies.
Upon
the
occurrence of an Event of Default, in addition to any rights and remedies
available at law or in equity, the following provisions shall govern the Secured
Party’s right to realize upon the Pledged Property:
(a) Any
item
of the Pledged Property may be sold for cash or other value in any number of
lots at brokers board, public auction or private sale and may be sold without
demand, advertisement or notice (except that the Secured Party shall give the
Company ten (10) days’ prior written notice of the time and place or
of the time after which a private sale may be made (the “Sale
Notice”)),
which notice period is hereby agreed to be commercially reasonable. At any
sale
or sales of the Pledged Property, the Company may bid for and purchase the
whole
or any part of the Pledged Property and, upon compliance with the terms of
such
sale, may hold, exploit and dispose of the same without further accountability
to the Secured Party. The Company will execute and deliver, or cause to be
executed and delivered, such instruments, documents, assignments, waivers,
certificates, and affidavits and supply or cause to be supplied such further
information and take such further action as the Secured Party reasonably shall
require in connection with any such sale.
(b) Any
cash
being held by the Secured Party as Pledged Property and all cash proceeds
received by the Secured Party in respect of, sale of, collection from, or other
realization upon all or any part of the Pledged Property shall be applied as
follows:
(i) to
the
payment of all amounts due the Secured Party for the expenses reimbursable
to it
hereunder or owed to it pursuant to Section 8.3 hereof;
(ii) to
the
payment of the Obligations then due and unpaid.
(iii) the
balance, if any, to the person or persons entitled thereto, including, without
limitation, the Company.
(c) In
addition to all of the rights and remedies which the Secured Party may have
pursuant to this Agreement, the Secured Party shall have all of the rights
and
remedies provided by law, including, without limitation, those under the Uniform
Commercial Code.
(i) If
the
Company fails to pay such amounts due upon the occurrence of an Event of Default
which is continuing, then the Secured Party may institute a judicial proceeding
for the collection of the sums so due and unpaid, may prosecute such proceeding
to judgment or final decree and may enforce the same against the Company and
collect the monies adjudged or decreed to be payable in the manner provided
by
law out of the property of Company, wherever situated.
(ii) The
Company agrees that it shall be liable for any reasonable fees, expenses and
costs incurred by the Secured Party in connection with enforcement, collection
and preservation of the Transaction Documents, including, without limitation,
reasonable legal fees and expenses, and such amounts shall be deemed included
as
Obligations secured hereby and payable as set forth in Section 8.3
hereof.
Section
5.3. Proofs
of Claim.
In
case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relating to the Company or the property of the Company or of such
other obligor or its creditors, the Secured Party (irrespective of whether
the
Obligations shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Secured Party shall have made
any
demand on the Company for the payment of the Obligations), subject to the rights
of Previous Security Holders, shall be entitled and empowered, by intervention
in such proceeding or otherwise:
(i) to
file
and prove a claim for the whole amount of the Obligations and to file such
other
papers or documents as may be necessary or advisable in order to have the claims
of the Secured Party (including any claim for the reasonable legal fees and
expenses and other expenses paid or incurred by the Secured Party permitted
hereunder and of the Secured Party allowed in such judicial proceeding),
and
(ii) to
collect and receive any monies or other property payable or deliverable on
any
such claims and to distribute the same; and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by the Secured Party to make such payments
to
the Secured Party and, in the event that the Secured Party shall consent to
the
making of such payments directed to the Secured Party, to pay to the Secured
Party any amounts for expenses due it hereunder.
Section
5.4. Duties
Regarding Pledged Property.
The
Secured Party shall have no duty as to the collection or protection of the
Pledged Property or any income thereon or as to the preservation of any rights
pertaining thereto, beyond the safe custody and reasonable care of any of the
Pledged Property actually in the Secured Party’s possession.
ARTICLE
6.
AFFIRMATIVE
COVENANTS
The
Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4
hereof):
Section
6.1. Existence,
Properties, Etc.
(a) The
Company shall do, or cause to be done, all things, or proceed with due diligence
with any actions or courses of action, that may be reasonably necessary
(i) to maintain Company’s due organization, valid existence and good
standing under the laws of its state of incorporation, and (ii) to preserve
and keep in full force and effect all qualifications, licenses and registrations
in those jurisdictions in which the failure to do so could have a Material
Adverse Effect (as defined below); and (b) the Company shall not do, or
cause to be done, any act impairing the Company’s corporate power or authority
(i) to carry on the Company’s business as now conducted, and (ii) to
execute or deliver this Agreement or any other document delivered in connection
herewith, including, without limitation, any UCC-1 Financing Statements required
by the Secured Party to which it is or will be a party, any stock powers or
perform any of its obligations hereunder or thereunder. For purpose of this
Agreement, the term “Material
Adverse Effect”
shall
mean any material and adverse affect as determined by Secured Party in its
sole
discretion, whether individually or in the aggregate, upon (a) the
Company’s assets, business, operations, properties or condition, financial or
otherwise; (b) the Company’s to make payment as and when due of all or any
part of the Obligations; or (c) the Pledged Property.
Section
6.2. Financial
Statements and Reports.
The
Company shall furnish to the Secured Party within a reasonable time such
financial data as the Secured Party may reasonably request, including, without
limitation, the following:
(a) The
balance sheet of the Company as of the close of each fiscal year, the statement
of earnings and retained earnings of the Company as of the close of such fiscal
year, and statement of cash flows for the Company for such fiscal year, all
in
reasonable detail, prepared in accordance with generally accepted accounting
principles consistently applied, certified by the chief executive and chief
financial officers of the Company as being true and correct and accompanied
by a
certificate of the chief executive and chief financial officers of the Company,
stating that the Company has kept, observed, performed and fulfilled each
covenant, term and condition of this Agreement during such fiscal year and
that
no Event of Default hereunder has occurred and is continuing, or if an Event
of
Default has occurred and is continuing, specifying the nature of same, the
period of existence of same and the action the Company proposes to take in
connection therewith;
(b) A
balance
sheet of the Company as of the close of each month, and statement of earnings
and retained earnings of the Company as of the close of such month, all in
reasonable detail, and prepared substantially in accordance with generally
accepted accounting principles consistently applied, certified by the chief
executive and chief financial officers of the Company as being true and correct;
and
(c) Copies
of
all accountants' reports and accompanying financial reports submitted to the
Company by independent accountants in connection with each annual examination
of
the Company.
Section
6.3. Accounts
and Reports.
The
Company shall maintain a standard system of accounting in accordance with
generally accepted accounting principles consistently applied and provide,
at
its sole expense, to the Secured Party the following:
(a) as
soon
as available, a copy of any notice or other communication alleging any
nonpayment or other material breach or default, or any foreclosure or other
action respecting any material portion of its assets and properties, received
respecting any of the indebtedness of the Company in excess of $100,000 (other
than the Obligations), or any demand or other request for payment under any
guaranty, assumption, purchase agreement or similar agreement or arrangement
respecting the indebtedness or obligations of others in excess of $100,000,
including any received from any person acting on behalf of the Secured Party
or
beneficiary thereof; and
(b) within
fifteen (15) days after the making of each submission or filing, a copy of
any report, financial statement, notice or other document, whether periodic
or
otherwise, submitted to the shareholders of the Company, or submitted to or
filed by the Company with any governmental authority involving or affecting
(i)
the Company that could have a Material Adverse Effect; (ii) the
Obligations; (iii) any part of the Pledged Property; or (iv) any of
the transactions contemplated in this Agreement or the Loan
Instruments.
Section
6.4. Maintenance
of Books and Records; Inspection.
The
Company shall maintain its books, accounts and records in accordance with
generally accepted accounting principles consistently applied, and permit the
Secured Party, its officers and employees and any professionals designated
by
the Secured Party in writing, at any time to visit and inspect any of its
properties (including but not limited to the collateral security described
in
the Transaction Documents), corporate books and financial records, and to
discuss its accounts, affairs and finances with any employee, officer or
director thereof.
Section
6.5. Maintenance
and Insurance.
(a) The
Company shall maintain or cause to be maintained, at its own expense, all of
its
assets and properties in good working order and condition, making all necessary
repairs thereto and renewals and replacements thereof.
(b) The
Company shall maintain or cause to be maintained, at its own expense, insurance
in form, substance and amounts (including deductibles), which the Company deems
reasonably necessary to the Company’s business, (i) adequate to insure all
assets and properties of the Company, which assets and properties are of a
character usually insured by persons engaged in the same or similar business
against loss or damage resulting from fire or other risks included in an
extended coverage policy; (ii) against public liability and other tort
claims that may be incurred by the Company; (iii) as may be required by the
Transaction Documents and/or applicable law and (iv) as may be reasonably
requested by Secured Party, all with adequate, financially sound and reputable
insurers.
Section
6.6. Contracts
and Other Collateral.
The
Company shall perform all of its obligations under or with respect to each
instrument, receivable, contract and other intangible included in the Pledged
Property to which the Company is now or hereafter will be party on a timely
basis and in the manner therein required, including, without limitation, this
Agreement.
Section
6.7. Defense
of Collateral, Etc.
The
Company shall defend and enforce its right, title and interest in and to any
part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss could have a Material
Adverse Effect, the Company shall defend the Secured Party’s right, title and
interest in and to each and every part of the Pledged Property, each against
all
manner of claims and demands on a timely basis to the full extent permitted
by
applicable law.
Section
6.8. Payment
of Debts, Taxes, Etc.
The
Company shall pay, or cause to be paid, all of its indebtedness and other
liabilities and perform, or cause to be performed, all of its obligations in
accordance with the respective terms thereof, and pay and discharge, or cause
to
be paid or discharged, all taxes, assessments and other governmental charges
and
levies imposed upon it, upon any of its assets and properties on or before
the
last day on which the same may be paid without penalty, as well as pay all
other
lawful claims (whether for services, labor, materials, supplies or
otherwise) consistent with past practice.
Section
6.9. Taxes
and Assessments; Tax Indemnity.
The
Company shall (a) file all tax returns and appropriate schedules thereto
that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits or
upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or
levies that, if unpaid, might become a lien or charge upon any of its
properties; provided,
however,
that
the Company in good faith may contest any such tax, assessment, governmental
charge or levy described in the foregoing clauses (b) and (c) so long as
appropriate reserves are maintained with respect thereto.
Section
6.10. Compliance
with Law and Other Agreements.
The
Company shall maintain its business operations and property owned or used in
connection therewith in compliance with (a) all applicable federal, state
and local laws, regulations and ordinances governing such business operations
and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound. Without limiting
the
foregoing, the Company shall pay all of its indebtedness promptly in accordance
with the terms thereof.
Section
6.11. Notice
of Default.
The
Company shall give written notice to the Secured Party of the occurrence of
any
default or Event of Default under this Agreement, the Transaction Documents
or
any other Loan Instrument or any other agreement of Company for the payment
of
money, promptly upon the occurrence thereof.
Section
6.12. Notice
of Litigation.
The
Company shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Company, or affecting any of
the
assets of the Company, and (b) any dispute, not resolved within fifteen
(15) days of the commencement thereof, between the Company on the one hand
and
any governmental or regulatory body on the other hand, which might reasonably
be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Company.
ARTICLE
7.
NEGATIVE
COVENANTS
The
Company covenants and agrees that, from the date hereof until the Obligations
have been fully paid and satisfied, the Company shall not, unless the Secured
Party shall consent otherwise in writing:
Section
7.1. Indebtedness.
The
Company shall not directly or indirectly permit, create, incur, assume, permit
to exist, increase, renew or extend on or after the date hereof any indebtedness
on its part, including commitments, contingencies and credit availabilities,
or
apply for or offer or agree to do any of the foregoing, except in the ordinary
course of business.
Section
7.2. Liens
and Encumbrances.
The
Company shall not, and shall cause its subsidiaries now existing or later
created or acquired not to, directly or indirectly make, create, incur, assume
or permit to exist any assignment, transfer, pledge, mortgage, security interest
or other lien or encumbrance of any nature in, to or against any part of the
Pledged Property or of the Company’s capital stock, or of the capital stock or
assets of any subsidiary of the Company now existing or later created or
acquired, or offer or agree to do so, or own or acquire or agree to acquire
any
asset or property of any character subject to any of the foregoing encumbrances
(including any conditional sale contract or other title retention agreement),
or
assign, pledge or in any way transfer or encumber its right to receive any
income or other distribution or proceeds from any part of the Pledged Property
or of the Company’s capital stock, or of the capital stock or assets of any
subsidiary of the Company now existing or later created or acquired; or enter
into any sale-leaseback financing respecting any part of the Pledged Property
as
lessee, or cause or assist the inception or continuation of any of the
foregoing.
Section
7.3. Certificate
of Incorporation, By-Laws, Mergers, Consolidations, Acquisitions and
Sales.
Without
the prior express written consent of the Secured Party, the Company shall not:
(a) Amend its Certificate of Incorporation or By-Laws; (b) issue or sell
its stock, stock options, bonds, notes or other corporate securities or
obligations; (c) be a party to any merger, consolidation or corporate
reorganization, (d) purchase or otherwise acquire all or substantially all
of the assets or stock of, or any partnership or joint venture interest in,
any
other person, firm or entity, (e) sell, transfer, convey, grant a security
interest in or lease all or any substantial part of its assets, nor
(f) create any subsidiaries nor convey any of its assets to any
subsidiary.
Section
7.4. Management,
Ownership.
The
Company shall not materially change its ownership, executive staff or management
without the prior written consent of the Secured Party. The ownership, executive
staff and management of the Company are material factors in the Secured Party's
willingness to institute and maintain a lending relationship with the
Company.
Section
7.5. Dividends,
Etc.
The
Company shall not declare or pay any dividend of any kind, in cash or in
property, on any class of its capital stock, nor purchase, redeem, retire or
otherwise acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof, nor make any return of capital to shareholders,
nor make any payments in respect of any pension, profit sharing, retirement,
stock option, stock bonus, incentive compensation or similar plan (except as
required or permitted hereunder), without the prior written consent of the
Secured Party.
Section
7.6. Guaranties;
Loans.
The
Company shall not guarantee nor be liable in any manner, whether directly or
indirectly, or become contingently liable after the date of this Agreement
in
connection with the obligations or indebtedness of any person or persons, except
for (i) the indebtedness currently secured by the liens identified on the
Pledged Property identified on Exhibit A hereto and (ii) the endorsement of
negotiable instruments payable to the Company for deposit or collection in
the
ordinary course of business. The Company shall not make any loan, advance or
extension of credit to any person other than in the normal course of its
business.
Section
7.7. Debt.
The
Company shall not create, incur, assume or suffer to exist any additional
indebtedness of any description whatsoever in an aggregate amount in excess
of
$100,000 (excluding any indebtedness of the Company to the Secured Party, trade
accounts payable and accrued expenses incurred in the ordinary course of
business and the endorsement of negotiable instruments payable to the Company,
respectively for deposit or collection in the ordinary course of
business).
Section
7.8. Conduct
of Business.
The
Company will continue to engage, in an efficient and economical manner, in
a
business of the same general type as conducted by it on the date of this
Agreement.
Section
7.9. Places
of Business.
The
location of the Company’s chief place of business is 2201 2nd
Floor -
Suite 402 Fort Myers, FL 33901. The Company shall not change the location of
its
chief place of business, chief executive office or any place of business
disclosed to the Secured Party or move any of the Pledged Property from its
current location without thirty (30) days' prior written notice to the Secured
Party in each instance.
ARTICLE
8.
MISCELLANEOUS
Section
8.1. Notices.
All
notices or other communications required or permitted to be given pursuant
to
this Agreement shall be in writing and shall be considered as duly given on:
(a) the date of delivery, if delivered in person, by nationally recognized
overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:
|
If
to the Secured Party:
|
Cornell
Capital Partners, LP
|
| |
101
Hudson Street-Suite 3700
|
| |
Jersey
City, New Jersey 07302
|
| |
Attention: Mark
Angelo
|
| |
Portfolio Manager
|
| |
Telephone: (201)
986-8300
|
| |
Facsimile: (201)
985-8266
|
| |
|
|
With
a copy to:
|
David
Gonzalez, Esq.
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101
Hudson Street, Suite 3700
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Jersey
City, NJ 07302
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Telephone: (201)
985-8300
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Facsimile: (201)
985-8266
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And
if to the Company:
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Neomedia
Technologies, Inc.
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2201
Second Street, Suite #600
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Fort
Myers, FL 33901
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Attention:
Charles T. Jensen, President
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Telephone: (239)
337-3434
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Facsimile: (239)
337-3668
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With
a copy to:
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Kirkpatrick
& Lockhart Nicholson Graham, LLP
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201
South Biscayne Boulevard, Suite 2000
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Miami,
Florida 33131
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Attention: Clayton
E. Parker, Esq.
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Telephone: (305)
539-3306
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Facsimile: (305)
328-7095
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Any
party
may change its address by giving notice to the other party stating its new
address. Commencing on the tenth (10th) day
after the giving of such notice, such newly designated address shall be such
party’s address for the purpose of all notices or other communications required
or permitted to be given pursuant to this Agreement.
Section
8.2. Severability.
If
any
provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall attach only to such provision and shall
not
in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if
any
such invalid or unenforceable provision were not contained herein.
Section
8.3. Expenses.
In
the
event of an Event of Default, the Company will pay to the Secured Party the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel, which the Secured Party may incur in connection with:
(i) the custody or preservation of, or the sale, collection from, or other
realization upon, any of the Pledged Property; (ii) the exercise or
enforcement of any of the rights of the Secured Party hereunder or
(iii) the failure by the Company to perform or observe any of the
provisions hereof.
Section
8.4. Waivers,
Amendments, Etc.
The
Secured Party’s delay or failure at any time or times hereafter to require
strict performance by Company of any undertakings, agreements or covenants
shall
not waiver, affect, or diminish any right of the Secured Party under this
Agreement to demand strict compliance and performance herewith. Any waiver
by
the Secured Party of any Event of Default shall not waive or affect any other
Event of Default, whether such Event of Default is prior or subsequent thereto
and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Company contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party,
nor
may this Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument in writing
specifying such waiver, amendment, change or modification and signed by the
Secured Party.
Section
8.5. Continuing
Security Interest.
This
Agreement shall create a continuing security interest in the Pledged Property
and shall: (i) remain in full force and effect until payment in full of the
Obligations; and (ii) be binding upon the Company and its successors and
heirs and (iii) inure to the benefit of the Secured Party and its
successors and assigns. Upon the payment or satisfaction in full of the
Obligations, the Company shall be entitled to the return, at its expense, of
such of the Pledged Property as shall not have been sold in accordance with
Section 5.2 hereof or otherwise applied pursuant to the terms
hereof.
Section
8.6. Independent
Representation.
Each
party hereto acknowledges and agrees that it has received or has had the
opportunity to receive independent legal counsel of its own choice and that
it
has been sufficiently apprised of its rights and responsibilities with regard
to
the substance of this Agreement.
Section
8.7. Applicable
Law: Jurisdiction.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New Jersey without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in Hudson
County, New Jersey, and expressly consent to the jurisdiction and venue of
the
Superior Court of New Jersey, sitting in Hudson County and the United States
District Court for the District of New Jersey sitting in Newark, New Jersey
for
the adjudication of any civil action asserted pursuant to this
Paragraph.
Section
8.8. Waiver
of Jury Trial.
AS
A
FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO
MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES
ANY
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS
AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.
Section
8.9. Entire
Agreement.
This
Agreement constitutes the entire agreement among the parties and supersedes
any
prior agreement or understanding among them with respect to the subject matter
hereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the
parties hereto have executed this Pledge and Security Agreement as of the date
first above written.
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COMPANY:
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NEOMEDIA
TECHNOLOGIES, INC.
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By:
/s/
Charles T. Jensen
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Name:
Charles T. Jensen
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Title:
President & Chief Executive Officer
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SECURED
PARTY:
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CORNELL
CAPITAL PARTNERS, LP
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By: Yorkville
Advisors, LLC
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Its: General
Partner
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By:
/s/
Mark Angelo
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Name: Mark
Angelo
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Title: Portfolio
Manager
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EXHIBIT
A
DEFINITION
OF PLEDGED PROPERTY
For
the
purpose of securing prompt and complete payment and performance by the Company
of all of the Obligations, the Company unconditionally and irrevocably hereby
grants to the Secured Party a continuing security interest in and to, and lien
upon, the following Pledged Property of the Company:
(a) all
goods
of the Company, including, without limitation, machinery, equipment, furniture,
furnishings, fixtures, signs, lights, tools, parts, supplies and motor vehicles
of every kind and description, now or hereafter owned by the Company or in
which
the Company may have or may hereafter acquire any interest, and all
replacements, additions, accessions, substitutions and proceeds thereof, arising
from the sale or disposition thereof, and where applicable, the proceeds of
insurance and of any tort claims involving any of the foregoing;
(b) all
inventory of the Company, including, but not limited to, all goods, wares,
merchandise, parts, supplies, finished products, other tangible personal
property, including such inventory as is temporarily out of Company’s custody or
possession and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any
of
the foregoing;
(c) all
contract rights and general intangibles of the Company, including, without
limitation, all of the capital stock owned by the Company in any of its
Subsidiaries now existing or later created or acquired, goodwill, trademarks,
trade styles, trade names, leasehold interests, partnership or joint venture
interests, patents and patent applications, copyrights, deposit accounts whether
now owned or hereafter created"
including;
(d) all
documents, warehouse receipts, instruments and chattel paper of the Company
whether now owned or hereafter created;
(e) all
accounts and other receivables, instruments or other forms of obligations and
rights to payment of the Company (herein collectively referred to as
“Accounts”),
together with the proceeds thereof, all goods represented by such Accounts
and
all such goods that may be returned by the Company’s customers, and all proceeds
of any insurance thereon, and all guarantees, securities and liens which the
Company may hold for the payment of any such Accounts including, without
limitation, all rights of stoppage in transit, replevin and reclamation and
as
an unpaid vendor and/or lienor, all of which the Company represents and warrants
will be bona fide and existing obligations of its respective customers, arising
out of the sale of goods by the Company in the ordinary course of
business;
(f) to
the
extent assignable, all of the Company’s rights under all present and future
authorizations, permits, licenses and franchises issued or granted in connection
with the operations of any of its facilities;
(g) all
equity interests, securities or other instruments in other companies, including,
without limitation, any subsidiaries, investments or other entities (whether
or
not controlled); and
(h) all
products and proceeds (including, without limitation, insurance proceeds) from
the above-described Pledged Property.
Dated:
August 24, 2006
NEITHER
THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS 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 ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
NEOMEDIA
TECHNOLOGIES, INC.
Secured
Convertible Debenture
Due
August 24, 2008
This
Secured Convertible Debenture (the “Debenture”)
is
issued by NEOMEDIA
TECHNOLOGIES, INC., a
Delaware corporation (the “Obligor”),
to
CORNELL
CAPITAL PARTNERS, LP
(the
“Holder”),
pursuant to that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”)
of
even date herewith.
FOR
VALUE RECEIVED,
the
Obligor hereby promises to pay to the Holder or its successors and assigns
the
principal sum of Five Million Dollars ($5,000,000) together with accrued but
unpaid interest on or before August 24, 2008 (the “Maturity
Date”)
in
accordance with the following terms:
Interest.
Interest shall accrue on the outstanding principal balance hereof at an annual
rate equal to ten percent (10%). Interest shall be calculated on the basis
of a
365-day year and the actual number of days elapsed, to the extent permitted
by
applicable law. Interest hereunder will be paid to the Holder or its assignee
(as defined in Section
5)
in
whose name this Debenture is registered on the records of the Obligor regarding
registration and transfers of Debentures (the “Debenture
Register”).
Right
of Redemption.
The
Obligor at its option shall have the right, with three (3) business days advance
written notice (the “Redemption
Notice”),
to
redeem a portion or all amounts outstanding under this Debenture prior to the
Maturity Date provided that the Closing Bid Price of the of the Obligor’s Common
Stock, as reported by Bloomberg, LP, is less than the Fixed Conversion Price
at
the time of the Redemption Notice. The Obligor shall pay an amount equal to
the
principal amount being redeemed plus a redemption premium (“Redemption
Premium”)
equal
to twenty percent (20%) of the principal amount being redeemed, and accrued
interest, (collectively referred to as the “Redemption
Amount”).
The
Obligor shall deliver to the Holder the Redemption Amount on the third
(3rd)
business day after the Redemption Notice.
Notwithstanding
the foregoing in the event that the Obligor has elected to redeem a portion
of
the outstanding principal amount and accrued interest under this Debenture
the
Holder shall be permitted to convert all or any portion of this Debenture during
such three business day period.
Security
Agreements.
This
Debenture is secured by a Pledge and Security Agreement (the “Security
Agreement”)
of
even date herewith between the Obligor and the Holder.
Consent
of Holder to Sell Capital Stock or Grant Security Interests.
So
long
as any of the principal amount or interest on this Debenture remains unpaid
and
unconverted, the Obligor shall not, and
with
respect to subsection (iii) herein shall cause its subsidiaries now existing
or
later created or acquired not to, without
the prior consent of the Holder, (i) issue or sell any shares of Common
Stock or preferred stock without consideration or for consideration per share
less than the Closing Bid Price of the Common Stock determined immediately
prior
to its issuance, (ii) issue or sell any preferred stock, warrant, option,
right, contract, call, or other security or instrument granting the holder
thereof the right to acquire Common Stock without consideration or for
consideration per share less than the Closing Bid Price of the Common Stock
determined immediately prior to its issuance, (iii)
enter into any security instrument granting the holder a security interest
in
any of the assets of the Obligor or any of its subsidiaries now existing or
later created or acquired or
(iv)
file any
registration statements on Form S-8.
Rights
of First Refusal.
So long as any portion of this Debenture is outstanding (including principal
or
accrued interest), if the Obligor intends to raise additional capital by the
issuance or sale of capital stock of the Obligor, including without limitation
shares of any class of Common Stock, any class of preferred stock, options,
warrants or any other securities convertible or exercisable into shares of
Common Stock (whether the offering is conducted by the Obligor, underwriter,
placement agent or any third party) the Obligor shall be obligated to offer
to
the Holder such issuance or sale of capital stock, by providing in writing
the
principal amount of capital it intends to raise and outline of the material
terms of such capital raise, prior to the offering such issuance or sale of
capital stock to any third parties including, but not limited to, current
or former officers or directors, current or former shareholders and/or investors
of the obligor, underwriters, brokers, agents or other third parties. The
Holder shall have ten (10) Business Days from receipt of such notice of the
sale
or issuance of capital stock to accept or reject all or a portion of such
capital raising offer.
This
Debenture is subject to the following additional provisions:
Section
1. This
Debenture is exchangeable for an equal aggregate principal amount of Debentures
of different authorized denominations, as requested by the Holder surrendering
the same. No service charge will be made for such registration of transfer
or
exchange.
Section
2. Events
of Default.
(a) An
“Event
of Default”,
wherever used herein, 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) Any
default in the payment of the principal of, interest on or other charges in
respect of this Debenture, free of any claim of subordination, as and when
the
same shall become due and payable (whether on a due date, a Conversion Date
or
the Maturity Date or by acceleration or otherwise);
(ii) The
Obligor shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach or default of any
provision of this Debenture (except as may be covered by Section
2(a)(i)
hereof)
or any Transaction Document (as defined in Section
5)
which
is not cured with in the time prescribed;
(iii) The
Obligor or any subsidiary of the Obligor shall commence, or there shall be
commenced against the Obligor or any subsidiary of the Obligor under any
applicable bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or the Obligor or any subsidiary of the Obligor commences
any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of
any
jurisdiction whether now or hereafter in effect relating to the Obligor or
any
subsidiary of the Obligor or there is commenced against the Obligor or any
subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Obligor or any
subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order
of
relief or other order approving any such case or proceeding is entered; or
the
Obligor or any subsidiary of the Obligor suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for
a
period of sixty one (61) days; or the Obligor or any subsidiary of the Obligor
makes a general assignment for the benefit of creditors; or the Obligor or
any
subsidiary of the Obligor shall fail to pay, or shall state that it is unable
to
pay, or shall be unable to pay, its debts generally as they become due; or
the
Obligor or any subsidiary of the Obligor shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Obligor or any subsidiary of the Obligor shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence
in
any of the foregoing; or any corporate or other action is taken by the Obligor
or any subsidiary of the Obligor for the purpose of effecting any of the
foregoing;
(iv) The
Obligor or any subsidiary of the Obligor shall default in any of its obligations
under any other debenture 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 Obligor or any subsidiary of the Obligor in an amount
exceeding $100,000, whether such indebtedness now exists or shall hereafter
be
created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;
(v) The
Common Stock shall cease to be quoted for trading or listing for trading on
either the Nasdaq OTC Bulletin Board (“OTC”),
or if
then listed on Nasdaq Capital Market, New York Stock Exchange, American Stock
Exchange or the Nasdaq National Market (each, a “Subsequent
Market”)
shall
cease to be quoted for trading or listing on such Subsequent Market and shall
not again be quoted or listed for trading thereon within five (5) Trading Days
of such delisting;
(vi) The
Obligor or any subsidiary of the Obligor shall be a party to any Change of
Control Transaction (as defined in Section
5);
(vii) The
Obligor shall fail to file the Underlying Shares Registration Statement (as
defined in Section
5)
with
the Commission (as defined in Section
5),
or the
Underlying Shares Registration Statement shall not have been declared effective
by the Commission, in each case within the time periods set forth in the
Investor Registration Rights Agreement (“Registration
Rights Agreement”)
of
even date herewith between the Obligor and the Holder;
(viii) If
the
effectiveness of the Underlying Shares Registration Statement lapses for any
reason or the Holder shall not be permitted to resell the shares of Common
Stock
underlying this Debenture under the Underlying Shares Registration Statement,
in
either case, for more than five (5) consecutive Trading Days or an aggregate
of
eight Trading Days (which need not be consecutive Trading Days);
(ix) The
Obligor shall fail for any reason to deliver Common Stock certificates to a
Holder prior to the fifth (5th)
Trading
Day after a Conversion Date or the Obligor shall provide notice to the Holder,
including by way of public announcement, at any time, of its intention not
to
comply with requests for conversions of this Debenture in accordance with the
terms hereof;
(x) The
Obligor shall fail for any reason to deliver the payment in cash pursuant to
a
Buy-In (as defined herein) within three (3) days after notice is claimed
delivered hereunder;
(b) During
the time that any portion of this Debenture is outstanding, if any Event of
Default has occurred, the full principal amount of this Debenture, together
with
interest and other amounts owing in respect thereof, to the date of acceleration
shall become at the Holder's election, immediately due and payable in cash,
provided
however,
the
Holder may request (but shall have no obligation to request) payment of such
amounts in Common Stock of the Obligor. In addition to any other remedies,
the
Holder shall have the right (but not the obligation) to convert this Debenture
at any time after (x) an Event of Default or (y) the Maturity Date at the
Conversion Price then in-effect. The Holder need not provide and the Obligor
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. Such declaration may be rescinded and
annulled by 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 thereon. Upon an Event of Default, notwithstanding any other
provision of this Debenture or any Transaction Document, the Holder shall have
no obligation to comply with or adhere to any limitations, if any, on the
conversion of this Debenture or the sale of the Underlying Shares.
Section
3. Conversion.
(a) Conversion
at Option of Holder.
(i) This
Debenture shall be convertible into shares of Common Stock at the option of
the
Holder, in whole or in part at any time and from time to time, after the
Original Issue Date (as defined in Section
5)
(subject to the limitations on conversion set forth in Section
3(b)
hereof).
The number of shares of Common Stock issuable upon a conversion hereunder equals
the quotient obtained by dividing (x) the outstanding amount of this Debenture
to be converted by (y) the Conversion Price (as defined in Section
3(c)(i)).
The
Obligor shall deliver Common Stock certificates to the Holder prior to the
Fifth
(5th)
Trading
Day after a Conversion Date.
(ii) Notwithstanding
anything to the contrary contained herein, if on any Conversion Date: (1) the
number of shares of Common Stock at the time authorized, unissued and unreserved
for all purposes, or held as treasury stock, is insufficient to pay principal
and interest hereunder in shares of Common Stock; (2) the Common Stock is not
listed or quoted for trading on the OTC or on a Subsequent Market; (3) the
Obligor has failed to timely satisfy its conversion; or (4) the issuance of
such
shares of Common Stock would result in a violation of Section
3(b),
then,
at the option of the Holder, the Obligor, in lieu of delivering shares of Common
Stock pursuant to Section
3(a)(i),
shall
deliver, within three (3) Trading Days of each applicable Conversion Date,
an
amount in cash equal to the product of the outstanding principal amount to
be
converted plus any interest due therein divided by the Conversion Price, chosen
by the Holder, and multiplied by the highest closing price of the stock from
date of the conversion notice till the date that such cash payment is
made.
Further,
if the Obligor shall not have delivered any cash due in respect of conversion
of
this Debenture or as payment of interest thereon by the fifth (5th)
Trading
Day after the Conversion Date, the Holder may, by notice to the Obligor, require
the Obligor to issue shares of Common Stock pursuant to Section
3(c),
except
that for such purpose the Conversion Price applicable thereto shall be the
lesser of the Conversion Price on the Conversion Date and the Conversion Price
on the date of such Holder demand. Any such shares will be subject to the
provisions of this Section.
(iii) The
Holder shall effect conversions by delivering to the Obligor a completed notice
in the form attached hereto as Exhibit A (a “Conversion
Notice”).
The
date on which a Conversion Notice is delivered is the “Conversion
Date.”
Unless
the Holder is converting the entire principal amount outstanding under this
Debenture, the Holder is not required to physically surrender this Debenture
to
the Obligor in order to effect conversions. Conversions hereunder shall have
the
effect of lowering the outstanding principal amount of this Debenture plus
all
accrued and unpaid interest thereon in an amount equal to the applicable
conversion. The Holder and the Obligor shall maintain records showing the
principal amount converted and the date of such conversions. In the event of
any
dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error.
(b) Certain
Conversion Restrictions.
(i) A
Holder
may not convert this Debenture or receive shares of Common Stock as payment
of
interest hereunder to the extent such conversion or receipt of such interest
payment would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon conversion of, and payment of interest on, this Debenture held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Obligor the number of shares of Common Stock it may hold at
the
time of a conversion hereunder, unless the conversion at issue would result
in
the issuance of shares of Common Stock in excess of 4.99% of the then
outstanding shares of Common Stock without regard to any other shares which
may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of this
Debenture is convertible shall be the responsibility and obligation of the
Holder. If the Holder has delivered a Conversion Notice for a principal amount
of this Debenture that, without regard to any other shares that the Holder
or
its affiliates may beneficially own, would result in the issuance in excess
of
the permitted amount hereunder, the Obligor shall notify the Holder of this
fact
and shall honor the conversion for the maximum principal amount permitted to
be
converted on such Conversion Date in accordance with the periods described
in
Section
3(a)(i)
and, at
the option of the Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future conversions
or
return such excess principal amount to the Holder. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than 65 days prior notice to the Obligor. Other Holders
shall be unaffected by any such waiver.
(c) Conversion
Price and Adjustments to Conversion Price.
(i) The
conversion price in effect on any Conversion Date shall be, at the sole option
of the Holder, equal to either (a) Fifteen Cents ($0.15) (the “Fixed
Conversion Price”)
or (b)
ninety percent (90%) of the lowest the closing Bid Price of the Common
Stock during the thirty (30) trading days immediately preceding the Conversion
Date as quoted by Bloomberg, LP (the “Market
Conversion Price”).
The
Fixed Conversion Price and the Market Conversion Price are collectively referred
to as the “Conversion
Price.”
The
Conversion Price may be adjusted pursuant to the other terms of this Debenture.
Notwithstanding the restriction set for the in Section 2(b)(ii) the Holder
shall
have the absolute right to convert any or all of this Debenture at the Fixed
Conversion Price free of such restriction.
(ii) If
the
Obligor, at any time while this Debenture is outstanding, shall (a) pay a
stock dividend or otherwise make a distribution or distributions on shares
of
its Common Stock or any other equity or equity equivalent securities payable
in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
a
larger number of shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (d)
issue
by reclassification of shares of the Common Stock any shares of capital stock
of
the Obligor, then the Fixed Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after
such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If
the
Obligor, at any time while this Debenture is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to the Holder)
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Fixed Conversion Price, then the Fixed Conversion Price
shall be multiplied by a fraction, of which the denominator shall be the number
of shares of the Common Stock (excluding treasury shares, if any) outstanding
on
the date of issuance of such rights or warrants (plus the number of additional
shares of Common Stock offered for subscription or purchase), and of which
the
numerator shall be the number of shares of the Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants,
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at the Fixed Conversion Price. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants. However,
upon
the expiration of any such right, option or warrant to purchase shares of the
Common Stock the issuance of which resulted in an adjustment in the Fixed
Conversion Price pursuant to this Section, if any such right, option or warrant
shall expire and shall not have been exercised, the Fixed Conversion Price
shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Fixed Conversion Price made pursuant
to
the provisions of this Section after the issuance of such rights or warrants)
had the adjustment of the Fixed Conversion Price made upon the issuance of
such
rights, options or warrants been made on the basis of offering for subscription
or purchase only that number of shares of the Common Stock actually purchased
upon the exercise of such rights, options or warrants actually
exercised.
(iv) If
the
Obligor or any subsidiary thereof, as applicable, at any time while this
Debenture is outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that are convertible into or
exchangeable for shares of Common Stock (“Common
Stock Equivalents”)
entitling any Person to acquire shares of Common Stock, at a price per share
less than the Fixed Conversion Price (if the holder of the Common Stock or
Common Stock Equivalent so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion, exercise
or
exchange prices or otherwise, or due to warrants, options or rights per share
which is issued in connection with such issuance, be entitled to receive shares
of Common Stock at a price per share which is less than the Fixed Conversion
Price, such issuance shall be deemed to have occurred for less than the Fixed
Conversion Price), then, at the sole option of the Holder, the Fixed Conversion
Price shall be adjusted to mirror the conversion, exchange or purchase price
for
such Common Stock or Common Stock Equivalents (including any reset provisions
thereof) at issue. Such adjustment shall be made whenever such Common Stock
or
Common Stock Equivalents are issued. The Obligor shall notify the Holder in
writing, no later than one (1) business day following the issuance of any Common
Stock or Common Stock Equivalent subject to this Section, indicating therein
the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms. No adjustment under this Section
shall
be made as a result of issuances and exercises of options to purchase shares
of
Common Stock issued for compensatory purposes pursuant to any of the Obligor's
stock option or stock purchase plans.
(v) If
the
Obligor, at any time while this Debenture is outstanding, shall distribute
to
all holders of Common Stock (and not to the Holder) evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Fixed Conversion Price at which this
Debenture shall thereafter be convertible shall be determined by multiplying
the
Fixed Conversion Price in effect immediately prior to the record date fixed
for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Closing Bid Price determined
as
of the record date mentioned above, and of which the numerator shall be such
Closing Bid Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) In
case
of any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash
or
property, the Holder shall have the right thereafter to, at its option, (A)
convert the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect of this
Debenture into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of the Common Stock following
such reclassification or share exchange, and the Holder of this Debenture shall
be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock of the Obligor into which the then
outstanding principal amount, together with all accrued but unpaid interest
and
any other amounts then owing hereunder in respect of this Debenture could have
been converted immediately prior to such reclassification or share exchange
would have been entitled, or (B) require the Obligor to prepay the outstanding
principal amount of this Debenture, plus all interest and other amounts due
and
payable thereon. The entire prepayment price shall be paid in cash. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(vii) The
Obligor shall at all times reserve and keep available out of its authorized
Common Stock the full number of shares of Common Stock issuable upon conversion
of all outstanding amounts under this Debenture; and within three (3) Business
Days following the receipt by the Obligor of a Holder's notice that such minimum
number of Underlying Shares is not so reserved, the Obligor shall promptly
reserve a sufficient number of shares of Common Stock to comply with such
requirement.
(viii) All
calculations under this Section
3
shall be
rounded to the nearest $0.0001 or whole share.
(ix) Whenever
the Conversion Price is adjusted pursuant to Section
3
hereof,
the Obligor shall promptly mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement
of
the facts requiring such adjustment.
(x) If
(A)
the Obligor shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Obligor shall declare a special nonrecurring cash dividend on
or
a redemption of the Common Stock; (C) the Obligor shall authorize the granting
to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Obligor shall be required in connection
with
any reclassification of the Common Stock, any consolidation or merger to which
the Obligor is a party, any sale or transfer of all or substantially all of
the
assets of the Obligor, of any compulsory share exchange whereby the Common
Stock
is converted into other securities, cash or property; or (E) the Obligor shall
authorize the voluntary or involuntary dissolution, liquidation or winding
up of
the affairs of the Obligor; then, in each case, the Obligor shall cause to
be
filed at each office or agency maintained for the purpose of conversion of
this
Debenture, and shall cause to be mailed to the Holder at its last address as
it
shall appear upon the stock books of the Obligor, at least twenty (20) calendar
days prior to the applicable record or effective date hereinafter specified,
a
notice stating (x) the date on which a record is to be taken for the purpose
of
such dividend, distribution, redemption, rights or warrants, or if a record
is
not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange,
provided, that the failure to mail such notice or any defect therein or in
the
mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice. The Holder is entitled to convert this Debenture
during the 20-day calendar period commencing the date of such notice to the
effective date of the event triggering such notice.
(xi) In
case
of any (1) merger or consolidation of the Obligor or any subsidiary of the
Obligor with or into another Person, or (2) sale by the Obligor or any
subsidiary of the Obligor of more than one-half of the assets of the Obligor
in
one or a series of related transactions, a Holder shall have the right to (A)
exercise any rights under Section
2(b),
(B)
convert the aggregate amount of this Debenture then outstanding into the shares
of stock and other securities, cash and property receivable upon or deemed
to be
held by holders of Common Stock following such merger, consolidation or sale,
and such Holder shall be entitled upon such event or series of related events
to
receive such amount of securities, cash and property as the shares of Common
Stock into which such aggregate principal amount of this Debenture could have
been converted immediately prior to such merger, consolidation or sales would
have been entitled, or (C) in the case of a merger or consolidation, require
the
surviving entity to issue to the Holder a convertible Debenture with a principal
amount equal to the aggregate principal amount of this Debenture then held
by
such Holder, plus all accrued and unpaid interest and other amounts owing
thereon, which such newly issued convertible Debenture shall have terms
identical (including with respect to conversion) to the terms of this Debenture,
and shall be entitled to all of the rights and privileges of the Holder of
this
Debenture set forth herein and the agreements pursuant to which this Debentures
were issued. In the case of clause (C), the conversion price applicable for
the
newly issued shares of convertible preferred stock or convertible Debentures
shall be based upon the amount of securities, cash and property that each share
of Common Stock would receive in such transaction and the Conversion Price
in
effect immediately prior to the effectiveness or closing date for such
transaction. The terms of any such merger, sale or consolidation shall include
such terms so as to continue to give the Holder the right to receive the
securities, cash and property set forth in this Section upon any conversion
or
redemption following such event. This provision shall similarly apply to
successive such events.
(d) Other
Provisions.
(i) The
Obligor covenants that it will at all times reserve and keep available out
of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of this Debenture and payment of interest on this
Debenture, each as herein provided, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holder, not less
than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Obligor as to reservation of such shares set
forth in this Debenture) be issuable (taking into account the adjustments and
restrictions of Sections
2(b) and 3(c))
upon
the conversion of the outstanding principal amount of this Debenture and payment
of interest hereunder. The Obligor covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly and validly authorized,
issued and fully paid, nonassessable and, if the Underlying Shares Registration
Statement has been declared effective under the Securities Act, registered
for
public sale in accordance with such Underlying Shares Registration
Statement.
(ii) Upon
a
conversion hereunder the Obligor shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but may
if
otherwise permitted, make a cash payment in respect of any final fraction of
a
share based on the Closing Bid Price at such time. If the Obligor elects not,
or
is unable, to make such a cash payment, the Holder shall be entitled to receive,
in lieu of the final fraction of a share, one whole share of Common
Stock.
(iii) The
issuance of certificates for shares of the Common Stock on conversion of this
Debenture shall be made without charge to the Holder thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Obligor shall not be required to pay
any
tax that may be payable in respect of any transfer involved in the issuance
and
delivery of any such certificate upon conversion in a name other than that
of
the Holder of such Debenture so converted and the Obligor shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Obligor the amount of
such tax or shall have established to the satisfaction of the Obligor that
such
tax has been paid.
