SECURITIES PURCHASEAGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (“Agreement”) is made as of the 1st day of July, 2010, by and among FIRST BLUSH BRANDS, INC., a Delaware corporation, with an address at 9595 Wilshire Blvd., Suite #900, Beverly Hills, California  90212 (the “Company”), and the Investors set forth on the signature pages affixed hereto (each an “Investor” and collectively the “Investors”).

 

 

A.           The Company and the Investors are executing and delivering this Agreement in connection with an offering of securities of the Company (the “Offering ”) in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (“Regulation D”), as promulgated by the United States Securities and Exchange Commission (the “SEC ”) under the Securities Act of 1933, as amended (the “1933 Act”); and

 

B.           The Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, securities having a maximum aggregate purchase price of $1,000,000 (the “Maximum Amount”) upon the terms and conditions stated in this Agreement; and

 

C.           The securities sold in the Offering shall consist of units (the “Units”) of (i) two (2) shares of the Company’s Common Stock (the “Shares”), (ii) a warrant to purchase one (1) share of Common Stock, in substantially the form attached hereto as Exhibit A (the “Base Warrant”) and (iii) a warrant to purchase additional shares of Common Stock, in substantially the form attached hereto as Exhibit B (the “Par Value Warrant” and together with the Base Warrant, the “Warrants”)

 

D.           The purchase price per Unit shall be $2.00 (the “Purchase Price”) with a minimum purchase by each Investor of $1,000, or 500 Units; and

 

E.           Contemporaneous with each sale of Units, the Company and Investor will execute and deliver a Registration Rights Agreement, in substantially the form attached hereto as Exhibit C (the “Registration Rights Agreement”), pursuant to which the Company will agree to provide certain piggyback registration rights under the 1933 Act, and the rules and regulations promulgated thereunder, and applicable state securities laws; and

 

F.           Each Investor is an “Accredited Investor” as that term is defined in Regulation D.

 

In consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.           Definitions.  For the purposes of this Agreement, the following terms shall have the meanings set forth below:

 

“$” means United States dollars.

 

“1933 Act” has the meaning set forth in the Recitals.

 

“1933 Act” has the meaning set forth in the Recitals.

 

“1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

 

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Base Warrant” has the meaning set forth in the Recitals.

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.

 

“Closing” has the meaning set forth in Section 2.1.

 

“Closing Date” has the meaning set forth in Section  3(c).

 

“Common Stock” means the Company’s common stock, par value $0.001 per share, and any securities into which the common stock may be reclassified.

 

“Common Stock Equivalents” means any securities of the Company or any Subsidiary which entitle the holder thereof to acquire Common Stock at any time, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.

 

“Company” has the meaning set forth in the Preamble.

 

“Company’s Knowledge,” or words of similar effect, means the actual knowledge of the executive officers (as defined in Rule 405 under the 1933 Act) of the Company, after due inquiry.

 

“Confidential Information” means trade secrets, confidential information and know-how (including but not limited to ideas, formulae, compositions, processes, procedures and techniques, research and development information, computer program code, performance specifications, support documentation, drawings, specifications, designs, business and marketing plans, and customer and supplier lists and related information).

 

“Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Equity Securities” means any stock or similar securities, including, without limitation, securities containing equity features and securities containing profit participation features, or any securities convertible into or exchangeable for, with or without consideration, any stock or similar securities, or any securities carrying any warrant, right or option to subscribe to or purchase any shares of capital stock, or any such warrant or right.

 

“Governmental Body” means any federal, national, state, or provincial, municipal or local government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, political subdivision, commission, court, tribunal, official, arbitrator or arbitral body, in each case whether U.S. or non-U.S.

 

“Initial Closing” has the meaning set forth in Section 3(b).

 

“Insiders” means the Company’s directors and executive officers.

 

“Intellectual Property” means all of the following: (i) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and Internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals for any of the foregoing; and (v) proprietary computer software (including but not limited to data, data bases and documentation).

 

“Legal Requirements” means, with respect to any Person, any U.S. or non-U.S. federal, national, state, provincial, local, municipal, international, multinational or other law (including common law), constitution, statute, code, ordinance, rule, regulation or treaty applicable to such Person.

 

“Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), business of the Company and its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform its obligations under the Transaction Documents.