(iv) Nothing
herein shall limit a Holder's right to pursue actual damages or declare an
Event
of Default pursuant to Section
2
herein
for the Obligor 's failure to deliver certificates representing shares of Common
Stock upon conversion within the period specified herein and such Holder shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief, in each case without the need to post a bond or provide
other
security. The exercise of any such rights shall not prohibit the Holder from
seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
(v) In
addition to any other rights available to the Holder, if the Obligor fails
to
deliver to the Holder such certificate or certificates pursuant to Section
3(a)(i) by
the
fifth (5th)
Trading
Day after the Conversion Date, and if after such fifth (5th)
Trading
Day the Holder purchases (in an open market transaction or otherwise) 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 Obligor shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
of Common Stock that such Holder anticipated receiving from the conversion
at
issue multiplied by (2) the market price of the Common Stock at the time of
the
sale giving rise to such purchase obligation and (B) at the option of the
Holder, either reissue a Debenture in the principal amount equal to the
principal amount of the attempted conversion or deliver to the Holder the number
of shares of Common Stock that would have been issued had the Obligor timely
complied with its delivery requirements under Section
3(a)(i).
For
example, if the Holder purchases Common Stock having a total purchase price
of
$11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
with respect to which the market price of the Underlying Shares on the date
of
conversion was a total of $10,000 under clause (A) of the immediately preceding
sentence, the Obligor shall be required to pay the Holder $1,000. The Holder
shall provide the Obligor written notice indicating the amounts payable to
the
Holder in respect of the Buy-In.
Section
4. Notices.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms hereof must be in writing and will be deemed to have
been
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when
sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
(1) trading day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same.
The
addresses and facsimile numbers for such communications shall be:
|
If
to the Company, to:
|
Neomedia
Technologies, Inc.
|
| |
2201
Second Street, Suite #600
|
| |
Fort
Myers, FL 33901
|
| |
Attention:
Charles T. Jensen, President
|
| |
Telephone: (239)
337-3434
|
| |
Facsimile: (239)
337-3668
|
| |
|
|
With
a copy to:
|
Kirkpatrick
& Lockhart Nicholson Graham LLP
|
| |
201
South Biscayne Boulevard - Suite 2000
|
| |
Miami,
FL 33131-2399
|
| |
Attention: Clayton
E. Parker, Esq.
|
| |
Telephone: (305)
539-3300
|
| |
Facsimile: (305)
358-7095
|
| |
|
|
If
to the Holder:
|
Cornell
Capital Partners, LP
|
| |
101
Hudson Street, Suite 3700
|
| |
Jersey
City, NJ 07303
|
| |
Attention: Mark
Angelo
|
| |
Telephone: (201)
985-8300
|
| |
Facsimile: (201)
985-8266
|
| |
|
|
With
a copy to:
|
David
Gonzalez, Esq.
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Telephone: (201)
985-8300
|
| |
Facsimile: (201)
985-8266
|
| |
|
or
at
such other address and/or facsimile number and/or to the attention of such
other
person as the recipient party has specified by written notice given to each
other party three (3) business days prior to the effectiveness of such change.
Written confirmation of receipt (i) given by the recipient of such notice,
consent, waiver or other communication, (ii) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (iii)
provided by a nationally recognized overnight delivery service, shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from
a
nationally recognized overnight delivery service in accordance with clause
(i),
(ii) or (iii) above, respectively.
Section
5. Definitions.
For the
purposes hereof, the following terms shall have the following
meanings:
“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States or a day on which banking institutions are
authorized or required by law or other government action to close.
“Change
of Control Transaction”
means
the occurrence of (a) an acquisition after the date hereof by an individual
or
legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Obligor, by contract or otherwise) of in
excess of fifty percent (50%) of the voting securities of the Obligor (except
that the acquisition of voting securities by the Holder shall not constitute
a
Change of Control Transaction for purposes hereof), (b) a replacement at one
time or over time of more than one-half of the members of the board of directors
of the Obligor which is not approved by a majority of those individuals who
are
members of the board of directors on the date hereof (or by those individuals
who are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the members
of the board of directors who are members on the date hereof), (c) the merger,
consolidation or sale of fifty percent (50%) or more of the assets of the
Obligor or any subsidiary of the Obligor in one or a series of related
transactions with or into another entity, or (d) the execution by the Obligor
of
an agreement to which the Obligor is a party or by which it is bound, providing
for any of the events set forth above in (a), (b) or (c).
“Closing
Bid Price”
means
the price per share in the last reported trade of the Common Stock on the OTC
or
on the exchange which the Common Stock is then listed as quoted by Bloomberg,
LP.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock, par value $0.01, of the Obligor and stock of any other class
into which such shares may hereafter be changed or reclassified.
“Conversion
Date”
shall
mean the date upon which the Holder gives the Obligor notice of their intention
to effectuate a conversion of this Debenture into shares of the Company’s Common
Stock as outlined herein.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Original
Issue Date”
shall
mean the date of the first issuance of this Debenture regardless of the number
of transfers and regardless of the number of instruments, which may be issued
to
evidence such Debenture.
“Person”
means
a
corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Trading
Day”
means
a
day on which the shares of Common Stock are quoted on the OTC or quoted or
traded on such Subsequent Market on which the shares of Common Stock are then
quoted or listed; provided, that in the event that the shares of Common Stock
are not listed or quoted, then Trading Day shall mean a Business
Day.
“Transaction
Documents”
means
the Securities Purchase Agreement or any other agreement delivered in connection
with the Securities Purchase Agreement, including, without limitation, the
Security Agreement, the Irrevocable Transfer Agent Instructions, the
Registration Rights Agreement, and the Warrants.
“Underlying
Shares”
means
the shares of Common Stock issuable upon conversion of this Debenture or as
payment of interest in accordance with the terms hereof.
“Underlying
Shares Registration Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering among other things the resale of the Underlying
Shares and naming the Holder as a “selling stockholder” thereunder.
Section
6. Except
as
expressly provided herein, no provision of this Debenture shall alter or impair
the obligations of the Obligor, which are absolute and unconditional, to pay
the
principal of, interest and other charges (if any) on, this Debenture at the
time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Obligor. This Debenture ranks pari
passu
with all other Debentures now or hereafter issued under the terms set forth
herein. As long as this Debenture is outstanding, the Obligor shall not and
shall cause their subsidiaries not to, without the consent of the Holder, (i)
amend its certificate of incorporation, bylaws or other charter documents so
as
to adversely affect any rights of the Holder; (ii) repay, repurchase or offer
to
repay, repurchase or otherwise acquire shares of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or required under the Transaction Documents; or (iii) enter into any agreement
with respect to any of the foregoing.
Section
7. This
Debenture shall not entitle the Holder to any of the rights of a stockholder
of
the Obligor, including without limitation, the right to vote, to receive
dividends and other distributions, or to receive any notice of, or to attend,
meetings of stockholders or any other proceedings of the Obligor, unless and
to
the extent converted into shares of Common Stock in accordance with the terms
hereof.
Section
8. If
this
Debenture is mutilated, lost, stolen or destroyed, the Obligor shall execute
and
deliver, in exchange and substitution for and upon cancellation of the mutilated
Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
Debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Debenture, and of the ownership hereof,
and
indemnity, if requested, all reasonably satisfactory to the
Obligor.
Section
9. No
indebtedness of the Obligor is senior to this Debenture in right of payment,
whether with respect to interest, damages or upon liquidation or dissolution
or
otherwise. Without the Holder’s consent, the Obligor will not and will not
permit any of their subsidiaries 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 there from that is senior in any
respect to the obligations of the Obligor under this Debenture.
Section
10. This
Debenture shall be governed by and construed in accordance with the laws of
the
State of New Jersey, without giving effect to conflicts of laws thereof. Each
of
the parties consents to the jurisdiction of the Superior Courts of the State
of
New Jersey sitting in Hudson County, New Jersey and the U.S. District Court
for the District of New Jersey sitting in Newark, New Jersey in connection
with
any dispute arising under this Debenture and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on
forum non conveniens
to the
bringing of any such proceeding in such jurisdictions.
Section
11. If
the
Obligor fails to strictly comply with the terms of this Debenture, then the
Obligor shall reimburse the Holder promptly for all fees, costs and expenses,
including, without limitation, attorneys’ fees and expenses incurred by the
Holder in any action in connection with this Debenture, including, without
limitation, those incurred: (i) during any workout, attempted workout, and/or
in
connection with the rendering of legal advice as to the Holder’s rights,
remedies and obligations, (ii) collecting any sums which become due to the
Holder, (iii) defending or prosecuting any proceeding or any counterclaim to
any
proceeding or appeal; or (iv) the protection, preservation or enforcement of
any
rights or remedies of the Holder.
Section
12. Any
waiver by the Holder of a breach of any provision of this Debenture shall not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Debenture. The failure of the
Holder to insist upon strict adherence to any term of this Debenture on one
or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other
term
of this Debenture. Any waiver must be in writing.
Section
13. If
any
provision of this Debenture is invalid, illegal or unenforceable, the balance
of
this Debenture shall remain in effect, and if any provision is inapplicable
to
any person or circumstance, it shall nevertheless remain applicable to all
other
persons and circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder shall violate applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The Obligor covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Obligor from paying all or any portion of the principal of or
interest on this Debenture as contemplated herein, wherever enacted, now or
at
any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Obligor (to the extent it may lawfully
do
so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded
the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been
enacted.
Section
14. Whenever
any payment or other obligation hereunder shall be due on a day other than
a
Business Day, such payment shall be made on the next succeeding Business
Day.
Section
15. THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR
THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.
[REMAINDER
OF PAGE INTENTIONLLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
Obligor has caused this Secured Convertible Debenture to be duly executed by
a
duly authorized officer as of the date set forth above.
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
| |
|
| |
By:/s/Charles
T. Jensen
|
| |
Name:
Charles T. Jensen
|
| |
Title:
President & Chief Executive
Officer
|
EXHIBIT
“A”
NOTICE
OF CONVERSION
(To
be executed by the Holder in order to convert the
Debenture)
The
undersigned hereby irrevocably elects to convert
$______________________
of the
principal amount of the above Debenture into Shares of Common Stock of Neomedia
Technologies, Inc., according to the conditions stated therein, as of the
Conversion Date written below.
|
Conversion
Date:
|
|
|
Applicable
Conversion Price:
|
|
|
Signature:
|
|
|
Name:
|
|
|
Address:
|
|
|
Amount
to be converted:
|
$
|
|
Amount
of Debenture unconverted:
|
$
|
|
Conversion
Price per share:
|
$
|
|
Number
of shares of Common Stock to be issued:
|
|
|
Please
issue the shares of Common Stock in the following name and to the
following address:
|
|
|
Issue
to:
|
|
|
Authorized
Signature:
|
|
|
Name:
|
|
|
Title:
|
|
|
Phone
Number:
|
|
|
Broker
DTC Participant Code:
|
|
|
Account
Number:
|
|
IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS
August
24, 2006
|
American
Stock Transfer & Trust Company
|
|
6201
15th
Avenue, 3rd
Floor
|
|
Brooklyn,
NY 11219
|
RE: NEOMEDIA
TECHNOLOGIES, INC.
Ladies
and Gentlemen:
Reference
is made to that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”)
of
even date herewith by and between Neomedia Technologies, Inc, a Delaware
corporation (the “Company”),
and
the Buyers set forth on Schedule I attached thereto (collectively the
“Buyers”).
Pursuant to the Securities Purchase Agreement, the Company shall sell to the
Buyers, and the Buyers shall purchase from the Company, convertible debentures
(collectively, the “Debentures”)
in the
aggregate principal amount of Five Million Dollars ($5,000,000), plus accrued
interest, which are convertible into shares of the Company’s common stock, par
value $.001 per share (the “Common
Stock”),
at
the Buyers’ discretion. The Company has also issued to the Buyers warrants to
purchase up to 175,000,000 shares of Common Stock, at the Buyers’ discretion
(the “Warrant”).
These
instructions relate to the following stock or proposed stock issuances or
transfers:
| 1. |
76,277,650
Shares of Common Stock to be issued to the Buyers upon conversion
of the
Debentures (“Conversion
Shares”)
plus the shares of Common Stock to be issued to the Buyers upon conversion
of accrued interest and liquidated damages into Common Stock (the
“Interest
Shares”).
|
| 2. |
Up
to 175,000,000 shares of Common Stock to be issued to the Buyers
upon
exercise of the Warrant (the “Warrant
Shares”).
|
This
letter shall serve as our irrevocable authorization and direction to American
Stock Transfer & Trust Company (the “Transfer
Agent”)
to do
the following:
| 1. |
Conversion
Shares, Warrant Shares and Interest Shares.
|
| a. |
Instructions
Applicable to Transfer Agent.
With respect to the Conversion Shares, Warrant Shares and the Interest
Shares, the Transfer Agent shall issue the Conversion Shares, Warrant
Shares and the Interest Shares to the Buyers from time to time upon
delivery to the Transfer Agent of a properly completed and duly executed
Conversion Notice (the “Conversion
Notice”)
in the form attached hereto as Exhibit A to the Debentures, or a
properly
completed and duly executed Exercise Notice (the “Exercise
Notice”)
in the form attached as Exhibit A to the Warrant, delivered to the
Transfer Agent by the Company or on behalf of the Company by David
Gonzalez, Esq. as escrow agent (the “Escrow
Agent”).
Upon receipt of a Conversion Notice or an Exercise Notice, the Transfer
Agent shall, as soon as reasonably practical thereafter, (i) issue
and
surrender to a common carrier for overnight delivery to the address
as
specified in the Conversion Notice or the Exercise Notice, a certificate,
registered in the name of the Buyer or its designees, for the number
of
shares of Common Stock to which the Buyer shall be entitled as set
forth
in the Conversion Notice or Exercise Notice, or (ii) provided the
Transfer
Agent is participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the
Buyers, credit such aggregate number of shares of Common Stock to
which
the Buyers shall be entitled to the Buyer’s or their designees’ balance
account with DTC through its Deposit Withdrawal At
Custodian (“DWAC”)
system, provided that the Buyer causes its bank or broker to initiate
the
DWAC transaction, and further provided that a certificate representing
such shares of Common Stock would not be required to bear a legend
restricting transfer.
|
| b. |
The
Company hereby confirms to the Transfer Agent and the Buyers that
certificates representing the Conversion Shares, Warrant Shares and
Interest Shares shall not bear any legend restricting transfer and
should
not be subject to any stop-transfer restrictions and shall otherwise
be
freely transferable on the books and records of the Company; provided
that Buyers
confirm to the Transfer Agent and the Company that the Conversion
Shares,
Warrant Shares and Interest Shares have been or will be sold only
pursuant
to an effective registration statement for such securities under
the
Securities Act of 1933, as amended (the “Act”), and that the Buyers have
complied, or will comply, with all applicable prospectus delivery
requirements;
and
further provided that counsel to the Company delivers (i) the Notice
of
Effectiveness set forth in Exhibit
I
attached hereto and (ii) an opinion of counsel in the form set forth
in
Exhibit
II
attached hereto, and that if the Conversion Shares, Warrant Shares
and the
Interest Shares are not registered for sale under the Act, then the
certificates for the Conversion Shares, Warrant Shares and Interest
Shares
shall bear the following legend:
|
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID
ACT.”
| c. |
In
the event that counsel to the Company fails or refuses to render
an
opinion as required to issue the Conversion Shares,
the Warrant Shares or the Interest Shares in
accordance with the preceding paragraph (either with or without
restrictive legends, as applicable), then the Company irrevocably
and
expressly authorizes counsel to the Buyer to render such opinion.
The
Transfer Agent shall accept and be entitled to rely on such opinion
for
the purposes of issuing the Conversion Shares, the Warrant Shares
or the
Interest Shares.
|
| d. |
Upon
the Company’s or the Escrow Agent’s receipt of a properly completed
Conversion Notice or Exercise Notice (along with evidence that the
Aggregate Exercise Price (as defined in the Warrant) has been delivered
to
the Company), the Company or the Escrow Agent, as the case may be,
shall,
within one (1) Trading Day thereafter, send to the Transfer Agent
the
Conversion Notice or Exercise Notice, as the case may be, which shall
constitute an irrevocable instruction to the Transfer Agent to process
such Conversion Notice or Exercise Notice in accordance with the
terms of
these instructions. For purposes hereof “Trading
Day”
shall mean any day on which the Nasdaq Market is open for customary
trading.
|
| a. |
The
Company hereby irrevocably appoints the Escrow Agent as a duly authorized
agent of the Company for the purposes of authorizing the Transfer
Agent to
process issuances and transfers specifically contemplated
herein.
|
| b. |
The
Transfer Agent shall rely exclusively on the Conversion Notice or
the
Exercise Notice, and shall have no liability for relying on such
instructions. Any Conversion Notice or Exercise Notice delivered
hereunder
shall constitute an irrevocable instruction to the Transfer Agent
to
process such notice or notices in accordance with the terms thereof.
Such
notice or notices may be transmitted to the Transfer Agent by facsimile
or
any commercially reasonable method.
|
| c. |
The
Company hereby confirms to the Transfer Agent and the Buyers that
no
instructions other than as contemplated herein will be given to Transfer
Agent by the Company with respect to the matters referenced herein.
The
Company hereby authorizes the Transfer Agent, and the Transfer Agent
shall
be obligated, to disregard any contrary instructions received by
or on
behalf of the Company.
|
Certain
Notice Regarding the Escrow Agent.
The
Company and the Transfer Agent hereby acknowledge that the Escrow Agent is
general counsel to the Buyers, a partner of the general partner of the Buyers
and counsel to the Buyers in connection with the transactions contemplated
and
referred herein. The Company and the Transfer Agent agree that in the event
of
any dispute arising in connection with this Agreement or otherwise in connection
with any transaction or agreement contemplated and referred herein, the Escrow
Agent shall be permitted to continue to represent the Buyers and neither the
Company nor the Transfer Agent will seek to disqualify such
counsel.
The
Company hereby agrees that it shall not replace the Transfer Agent as the
Company’s transfer agent without the prior written consent of the
Buyers.
The
Company agrees that in the event that the Transfer Agent resigns as the
Company’s transfer agent the Company shall engage a suitable replacement
transfer agent that will agree to serve as transfer agent and to be bound by
the
terms and conditions of these Irrevocable Transfer Agent Instructions within
5
business days from the effectiveness of such resignation.
The
Company acknowledges that the Buyers are relying on the representations and
covenants made by the Company hereunder and are a material inducement to the
Buyers purchasing convertible debentures under the Securities Purchase
Agreement. The Company further acknowledges that without such representations
and covenants of the Company made hereunder, the Buyers would not purchase
the
Debentures.
The
Company specifically acknowledges and agrees that in the event of a breach
or
threatened breach by a party hereto of any provision hereof, the Buyers will
be
irreparably damaged and that damages at law would be an inadequate remedy if
these Irrevocable Transfer Agent Instructions were not specifically enforced.
Therefore, in the event of a breach or threatened breach by the Company,
including, without limitation, the attempted termination of the agency
relationship created by this instrument, the Buyers shall be entitled, in
addition to all other rights or remedies, to an injunction restraining such
breach, without being required to show any actual damage or to post any bond
or
other security, and/or to a decree for specific performance of the provisions
of
these Irrevocable Transfer Agent Instructions.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties have caused this letter agreement regarding Irrevocable Transfer Agent
Instructions to be duly executed and delivered as of the date first written
above.
| |
COMPANY:
|
| |
|
| |
Neomedia
Technologies, Inc.
|
| |
|
| |
By:
/s/ Charles T. Jensen
|
| |
Name: Charles
T. Jensen
|
| |
Title: President
& Chief Executive Officer
|
| |
|
| |
|
| |
/s/
David Gonzalez
|
| |
David
Gonzalez, Esq.
|
| |
|
American
Stock Transfer & Trust Company
By:
/s/
Herbert J. Lemmer
Name: Herbert
J. Lemmer
Title: Vice
President
SCHEDULE
I
SCHEDULE
OF BUYERS
|
Name
|
Signature
|
Address/Facsimile
Number
of Buyers
|
| |
|
|
|
Cornell
Capital Partners, LP
|
By: Yorkville
Advisors, LLC
|
101
Hudson Street - Suite 3700
|
| |
Its: General
Partner
|
Jersey
City, NJ 07303
|
| |
|
Facsimile:
(201)
985-8266
|
| |
|
|
| |
By:
|
|
| |
Name: Mark
Angelo
|
|
| |
Its: Portfolio
Manager
|
|
| |
|
|
EXHIBIT
I
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
_________,
200_
________
Attention:
RE: NEOMEDIA
TECHNOLOGIES, INC.
Ladies
and Gentlemen:
We
are
counsel to Neomedia Technologies, Inc., (the “Company”),
and
have represented the Company in connection with that certain Securities Purchase
Agreement, dated as of ________________ ____, 200_ (the “Securities
Purchase Agreement”),
entered into by and among the Company and the Buyers set forth on Schedule
I
attached thereto (collectively the “Buyers”)
pursuant to which the Company has agreed to sell to the Buyers up to $5,000,000
of secured convertible debentures, which shall be convertible into shares (the
“Conversion
Shares”)
of the
Company’s common stock, par value $.01 per share (the “Common
Stock”),
in
accordance with the terms of the Securities Purchase Agreement. Pursuant to
the
Securities Purchase Agreement, the Company also has entered into a Registration
Rights Agreement, dated as of ______________ ___, 200_, with the Buyers (the
“Investor
Registration Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the
Conversion Shares under the Securities Act of 1933, as amended (the
“1933
Act”).
In
connection with the Company’s obligations under the Securities Purchase
Agreement and the Registration Rights Agreement, on _______, 200_, the Company
filed a Registration Statement (File No. ___-_________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the sale of the Conversion Shares.
In
connection with the foregoing, we advise the Transfer Agent that a member of
the
SEC’s staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at ____ P.M.
on __________, 200_ and we have no knowledge that any stop order suspending
its
effectiveness has been issued or that any proceedings for that purpose are
pending before, or threatened by, the SEC and the Conversion Shares are
available for sale under the 1933 Act pursuant to the Registration
Statement.
The
statement made herein that “we have no knowledge” is based solely on information
actually known to those attorneys currently practicing with this firm and
engaged in the representation of the Company in connection with the transactions
contem-plated by the Securities Purchase Agreement.
EXHIBIT
II
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF OPINION
VIA
FACSIMILE AND REGULAR MAIL
American
Stock Transfer and Trust
6201
15th
Avenue,
3rd
Floor
Brooklyn,
NY 11212
RE: NEOMEDIA
TECHNOLOGIES, INC.
Ladies
and Gentlemen:
We
have
acted as counsel to Neomedia Technologies, Inc., a Delaware corporation (the
“Company”),
in
connection with the registration under the Securities Act of 1933, as amended
(the “Act”), of an offering of up to ____________ shares of the Company’s common
stock, par value $0.001 per share (the “Common Stock”), issued or to be issued
to the selling stockholders (the “Selling Stockholders”) listed in the selling
stockholders table at page __ of the final prospectus, a copy of which is
attached hereto as Exhibit A. We understand that the certificates representing
the Common Stock currently contain a legend (the “Securities Act Legend”)
stating that the Common Stock represented by such certificates may not be sold
or transferred without registration under the Act.
The
sale
of the Common Stock by the Selling Stockholders has been registered under the
Act pursuant to a Registration Statement on Form S-1 (SEC File No. 333-______),
filed with the Securities and Exchange Commission (the “Commission”) on ________
__, 200_ (the “Registration Statement”). The Registration Statement was declared
effective under the Act by the Commission on ________ __, 200_. Therefore,
the
Common Stock identified in the Registration Statement, including those shares
issued upon exercise of the Convertible Debentures and Warrants referenced
in
Exhibit A, may, upon receipt of confirmation from the Selling Stockholder that
the Common Stock has been or will be sold only pursuant to the Registration
Statement and that the Selling Stockholder has complied, or will comply, with
all applicable prospectus delivery requirements, be issued or reissued, as
applicable, without bearing the Securities Act Legend.
EXHIBIT
A
Prospectus
“A”
WARRANT
THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
NEOMEDIA
TECHNOLOGIES, INC.
Warrant
To Purchase Common Stock
|
Warrant
No.: CCP-001
|
Number
of Shares: 25,000,000
|
| |
|
|
Date
of Reissuance: August 24, 2006
|
|
Neomedia
Technologies, Inc., a Delaware corporation (the “Company”),
hereby certifies that, for good and valuable consideration paid, the receipt
and
sufficiency of which are hereby acknowledged, Cornell
Capital Partners, LP
(“Cornell”),
the
registered holder hereof or its permitted assigns, is entitled, subject to
the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after
11:59 P.M. Eastern Time on the Expiration Date (as defined
herein) Twenty-Five Million (25,000,000) fully paid and nonassessable
shares of Common Stock (as defined herein) of the Company (the
“Warrant
Shares”) at
the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the holder
be
entitled to exercise this Warrant for a number of Warrant Shares in excess
of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by
the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) days of the
Expiration Date (however, such restriction may be waived by Cornell (but only
as
to itself and not to any other holder) upon not less than sixty-five (65)
days prior notice to the Company). For purposes of the foregoing proviso, the
aggregate number of shares of Common Stock beneficially owned by the holder
and
its affiliates shall include the number of shares of Common Stock issuable
upon
exercise of this Warrant with respect to which the determination of such proviso
is being made, but shall exclude shares of Common Stock which would be issuable
upon (i) exercise of the remaining, unexercised Warrants beneficially owned
by the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For purposes of
this Warrant, in determining the number of outstanding shares of Common Stock
a
holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company’s most recent Form 10-QSB or Form 10-KSB, as the case
may be, (2) a more recent public announcement by the Company or
(3) any other notice by the Company or its transfer agent setting forth the
number of shares of Common Stock outstanding. Upon the written request of any
holder, the Company shall promptly, but in no event later than one
(1) Business Day following the receipt of such notice, confirm in writing
to any such holder the number of shares of Common Stock then outstanding. In
any
case, the number of outstanding shares of Common Stock shall be determined
after
giving effect to the exercise of Warrants (as defined below) by such holder
and its affiliates since the date as of which such number of outstanding shares
of Common Stock was reported.
Section
1.
(a) This
Warrant is the common stock purchase warrant (the “Warrant”) issued
pursuant to the Securities Purchase Agreement (the “Securities
Purchase Agreement”) dated
the date hereof between the Company and the Buyers listed on Schedule I
thereto.
(b) Definitions.
The
following words and terms as used in this Warrant shall have the following
meanings:
(i) “Approved
Stock Plan”
means
any employee benefit plan which has been approved by the Board of Directors
of
the Company, pursuant to which the Company’s securities may be issued to any
employee, officer or director for services provided to the Company.
(ii) “Business
Day”
means
any day other than Saturday, Sunday or other day on which commercial banks
in
the City of New York are authorized or required by law to remain
closed.
(iii) “Closing
Bid Price”
means
the closing bid price of Common Stock as quoted on the Principal Market (as
reported by Bloomberg Financial Markets (“Bloomberg”) through
its “Volume at Price” function).
(iv) “Common
Stock”
means
(i) the Company’s common stock, par value $0.01 per share, and
(ii) any capital stock into which such Common Stock shall have been changed
or any capital stock resulting from a reclassification of such Common
Stock.
(v) “Event
of Default”
means
an event of default under the Securities Purchase Agreement or the Convertible
Debentures issued in connection therewith.
(vi) “Excluded
Securities”
means,
provided such security is issued at a price which is greater than or equal
to
the arithmetic average of the Closing Bid Prices of the Common Stock for the
ten
(10) consecutive trading days immediately preceding the date of issuance,
any of the following: (a) any issuance by the Company of securities in
connection with a strategic partnership or a joint venture (the primary purpose
of which is not to raise equity capital), (b) any issuance by the Company
of securities as consideration for a merger or consolidation or the acquisition
of a business, product, license, or other assets of another person or entity
and
(c) options to purchase shares of Common Stock, provided (I) such
options are issued after the date of this Warrant to employees or directors
of
the Company and (II) the exercise price of such options is not less than
the Closing Bid Price of the Common Stock on the date of issuance of such
option.
(vii) “Expiration
Date”
means
the date five (5) years from the Issuance Date of this Warrant or, if such
date falls on a Saturday, Sunday or other day on which banks are required or
authorized to be closed in the City of New York or the State of New York or
on
which trading does not take place on the Principal Exchange or automated
quotation system on which the Common Stock is traded (a “Holiday”),
the
next date that is not a Holiday.
(viii) “Issuance
Date”
means
the date hereof.
(ix) “Options”
means
any rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
(x) “Other
Securities”
means
(i) those options and warrants of the Company issued prior to, and
outstanding on, the Issuance Date of this Warrant, (ii) the shares of
Common Stock issuable on exercise of such options and warrants, provided such
options and warrants are not amended after the Issuance Date of this Warrant,
(iii) the shares of Common Stock issuable upon exercise of this Warrant,
(iv) shares of Common Stock paid upon conversion of the convertible
preferred stock paid pursuant to the Amended and Restated Investment Agreement
and (v) any shares of Common Stock issued in connection with any
acquisition of the stock or assets of another entity which have been approved
by
the Board of Directors of the Company.
(xi) “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(xii) “Principal
Market”
means
the New York Stock Exchange, the American Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market, whichever is at the time the principal
trading exchange or market for such security, or the over-the-counter market
on
the electronic bulletin board for such security as reported by Bloomberg or,
if
no bid or sale information is reported for such security by Bloomberg, then
the
average of the bid prices of each of the market makers for such security as
reported in the “pink sheets” by the National Quotation Bureau,
Inc.
(xiii) “Securities
Act”
means
the Securities Act of 1933, as amended.
(xiv) “Warrant”
means
this Warrant and all Warrants issued in exchange, transfer or replacement
thereof.
(xv) “Warrant
Exercise Price”
shall
be $0.15 or as subsequently adjusted as provided in Section 8 hereof.
(xvi) “Warrant
Shares”
means
the shares of Common Stock issuable at any time upon exercise of this Warrant.
(c) Other
Definitional Provisions.
(i) Except
as
otherwise specified herein, all references herein (A) to the Company shall
be deemed to include the Company’s successors and (B) to any applicable law
defined or referred to herein shall be deemed references to such applicable
law
as the same may have been or may be amended or supplemented from time to time.
(ii) When
used
in this Warrant, the words “herein”,
“hereof”,
and
“hereunder”
and
words of similar import, shall refer to this Warrant as a whole and not to
any
provision of this Warrant, and the words “Section”,
“Schedule”,
and
“Exhibit”
shall
refer to Sections of, and Schedules and Exhibits to, this Warrant unless
otherwise specified.
(iii) Whenever
the context so requires, the neuter gender includes the masculine or feminine,
and the singular number includes the plural, and vice versa.
Section
2. Exercise
of Warrant.
(a) Subject
to the terms and conditions hereof, this Warrant may be exercised by the holder
hereof then registered on the books of the Company, pro rata as hereinafter
provided, at any time on any Business Day on or after the opening of business
on
such Business Day, commencing with the first day after the date hereof, and
prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by
delivery of a written notice, in the form of the subscription notice attached
as
Exhibit
A
hereto
(the “Exercise
Notice”),
of
such holder’s election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, payment to the Company of an
amount equal to the Warrant Exercise Price(s) applicable to the Warrant
Shares being purchased, multiplied by the number of Warrant Shares (at the
applicable Warrant Exercise Price) as to which this Warrant is being
exercised (plus any applicable issue or transfer taxes) (the
“Aggregate
Exercise Price”) in
cash or wire transfer of immediately available funds and the surrender of this
Warrant (or an indemnification undertaking with respect to this Warrant in
the
case of its loss, theft or destruction) to a common carrier for overnight
delivery to the Company as soon as practicable following such date
(“Cash
Basis”) or
(ii) if at the time of exercise, the Warrant Shares are not subject to an
effective registration statement or if an Event of Default has occurred, by
delivering an Exercise Notice and in lieu of making payment of the Aggregate
Exercise Price in cash or wire transfer, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (the “Cashless
Exercise”):
| |
Net
Number
|
=
|
(A
x B) - (A x C)
|
|
| |
|
|
B
|
|
| |
|
|
|
|
For
purposes of the foregoing formula:
| |
A
|
=
|
the
total number of Warrant Shares with respect to which this Warrant
is then
being exercised.
|
|
| |
|
|
|
|
| |
B
|
=
|
the
Closing Bid Price of the Common Stock on the date of exercise of
the
Warrant.
|
|
| |
|
|
|
|
| |
C
|
=
|
the
Warrant Exercise Price then in effect for the applicable Warrant
Shares at
the time of such exercise.
|
|
| |
|
|
|
|
In
the
event of any exercise of the rights represented by this Warrant in compliance
with this Section 2, the Company shall on or before the
fifth (5th) Business Day following the date of receipt of the Exercise
Notice, the Aggregate Exercise Price and this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) and the receipt of the representations of the holder specified
in Section 6 hereof, if requested by the Company (the “Exercise
Delivery Documents”),
and
if the Common Stock is DTC eligible, credit such aggregate 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; provided, however,
if the holder who submitted the Exercise Notice requested physical delivery
of
any or all of the Warrant Shares, or, if the Common Stock is not DTC eligible
then the Company shall, on or before the fifth (5th) Business
Day following receipt of the Exercise Delivery Documents, issue and surrender
to
a common carrier for overnight delivery to the address specified in the Exercise
Notice, a certificate, registered in the name of the holder, for the number
of
shares of Common Stock to which the holder shall be entitled pursuant to such
request. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (i) or (ii) above the holder of this
Warrant shall be deemed for all corporate purposes to have become the holder
of
record of the Warrant Shares with respect to which this Warrant has been
exercised. In the case of a dispute as to the determination of the Warrant
Exercise Price, the Closing Bid Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the holder the number of
Warrant Shares that is not disputed and shall submit the disputed determinations
or arithmetic calculations to the holder via facsimile within one
(1) Business Day of receipt of the holder’s Exercise Notice.
(b) If
the
holder and the Company are unable to agree upon the determination of the Warrant
Exercise Price or arithmetic calculation of the Warrant Shares within one
(1) day of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall immediately submit via facsimile
(i) the disputed determination of the Warrant Exercise Price or the Closing
Bid Price to an independent, reputable investment banking firm or (ii) the
disputed arithmetic calculation of the Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or
the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment banking firm’s or accountant’s determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(c) Unless
the rights represented by this Warrant shall have expired or shall have been
fully exercised, the Company shall, as soon as practicable and in no event
later
than five (5) Business Days after any exercise and at its own expense,
issue a new Warrant identical in all respects to this Warrant exercised except
it shall represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised.
(d) No
fractional Warrant Shares are to be issued upon any pro rata exercise of this
Warrant, but rather the number of Warrant Shares issued upon such exercise
of
this Warrant shall be rounded up or down to the nearest whole
number.
(e) If
the
Company or its Transfer Agent shall fail for any reason or for no reason to
issue to the holder within ten (10) days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which
the
holder is entitled or to credit the holder’s balance account with The Depository
Trust Company for such number of Warrant Shares to which the holder is entitled
upon the holder’s exercise of this Warrant, the Company shall, in addition to
any other remedies under this Warrant or the Placement Agent Agreement or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day the issuance of such certificate for Warrant Shares is not
timely effected an amount equal to 0.025% of the product of (A) the sum of
the number of Warrant Shares not issued to the holder on a timely basis and
to
which the holder is entitled, and (B) the Closing Bid Price of the Common
Stock for the trading day immediately preceding the last possible date which
the
Company could have issued such Common Stock to the holder without violating
this
Section 2.
(f) If
within
ten (10) days after the Company’s receipt of the Exercise Delivery
Documents, the Company fails to deliver a new Warrant to the holder for the
number of Warrant Shares to which such holder is entitled pursuant to Section
2
hereof, then, in addition to any other available remedies under this Warrant
or
the Placement Agent Agreement, or otherwise available to such holder, the
Company shall pay as additional damages in cash to such holder on each day
after
such tenth (10th) day
that such delivery of such new Warrant is not timely effected in an amount
equal
to 0.25% of the product of (A) the number of Warrant Shares represented by
the portion of this Warrant which is not being exercised and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Warrant to
the
holder without violating this Section 2.
(g)
Forced
Exercise.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than Twenty
Five Cents ($.25) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
Section
3. Covenants
as to Common Stock.
The
Company hereby covenants and agrees as follows:
(a) This
Warrant is, and any Warrants issued in substitution for or replacement of this
Warrant will upon issuance be, duly authorized and validly issued.
(b) All
Warrant Shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
(c) During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved at least one hundred
percent (100%) of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price. If at any time the Company does not have a sufficient
number of shares of Common Stock authorized and available, then the Company
shall call and hold a special meeting of its stockholders within
sixty (60) days of that time for the sole purpose of increasing the
number of authorized shares of Common Stock.
(d) If
at any
time after the date hereof the Company shall file a registration statement,
the
Company shall include the Warrant Shares issuable to the holder, pursuant to
the
terms of this Warrant and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Warrant Shares from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case
may
be, and shall maintain such listing of, any other shares of capital stock of
the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(e) The
Company will not, by amendment of its Articles of Incorporation 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 to be observed or performed by
it
hereunder, but will at all times in good faith assist in the carrying out of
all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this Warrant. The Company
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Warrant Exercise Price then in effect,
and (ii) will take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this
Warrant.
(f) This
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets.
Section
4. Taxes.
The
Company shall pay any and all taxes, except any applicable withholding, which
may be payable with respect to the issuance and delivery of Warrant Shares
upon
exercise of this Warrant.
Section
5. Warrant
Holder Not Deemed a Stockholder.
Except
as otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of shares
of capital stock of the Company for any purpose, nor shall anything contained
in
this Warrant be construed to confer upon the holder hereof, as such, any of
the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of
this
Warrant. In addition, nothing contained in this Warrant shall be construed
as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder
of
this Warrant with copies of the same notices and other information given to
the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section
6. Representations
of Holder.
The
holder of this Warrant, by the acceptance hereof, represents that it is
acquiring this Warrant and the Warrant Shares for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution of this Warrant or the Warrant Shares, except pursuant
to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, the holder does not agree to hold this
Warrant or any of the Warrant Shares for any minimum or other specific term
and
reserves the right to dispose of this Warrant and the Warrant Shares at any
time
in accordance with or pursuant to a registration statement or an exemption
under
the Securities Act. The holder of this Warrant further represents, by acceptance
hereof, that, as of this date, such holder is an “accredited investor” as such
term is defined in Rule 501(a)(1) of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act (an “Accredited
Investor”).
Upon
exercise of this Warrant the holder shall, if requested by the Company, confirm
in writing, in a form satisfactory to the Company, that the Warrant Shares
so
purchased are being acquired solely for the holder’s own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale and that such holder is an Accredited Investor. If such
holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder’s exercise of this Warrant
that the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of this Warrant shall not violate any United States or state
securities laws.
Section
7. Ownership
and Transfer.
(a) The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof),
a
register for this Warrant, in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as
the
name and address of each transferee. The Company may treat the person in whose
name any Warrant is registered on the register as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this
Warrant.
Section
8. Adjustment
of Warrant Exercise Price and Number of Shares.
The
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as
follows:
(a) Adjustment
of Warrant Exercise Price and Number of Shares upon Issuance of Common
Stock.
If and
whenever on or after the Issuance Date of this Warrant, the Company issues
or
sells, or is deemed to have issued or sold, any shares of Common
Stock (other than (i) Excluded Securities and (ii) shares of
Common Stock which are issued or deemed to have been issued by the Company
in
connection with an Approved Stock Plan or upon exercise or conversion of the
Other Securities) for a consideration per share less than a price (the
“Applicable
Price”) equal
to the Warrant Exercise Price in effect immediately prior to such issuance
or
sale, then immediately after such issue or sale the Warrant Exercise Price
then
in effect shall be reduced to an amount equal to such consideration per share.
Upon each such adjustment of the Warrant Exercise Price hereunder, the number
of
Warrant Shares issuable upon exercise of this Warrant shall be adjusted to
the
number of shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Warrant Exercise Price resulting from such
adjustment.
(b) Effect
on Warrant Exercise Price of Certain Events.
Excluding the issuance of Excluded Securities or the exercise or conversion
of
Other Securities, for purposes of determining the adjusted Warrant Exercise
Price under Section 8(a) above, the following shall be
applicable:
(i) Issuance
of Options.
If
after the date hereof, the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon
the
exercise of any such Option or upon conversion or exchange of any convertible
securities issuable upon exercise of any such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and
to
have been issued and sold by the Company at the time of the granting or sale
of
such Option for such price per share. For purposes of this Section 8(b)(i),
the
lowest price per share for which one share of Common Stock is issuable upon
exercise of such Options or upon conversion or exchange of such Convertible
Securities shall be equal to the sum of the lowest amounts of consideration
(if
any) received or receivable by the Company with respect to any one share of
Common Stock upon the granting or sale of the Option, upon exercise of the
Option or upon conversion or exchange of any convertible security issuable
upon
exercise of such Option. No further adjustment of the Warrant Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
convertible securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such convertible
securities.
(ii) Issuance
of Convertible Securities.
If the
Company in any manner issues or sells any convertible securities and the lowest
price per share for which one share of Common Stock is issuable upon the
conversion or exchange thereof is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the issuance or sale of such convertible
securities for such price per share. For the purposes of this
Section 8(b)(ii), the lowest price per share for which one share of Common
Stock is issuable upon such conversion or exchange shall be equal to the sum
of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance or sale
of
the convertible security and upon conversion or exchange of such convertible
security. No further adjustment of the Warrant Exercise Price shall be made
upon
the actual issuance of such Common Stock upon conversion or exchange of such
convertible securities, and if any such issue or sale of such convertible
securities is made upon exercise of any Options for which adjustment of the
Warrant Exercise Price had been or are to be made pursuant to other provisions
of this Section 8(b), no further adjustment of the Warrant Exercise Price shall
be made by reason of such issue or sale.
(iii) Change
in Option Price or Rate of Conversion.
If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any convertible
securities, or the rate at which any convertible securities are convertible
into
or exchangeable for Common Stock changes at any time, the Warrant Exercise
Price
in effect at the time of such change shall be adjusted to the Warrant Exercise
Price which would have been in effect at such time had such Options or
convertible securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of Warrant Shares issuable
upon
exercise of this Warrant shall be correspondingly readjusted. For purposes
of
this Section 8(b)(iii), if the terms of any Option or convertible security
that
was outstanding as of the Issuance Date of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
convertible security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change. No adjustment pursuant to this Section 8(b) shall
be made if such adjustment would result in an increase of the Warrant Exercise
Price then in effect.
(c) Effect
on Warrant Exercise Price of Certain Events.
Excluding the issuance of Excluded Securities or the exercise or conversion
of
Other Securities, for purposes of determining the adjusted Warrant Exercise
Price under Sections 8(a) and 8(b), the following shall be
applicable:
(i) Calculation
of Consideration Received.
If any
Common Stock, Options or convertible securities are issued or sold or deemed
to
have been issued or sold for cash, the consideration received therefore will
be
deemed to be the net amount received by the Company therefore. If any Common
Stock, Options or convertible securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of marketable securities, in which case the amount of consideration
received by the Company will be the market price of such securities on the
date
of receipt of such securities. If any Common Stock, Options or convertible
securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefore will be deemed to be the fair value of such portion
of
the net assets and business of the non-surviving entity as is attributable
to
such Common Stock, Options or convertible securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding. If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring valuation
(the “Valuation
Event”),
the
fair value of such consideration will be determined within five
(5) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding. The determination of such appraiser shall be final and binding
upon all parties and the fees and expenses of such appraiser shall be borne
jointly by the Company and the holders of Warrants.
(ii) Integrated
Transactions.
In case
any Option is issued in connection with the issue or sale of other securities
of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01.
(iii) Treasury
Shares.
The
number of shares of Common Stock outstanding at any given time does not include
shares owned or held by or for the account of the Company, and the disposition
of any shares so owned or held will be considered an issue or sale of Common
Stock.
(iv) Record
Date.
If the
Company takes a record of the holders of Common Stock for the purpose of
entitling them (1) to receive a dividend or other distribution payable in
Common Stock, Options or in convertible securities or (2) to subscribe for
or purchase Common Stock, Options or convertible securities, then such record
date will be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(d) Adjustment
of Warrant Exercise Price upon Subdivision or Combination of Common
Stock.
If the
Company at any time after the date of issuance of this Warrant subdivides (by
any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, any Warrant Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant will be proportionately
increased. If the Company at any time after the date of issuance of this Warrant
combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, any Warrant Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
issuable upon exercise of this Warrant will be proportionately decreased. Any
adjustment under this Section 8(d) shall become effective at the close
of business on the date the subdivision or combination becomes
effective.
(e) Distribution
of Assets.
If the
Company shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of Common Stock, by way of
return of capital or otherwise (including, without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement or other similar
transaction) (a “Distribution”),
at
any time after the issuance of this Warrant, then, in each such
case:
(i) any
Warrant Exercise Price in effect immediately prior to the close of business
on
the record date fixed for the determination of holders of Common Stock
entitled to
receive the Distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Warrant Exercise
Price by a fraction of which (A) the numerator shall be the Closing Sale
Price of the Common Stock on the trading day immediately preceding such record
date minus the value of the Distribution (as determined in good faith by the
Company’s Board of Directors) applicable to one share of Common Stock, and
(B) the denominator shall be the Closing Sale Price of the Common Stock on
the trading day immediately preceding such record date; and
(ii) either
(A) the number of Warrant Shares obtainable upon exercise of this Warrant
shall be increased to a number of shares equal to the number of shares of Common
Stock obtainable immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive
the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding clause (i), or (B) in the event that the Distribution
is of common stock of a company whose common stock is traded on a national
securities exchange or a national automated quotation system, then the holder
of
this Warrant shall receive an additional warrant to purchase Common Stock,
the
terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the amount of the assets that would have
been
payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such record date and with
an
exercise price equal to the amount by which the exercise price of this Warrant
was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding clause (i).
(f) Certain
Events.
If any
event occurs of the type contemplated by the provisions of this Section 8
but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights
or
other rights with equity features), then the Company’s Board of Directors will
make an appropriate adjustment in the Warrant Exercise Price and the number
of
shares of Common Stock obtainable upon exercise of this Warrant so as to protect
the rights of the holders of the Warrants; provided, except as set forth in
section 8(d), that no such adjustment pursuant to this Section 8(f) will
increase the Warrant Exercise Price or decrease the number of shares of Common
Stock obtainable as otherwise determined pursuant to this Section
8.
(g) Notices.
(i) Immediately
upon any adjustment of the Warrant Exercise Price, the Company will give written
notice thereof to the holder of this Warrant, setting forth in reasonable
detail, and certifying, the calculation of such adjustment.
(ii) The
Company will give written notice to the holder of this Warrant at least ten
(10) days prior to the date on which the Company closes its books or takes
a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with respect to any
Organic Change (as defined below), dissolution or liquidation, provided that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder.
(iii) The
Company will also give written notice to the holder of this Warrant at least
ten
(10) days prior to the date on which any Organic Change, dissolution or
liquidation will take place, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to
such
holder.
Section
9. Purchase
Rights; Reorganization, Reclassification, Consolidation, Merger or
Sale.
(a) In
addition to any adjustments pursuant to Section 8 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights
to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the “Purchase
Rights”),
then
the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale
of
such Purchase Rights, or, if no such record is taken, the date as of which
the
record holders of Common Stock are to be determined for the grant, issue or
sale
of such Purchase Rights.
(b) Any
recapitalization, reorganization, reclassification, consolidation, merger,
sale
of all or substantially all of the Company’s assets to another Person or other
transaction in each case which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an “Organic
Change.”
Prior
to the consummation of any (i) sale of all or substantially all of the
Company’s assets to an acquiring Person or (ii) other Organic Change
following which the Company is not a surviving entity, the Company will secure
from the Person purchasing such assets or the successor resulting from such
Organic Change (in each case, the “Acquiring
Entity”) a
written agreement (in form and substance satisfactory to the holders of Warrants
representing at least two-thirds (iii) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding) to deliver to each holder of
Warrants in exchange for such Warrants, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance
to
this Warrant and satisfactory to the holders of the Warrants (including an
adjusted warrant exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants without regard to any limitations on exercise,
if
the value so reflected is less than any Applicable Warrant Exercise Price
immediately prior to such consolidation, merger or sale). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance satisfactory to the holders of Warrants
representing a majority of
the
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may
be) the Warrant Shares immediately theretofore issuable and receivable upon
the exercise of such holder’s Warrants (without regard to any limitations
on exercise), such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange for
the
number of Warrant Shares which would have been issuable and receivable upon
the
exercise of such holder’s Warrant as of the date of such Organic Change (without
taking into account any limitations or restrictions on the exercisability of
this Warrant).
Section
10. Lost,
Stolen, Mutilated or Destroyed Warrant.
If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly,
on
receipt of an indemnification undertaking (or, in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed.
Section
11. Notice.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Warrant must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of receipt
is received by the sending party transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to Cornell:
|
Cornell
Capital Partners, LP
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Attention: Mark
A. Angelo
|
| |
Telephone: (201) 985-8300
|
| |
Facsimile: (201) 985-8266
|
| |
|
|
With
Copy to:
|
David
Gonzalez, Esq.
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Telephone: (201) 985-8300
|
| |
Facsimile: (201) 985-8266
|
| |
|
|
If
to the Company, to:
|
Neomedia
Technologies, Inc.
|
| |
2201
Second Street, Suite #600
|
| |
Fort
Myers, FL 33901
|
| |
Attention: Charles
T. Jensen
|
| |
Telephone: (239) 337-3434
|
| |
Facsimile: (239) 337-3668
|
| |
|
|
With
a copy to:
|
Kirkpatrick
& Lockhart Nicholson Graham, LLP
|
| |
201
South Biscayne Boulevard, Suite 2000
|
| |
Miami,
FL 33131
|
| |
Attention: Clayton
E. Parker, Esquire
|
| |
Telephone: (305) 539-3306
|
| |
Facsimile: (305) 358-7095
|
| |
|
If
to a
holder of this Warrant, to it at the address and facsimile number set forth
on
Exhibit C
hereto,
with copies to such holder’s representatives as set forth on Exhibit C,
or at
such other address and facsimile as shall be delivered to the Company upon
the
issuance or transfer of this Warrant. Each party shall provide five days’ prior
written notice to the other party of any change in address or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, facsimile, waiver or other communication, (or (B) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence
of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
Section
12. Date.
The
date of this Warrant is set forth on page 1 hereof. This Warrant, in all
events, shall be wholly void and of no effect after the close of business on
the
Expiration Date, except that notwithstanding any other provisions hereof, the
provisions of Section 8(b) shall continue in full force and effect
after such date as to any Warrant Shares or other securities issued upon the
exercise of this Warrant.
Section
13. Amendment
and Waiver.
Except
as otherwise provided herein, the provisions of the Warrants may be amended
and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the holders of Warrants representing at least two-thirds
of
the Warrant Shares issuable upon exercise of the Warrants then outstanding;
provided that, except for Section 8(d), no such action may increase the Warrant
Exercise Price or decrease the number of shares or class of stock obtainable
upon exercise of any Warrant without the written consent of the holder of such
Warrant.
Section
14. Descriptive
Headings; Governing Law.
The
descriptive headings of the several sections and paragraphs of this Warrant
are
inserted for convenience only and do not constitute a part of this Warrant.
The
corporate laws of the State of Delaware shall govern all issues concerning
the
relative rights of the Company and its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of New Jersey or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in Hudson County and the United States
District Court for the District of New Jersey, for the adjudication of any
dispute hereunder or in connection herewith or therewith, or with any
transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party 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 to
such
party at the address for such 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.
Section
15. Waiver
of Jury Trial.
AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT,
THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.
REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed as of the date first set forth
above.
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
| |
|
| |
By:/s/
Charles T. Jensen
|
| |
Name: Charles
T. Jensen
|
| |
Title: President
& Chief Executive Officer
|
| |
|
EXHIBIT
A TO WARRANT
EXERCISE
NOTICE
TO
BE EXECUTED
BY
THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
NEOMEDIA
TECHNOLOGIES, INC.
The
undersigned holder hereby exercises the right to purchase ______________ of
the
shares of Common Stock (“Warrant
Shares”) of
Neomedia Technologies, Inc. (the “Company”),
evidenced by the attached Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
Specify
Method of exercise by check mark:
| |
1.
|
___
|
Cash
Exercise
|
|
| |
|
(a)
|
Payment
of Warrant Exercise Price.
The holder shall pay the Aggregate Exercise Price of $______________
to
the Company in accordance with the terms of the Warrant.
|
|
| |
|
(b)
|
Delivery
of Warrant Shares.
The Company shall deliver to the holder _____ Warrant Shares in accordance
with the terms of the Warrant.
|
|
| |
2.
|
___
|
Cashless
Exercise
|
|
| |
|
(a)
|
Payment
of Warrant Exercise Price.
In lieu of making payment of the Aggregate Exercise Price, the holder
elects to receive upon such exercise the Net Number of shares of
Common
Stock determined in accordance with the terms of the Warrant.
|
|
| |
|
(b)
|
Delivery
of Warrant Shares.
The Company shall deliver to the holder _____ Warrant Shares in accordance
with the terms of the Warrant.
|
|
Date:
_______________ __, ______
Name
of
Registered Holder
By:
__________________________
Name:
________________________
Title:
_________________________
EXHIBIT
B TO WARRANT
FORM
OF WARRANT POWER
FOR
VALUE RECEIVED,
the
undersigned does hereby assign and transfer to ________________, Federal
Identification No. __________, a warrant to purchase ____________ shares of
the capital stock of Neomedia Technologies, Inc. represented by warrant
certificate no. _____, standing in the name of the undersigned on the books
of said corporation. The undersigned does hereby irrevocably constitute and
appoint ______________, attorney to transfer the warrants of said corporation,
with full power of substitution in the premises.
|
Dated:
_________________________
|
|
| |
|
| |
By:
_________________________
|
| |
Name:________________________
|
| |
Title:_________________________
|
| |
|
“B”
WARRANT
THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
NEOMEDIA
TECHNOLOGIES, INC.
Warrant
To Purchase Common Stock
|
Warrant
No.: CCP-001
|
Number
of Shares: 50,000,000
|
| |
|
|
Date
of Issuance: August
24, 2006
|
|
| |
|
Neomedia
Technologies, Inc., a Delaware corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Cornell
Capital Partners, LP
(“Cornell”),
the
registered holder hereof or its permitted assigns, is entitled, subject to
the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after
11:59 P.M. Eastern Time on the Expiration Date (as defined
herein) Fifty Million (50,000,000) fully paid and nonassessable shares
of Common Stock (as defined herein) of the Company (the “Warrant
Shares”) at
the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the holder
be
entitled to exercise this Warrant for a number of Warrant Shares in excess
of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by
the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) days of the
Expiration Date (however, such restriction may be waived by Cornell (but only
as
to itself and not to any other holder) upon not less than sixty-five (65)
days prior notice to the Company). For purposes of the foregoing proviso, the
aggregate number of shares of Common Stock beneficially owned by the holder
and
its affiliates shall include the number of shares of Common Stock issuable
upon
exercise of this Warrant with respect to which the determination of such proviso
is being made, but shall exclude shares of Common Stock which would be issuable
upon (i) exercise of the remaining, unexercised Warrants beneficially owned
by the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For purposes of
this Warrant, in determining the number of outstanding shares of Common Stock
a
holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company’s most recent Form 10-Q or Form 10-K, as the case may
be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or its transfer agent setting forth the number
of
shares of Common Stock outstanding. Upon the written request of any holder,
the
Company shall promptly, but in no event later than one (1) Business Day
following the receipt of such notice, confirm in writing to any such holder
the
number of shares of Common Stock then outstanding. In any case, the number
of
outstanding shares of Common Stock shall be determined after giving effect
to
the exercise of Warrants (as defined below) by such holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.
Section
1.
(a) This
Warrant is the common stock purchase warrant (the “Warrant”) issued
pursuant to the Securities Purchase Agreement Investment Agreement (the
“Securities
Purchase Agreement”) dated
the date hereof between the Company and the Buyers listed on Schedule I
thereto.
(b) Definitions.
The
following words and terms as used in this Warrant shall have the following
meanings:
(i) “Approved
Stock Plan”
means
any employee benefit plan which has been approved by the Board of Directors
of
the Company, pursuant to which the Company’s securities may be issued to any
employee, officer or director for services provided to the Company.
(ii) “Business
Day”
means
any day other than Saturday, Sunday or other day on which commercial banks
in
the City of New York are authorized or required by law to remain
closed.
(iii) “Closing
Bid Price”
means
the closing bid price of Common Stock as quoted on the Principal Market (as
reported by Bloomberg Financial Markets (“Bloomberg”) through
its “Volume at Price” function).
(iv) “Common
Stock”
means
(i) the Company’s common stock, par value $0.01 per share, and
(ii) any capital stock into which such Common Stock shall have been changed
or any capital stock resulting from a reclassification of such Common
Stock.
(v) “Event
of Default”
means
an event of default under the Securities Purchase Agreement or the Convertible
Debentures issued in connection therewith.
(vi) “Excluded
Securities”
means,
provided such security is issued at a price which is greater than or equal
to
the arithmetic average of the Closing Bid Prices of the Common Stock for the
ten
(10) consecutive trading days immediately preceding the date of issuance,
any of the following: (a) any issuance by the Company of securities in
connection with a strategic partnership or a joint venture (the primary purpose
of which is not to raise equity capital), (b) any issuance by the Company
of securities as consideration for a merger or consolidation or the acquisition
of a business, product, license, or other assets of another person or entity
and
(c) options to purchase shares of Common Stock, provided (I) such
options are issued after the date of this Warrant to employees or directors
of
the Company and (II) the exercise price of such options is not less than
the Closing Bid Price of the Common Stock on the date of issuance of such
option.
(vii) “Expiration
Date”
means
the date five (5) years from the Issuance Date of this Warrant or, if such
date falls on a Saturday, Sunday or other day on which banks are required or
authorized to be closed in the City of New York or the State of New York or
on
which trading does not take place on the Principal Exchange or automated
quotation system on which the Common Stock is traded (a “Holiday”),
the
next date that is not a Holiday.
(viii) “Issuance
Date”
means
the date hereof.
(ix) “Options”
means
any rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
(x) “Other
Securities”
means
(i) those options and warrants of the Company issued prior to, and
outstanding on, the Issuance Date of this Warrant, (ii) the shares of
Common Stock issuable on exercise of such options and warrants, provided such
options and warrants are not amended after the Issuance Date of this Warrant,
(iii) the shares of Common Stock issuable upon exercise of this Warrant,
(iv) shares of Common Stock paid upon conversion of the convertible
preferred stock paid pursuant to the Amended and Restated Investment Agreement
and (v) any shares of Common Stock issued in connection with any
acquisition of the stock or assets of another entity which have been approved
by
the Board of Directors of the Company.
(xi) “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(xii) “Principal
Market”
means
the New York Stock Exchange, the American Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market, whichever is at the time the principal
trading exchange or market for such security, or the over-the-counter market
on
the electronic bulletin board for such security as reported by Bloomberg or,
if
no bid or sale information is reported for such security by Bloomberg, then
the
average of the bid prices of each of the market makers for such security as
reported in the “pink sheets” by the National Quotation Bureau,
Inc.
(xiii) “Securities
Act”
means
the Securities Act of 1933, as amended.
(xiv) “Warrant”
means
this Warrant and all Warrants issued in exchange, transfer or replacement
thereof.
(xv) “Warrant
Exercise Price”
shall
be $0.25 or as subsequently adjusted as provided in Section 8 hereof.
(xvi) “Warrant
Shares”
means
the shares of Common Stock issuable at any time upon exercise of this Warrant.
(c) Other
Definitional Provisions.
(i) Except
as
otherwise specified herein, all references herein (A) to the Company shall
be deemed to include the Company’s successors and (B) to any applicable law
defined or referred to herein shall be deemed references to such applicable
law
as the same may have been or may be amended or supplemented from time to time.
(ii) When
used
in this Warrant, the words “herein”,
“hereof”,
and
“hereunder”
and
words of similar import, shall refer to this Warrant as a whole and not to
any
provision of this Warrant, and the words “Section”,
“Schedule”,
and
“Exhibit”
shall
refer to Sections of, and Schedules and Exhibits to, this Warrant unless
otherwise specified.
(iii) Whenever
the context so requires, the neuter gender includes the masculine or feminine,
and the singular number includes the plural, and vice versa.
Section
2. Exercise
of Warrant.
(a) Subject
to the terms and conditions hereof, this Warrant may be exercised by the holder
hereof then registered on the books of the Company, pro rata as hereinafter
provided, at any time on any Business Day on or after the opening of business
on
such Business Day, commencing with the first day after the date hereof, and
prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by
delivery of a written notice, in the form of the subscription notice attached
as
Exhibit
A
hereto
(the “Exercise
Notice”),
of
such holder’s election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, payment to the Company of an
amount equal to the Warrant Exercise Price(s) applicable to the Warrant
Shares being purchased, multiplied by the number of Warrant Shares (at the
applicable Warrant Exercise Price) as to which this Warrant is being
exercised (plus any applicable issue or transfer taxes) (the
“Aggregate
Exercise Price”) in
cash or wire transfer of immediately available funds and the surrender of this
Warrant (or an indemnification undertaking with respect to this Warrant in
the
case of its loss, theft or destruction) to a common carrier for overnight
delivery to the Company as soon as practicable following such date
(“Cash
Basis”) or
(ii) if at the time of exercise, the Warrant Shares are not subject to an
effective registration statement or if an Event of Default has occurred, by
delivering an Exercise Notice and in lieu of making payment of the Aggregate
Exercise Price in cash or wire transfer, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (the “Cashless
Exercise”):
| |
Net
Number
|
=
|
(A
x B) - (A x C)
|
|
| |
|
|
B
|
|
| |
|
|
|
|
For
purposes of the foregoing formula:
| |
A
|
=
|
the
total number of Warrant Shares with respect to which this Warrant
is then
being exercised.
|
|
| |
|
|
|
|
| |
B
|
=
|
the
Closing Bid Price of the Common Stock on the date of exercise of
the
Warrant.
|
|
| |
|
|
|
|
| |
C
|
=
|
the
Warrant Exercise Price then in effect for the applicable Warrant
Shares at
the time of such exercise.
|
|
| |
|
|
|
|
In
the
event of any exercise of the rights represented by this Warrant in compliance
with this Section 2, the Company shall on or before the
fifth (5th) Business Day following the date of receipt of the Exercise
Notice, the Aggregate Exercise Price and this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) and the receipt of the representations of the holder specified
in Section 6 hereof, if requested by the Company (the “Exercise
Delivery Documents”),
and
if the Common Stock is DTC eligible, credit such aggregate 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; provided, however,
if the holder who submitted the Exercise Notice requested physical delivery
of
any or all of the Warrant Shares, or, if the Common Stock is not DTC eligible
then the Company shall, on or before the fifth (5th) Business
Day following receipt of the Exercise Delivery Documents, issue and surrender
to
a common carrier for overnight delivery to the address specified in the Exercise
Notice, a certificate, registered in the name of the holder, for the number
of
shares of Common Stock to which the holder shall be entitled pursuant to such
request. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (i) or (ii) above the holder of this
Warrant shall be deemed for all corporate purposes to have become the holder
of
record of the Warrant Shares with respect to which this Warrant has been
exercised. In the case of a dispute as to the determination of the Warrant
Exercise Price, the Closing Bid Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the holder the number of
Warrant Shares that is not disputed and shall submit the disputed determinations
or arithmetic calculations to the holder via facsimile within one
(1) Business Day of receipt of the holder’s Exercise Notice.
(b) If
the
holder and the Company are unable to agree upon the determination of the Warrant
Exercise Price or arithmetic calculation of the Warrant Shares within one
(1) day of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall immediately submit via facsimile
(i) the disputed determination of the Warrant Exercise Price or the Closing
Bid Price to an independent, reputable investment banking firm or (ii) the
disputed arithmetic calculation of the Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or
the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment banking firm’s or accountant’s determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(c) Unless
the rights represented by this Warrant shall have expired or shall have been
fully exercised, the Company shall, as soon as practicable and in no event
later
than five (5) Business Days after any exercise and at its own expense,
issue a new Warrant identical in all respects to this Warrant exercised except
it shall represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised.
(d) No
fractional Warrant Shares are to be issued upon any pro rata exercise of this
Warrant, but rather the number of Warrant Shares issued upon such exercise
of
this Warrant shall be rounded up or down to the nearest whole
number.
(e) If
the
Company or its Transfer Agent shall fail for any reason or for no reason to
issue to the holder within ten (10) days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which
the
holder is entitled or to credit the holder’s balance account with The Depository
Trust Company for such number of Warrant Shares to which the holder is entitled
upon the holder’s exercise of this Warrant, the Company shall, in addition to
any other remedies under this Warrant or the Placement Agent Agreement or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day the issuance of such certificate for Warrant Shares is not
timely effected an amount equal to 0.025% of the product of (A) the sum of
the number of Warrant Shares not issued to the holder on a timely basis and
to
which the holder is entitled, and (B) the Closing Bid Price of the Common
Stock for the trading day immediately preceding the last possible date which
the
Company could have issued such Common Stock to the holder without violating
this
Section 2.
(f) If
within
ten (10) days after the Company’s receipt of the Exercise Delivery
Documents, the Company fails to deliver a new Warrant to the holder for the
number of Warrant Shares to which such holder is entitled pursuant to Section
2
hereof, then, in addition to any other available remedies under this Warrant
or
the Placement Agent Agreement, or otherwise available to such holder, the
Company shall pay as additional damages in cash to such holder on each day
after
such tenth (10th) day
that such delivery of such new Warrant is not timely effected in an amount
equal
to 0.25% of the product of (A) the number of Warrant Shares represented by
the portion of this Warrant which is not being exercised and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Warrant to
the
holder without violating this Section 2.
(g) Forced
Exercise.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than Thirty
Five Cents ($0.35) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
Section
3. Covenants
as to Common Stock.
The
Company hereby covenants and agrees as follows:
(a) This
Warrant is, and any Warrants issued in substitution for or replacement of this
Warrant will upon issuance be, duly authorized and validly issued.
(b) All
Warrant Shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
(c) During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved at least one hundred
percent (100%) of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price. If at any time the Company does not have a sufficient
number of shares of Common Stock authorized and available, then the Company
shall call and hold a special meeting of its stockholders within
sixty (60) days of that time for the sole purpose of increasing the
number of authorized shares of Common Stock.
(d) If
at any
time after the date hereof the Company shall file a registration statement,
the
Company shall include the Warrant Shares issuable to the holder, pursuant to
the
terms of this Warrant and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Warrant Shares from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case
may
be, and shall maintain such listing of, any other shares of capital stock of
the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(e) The
Company will not, by amendment of its Articles of Incorporation 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 to be observed or performed by
it
hereunder, but will at all times in good faith assist in the carrying out of
all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this Warrant. The Company
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Warrant Exercise Price then in effect,
and (ii) will take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this
Warrant.
(f) This
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets.
Section
4. Taxes.
The
Company shall pay any and all taxes, except any applicable withholding, which
may be payable with respect to the issuance and delivery of Warrant Shares
upon
exercise of this Warrant.
Section
5. Warrant
Holder Not Deemed a Stockholder.
Except
as otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of shares
of capital stock of the Company for any purpose, nor shall anything contained
in
this Warrant be construed to confer upon the holder hereof, as such, any of
the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of
this
Warrant. In addition, nothing contained in this Warrant shall be construed
as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder
of
this Warrant with copies of the same notices and other information given to
the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section
6. Representations
of Holder.
The
holder of this Warrant, by the acceptance hereof, represents that it is
acquiring this Warrant and the Warrant Shares for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution of this Warrant or the Warrant Shares, except pursuant
to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, the holder does not agree to hold this
Warrant or any of the Warrant Shares for any minimum or other specific term
and
reserves the right to dispose of this Warrant and the Warrant Shares at any
time
in accordance with or pursuant to a registration statement or an exemption
under
the Securities Act. The holder of this Warrant further represents, by acceptance
hereof, that, as of this date, such holder is an “accredited investor” as such
term is defined in Rule 501(a)(1) of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act (an “Accredited
Investor”).
Upon
exercise of this Warrant the holder shall, if requested by the Company, confirm
in writing, in a form satisfactory to the Company, that the Warrant Shares
so
purchased are being acquired solely for the holder’s own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale and that such holder is an Accredited Investor. If such
holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder’s exercise of this Warrant
that the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of this Warrant shall not violate any United States or state
securities laws.
Section
7. Ownership
and Transfer.
(a) The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof),
a
register for this Warrant, in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as
the
name and address of each transferee. The Company may treat the person in whose
name any Warrant is registered on the register as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this
Warrant.
Section
8. Adjustment
of Warrant Exercise Price and Number of Shares.
The
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as
follows:
(a) Adjustment
of Warrant Exercise Price and Number of Shares upon Issuance of Common
Stock.
If and
whenever on or after the Issuance Date of this Warrant, the Company issues
or
sells, or is deemed to have issued or sold, any shares of Common
Stock (other than (i) Excluded Securities and (ii) shares of
Common Stock which are issued or deemed to have been issued by the Company
in
connection with an Approved Stock Plan or upon exercise or conversion of the
Other Securities) for a consideration per share less than a price (the
“Applicable
Price”) equal
to the Warrant Exercise Price in effect immediately prior to such issuance
or
sale, then immediately after such issue or sale the Warrant Exercise Price
then
in effect shall be reduced to an amount equal to such consideration per share.
Upon each such adjustment of the Warrant Exercise Price hereunder, the number
of
Warrant Shares issuable upon exercise of this Warrant shall be adjusted to
the
number of shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Warrant Exercise Price resulting from such
adjustment.
(b) Effect
on Warrant Exercise Price of Certain Events.
Excluding the issuance of Excluded Securities or the exercise or conversion
of
Other Securities, for purposes of determining the adjusted Warrant Exercise
Price under Section 8(a) above, the following shall be
applicable:
(i) Issuance
of Options.
If
after the date hereof, the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon
the
exercise of any such Option or upon conversion or exchange of any convertible
securities issuable upon exercise of any such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and
to
have been issued and sold by the Company at the time of the granting or sale
of
such Option for such price per share. For purposes of this Section 8(b)(i),
the
lowest price per share for which one share of Common Stock is issuable upon
exercise of such Options or upon conversion or exchange of such Convertible
Securities shall be equal to the sum of the lowest amounts of consideration
(if
any) received or receivable by the Company with respect to any one share of
Common Stock upon the granting or sale of the Option, upon exercise of the
Option or upon conversion or exchange of any convertible security issuable
upon
exercise of such Option. No further adjustment of the Warrant Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
convertible securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such convertible
securities.
(ii) Issuance
of Convertible Securities.
If the
Company in any manner issues or sells any convertible securities and the lowest
price per share for which one share of Common Stock is issuable upon the
conversion or exchange thereof is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the issuance or sale of such convertible
securities for such price per share. For the purposes of this
Section 8(b)(ii), the lowest price per share for which one share of Common
Stock is issuable upon such conversion or exchange shall be equal to the sum
of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance or sale
of
the convertible security and upon conversion or exchange of such convertible
security. No further adjustment of the Warrant Exercise Price shall be made
upon
the actual issuance of such Common Stock upon conversion or exchange of such
convertible securities, and if any such issue or sale of such convertible
securities is made upon exercise of any Options for which adjustment of the
Warrant Exercise Price had been or are to be made pursuant to other provisions
of this Section 8(b), no further adjustment of the Warrant Exercise Price shall
be made by reason of such issue or sale.
(iii) Change
in Option Price or Rate of Conversion.
If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any convertible
securities, or the rate at which any convertible securities are convertible
into
or exchangeable for Common Stock changes at any time, the Warrant Exercise
Price
in effect at the time of such change shall be adjusted to the Warrant Exercise
Price which would have been in effect at such time had such Options or
convertible securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of Warrant Shares issuable
upon
exercise of this Warrant shall be correspondingly readjusted. For purposes
of
this Section 8(b)(iii), if the terms of any Option or convertible security
that
was outstanding as of the Issuance Date of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
convertible security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change. No adjustment pursuant to this Section 8(b) shall
be made if such adjustment would result in an increase of the Warrant Exercise
Price then in effect.
(c) Effect
on Warrant Exercise Price of Certain Events.
Excluding the issuance of Excluded Securities or the exercise or conversion
of
Other Securities, for purposes of determining the adjusted Warrant Exercise
Price under Sections 8(a) and 8(b), the following shall be
applicable:
(i) Calculation
of Consideration Received.
If any
Common Stock, Options or convertible securities are issued or sold or deemed
to
have been issued or sold for cash, the consideration received therefore will
be
deemed to be the net amount received by the Company therefore. If any Common
Stock, Options or convertible securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of marketable securities, in which case the amount of consideration
received by the Company will be the market price of such securities on the
date
of receipt of such securities. If any Common Stock, Options or convertible
securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefore will be deemed to be the fair value of such portion
of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or convertible securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding. If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring valuation
(the “Valuation
Event”),
the
fair value of such consideration will be determined within five
(5) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding. The determination of such appraiser shall be final and binding
upon all parties and the fees and expenses of such appraiser shall be borne
jointly by the Company and the holders of Warrants.
(ii) Integrated
Transactions.
In case
any Option is issued in connection with the issue or sale of other securities
of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01.
(iii) Treasury
Shares.
The
number of shares of Common Stock outstanding at any given time does not include
shares owned or held by or for the account of the Company, and the disposition
of any shares so owned or held will be considered an issue or sale of Common
Stock.
(iv) Record
Date.
If the
Company takes a record of the holders of Common Stock for the purpose of
entitling them (1) to receive a dividend or other distribution payable in
Common Stock, Options or in convertible securities or (2) to subscribe for
or purchase Common Stock, Options or convertible securities, then such record
date will be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(d) Adjustment
of Warrant Exercise Price upon Subdivision or Combination of Common
Stock.
If the
Company at any time after the date of issuance of this Warrant subdivides (by
any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, any Warrant Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant will be proportionately
increased. If the Company at any time after the date of issuance of this Warrant
combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, any Warrant Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
issuable upon exercise of this Warrant will be proportionately decreased. Any
adjustment under this Section 8(d) shall become effective at the close
of business on the date the subdivision or combination becomes
effective.
(e) Distribution
of Assets.
If the
Company shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of Common Stock, by way of
return of capital or otherwise (including, without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement or other similar
transaction) (a “Distribution”),
at
any time after the issuance of this Warrant, then, in each such
case:
(i) any
Warrant Exercise Price in effect immediately prior to the close of business
on
the record date fixed for the determination of holders of Common Stock
entitled to
receive the Distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Warrant Exercise
Price by a fraction of which (A) the numerator shall be the Closing Sale
Price of the Common Stock on the trading day immediately preceding such record
date minus the value of the Distribution (as determined in good faith by the
Company’s Board of Directors) applicable to one share of Common Stock, and
(B) the denominator shall be the Closing Sale Price of the Common Stock on
the trading day immediately preceding such record date; and
(ii) either
(A) the number of Warrant Shares obtainable upon exercise of this Warrant
shall be increased to a number of shares equal to the number of shares of Common
Stock obtainable immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive
the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding clause (i), or (B) in the event that the Distribution
is of common stock of a company whose common stock is traded on a national
securities exchange or a national automated quotation system, then the holder
of
this Warrant shall receive an additional warrant to purchase Common Stock,
the
terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the amount of the assets that would have
been
payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such record date and with
an
exercise price equal to the amount by which the exercise price of this Warrant
was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding clause (i).
(f) Certain
Events.
If any
event occurs of the type contemplated by the provisions of this Section 8
but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights
or
other rights with equity features), then the Company’s Board of Directors will
make an appropriate adjustment in the Warrant Exercise Price and the number
of
shares of Common Stock obtainable upon exercise of this Warrant so as to protect
the rights of the holders of the Warrants; provided, except as set forth in
section 8(d), that no such adjustment pursuant to this Section 8(f) will
increase the Warrant Exercise Price or decrease the number of shares of Common
Stock obtainable as otherwise determined pursuant to this Section
8.
(g) Notices.
(i) Immediately
upon any adjustment of the Warrant Exercise Price, the Company will give written
notice thereof to the holder of this Warrant, setting forth in reasonable
detail, and certifying, the calculation of such adjustment.
(ii) The
Company will give written notice to the holder of this Warrant at least ten
(10) days prior to the date on which the Company closes its books or takes
a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with respect to any
Organic Change (as defined below), dissolution or liquidation, provided that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder.
(iii) The
Company will also give written notice to the holder of this Warrant at least
ten
(10) days prior to the date on which any Organic Change, dissolution or
liquidation will take place, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to
such
holder.
Section
9. Purchase
Rights; Reorganization, Reclassification, Consolidation, Merger or
Sale.
(a) In
addition to any adjustments pursuant to Section 8 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights
to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the “Purchase
Rights”),
then
the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale
of
such Purchase Rights, or, if no such record is taken, the date as of which
the
record holders of Common Stock are to be determined for the grant, issue or
sale
of such Purchase Rights.
(b) Any
recapitalization, reorganization, reclassification, consolidation, merger,
sale
of all or substantially all of the Company’s assets to another Person or other
transaction in each case which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an “Organic
Change.”
Prior
to the consummation of any (i) sale of all or substantially all of the
Company’s assets to an acquiring Person or (ii) other Organic Change
following which the Company is not a surviving entity, the Company will secure
from the Person purchasing such assets or the successor resulting from such
Organic Change (in each case, the “Acquiring
Entity”) a
written agreement (in form and substance satisfactory to the holders of Warrants
representing at least two-thirds (iii) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding) to deliver to each holder of
Warrants in exchange for such Warrants, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance
to
this Warrant and satisfactory to the holders of the Warrants (including an
adjusted warrant exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants without regard to any limitations on exercise,
if
the value so reflected is less than any Applicable Warrant Exercise Price
immediately prior to such consolidation, merger or sale). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance satisfactory to the holders of Warrants
representing a majority of
the
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may
be) the Warrant Shares immediately theretofore issuable and receivable upon
the exercise of such holder’s Warrants (without regard to any limitations
on exercise), such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange for
the
number of Warrant Shares which would have been issuable and receivable upon
the
exercise of such holder’s Warrant as of the date of such Organic Change (without
taking into account any limitations or restrictions on the exercisability of
this Warrant).
Section
10. Lost,
Stolen, Mutilated or Destroyed Warrant.
If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly,
on
receipt of an indemnification undertaking (or, in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed.
Section
11. Notice.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Warrant must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of receipt
is received by the sending party transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to Cornell:
|
Cornell
Capital Partners, LP
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Attention: Mark
A. Angelo
|
| |
Telephone: (201) 985-8300
|
| |
Facsimile: (201) 985-8266
|
| |
|
|
With
Copy to:
|
David
Gonzalez, Esq.
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Telephone: (201) 985-8300
|
| |
Facsimile: (201) 985-8266
|
| |
|
|
If
to the Company, to:
|
Neomedia
Technologies, Inc.
|
| |
2201
Second Street, Suite #600
|
| |
Fort
Myers, FL 33901
|
| |
Attention: Charles
T. Jensen
|
| |
Telephone: (239) 337-3434
|
| |
Facsimile: (239) 337-3668
|
| |
|
|
With
a copy to:
|
Kirkpatrick
& Lockhart Nicholson Graham, LLP
|
| |
201
South Biscayne Boulevard, Suite 2000
|
| |
Miami,
FL 33131
|
| |
Attention: Clayton
E. Parker, Esquire
|
| |
Telephone: (305) 539-3306
|
| |
Facsimile: (305) 358-7095
|
| |
|
If
to a
holder of this Warrant, to it at the address and facsimile number set forth
on
Exhibit C
hereto,
with copies to such holder’s representatives as set forth on Exhibit C,
or at
such other address and facsimile as shall be delivered to the Company upon
the
issuance or transfer of this Warrant. Each party shall provide five days’ prior
written notice to the other party of any change in address or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, facsimile, waiver or other communication, (or (B) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence
of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
Section
12. Date.
The
date of this Warrant is set forth on page 1 hereof. This Warrant, in all
events, shall be wholly void and of no effect after the close of business on
the
Expiration Date, except that notwithstanding any other provisions hereof, the
provisions of Section 8(b) shall continue in full force and effect
after such date as to any Warrant Shares or other securities issued upon the
exercise of this Warrant.
Section
13. Amendment
and Waiver.
Except
as otherwise provided herein, the provisions of the Warrants may be amended
and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the holders of Warrants representing at least two-thirds
of
the Warrant Shares issuable upon exercise of the Warrants then outstanding;
provided that, except for Section 8(d), no such action may increase the Warrant
Exercise Price or decrease the number of shares or class of stock obtainable
upon exercise of any Warrant without the written consent of the holder of such
Warrant.
Section
14. Descriptive
Headings; Governing Law.
The
descriptive headings of the several sections and paragraphs of this Warrant
are
inserted for convenience only and do not constitute a part of this Warrant.
The
corporate laws of the State of Delaware shall govern all issues concerning
the
relative rights of the Company and its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of New Jersey or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in Hudson County and the United States
District Court for the District of New Jersey, for the adjudication of any
dispute hereunder or in connection herewith or therewith, or with any
transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party 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 to
such
party at the address for such 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.
Section
15. Waiver
of Jury Trial.
AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT,
THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.
REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed as of the date first set forth
above.
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
| |
|
| |
By:/s/
Charles T. Jensen
|
| |
Name: Charles
T. Jensen
|
| |
Title: President
& Chief Executive Officer
|
| |
|
EXHIBIT
A TO WARRANT
EXERCISE
NOTICE
TO
BE EXECUTED
BY
THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
NEOMEDIA
TECHNOLOGIES, INC.
The
undersigned holder hereby exercises the right to purchase ______________ of
the
shares of Common Stock (“Warrant
Shares”) of
Neomedia Technologies, Inc. (the “Company”),
evidenced by the attached Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
Specify
Method of exercise by check mark:
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1.
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___
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Cash
Exercise
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(a)
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Payment
of Warrant Exercise Price.
The holder shall pay the Aggregate Exercise Price of $______________
to
the Company in accordance with the terms of the Warrant.
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(b)
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Delivery
of Warrant Shares.
The Company shall deliver to the holder _____ Warrant Shares in accordance
with the terms of the Warrant.
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2.
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___
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Cashless
Exercise
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(a)
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Payment
of Warrant Exercise Price.
In lieu of making payment of the Aggregate Exercise Price, the holder
elects to receive upon such exercise the Net Number of shares of
Common
Stock determined in accordance with the terms of the Warrant.
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(b)
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Delivery
of Warrant Shares.
The Company shall deliver to the holder _____ Warrant Shares in accordance
with the terms of the Warrant.
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Date:
_______________ __, ______
Name
of
Registered Holder
By:_________________________
Name:_______________________
Title:________________________
EXHIBIT
B TO WARRANT
FORM
OF WARRANT POWER
FOR
VALUE RECEIVED,
the
undersigned does hereby assign and transfer to ________________, Federal
Identification No. __________, a warrant to purchase ____________ shares of
the capital stock of Neomedia Technologies, Inc. represented by warrant
certificate no. _____, standing in the name of the undersigned on the books
of said corporation. The undersigned does hereby irrevocably constitute and
appoint ______________, attorney to transfer the warrants of said corporation,
with full power of substitution in the premises.
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Dated:____________________________
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By:____________________________
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Name:__________________________
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Title:___________________________
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DOCUMENT
BASICALLY CLEANED
IMPORTED
E-MAIL DOCUMENT
DOCUMENT
BASICALLY CLEANED BY DOCX
“C”
WARRANT
THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
NEOMEDIA
TECHNOLOGIES, INC.
Warrant
To Purchase Common Stock
| Warrant No.: |
CCP-001
|
Number
of Shares: 50,000,000
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| Date of
Issuance: |
August
24, 2006
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Neomedia
Technologies, Inc., a Delaware corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Cornell
Capital Partners, LP
(“Cornell”),
the
registered holder hereof or its permitted assigns, is entitled, subject to
the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after
11:59 P.M. Eastern Time on the Expiration Date (as defined
herein) Fifty Million (50,000,000) fully paid and nonassessable shares
of Common Stock (as defined herein) of the Company (the “Warrant
Shares”) at
the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the holder
be
entitled to exercise this Warrant for a number of Warrant Shares in excess
of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by
the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) days of the
Expiration Date (however, such restriction may be waived by Cornell (but only
as
to itself and not to any other holder) upon not less than sixty-five (65)
days prior notice to the Company). For purposes of the foregoing proviso, the
aggregate number of shares of Common Stock beneficially owned by the holder
and
its affiliates shall include the number of shares of Common Stock issuable
upon
exercise of this Warrant with respect to which the determination of such proviso
is being made, but shall exclude shares of Common Stock which would be issuable
upon (i) exercise of the remaining, unexercised Warrants beneficially owned
by the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For purposes of
this Warrant, in determining the number of outstanding shares of Common Stock
a
holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company’s most recent Form 10-Q or Form 10-K, as the case may
be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or its transfer agent setting forth the number
of
shares of Common Stock outstanding. Upon the written request of any holder,
the
Company shall promptly, but in no event later than one (1) Business Day
following the receipt of such notice, confirm in writing to any such holder
the
number of shares of Common Stock then outstanding. In any case, the number
of
outstanding shares of Common Stock shall be determined after giving effect
to
the exercise of Warrants (as defined below) by such holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.
Section
1.
(a) This
Warrant is the common stock purchase warrant (the “Warrant”) issued
pursuant to the Securities Purchase Agreement (the “Securities
Purchase Agreement”) dated
the date hereof between the Company and the Buyers listed on Schedule I
thereto.
(b) Definitions.
The
following words and terms as used in this Warrant shall have the following
meanings:
(i) “Approved
Stock Plan”
means
any employee benefit plan which has been approved by the Board of Directors
of
the Company, pursuant to which the Company’s securities may be issued to any
employee, officer or director for services provided to the Company.
(ii) “Business
Day”
means
any day other than Saturday, Sunday or other day on which commercial banks
in
the City of New York are authorized or required by law to remain
closed.
(iii) “Closing
Bid Price”
means
the closing bid price of Common Stock as quoted on the Principal Market (as
reported by Bloomberg Financial Markets (“Bloomberg”) through
its “Volume at Price” function).
(iv) “Common
Stock”
means
(i) the Company’s common stock, par value $0.01 per share, and
(ii) any capital stock into which such Common Stock shall have been changed
or any capital stock resulting from a reclassification of such Common
Stock.
(v) “Event
of Default”
means
an event of default under the Securities Purchase Agreement or the Convertible
Debentures issued in connection therewith.
(vi) “Excluded
Securities”
means,
provided such security is issued at a price which is greater than or equal
to
the arithmetic average of the Closing Bid Prices of the Common Stock for the
ten
(10) consecutive trading days immediately preceding the date of issuance,
any of the following: (a) any issuance by the Company of securities in
connection with a strategic partnership or a joint venture (the primary purpose
of which is not to raise equity capital), (b) any issuance by the Company
of securities as consideration for a merger or consolidation or the acquisition
of a business, product, license, or other assets of another person or entity
and
(c) options to purchase shares of Common Stock, provided (I) such
options are issued after the date of this Warrant to employees or directors
of
the Company and (II) the exercise price of such options is not less than
the Closing Bid Price of the Common Stock on the date of issuance of such
option.
(vii) “Expiration
Date”
means
the date five (5) years from the Issuance Date of this Warrant or, if such
date falls on a Saturday, Sunday or other day on which banks are required or
authorized to be closed in the City of New York or the State of New York or
on
which trading does not take place on the Principal Exchange or automated
quotation system on which the Common Stock is traded (a “Holiday”),
the
next date that is not a Holiday.
(viii) “Issuance
Date”
means
the date hereof.
(ix) “Options”
means
any rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
(x) “Other
Securities”
means
(i) those options and warrants of the Company issued prior to, and
outstanding on, the Issuance Date of this Warrant, (ii) the shares of
Common Stock issuable on exercise of such options and warrants, provided such
options and warrants are not amended after the Issuance Date of this Warrant,
(iii) the shares of Common Stock issuable upon exercise of this Warrant,
(iv) shares of Common Stock paid upon conversion of the convertible
preferred stock paid pursuant to the Amended and Restated Investment Agreement
and (v) any shares of Common Stock issued in connection with any
acquisition of the stock or assets of another entity which have been approved
by
the Board of Directors of the Company.
(xi) “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(xii) “Principal
Market”
means
the New York Stock Exchange, the American Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market, whichever is at the time the principal
trading exchange or market for such security, or the over-the-counter market
on
the electronic bulletin board for such security as reported by Bloomberg or,
if
no bid or sale information is reported for such security by Bloomberg, then
the
average of the bid prices of each of the market makers for such security as
reported in the “pink sheets” by the National Quotation Bureau,
Inc.
(xiii) “Securities
Act”
means
the Securities Act of 1933, as amended.
(xiv) “Warrant”
means
this Warrant and all Warrants issued in exchange, transfer or replacement
thereof.
(xv) “Warrant
Exercise Price”
shall
be $0.20 or as subsequently adjusted as provided in Section 8 hereof.
(xvi) “Warrant
Shares”
means
the shares of Common Stock issuable at any time upon exercise of this Warrant.
(c) Other
Definitional Provisions.
(i) Except
as
otherwise specified herein, all references herein (A) to the Company shall
be deemed to include the Company’s successors and (B) to any applicable law
defined or referred to herein shall be deemed references to such applicable
law
as the same may have been or may be amended or supplemented from time to time.
(ii) When
used
in this Warrant, the words “herein”,
“hereof”,
and
“hereunder”
and
words of similar import, shall refer to this Warrant as a whole and not to
any
provision of this Warrant, and the words “Section”,
“Schedule”,
and
“Exhibit”
shall
refer to Sections of, and Schedules and Exhibits to, this Warrant unless
otherwise specified.
(iii) Whenever
the context so requires, the neuter gender includes the masculine or feminine,
and the singular number includes the plural, and vice versa.
Section
2. Exercise
of Warrant.
(a) Subject
to the terms and conditions hereof, this Warrant may be exercised by the holder
hereof then registered on the books of the Company, pro rata as hereinafter
provided, at any time on any Business Day on or after the opening of business
on
such Business Day, commencing with the first day after the date hereof, and
prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by
delivery of a written notice, in the form of the subscription notice attached
as
Exhibit
A
hereto
(the “Exercise
Notice”),
of
such holder’s election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, payment to the Company of an
amount equal to the Warrant Exercise Price(s) applicable to the Warrant
Shares being purchased, multiplied by the number of Warrant Shares (at the
applicable Warrant Exercise Price) as to which this Warrant is being
exercised (plus any applicable issue or transfer taxes) (the
“Aggregate
Exercise Price”) in
cash or wire transfer of immediately available funds and the surrender of this
Warrant (or an indemnification undertaking with respect to this Warrant in the
case of its loss, theft or destruction) to a common carrier for overnight
delivery to the Company as soon as practicable following such date
(“Cash
Basis”) or
(ii) if at the time of exercise, the Warrant Shares are not subject to an
effective registration statement or if an Event of Default has occurred, by
delivering an Exercise Notice and in lieu of making payment of the Aggregate
Exercise Price in cash or wire transfer, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (the “Cashless
Exercise”):
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Net
Number
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=
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(A
x B) - (A x C)
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B
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For
purposes of the foregoing formula:
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A
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=
|
the
total number of Warrant Shares with respect to which this Warrant
is then
being exercised.
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B
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=
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the
Closing Bid Price of the Common Stock on the date of exercise of
the
Warrant.
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C
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=
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the
Warrant Exercise Price then in effect for the applicable Warrant
Shares at
the time of such exercise.
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In
the
event of any exercise of the rights represented by this Warrant in compliance
with this Section 2, the Company shall on or before the
fifth (5th) Business Day following the date of receipt of the Exercise
Notice, the Aggregate Exercise Price and this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) and the receipt of the representations of the holder specified
in Section 6 hereof, if requested by the Company (the “Exercise
Delivery Documents”),
and
if the Common Stock is DTC eligible, credit such aggregate 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; provided, however,
if the holder who submitted the Exercise Notice requested physical delivery
of
any or all of the Warrant Shares, or, if the Common Stock is not DTC eligible
then the Company shall, on or before the fifth (5th) Business
Day following receipt of the Exercise Delivery Documents, issue and surrender
to
a common carrier for overnight delivery to the address specified in the Exercise
Notice, a certificate, registered in the name of the holder, for the number
of
shares of Common Stock to which the holder shall be entitled pursuant to such
request. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (i) or (ii) above the holder of this
Warrant shall be deemed for all corporate purposes to have become the holder
of
record of the Warrant Shares with respect to which this Warrant has been
exercised. In the case of a dispute as to the determination of the Warrant
Exercise Price, the Closing Bid Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the holder the number of
Warrant Shares that is not disputed and shall submit the disputed determinations
or arithmetic calculations to the holder via facsimile within one
(1) Business Day of receipt of the holder’s Exercise Notice.
(b) If
the
holder and the Company are unable to agree upon the determination of the Warrant
Exercise Price or arithmetic calculation of the Warrant Shares within one
(1) day of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall immediately submit via facsimile
(i) the disputed determination of the Warrant Exercise Price or the Closing
Bid Price to an independent, reputable investment banking firm or (ii) the
disputed arithmetic calculation of the Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or
the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment banking firm’s or accountant’s determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(c) Unless
the rights represented by this Warrant shall have expired or shall have been
fully exercised, the Company shall, as soon as practicable and in no event
later
than five (5) Business Days after any exercise and at its own expense,
issue a new Warrant identical in all respects to this Warrant exercised except
it shall represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised.
(d) No
fractional Warrant Shares are to be issued upon any pro rata exercise of this
Warrant, but rather the number of Warrant Shares issued upon such exercise
of
this Warrant shall be rounded up or down to the nearest whole
number.
(e) If
the
Company or its Transfer Agent shall fail for any reason or for no reason to
issue to the holder within ten (10) days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which
the
holder is entitled or to credit the holder’s balance account with The Depository
Trust Company for such number of Warrant Shares to which the holder is entitled
upon the holder’s exercise of this Warrant, the Company shall, in addition to
any other remedies under this Warrant or the Placement Agent Agreement or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day the issuance of such certificate for Warrant Shares is not
timely effected an amount equal to 0.025% of the product of (A) the sum of
the number of Warrant Shares not issued to the holder on a timely basis and
to
which the holder is entitled, and (B) the Closing Bid Price of the Common
Stock for the trading day immediately preceding the last possible date which
the
Company could have issued such Common Stock to the holder without violating
this
Section 2.
(f) If
within
ten (10) days after the Company’s receipt of the Exercise Delivery
Documents, the Company fails to deliver a new Warrant to the holder for the
number of Warrant Shares to which such holder is entitled pursuant to Section
2
hereof, then, in addition to any other available remedies under this Warrant
or
the Placement Agent Agreement, or otherwise available to such holder, the
Company shall pay as additional damages in cash to such holder on each day
after
such tenth (10th) day
that such delivery of such new Warrant is not timely effected in an amount
equal
to 0.25% of the product of (A) the number of Warrant Shares represented by
the portion of this Warrant which is not being exercised and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Warrant to
the
holder without violating this Section 2.
(g)
Forced
Exercise.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than Thirty
Cents ($0.30) for
ten
(10) consecutive Trading Days, to on such tenth (10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
Section
3. Covenants
as to Common Stock.
The
Company hereby covenants and agrees as follows:
(a) This
Warrant is, and any Warrants issued in substitution for or replacement of this
Warrant will upon issuance be, duly authorized and validly issued.
(b) All
Warrant Shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
(c) During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved at least one hundred
percent (100%) of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price. If at any time the Company does not have a sufficient
number of shares of Common Stock authorized and available, then the Company
shall call and hold a special meeting of its stockholders within
sixty (60) days of that time for the sole purpose of increasing the
number of authorized shares of Common Stock.
(d) If
at any
time after the date hereof the Company shall file a registration statement,
the
Company shall include the Warrant Shares issuable to the holder, pursuant to
the
terms of this Warrant and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Warrant Shares from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case
may
be, and shall maintain such listing of, any other shares of capital stock of
the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(e) The
Company will not, by amendment of its Articles of Incorporation 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 to be observed or performed by
it
hereunder, but will at all times in good faith assist in the carrying out of
all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this Warrant. The Company
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Warrant Exercise Price then in effect,
and (ii) will take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this
Warrant.
(f) This
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets.
Section
4. Taxes.
The
Company shall pay any and all taxes, except any applicable withholding, which
may be payable with respect to the issuance and delivery of Warrant Shares
upon
exercise of this Warrant.
Section
5. Warrant
Holder Not Deemed a Stockholder.
Except
as otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of shares
of capital stock of the Company for any purpose, nor shall anything contained
in
this Warrant be construed to confer upon the holder hereof, as such, any of
the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of
this
Warrant. In addition, nothing contained in this Warrant shall be construed
as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder
of
this Warrant with copies of the same notices and other information given to
the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section
6. Representations
of Holder.
The
holder of this Warrant, by the acceptance hereof, represents that it is
acquiring this Warrant and the Warrant Shares for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution of this Warrant or the Warrant Shares, except pursuant
to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, the holder does not agree to hold this
Warrant or any of the Warrant Shares for any minimum or other specific term
and
reserves the right to dispose of this Warrant and the Warrant Shares at any
time
in accordance with or pursuant to a registration statement or an exemption
under
the Securities Act. The holder of this Warrant further represents, by acceptance
hereof, that, as of this date, such holder is an “accredited investor” as such
term is defined in Rule 501(a)(1) of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act (an “Accredited
Investor”).
Upon
exercise of this Warrant the holder shall, if requested by the Company, confirm
in writing, in a form satisfactory to the Company, that the Warrant Shares
so
purchased are being acquired solely for the holder’s own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale and that such holder is an Accredited Investor. If such
holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder’s exercise of this Warrant
that the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of this Warrant shall not violate any United States or state
securities laws.
Section
7. Ownership
and Transfer.
(a) The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof),
a
register for this Warrant, in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as
the
name and address of each transferee. The Company may treat the person in whose
name any Warrant is registered on the register as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this
Warrant.
Section
8. Adjustment
of Warrant Exercise Price and Number of Shares.
The
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as
follows:
(a) Adjustment
of Warrant Exercise Price and Number of Shares upon Issuance of Common
Stock.
If and
whenever on or after the Issuance Date of this Warrant, the Company issues
or
sells, or is deemed to have issued or sold, any shares of Common
Stock (other than (i) Excluded Securities and (ii) shares of
Common Stock which are issued or deemed to have been issued by the Company
in
connection with an Approved Stock Plan or upon exercise or conversion of the
Other Securities) for a consideration per share less than a price (the
“Applicable
Price”) equal
to the Warrant Exercise Price in effect immediately prior to such issuance
or
sale, then immediately after such issue or sale the Warrant Exercise Price
then
in effect shall be reduced to an amount equal to such consideration per share.
Upon each such adjustment of the Warrant Exercise Price hereunder, the number
of
Warrant Shares issuable upon exercise of this Warrant shall be adjusted to
the
number of shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Warrant Exercise Price resulting from such
adjustment.
(b) Effect
on Warrant Exercise Price of Certain Events.
Excluding the issuance of Excluded Securities or the exercise or conversion
of
Other Securities, for purposes of determining the adjusted Warrant Exercise
Price under Section 8(a) above, the following shall be
applicable:
(i) Issuance
of Options.
If
after the date hereof, the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon
the
exercise of any such Option or upon conversion or exchange of any convertible
securities issuable upon exercise of any such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and
to
have been issued and sold by the Company at the time of the granting or sale
of
such Option for such price per share. For purposes of this Section 8(b)(i),
the
lowest price per share for which one share of Common Stock is issuable upon
exercise of such Options or upon conversion or exchange of such Convertible
Securities shall be equal to the sum of the lowest amounts of consideration
(if
any) received or receivable by the Company with respect to any one share of
Common Stock upon the granting or sale of the Option, upon exercise of the
Option or upon conversion or exchange of any convertible security issuable
upon
exercise of such Option. No further adjustment of the Warrant Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
convertible securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such convertible
securities.
(ii) Issuance
of Convertible Securities.
If the
Company in any manner issues or sells any convertible securities and the lowest
price per share for which one share of Common Stock is issuable upon the
conversion or exchange thereof is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the issuance or sale of such convertible
securities for such price per share. For the purposes of this
Section 8(b)(ii), the lowest price per share for which one share of Common
Stock is issuable upon such conversion or exchange shall be equal to the sum
of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance or sale
of
the convertible security and upon conversion or exchange of such convertible
security. No further adjustment of the Warrant Exercise Price shall be made
upon
the actual issuance of such Common Stock upon conversion or exchange of such
convertible securities, and if any such issue or sale of such convertible
securities is made upon exercise of any Options for which adjustment of the
Warrant Exercise Price had been or are to be made pursuant to other provisions
of this Section 8(b), no further adjustment of the Warrant Exercise Price shall
be made by reason of such issue or sale.
(iii) Change
in Option Price or Rate of Conversion.
If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any convertible
securities, or the rate at which any convertible securities are convertible
into
or exchangeable for Common Stock changes at any time, the Warrant Exercise
Price
in effect at the time of such change shall be adjusted to the Warrant Exercise
Price which would have been in effect at such time had such Options or
convertible securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of Warrant Shares issuable
upon
exercise of this Warrant shall be correspondingly readjusted. For purposes
of
this Section 8(b)(iii), if the terms of any Option or convertible security
that
was outstanding as of the Issuance Date of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
convertible security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change. No adjustment pursuant to this Section 8(b) shall
be made if such adjustment would result in an increase of the Warrant Exercise
Price then in effect.
(c) Effect
on Warrant Exercise Price of Certain Events.
Excluding the issuance of Excluded Securities or the exercise or conversion
of
Other Securities, for purposes of determining the adjusted Warrant Exercise
Price under Sections 8(a) and 8(b), the following shall be
applicable:
(i) Calculation
of Consideration Received.
If any
Common Stock, Options or convertible securities are issued or sold or deemed
to
have been issued or sold for cash, the consideration received therefore will
be
deemed to be the net amount received by the Company therefore. If any Common
Stock, Options or convertible securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of marketable securities, in which case the amount of consideration
received by the Company will be the market price of such securities on the
date
of receipt of such securities. If any Common Stock, Options or convertible
securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefore will be deemed to be the fair value of such portion
of
the net assets and business of the non-surviving entity as is attributable
to
such Common Stock, Options or convertible securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding. If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring valuation
(the “Valuation
Event”),
the
fair value of such consideration will be determined within five
(5) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding. The determination of such appraiser shall be final and binding
upon all parties and the fees and expenses of such appraiser shall be borne
jointly by the Company and the holders of Warrants.
(ii) Integrated
Transactions.
In case
any Option is issued in connection with the issue or sale of other securities
of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01.
(iii) Treasury
Shares.
The
number of shares of Common Stock outstanding at any given time does not include
shares owned or held by or for the account of the Company, and the disposition
of any shares so owned or held will be considered an issue or sale of Common
Stock.
(iv) Record
Date.
If the
Company takes a record of the holders of Common Stock for the purpose of
entitling them (1) to receive a dividend or other distribution payable in
Common Stock, Options or in convertible securities or (2) to subscribe for
or purchase Common Stock, Options or convertible securities, then such record
date will be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(d) Adjustment
of Warrant Exercise Price upon Subdivision or Combination of Common
Stock.
If the
Company at any time after the date of issuance of this Warrant subdivides (by
any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, any Warrant Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant will be proportionately
increased. If the Company at any time after the date of issuance of this Warrant
combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, any Warrant Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
issuable upon exercise of this Warrant will be proportionately decreased. Any
adjustment under this Section 8(d) shall become effective at the close
of business on the date the subdivision or combination becomes
effective.
(e) Distribution
of Assets.
If the
Company shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of Common Stock, by way of
return of capital or otherwise (including, without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement or other similar
transaction) (a “Distribution”),
at
any time after the issuance of this Warrant, then, in each such
case:
(i) any
Warrant Exercise Price in effect immediately prior to the close of business
on
the record date fixed for the determination of holders of Common Stock
entitled to
receive the Distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Warrant Exercise
Price by a fraction of which (A) the numerator shall be the Closing Sale
Price of the Common Stock on the trading day immediately preceding such record
date minus the value of the Distribution (as determined in good faith by the
Company’s Board of Directors) applicable to one share of Common Stock, and
(B) the denominator shall be the Closing Sale Price of the Common Stock on
the trading day immediately preceding such record date; and
(ii) either
(A) the number of Warrant Shares obtainable upon exercise of this Warrant
shall be increased to a number of shares equal to the number of shares of Common
Stock obtainable immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive
the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding clause (i), or (B) in the event that the Distribution
is of common stock of a company whose common stock is traded on a national
securities exchange or a national automated quotation system, then the holder
of
this Warrant shall receive an additional warrant to purchase Common Stock,
the
terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the amount of the assets that would have
been
payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such record date and with
an
exercise price equal to the amount by which the exercise price of this Warrant
was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding clause (i).
(f) Certain
Events.
If any
event occurs of the type contemplated by the provisions of this Section 8
but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights
or
other rights with equity features), then the Company’s Board of Directors will
make an appropriate adjustment in the Warrant Exercise Price and the number
of
shares of Common Stock obtainable upon exercise of this Warrant so as to protect
the rights of the holders of the Warrants; provided, except as set forth in
section 8(d), that no such adjustment pursuant to this Section 8(f) will
increase the Warrant Exercise Price or decrease the number of shares of Common
Stock obtainable as otherwise determined pursuant to this Section
8.
(g) Notices.
(i) Immediately
upon any adjustment of the Warrant Exercise Price, the Company will give written
notice thereof to the holder of this Warrant, setting forth in reasonable
detail, and certifying, the calculation of such adjustment.
(ii) The
Company will give written notice to the holder of this Warrant at least ten
(10) days prior to the date on which the Company closes its books or takes
a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with respect to any
Organic Change (as defined below), dissolution or liquidation, provided that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder.
(iii) The
Company will also give written notice to the holder of this Warrant at least
ten
(10) days prior to the date on which any Organic Change, dissolution or
liquidation will take place, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to
such
holder.
Section
9. Purchase
Rights; Reorganization, Reclassification, Consolidation, Merger or
Sale.
(a) In
addition to any adjustments pursuant to Section 8 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights
to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the “Purchase
Rights”),
then
the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale
of
such Purchase Rights, or, if no such record is taken, the date as of which
the
record holders of Common Stock are to be determined for the grant, issue or
sale
of such Purchase Rights.
(b) Any
recapitalization, reorganization, reclassification, consolidation, merger,
sale
of all or substantially all of the Company’s assets to another Person or other
transaction in each case which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an “Organic
Change.”
Prior
to the consummation of any (i) sale of all or substantially all of the
Company’s assets to an acquiring Person or (ii) other Organic Change
following which the Company is not a surviving entity, the Company will secure
from the Person purchasing such assets or the successor resulting from such
Organic Change (in each case, the “Acquiring
Entity”) a
written agreement (in form and substance satisfactory to the holders of Warrants
representing at least two-thirds (iii) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding) to deliver to each holder of
Warrants in exchange for such Warrants, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance
to
this Warrant and satisfactory to the holders of the Warrants (including an
adjusted warrant exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants without regard to any limitations on exercise,
if
the value so reflected is less than any Applicable Warrant Exercise Price
immediately prior to such consolidation, merger or sale). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance satisfactory to the holders of Warrants
representing a majority of
the
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may
be) the Warrant Shares immediately theretofore issuable and receivable upon
the exercise of such holder’s Warrants (without regard to any limitations
on exercise), such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange for
the
number of Warrant Shares which would have been issuable and receivable upon
the
exercise of such holder’s Warrant as of the date of such Organic Change (without
taking into account any limitations or restrictions on the exercisability of
this Warrant).
Section
10. Lost,
Stolen, Mutilated or Destroyed Warrant.
If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly,
on
receipt of an indemnification undertaking (or, in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed.
Section
11. Notice.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Warrant must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of receipt
is received by the sending party transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to Cornell:
|
Cornell
Capital Partners, LP
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Attention: Mark
A. Angelo
|
| |
Telephone: (201) 985-8300
|
| |
Facsimile: (201) 985-8266
|
| |
|
|
With
Copy to:
|
David
Gonzalez, Esq.
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Telephone: (201) 985-8300
|
| |
Facsimile: (201) 985-8266
|
|
If
to the Company, to:
|
Neomedia
Technologies, Inc.
|
| |
2201
Second Street, Suite #600
|
| |
Fort
Myers, FL 33901
|
| |
Attention: Charles
T. Jensen
|
| |
Telephone: (239) 337-3434
|
| |
Facsimile: (239) 337-3668
|
| |
|
|
With
a copy to:
|
Kirkpatrick
& Lockhart Nicholson Graham, LLP
|
| |
201
South Biscayne Boulevard, Suite 2000
|
| |
Miami,
FL 33131
|
| |
Attention: Clayton
E. Parker, Esquire
|
| |
Telephone: (305) 539-3306
|
| |
Facsimile: (305) 358-7095
|
If
to a
holder of this Warrant, to it at the address and facsimile number set forth
on
Exhibit C
hereto,
with copies to such holder’s representatives as set forth on Exhibit C,
or at
such other address and facsimile as shall be delivered to the Company upon
the
issuance or transfer of this Warrant. Each party shall provide five days’ prior
written notice to the other party of any change in address or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, facsimile, waiver or other communication, (or (B) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence
of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
Section
12. Date.
The
date of this Warrant is set forth on page 1 hereof. This Warrant, in all
events, shall be wholly void and of no effect after the close of business on
the
Expiration Date, except that notwithstanding any other provisions hereof, the
provisions of Section 8(b) shall continue in full force and effect
after such date as to any Warrant Shares or other securities issued upon the
exercise of this Warrant.
Section
13. Amendment
and Waiver.
Except
as otherwise provided herein, the provisions of the Warrants may be amended
and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the holders of Warrants representing at least two-thirds
of
the Warrant Shares issuable upon exercise of the Warrants then outstanding;
provided that, except for Section 8(d), no such action may increase the Warrant
Exercise Price or decrease the number of shares or class of stock obtainable
upon exercise of any Warrant without the written consent of the holder of such
Warrant.
Section
14. Descriptive
Headings; Governing Law.
The
descriptive headings of the several sections and paragraphs of this Warrant
are
inserted for convenience only and do not constitute a part of this Warrant.
The
corporate laws of the State of Delaware shall govern all issues concerning
the
relative rights of the Company and its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of New Jersey or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in Hudson County and the United States
District Court for the District of New Jersey, for the adjudication of any
dispute hereunder or in connection herewith or therewith, or with any
transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party 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 to
such
party at the address for such 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.
Section
15. Waiver
of Jury Trial.
AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT,
THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.
REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed as of the date first set forth
above.
| |
|
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ Charles
T. Jensen |
| |
Name: Charles
T. Jensen
|
| |
Title: President
& Chief Executive Officer
|
EXHIBIT
A TO WARRANT
EXERCISE
NOTICE
TO
BE EXECUTED
BY
THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
NEOMEDIA
TECHNOLOGIES, INC.
The
undersigned holder hereby exercises the right to purchase ______________ of
the
shares of Common Stock (“Warrant
Shares”) of
Neomedia Technologies, Inc. (the “Company”),
evidenced by the attached Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
Specify
Method of exercise by check mark:
| |
1.
|
o
|
Cash
Exercise
|
|
| |
|
(a)
|
Payment
of Warrant Exercise Price.
The holder shall pay the Aggregate Exercise Price of $______________
to
the Company in accordance with the terms of the Warrant.
|
|
| |
|
(b)
|
Delivery
of Warrant Shares.
The Company shall deliver to the holder _____ Warrant Shares in accordance
with the terms of the Warrant.
|
|
| |
2.
|
|
Cashless
Exercise
|
|
| |
|
(a)
|
Payment
of Warrant Exercise Price.
In lieu of making payment of the Aggregate Exercise Price, the holder
elects to receive upon such exercise the Net Number of shares of
Common
Stock determined in accordance with the terms of the
Warrant.
|
|
| |
|
(b)
|
Delivery
of Warrant Shares.
The Company shall deliver to the holder _____ Warrant Shares in accordance
with the terms of the Warrant.
|
|
Date:
_______________ __, ______
Name
of
Registered Holder
By:
__________________________________
Name:
________________________________
Title:
_________________________________
EXHIBIT
B TO WARRANT
FORM
OF WARRANT POWER
FOR
VALUE RECEIVED,
the
undersigned does hereby assign and transfer to ________________, Federal
Identification No. __________, a warrant to purchase ____________ shares of
the capital stock of Neomedia Technologies, Inc. represented by warrant
certificate no. _____, standing in the name of the undersigned on the books
of said corporation. The undersigned does hereby irrevocably constitute and
appoint ______________, attorney to transfer the warrants of said corporation,
with full power of substitution in the premises.
|
Dated:
__________________________________
|
_____________________________________ |
| |
|
| |
By:
__________________________________
|
| |
Name:
________________________________
|
| |
Title:
_________________________________
|
DOCUMENT
BASICALLY CLEANED
IMPORTED
E-MAIL DOCUMENT
DOCUMENT
BASICALLY CLEANED BY DOCX
“D”
WARRANT
THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
NEOMEDIA
TECHNOLOGIES, INC.
Warrant
To Purchase Common Stock
| Warrant No.: |
CCP-001
|
Number
of Shares: 50,000,000
|
| |
|
|
| Date of
Issuance: |
August
24, 2006
|
|
| |
|
|
Neomedia
Technologies, Inc., a Delaware corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Cornell
Capital Partners, LP
(“Cornell”),
the
registered holder hereof or its permitted assigns, is entitled, subject to
the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after
11:59 P.M. Eastern Time on the Expiration Date (as defined
herein) Fifty Million (50,000,000) fully paid and nonassessable shares
of Common Stock (as defined herein) of the Company (the “Warrant
Shares”) at
the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the holder
be
entitled to exercise this Warrant for a number of Warrant Shares in excess
of
that number of Warrant Shares which, upon giving effect to such exercise,
would
cause the aggregate number of shares of Common Stock beneficially owned by
the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) days of the
Expiration Date (however, such restriction may be waived by Cornell (but
only as
to itself and not to any other holder) upon not less than sixty-five (65)
days prior notice to the Company). For purposes of the foregoing proviso,
the
aggregate number of shares of Common Stock beneficially owned by the holder
and
its affiliates shall include the number of shares of Common Stock issuable
upon
exercise of this Warrant with respect to which the determination of such
proviso
is being made, but shall exclude shares of Common Stock which would be issuable
upon (i) exercise of the remaining, unexercised Warrants beneficially owned
by the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For purposes of
this Warrant, in determining the number of outstanding shares of Common Stock
a
holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company’s most recent Form 10-Q or Form 10-K, as the case may
be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or its transfer agent setting forth the number
of
shares of Common Stock outstanding. Upon the written request of any holder,
the
Company shall promptly, but in no event later than one (1) Business Day
following the receipt of such notice, confirm in writing to any such holder
the
number of shares of Common Stock then outstanding. In any case, the number
of
outstanding shares of Common Stock shall be determined after giving effect
to
the exercise of Warrants (as defined below) by such holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.
Section
1.
(a) This
Warrant is the common stock purchase warrant (the “Warrant”) issued
pursuant to the Securities Purchase Agreement (the “Securities
Purchase Agreement”) dated
the date hereof between the Company and the Buyers listed on Schedule I
thereto.
(b) Definitions.
The
following words and terms as used in this Warrant shall have the following
meanings:
(i) “Approved
Stock Plan”
means
any employee benefit plan which has been approved by the Board of Directors
of
the Company, pursuant to which the Company’s securities may be issued to any
employee, officer or director for services provided to the Company.
(ii) “Business
Day”
means
any day other than Saturday, Sunday or other day on which commercial banks
in
the City of New York are authorized or required by law to remain
closed.
(iii) “Closing
Bid Price”
means
the closing bid price of Common Stock as quoted on the Principal Market (as
reported by Bloomberg Financial Markets (“Bloomberg”) through
its “Volume at Price” function).
(iv) “Common
Stock”
means
(i) the Company’s common stock, par value $0.01 per share, and
(ii) any capital stock into which such Common Stock shall have been changed
or any capital stock resulting from a reclassification of such Common
Stock.
(v) “Event
of Default”
means
an event of default under the Securities Purchase Agreement or the Convertible
Debentures issued in connection therewith.
(vi) “Excluded
Securities”
means,
provided such security is issued at a price which is greater than or equal
to
the arithmetic average of the Closing Bid Prices of the Common Stock for
the ten
(10) consecutive trading days immediately preceding the date of issuance,
any of the following: (a) any issuance by the Company of securities in
connection with a strategic partnership or a joint venture (the primary purpose
of which is not to raise equity capital), (b) any issuance by the Company
of securities as consideration for a merger or consolidation or the acquisition
of a business, product, license, or other assets of another person or entity
and
(c) options to purchase shares of Common Stock, provided (I) such
options are issued after the date of this Warrant to employees or directors
of
the Company and (II) the exercise price of such options is not less than
the Closing Bid Price of the Common Stock on the date of issuance of such
option.
(vii) “Expiration
Date”
means
the date five (5) years from the Issuance Date of this Warrant or, if such
date falls on a Saturday, Sunday or other day on which banks are required
or
authorized to be closed in the City of New York or the State of New York
or on
which trading does not take place on the Principal Exchange or automated
quotation system on which the Common Stock is traded (a “Holiday”),
the
next date that is not a Holiday.
(viii) “Issuance
Date”
means
the date hereof.
(ix) “Options”
means
any rights, warrants or options to subscribe for or purchase Common Stock
or
Convertible Securities.
(x) “Other
Securities”
means
(i) those options and warrants of the Company issued prior to, and
outstanding on, the Issuance Date of this Warrant, (ii) the shares of
Common Stock issuable on exercise of such options and warrants, provided
such
options and warrants are not amended after the Issuance Date of this Warrant,
(iii) the shares of Common Stock issuable upon exercise of this Warrant,
(iv) shares of Common Stock paid upon conversion of the convertible
preferred stock paid pursuant to the Amended and Restated Investment Agreement
and (v) any shares of Common Stock issued in connection with any
acquisition of the stock or assets of another entity which have been approved
by
the Board of Directors of the Company.
(xi) “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or
any
department or agency thereof.
(xii) “Principal
Market”
means
the New York Stock Exchange, the American Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market, whichever is at the time the principal
trading exchange or market for such security, or the over-the-counter market
on
the electronic bulletin board for such security as reported by Bloomberg
or, if
no bid or sale information is reported for such security by Bloomberg, then
the
average of the bid prices of each of the market makers for such security
as
reported in the “pink sheets” by the National Quotation Bureau,
Inc.
(xiii) “Securities
Act”
means
the Securities Act of 1933, as amended.
(xiv) “Warrant”
means
this Warrant and all Warrants issued in exchange, transfer or replacement
thereof.
(xv) “Warrant
Exercise Price”
shall
be $0.05 or as subsequently adjusted as provided in Section 8 hereof.
(xvi) “Warrant
Shares”
means
the shares of Common Stock issuable at any time upon exercise of this Warrant.
(c) Other
Definitional Provisions.
(i) Except
as
otherwise specified herein, all references herein (A) to the Company shall
be deemed to include the Company’s successors and (B) to any applicable law
defined or referred to herein shall be deemed references to such applicable
law
as the same may have been or may be amended or supplemented from time to
time.
(ii) When
used
in this Warrant, the words “herein”,
“hereof”,
and
“hereunder”
and
words of similar import, shall refer to this Warrant as a whole and not to
any
provision of this Warrant, and the words “Section”,
“Schedule”,
and
“Exhibit”
shall
refer to Sections of, and Schedules and Exhibits to, this Warrant unless
otherwise specified.
(iii) Whenever
the context so requires, the neuter gender includes the masculine or feminine,
and the singular number includes the plural, and vice versa.
Section
2. Exercise
of Warrant.
(a) Subject
to the terms and conditions hereof, this Warrant may be exercised by the
holder
hereof then registered on the books of the Company, pro rata as hereinafter
provided, at any time on any Business Day on or after the opening of business
on
such Business Day, commencing with the first day after the date hereof, and
prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by
delivery of a written notice, in the form of the subscription notice attached
as
Exhibit
A
hereto
(the “Exercise
Notice”),
of
such holder’s election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, payment to the Company of an
amount equal to the Warrant Exercise Price(s) applicable to the Warrant
Shares being purchased, multiplied by the number of Warrant Shares (at the
applicable Warrant Exercise Price) as to which this Warrant is being
exercised (plus any applicable issue or transfer taxes) (the
“Aggregate
Exercise Price”) in
cash or wire transfer of immediately available funds and the surrender of
this
Warrant (or an indemnification undertaking with respect to this Warrant in
the
case of its loss, theft or destruction) to a common carrier for overnight
delivery to the Company as soon as practicable following such date
(“Cash
Basis”) or
(ii) if at the time of exercise, the Warrant Shares are not subject to an
effective registration statement or if an Event of Default has occurred,
by
delivering an Exercise Notice and in lieu of making payment of the Aggregate
Exercise Price in cash or wire transfer, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (the “Cashless
Exercise”):
| |
Net
Number
|
=
|
(A
x B) - (A x C)
|
|
| |
|
|
B
|
|
For
purposes of the foregoing formula:
| |
A
|
=
|
the
total number of Warrant Shares with respect to which this Warrant
is then
being exercised.
|
|
| |
|
|
|
|
| |
B
|
=
|
the
Closing Bid Price of the Common Stock on the date of exercise of
the
Warrant.
|
|
| |
|
|
|
|
| |
C
|
=
|
the
Warrant Exercise Price then in effect for the applicable Warrant
Shares at
the time of such exercise.
|
|
| |
|
|
|
|
In
the
event of any exercise of the rights represented by this Warrant in compliance
with this Section 2, the Company shall on or before the
fifth (5th) Business Day following the date of receipt of the Exercise
Notice, the Aggregate Exercise Price and this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) and the receipt of the representations of the holder specified
in Section 6 hereof, if requested by the Company (the “Exercise
Delivery Documents”),
and
if the Common Stock is DTC eligible, credit such aggregate 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; provided, however,
if the holder who submitted the Exercise Notice requested physical delivery
of
any or all of the Warrant Shares, or, if the Common Stock is not DTC eligible
then the Company shall, on or before the fifth (5th) Business
Day following receipt of the Exercise Delivery Documents, issue and surrender
to
a common carrier for overnight delivery to the address specified in the Exercise
Notice, a certificate, registered in the name of the holder, for the number
of
shares of Common Stock to which the holder shall be entitled pursuant to
such
request. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (i) or (ii) above the holder of this
Warrant shall be deemed for all corporate purposes to have become the holder
of
record of the Warrant Shares with respect to which this Warrant has been
exercised. In the case of a dispute as to the determination of the Warrant
Exercise Price, the Closing Bid Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the holder the number
of
Warrant Shares that is not disputed and shall submit the disputed determinations
or arithmetic calculations to the holder via facsimile within one
(1) Business Day of receipt of the holder’s Exercise Notice.
(b) If
the
holder and the Company are unable to agree upon the determination of the
Warrant
Exercise Price or arithmetic calculation of the Warrant Shares within one
(1) day of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall immediately submit via facsimile
(i) the disputed determination of the Warrant Exercise Price or the Closing
Bid Price to an independent, reputable investment banking firm or (ii) the
disputed arithmetic calculation of the Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or
the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment banking firm’s or accountant’s determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(c) Unless
the rights represented by this Warrant shall have expired or shall have been
fully exercised, the Company shall, as soon as practicable and in no event
later
than five (5) Business Days after any exercise and at its own expense,
issue a new Warrant identical in all respects to this Warrant exercised except
it shall represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant exercised, less the
number
of Warrant Shares with respect to which such Warrant is exercised.
(d) No
fractional Warrant Shares are to be issued upon any pro rata exercise of
this
Warrant, but rather the number of Warrant Shares issued upon such exercise
of
this Warrant shall be rounded up or down to the nearest whole
number.
(e) If
the
Company or its Transfer Agent shall fail for any reason or for no reason
to
issue to the holder within ten (10) days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which
the
holder is entitled or to credit the holder’s balance account with The Depository
Trust Company for such number of Warrant Shares to which the holder is entitled
upon the holder’s exercise of this Warrant, the Company shall, in addition to
any other remedies under this Warrant or the Placement Agent Agreement or
otherwise available to such holder, pay as additional damages in cash to
such
holder on each day the issuance of such certificate for Warrant Shares is
not
timely effected an amount equal to 0.025% of the product of (A) the sum of
the number of Warrant Shares not issued to the holder on a timely basis and
to
which the holder is entitled, and (B) the Closing Bid Price of the Common
Stock for the trading day immediately preceding the last possible date which
the
Company could have issued such Common Stock to the holder without violating
this
Section 2.
(f) If
within
ten (10) days after the Company’s receipt of the Exercise Delivery
Documents, the Company fails to deliver a new Warrant to the holder for the
number of Warrant Shares to which such holder is entitled pursuant to Section
2
hereof, then, in addition to any other available remedies under this Warrant
or
the Placement Agent Agreement, or otherwise available to such holder, the
Company shall pay as additional damages in cash to such holder on each day
after
such tenth (10th) day
that such delivery of such new Warrant is not timely effected in an amount
equal
to 0.25% of the product of (A) the number of Warrant Shares represented by
the portion of this Warrant which is not being exercised and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Warrant to
the
holder without violating this Section 2.
(g)
Forced
Exercise.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than
Fifteen
Cents ($0.15) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
Section
3. Covenants
as to Common Stock.
The
Company hereby covenants and agrees as follows:
(a) This
Warrant is, and any Warrants issued in substitution for or replacement of
this
Warrant will upon issuance be, duly authorized and validly issued.
(b) All
Warrant Shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to
the
issue thereof.
(c) During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved at least one hundred
percent (100%) of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price. If at any time the Company does not have a sufficient
number of shares of Common Stock authorized and available, then the Company
shall call and hold a special meeting of its stockholders within
sixty (60) days of that time for the sole purpose of increasing the
number of authorized shares of Common Stock.
(d) If
at any
time after the date hereof the Company shall file a registration statement,
the
Company shall include the Warrant Shares issuable to the holder, pursuant
to the
terms of this Warrant and shall maintain, so long as any other shares of
Common
Stock shall be so listed, such listing of all Warrant Shares from time to
time
issuable upon the exercise of this Warrant; and the Company shall so list
on
each national securities exchange or automated quotation system, as the case
may
be, and shall maintain such listing of, any other shares of capital stock
of the
Company issuable upon the exercise of this Warrant if and so long as any
shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(e) The
Company will not, by amendment of its Articles of Incorporation 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 to be observed or performed
by it
hereunder, but will at all times in good faith assist in the carrying out
of all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect
the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this Warrant. The Company
will not increase the par value of any shares of Common Stock receivable
upon
the exercise of this Warrant above the Warrant Exercise Price then in effect,
and (ii) will take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this
Warrant.
(f) This
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets.
Section
4. Taxes.
The
Company shall pay any and all taxes, except any applicable withholding, which
may be payable with respect to the issuance and delivery of Warrant Shares
upon
exercise of this Warrant.
Section
5. Warrant
Holder Not Deemed a Stockholder.
Except
as otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of
shares
of capital stock of the Company for any purpose, nor shall anything contained
in
this Warrant be construed to confer upon the holder hereof, as such, any
of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise
of this
Warrant. In addition, nothing contained in this Warrant shall be construed
as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder
of
this Warrant with copies of the same notices and other information given
to the
stockholders of the Company generally, contemporaneously with the giving
thereof
to the stockholders.
Section
6. Representations
of Holder.
The
holder of this Warrant, by the acceptance hereof, represents that it is
acquiring this Warrant and the Warrant Shares for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution of this Warrant or the Warrant Shares, except pursuant
to
sales registered or exempted under the Securities Act; provided, however,
that
by making the representations herein, the holder does not agree to hold this
Warrant or any of the Warrant Shares for any minimum or other specific term
and
reserves the right to dispose of this Warrant and the Warrant Shares at any
time
in accordance with or pursuant to a registration statement or an exemption
under
the Securities Act. The holder of this Warrant further represents, by acceptance
hereof, that, as of this date, such holder is an “accredited investor” as such
term is defined in Rule 501(a)(1) of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act (an “Accredited
Investor”).
Upon
exercise of this Warrant the holder shall, if requested by the Company, confirm
in writing, in a form satisfactory to the Company, that the Warrant Shares
so
purchased are being acquired solely for the holder’s own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale and that such holder is an Accredited Investor. If
such
holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder’s exercise of this Warrant
that the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of this Warrant shall not violate any United States or state
securities laws.
Section
7. Ownership
and Transfer.
(a) The
Company shall maintain at its principal executive offices (or such other
office
or agency of the Company as it may designate by notice to the holder hereof),
a
register for this Warrant, in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well
as the
name and address of each transferee. The Company may treat the person in
whose
name any Warrant is registered on the register as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, but in all
events
recognizing any transfers made in accordance with the terms of this
Warrant.
Section
8. Adjustment
of Warrant Exercise Price and Number of Shares.
The
Warrant Exercise Price and the number of shares of Common Stock issuable
upon
exercise of this Warrant shall be adjusted from time to time as
follows:
(a) Adjustment
of Warrant Exercise Price and Number of Shares upon Issuance of Common
Stock.
If and
whenever on or after the Issuance Date of this Warrant, the Company issues
or
sells, or is deemed to have issued or sold, any shares of Common
Stock (other than (i) Excluded Securities and (ii) shares of
Common Stock which are issued or deemed to have been issued by the Company
in
connection with an Approved Stock Plan or upon exercise or conversion of
the
Other Securities) for a consideration per share less than a price (the
“Applicable
Price”) equal
to the Warrant Exercise Price in effect immediately prior to such issuance
or
sale, then immediately after such issue or sale the Warrant Exercise Price
then
in effect shall be reduced to an amount equal to such consideration per share.
Upon each such adjustment of the Warrant Exercise Price hereunder, the number
of
Warrant Shares issuable upon exercise of this Warrant shall be adjusted to
the
number of shares determined by multiplying the Warrant Exercise Price in
effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Warrant Exercise Price resulting from such
adjustment.
(b) Effect
on Warrant Exercise Price of Certain Events.
Excluding the issuance of Excluded Securities or the exercise or conversion
of
Other Securities, for purposes of determining the adjusted Warrant Exercise
Price under Section 8(a) above, the following shall be
applicable:
(i) Issuance
of Options.
If
after the date hereof, the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon
the
exercise of any such Option or upon conversion or exchange of any convertible
securities issuable upon exercise of any such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding
and to
have been issued and sold by the Company at the time of the granting or sale
of
such Option for such price per share. For purposes of this Section 8(b)(i),
the
lowest price per share for which one share of Common Stock is issuable upon
exercise of such Options or upon conversion or exchange of such Convertible
Securities shall be equal to the sum of the lowest amounts of consideration
(if
any) received or receivable by the Company with respect to any one share of
Common Stock upon the granting or sale of the Option, upon exercise of the
Option or upon conversion or exchange of any convertible security issuable
upon
exercise of such Option. No further adjustment of the Warrant Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
convertible securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such convertible
securities.
(ii) Issuance
of Convertible Securities.
If the
Company in any manner issues or sells any convertible securities and the
lowest
price per share for which one share of Common Stock is issuable upon the
conversion or exchange thereof is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been
issued
and sold by the Company at the time of the issuance or sale of such convertible
securities for such price per share. For the purposes of this
Section 8(b)(ii), the lowest price per share for which one share of Common
Stock is issuable upon such conversion or exchange shall be equal to the
sum of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance or sale
of
the convertible security and upon conversion or exchange of such convertible
security. No further adjustment of the Warrant Exercise Price shall be made
upon
the actual issuance of such Common Stock upon conversion or exchange of such
convertible securities, and if any such issue or sale of such convertible
securities is made upon exercise of any Options for which adjustment of the
Warrant Exercise Price had been or are to be made pursuant to other provisions
of this Section 8(b), no further adjustment of the Warrant Exercise Price
shall
be made by reason of such issue or sale.
(iii) Change
in Option Price or Rate of Conversion.
If the
purchase price provided for in any Options, the additional consideration,
if
any, payable upon the issue, conversion or exchange of any convertible
securities, or the rate at which any convertible securities are convertible
into
or exchangeable for Common Stock changes at any time, the Warrant Exercise
Price
in effect at the time of such change shall be adjusted to the Warrant Exercise
Price which would have been in effect at such time had such Options or
convertible securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of Warrant Shares issuable
upon
exercise of this Warrant shall be correspondingly readjusted. For purposes
of
this Section 8(b)(iii), if the terms of any Option or convertible security
that
was outstanding as of the Issuance Date of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option
or
convertible security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of
the
date of such change. No adjustment pursuant to this Section 8(b) shall
be made if such adjustment would result in an increase of the Warrant Exercise
Price then in effect.
(c) Effect
on Warrant Exercise Price of Certain Events.
Excluding the issuance of Excluded Securities or the exercise or conversion
of
Other Securities, for purposes of determining the adjusted Warrant Exercise
Price under Sections 8(a) and 8(b), the following shall be
applicable:
(i) Calculation
of Consideration Received.
If any
Common Stock, Options or convertible securities are issued or sold or deemed
to
have been issued or sold for cash, the consideration received therefore will
be
deemed to be the net amount received by the Company therefore. If any Common
Stock, Options or convertible securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company
will
be the fair value of such consideration, except where such consideration
consists of marketable securities, in which case the amount of consideration
received by the Company will be the market price of such securities on the
date
of receipt of such securities. If any Common Stock, Options or convertible
securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount
of
consideration therefore will be deemed to be the fair value of such portion
of
the net assets and business of the non-surviving entity as is attributable
to
such Common Stock, Options or convertible securities, as the case may be.
The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding. If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring valuation
(the “Valuation
Event”),
the
fair value of such consideration will be determined within five
(5) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding. The determination of such appraiser shall be final and
binding
upon all parties and the fees and expenses of such appraiser shall be borne
jointly by the Company and the holders of Warrants.
(ii) Integrated
Transactions.
In case
any Option is issued in connection with the issue or sale of other securities
of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01.
(iii) Treasury
Shares.
The
number of shares of Common Stock outstanding at any given time does not include
shares owned or held by or for the account of the Company, and the disposition
of any shares so owned or held will be considered an issue or sale of Common
Stock.
(iv) Record
Date.
If the
Company takes a record of the holders of Common Stock for the purpose of
entitling them (1) to receive a dividend or other distribution payable in
Common Stock, Options or in convertible securities or (2) to subscribe for
or purchase Common Stock, Options or convertible securities, then such record
date will be deemed to be the date of the issue or sale of the shares of
Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(d) Adjustment
of Warrant Exercise Price upon Subdivision or Combination of Common
Stock.
If the
Company at any time after the date of issuance of this Warrant subdivides
(by
any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, any Warrant Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant will be proportionately
increased. If the Company at any time after the date of issuance of this
Warrant
combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, any Warrant Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
issuable upon exercise of this Warrant will be proportionately decreased.
Any
adjustment under this Section 8(d) shall become effective at the close
of business on the date the subdivision or combination becomes
effective.
(e) Distribution
of Assets.
If the
Company shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of Common Stock, by way of
return of capital or otherwise (including, without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement or other similar
transaction) (a “Distribution”),
at
any time after the issuance of this Warrant, then, in each such
case:
(i) any
Warrant Exercise Price in effect immediately prior to the close of business
on
the record date fixed for the determination of holders of Common Stock
entitled to
receive the Distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Warrant Exercise
Price by a fraction of which (A) the numerator shall be the Closing Sale
Price of the Common Stock on the trading day immediately preceding such record
date minus the value of the Distribution (as determined in good faith by
the
Company’s Board of Directors) applicable to one share of Common Stock, and
(B) the denominator shall be the Closing Sale Price of the Common Stock on
the trading day immediately preceding such record date; and
(ii) either
(A) the number of Warrant Shares obtainable upon exercise of this Warrant
shall be increased to a number of shares equal to the number of shares of
Common
Stock obtainable immediately prior to the close of business on the record
date
fixed for the determination of holders of Common Stock entitled to receive
the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding clause (i), or (B) in the event that the Distribution
is of common stock of a company whose common stock is traded on a national
securities exchange or a national automated quotation system, then the holder
of
this Warrant shall receive an additional warrant to purchase Common Stock,
the
terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the amount of the assets that would have
been
payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such record date and with
an
exercise price equal to the amount by which the exercise price of this Warrant
was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding clause (i).
(f) Certain
Events.
If any
event occurs of the type contemplated by the provisions of this Section 8
but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights
or
other rights with equity features), then the Company’s Board of Directors will
make an appropriate adjustment in the Warrant Exercise Price and the number
of
shares of Common Stock obtainable upon exercise of this Warrant so as to
protect
the rights of the holders of the Warrants; provided, except as set forth
in
section 8(d), that no such adjustment pursuant to this Section 8(f) will
increase the Warrant Exercise Price or decrease the number of shares of Common
Stock obtainable as otherwise determined pursuant to this Section
8.
(g) Notices.
(i) Immediately
upon any adjustment of the Warrant Exercise Price, the Company will give
written
notice thereof to the holder of this Warrant, setting forth in reasonable
detail, and certifying, the calculation of such adjustment.
(ii) The
Company will give written notice to the holder of this Warrant at least ten
(10) days prior to the date on which the Company closes its books or takes
a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with respect to any
Organic Change (as defined below), dissolution or liquidation, provided that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder.
(iii) The
Company will also give written notice to the holder of this Warrant at least
ten
(10) days prior to the date on which any Organic Change, dissolution or
liquidation will take place, provided that such information shall be made
known
to the public prior to or in conjunction with such notice being provided
to such
holder.
Section
9. Purchase
Rights; Reorganization, Reclassification, Consolidation, Merger or
Sale.
(a) In
addition to any adjustments pursuant to Section 8 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights
to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the “Purchase
Rights”),
then
the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale
of
such Purchase Rights, or, if no such record is taken, the date as of which
the
record holders of Common Stock are to be determined for the grant, issue
or sale
of such Purchase Rights.
(b) Any
recapitalization, reorganization, reclassification, consolidation, merger,
sale
of all or substantially all of the Company’s assets to another Person or other
transaction in each case which is effected in such a way that holders of
Common
Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an “Organic
Change.”
Prior
to the consummation of any (i) sale of all or substantially all of the
Company’s assets to an acquiring Person or (ii) other Organic Change
following which the Company is not a surviving entity, the Company will secure
from the Person purchasing such assets or the successor resulting from such
Organic Change (in each case, the “Acquiring
Entity”) a
written agreement (in form and substance satisfactory to the holders of Warrants
representing at least two-thirds (iii) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding) to deliver to each holder of
Warrants in exchange for such Warrants, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance
to
this Warrant and satisfactory to the holders of the Warrants (including an
adjusted warrant exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants without regard to any limitations on exercise,
if
the value so reflected is less than any Applicable Warrant Exercise Price
immediately prior to such consolidation, merger or sale). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance satisfactory to the holders of Warrants
representing a majority of
the
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the
right
to acquire and receive in lieu of or in addition to (as the case may
be) the Warrant Shares immediately theretofore issuable and receivable upon
the exercise of such holder’s Warrants (without regard to any limitations
on exercise), such shares of stock, securities or assets that would have
been
issued or payable in such Organic Change with respect to or in exchange for
the
number of Warrant Shares which would have been issuable and receivable upon
the
exercise of such holder’s Warrant as of the date of such Organic Change (without
taking into account any limitations or restrictions on the exercisability
of
this Warrant).
Section
10. Lost,
Stolen, Mutilated or Destroyed Warrant.
If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly,
on
receipt of an indemnification undertaking (or, in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor
as
this Warrant so lost, stolen, mutilated or destroyed.
Section
11. Notice.
Any
notices, consents, waivers or other communications required or permitted
to be
given under the terms of this Warrant must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of receipt
is received by the sending party transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with a nationally recognized overnight delivery service, in
each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to Cornell:
|
Cornell
Capital Partners, LP
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Attention: Mark
A. Angelo
|
| |
Telephone: (201) 985-8300
|
| |
Facsimile: (201) 985-8266
|
| |
|
|
With
Copy to:
|
David
Gonzalez, Esq.
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Telephone: (201) 985-8300
|
| |
Facsimile: (201) 985-8266
|
|
If
to the Company, to:
|
Neomedia
Technologies, Inc.
|
| |
2201
Second Street, Suite #600
|
| |
Fort
Myers, FL 33901
|
| |
Attention: Charles
T. Jensen
|
| |
Telephone: (239) 337-3434
|
| |
Facsimile: (239) 337-3668
|
| |
|
|
With
a copy to:
|
Kirkpatrick
& Lockhart Nicholson Graham, LLP
|
| |
201
South Biscayne Boulevard, Suite 2000
|
| |
Miami,
FL 33131
|
| |
Attention: Clayton
E. Parker, Esquire
|
| |
Telephone: (305) 539-3306
|
| |
Facsimile: (305) 358-7095
|
| |
|
If
to a
holder of this Warrant, to it at the address and facsimile number set forth
on
Exhibit C
hereto,
with copies to such holder’s representatives as set forth on Exhibit C,
or at
such other address and facsimile as shall be delivered to the Company upon
the
issuance or transfer of this Warrant. Each party shall provide five days’ prior
written notice to the other party of any change in address or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, facsimile, waiver or other communication, (or (B) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence
of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
Section
12. Date.
The
date of this Warrant is set forth on page 1 hereof. This Warrant, in all
events, shall be wholly void and of no effect after the close of business
on the
Expiration Date, except that notwithstanding any other provisions hereof,
the
provisions of Section 8(b) shall continue in full force and effect
after such date as to any Warrant Shares or other securities issued upon
the
exercise of this Warrant.
Section
13. Amendment
and Waiver.
Except
as otherwise provided herein, the provisions of the Warrants may be amended
and
the Company may take any action herein prohibited, or omit to perform any
act
herein required to be performed by it, only if the Company has obtained the
written consent of the holders of Warrants representing at least two-thirds
of
the Warrant Shares issuable upon exercise of the Warrants then outstanding;
provided that, except for Section 8(d), no such action may increase the Warrant
Exercise Price or decrease the number of shares or class of stock obtainable
upon exercise of any Warrant without the written consent of the holder of
such
Warrant.
Section
14. Descriptive
Headings; Governing Law.
The
descriptive headings of the several sections and paragraphs of this Warrant
are
inserted for convenience only and do not constitute a part of this Warrant.
The
corporate laws of the State of Delaware shall govern all issues concerning
the
relative rights of the Company and its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of
this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of New Jersey or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in Hudson County and the United States
District Court for the District of New Jersey, for the adjudication of any
dispute hereunder or in connection herewith or therewith, or with any
transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party 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 to
such
party at the address for such 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.
Section
15. Waiver
of Jury Trial.
AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT,
THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.
REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed as of the date first set forth
above.
| |
|
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| Date: |
By: |
/s/ Charles
T. Jensen |
| |
Name: Charles
T. Jensen
|
| |
Title: President
& Chief Executive Officer
|
EXHIBIT
A TO WARRANT
EXERCISE
NOTICE
TO
BE EXECUTED
BY
THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
NEOMEDIA
TECHNOLOGIES, INC.
The
undersigned holder hereby exercises the right to purchase ______________ of
the
shares of Common Stock (“Warrant
Shares”) of
Neomedia Technologies, Inc. (the “Company”),
evidenced by the attached Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
Specify
Method of exercise by check mark:
| |
1.
|
o
|
Cash
Exercise
|
|
| |
|
(a)
|
Payment
of Warrant Exercise Price.
The holder shall pay the Aggregate Exercise Price of $______________
to
the Company in accordance with the terms of the Warrant.
|
|
| |
|
(b)
|
Delivery
of Warrant Shares.
The Company shall deliver to the holder _____ Warrant Shares in accordance
with the terms of the Warrant.
|
|
| |
2.
|
|
Cashless
Exercise
|
|
| |
|
(a)
|
Payment
of Warrant Exercise Price.
In lieu of making payment of the Aggregate Exercise Price, the holder
elects to receive upon such exercise the Net Number of shares of
Common
Stock determined in accordance with the terms of the
Warrant.
|
|
| |
|
(b)
|
Delivery
of Warrant Shares.
The Company shall deliver to the holder _____ Warrant Shares in accordance
with the terms of the Warrant.
|
|
Date:
_______________ __, ______
Name
of
Registered Holder
By:
__________________________________
Name:
________________________________
Title:
_________________________________
EXHIBIT
B TO WARRANT
FORM
OF WARRANT POWER
FOR
VALUE RECEIVED,
the
undersigned does hereby assign and transfer to ________________, Federal
Identification No. __________, a warrant to purchase ____________ shares of
the capital stock of Neomedia Technologies, Inc. represented by warrant
certificate no. _____, standing in the name of the undersigned on the books
of said corporation. The undersigned does hereby irrevocably constitute and
appoint ______________, attorney to transfer the warrants of said corporation,
with full power of substitution in the premises.
|
Dated:
__________________________________
|
_____________________________________ |
| |
|
| |
By:
__________________________________
|
| |
Name:
________________________________
|
| |
Title:
_________________________________
|
AMENDMENT
TO WARRANT NO.: CCP-002
THIS
AMENDMENT AGREEMENT (the
“Amendment”) is
entered into as of August 24, 2006, between NEOMEDIA
TECHNOLOGIES, INC., a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP a
Delaware limited partnership (the
“Holder”).
WHEREAS,
the
Company issued to the Holder on March 30, 2005 a certain warrant No.: CCP-002
to
purchase 50,000,000 shares of the Company’s Common Stock at an exercise price of
$0.20 (the “Warrant”);
and
WHEREAS,
the
parties wish to amend the Warrant as set forth below.
NOW,
THEREFORE,
it is
agreed:
|
|
A. |
Section
1(b)(xv) “Warrant
Exercise Price”:
Section 1(b)(xv) of the Warrant is hereby deleted in its entirety
and the
following language shall replace said Section
1(b)(xv):
|
Section
1(b)(xv) “Warrant
Exercise Price”
shall
be Ten Cents ($0.10) or as subsequently adjusted as provided in Section 8
hereof.
|
|
B. |
Section
2(a) “Forced Exercise”: Section 2(g) of the Warrant is hereby deleted in
its entirety and the following language shall replace said Section
2(g):
|
Section
2(g) “Forced Exercise”. Provided that the shares issuable upon exercise this
Warrant are registered pursuant to an effective registration statement, the
Company at its option shall have the right at any time commencing on the date
hereof if the Company’s Closing Bid Price as quoted by Bloomberg, LP is equal to
or greater than Twenty Cents ($0.20) for ten (10) consecutive Trading Days,
to
on such tenth (10th)
day
provide written notice to the Holder (the “Forced Exercise Notice”) providing
the Holder twenty (20) calendar days from the day following receipt of the
Forced Exercise Notice, to exercise this Warrant in whole at the then applicable
Exercise Price (“Forced Exercise Period”). Provided however in the event that
the Closing Bid Price of the Company’s Common Stock during the Forced Exercise
Period is equal to or lower than the applicable Warrant Exercise Price the
Holder shall not be forced to exercise this Warrant, in whole or in part, as
provided for herein.
|
|
A. |
Except
as provided hereinabove, all of the terms and conditions contained
in the
Warrant shall remain unchanged and in full force and
effect.
|
|
|
B. |
This
Amendment is made pursuant to and in accordance with the terms
and
conditions of the Warrant.
|
|
|
C. |
All
capitalized but not defined terms used herein shall have those
meanings
ascribed to them in the
Warrant.
|
|
|
D. |
All
provisions in the Warrant and any amendments, schedules or exhibits
thereto in conflict with this Amendment shall be and hereby are
changed to
conform to this Amendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ Charles
T. Jensen |
| |
Name Charles
T. Jensen
|
| |
Title: President
& Chief Executive Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By:
Yorkville Advisors LLC
|
| |
Its:
General Partner
|
|
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager
|
AMENDMENT
TO “A” WARRANT NO.: CCP-001
THIS
AMENDMENT AGREEMENT
(the
“Amendment”)
is
entered into as of August 24, 2006, between NEOMEDIA
TECHNOLOGIES, INC.,
a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP
a
Delaware limited partnership (the “Holder”).
WHEREAS,
the
Company issued to the Holder on February 17, 2006 a certain “A” warrant No.:
CCP-001 to purchase 20,000,000 shares of the Company’s Common Stock at an
exercise price of $0.50 (the “Warrant”);
and
WHEREAS,
the
parties wish to amend the Warrant as set forth below.
NOW,
THEREFORE,
it is
agreed:
|
|
A. |
Section
1(b)(xv) “Warrant
Exercise Price”:
Section 1(b)(xv) of the Warrant is hereby deleted in its entirety
and the
following language shall replace said Section
1(b)(xv):
|
Section
1(b)(xv) “Warrant
Exercise Price”
shall
be Ten Cents ($0.10) or as
subsequently adjusted as provided
in Section 8 hereof.
|
|
B. |
Section
2(g) “Forced Exercise”: Section 2(g) of the Warrant is hereby deleted in
its entirety and the following language shall replace said Section
2(g):
|
Section
2(g) “Forced Exercise”.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than Twenty
Cents ($0.20) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
|
|
A. |
Except
as provided hereinabove, all of the terms and conditions contained
in the
Warrant shall remain unchanged and in full force and
effect.
|
|
|
B. |
This
Amendment is made pursuant to and in accordance with the terms
and
conditions of the Warrant.
|
|
|
C. |
All
capitalized but not defined terms used herein shall have those
meanings
ascribed to them in the
Warrant.
|
|
|
D. |
All
provisions in the Warrant and any amendments, schedules or exhibits
thereto in conflict with this Amendment shall be and hereby are
changed to
conform to this Amendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ Charles
T. Jensen |
| |
Name Charles
T. Jensen
|
| |
Title: President
& Chief Executive Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By:
Yorkville Advisors LLC
|
| |
Its:
General Partner
|
|
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager
|
AMENDMENT
TO “B” WARRANT NO.: CCP-002
THIS
AMENDMENT AGREEMENT (the
“Amendment”) is
entered into as of August 24, 2006, between NEOMEDIA
TECHNOLOGIES, INC., a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP a
Delaware limited partnership (the
“Holder”).
WHEREAS,
the
Company issued to the Holder on February 17, 2006 a certain “B” warrant No.:
CCP-002 to purchase 25,000,000 shares of the Company’s Common Stock at an
exercise price of $0.40 (the “Warrant”);
and
WHEREAS,
the
parties wish to amend the Warrant as set forth below.
NOW,
THEREFORE,
it is
agreed:
|
|
A. |
Section
1(b)(xv) “Warrant Exercise Price”: Section 1(b)(xv) of the Warrant is
hereby deleted in its entirety and the following language shall replace
said Section 1(b)(xv):
|
Section
1(b)(xv) “Warrant Exercise Price” shall be Fifteen Cents ($0.15) or as
subsequently adjusted
as
provided in Section 8 hereof.
|
|
B. |
Section
2(g) “Forced Exercise”: Section 2(g) of the Warrant is hereby deleted in
its entirety and the following language shall replace said Section
2(g):
|
Section
2(g) “Forced
Exercise”.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than
Twenty-Five Cents ($0.25) for ten (10) consecutive Trading Days, to on such
tenth (10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
|
|
A. |
Except
as provided hereinabove, all of the terms and conditions contained
in the
Warrant shall remain unchanged and in full force and
effect.
|
|
|
B. |
This
Amendment is made pursuant to and in accordance with the terms and
conditions of the Warrant.
|
|
|
C. |
All
capitalized but not defined terms used herein shall have those meanings
ascribed to them in the Warrant.
|
|
|
D. |
All
provisions in the Warrant and any amendments, schedules or exhibits
thereto in conflict with this Amendment shall be and hereby are changed
to
conform to this Amendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ Charles
T. Jensen |
| |
Name Charles
T. Jensen
|
| |
Title: President
& Chief Executive Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By:
Yorkville Advisors LLC
|
| |
Its:
General Partner
|
|
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager
|
AMENDMENT
TO “C” WARRANT NO.: CCP-003
THIS
AMENDMENT AGREEMENT (the
“Amendment”) is
entered into as of August 24, 2006, between NEOMEDIA
TECHNOLOGIES, INC., a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP a
Delaware limited partnership (the
“Holder”).
WHEREAS,
the
Company issued to the Holder on February 17, 2006 a certain “C” warrant No.:
CCP-003 to purchase 30,000,000 shares of the Company’s Common Stock at an
exercise price of $0.35 (the “Warrant”);
and
WHEREAS,
the
parties wish to amend the Warrant as set forth below.
NOW,
THEREFORE,
it is
agreed:
|
|
A. |
Section
1(b)(xv) “Warrant
Exercise Price”:
Section 1(b)(xv) of the Warrant is hereby deleted in its entirety
and the
following language shall replace said Section
1(b)(xv):
|
Section
1(b)(xv) “Warrant Exercise Price” shall be Ten Cents ($0.10) or as subsequently
adjusted as provided in Section 8 hereof.
|
|
B. |
Section
2(g) “Forced Exercise”: Section 2(g) of the Warrant is hereby deleted in
its entirety and the following language shall replace said Section
2(g):
|
Section
2(g) “Forced Exercise”.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than Twenty
Cents ($0.20) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
|
|
A. |
Except
as provided hereinabove, all of the terms and conditions contained
in the
Warrant shall remain unchanged and in full force and
effect.
|
|
|
B. |
This
Amendment is made pursuant to and in accordance with the terms and
conditions of the Warrant.
|
|
|
C. |
All
capitalized but not defined terms used herein shall have those meanings
ascribed to them in the Warrant.
|
|
|
D. |
All
provisions in the Warrant and any amendments, schedules or exhibits
thereto in conflict with this Amendment shall be and hereby are changed
to
conform to this Amendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ Charles
T. Jensen |
| |
Name Charles
T. Jensen
|
| |
Title: President
& Chief Executive Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By:
Yorkville Advisors LLC
|
| |
Its:
General Partner
|
|
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager
|
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
__________________
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) of the
SECURITIES
EXCHANGE ACT OF 1934
__________________
Date
of
Report: December 29, 2006
NeoMedia
Technologies, Inc.
(Exact
Name of Registrant as Specified in Charter)
|
Delaware
|
0-21743
|
36-3680347
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
|
2201
Second Street, Suite #600, Fort Myers,
Florida
|
33901
|
|
(Address
of principal executive offices)
|
(Zip
code)
|
| |
|
|
Registrant's
telephone number, including area code:
|
(239)
337-3434
|
Not
Applicable
(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:
| o |
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
| o |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
| o |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|
| o |
Pre-commencement
communications pursuant to Rule 13c-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
|
ITEM
1.01 ENTRY INTO A MATERIAL DEFINITIVE
AGREEMENT
On
December 29, 2006, NeoMedia Technologies, Inc., a Delaware corporation (the
“Company”)
entered into a Securities Purchase Agreement (the “SPA”)
with
Cornell Capital Partners, LP, a Delaware limited partnership (the “Buyer”
and
together with the Company, the “Parties”).
Pursuant to the terms and subject to the conditions contained in the SPA, the
Company issued and sold to the Buyer, and the Buyer purchased from the Company,
$2,500,000 of secured convertible debentures (the “Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value $0.01
(the “Common
Stock”),
and
which was funded on December 29, 2006 for a purchase price equal to $2,230,000,
net of $270,000 fees paid to the Buyer. The funds are expected to be used to
repay certain of the Company’s obligations to silent partners assumed by the
Company with its acquisition of 12Snap AG in February 2006.
Contemporaneously
with the execution and delivery of the SPA and the issuance by the Company
to
the Buyer of the Debentures, the Parties executed and delivered an Investor
Registration Rights Agreement, pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act of 1933, as amended
and the rules and regulations promulgated there under and applicable state
securities laws.
The
Debentures are secured according to the terms of a Pledge and Security Agreement
(the “Security
Agreement”)
dated
August 23, 2006 and entered into in connection with a previous $5 million
secured convertible debenture between the parties, pursuant to which the Company
agreed to provide to Buyer a security interest in certain Pledged Collateral
(as
this term is defined in the Security Agreement) to secure the Company’s
obligations under the SPA, the Transaction Documents (as such term is defined
in
the SPA), or any other obligations of the Company to the Buyer.
In
connection with the SPA, the Company also issued to the Buyer a warrant to
purchase forty-two million (42,000,000) shares of the Company’s Common Stock,
exercisable for a period of five (5) years at an exercise price of $0.06 per
share (the “Warrant”).
The
Common Stock issuable under the Warrant shall have “piggy-back” and demand
registration rights.
Furthermore,
on December 29, 2006, the Company entered into seven (7) amendment agreements
to
reprice certain warrants which had been previously issued by the Company to
the
Buyer, as follows:
|
|
(i) |
Pursuant
to a second Amendment to Warrant No. CCP-002, the Parties amended
a
certain warrant, dated March 30, 2005, to purchase 50,000,000 shares
(40,000,000 of which had been previously exercised) at an exercise
price
of $0.10, to modify the warrant exercise price therein to $0.04 per
share.
|
|
|
(ii) |
Pursuant
to a second Amendment to “A” Warrant No. CCP-001, the Parties amended a
certain “A” warrant, dated February 17, 2006, to purchase 20,000,000
shares at an exercise price of $0.10 to modify the warrant exercise
price
therein to $0.04 per share.
|
|
|
(iii) |
Pursuant
to a second Amendment to “B” Warrant No. CCP-002, the Parties amended a
certain “B” warrant, dated February 17, 2006, to purchase 25,000,000
shares at an exercise price of $0.15 to modify the warrant exercise
price
therein to $0.04 per share.
|
|
|
(iv) |
Pursuant
to a second Amendment to “C” Warrant No. CCP-003, the Parties amended a
certain “C” warrant, dated February 17, 2006, to purchase 30,000,000
shares at an exercise price of $0.10 to modify the warrant exercise
price
therein to $0.04 per share.
|
|
|
(v) |
Pursuant
to Amendment to “A” Warrant No. CCP-001, the Parties amended a certain “C”
warrant, dated August 24, 2006, to purchase 25,000,000 shares at
an
exercise price of $0.15 to modify the warrant exercise price therein
to
$0.04 per share.
|
|
|
(vi) |
Pursuant
to Amendment to “B” Warrant No. CCP-001, the Parties amended a certain “C”
warrant, dated August 24, 2006, to purchase 50,000,000 shares at
an
exercise price of $0.25 to modify the warrant exercise price therein
to
$0.04 per share.
|
|
|
(vii) |
Pursuant
to Amendment to “C” Warrant No. CCP-001, the Parties amended a certain “C”
warrant, dated August 24, 2006, to purchase 50,000,000 shares at
an
exercise price of $0.20 to modify the warrant exercise price therein
to
$0.04 per share.
|
In
addition, the warrant amendments each contain a stipulation whereby, for
a
period of six (6) months, the Company shall have the right to redeem the
warrants on a cashless basis at an effective price of twelve cents ($0.12)
per
share.
ITEM
3.02 UNREGISTERED SALES OF EQUITY SECURITIES
See
Item
1.01 above.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS
|
|
(d) |
Exhibits
No. Description:
|
|
Exhibit
No.
|
|
Item
|
|
|
| |
|
|
|
|
|
Exhibit
10.1
|
|
Securities
Purchase Agreement, dated December 29, 2006, by and between the Company
and Cornell Capital Partners, LP
|
|
Provided
herewith
|
|
Exhibit
10.2
|
|
Investor
Registration Rights Agreement, dated December 29, 2006, by and between
the
Company and Cornell Capital Partners, LP
|
|
Provided
herewith
|
|
Exhibit
10.3
|
|
Secured
Convertible Debenture, dated December 29, 2006, issued by the Company
to
Cornell Capital Partners, LP
|
|
Provided
herewith
|
|
Exhibit
10.4
|
|
Irrevocable
Transfer Agent Instructions, dated December 29, 2006, by and among
the
Company, Cornell Capital Partners, LP and American Stock Transfer
&
Trust Co.
|
|
Provided
herewith
|
|
Exhibit
10.5
|
|
A
Warrant, dated December 29, 2006
|
|
Provided
herewith
|
|
Exhibit
10.6
|
|
Amendment
to Warrant No. CCP-002, dated December 29, 2006, by and between the
Company and Cornell Capital Partners, LP
|
|
Provided
herewith
|
|
Exhibit
10.7
|
|
Amendment
to “A” Warrant No. CCP-001, dated December 29, 2006, by and between the
Company and Cornell Capital Partners, LP
|
|
Provided
herewith
|
|
Exhibit
10.8
|
|
Amendment
to “B” Warrant No. CCP-002, dated December 29, 2006, by and between the
Company and Cornell Capital Partners, LP
|
|
Provided
herewith
|
|
Exhibit
10.9
|
|
Amendment
to “C” Warrant No. CCP-003, dated December 29, 2006, by and between the
Company and Cornell Capital Partners, LP
|
|
Provided
herewith
|
|
Exhibit
10.10
|
|
Amendment
to “A” Warrant No. CCP-001, dated December 29, 2006, by and between the
Company and Cornell Capital Partners, LP
|
|
Provided
herewith
|
|
Exhibit
10.11
|
|
Amendment
to “B” Warrant No. CCP-001, dated December 29, 2006, by and between the
Company and Cornell Capital Partners, LP
|
|
Provided
herewith
|
|
Exhibit
10.12
|
|
Amendment
to “C” Warrant No. CCP-001, dated December 29, 2006, by and between the
Company and Cornell Capital Partners, LP
|
|
Provided
herewith
|
|
Exhibit
10.13
|
|
Press release
dated
January 8, 2006 |
|
Provided
herewith
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
| |
|
|
| Date: January
4, 2006 |
NEOMEDIA
TECHNOLGIES, INC.
|
|
|
|
| |
By: |
/s/ Charles
W. Fritz |
| |
Name: Charles
W. Fritz
|
| |
Its: Acting
Chief Executive Officer
|
SECURITIES
PURCHASE AGREEMENT
THIS SECURITIES
PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of December 29, 2006, by and among NEOMEDIA
TECHNOLOGIES, INC.,
a
Delaware corporation (the “Company”),
and
the Buyers listed on Schedule I attached hereto (individually, a
“Buyer”
or
collectively “Buyers”).
WITNESSETH
WHEREAS,
the
Company and the Buyer(s) are executing and delivering this Agreement in reliance
upon an exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”);
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Buyer(s), as provided herein,
and the Buyer(s) shall purchase up to Two Million Five
Hundred Thousand Dollars
($2,500,000) of secured convertible debentures (the “Convertible
Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value $0.01
(the “Common
Stock”)
(as
converted, the “Conversion
Shares”)
which
shall be funded within two (2) business days from the date hereof, with the
United States Securities and Exchange Commission (the “SEC”)
(the
“Closing”)
(referred to as a “Closing”
collectively referred to as the “Closings”),
for a
total purchase price of up to Two Million Five Hundred Thousand Dollars
($2,500,000), (the “Purchase
Price”)
in the
respective amounts set forth opposite each Buyer(s) name on Schedule I (the
“Subscription
Amount”);
and
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement (the
“Investor
Registration Rights Agreement”)
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated there under,
and applicable state securities laws; and
WHEREAS,
the
Company has agreed to provide the Buyers a security interest, pursuant to the
Security Agreement executed August 23, 2006 (the “Security
Agreement”),
in
the Pledged Collateral, as defined in the Security Agreement, and perfected
pursuant to the UCC-1 initially filed with the Delaware Department of State
the
UCC Filing Section on August 25, 06 Filing No. 62970861 later amended on
November 14, 2006 Amendment No. 63963113 and the Florida Secured Transaction
Registry on August 25, 2006 Filing No. 200603546313 later amended on November
14, 2006 Filing No. 200604142828 to secure the Company’s obligations under this
Agreement, the Transaction Documents, or any other obligations of the Company
to
the Buyer; and
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering Irrevocable Transfer Agent Instructions
(the
“Irrevocable
Transfer Agent Instructions”)
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:
1. PURCHASE
AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase
of Convertible Debentures.
Subject
to the satisfaction (or waiver) of the terms and conditions of this Agreement,
each Buyer agrees, severally and not jointly, to purchase at each Closing and
the Company agrees to sell and issue to each Buyer, severally and not jointly,
at each Closing, Convertible Debentures in amounts corresponding with the
Subscription Amount set forth opposite each Buyer’s name on Schedule I hereto.
(b) Closing
Date.
The
Closing of the purchase and sale of the Convertible Debentures shall take place
at 10:00 a.m. Eastern Standard Time two (2) business days from the date hereof,
subject to notification of satisfaction of the conditions to the Closing set
forth herein and in Sections 6 and 7 below (or such later date as is mutually
agreed to by the Company and the Buyer(s)) (“Closing
Date”).
The
Closing shall occur on the Closing Date at the offices of Yorkville Advisors,
LLC, 3700 Hudson Street, Suite 3700, Jersey City, New Jersey 07302 (or such
other place as is mutually agreed to by the Company and the Buyer(s)).
(c) Form
of Payment.
Subject
to the satisfaction of the terms and conditions of this Agreement, on the
Closing Date, (i) the Buyers shall deliver to the Company such aggregate
proceeds for the Convertible Debentures to be issued and sold to such Buyer(s),
minus the fees to be paid directly from the proceeds of the Closing as set
forth
herein, and (ii) the Company shall deliver to each Buyer, Convertible
Debentures which such Buyer(s) is purchasing in amounts indicated opposite
such
Buyer’s name on Schedule I, duly executed on behalf of the Company.
2. BUYER’S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer represents and warrants, severally and not jointly, that:
(a) Investment
Purpose.
Each
Buyer is acquiring the Convertible Debentures and, upon conversion of
Convertible Debentures, the Buyer will acquire the Conversion Shares then
issuable, for its own account for investment only and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the Securities Act;
provided, however, that by making the representations herein, such Buyer
reserves the right to dispose of the Conversion Shares at any time in accordance
with or pursuant to an effective registration statement covering such Conversion
Shares or an available exemption under the Securities Act.
(b) Accredited
Investor Status.
Each
Buyer is an “Accredited
Investor”
as
that
term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance
on Exemptions.
Each
Buyer understands that the Convertible Debentures are being offered and sold
to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire such
securities.
(d) Information.
Each
Buyer and its advisors (and his or, its counsel), if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and information he deemed material to making an informed investment
decision regarding his purchase of the Convertible Debentures and the Conversion
Shares, which have been requested by such Buyer. Each Buyer and its advisors,
if
any, have been afforded the opportunity to ask questions of the Company and
its
management. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer’s right to rely on the Company’s
representations and warranties contained in Section 3 below. Each Buyer
understands that its investment in the Convertible Debentures and the Conversion
Shares involves a high degree of risk. Each Buyer is in a position regarding
the
Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables such Buyer to obtain information from
the
Company in order to evaluate the merits and risks of this investment. Each
Buyer
has sought such accounting, legal and tax advice, as it has considered necessary
to make an informed investment decision with respect to its acquisition of
the
Convertible Debentures and the Conversion Shares.
(e) No
Governmental Review.
Each
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Convertible Debentures or the Conversion Shares, or the
fairness or suitability of the investment in the Convertible Debentures or
the
Conversion Shares, nor have such authorities passed upon or endorsed the merits
of the offering of the Convertible Debentures or the Conversion
Shares.
(f) Transfer
or Resale.
Each
Buyer understands that except as provided in the Investor Registration Rights
Agreement: (i) the Convertible Debentures have not been and are not being
registered under the Securities Act or any state securities laws, and may not
be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, or (B) such Buyer shall have delivered to the Company
an
opinion of counsel, in a generally acceptable form, to the effect that such
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration requirements; (ii)
any sale of such securities made in reliance on Rule 144 under the Securities
Act (or a successor rule thereto) (“Rule 144”)
may be
made only in accordance with the terms of Rule 144 and further, if Rule 144
is
not applicable, any resale of such securities under circumstances in which
the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the Securities
Act or any state securities laws or to comply with the terms and conditions
of
any exemption thereunder.
(g) Legends.
Each
Buyer understands that the certificates or other instruments representing the
Convertible Debentures and or the Conversion Shares shall bear a restrictive
legend in substantially the following form (and a stop transfer order may be
placed against transfer of such stock certificates):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
The
legend set forth above shall be removed and the Company within two (2) business
days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided
the
Conversion Shares are registered under the Securities Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the Securities Act.
(h) Authorization,
Enforcement.
This
Agreement has been duly and validly authorized, executed and delivered on behalf
of such Buyer and is a valid and binding agreement of such Buyer enforceable
in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
(i) Receipt
of Documents.
Each
Buyer and his or its counsel has received and read in their entirety: (i) this
Agreement and each representation, warranty and covenant set forth herein and
the Transaction Documents (as defined herein); (ii) all due diligence and other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company’s Form 10-KSB for
the fiscal year ended December 31, 2005; (iv) the Company’s Form 10-Q for the
fiscal quarter ended March 31, 2006, June 30, 2006 and September 30, 2006 (v)
answers to all questions each Buyer submitted to the Company regarding an
investment in the Company; and each Buyer has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.
(j) Due
Formation of Corporate and Other Buyers.
If the
Buyer(s) is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Convertible Debentures
and
is not prohibited from doing so.
(k) No
Legal Advice From the Company.
Each
Buyer acknowledges, that it had the opportunity to review this Agreement and
the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. Each Buyer is relying solely on such counsel
and advisors and not on any statements or representations of the Company or
any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement
or
the securities laws of any jurisdiction.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants as of the date hereof to each of the Buyers
that, except as set forth in the SEC Documents (as defined herein) or in the
Disclosure Schedule attached hereto (the “Disclosure
Schedule”):
(a) Organization
and Qualification.
The
Company and its subsidiaries are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they
are
incorporated, and have the requisite corporate power to own their properties
and
to carry on their business as now being conducted. Each of the Company and
its
subsidiaries is duly qualified as a foreign corporation to do business and
is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a
whole.
(b) Authorization,
Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter
into and perform this Agreement, the Security Agreement, the Investor
Registration Rights Agreement, the Irrevocable Transfer Agent Agreement, the
Warrants, and any related agreements (collectively the “Transaction
Documents”)
and to
issue the Convertible Debentures and the Conversion Shares in accordance with
the terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance
of
the Convertible Debentures the Conversion Shares and the reservation for
issuance and the issuance of the Conversion Shares issuable upon conversion
or
exercise thereof, have been duly authorized by the Company’s Board of Directors
and no further consent or authorization is required by the Company, its Board
of
Directors or its stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited
by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies. The
authorized officer of the Company executing the Transaction Documents knows
of
no reason why the Company cannot file the registration statement as required
under the Investor Registration Rights Agreement or perform any of the Company’s
other obligations under such documents.
(c) Capitalization.
The
authorized capital stock of the Company consists of 5,000,000,000 shares of
Common Stock and 25,000,000,000 shares of Preferred Stock, par value $0.01
(“Preferred
Stock”)
of
which _________ shares
of
Common Stock and 22,000 shares of Preferred Stock are issued and outstanding.
All of such outstanding shares have been validly issued and are fully paid
and
nonassessable. No shares of Common Stock are subject to preemptive rights or
any
other similar rights or any liens or encumbrances suffered or permitted by
the
Company. As of the date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights
to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any
of
their securities under the Securities Act (except pursuant to the Registration
Rights Agreement) and (iv) there are no outstanding registration statements
and
there are no outstanding comment letters from the SEC or any other regulatory
agency. There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Convertible
Debentures as described in this Agreement. The Company has furnished to the
Buyer true and correct copies of the Company’s Articles of Incorporation, as
amended and as in effect on the date hereof (the “Articles
of Incorporation”),
and
the Company’s By-laws, as in effect on the date hereof (the “By-laws”),
and
the terms of all securities convertible into or exercisable for Common Stock
and
the material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants.
(d) Issuance
of Securities.
The
Convertible Debentures are duly authorized and, upon issuance in accordance
with
the terms hereof, shall be duly issued, fully paid and nonassessable, are free
from all taxes, liens and charges with respect to the issue thereof. The
Conversion Shares issuable upon conversion of the Convertible Debentures have
been duly authorized and reserved for issuance. Upon conversion or exercise
in
accordance with the Convertible Debentures the Conversion Shares will be duly
issued, fully paid and nonassessable.
(e) 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
will
not (i) result in a violation of the Articles of Incorporation, any certificate
of designations of any outstanding series of preferred stock of the Company
or
the By-laws or (ii) conflict with or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of The National Association of
Securities Dealers Inc.’s OTC Bulletin Board on which the Common Stock is
quoted) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. Neither the Company nor its subsidiaries is in violation of any term
of or in default under its Articles of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree
or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act and
any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any
court or governmental agency in order for it to execute, deliver or perform
any
of its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected
on
or prior to the date hereof. The Company and its subsidiaries are unaware of
any
facts or circumstance, which might give rise to any of the
foregoing.
(f) SEC
Documents: Financial Statements.
Since
January 1, 2005, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”)
(all
of the foregoing filed prior to the date hereof or amended after the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein, being hereinafter referred
to
as the “SEC
Documents”).
The
Company has delivered to the Buyers or their representatives, or made available
through the SEC’s website at http://www.sec.gov., true and complete copies of
the SEC Documents. As of their respective dates, the financial statements of
the
Company disclosed in the SEC Documents (the “Financial
Statements”)
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such Financial
Statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and, fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in this Agreement, contains any untrue statement of a material
fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(g) 10(b)-5.
Neither
the Transaction Documents nor the SEC Documents include any untrue statements
of
material fact, nor do they omit to state any material fact required to be stated
therein necessary to make the statements made, in light of the circumstances
under which they were made, not misleading.
(h) Absence
of Litigation.
There
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would (i)
have
a material adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) have a material adverse effect on the business,
operations, properties, financial condition or results of operations of the
Company and its subsidiaries taken as a whole.
(i) Acknowledgment
Regarding Buyer’s Purchase of the Convertible Debentures.
The
Company acknowledges and agrees that the Buyer(s) 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 the
Buyer(s) is not acting as a financial advisor or fiduciary of the Company (or
in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer(s) or any of their
respective representatives or agents in connection with this Agreement and
the
transactions contemplated hereby is merely incidental to such Buyer’s purchase
of the Convertible Debentures or the Conversion Shares. The Company further
represents to the Buyer that the Company’s decision to enter into this Agreement
has been based solely on the independent evaluation by the Company and its
representatives.
(j) No
General Solicitation.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection
with
the offer or sale of the Convertible Debentures or the Conversion
Shares.
(k) No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security, under circumstances that would require
registration of the Convertible Debentures or the Conversion Shares under the
Securities Act or cause this offering of the Convertible Debentures or the
Conversion Shares to be integrated with prior offerings by the Company for
purposes of the Securities Act.
(l) Employee
Relations.
Neither
the Company nor any of its subsidiaries is involved in any labor dispute nor,
to
the knowledge of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company’s or its subsidiaries’ employees is a member of
a union and the Company and its subsidiaries believe that their relations with
their employees are good.
(m) Intellectual
Property Rights.
The
Company and its subsidiaries own or possess adequate rights or licenses to
use
all trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct
their
respective businesses as now conducted. The Company and its subsidiaries do
not
have any knowledge of any infringement by the Company or its subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other similar rights of others, and, to the knowledge of the Company there
is
no claim, action or proceeding being made or brought against, or to the
Company’s knowledge, being threatened against, the Company or its subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service mark registrations, trade secret
or other infringement; and the Company and its subsidiaries are unaware of
any
facts or circumstances which might give rise to any of the
foregoing.
(n) Environmental
Laws.
The
Company and its subsidiaries are (i) in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental
Laws”),
(ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license
or
approval.
(o) Title.
Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use
made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
(p) Insurance.
The
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company
nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such 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 at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(q) Regulatory
Permits.
The
Company and its subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(r) Internal
Accounting Controls.
The
Company and each of its 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, and (iii) the recorded amounts for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(s) No
Material Adverse Breaches, etc.
Neither
the Company nor any of its subsidiaries is subject to any charter, corporate
or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company’s officers has or is expected in the future
to have a material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
subsidiaries. Neither the Company nor any of its subsidiaries is in breach
of
any contract or agreement which breach, in the judgment of the Company’s
officers, has or is expected to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries.
(t) Tax
Status.
The
Company and each of its subsidiaries has made and filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that
the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has
paid
all taxes and other governmental assessments and charges that are material
in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
(u) Certain
Transactions.
Except
for arm’s length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors, or employees
of
the Company is presently a party to any transaction with the Company (other
than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the
knowledge of the Company, any corporation, partnership, trust or other entity
in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner.
(v) Fees
and Rights of First Refusal.
The
Company is not obligated to offer the securities offered hereunder on a right
of
first refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers, agents
or other third parties.
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts to timely satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form
D.
The
Company agrees to file a Form D with respect to the Conversion Shares as
required under Regulation D and to provide a copy thereof to each Buyer promptly
after such filing. The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary to qualify the
Conversion Shares, or obtain an exemption for the Conversion Shares for sale
to
the Buyers at the Closing pursuant to this Agreement under applicable securities
or “Blue Sky” laws of the states of the United States, and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date.
(c) Reporting
Status.
Until
the earlier of (i) the date as of which the Buyer(s) may sell all of the
Conversion Shares without restriction pursuant to Rule 144(k) promulgated under
the Securities Act (or successor thereto), or (ii) the date on which (A) the
Buyer(s) shall have sold all the Conversion Shares and (B) none of the
Convertible Debentures are outstanding (the “Registration
Period”),
the
Company shall file in a timely manner all reports required to be filed with
the
SEC pursuant to the Exchange Act and the regulations of the SEC thereunder,
and
the Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination.
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Convertible Debentures for
general corporate and working capital purposes.
(e) Reservation
of Shares.
The
Company shall take all action reasonably necessary to at all times have
authorized, and reserved for the purpose of issuance, such number of shares
of
Common Stock as shall be necessary to effect the issuance of the Conversion
Shares. If at any time the Company does not have available such shares of Common
Stock as shall from time to time be sufficient to effect the conversion of
all
of the Conversion Shares, the Company shall call and hold a special meeting
of
the shareholders within thirty (30) days of such occurrence, for the sole
purpose of increasing the number of shares authorized. The Company’s management
shall recommend to the shareholders to vote in favor of increasing the number
of
shares of Common Stock authorized. Management shall also vote all of its shares
in favor of increasing the number of authorized shares of Common
Stock.
(f) Listings
or Quotation.
The
Company shall promptly secure the listing or quotation of the Conversion Shares
upon each national securities exchange, automated quotation system or The
National Association of Securities Dealers Inc.’s Over-The-Counter Bulletin
Board (“OTCBB”)
or
other market, if any, upon which shares of Common Stock are then listed or
quoted (subject to official notice of issuance) and shall use its best efforts
to maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all Conversion Shares from time to time issuable under the
terms
of this Agreement. The Company shall maintain the Common Stock’s authorization
for quotation on the OTCBB.
(g) Fees
and
Expenses.
(i) Each
of
the Company and the Buyer(s) shall pay all costs and expenses incurred by such
party in connection with the negotiation, investigation, preparation, execution
and delivery of the Transaction Documents. The Company shall pay Yorkville
Advisors LLC a fee equal to ten percent (10%) of the Purchase Price.
(ii) The
Company shall pay a structuring fee to Yorkville Advisors LLC of Twenty Thousand
Dollars ($20,000), which shall be paid from the gross proceeds of the Closing.
(iii) On
the
date hereof the Company shall issue to the Buyer a warrant to purchase forty
two
million (42,000,000) shares of the Company’s Common Stock which shall be
exercisable for a period of five (5) years at an exercise price of Six Cents
($0.06) per share (collectively referred to as the “Warrants”).
The
shares of Common Stock issuable under the Warrants shall collectively be
referred to as the “Warrant
Shares”.
(iv) The
Warrant Shares shall have “piggy-back” and demand registration rights.
(h) Corporate
Existence.
So long
as any of the Convertible Debentures remain outstanding, the Company shall
not
directly or indirectly consummate any merger, reorganization, restructuring,
reverse stock split consolidation, sale of all or substantially all of the
Company’s assets or any similar transaction or related transactions (each such
transaction, an “Organizational
Change”)
unless, prior to the consummation an Organizational Change, the Company obtains
the written consent of each Buyer. In any such case, the Company will make
appropriate provision with respect to such holders’ rights and interests to
insure that the provisions of this Section 4(h) will thereafter be applicable
to
the Convertible Debentures.
(i) Transactions
With Affiliates.
So long
as any Convertible Debentures are outstanding, the Company shall not, and shall
cause each of its subsidiaries not to, enter into, amend, modify or supplement,
or permit any subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or any
subsidiary’s officers, directors, person who were officers or directors at any
time during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below)
or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a
five
percent (5%) or more beneficial interest (each a “Related
Party”),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any investment in an Affiliate of the Company, (c) any
agreement, transaction, commitment, or arrangement on an arms-length basis
on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, (d) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the disinterested
directors of the Company; for purposes hereof, any director who is also an
officer of the Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. “Affiliate”
for
purposes hereof means, with respect to any person or entity, another person
or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity,
or
(iv) shares common control with that person or entity. “Control”
or
“controls”
for
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity.
(j) Transfer
Agent.
The
Company covenants and agrees that, in the event that the Company’s agency
relationship with the transfer agent should be terminated for any reason prior
to a date which is two (2) years after the Closing Date, the Company shall
immediately appoint a new transfer agent and shall require that the new transfer
agent execute and agree to be bound by the terms of the Irrevocable Transfer
Agent Instructions (as defined herein).
(k) Restriction
on Issuance of the Capital Stock.
So long
as any Convertible Debentures are outstanding, the Company shall not, and with
respect to subsection (iii) herein shall cause its subsidiaries now existing
or
later created or acquired not to, without the prior written consent of the
Buyer(s), (i) issue or sell shares of Common Stock or Preferred Stock without
consideration or for a consideration per share less than the bid price of the
Common Stock determined immediately prior to its issuance, (ii) issue any
preferred stock, warrant, option, right, contract, call, or other security
or
instrument granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration less than such Common Stock’s Bid Price
determined immediately prior to it’s issuance, (iii) enter into any security
instrument granting the holder a security interest in any and all assets of
the
Company or any of its subsidiaries now existing or later created or acquired
or
(iv) file any registration statement on Form S-8.
(l) Neither
the Buyer(s) nor any of its affiliates have an open short position in the Common
Stock of the Company, and the Buyer(s) agrees that it shall not, and that it
will cause its affiliates not to, engage in any short sales of or hedging
transactions with respect to the Common Stock as long as any Convertible
Debentures shall remain outstanding.
(m) Rights
of First Refusal.
So
long
as any portion of Convertible Debentures are outstanding, if the Company intends
to raise additional capital by the issuance or sale of capital stock of the
Company, including without limitation shares of any class of common stock,
any
class of preferred stock, options, warrants or any other securities convertible
or exercisable into shares of common stock (whether the offering is conducted
by
the Company, underwriter, placement agent or any third party) the Company shall
be obligated to offer to the Buyers such issuance or sale of capital stock,
by
providing in writing the principal amount of capital it intends to raise and
outline of the material terms of such capital raise, prior to the offering
such
issuance or sale of capital stock to any third parties including, but not
limited to, current or former officers or directors, current or former
shareholders and/or investors of the obligor, underwriters, brokers, agents
or
other third parties. The Buyers shall have ten (10) business days from
receipt of such notice of the sale or issuance of capital stock to accept or
reject all or a portion of such capital raising offer.
(n) Lock
Up Agreements.
On the
date hereof, the Company shall obtain from each officer and director a lock
up
agreement in the form attached hereto as Exhibit
A.
(o) So
long
as no Event of Default exists, solely with regard cash payments made by the
Company to pay any and all amounts due and outstanding to the Holder, unless
otherwise specified by the Holder, any cash payments made by the Company to
the
Holder shall first apply all amounts of principal and interest outstanding
pursuant the Series C Preferred shares on February 17, 2006 (“Series
C Preferred”).
5. TRANSFER
AGENT INSTRUCTIONS.
(a) The
Company shall issue the Irrevocable Transfer Agent Instructions to its transfer
agent irrevocably appointing David Gonzalez, Esq. as the Company’s agent for
purpose of having certificates issued, registered in the name of the Buyer(s)
or
its respective nominee(s), for the Conversion Shares representing such amounts
of Convertible Debentures as specified from time to time by the Buyer(s) to
the
Company upon conversion of the Convertible Debentures, for interest owed
pursuant to the Convertible Debenture, and for any and all Liquidated Damages
(as this term is defined in the Investor Registration Rights Agreement). David
Gonzalez, Esq. shall be paid a cash fee of Fifty Dollars ($50) for every
occasion they act pursuant to the Irrevocable Transfer Agent Instructions.
The
Company shall not change its transfer agent without the express written consent
of the Buyer(s), which may be withheld by the Buyer(s) in its sole discretion.
Prior to registration of the Conversion Shares under the Securities Act, all
such certificates shall bear the restrictive legend specified in Section 2(g)
of
this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and
stop
transfer instructions to give effect to Section 2(g) hereof (in the case of
the
Conversion Shares prior to registration of such shares under the Securities
Act)
will be given by the Company to its transfer agent and as long as the
registration statement relating to the Conversion Shares is effective, that
the
Conversion Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and
the
Investor Registration Rights Agreement. Nothing in this Section 5 shall affect
in any way the Buyer’s obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares. If the Buyer(s) provides
the
Company with an opinion of counsel, in form, scope and substance customary
for
opinions of counsel in comparable transactions to the effect that registration
of a resale by the Buyer(s) of any of the Conversion Shares is not required
under the Securities Act, the Company shall within two (2) business days
instruct its transfer agent to issue one or more certificates in such name
and
in such denominations as specified by the Buyer. The Company acknowledges that
a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees,
in
the event of a breach or threatened breach by the Company of the provisions
of
this Section 5, that the Buyer(s) shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss
and without any bond or other security being required.
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Convertible Debentures
to the Buyer(s) at the Closings is subject to the satisfaction, at or before
the
Closing Dates, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:
(a) Each
Buyer shall have executed the Transaction Documents and delivered them to the
Company.
(b) The
Buyer(s) shall have delivered to the Company the Purchase Price for Convertible
Debentures in respective amounts as set forth next to each Buyer as outlined
on
Schedule I attached hereto, minus any fees to be paid directly from the proceeds
the Closings as set forth herein, by wire transfer of immediately available
U.S.
funds pursuant to the wire instructions provided by the Company.
(c) The
representations and warranties of the Buyer(s) shall be true and correct in
all
material respects as of the date when made and as of the Closing Dates as though
made at that time (except for representations and warranties that speak as
of a
specific date), and the Buyer(s) shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Buyer(s)
at or
prior to the Closing Dates.
7. CONDITIONS
TO THE BUYER’S OBLIGATION TO PURCHASE.
(a) The
obligation of the Buyer(s) hereunder to purchase the Convertible Debentures
at
the Closing is subject to the satisfaction, at or before the First Closing
Date
unless otherewise noted, of each of the following conditions:
(i) The
Company shall have executed the Transaction Documents and delivered the same
to
the Buyer(s).
(ii) The
Common Stock shall be authorized for quotation on the OTCBB, trading in the
Common Stock shall not have been suspended for any reason, and all the
Conversion Shares issuable upon the conversion of the Convertible Debentures
shall be approved by the OTCBB.
(iii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.
(iv) The
Company shall have executed and delivered to the Buyer(s) the Convertible
Debentures in the respective amounts set forth opposite each Buyer(s) name
on
Schedule I attached hereto.
(v) The
Buyer(s) shall receive an opinion of counsel from Kirkpatrick & Lockhart
Nicholson Graham, LLP in a form satisfactory to the Buyer(s) within five (5)
business days of the First Closing, and in no event later than the close of
business on Tuesday, January 9, 2007.
(vi) The
Company shall provide to the Buyer(s) a certificate of good standing from the
secretary of state from the state in which the Company is incorporated no later
than the close of business on Wednesday, January 3, 2006.
(vii) The
Company shall provide to the Buyer within five (5) business days of the First
Closing, and in no event later than the close of business on Tuesday, January
9,
2007, an acknowledgement, to the satisfaction of the Buyer, from the Company’s
independent certified public accountants as to its ability to provide all
consents required in order to file a registration statement in connection with
this transaction.
(viii) The
Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Convertible
Debentures, shares of Common Stock to effect the conversion of all of the
Conversion Shares then outstanding.
(ix) The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to
the Buyer, shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
8. INDEMNIFICATION.
(a) In
consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder, and
in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
each
other holder of the Convertible Debentures and the Conversion Shares, and all
of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Buyer
Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action
for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified
Liabilities”),
incurred by the Buyer Indemnitees or any of them as a result of, or arising
out
of, or relating to (a) any misrepresentation or breach of any representation
or
warranty made by the Company in this Agreement, the Convertible Debentures
or
the Investor Registration Rights Agreement or any other certificate, instrument
or document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement, or the
Investor Registration Rights Agreement or any other certificate, instrument
or
document contemplated hereby or thereby, or (c) any cause of action, suit or
claim brought or made against such Indemnitee and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement
or
any other instrument, document or agreement executed pursuant hereto by any
of
the parties hereto, any transaction financed or to be financed in whole or
in
part, directly or indirectly, with the proceeds of the issuance of the
Convertible Debentures or the status of the Buyer or holder of the Convertible
Debentures the Conversion Shares, as a Buyer of Convertible Debentures in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution
to
the payment and satisfaction of each of the Indemnified Liabilities, which
is
permissible under applicable law.
(b) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Buyer’s other obligations under this Agreement, the Buyer
shall defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company
Indemnitees”)
from
and against any and all Indemnified Liabilities incurred by the Indemnitees
or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, instrument or document contemplated hereby or
thereby executed by the Buyer, (b) any breach of any covenant, agreement or
obligation of the Buyer(s) contained in this Agreement, the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer, or (c) any cause of
action, suit or claim brought or made against such Company Indemnitee based
on
material misrepresentations or due to a material breach and arising out of
or
resulting from the execution, delivery, performance or enforcement of this
Agreement, the Investor Registration Rights Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the parties hereto.
To
the extent that the foregoing undertaking by each Buyer may be unenforceable
for
any reason, each Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
9. GOVERNING
LAW: MISCELLANEOUS.
(a) Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New Jersey without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in Hudson
County, New Jersey, and expressly consent to the jurisdiction and venue of
the
Superior Court of New Jersey, sitting in Hudson County and the United States
District Court for the District of New Jersey sitting in Newark, New Jersey
for
the adjudication of any civil action asserted pursuant to this
Paragraph.
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
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.
In
the event any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause four (4) additional original executed
signature pages to be physically delivered to the other party within five (5)
days of the execution and delivery hereof.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement, Amendments.
This
Agreement supersedes all other prior oral or written agreements between the
Buyer(s), the Company, their affiliates and persons acting on their behalf
with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
(f) Notices.
Any
notices, consents, waivers, or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to the Company, to:
|
Neomedia
Technologies, Inc.
|
| |
2201
Second Street, Suite #600
|
| |
Fort
Myers, FL 33901
|
| |
Attention:
Charles T. Jensen, President
|
| |
Telephone: (239)
337-3434
|
| |
Facsimile: (239)
337-3668
|
| |
|
|
With
a copy to:
|
Kirkpatrick
& Lockhart Nicholson Graham LLP
|
| |
201
South Biscayne Boulevard - Suite 2000
|
| |
Miami,
FL 33131-2399
|
| |
Attention: Clayton
E. Parker, Esq.
|
| |
Telephone: (305)
539-3300
|
| |
Facsimile: (305)
358-7095
|
If
to the
Buyer(s), to its address and facsimile number on Schedule I, with copies to
the
Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5)
days’ prior written notice to the other party of any change in address or
facsimile number.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. Neither the Company nor any Buyer
shall
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto.
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) Survival.
Unless
this Agreement is terminated under Section 9(l), the representations and
warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing
for
a period of two (2) years following the date on which the Convertible Debentures
are converted in full. The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Publicity.
The
Company and the Buyer(s) shall have the right to approve, before issuance any
press release or any other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that the Company
shall
be entitled, without the prior approval of the Buyer(s), to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company shall
use
its best efforts to consult the Buyer(s) in connection with any such press
release or other public disclosure prior to its release and Buyer(s) shall
be
provided with a copy thereof upon release thereof).
(k) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(l) Termination.
In the
event that the First Closing shall not have occurred with respect to the Buyers
on or before five (5) business days from the date hereof due to the Company’s or
the Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
above (and the non-breaching party’s failure to waive such unsatisfied
condition(s)), the non-breaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on
such
date without liability of any party to any other party; provided, however,
that
if this Agreement is terminated by the Company pursuant to this Section 9(l),
the Company shall remain obligated to reimburse the Buyer(s) for the fees and
expenses of Yorkville Advisors LLC described in Section 4(g) above.
(m) Brokerage.
The
Company represents that no broker, agent, finder or other party has been
retained by it in connection with the transactions contemplated hereby and
that
no other fee or commission has been agreed by the Company to be paid for or
on
account of the transactions contemplated hereby.
(n) No
Strict Construction.
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.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
Buyers and the Company have caused this Securities Purchase Agreement to be
duly
executed as of the date first written above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
Dodge |
| |
Name:
David Dodge
|
| |
Title:
CFO
|
Execution
Copy
SCHEDULE
I
SCHEDULE
OF BUYERS
|
Name
|
|
Signature
|
|
Address/Facsimile
Number
of Buyer
|
|
Amount
of Subscription
|
| |
|
|
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|
|
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| |
|
|
|
|
|
|
|
Cornell
Capital Partners, LP
|
|
By: Yorkville
Advisors, LLC
|
|
101
Hudson Street - Suite 3700
|
|
$2,000,000
|
| |
|
Its: General
Partner
|
|
Jersey
City, NJ 07303
|
|
|
| |
|
|
|
Facsimile: (201)
985-8266
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|
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| |
|
|
|
|
|
|
| |
|
By:
_______________________
|
|
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| |
|
Name: Mark
Angelo
|
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|
|
|
| |
|
Its: Portfolio
Manager
|
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| |
|
|
|
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|
|
|
With
a copy to:
|
|
David
Gonzalez, Esq.
|
|
101
Hudson Street - Suite 3700
|
|
|
| |
|
|
|
Jersey
City, NJ 07302
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|
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| |
|
|
|
Facsimile:
(201) 985-8266
|
|
|
DISCLOSURE
SCHEDULE
EXHIBIT
A
LOCK
UP AGREEMENT
The
undersigned hereby agrees that for a period commencing on December ___, 2006
and
expiring on the date thirty (30) days after the date that all amounts owed
to
Cornell Capital Partners, LP (the “Investor”),
under
the Secured Convertible Debentures issued to the Investor pursuant to the
Securities Purchase Agreement between Neomedia Technologies, Inc. (the
“Company”)
and
the Investor dated December ___, 2006 have been paid (the “Lock-up
Period”),
he,
she or it will not, directly or indirectly, without the prior written consent
of
the Investor, issue, offer, agree or offer to sell, sell, grant an option for
the purchase or sale of, transfer, pledge, assign, hypothecate, distribute
or
otherwise encumber or dispose of any securities of the Company, including common
stock or options, rights, warrants or other securities underlying, convertible
into, exchangeable or exercisable for or evidencing any right to purchase or
subscribe for any common stock (whether or not beneficially owned by the
undersigned), or any beneficial interest therein (collectively, the
“Securities”)
except
in accordance with the volume limitations set forth in Rule 144(e) of the
General Rules and Regulations under the Securities Act of 1933, as
amended.
In
order
to enable the aforesaid covenants to be enforced, the undersigned hereby
consents to the placing of legends and/or stop-transfer orders with the transfer
agent of the Company’s securities with respect to any of the Securities
registered in the name of the undersigned or beneficially owned by the
undersigned, and the undersigned hereby confirms the undersigned’s investment in
the Company.
Dated:
_______________, 2006
| Signature |
| |
| ____________________________________ |
| Name:
____________________________________ |
| Address:
__________________________________ |
| City, State, Zip Code:
_________________________ |
| |
| |
| ____________________________________ |
Print Social Security Number
or
Taxpayer I.D. Number |
INVESTOR
REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT
(this
“Agreement”),
dated
as of December 29, 2006, by and among NEOMEDIA
TECHNOLOGIES, INC.,
a
Delaware corporation (the “Company”),
and
the undersigned investors listed on Schedule I attached hereto (each, an
“Investor”
and
collectively, the “Investors”).
WHEREAS:
A. In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “Securities
Purchase Agreement”),
the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Investors secured
convertible debentures (the “Convertible
Debentures”)
which
shall be convertible into that number of shares of the Company’s common stock,
par value $0.01 per share (the “Common
Stock”),
pursuant to the terms of the Securities Purchase Agreement for an aggregate
purchase price of up to Two Million Five Hundred Thousand
Dollars ($2,500,000). Capitalized terms not defined herein shall have the
meaning ascribed to them in the Securities Purchase Agreement.
B. To
induce
the Investors to execute and deliver the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “Securities
Act”),
and
applicable state securities laws.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and the Investors hereby agree as
follows:
1. DEFINITIONS.
As
used
in this Agreement, the following terms shall have the following
meanings:
(a) “Person”
means
a
corporation, a limited liability company, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
(b) “Register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the Securities Act and pursuant
to Rule 415 under the Securities Act or any successor rule providing for
offering securities on a continuous or delayed basis (“Rule
415”),
and
the declaration or ordering of effectiveness of such Registration Statement(s)
by the United States Securities and Exchange Commission (the “SEC”).
(c) “Registrable
Securities”
means
the shares of Common Stock issuable to the Investors upon conversion of the
Convertible Debentures pursuant to the Securities Purchase Agreement and the
Warrant Shares, as this term is defined in the Securities Purchase
Agreement.
(d) “Registration
Statement”
means
a
registration statement under the Securities Act which covers the Registrable
Securities.
2. REGISTRATION.
(a) Subject
to the terms and conditions of this Agreement, the Company shall prepare and
file, no later than one hundred fifty (150) days from the date hereof (the
“Scheduled
Filing Deadline”),
with
the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is
then
eligible, on Form S-3) under the Securities Act (the “Initial
Registration Statement”)
for
the resale by the Investors of the Registrable Securities, which includes at
least 180,000,000 shares of Common Stock to be issued upon conversion of the
Convertible Debentures as well as the Warrant Shares. The Company shall cause
the Registration Statement to remain effective until all of the Registrable
Securities have been sold. Prior to the filing of the Registration Statement
with the SEC, the Company shall furnish a copy of the Initial Registration
Statement to the Investors for their review and comment. The Investors shall
furnish comments on the Initial Registration Statement to the Company within
twenty-four (24) hours of the receipt thereof from the Company.
(b) Effectiveness
of the Initial Registration Statement.
The
Company shall use its best efforts (i) to have the Initial Registration
Statement declared effective by the SEC no later than ninety (90) days from
the
date hereof (the “Scheduled
Effective Deadline”)
and
(ii) to insure that the Initial Registration Statement and any subsequent
Registration Statement remains in effect until all of the Registrable Securities
have been sold, subject to the terms and conditions of this
Agreement.
(c) Failure
to File or Obtain Effectiveness of the Registration Statement.
In the
event the Registration Statement is not filed by the Scheduled Filing Deadline
or is not declared effective by the SEC on or before the Scheduled Effective
Date, or if after the Registration Statement has been declared effective by
the
SEC, sales cannot be made pursuant to the Registration Statement (whether
because of a failure to keep the Registration Statement effective, failure
to
disclose such information as is necessary for sales to be made pursuant to
the
Registration Statement, failure to register sufficient shares of Common Stock
or
otherwise) then as partial relief for the damages to any holder of Registrable
Securities by reason of any such delay in or reduction of its ability to sell
the underlying shares of Common Stock (which remedy shall not be exclusive
of
any other remedies at law or in equity), the Company will pay as liquidated
damages (the “Liquidated
Damages”)
to the
holder, at the holder’s option, either a cash amount or shares of the Company’s
Common Stock within three (3) business days, after demand therefore, equal
to
two percent (2%) of the liquidated value of the Convertible Debentures
outstanding as Liquidated Damages for each thirty (30) day period after the
Scheduled Filing Deadline or the Scheduled Effective Date as the case may be.
Notwithstanding anything herein to the contrary, in no event shall Liquidated
Damages exceed twenty percent (20%) of the aggregate Purchase Price for all
Investors.
(d) Liquidated
Damages.
The
Company and the Investor hereto acknowledge and agree that the sums payable
under subsection 2(c) above shall constitute liquidated damages and not
penalties and are in addition to all other rights of the Investor, including
the
right to call a default. The parties further acknowledge that (i) the amount
of
loss or damages likely to be incurred is incapable or is difficult to precisely
estimate, (ii) the amounts specified in such subsections bear a reasonable
relationship to, and are not plainly or grossly disproportionate to, the
probable loss likely to be incurred in connection with any failure by the
Company to obtain or maintain the effectiveness of a Registration Statement,
(iii) one of the reasons for the Company and the Investor reaching an agreement
as to such amounts was the uncertainty and cost of litigation regarding the
question of actual damages, and (iv) the Company and the Investor are
sophisticated business parties and have been represented by sophisticated and
able legal counsel and negotiated this Agreement at arm’s length.
3. RELATED
OBLIGATIONS.
(a) The
Company shall keep the Registration Statement effective pursuant to
Rule 415 at all times until the date on which the Investor shall have sold
all the Registrable Securities covered by such Registration Statement (the
“Registration
Period”),
which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any 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 light of the circumstances in
which
they were made, not misleading.
(b) The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the Securities Act, as
may
be necessary to keep such Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the provisions
of
the Securities Act with respect to the disposition of all Registrable Securities
of the Company covered by such Registration Statement until such time as all
of
such Registrable Securities shall have been disposed of in accordance with
the
intended methods of disposition by the seller or sellers thereof as set forth
in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company’s filing a
report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
the
Company shall incorporate such report by reference into the Registration
Statement, if applicable, or shall file such amendments or supplements with
the
SEC on the same day on which the Exchange Act report is filed which created
the
requirement for the Company to amend or supplement the Registration Statement.
(c) The
Company shall furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge, (i) at least one (1) copy of
such
Registration Statement as declared effective by the SEC and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference, all exhibits and each preliminary prospectus,
(ii) ten (10) copies of the final prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number
of
copies as such Investor may reasonably request) and (iii) such other documents
as such Investor may reasonably request from time to time in order to facilitate
the disposition of the Registrable Securities owned by such
Investor.
(d) The
Company shall use its best efforts to (i) register and qualify the Registrable
Securities covered by a Registration Statement under such other securities
or
“blue sky” laws of such jurisdictions in the United States as any Investor
reasonably requests, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not
be
required in connection therewith or as a condition thereto to (w) make any
change to its articles of incorporation or by-laws, (x) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but
for
this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “blue sky” laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
(e) As
promptly as practicable after becoming aware of such event or development,
the
Company shall notify each Investor in writing of the happening of any event
as a
result of which the prospectus included in a Registration Statement, as then
in
effect, includes an untrue statement of a material fact or omission to state
a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material,
nonpublic information), and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor. The Company
shall also promptly notify each Investor in writing (i) when a prospectus or
any
prospectus supplement or post-effective amendment has been filed, and when
a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness), (ii) of any request by the
SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company’s reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(f) The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction within the United States of America and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension
at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(g) At
the
reasonable request of any Investor, the Company shall furnish to such Investor,
on the date of the effectiveness of the Registration Statement and thereafter
from time to time on such dates as an Investor may reasonably request (i) a
letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
and (ii) an opinion, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement, in form, scope and substance as
is
customarily given in an underwritten public offering, addressed to the
Investors.
(h) The
Company shall make available for inspection by (i) any Investor and
(ii) one (1) firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”)
all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the “Records”),
as
shall be reasonably deemed necessary by each Inspector, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree,
and
each Investor hereby agrees, to hold in strict confidence and shall not make
any
disclosure (except to an Investor) or use any Record or other information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of
such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the Securities Act, (b)
the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction,
or
(c) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement
of
which the Inspector and the Investor has knowledge. Each Investor agrees that
it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
(i) The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure
of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor’s
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
(j) The
Company shall use its best efforts either to cause all the Registrable
Securities covered by a Registration Statement (i) to be listed on each
securities exchange on which securities of the same class or series issued
by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii) the
inclusion for quotation on the National Association of Securities Dealers,
Inc.
OTC Bulletin Board for such Registrable Securities. The Company shall pay all
fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and, to the extent applicable, to facilitate the timely preparation
and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Investors may reasonably request and registered in such names as
the
Investors may request.
(l) The
Company shall use its best efforts to cause the Registrable Securities covered
by the applicable Registration Statement to be registered with or approved
by
such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.
(m) The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of
Rule 158 under the Securities Act) covering a twelve (12) month period beginning
not later than the first day of the Company’s fiscal quarter next following the
effective date of the Registration Statement.
(n) The
Company shall otherwise use its best efforts to comply with all applicable
rules
and regulations of the SEC in connection with any registration
hereunder.
(o) Within
two (2) business days after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent
for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit
A.
(p) The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of Registrable Securities pursuant
to a
Registration Statement.
4. OBLIGATIONS
OF THE INVESTORS.
Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or receipt
of
notice that no supplement or amendment is required. Notwithstanding anything
to
the contrary, the Company shall cause its transfer agent to deliver unlegended
certificates for shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an Investor has
entered into a contract for sale prior to the Investor’s receipt of a notice
from the Company of the happening of any event of the kind described in Section
3(f) or the first sentence of 3(e) and for which the Investor has not yet
settled.
5. EXPENSES
OF REGISTRATION.
All
expenses incurred in connection with registrations, filings or qualifications
pursuant to Sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers, legal and accounting fees shall
be
paid by the Company.
6. INDEMNIFICATION.
With
respect to Registrable Securities which are included in a Registration Statement
under this Agreement:
(a) To
the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, the directors, officers, partners,
employees, agents, representatives of, and each Person, if any, who controls
any
Investor within the meaning of the Securities Act or the Exchange Act (each,
an
“Indemnified
Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
expenses, joint or several (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified
Damages”),
to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon: (i) any untrue statement or alleged untrue statement of
a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue
Sky Filing”),
or
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation there under
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the foregoing clauses (i) through (iii)
being, collectively, “Violations”).
The
Company shall reimburse the Investors and each such controlling person promptly
as such expenses are incurred and are due and payable, for any legal fees or
disbursements or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (y) shall not
be
available to the extent such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company, if such prospectus was timely made available by the Company pursuant
to
Section 3(c); and (z) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9
hereof.
(b) In
connection with a Registration Statement, each Investor agrees to severally
and
not jointly indemnify, hold harmless and defend, to the same extent and in
the
same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers, employees, representatives, or agents and each Person,
if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (each an “Indemnified
Party”),
against any Claim or Indemnified Damages to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim or Indemnified Damages arise out of or is based upon any Violation,
in each case to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6(d), such Investor will reimburse any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only
that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds
to
such Investor as a result of the sale of Registrable Securities pursuant to
such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
prospectus was corrected and such new prospectus was delivered to each Investor
prior to such Investor’s use of the prospectus to which the Claim
relates.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any
indemnifying party under this Section 6, deliver to the indemnifying party
a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses of
not
more than one (1) counsel for such Indemnified Person or Indemnified Party
to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by
such
counsel in such proceeding. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for
any
settlement of any action, claim or proceeding effected without its prior written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of
a
release from all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter
for
which indemnification has been made. The failure to deliver written notice
to
the indemnifying party within a reasonable time of the commencement of any
such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
(d) The
indemnification required by this Section 6 shall be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.
(e) The
indemnity agreements contained herein shall be in addition to (i) any cause
of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that: (i) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by
such seller from the sale of such Registrable Securities.
8. REPORTS
UNDER THE EXCHANGE ACT.
With
a
view to making available to the Investors the benefits of Rule 144 promulgated
under the Securities Act or any similar rule or regulation of the SEC that
may
at any time permit the Investors to sell securities of the Company to the public
without registration (“Rule
144”)
the
Company agrees to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act so long as the Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company’s obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other documents as are
required by the applicable provisions of Rule 144; and
(c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied with
the reporting requirements of Rule 144, the Securities Act and the Exchange
Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the Investors to sell
such
securities pursuant to Rule 144 without registration.
9. AMENDMENT
OF REGISTRATION RIGHTS.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors
who
then hold at least two-thirds (2/3) of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 9 shall be binding upon
each Investor and the Company. No such amendment shall be effective to the
extent that it applies to fewer than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend
or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
10. MISCELLANEOUS.
(a) A
Person
is deemed to be a holder of Registrable Securities whenever such Person owns
or
is deemed to own of record such Registrable Securities or owns the right to
receive the Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two (2) or more Persons with respect
to
the same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
|
If
to the Company, to:
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Neomedia
Technologies, Inc.
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2201
Second Street, Suite #600
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| |
Fort
Myers, FL 33901
|
| |
Attention:
Charles T. Jensen, President
|
| |
Telephone: (239)
337-3434
|
| |
Facsimile: (239)
337-3668
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| |
|
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With
Copy to:
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Kirkpatrick
& Lockhart Nicholson Graham LLP
|
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201
South Biscayne Boulevard - Suite 2000
|
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Miami,
FL 33131-2399
|
| |
Attention: Clayton
E. Parker, Esq.
|
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Telephone: (305)
539-3300
|
| |
Facsimile: (305)
358-7095
|
If
to an
Investor, to its address and facsimile number on the Schedule of Investors
attached hereto, with copies to such Investor’s representatives as set forth on
the Schedule of Investors or to such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to
the
effectiveness of such change. Written confirmation of receipt (A) given by
the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
(d) The
laws
of the State of Delaware shall govern all issues concerning the relative rights
of the Company and the Investors as its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction
of the Superior Courts of the State of New Jersey, sitting in Hudson County,
New
Jersey and federal courts for the District of New Jersey sitting Newark, New
Jersey, for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
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
to
such party at the address for such 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. If any provision of
this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(e) This
Agreement, the Irrevocable Transfer Agent Instructions, the Securities Purchase
Agreement and related documents including the Convertible Debenture and the
Pledge and Security Agreement dated August 23, 2006 (the “Security
Agreement”)
and
the Warrants constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred
to
herein and therein. This Agreement, the Irrevocable Transfer Agent Instructions,
the Securities Purchase Agreement and related documents including the
Convertible Debenture, and the Security Agreement supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
(f) This
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
(g) The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(h) This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
(i) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
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.
(j) This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
IN
WITNESS WHEREOF,
the
parties have caused this Investor Registration Rights Agreement to be duly
executed as of day and year first above written.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
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| |
By: |
/s/ David
Dodge |
| |
Name:
David Dodge
|
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Title:
CFO
|
Execution
Copy
SCHEDULE
I
SCHEDULE
OF INVESTORS
|
Name
|
|
Signature
|
|
Address/Facsimile
Number
of Investors
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| |
|
|
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Cornell
Capital Partners, LP
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By: Yorkville
Advisors, LLC
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101
Hudson Street - Suite 3700
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Its: General
Partner
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Jersey
City, NJ 07303
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Facsimile: (201)
985-8266
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By:
__________________________
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Name: Mark
Angelo
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Its: Portfolio
Manager
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With
a copy to:
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David
Gonzalez, Esq.
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101
Hudson Street - Suite 3700
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Jersey
City, NJ 07302
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Facsimile:
(201) 985-8266
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Execution
Copy
EXHIBIT
A
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
Attention:
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Re:
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NEOMEDIA
TECHNOLOGIES, INC.
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Ladies
and Gentlemen:
We
are
counsel to Neomedia Technologies, Inc., a Delaware corporation (the
“Company”),
and
have represented the Company in connection with that certain Securities Purchase
Agreement (the “Securities
Purchase Agreement”)
entered into by and among the Company and the investors named therein
(collectively, the “Investors”)
pursuant to which the Company issued to the Investors shares of its Common
Stock, par value $0.01 per share (the “Common
Stock”).
Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Investors (the “Investor
Registration Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement) under
the Securities Act of 1933, as amended (the “Securities
Act”).
In
connection with the Company’s obligations under the Registration Rights
Agreement, on ____________ ____, the Company filed a Registration Statement
on
Form ________ (File No. 333-_____________) (the “Registration
Statement”)
with
the Securities and Exchange SEC (the “SEC”)
relating to the Registrable Securities which names each of the Investors as
a
selling stockholder there under.
In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the Securities Act at [ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC
and
the Registrable Securities are available for resale under the Securities Act
pursuant to the Registration Statement.
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Very truly yours, |
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[Law
Firm] |
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By: |
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[LIST
NAMES OF INVESTORS]
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Dated:
December 29, 2006
NEITHER
THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS 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 ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
NEOMEDIA
TECHNOLOGIES, INC.
Secured
Convertible Debenture
Due
December 29, 2008
This
Secured Convertible Debenture (the “Debenture”)
is
issued by NEOMEDIA
TECHNOLOGIES, INC., a
Delaware corporation (the “Obligor”),
to
CORNELL
CAPITAL PARTNERS, LP
(the
“Holder”),
pursuant to that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”)
of
even date herewith.
FOR
VALUE RECEIVED,
the
Obligor hereby promises to pay to the Holder or its successors and assigns
the
principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000) together
with accrued but unpaid interest on or before December ___, 2008 (the
“Maturity
Date”)
in
accordance with the following terms:
Interest.
Interest shall accrue on the outstanding principal balance hereof at an annual
rate equal to ten percent (10%). Interest shall be calculated on the basis
of a
365-day year and the actual number of days elapsed, to the extent permitted
by
applicable law. Interest hereunder will be paid to the Holder or its assignee
(as defined in Section
5)
in
whose name this Debenture is registered on the records of the Obligor regarding
registration and transfers of Debentures (the “Debenture
Register”).
Right
of Redemption.
The
Obligor at its option shall have the right, with three (3) business days advance
written notice (the “Redemption
Notice”),
to
redeem a portion or all amounts outstanding under this Debenture prior to the
Maturity Date provided that the Closing Bid Price of the of the Obligor’s Common
Stock, as reported by Bloomberg, LP, is less than the Fixed Conversion Price
at
the time of the Redemption Notice. The Obligor shall pay an amount equal to
the
principal amount being redeemed plus a redemption premium (“Redemption
Premium”)
equal
to twenty percent (20%) of the principal amount being redeemed, and accrued
interest, (collectively referred to as the “Redemption
Amount”).
The
Obligor shall deliver to the Holder the Redemption Amount on the third
(3rd)
business day after the Redemption Notice.
Notwithstanding
the foregoing in the event that the Obligor has elected to redeem a portion
of
the outstanding principal amount and accrued interest under this Debenture
the
Holder shall be permitted to convert all or any portion of this Debenture during
such three business day period.
Security
Agreements.
This
Debenture is secured by a security interest, pursuant to the Security Agreement
executed August 23, 2006 (the “Security
Agreement”),
in
the Pledged Collateral, as defined in the Security Agreement, and perfected
pursuant to the UCC-1 initially filed with the Delaware Department of State
the
UCC Filing Section on August 25, 06 Filing No. 62970861 later amended on
November 14, 2006 Amendment No. 63963113 and the Florida Secured Transaction
Registry on August 25, 2006 Filing No. 200603546313 later amended on November
14, 2006 Filing No. 200604142828.
Consent
of Holder to Sell Capital Stock or Grant Security Interests.
So
long
as any of the principal amount or interest on this Debenture remains unpaid
and
unconverted, the Obligor shall not, and
with
respect to subsection (iii) herein shall cause its subsidiaries now existing
or
later created or acquired not to, without
the prior consent of the Holder, (i) issue or sell any shares of Common
Stock or preferred stock without consideration or for consideration per share
less than the Closing Bid Price of the Common Stock determined immediately
prior
to its issuance, (ii) issue or sell any preferred stock, warrant, option,
right, contract, call, or other security or instrument granting the holder
thereof the right to acquire Common Stock without consideration or for
consideration per share less than the Closing Bid Price of the Common Stock
determined immediately prior to its issuance, (iii)
enter into any security instrument granting the holder a security interest
in
any of the assets of the Obligor or any of its subsidiaries now existing or
later created or acquired or
(iv)
file any
registration statements on Form S-8.
Rights
of First Refusal.
So long as any portion of this Debenture is outstanding (including principal
or
accrued interest), if the Obligor intends to raise additional capital by the
issuance or sale of capital stock of the Obligor, including without limitation
shares of any class of Common Stock, any class of preferred stock, options,
warrants or any other securities convertible or exercisable into shares of
Common Stock (whether the offering is conducted by the Obligor, underwriter,
placement agent or any third party) the Obligor shall be obligated to offer
to
the Holder such issuance or sale of capital stock, by providing in writing
the
principal amount of capital it intends to raise and outline of the material
terms of such capital raise, prior to the offering such issuance or sale of
capital stock to any third parties including, but not limited to, current
or former officers or directors, current or former shareholders and/or investors
of the obligor, underwriters, brokers, agents or other third parties. The
Holder shall have ten (10) Business Days from receipt of such notice of the
sale
or issuance of capital stock to accept or reject all or a portion of such
capital raising offer.
This
Debenture is subject to the following additional provisions:
Section
1. This
Debenture is exchangeable for an equal aggregate principal amount of Debentures
of different authorized denominations, as requested by the Holder surrendering
the same. No service charge will be made for such registration of transfer
or
exchange.
Section
2. Events
of Default.
(a) An
“Event
of Default”,
wherever used herein, 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) Any
default in the payment of the principal of, interest on or other charges in
respect of this Debenture, free of any claim of subordination, as and when
the
same shall become due and payable (whether on a due date, a Conversion Date
or
the Maturity Date or by acceleration or otherwise);
(ii) The
Obligor shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach or default of any
provision of this Debenture (except as may be covered by Section
2(a)(i)
hereof)
or any Transaction Document (as defined in Section
5)
which
is not cured with in the time prescribed;
(iii) The
Obligor or any subsidiary of the Obligor shall commence, or there shall be
commenced against the Obligor or any subsidiary of the Obligor under any
applicable bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or the Obligor or any subsidiary of the Obligor commences
any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of
any
jurisdiction whether now or hereafter in effect relating to the Obligor or
any
subsidiary of the Obligor or there is commenced against the Obligor or any
subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Obligor or any
subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order
of
relief or other order approving any such case or proceeding is entered; or
the
Obligor or any subsidiary of the Obligor suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for
a
period of sixty one (61) days; or the Obligor or any subsidiary of the Obligor
makes a general assignment for the benefit of creditors; or the Obligor or
any
subsidiary of the Obligor shall fail to pay, or shall state that it is unable
to
pay, or shall be unable to pay, its debts generally as they become due; or
the
Obligor or any subsidiary of the Obligor shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Obligor or any subsidiary of the Obligor shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence
in
any of the foregoing; or any corporate or other action is taken by the Obligor
or any subsidiary of the Obligor for the purpose of effecting any of the
foregoing;
(iv) The
Obligor or any subsidiary of the Obligor shall default in any of its obligations
under any other debenture 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 Obligor or any subsidiary of the Obligor in an amount
exceeding $100,000, whether such indebtedness now exists or shall hereafter
be
created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;
(v) The
Common Stock shall cease to be quoted for trading or listing for trading on
either the Nasdaq OTC Bulletin Board (“OTC”),
or if
then listed on Nasdaq Capital Market, New York Stock Exchange, American Stock
Exchange or the Nasdaq National Market (each, a “Subsequent
Market”)
shall
cease to be quoted for trading or listing on such Subsequent Market and shall
not again be quoted or listed for trading thereon within five (5) Trading Days
of such delisting;
(vi) The
Obligor or any subsidiary of the Obligor shall be a party to any Change of
Control Transaction (as defined in Section
5);
(vii) The
Obligor shall fail to file the Underlying Shares Registration Statement (as
defined in Section
5)
with
the Commission (as defined in Section
5),
or the
Underlying Shares Registration Statement shall not have been declared effective
by the Commission, in each case within the time periods set forth in the
Investor Registration Rights Agreement (“Registration
Rights Agreement”)
of
even date herewith between the Obligor and the Holder;
(viii) If
the
effectiveness of the Underlying Shares Registration Statement lapses for any
reason or the Holder shall not be permitted to resell the shares of Common
Stock
underlying this Debenture under the Underlying Shares Registration Statement,
in
either case, for more than five (5) consecutive Trading Days or an aggregate
of
eight Trading Days (which need not be consecutive Trading Days);
(ix) The
Obligor shall fail for any reason to deliver Common Stock certificates to a
Holder prior to the fifth (5th)
Trading
Day after a Conversion Date or the Obligor shall provide notice to the Holder,
including by way of public announcement, at any time, of its intention not
to
comply with requests for conversions of this Debenture in accordance with the
terms hereof;
(x) The
Obligor shall fail for any reason to deliver the payment in cash pursuant to
a
Buy-In (as defined herein) within three (3) days after notice is claimed
delivered hereunder;
(b) During
the time that any portion of this Debenture is outstanding, if any Event of
Default has occurred, the full principal amount of this Debenture, together
with
interest and other amounts owing in respect thereof, to the date of acceleration
shall become at the Holder's election, immediately due and payable in cash,
provided
however,
the
Holder may request (but shall have no obligation to request) payment of such
amounts in Common Stock of the Obligor. In addition to any other remedies,
the
Holder shall have the right (but not the obligation) to convert this Debenture
at any time after (x) an Event of Default or (y) the Maturity Date at the
Conversion Price then in-effect. The Holder need not provide and the Obligor
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. Such declaration may be rescinded and
annulled by 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 thereon. Upon an Event of Default, notwithstanding any other
provision of this Debenture or any Transaction Document, the Holder shall have
no obligation to comply with or adhere to any limitations, if any, on the
conversion of this Debenture or the sale of the Underlying Shares.
Section
3. Conversion.
(a) Conversion
at Option of Holder.
(i) This
Debenture shall be convertible into shares of Common Stock at the option of
the
Holder, in whole or in part at any time and from time to time, after the
Original Issue Date (as defined in Section
5)
(subject to the limitations on conversion set forth in Section
3(b)
hereof).
The number of shares of Common Stock issuable upon a conversion hereunder equals
the quotient obtained by dividing (x) the outstanding amount of this Debenture
to be converted by (y) the Conversion Price (as defined in Section
3(c)(i)).
The
Obligor shall deliver Common Stock certificates to the Holder prior to the
Fifth
(5th)
Trading
Day after a Conversion Date.
(ii) Notwithstanding
anything to the contrary contained herein, if on any Conversion Date: (1) the
number of shares of Common Stock at the time authorized, unissued and unreserved
for all purposes, or held as treasury stock, is insufficient to pay principal
and interest hereunder in shares of Common Stock; (2) the Common Stock is not
listed or quoted for trading on the OTC or on a Subsequent Market; (3) the
Obligor has failed to timely satisfy its conversion; or (4) the issuance of
such
shares of Common Stock would result in a violation of Section
3(b),
then,
at the option of the Holder, the Obligor, in lieu of delivering shares of Common
Stock pursuant to Section
3(a)(i),
shall
deliver, within three (3) Trading Days of each applicable Conversion Date,
an
amount in cash equal to the product of the outstanding principal amount to
be
converted plus any interest due therein divided by the Conversion Price, chosen
by the Holder, and multiplied by the highest closing price of the stock from
date of the conversion notice till the date that such cash payment is
made.
Further,
if the Obligor shall not have delivered any cash due in respect of conversion
of
this Debenture or as payment of interest thereon by the fifth (5th)
Trading
Day after the Conversion Date, the Holder may, by notice to the Obligor, require
the Obligor to issue shares of Common Stock pursuant to Section
3(c),
except
that for such purpose the Conversion Price applicable thereto shall be the
lesser of the Conversion Price on the Conversion Date and the Conversion Price
on the date of such Holder demand. Any such shares will be subject to the
provisions of this Section.
(iii) The
Holder shall effect conversions by delivering to the Obligor a completed notice
in the form attached hereto as Exhibit A (a “Conversion
Notice”).
The
date on which a Conversion Notice is delivered is the “Conversion
Date.”
Unless
the Holder is converting the entire principal amount outstanding under this
Debenture, the Holder is not required to physically surrender this Debenture
to
the Obligor in order to effect conversions. Conversions hereunder shall have
the
effect of lowering the outstanding principal amount of this Debenture plus
all
accrued and unpaid interest thereon in an amount equal to the applicable
conversion. The Holder and the Obligor shall maintain records showing the
principal amount converted and the date of such conversions. In the event of
any
dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error.
(b) Certain
Conversion Restrictions.
(i) A
Holder
may not convert this Debenture or receive shares of Common Stock as payment
of
interest hereunder to the extent such conversion or receipt of such interest
payment would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon conversion of, and payment of interest on, this Debenture held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Obligor the number of shares of Common Stock it may hold at
the
time of a conversion hereunder, unless the conversion at issue would result
in
the issuance of shares of Common Stock in excess of 4.99% of the then
outstanding shares of Common Stock without regard to any other shares which
may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of this
Debenture is convertible shall be the responsibility and obligation of the
Holder. If the Holder has delivered a Conversion Notice for a principal amount
of this Debenture that, without regard to any other shares that the Holder
or
its affiliates may beneficially own, would result in the issuance in excess
of
the permitted amount hereunder, the Obligor shall notify the Holder of this
fact
and shall honor the conversion for the maximum principal amount permitted to
be
converted on such Conversion Date in accordance with the periods described
in
Section
3(a)(i)
and, at
the option of the Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future conversions
or
return such excess principal amount to the Holder. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than 65 days prior notice to the Obligor. Other Holders
shall be unaffected by any such waiver.
(c) Conversion
Price and Adjustments to Conversion Price.
(i) The
conversion price in effect on any Conversion Date shall be, at the sole option
of the Holder, equal to either (a) Six Cents ($0.06) (the “Fixed
Conversion Price”)
or (b)
ninety percent (90%) of the lowest the closing Bid Price of the Common
Stock during the thirty (30) trading days immediately preceding the Conversion
Date as quoted by Bloomberg, LP (the “Market
Conversion Price”).
The
Fixed Conversion Price and the Market Conversion Price are collectively referred
to as the “Conversion
Price.”
The
Conversion Price may be adjusted pursuant to the other terms of this Debenture.
Notwithstanding the restriction set for the in Section 2(b)(ii) the Holder
shall
have the absolute right to convert any or all of this Debenture at the Fixed
Conversion Price free of such restriction.
(ii) If
the
Obligor, at any time while this Debenture is outstanding, shall (a) pay a
stock dividend or otherwise make a distribution or distributions on shares
of
its Common Stock or any other equity or equity equivalent securities payable
in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
a
larger number of shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (d)
issue
by reclassification of shares of the Common Stock any shares of capital stock
of
the Obligor, then the Fixed Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after
such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If
the
Obligor, at any time while this Debenture is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to the Holder)
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Fixed Conversion Price, then the Fixed Conversion Price
shall be multiplied by a fraction, of which the denominator shall be the number
of shares of the Common Stock (excluding treasury shares, if any) outstanding
on
the date of issuance of such rights or warrants (plus the number of additional
shares of Common Stock offered for subscription or purchase), and of which
the
numerator shall be the number of shares of the Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants,
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at the Fixed Conversion Price. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants. However,
upon
the expiration of any such right, option or warrant to purchase shares of the
Common Stock the issuance of which resulted in an adjustment in the Fixed
Conversion Price pursuant to this Section, if any such right, option or warrant
shall expire and shall not have been exercised, the Fixed Conversion Price
shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Fixed Conversion Price made pursuant
to
the provisions of this Section after the issuance of such rights or warrants)
had the adjustment of the Fixed Conversion Price made upon the issuance of
such
rights, options or warrants been made on the basis of offering for subscription
or purchase only that number of shares of the Common Stock actually purchased
upon the exercise of such rights, options or warrants actually
exercised.
(iv) If
the
Obligor or any subsidiary thereof, as applicable, at any time while this
Debenture is outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that are convertible into or
exchangeable for shares of Common Stock (“Common
Stock Equivalents”)
entitling any Person to acquire shares of Common Stock, at a price per share
less than the Fixed Conversion Price (if the holder of the Common Stock or
Common Stock Equivalent so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion, exercise
or
exchange prices or otherwise, or due to warrants, options or rights per share
which is issued in connection with such issuance, be entitled to receive shares
of Common Stock at a price per share which is less than the Fixed Conversion
Price, such issuance shall be deemed to have occurred for less than the Fixed
Conversion Price), then, at the sole option of the Holder, the Fixed Conversion
Price shall be adjusted to mirror the conversion, exchange or purchase price
for
such Common Stock or Common Stock Equivalents (including any reset provisions
thereof) at issue. Such adjustment shall be made whenever such Common Stock
or
Common Stock Equivalents are issued. The Obligor shall notify the Holder in
writing, no later than one (1) business day following the issuance of any Common
Stock or Common Stock Equivalent subject to this Section, indicating therein
the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms. No adjustment under this Section
shall
be made as a result of issuances and exercises of options to purchase shares
of
Common Stock issued for compensatory purposes pursuant to any of the Obligor's
stock option or stock purchase plans.
(v) If
the
Obligor, at any time while this Debenture is outstanding, shall distribute
to
all holders of Common Stock (and not to the Holder) evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Fixed Conversion Price at which this
Debenture shall thereafter be convertible shall be determined by multiplying
the
Fixed Conversion Price in effect immediately prior to the record date fixed
for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Closing Bid Price determined
as
of the record date mentioned above, and of which the numerator shall be such
Closing Bid Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) In
case
of any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash
or
property, the Holder shall have the right thereafter to, at its option, (A)
convert the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect of this
Debenture into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of the Common Stock following
such reclassification or share exchange, and the Holder of this Debenture shall
be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock of the Obligor into which the then
outstanding principal amount, together with all accrued but unpaid interest
and
any other amounts then owing hereunder in respect of this Debenture could have
been converted immediately prior to such reclassification or share exchange
would have been entitled, or (B) require the Obligor to prepay the outstanding
principal amount of this Debenture, plus all interest and other amounts due
and
payable thereon. The entire prepayment price shall be paid in cash. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(vii) The
Obligor shall at all times reserve and keep available out of its authorized
Common Stock the full number of shares of Common Stock issuable upon conversion
of all outstanding amounts under this Debenture; and within three (3) Business
Days following the receipt by the Obligor of a Holder's notice that such minimum
number of Underlying Shares is not so reserved, the Obligor shall promptly
reserve a sufficient number of shares of Common Stock to comply with such
requirement.
(viii) All
calculations under this Section
3
shall be
rounded to the nearest $0.0001 or whole share.
(ix) Whenever
the Conversion Price is adjusted pursuant to Section
3
hereof,
the Obligor shall promptly mail to the Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement
of
the facts requiring such adjustment.
(x) If
(A)
the Obligor shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Obligor shall declare a special nonrecurring cash dividend on
or
a redemption of the Common Stock; (C) the Obligor shall authorize the granting
to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Obligor shall be required in connection
with
any reclassification of the Common Stock, any consolidation or merger to which
the Obligor is a party, any sale or transfer of all or substantially all of
the
assets of the Obligor, of any compulsory share exchange whereby the Common
Stock
is converted into other securities, cash or property; or (E) the Obligor shall
authorize the voluntary or involuntary dissolution, liquidation or winding
up of
the affairs of the Obligor; then, in each case, the Obligor shall cause to
be
filed at each office or agency maintained for the purpose of conversion of
this
Debenture, and shall cause to be mailed to the Holder at its last address as
it
shall appear upon the stock books of the Obligor, at least twenty (20) calendar
days prior to the applicable record or effective date hereinafter specified,
a
notice stating (x) the date on which a record is to be taken for the purpose
of
such dividend, distribution, redemption, rights or warrants, or if a record
is
not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange,
provided, that the failure to mail such notice or any defect therein or in
the
mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice. The Holder is entitled to convert this Debenture
during the 20-day calendar period commencing the date of such notice to the
effective date of the event triggering such notice.
(xi) In
case
of any (1) merger or consolidation of the Obligor or any subsidiary of the
Obligor with or into another Person, or (2) sale by the Obligor or any
subsidiary of the Obligor of more than one-half of the assets of the Obligor
in
one or a series of related transactions, a Holder shall have the right to (A)
exercise any rights under Section
2(b),
(B)
convert the aggregate amount of this Debenture then outstanding into the shares
of stock and other securities, cash and property receivable upon or deemed
to be
held by holders of Common Stock following such merger, consolidation or sale,
and such Holder shall be entitled upon such event or series of related events
to
receive such amount of securities, cash and property as the shares of Common
Stock into which such aggregate principal amount of this Debenture could have
been converted immediately prior to such merger, consolidation or sales would
have been entitled, or (C) in the case of a merger or consolidation, require
the
surviving entity to issue to the Holder a convertible Debenture with a principal
amount equal to the aggregate principal amount of this Debenture then held
by
such Holder, plus all accrued and unpaid interest and other amounts owing
thereon, which such newly issued convertible Debenture shall have terms
identical (including with respect to conversion) to the terms of this Debenture,
and shall be entitled to all of the rights and privileges of the Holder of
this
Debenture set forth herein and the agreements pursuant to which this Debentures
were issued. In the case of clause (C), the conversion price applicable for
the
newly issued shares of convertible preferred stock or convertible Debentures
shall be based upon the amount of securities, cash and property that each share
of Common Stock would receive in such transaction and the Conversion Price
in
effect immediately prior to the effectiveness or closing date for such
transaction. The terms of any such merger, sale or consolidation shall include
such terms so as to continue to give the Holder the right to receive the
securities, cash and property set forth in this Section upon any conversion
or
redemption following such event. This provision shall similarly apply to
successive such events.
(d) Other
Provisions.
(i) The
Obligor covenants that it will at all times reserve and keep available out
of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of this Debenture and payment of interest on this
Debenture, each as herein provided, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holder, not less
than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Obligor as to reservation of such shares set
forth in this Debenture) be issuable (taking into account the adjustments and
restrictions of Sections
2(b) and 3(c))
upon
the conversion of the outstanding principal amount of this Debenture and payment
of interest hereunder. The Obligor covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly and validly authorized,
issued and fully paid, nonassessable and, if the Underlying Shares Registration
Statement has been declared effective under the Securities Act, registered
for
public sale in accordance with such Underlying Shares Registration
Statement.
(ii) Upon
a
conversion hereunder the Obligor shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but may
if
otherwise permitted, make a cash payment in respect of any final fraction of
a
share based on the Closing Bid Price at such time. If the Obligor elects not,
or
is unable, to make such a cash payment, the Holder shall be entitled to receive,
in lieu of the final fraction of a share, one whole share of Common
Stock.
(iii) The
issuance of certificates for shares of the Common Stock on conversion of this
Debenture shall be made without charge to the Holder thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Obligor shall not be required to pay
any
tax that may be payable in respect of any transfer involved in the issuance
and
delivery of any such certificate upon conversion in a name other than that
of
the Holder of such Debenture so converted and the Obligor shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Obligor the amount of
such tax or shall have established to the satisfaction of the Obligor that
such
tax has been paid.
(iv) Nothing
herein shall limit a Holder's right to pursue actual damages or declare an
Event
of Default pursuant to Section
2
herein
for the Obligor 's failure to deliver certificates representing shares of Common
Stock upon conversion within the period specified herein and such Holder shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief, in each case without the need to post a bond or provide
other
security. The exercise of any such rights shall not prohibit the Holder from
seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
(v) In
addition to any other rights available to the Holder, if the Obligor fails
to
deliver to the Holder such certificate or certificates pursuant to Section
3(a)(i) by
the
fifth (5th)
Trading
Day after the Conversion Date, and if after such fifth (5th)
Trading
Day the Holder purchases (in an open market transaction or otherwise) 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 Obligor shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
of Common Stock that such Holder anticipated receiving from the conversion
at
issue multiplied by (2) the market price of the Common Stock at the time of
the
sale giving rise to such purchase obligation and (B) at the option of the
Holder, either reissue a Debenture in the principal amount equal to the
principal amount of the attempted conversion or deliver to the Holder the number
of shares of Common Stock that would have been issued had the Obligor timely
complied with its delivery requirements under Section
3(a)(i).
For
example, if the Holder purchases Common Stock having a total purchase price
of
$11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
with respect to which the market price of the Underlying Shares on the date
of
conversion was a total of $10,000 under clause (A) of the immediately preceding
sentence, the Obligor shall be required to pay the Holder $1,000. The Holder
shall provide the Obligor written notice indicating the amounts payable to
the
Holder in respect of the Buy-In.
Section
4. Notices.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms hereof must be in writing and will be deemed to have
been
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when
sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
(1) trading day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same.
The
addresses and facsimile numbers for such communications shall be:
|
If
to the Company, to:
|
Neomedia
Technologies, Inc.
|
| |
2201
Second Street, Suite #600
|
| |
Fort
Myers, FL 33901
|
| |
Attention:
Charles T. Jensen, President
|
| |
Telephone: (239)
337-3434
|
| |
Facsimile: (239)
337-3668
|
| |
|
|
With
a copy to:
|
Kirkpatrick
& Lockhart Nicholson Graham LLP
|
| |
201
South Biscayne Boulevard - Suite 2000
|
| |
Miami,
FL 33131-2399
|
| |
Attention: Clayton
E. Parker, Esq.
|
| |
Telephone: (305)
539-3300
|
| |
Facsimile: (305)
358-7095
|
|
If
to the Holder:
|
Cornell
Capital Partners, LP
|
| |
101
Hudson Street, Suite 3700
|
| |
Jersey
City, NJ 07303
|
| |
Attention: Mark
Angelo
|
| |
Telephone: (201)
985-8300
|
| |
Facsimile: (201)
985-8266
|
| |
|
|
With
a copy to:
|
David
Gonzalez, Esq.
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Telephone: (201)
985-8300
|
| |
Facsimile: (201)
985-8266
|
or
at
such other address and/or facsimile number and/or to the attention of such
other
person as the recipient party has specified by written notice given to each
other party three (3) business days prior to the effectiveness of such change.
Written confirmation of receipt (i) given by the recipient of such notice,
consent, waiver or other communication, (ii) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (iii)
provided by a nationally recognized overnight delivery service, shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from
a
nationally recognized overnight delivery service in accordance with clause
(i),
(ii) or (iii) above, respectively.
Section
5. Definitions.
For the
purposes hereof, the following terms shall have the following
meanings:
“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States or a day on which banking institutions are
authorized or required by law or other government action to close.
“Change
of Control Transaction”
means
the occurrence of (a) an acquisition after the date hereof by an individual
or
legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Obligor, by contract or otherwise) of in
excess of fifty percent (50%) of the voting securities of the Obligor (except
that the acquisition of voting securities by the Holder shall not constitute
a
Change of Control Transaction for purposes hereof), (b) a replacement at one
time or over time of more than one-half of the members of the board of directors
of the Obligor which is not approved by a majority of those individuals who
are
members of the board of directors on the date hereof (or by those individuals
who are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the members
of the board of directors who are members on the date hereof), (c) the merger,
consolidation or sale of fifty percent (50%) or more of the assets of the
Obligor or any subsidiary of the Obligor in one or a series of related
transactions with or into another entity, or (d) the execution by the Obligor
of
an agreement to which the Obligor is a party or by which it is bound, providing
for any of the events set forth above in (a), (b) or (c).
“Closing
Bid Price”
means
the price per share in the last reported trade of the Common Stock on the OTC
or
on the exchange which the Common Stock is then listed as quoted by Bloomberg,
LP.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock, par value $0.01, of the Obligor and stock of any other class
into which such shares may hereafter be changed or reclassified.
“Conversion
Date”
shall
mean the date upon which the Holder gives the Obligor notice of their intention
to effectuate a conversion of this Debenture into shares of the Company’s Common
Stock as outlined herein.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Original
Issue Date”
shall
mean the date of the first issuance of this Debenture regardless of the number
of transfers and regardless of the number of instruments, which may be issued
to
evidence such Debenture.
“Person”
means
a
corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Trading
Day”
means
a
day on which the shares of Common Stock are quoted on the OTC or quoted or
traded on such Subsequent Market on which the shares of Common Stock are then
quoted or listed; provided, that in the event that the shares of Common Stock
are not listed or quoted, then Trading Day shall mean a Business
Day.
“Transaction
Documents”
means
the Securities Purchase Agreement or any other agreement delivered in connection
with the Securities Purchase Agreement, including, without limitation, the
Security Agreement, the Irrevocable Transfer Agent Instructions, the
Registration Rights Agreement, and the Warrants.
“Underlying
Shares”
means
the shares of Common Stock issuable upon conversion of this Debenture or as
payment of interest in accordance with the terms hereof.
“Underlying
Shares Registration Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering among other things the resale of the Underlying
Shares and naming the Holder as a “selling stockholder” thereunder.
Section
6. Except
as
expressly provided herein, no provision of this Debenture shall alter or impair
the obligations of the Obligor, which are absolute and unconditional, to pay
the
principal of, interest and other charges (if any) on, this Debenture at the
time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Obligor. This Debenture ranks pari
passu
with all other Debentures now or hereafter issued under the terms set forth
herein. As long as this Debenture is outstanding, the Obligor shall not and
shall cause their subsidiaries not to, without the consent of the Holder, (i)
amend its certificate of incorporation, bylaws or other charter documents so
as
to adversely affect any rights of the Holder; (ii) repay, repurchase or offer
to
repay, repurchase or otherwise acquire shares of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or required under the Transaction Documents; or (iii) enter into any agreement
with respect to any of the foregoing.
Section
7. This
Debenture shall not entitle the Holder to any of the rights of a stockholder
of
the Obligor, including without limitation, the right to vote, to receive
dividends and other distributions, or to receive any notice of, or to attend,
meetings of stockholders or any other proceedings of the Obligor, unless and
to
the extent converted into shares of Common Stock in accordance with the terms
hereof.
Section
8. If
this
Debenture is mutilated, lost, stolen or destroyed, the Obligor shall execute
and
deliver, in exchange and substitution for and upon cancellation of the mutilated
Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
Debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Debenture, and of the ownership hereof,
and
indemnity, if requested, all reasonably satisfactory to the
Obligor.
Section
9. No
indebtedness of the Obligor is senior to this Debenture in right of payment,
whether with respect to interest, damages or upon liquidation or dissolution
or
otherwise. Without the Holder’s consent, the Obligor will not and will not
permit any of their subsidiaries 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 there from that is senior in any
respect to the obligations of the Obligor under this Debenture.
Section
10. This
Debenture shall be governed by and construed in accordance with the laws of
the
State of New Jersey, without giving effect to conflicts of laws thereof. Each
of
the parties consents to the jurisdiction of the Superior Courts of the State
of
New Jersey sitting in Hudson County, New Jersey and the U.S. District Court
for the District of New Jersey sitting in Newark, New Jersey in connection
with
any dispute arising under this Debenture and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on
forum non conveniens
to the
bringing of any such proceeding in such jurisdictions.
Section
11. If
the
Obligor fails to strictly comply with the terms of this Debenture, then the
Obligor shall reimburse the Holder promptly for all fees, costs and expenses,
including, without limitation, attorneys’ fees and expenses incurred by the
Holder in any action in connection with this Debenture, including, without
limitation, those incurred: (i) during any workout, attempted workout, and/or
in
connection with the rendering of legal advice as to the Holder’s rights,
remedies and obligations, (ii) collecting any sums which become due to the
Holder, (iii) defending or prosecuting any proceeding or any counterclaim to
any
proceeding or appeal; or (iv) the protection, preservation or enforcement of
any
rights or remedies of the Holder.
Section
12. Any
waiver by the Holder of a breach of any provision of this Debenture shall not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Debenture. The failure of the
Holder to insist upon strict adherence to any term of this Debenture on one
or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other
term
of this Debenture. Any waiver must be in writing.
Section
13. If
any
provision of this Debenture is invalid, illegal or unenforceable, the balance
of
this Debenture shall remain in effect, and if any provision is inapplicable
to
any person or circumstance, it shall nevertheless remain applicable to all
other
persons and circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder shall violate applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The Obligor covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Obligor from paying all or any portion of the principal of or
interest on this Debenture as contemplated herein, wherever enacted, now or
at
any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Obligor (to the extent it may lawfully
do
so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded
the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been
enacted.
Section
14. Whenever
any payment or other obligation hereunder shall be due on a day other than
a
Business Day, such payment shall be made on the next succeeding Business
Day.
Section
16. So
long
as no Event of Default exists, solely with regard cash payments made by the
Company to pay any and all amounts due and outstanding to the Holder, unless
otherwise specified by the Holder, any cash payments made by the Company to
the
Holder shall first apply all amounts of principal and interest outstanding
pursuant the Series C Preferred shares on February 17, 2006 (“Series
C Preferred”).
Section
15. THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR
THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.
[REMAINDER
OF PAGE INTENTIONLLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
Obligor has caused this Secured Convertible Debenture to be duly executed by
a
duly authorized officer as of the date set forth above.
| |
|
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
Dodge |
| |
Name:
David Dodge
|
| |
Title:
CFO
|
EXHIBIT
“A”
NOTICE
OF CONVERSION
(To
be executed by the Holder in order to convert the
Debenture)
The
undersigned hereby irrevocably elects to convert $___________________________
of
the
principal amount of the above Debenture into Shares of Common Stock of Neomedia
Technologies, Inc., according to the conditions stated therein, as of the
Conversion Date written below.
|
Conversion
Date:
|
|
|
|
Applicable
Conversion Price:
|
|
|
|
Signature:
|
|
|
|
Name:
|
|
|
|
Address:
|
|
|
|
Amount
to be converted:
|
|
$
|
|
Amount
of Debenture unconverted:
|
|
$
|
|
Conversion
Price per share:
|
|
$
|
|
Number
of shares of Common Stock to be issued:
|
|
|
|
Please
issue the shares of Common Stock in the
following name and to the
following address:
|
|
|
|
Issue
to:
|
|
|
|
Authorized
Signature:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
|
Phone
Number:
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|
Broker
DTC Participant Code:
|
|
|
|
Account
Number:
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|
|
IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS
December
29, 2006
|
American
Stock Transfer & Trust Company
|
|
6201
15th
Avenue, 3rd
Floor
|
|
Brooklyn,
NY 11219
|
|
|
RE: |
NEOMEDIA
TECHNOLOGIES, INC.
|
Ladies
and Gentlemen:
Reference
is made to that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”)
of
even date herewith by and between Neomedia Technologies, Inc, a Delaware
corporation (the “Company”),
and
the Buyers set forth on Schedule I attached thereto (collectively the
“Buyers”).
Pursuant to the Securities Purchase Agreement, the Company shall sell to the
Buyers, and the Buyers shall purchase from the Company, convertible debentures
(collectively, the “Debentures”)
in the
aggregate principal amount of Two Million Five Hundred Thousand Dollars
($2,500,000), plus accrued interest, which are convertible into shares of the
Company’s common stock, par value $.01 per share (the “Common
Stock”),
at
the Buyers’ discretion. The Company has also issued to the Buyers warrants to
purchase up to 42,000,000 shares of Common Stock, at the Buyers’ discretion (the
“Warrant”).
These
instructions relate to the following stock or proposed stock issuances or
transfers:
|
|
1. |
Shares
of Common Stock to be issued to the Buyers upon conversion of the
Debentures (“Conversion
Shares”)
plus the shares of Common Stock to be issued to the Buyers upon conversion
of accrued interest and liquidated damages into Common Stock (the
“Interest
Shares”).
|
|
|
2. |
Up
to 42,000,000 shares of Common Stock to be issued to the Buyers upon
exercise of the Warrant (the “Warrant
Shares”).
|
This
letter shall serve as our irrevocable authorization and direction to American
Stock Transfer & Trust Company (the “Transfer
Agent”)
to do
the following:
| 1. |
Conversion
Shares, Warrant Shares and Interest Shares.
|
| a. |
Instructions
Applicable to Transfer Agent.
With respect to the Conversion Shares, Warrant Shares and the Interest
Shares, the Transfer Agent shall issue the Conversion Shares, Warrant
Shares and the Interest Shares to the Buyers from time to time upon
delivery to the Transfer Agent of a properly completed and duly executed
Conversion Notice (the “Conversion
Notice”)
in the form attached hereto as Exhibit A to the Debentures, or a
properly
completed and duly executed Exercise Notice (the “Exercise
Notice”)
in the form attached as Exhibit A to the Warrant, delivered to the
Transfer Agent by the Company or on behalf of the Company by David
Gonzalez, Esq. as escrow agent (the “Escrow
Agent”).
Upon receipt of a Conversion Notice or an Exercise Notice, the Transfer
Agent shall, as soon as reasonably practical thereafter, (i) issue
and
surrender to a common carrier for overnight delivery to the address
as
specified in the Conversion Notice or the Exercise Notice, a certificate,
registered in the name of the Buyer or its designees, for the number
of
shares of Common Stock to which the Buyer shall be entitled as set
forth
in the Conversion Notice or Exercise Notice, or (ii) provided the
Transfer
Agent is participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the
Buyers, credit such aggregate number of shares of Common Stock to
which
the Buyers shall be entitled to the Buyer’s or their designees’ balance
account with DTC through its Deposit Withdrawal At
Custodian (“DWAC”)
system, provided that the Buyer causes its bank or broker to initiate
the
DWAC transaction, and further provided that a certificate representing
such shares of Common Stock would not be required to bear a legend
restricting transfer.
|
| b. |
The
Company hereby confirms to the Transfer Agent and the Buyers that
certificates representing the Conversion Shares, Warrant Shares and
Interest Shares shall not bear any legend restricting transfer and
should
not be subject to any stop-transfer restrictions and shall otherwise
be
freely transferable on the books and records of the Company; provided
that Buyers
confirm to the Transfer Agent and the Company that the Conversion
Shares,
Warrant Shares and Interest Shares have been or will be sold only
pursuant
to an effective registration statement for such securities under
the
Securities Act of 1933, as amended (the “Act”), and that the Buyers have
complied, or will comply, with all applicable prospectus delivery
requirements;
and
further provided that counsel to the Company delivers (i) the Notice
of
Effectiveness set forth in Exhibit
I
attached hereto and (ii) an opinion of counsel in the form set forth
in
Exhibit
II
attached hereto, and that if the Conversion Shares, Warrant Shares
and the
Interest Shares are not registered for sale under the Act, then the
certificates for the Conversion Shares, Warrant Shares and Interest
Shares
shall bear the following legend:
|
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID
ACT.”
| c. |
In
the event that counsel to the Company fails or refuses to render
an
opinion as required to issue the Conversion Shares,
the Warrant Shares or the Interest Shares in
accordance with the preceding paragraph (either with or without
restrictive legends, as applicable), then the Company irrevocably
and
expressly authorizes counsel to the Buyer to render such opinion.
The
Transfer Agent shall accept and be entitled to rely on such opinion
for
the purposes of issuing the Conversion Shares, the Warrant Shares
or the
Interest Shares.
|
| d. |
Upon
the Company’s or the Escrow Agent’s receipt of a properly completed
Conversion Notice or Exercise Notice (along with evidence that the
Aggregate Exercise Price (as defined in the Warrant) has been delivered
to
the Company), the Company or the Escrow Agent, as the case may be,
shall,
within one (1) Trading Day thereafter, send to the Transfer Agent
the
Conversion Notice or Exercise Notice, as the case may be, which shall
constitute an irrevocable instruction to the Transfer Agent to process
such Conversion Notice or Exercise Notice in accordance with the
terms of
these instructions. For purposes hereof “Trading
Day”
shall mean any day on which the Nasdaq Market is open for customary
trading.
|
| a. |
The
Company hereby irrevocably appoints the Escrow Agent as a duly authorized
agent of the Company for the purposes of authorizing the Transfer
Agent to
process issuances and transfers specifically contemplated
herein.
|
| b. |
The
Transfer Agent shall rely exclusively on the Conversion Notice or
the
Exercise Notice, and shall have no liability for relying on such
instructions. Any Conversion Notice or Exercise Notice delivered
hereunder
shall constitute an irrevocable instruction to the Transfer Agent
to
process such notice or notices in accordance with the terms thereof.
Such
notice or notices may be transmitted to the Transfer Agent by facsimile
or
any commercially reasonable method.
|
| c. |
The
Company hereby confirms to the Transfer Agent and the Buyers that
no
instructions other than as contemplated herein will be given to Transfer
Agent by the Company with respect to the matters referenced herein.
The
Company hereby authorizes the Transfer Agent, and the Transfer Agent
shall
be obligated, to disregard any contrary instructions received by
or on
behalf of the Company.
|
Certain
Notice Regarding the Escrow Agent.
The
Company and the Transfer Agent hereby acknowledge that the Escrow Agent is
general counsel to the Buyers, a partner of the general partner of the Buyers
and counsel to the Buyers in connection with the transactions contemplated
and
referred herein. The Company and the Transfer Agent agree that in the event
of
any dispute arising in connection with this Agreement or otherwise in connection
with any transaction or agreement contemplated and referred herein, the Escrow
Agent shall be permitted to continue to represent the Buyers and neither the
Company nor the Transfer Agent will seek to disqualify such
counsel.
The
Company hereby agrees that it shall not replace the Transfer Agent as the
Company’s transfer agent without the prior written consent of the
Buyers.
The
Company agrees that in the event that the Transfer Agent resigns as the
Company’s transfer agent the Company shall engage a suitable replacement
transfer agent that will agree to serve as transfer agent and to be bound by
the
terms and conditions of these Irrevocable Transfer Agent Instructions within
5
business days from the effectiveness of such resignation.
The
Company acknowledges that the Buyers are relying on the representations and
covenants made by the Company hereunder and are a material inducement to the
Buyers purchasing convertible debentures under the Securities Purchase
Agreement. The Company further acknowledges that without such representations
and covenants of the Company made hereunder, the Buyers would not purchase
the
Debentures.
The
Company specifically acknowledges and agrees that in the event of a breach
or
threatened breach by a party hereto of any provision hereof, the Buyers will
be
irreparably damaged and that damages at law would be an inadequate remedy if
these Irrevocable Transfer Agent Instructions were not specifically enforced.
Therefore, in the event of a breach or threatened breach by the Company,
including, without limitation, the attempted termination of the agency
relationship created by this instrument, the Buyers shall be entitled, in
addition to all other rights or remedies, to an injunction restraining such
breach, without being required to show any actual damage or to post any bond
or
other security, and/or to a decree for specific performance of the provisions
of
these Irrevocable Transfer Agent Instructions.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties have caused this letter agreement regarding Irrevocable Transfer Agent
Instructions to be duly executed and delivered as of the date first written
above.
| |
|
|
| |
COMPANY:
|
| |
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
Dodge |
| |
Name:
David Dodge
|
| |
Title:
CFO
|
| |
|
|
|
|
|
| |
|
/s/
David Gonzalez |
| |
David
Gonzalez, Esq.
|
| |
|
| American Stock Transfer &
Trust Company |
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| By: |
/s/ Herbert
J. Lemmer |
|
|
|
| Name: |
Herbert
J. Lemmer |
|
|
|
| Title: |
Vice
President |
|
|
|
Execution
Copy
SCHEDULE
I
SCHEDULE
OF BUYERS
|
Name
|
|
Signature
|
|
Address/Facsimile
Number
of Buyers
|
| |
|
|
|
|
|
Cornell
Capital Partners, LP
|
|
By: Yorkville
Advisors, LLC
|
|
101
Hudson Street - Suite 3700
|
| |
|
Its: General
Partner
|
|
Jersey
City, NJ 07303
|
| |
|
|
|
Facsimile:
(201)
985-8266
|
| |
|
|
|
|
| |
|
By:
______________________________
|
|
|
| |
|
Name: Mark
Angelo
|
|
|
| |
|
Its: Portfolio
Manager
|
|
|
| |
|
|
|
|
Execution
Copy
EXHIBIT
I
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
_________,
200_
____________
Attention:
| RE: |
NEOMEDIA
TECHNOLOGIES, INC.
|
Ladies
and Gentlemen:
We
are
counsel to Neomedia Technologies, Inc., (the “Company”),
and
have represented the Company in connection with that certain Securities Purchase
Agreement, dated as of ________________ ____, 200_ (the “Securities
Purchase Agreement”),
entered into by and among the Company and the Buyers set forth on Schedule
I
attached thereto (collectively the “Buyers”)
pursuant to which the Company has agreed to sell to the Buyers up to $5,000,000
of secured convertible debentures, which shall be convertible into shares (the
“Conversion
Shares”)
of the
Company’s common stock, par value $.01 per share (the “Common
Stock”),
in
accordance with the terms of the Securities Purchase Agreement. Pursuant to
the
Securities Purchase Agreement, the Company also has entered into a Registration
Rights Agreement, dated as of ______________ ___, 200_, with the Buyers (the
“Investor
Registration Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the
Conversion Shares under the Securities Act of 1933, as amended (the
“1933
Act”).
In
connection with the Company’s obligations under the Securities Purchase
Agreement and the Registration Rights Agreement, on _______, 200_, the Company
filed a Registration Statement (File No. ___-_________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the sale of the Conversion Shares.
In
connection with the foregoing, we advise the Transfer Agent that a member of
the
SEC’s staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at ____ P.M.
on __________, 200_ and we have no knowledge that any stop order suspending
its
effectiveness has been issued or that any proceedings for that purpose are
pending before, or threatened by, the SEC and the Conversion Shares are
available for sale under the 1933 Act pursuant to the Registration
Statement.
The
statement made herein that “we have no knowledge” is based solely on information
actually known to those attorneys currently practicing with this firm and
engaged in the representation of the Company in connection with the transactions
contem-plated by the Securities Purchase Agreement.
Execution
Copy
EXHIBIT
II
TO
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM
OF OPINION
VIA
FACSIMILE AND REGULAR MAIL
American
Stock Transfer and Trust
6201
15th
Avenue,
3rd
Floor
Brooklyn,
NY 11212
|
|
RE: |
NEOMEDIA
TECHNOLOGIES, INC.
|
Ladies
and Gentlemen:
We
have
acted as counsel to Neomedia Technologies, Inc., a Delaware corporation (the
“Company”),
in
connection with the registration under the Securities Act of 1933, as amended
(the “Act”), of an offering of up to ____________ shares of the Company’s common
stock, par value $0.001 per share (the “Common Stock”), issued or to be issued
to the selling stockholders (the “Selling Stockholders”) listed in the selling
stockholders table at page __ of the final prospectus, a copy of which is
attached hereto as Exhibit A. We understand that the certificates representing
the Common Stock currently contain a legend (the “Securities Act Legend”)
stating that the Common Stock represented by such certificates may not be sold
or transferred without registration under the Act.
The
sale
of the Common Stock by the Selling Stockholders has been registered under the
Act pursuant to a Registration Statement on Form S-1 (SEC File No. 333-______),
filed with the Securities and Exchange Commission (the “Commission”) on ________
__, 200_ (the “Registration Statement”). The Registration Statement was declared
effective under the Act by the Commission on ________ __, 200_. Therefore,
the
Common Stock identified in the Registration Statement, including those shares
issued upon exercise of the Convertible Debentures and Warrants referenced
in
Exhibit A, may, upon receipt of confirmation from the Selling Stockholder that
the Common Stock has been or will be sold only pursuant to the Registration
Statement and that the Selling Stockholder has complied, or will comply, with
all applicable prospectus delivery requirements, be issued or reissued, as
applicable, without bearing the Securities Act Legend.
Prospectus
“A”
WARRANT
THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
NEOMEDIA
TECHNOLOGIES, INC.
Warrant
To Purchase Common Stock
| Warrant No.: |
CCP-001
|
Number
of Shares: 42,000,000
|
| |
|
|
| Date of
Reissuance: |
December
29, 2006
|
|
Neomedia
Technologies, Inc., a Delaware corporation (the “Company”),
hereby certifies that, for good and valuable consideration paid, the receipt
and
sufficiency of which are hereby acknowledged, Cornell
Capital Partners, LP
(“Cornell”),
the
registered holder hereof or its permitted assigns, is entitled, subject to
the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after the date hereof, but not after
11:59 P.M. Eastern Time on the Expiration Date (as defined
herein) Forty Two Million (42,000,000) fully paid and nonassessable
shares of Common Stock (as defined herein) of the Company (the
“Warrant
Shares”) at
the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the holder
be
entitled to exercise this Warrant for a number of Warrant Shares in excess
of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by
the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) days of the
Expiration Date (however, such restriction may be waived by Cornell (but only
as
to itself and not to any other holder) upon not less than sixty-five (65)
days prior notice to the Company). For purposes of the foregoing proviso, the
aggregate number of shares of Common Stock beneficially owned by the holder
and
its affiliates shall include the number of shares of Common Stock issuable
upon
exercise of this Warrant with respect to which the determination of such proviso
is being made, but shall exclude shares of Common Stock which would be issuable
upon (i) exercise of the remaining, unexercised Warrants beneficially owned
by the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For purposes of
this Warrant, in determining the number of outstanding shares of Common Stock
a
holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company’s most recent Form 10-QSB or Form 10-KSB, as the case
may be, (2) a more recent public announcement by the Company or
(3) any other notice by the Company or its transfer agent setting forth the
number of shares of Common Stock outstanding. Upon the written request of any
holder, the Company shall promptly, but in no event later than one
(1) Business Day following the receipt of such notice, confirm in writing
to any such holder the number of shares of Common Stock then outstanding. In
any
case, the number of outstanding shares of Common Stock shall be determined
after
giving effect to the exercise of Warrants (as defined below) by such holder
and its affiliates since the date as of which such number of outstanding shares
of Common Stock was reported.
Section
1.
(a) This
Warrant is the common stock purchase warrant (the “Warrant”) issued
pursuant to the Securities Purchase Agreement (the “Securities
Purchase Agreement”) dated
the date hereof between the Company and the Buyers listed on Schedule I
thereto.
(b) Definitions.
The
following words and terms as used in this Warrant shall have the following
meanings:
(i) “Approved
Stock Plan”
means
any employee benefit plan which has been approved by the Board of Directors
of
the Company, pursuant to which the Company’s securities may be issued to any
employee, officer or director for services provided to the Company.
(ii) “Business
Day”
means
any day other than Saturday, Sunday or other day on which commercial banks
in
the City of New York are authorized or required by law to remain
closed.
(iii) “Closing
Bid Price”
means
the closing bid price of Common Stock as quoted on the Principal Market (as
reported by Bloomberg Financial Markets (“Bloomberg”) through
its “Volume at Price” function).
(iv) “Common
Stock”
means
(i) the Company’s common stock, par value $0.01 per share, and
(ii) any capital stock into which such Common Stock shall have been changed
or any capital stock resulting from a reclassification of such Common
Stock.
(v) “Event
of Default”
means
an event of default under the Securities Purchase Agreement or the Convertible
Debentures issued in connection therewith.
(vi) “Excluded
Securities”
means,
provided such security is issued at a price which is greater than or equal to
the arithmetic average of the Closing Bid Prices of the Common Stock for the
ten
(10) consecutive trading days immediately preceding the date of issuance,
any of the following: (a) any issuance by the Company of securities in
connection with a strategic partnership or a joint venture (the primary purpose
of which is not to raise equity capital), (b) any issuance by the Company
of securities as consideration for a merger or consolidation or the acquisition
of a business, product, license, or other assets of another person or entity
and
(c) options to purchase shares of Common Stock, provided (I) such
options are issued after the date of this Warrant to employees or directors
of
the Company and (II) the exercise price of such options is not less than
the Closing Bid Price of the Common Stock on the date of issuance of such
option.
(vii) “Expiration
Date”
means
the date five (5) years from the Issuance Date of this Warrant or, if such
date falls on a Saturday, Sunday or other day on which banks are required or
authorized to be closed in the City of New York or the State of New York or
on
which trading does not take place on the Principal Exchange or automated
quotation system on which the Common Stock is traded (a “Holiday”),
the
next date that is not a Holiday.
(viii) “Issuance
Date”
means
the date hereof.
(ix) “Options”
means
any rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
(x) “Other
Securities”
means
(i) those options and warrants of the Company issued prior to, and
outstanding on, the Issuance Date of this Warrant, (ii) the shares of
Common Stock issuable on exercise of such options and warrants, provided such
options and warrants are not amended after the Issuance Date of this Warrant,
(iii) the shares of Common Stock issuable upon exercise of this Warrant,
(iv) shares of Common Stock paid upon conversion of the convertible
preferred stock paid pursuant to the Amended and Restated Investment Agreement
and (v) any shares of Common Stock issued in connection with any
acquisition of the stock or assets of another entity which have been approved
by
the Board of Directors of the Company.
(xi) “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(xii) “Principal
Market”
means
the New York Stock Exchange, the American Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market, whichever is at the time the principal
trading exchange or market for such security, or the over-the-counter market
on
the electronic bulletin board for such security as reported by Bloomberg or,
if
no bid or sale information is reported for such security by Bloomberg, then
the
average of the bid prices of each of the market makers for such security as
reported in the “pink sheets” by the National Quotation Bureau,
Inc.
(xiii) “Securities
Act”
means
the Securities Act of 1933, as amended.
(xiv) “Warrant”
means
this Warrant and all Warrants issued in exchange, transfer or replacement
thereof.
(xv) “Warrant
Exercise Price”
shall
be $0.06 or as subsequently adjusted as provided in Section 8 hereof.
(xvi) “Warrant
Shares”
means
the shares of Common Stock issuable at any time upon exercise of this Warrant.
(c) Other
Definitional Provisions.
(i) Except
as
otherwise specified herein, all references herein (A) to the Company shall
be deemed to include the Company’s successors and (B) to any applicable law
defined or referred to herein shall be deemed references to such applicable
law
as the same may have been or may be amended or supplemented from time to time.
(ii) When
used
in this Warrant, the words “herein”,
“hereof”,
and
“hereunder”
and
words of similar import, shall refer to this Warrant as a whole and not to
any
provision of this Warrant, and the words “Section”,
“Schedule”,
and
“Exhibit”
shall
refer to Sections of, and Schedules and Exhibits to, this Warrant unless
otherwise specified.
(iii) Whenever
the context so requires, the neuter gender includes the masculine or feminine,
and the singular number includes the plural, and vice versa.
Section
2. Exercise
of Warrant.
(a) Subject
to the terms and conditions hereof, this Warrant may be exercised by the holder
hereof then registered on the books of the Company, pro rata as hereinafter
provided, at any time on any Business Day on or after the opening of business
on
such Business Day, commencing with the first day after the date hereof, and
prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by
delivery of a written notice, in the form of the subscription notice attached
as
Exhibit
A
hereto
(the “Exercise
Notice”),
of
such holder’s election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, payment to the Company of an
amount equal to the Warrant Exercise Price(s) applicable to the Warrant
Shares being purchased, multiplied by the number of Warrant Shares (at the
applicable Warrant Exercise Price) as to which this Warrant is being
exercised (plus any applicable issue or transfer taxes) (the
“Aggregate
Exercise Price”) in
cash or wire transfer of immediately available funds and the surrender of this
Warrant (or an indemnification undertaking with respect to this Warrant in
the
case of its loss, theft or destruction) to a common carrier for overnight
delivery to the Company as soon as practicable following such date
(“Cash
Basis”) or
(ii) if at the time of exercise, the Warrant Shares are not subject to an
effective registration statement or if an Event of Default has occurred, by
delivering an Exercise Notice and in lieu of making payment of the Aggregate
Exercise Price in cash or wire transfer, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (the “Cashless
Exercise”):
|
Net
Number
|
=
|
(A
x B) - (A x C)
|
| |
|
B
|
For
purposes of the foregoing formula:
|
A
|
=
|
the
total number of Warrant Shares with respect to which this Warrant
is then
being exercised.
|
| |
|
|
|
B
|
=
|
the
Closing Bid Price of the Common Stock on the date of exercise of
the
Warrant.
|
| |
|
|
|
C
|
=
|
the
Warrant Exercise Price then in effect for the applicable Warrant
Shares at
the time of such exercise.
|
In
the
event of any exercise of the rights represented by this Warrant in compliance
with this Section 2, the Company shall on or before the
fifth (5th) Business Day following the date of receipt of the Exercise
Notice, the Aggregate Exercise Price and this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) and the receipt of the representations of the holder specified
in Section 6 hereof, if requested by the Company (the “Exercise
Delivery Documents”),
and
if the Common Stock is DTC eligible, credit such aggregate 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; provided, however,
if the holder who submitted the Exercise Notice requested physical delivery
of
any or all of the Warrant Shares, or, if the Common Stock is not DTC eligible
then the Company shall, on or before the fifth (5th) Business
Day following receipt of the Exercise Delivery Documents, issue and surrender
to
a common carrier for overnight delivery to the address specified in the Exercise
Notice, a certificate, registered in the name of the holder, for the number
of
shares of Common Stock to which the holder shall be entitled pursuant to such
request. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (i) or (ii) above the holder of this
Warrant shall be deemed for all corporate purposes to have become the holder
of
record of the Warrant Shares with respect to which this Warrant has been
exercised. In the case of a dispute as to the determination of the Warrant
Exercise Price, the Closing Bid Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the holder the number of
Warrant Shares that is not disputed and shall submit the disputed determinations
or arithmetic calculations to the holder via facsimile within one
(1) Business Day of receipt of the holder’s Exercise Notice.
(b) If
the
holder and the Company are unable to agree upon the determination of the Warrant
Exercise Price or arithmetic calculation of the Warrant Shares within one
(1) day of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall immediately submit via facsimile
(i) the disputed determination of the Warrant Exercise Price or the Closing
Bid Price to an independent, reputable investment banking firm or (ii) the
disputed arithmetic calculation of the Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or
the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment banking firm’s or accountant’s determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(c) Unless
the rights represented by this Warrant shall have expired or shall have been
fully exercised, the Company shall, as soon as practicable and in no event
later
than five (5) Business Days after any exercise and at its own expense,
issue a new Warrant identical in all respects to this Warrant exercised except
it shall represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised.
(d) No
fractional Warrant Shares are to be issued upon any pro rata exercise of this
Warrant, but rather the number of Warrant Shares issued upon such exercise
of
this Warrant shall be rounded up or down to the nearest whole
number.
(e) If
the
Company or its Transfer Agent shall fail for any reason or for no reason to
issue to the holder within ten (10) days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which
the
holder is entitled or to credit the holder’s balance account with The Depository
Trust Company for such number of Warrant Shares to which the holder is entitled
upon the holder’s exercise of this Warrant, the Company shall, in addition to
any other remedies under this Warrant or the Placement Agent Agreement or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day the issuance of such certificate for Warrant Shares is not
timely effected an amount equal to 0.025% of the product of (A) the sum of
the number of Warrant Shares not issued to the holder on a timely basis and
to
which the holder is entitled, and (B) the Closing Bid Price of the Common
Stock for the trading day immediately preceding the last possible date which
the
Company could have issued such Common Stock to the holder without violating
this
Section 2.
(f) If
within
ten (10) days after the Company’s receipt of the Exercise Delivery
Documents, the Company fails to deliver a new Warrant to the holder for the
number of Warrant Shares to which such holder is entitled pursuant to Section
2
hereof, then, in addition to any other available remedies under this Warrant
or
the Placement Agent Agreement, or otherwise available to such holder, the
Company shall pay as additional damages in cash to such holder on each day
after
such tenth (10th) day
that such delivery of such new Warrant is not timely effected in an amount
equal
to 0.25% of the product of (A) the number of Warrant Shares represented by
the portion of this Warrant which is not being exercised and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Warrant to
the
holder without violating this Section 2.
(g)
Forced
Exercise.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than Sixteen
Cents ($0.16) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
Section
3. Covenants
as to Common Stock.
The
Company hereby covenants and agrees as follows:
(a) This
Warrant is, and any Warrants issued in substitution for or replacement of this
Warrant will upon issuance be, duly authorized and validly issued.
(b) All
Warrant Shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
(c) During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved at least one hundred
percent (100%) of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price. If at any time the Company does not have a sufficient
number of shares of Common Stock authorized and available, then the Company
shall call and hold a special meeting of its stockholders within
sixty (60) days of that time for the sole purpose of increasing the
number of authorized shares of Common Stock.
(d) If
at any
time after the date hereof the Company shall file a registration statement,
the
Company shall include the Warrant Shares issuable to the holder, pursuant to
the
terms of this Warrant and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Warrant Shares from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case
may
be, and shall maintain such listing of, any other shares of capital stock of
the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(e) The
Company will not, by amendment of its Articles of Incorporation 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 to be observed or performed by
it
hereunder, but will at all times in good faith assist in the carrying out of
all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this Warrant. The Company
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Warrant Exercise Price then in effect,
and (ii) will take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this
Warrant.
(f) This
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets.
Section
4. Taxes.
The
Company shall pay any and all taxes, except any applicable withholding, which
may be payable with respect to the issuance and delivery of Warrant Shares
upon
exercise of this Warrant.
Section
5. Warrant
Holder Not Deemed a Stockholder.
Except
as otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of shares
of capital stock of the Company for any purpose, nor shall anything contained
in
this Warrant be construed to confer upon the holder hereof, as such, any of
the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of
this
Warrant. In addition, nothing contained in this Warrant shall be construed
as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder
of
this Warrant with copies of the same notices and other information given to
the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section
6. Representations
of Holder.
The
holder of this Warrant, by the acceptance hereof, represents that it is
acquiring this Warrant and the Warrant Shares for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution of this Warrant or the Warrant Shares, except pursuant
to
sales registered or exempted under the Securities Act; provided, however, that
by making the representations herein, the holder does not agree to hold this
Warrant or any of the Warrant Shares for any minimum or other specific term
and
reserves the right to dispose of this Warrant and the Warrant Shares at any
time
in accordance with or pursuant to a registration statement or an exemption
under
the Securities Act. The holder of this Warrant further represents, by acceptance
hereof, that, as of this date, such holder is an “accredited investor” as such
term is defined in Rule 501(a)(1) of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act (an “Accredited
Investor”).
Upon
exercise of this Warrant the holder shall, if requested by the Company, confirm
in writing, in a form satisfactory to the Company, that the Warrant Shares
so
purchased are being acquired solely for the holder’s own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale and that such holder is an Accredited Investor. If such
holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder’s exercise of this Warrant
that the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of this Warrant shall not violate any United States or state
securities laws.
Section
7. Ownership
and Transfer.
(a) The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof),
a
register for this Warrant, in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as
the
name and address of each transferee. The Company may treat the person in whose
name any Warrant is registered on the register as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this
Warrant.
Section
8. Adjustment
of Warrant Exercise Price and Number of Shares.
The
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as
follows:
(a) Adjustment
of Warrant Exercise Price and Number of Shares upon Issuance of Common
Stock.
If and
whenever on or after the Issuance Date of this Warrant, the Company issues
or
sells, or is deemed to have issued or sold, any shares of Common
Stock (other than (i) Excluded Securities and (ii) shares of
Common Stock which are issued or deemed to have been issued by the Company
in
connection with an Approved Stock Plan or upon exercise or conversion of the
Other Securities) for a consideration per share less than a price (the
“Applicable
Price”) equal
to the Warrant Exercise Price in effect immediately prior to such issuance
or
sale, then immediately after such issue or sale the Warrant Exercise Price
then
in effect shall be reduced to an amount equal to such consideration per share.
Upon each such adjustment of the Warrant Exercise Price hereunder, the number
of
Warrant Shares issuable upon exercise of this Warrant shall be adjusted to
the
number of shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Warrant Exercise Price resulting from such
adjustment.
(b) Effect
on Warrant Exercise Price of Certain Events.
Excluding the issuance of Excluded Securities or the exercise or conversion
of
Other Securities, for purposes of determining the adjusted Warrant Exercise
Price under Section 8(a) above, the following shall be
applicable:
(i) Issuance
of Options.
If
after the date hereof, the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon
the
exercise of any such Option or upon conversion or exchange of any convertible
securities issuable upon exercise of any such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and
to
have been issued and sold by the Company at the time of the granting or sale
of
such Option for such price per share. For purposes of this Section 8(b)(i),
the
lowest price per share for which one share of Common Stock is issuable upon
exercise of such Options or upon conversion or exchange of such Convertible
Securities shall be equal to the sum of the lowest amounts of consideration
(if
any) received or receivable by the Company with respect to any one share of
Common Stock upon the granting or sale of the Option, upon exercise of the
Option or upon conversion or exchange of any convertible security issuable
upon
exercise of such Option. No further adjustment of the Warrant Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
convertible securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such convertible
securities.
(ii) Issuance
of Convertible Securities.
If the
Company in any manner issues or sells any convertible securities and the lowest
price per share for which one share of Common Stock is issuable upon the
conversion or exchange thereof is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the issuance or sale of such convertible
securities for such price per share. For the purposes of this
Section 8(b)(ii), the lowest price per share for which one share of Common
Stock is issuable upon such conversion or exchange shall be equal to the sum
of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance or sale
of
the convertible security and upon conversion or exchange of such convertible
security. No further adjustment of the Warrant Exercise Price shall be made
upon
the actual issuance of such Common Stock upon conversion or exchange of such
convertible securities, and if any such issue or sale of such convertible
securities is made upon exercise of any Options for which adjustment of the
Warrant Exercise Price had been or are to be made pursuant to other provisions
of this Section 8(b), no further adjustment of the Warrant Exercise Price shall
be made by reason of such issue or sale.
(iii) Change
in Option Price or Rate of Conversion.
If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any convertible
securities, or the rate at which any convertible securities are convertible
into
or exchangeable for Common Stock changes at any time, the Warrant Exercise
Price
in effect at the time of such change shall be adjusted to the Warrant Exercise
Price which would have been in effect at such time had such Options or
convertible securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of Warrant Shares issuable
upon
exercise of this Warrant shall be correspondingly readjusted. For purposes
of
this Section 8(b)(iii), if the terms of any Option or convertible security
that
was outstanding as of the Issuance Date of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
convertible security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change. No adjustment pursuant to this Section 8(b) shall
be made if such adjustment would result in an increase of the Warrant Exercise
Price then in effect.
(c) Effect
on Warrant Exercise Price of Certain Events.
Excluding the issuance of Excluded Securities or the exercise or conversion
of
Other Securities, for purposes of determining the adjusted Warrant Exercise
Price under Sections 8(a) and 8(b), the following shall be
applicable:
(i) Calculation
of Consideration Received.
If any
Common Stock, Options or convertible securities are issued or sold or deemed
to
have been issued or sold for cash, the consideration received therefore will
be
deemed to be the net amount received by the Company therefore. If any Common
Stock, Options or convertible securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of marketable securities, in which case the amount of consideration
received by the Company will be the market price of such securities on the
date
of receipt of such securities. If any Common Stock, Options or convertible
securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefore will be deemed to be the fair value of such portion
of
the net assets and business of the non-surviving entity as is attributable
to
such Common Stock, Options or convertible securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding. If such parties are unable to reach agreement within
ten (10) days after the occurrence of an event requiring valuation
(the “Valuation
Event”),
the
fair value of such consideration will be determined within five
(5) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding. The determination of such appraiser shall be final and binding
upon all parties and the fees and expenses of such appraiser shall be borne
jointly by the Company and the holders of Warrants.
(ii) Integrated
Transactions.
In case
any Option is issued in connection with the issue or sale of other securities
of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01.
(iii) Treasury
Shares.
The
number of shares of Common Stock outstanding at any given time does not include
shares owned or held by or for the account of the Company, and the disposition
of any shares so owned or held will be considered an issue or sale of Common
Stock.
(iv) Record
Date.
If the
Company takes a record of the holders of Common Stock for the purpose of
entitling them (1) to receive a dividend or other distribution payable in
Common Stock, Options or in convertible securities or (2) to subscribe for
or purchase Common Stock, Options or convertible securities, then such record
date will be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(d) Adjustment
of Warrant Exercise Price upon Subdivision or Combination of Common
Stock.
If the
Company at any time after the date of issuance of this Warrant subdivides (by
any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, any Warrant Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant will be proportionately
increased. If the Company at any time after the date of issuance of this Warrant
combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, any Warrant Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
issuable upon exercise of this Warrant will be proportionately decreased. Any
adjustment under this Section 8(d) shall become effective at the close
of business on the date the subdivision or combination becomes
effective.
(e) Distribution
of Assets.
If the
Company shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of Common Stock, by way of
return of capital or otherwise (including, without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement or other similar
transaction) (a “Distribution”),
at
any time after the issuance of this Warrant, then, in each such
case:
(i) any
Warrant Exercise Price in effect immediately prior to the close of business
on
the record date fixed for the determination of holders of Common Stock
entitled to
receive the Distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Warrant Exercise
Price by a fraction of which (A) the numerator shall be the Closing Sale
Price of the Common Stock on the trading day immediately preceding such record
date minus the value of the Distribution (as determined in good faith by the
Company’s Board of Directors) applicable to one share of Common Stock, and
(B) the denominator shall be the Closing Sale Price of the Common Stock on
the trading day immediately preceding such record date; and
(ii) either
(A) the number of Warrant Shares obtainable upon exercise of this Warrant
shall be increased to a number of shares equal to the number of shares of Common
Stock obtainable immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive
the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding clause (i), or (B) in the event that the Distribution
is of common stock of a company whose common stock is traded on a national
securities exchange or a national automated quotation system, then the holder
of
this Warrant shall receive an additional warrant to purchase Common Stock,
the
terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the amount of the assets that would have
been
payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such record date and with
an
exercise price equal to the amount by which the exercise price of this Warrant
was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding clause (i).
(f) Certain
Events.
If any
event occurs of the type contemplated by the provisions of this Section 8
but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights
or
other rights with equity features), then the Company’s Board of Directors will
make an appropriate adjustment in the Warrant Exercise Price and the number
of
shares of Common Stock obtainable upon exercise of this Warrant so as to protect
the rights of the holders of the Warrants; provided, except as set forth in
section 8(d), that no such adjustment pursuant to this Section 8(f) will
increase the Warrant Exercise Price or decrease the number of shares of Common
Stock obtainable as otherwise determined pursuant to this Section
8.
(g) Notices.
(i) Immediately
upon any adjustment of the Warrant Exercise Price, the Company will give written
notice thereof to the holder of this Warrant, setting forth in reasonable
detail, and certifying, the calculation of such adjustment.
(ii) The
Company will give written notice to the holder of this Warrant at least ten
(10) days prior to the date on which the Company closes its books or takes
a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with respect to any
Organic Change (as defined below), dissolution or liquidation, provided that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder.
(iii) The
Company will also give written notice to the holder of this Warrant at least
ten
(10) days prior to the date on which any Organic Change, dissolution or
liquidation will take place, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to
such
holder.
Section
9. Purchase
Rights; Reorganization, Reclassification, Consolidation, Merger or
Sale.
(a) In
addition to any adjustments pursuant to Section 8 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights
to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the “Purchase
Rights”),
then
the holder of this Warrant will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale
of
such Purchase Rights, or, if no such record is taken, the date as of which
the
record holders of Common Stock are to be determined for the grant, issue or
sale
of such Purchase Rights.
(b) Any
recapitalization, reorganization, reclassification, consolidation, merger,
sale
of all or substantially all of the Company’s assets to another Person or other
transaction in each case which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an “Organic
Change.”
Prior
to the consummation of any (i) sale of all or substantially all of the
Company’s assets to an acquiring Person or (ii) other Organic Change
following which the Company is not a surviving entity, the Company will secure
from the Person purchasing such assets or the successor resulting from such
Organic Change (in each case, the “Acquiring
Entity”) a
written agreement (in form and substance satisfactory to the holders of Warrants
representing at least two-thirds (iii) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding) to deliver to each holder of
Warrants in exchange for such Warrants, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance
to
this Warrant and satisfactory to the holders of the Warrants (including an
adjusted warrant exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants without regard to any limitations on exercise,
if
the value so reflected is less than any Applicable Warrant Exercise Price
immediately prior to such consolidation, merger or sale). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance satisfactory to the holders of Warrants
representing a majority of
the
Warrant Shares issuable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may
be) the Warrant Shares immediately theretofore issuable and receivable upon
the exercise of such holder’s Warrants (without regard to any limitations
on exercise), such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange for
the
number of Warrant Shares which would have been issuable and receivable upon
the
exercise of such holder’s Warrant as of the date of such Organic Change (without
taking into account any limitations or restrictions on the exercisability of
this Warrant).
Section
10. Lost,
Stolen, Mutilated or Destroyed Warrant.
If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly,
on
receipt of an indemnification undertaking (or, in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed.
Section
11. Notice.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Warrant must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of receipt
is received by the sending party transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to Cornell:
|
Cornell
Capital Partners, LP
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Attention: Mark
A. Angelo
|
| |
Telephone: (201) 985-8300
|
| |
Facsimile: (201) 985-8266
|
| |
|
|
With
Copy to:
|
David
Gonzalez, Esq.
|
| |
101
Hudson Street - Suite 3700
|
| |
Jersey
City, NJ 07302
|
| |
Telephone: (201) 985-8300
|
| |
Facsimile: (201) 985-8266
|
|
If
to the Company, to:
|
Neomedia
Technologies, Inc.
|
| |
2201
Second Street, Suite #600
|
| |
Fort
Myers, FL 33901
|
| |
Attention: Charles
T. Jensen
|
| |
Telephone: (239) 337-3434
|
| |
Facsimile: (239) 337-3668
|
| |
|
|
With
a copy to:
|
Kirkpatrick
& Lockhart Nicholson Graham, LLP
|
| |
201
South Biscayne Boulevard, Suite 2000
|
| |
Miami,
FL 33131
|
| |
Attention: Clayton
E. Parker, Esquire
|
| |
Telephone: (305) 539-3306
|
| |
Facsimile: (305) 358-7095
|
| |
|
If
to a
holder of this Warrant, to it at the address and facsimile number set forth
on
Exhibit C
hereto,
with copies to such holder’s representatives as set forth on Exhibit C,
or at
such other address and facsimile as shall be delivered to the Company upon
the
issuance or transfer of this Warrant. Each party shall provide five days’ prior
written notice to the other party of any change in address or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, facsimile, waiver or other communication, (or (B) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence
of
personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
Section
12. Date.
The
date of this Warrant is set forth on page 1 hereof. This Warrant, in all
events, shall be wholly void and of no effect after the close of business on
the
Expiration Date, except that notwithstanding any other provisions hereof, the
provisions of Section 8(b) shall continue in full force and effect
after such date as to any Warrant Shares or other securities issued upon the
exercise of this Warrant.
Section
13. Amendment
and Waiver.
Except
as otherwise provided herein, the provisions of the Warrants may be amended
and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the holders of Warrants representing at least two-thirds
of
the Warrant Shares issuable upon exercise of the Warrants then outstanding;
provided that, except for Section 8(d), no such action may increase the Warrant
Exercise Price or decrease the number of shares or class of stock obtainable
upon exercise of any Warrant without the written consent of the holder of such
Warrant.
Section
14. Descriptive
Headings; Governing Law.
The
descriptive headings of the several sections and paragraphs of this Warrant
are
inserted for convenience only and do not constitute a part of this Warrant.
The
corporate laws of the State of Delaware shall govern all issues concerning
the
relative rights of the Company and its stockholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of New Jersey or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New Jersey. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in Hudson County and the United States
District Court for the District of New Jersey, for the adjudication of any
dispute hereunder or in connection herewith or therewith, or with any
transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party 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 to
such
party at the address for such 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.
Section
15. Waiver
of Jury Trial.
AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT,
THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.
REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed as of the date first set forth
above.
| |
|
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
Dodge |
| |
Name: David
Dodge
|
| |
Title: CFO
|
Execution
Copy
EXHIBIT
A TO WARRANT
EXERCISE
NOTICE
TO
BE EXECUTED
BY
THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
NEOMEDIA
TECHNOLOGIES, INC.
The
undersigned holder hereby exercises the right to purchase ______________ of
the
shares of Common Stock (“Warrant
Shares”) of
Neomedia Technologies, Inc. (the “Company”),
evidenced by the attached Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
Specify
Method of exercise by check mark:
| |
1.
|
___
|
Cash
Exercise
|
|
| |
|
(a)
|
Payment
of Warrant Exercise Price.
The holder shall pay the Aggregate Exercise Price of $______________
to
the Company in accordance with the terms of the Warrant.
|
|
| |
|
(b)
|
Delivery
of Warrant Shares.
The Company shall deliver to the holder _____ Warrant Shares in accordance
with the terms of the Warrant.
|
|
| |
2.
|
___
|
Cashless
Exercise
|
|
| |
|
(a)
|
Payment
of Warrant Exercise Price.
In lieu of making payment of the Aggregate Exercise Price, the holder
elects to receive upon such exercise the Net Number of shares of
Common
Stock determined in accordance with the terms of the
Warrant.
|
|
| |
|
(b)
|
Delivery
of Warrant Shares.
The Company shall deliver to the holder _____ Warrant Shares in accordance
with the terms of the Warrant.
|
|
Date:
_______________ __, ______
Name
of
Registered Holder
By:
_____________________________
Name:
___________________________
Title:
____________________________
Execution
Copy
EXHIBIT
B TO WARRANT
FORM
OF WARRANT POWER
FOR
VALUE RECEIVED,
the
undersigned does hereby assign and transfer to ________________, Federal
Identification No. __________, a warrant to purchase ____________ shares of
the capital stock of Neomedia Technologies, Inc. represented by warrant
certificate no. _____, standing in the name of the undersigned on the books
of said corporation. The undersigned does hereby irrevocably constitute and
appoint ______________, attorney to transfer the warrants of said corporation,
with full power of substitution in the premises.
|
Dated:
_____________________
|
_________________________________________ |
| |
|
| |
By:
____________________________________________
|
| |
Name:
__________________________________________
|
| |
Title:
___________________________________________
|
AMENDMENT
TO WARRANT NO.: CCP-002
THIS AMENDMENT AGREEMENT (the
“Amendment”) is
entered into as of December 29, 2006, between NEOMEDIA
TECHNOLOGIES, INC., a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP a
Delaware limited partnership (the
“Holder”).
WHEREAS,
the
Company issued to the Holder on March 30, 2005 a certain warrant No.: CCP-002
to
purchase 50,000,000 shares of the Company’s Common Stock at an exercise price of
$0.20 (the “Warrant”);
and
WHEREAS,
on
August 24, 2006, the Company and the Holder entered into an amendment agreement
whereby the exercise price of the Warrant was lowered from $0.20 to $0.10;
and
WHEREAS,
the
parties wish to further amend the Warrant as set forth below.
NOW, THEREFORE,
it is
agreed:
|
|
A.
|
|
Section
1(b)(xv) “Warrant
Exercise Price”:
Section 1(b)(xv) of the Warrant is hereby deleted in its entirety
and the
following language shall replace said Section
1(b)(xv):
|
Section
1(b)(xv) “Warrant
Exercise Price”
shall
be Four Cents ($0.04) or as subsequently adjusted as provided in Section 8
hereof.
| B. |
Section
2(a)
of the Warrant is hereby deleted in its entirety and the following
language shall replace said Section
2(a):
|
Section
2(a). If shares of the Company’s Common Stock underlying the Warrant are covered
by an effective registration statement and if the Closing Bid Price of the
Company’s Common Stock is above Fourteen Cents ($0.14) for five (5) consecutive
Trading Days, the Company may force conversion of this Warrant at an exercise
price as described in Section 1(b) (xv).
| C. |
The
following
language shall be inserted as Section
2(f):
|
Section
2(f) “Redemption”.
For a
period of six (6) months from the date hereof, and provided that the shares
underlying the Warrant are subject to an effective registration statement,
the
Company shall have the right to redeem the Warrant on a cashless basis at an
effective price of Twelve Cents ($0.12).
| A. |
Except
as provided
hereinabove, all of the terms and conditions contained in the Warrant
shall remain unchanged and in full force and
effect.
|
| B. |
This
Amendment is
made pursuant to and in accordance with the terms and conditions
of the
Warrant.
|
| C. |
All
capitalized but
not defined terms used herein shall have those meanings ascribed
to them
in the Warrant.
|
| D. |
|
All
provisions in the Warrant and any amendments, schedules or exhibits
thereto in conflict with this Amendment shall be and hereby are changed
to
conform to this mendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
A.
Dodge |
| |
Name David
A. Dodge
|
| |
Title: Chief
Financial Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By: |
Yorkville
Advisors
LLC |
| |
Its: |
General Partner |
| |
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager
|
AMENDMENT
TO “A” WARRANT NO.: CCP-001
THIS AMENDMENT AGREEMENT
(the
“Amendment”)
is
entered into as of December 29, 2006, between NEOMEDIA
TECHNOLOGIES, INC.,
a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP
a
Delaware limited partnership (the “Holder”).
WHEREAS,
the
Company issued to the Holder on February 17, 2006 a certain “A” warrant No.:
CCP-001 to purchase 20,000,000 shares of the Company’s Common Stock at an
exercise price of $0.50 (the “Warrant”);
and
WHEREAS,
on
August 24, 2006, the Company and the Holder entered into an amendment agreement
whereby the exercise price of the Warrant was lowered from $0.50 to $0.10;
and
WHEREAS,
the
parties wish to amend the Warrant as set forth below.
NOW, THEREFORE,
it is
agreed:
| A. |
|
Section
1(b)(xv) “Warrant
Exercise Price”:
Section 1(b)(xv) of the Warrant is hereby deleted in its entirety
and the
following language shall replace said Section
1(b)(xv):
|
Section
1(b)(xv) “Warrant
Exercise Price”
shall
be Four Cents ($0.04) or as
subsequently adjusted as provided
in Section 8 hereof.
|
|
B. |
Section
2(g)
“Forced Exercise”: Section 2(g) of the Warrant is hereby deleted in its
entirety and the following language shall replace said Section
2(g):
|
Section
2(g) “Forced Exercise”.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than
Fourteen Cents ($0.14) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
| C. |
The
following
language shall be inserted as Section
2(h):
|
Section
2(h) “Redemption”.
For a
period of six (6) months from the date hereof, and provided that the shares
underlying the Warrant are subject to an effective registration statement,
the
Company shall have the right to redeem the Warrant on a cashless basis at an
effective price of Twelve Cents ($0.12).
| A. |
Except
as provided
hereinabove, all of the terms and conditions contained in the Warrant
shall remain unchanged and in full force and
effect.
|
| B. |
This
Amendment is
made pursuant to and in accordance with the terms and conditions
of the
Warrant.
|
| C. |
All
capitalized but not
defined terms used herein shall have those meanings ascribed to them
in
the Warrant.
|
| D. |
|
All
provisions in the Warrant and any amendments, schedules or exhibits
thereto in conflict with this Amendment shall be and hereby are changed
to
conform to this Amendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
A.
Dodge |
| |
Name David
A. Dodge
|
| |
Title: Chief
Financial Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By: |
Yorkville
Advisors
LLC |
| |
Its: |
General Partner |
| |
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager
|
AMENDMENT
TO “B” WARRANT NO.: CCP-002
THIS
AMENDMENT AGREEMENT
(the
“Amendment”) is
entered into as of December 29, 2006, between NEOMEDIA
TECHNOLOGIES, INC., a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP a
Delaware limited partnership (the
“Holder”).
WHEREAS,
the
Company issued to the Holder on February 17, 2006 a certain “B” warrant No.:
CCP-002 to purchase 25,000,000 shares of the Company’s Common Stock at an
exercise price of $0.40 (the “Warrant”);
and
WHEREAS,
on
August 24, 2006, the Company and the Holder entered into an amendment agreement
whereby the exercise price of the Warrant was lowered from $0.40 to $0.15;
and
WHEREAS,
the
parties wish to amend the Warrant as set forth below.
NOW,
THEREFORE,
it is
agreed:
I. Amendments.
|
|
A.
|
Section
1(b)(xv) “Warrant
Exercise Price”: Section 1(b)(xv) of the Warrant is hereby deleted in its
entirety and the following language shall replace said Section
1(b)(xv):
|
Section
1(b)(xv) “Warrant Exercise Price” shall be Four
Cents ($0.04) or
as
subsequently adjusted
as
provided in Section 8 hereof.
| B. |
Section
2(g)
“Forced Exercise”: Section 2(g) of the Warrant is hereby deleted in its
entirety and the following language shall replace said Section
2(g):
|
Section
2(g) “Forced Exercise”.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than
Fourteen Cents ($0.14) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
| C. |
The
following
language shall be inserted as Section
2(h):
|
Section
2(h) “Redemption”.
For a
period of six (6) months from the date hereof, and provided that the shares
underlying the Warrant are subject to an effective registration statement,
the
Company shall have the right to redeem the Warrant on a cashless basis at an
effective price of Twelve Cents ($0.12).
II. Miscellaneous.
| A. |
Except
as provided
hereinabove, all of the terms and conditions contained in the Warrant
shall remain unchanged and in full force and
effect.
|
| B. |
This
Amendment is
made pursuant to and in accordance with the terms and conditions
of the
Warrant.
|
| C. |
All
capitalized but
not defined terms used herein shall have those meanings ascribed
to them
in the Warrant.
|
|
|
D.
|
All
provisions in the Warrant and any amendments, schedules or exhibits
thereto in conflict with this Amendment shall be and hereby are
changed to
conform to this Amendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth
above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
A.
Dodge |
| |
Name David
A. Dodge
|
| |
Title: Chief
Financial Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By: |
Yorkville Advisors LLC |
| |
Its: |
General
Partner
|
| |
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager
|
AMENDMENT
TO “C” WARRANT NO.: CCP-003
THIS AMENDMENT AGREEMENT (the
“Amendment”) is
entered into as of December 29, 2006, between NEOMEDIA
TECHNOLOGIES, INC., a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP a
Delaware limited partnership (the
“Holder”).
WHEREAS,
the
Company issued to the Holder on February 17, 2006 a certain “C” warrant No.:
CCP-003 to purchase 30,000,000 shares of the Company’s Common Stock at an
exercise price of $0.35 (the “Warrant”);
and
WHEREAS,
on
August 24, 2006, the Company and the Holder entered into an amendment agreement
whereby the exercise price of the Warrant was lowered from $0.35 to $0.10;
and
WHEREAS,
the
parties wish to amend the Warrant as set forth below.
NOW,
THEREFORE,
it is
agreed:
I.
Amendments.
|
|
A.
|
Section
1(b)(xv) “Warrant
Exercise Price”: Section 1(b)(xv) of the Warrant is hereby deleted in its
entirety and the following language shall replace said Section
1(b)(xv):
|
Section
1(b)(xv) “Warrant Exercise Price” shall be Four Cents ($0.04) or as subsequently
adjusted as provided in Section 8 hereof.
| B. |
Section
2(g)
“Forced Exercise”: Section 2(g) of the Warrant is hereby deleted in its
entirety and the following language shall replace said Section
2(g):
|
Section
2(g) “Forced Exercise”.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than
Fourteen Cents ($0.14) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
| C. |
The
following
language shall be inserted as Section
2(h):
|
Section
2(h) “Redemption”.
For a
period of six (6) months from the date hereof, and provided that the shares
underlying the Warrant are subject to an effective registration statement,
the
Company shall have the right to redeem the Warrant on a cashless basis at an
effective price of Twelve Cents ($0.12).
II.
Miscellaneous.
| A. |
Except
as provided
hereinabove, all of the terms and conditions contained in the Warrant
shall remain unchanged and in full force and
effect.
|
| B. |
This
Amendment is
made pursuant to and in accordance with the terms and conditions
of the
Warrant.
|
| C. |
All
capitalized but not
defined terms used herein shall have those meanings ascribed to them
in
the Warrant.
|
|
|
D.
|
All
provisions in the Warrant and any amendments, schedules or exhibits
thereto in conflict with this Amendment shall be and hereby are
changed to
conform to this
Amendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
| |
|
|
| |
COMPANY
NAME CORPORATION |
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
A.
Dodge |
| |
Name: David
A. Dodge
|
| |
Title: Chief
Financial Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By: |
Yorkville Advisors LLC |
| |
Its: |
General
Partner
|
| |
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager
|
AMENDMENT
TO “A” WARRANT NO.: CCP-001
THIS AMENDMENT AGREEMENT
(the
“Amendment”)
is
entered into as of December 29, 2006, between NEOMEDIA
TECHNOLOGIES, INC.,
a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP
a
Delaware limited partnership (the “Holder”).
WHEREAS,
the
Company issued to the Holder on August 24, 2006, 2006 a certain “A” warrant No.:
CCP-001 to purchase 25,000,000 shares of the Company’s Common Stock at an
exercise price of $0.15 (the “Warrant”);
and
WHEREAS,
the
parties wish to amend the Warrant as set forth below.
NOW, THEREFORE,
it is
agreed:
I.
Amendments.
| |
A.
|
Section 1(b)(xv) “Warrant
Exercise Price”:
Section 1(b)(xv) of the Warrant is hereby deleted in its entirety
and the
following language shall replace said Section
1(b)(xv): |
Section
1(b)(xv) “Warrant
Exercise Price”
shall
be Four Cents ($0.04) or as
subsequently adjusted as provided
in Section 8 hereof.
| B. |
Section
2(g)
“Forced Exercise”: Section 2(g) of the Warrant is hereby deleted in its
entirety and the following language shall replace said Section
2(g):
|
Section
2(g) “Forced Exercise”.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than
Fourteen Cents ($0.14) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
| C. |
The
following
language shall be inserted as Section
2(h):
|
Section
2(h) “Redemption”.
For a
period of six (6) months from the date hereof, and provided that the shares
underlying the Warrant are subject to an effective registration statement,
the
Company shall have the right to redeem the Warrant on a cashless basis at an
effective price of Twelve Cents ($0.12).
II.
Miscellaneous.
| A. |
Except
as provided
hereinabove, all of the terms and conditions contained in the Warrant
shall remain unchanged and in full force and
effect.
|
| B. |
This
Amendment is
made pursuant to and in accordance with the terms and conditions
of the
Warrant.
|
| C. |
All
capitalized but
not defined terms used herein shall have those meanings ascribed
to them
in the Warrant.
|
| |
D.
|
All
provisions in the Warrant and any
amendments, schedules or exhibits thereto in conflict with
this Amendment
shall be and hereby are changed to conform to this Amendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
A.
Dodge |
| |
Name: David
A. Dodge
|
| |
Title: Chief
Financial Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By: |
Yorkville
Advisors
LLC |
| |
Its: |
General Partner |
| |
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager
|
AMENDMENT
TO “B” WARRANT NO.: CCP-001
THIS AMENDMENT AGREEMENT
(the
“Amendment”)
is
entered into as of December 29, 2006, between NEOMEDIA
TECHNOLOGIES, INC.,
a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP
a
Delaware limited partnership (the “Holder”).
WHEREAS,
the
Company issued to the Holder on August 24, 2006, 2006 a certain “B” warrant No.:
CCP-001 to purchase 50,000,000 shares of the Company’s Common Stock at an
exercise price of $0.25 (the “Warrant”);
and
WHEREAS,
the
parties wish to amend the Warrant as set forth below.
NOW, THEREFORE,
it is
agreed:
I.
Amendments.
|
|
A. |
|
Section
1(b)(xv) “Warrant
Exercise Price”:
Section 1(b)(xv) of the Warrant is hereby deleted in its entirety
and the
following language shall replace said Section
1(b)(xv):
|
Section
1(b)(xv) “Warrant
Exercise Price”
shall
be Four Cents ($0.04) or as
subsequently adjusted as provided
in Section 8 hereof.
| B. |
Section
2(g)
“Forced Exercise”: Section 2(g) of the Warrant is hereby deleted in its
entirety and the following language shall replace said Section
2(g):
|
Section
2(g) “Forced Exercise”.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than
Fourteen Cents ($0.14) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
| C. |
The
following
language shall be inserted as Section
2(h):
|
Section
2(h) “Redemption”.
For a
period of six (6) months from the date hereof, and provided that the shares
underlying the Warrant are subject to an effective registration statement,
the
Company shall have the right to redeem the Warrant on a cashless basis at an
effective price of Twelve Cents ($0.12).
II.
Miscellaneous.
| A. |
Except
as provided
hereinabove, all of the terms and conditions contained in the Warrant
shall remain unchanged and in full force and
effect.
|
| B. |
This
Amendment is
made pursuant to and in accordance with the terms and conditions
of the
Warrant.
|
| C. |
All
capitalized but
not defined terms used herein shall have those meanings ascribed
to them
in the Warrant.
|
|
|
D. |
|
All
provisions in the Warrant and any
amendments, schedules or exhibits thereto in conflict with
this Amendment
shall be and hereby are changed to conform to this Amendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
A.
Dodge |
| |
Name: David
A. Dodge
|
| |
Title: Chief
Financial Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By: |
Yorkville
Advisors
LLC |
| |
Its: |
General Partner |
| |
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager
|
AMENDMENT
TO “C” WARRANT NO.: CCP-001
THIS AMENDMENT AGREEMENT
(the
“Amendment”)
is
entered into as of December 29, 2006, between NEOMEDIA
TECHNOLOGIES, INC.,
a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”),
and
CORNELL
CAPITAL PARTNERS, LP
a
Delaware limited partnership (the “Holder”).
WHEREAS,
the
Company issued to the Holder on August 24, 2006, 2006 a certain “C” warrant No.:
CCP-001 to purchase 50,000,000 shares of the Company’s Common Stock at an
exercise price of $0.20 (the “Warrant”);
and
WHEREAS,
the
parties wish to amend the Warrant as set forth below.
NOW, THEREFORE,
it is
agreed:
I.
Amendments.
|
|
A. |
|
Section
1(b)(xv)
“Warrant
Exercise Price”:
Section 1(b)(xv) of the Warrant is hereby deleted in its entirety
and the
following language shall replace said Section
1(b)(xv):
|
Section
1(b)(xv) “Warrant
Exercise Price”
shall
be Four Cents ($0.04) or as
subsequently adjusted as provided
in Section 8 hereof.
| B. |
Section
2(g)
“Forced Exercise”: Section 2(g) of the Warrant is hereby deleted in its
entirety and the following language shall replace said Section
2(g):
|
Section
2(g) “Forced Exercise”.
Provided that the shares issuable upon exercise this Warrant are registered
pursuant to an effective registration statement, the Company at its option
shall
have the right at any time commencing on the date hereof if the Company’s
Closing Bid Price as quoted by Bloomberg, LP is equal to or greater than
Fourteen ($0.14) for ten (10) consecutive Trading Days, to on such tenth
(10th)
day
provide written notice to the Holder (the “Forced
Exercise Notice”)
providing the Holder twenty (20) calendar days from the day following receipt
of
the Forced Exercise Notice, to exercise this Warrant in whole at the then
applicable Exercise Price (“Forced
Exercise Period”).
Provided however in the event that the Closing Bid Price of the Company’s Common
Stock during the Forced Exercise Period is equal to or lower than the applicable
Warrant Exercise Price the Holder shall not be forced to exercise this Warrant,
in whole or in part, as provided for herein.
| C. |
The
following
language shall be inserted as Section
2(h):
|
Section
2(h) “Redemption”.
For a
period of six (6) months from the date hereof, and provided that the shares
underlying the Warrant are subject to an effective registration statement,
the
Company shall have the right to redeem the Warrant on a cashless basis at an
effective price of Twelve Cents ($0.12).
II.
Miscellaneous.
| A. |
Except
as provided
hereinabove, all of the terms and conditions contained in the Warrant
shall remain unchanged and in full force and
effect.
|
| B. |
This
Amendment is
made pursuant to and in accordance with the terms and conditions
of the
Warrant.
|
| C. |
All
capitalized but
not defined terms used herein shall have those meanings ascribed
to them
in the Warrant.
|
|
|
D. |
All
provisions in the Warrant and any
amendments, schedules or exhibits thereto in conflict with this Amendment
shall be and hereby are changed to conform to this Amendment.
|
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF,
the
parties hereto have caused this Amendment to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
| |
|
|
| |
COMPANY:
|
| |
NEOMEDIA
TECHNOLOGIES, INC.
|
|
|
|
| |
By: |
/s/ David
A.
Dodge |
| |
Name: David
A. Dodge
|
| |
Title: Chief
Financial Officer
|
| |
|
|
| |
CORNELL
CAPITAL PARTNERS, LP
|
| |
By: |
Yorkville
Advisors
LLC |
| |
Its: |
General Partner |
| |
|
|
| |
By: |
/s/ Mark
Angelo |
| |
Name Mark
Angelo
|
| |
Title: President
& Portfolio Manager |
|
For
Immediate Release
|
|
| |
|
|
Press
Contacts:
|
|
|
Rick
Szatkowski
|
David
A. Kaminer
|
|
NeoMedia
Technologies, Inc.
|
The
Kaminer Group
|
|
+1
(239) 571-3104
|
+1
(914) 584-1934
|
|
rszatkowski@neom.com
|
dkaminer@kamgrp.com
|
Prentice
Hall to Use NeoMedia’s qode to Link to Sales Force via Cell Phones;
NeoMedia
Completes $2.5 Million Funding Agreement with Cornell
Capital
FORT
MYERS, Fla., Jan.8, 2007 - NeoMedia Technologies, Inc. (OTC BB NEOM), announced
today that its patented qode®
technology, which links users via cell phones to the Mobile Internet, will
be
used by Prentice Hall, a worldwide leader in text book publishing, to help
communicate with its sales force. Prentice Hall is currently introducing
qode
to its
sales force at a national sales meeting in Phoenix.
Eric
Frank, director of marketing, Business Publishing for Pearson Prentice Hall
said
qode
will be
an “integral component” of the seven-day
meeting at the J.W. Marriott. Prentice Hall, he said, will use qode
as an
“ice-breaker” from the beginning of the meeting, and will have its sales staff
enter daily contests through active personal interaction, all powered-by
qode.
When
the
national sales meeting is over, he said, the Prentice Hall sales staff will
take
qode
with
them, on their cell phones, as they work. Initially, they will use qode
to
receive sales tips and “talking points” on some 40 titles.
“Our
team
is very excited about using qode
in our
internal and external marketing efforts,” Mr. Frank said, noting that sales
staff “will also be enabled to demonstrate the interactive features of the
“Marketing: Real People, Real Choices 5/e,” text book
The
fifth
edition of the popular marketing text, ”Marketing: Real People, Real Choices
5/e” will be in distribution in January. The text, used annually by thousands of
college students and hundreds of professors and instructors worldwide, includes
a detailed description of NeoMedia’s launch of qode,
including interviews with top executives. Prentice Hall also made a video about
the qode
launch,
which was filmed at NeoMedia’s Fort Myers headquarters. Dr. Michael R. Solomon,
visiting professor
of Marketing, St. Joseph's University, Greg
W.
Marshall, professor of Marketing and Strategy in the Crummer Graduate School
of
Business, Rollins College, and Elnora W. Stuart, professor of Marketing and
BP
Egypt Oil professor of Management Studies at The American University in Cairo,
wrote the fifth edition of the text. Through a special arrangement with Prentice
Hall, the textbook will be made available for purchase through links on both
the
NeoMedia Technologies (www.neom.com)
and
qode (www.qode.com)
Web
sites.
NeoMedia
said the contract with Prentice hall is revenue-generating.
NeoMedia
- Cornell Capital in Funding Agreement
NeoMedia
also said that on December 29, 2006, it entered into a Securities Purchase
Agreement with Cornell Capital Partners, LP, selling $2,500,000 of secured
convertible debentures to Cornell which can be converted into shares of NeoMedia
common stock. In connection with the transaction, NeoMedia also issued 42
million warrants to Cornell with an exercise price of $0.06 per share, and
repriced 210 million warrants held by Cornell to $0.04 per share. For a period
of six months, NeoMedia has the right to redeem the repriced warrants on a
cashless basis at a price of $0.12 per share.
Charles
W. Fritz, NeoMedia’s chairman and interim CEO, said that he and the company’s
Board “are pleased that Cornell has stepped up to help us meet current and
near-term obligations. Mr. Fritz said that a significant portion of the funds
is
expected to be used to repay some of NeoMedia’s obligations to silent partners
assumed by the company in its acquisition of 12Snap AG in February 2006.
About
NeoMedia Technologies, Inc.
NeoMedia
Technologies, Inc. (www.neom.com),
is a
diversified global company offering leading edge, technologically advanced
products and solutions for companies and consumers, built upon its solid family
of patented products and processes, and management experience and expertise.
Its
NeoMedia Mobile group of companies offers end-to-end mobile enterprise and
mobile marketing solutions through its flagship qode
direct-to-mobile-web technology and ground-breaking products and services from
four of the leading mobile marketing providers in the U.S. and Europe. By
linking consumers and companies to the interactive electronic world, NeoMedia
delivers one-to-one, permission-based, personalized and profiled dialogue --
anytime and anywhere.
NeoMedia’s
patented qode
(www.qode.com)
suite
is
an easy-to-use set of applications, including qode®reader
and qode®window,
which provide One Click to Content™ connectivity for products, print, packaging
and other physical objects to link directly to specific desired content on
the
Mobile Internet. qode®reader
works with camera phones, letting users “click” on two-dimensional “smart codes”
to access the Mobile Web site to which the code is linked, while qode®window
lets users reach the same destination by entering a key word, slogan, or product
barcode number.
This
press release contains forward-looking statements within the meaning of section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act
of 1934. With the exception of historical information contained herein, the
matters discussed in this press release involve risk and uncertainties. Actual
results could differ materially from those expressed in any forward-looking
statement.
qode
is a registered trademark, and qode®reader,
qode®window and One Click to Content are trademarks of NeoMedia Technologies,
Inc. Other trademarks are properties of their respective
owners.