 

“Maximum Amount” has the meaning set forth in the Recitals.

 

 “Offering” has the meaning set forth in the Recitals.

 

“Par Value Warrant” has the meaning set forth in the Recitals.

 

“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

 

“Purchase Price” has the meaning set forth in the Recitals.

 

“Qualified Financing” means the next financing of the Company through the issuance of Equity Securities resulting in gross proceeds to the Company of not less than $1,000,000..

 

“Registration Statement” has the meaning set forth in the Registration Rights Agreement.

 

“Regulation D” has the meaning set forth in the Recitals.

 

“Shares” has the meaning set forth in the Recitals.

 

“SEC” has the meaning set forth in the Recitals.

 

“SEC Filings” has the meaning set forth in Section 4.6.

 

“Securities” means the Shares, the Warrants and the Warrant Shares.

 

“Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the 1934 Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers.

 

“Subscription Instructions” has the meaning set forth in Section 3(b).

 

“Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person.

 

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the New York Stock Exchange, the NYSE AMEX, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

 

“Transaction Documents” means this Agreement, the Warrants and the Registration Rights Agreement.

 

“Transfer Agent” means Corporate Stock Transfer, the Company’s transfer agent.

 

“Unit” has the meaning set forth in the Recitals.

 

“Warrants” has the meaning set forth in the Recitals.

 

“Warrant Shares” means the shares of Common Stock issuable upon the exercise of the Warrants.

 

2.           Purchase and Sale of the Securities.

 

2.1           Subject to the terms and conditions of this Agreement, the Investors shall severally, and not jointly, purchase, and the Company shall sell and issue to such Investors, Units having an aggregate Purchase Price of not more than the Maximum Amount in one or more closings (each, a “Closing”); each Investor to purchase the number of Units in the respective amounts set forth opposite the applicable Investor’s name on the signature pages attached hereto in exchange for each Investor’s Purchase Price payable in full as specified in Section 3 below; provided, however, that unless waived by the Company, each Investor must agree to a minimum investment of $1,000, or 500 Units.

 

3.           Closing; Payment and Delivery.  (a) Each Investor shall deliver, or cause to be delivered, the aggregate Purchase Price for the Units to be purchased by such Investor to the Company, in immediately available funds, to be held by the Company in a segregated, non-interest bearing bank account.

 

(b)           At a Closing, each Investor shall subscribe for Units by executing, completing and delivering its signature pages to this Agreement indicating such and signature pages to the Registration Rights Agreement all in accordance with the instructions set forth in the Subscription Instructions which accompany this Agreement (“Subscription Instructions”), and the Company, in its discretion, may accept such subscription.  The Closing shall occur at the offices of Blank Rome LLP, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174 at 1:00 p.m. Eastern Daylight Time (which time may be changed by the Company) at which time the Company will execute this Agreement and the Purchase Price for the Units being sold at the Closing shall be transferred by the Company to its general banking account against delivery of the Shares and Warrants comprising the Units being purchased.

 

(c)           The Company shall have the right to conduct multiple Closings; provided, however, that (i) the Initial Closing shall occur on or about June 7, 2010 and (ii) any additional Closing(s) shall occur on or prior to June 15, 2010 and (iii) the Company shall not sell Units in this Offering in excess of the Maximum Amount.  Each date on which a Closing occurs is referred to herein as the “Closing Date”.

 

4.           Representations and Warranties of the Company.  The Company hereby represents and warrants to the Investors that, except as set forth in the schedules delivered herewith, including without limitation any supplement, amendment or update delivered in connection with any Closing occurring after the Initial Closing (collectively, the “Disclosure Schedules”):

 

4.1           Organization, Good Standing and Qualification.  Each of the Company and its Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and to own its properties. Each of the Company and its Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary unless the failure to so qualify has not had and could not reasonably be expected to have a Material Adverse Effect. First Blush, Inc., a Delaware corporation, is the Company’s only Subsidiary.

 

4.2           Authorization.  The Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and shareholders necessary for (i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities. The Transaction Documents constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

 

4.3           Capitalization.

 

(a)           Schedule 4.3 sets forth (a) the authorized capital stock of the Company on the date hereof; (b) the number of shares of capital stock issued and outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s equity compensation plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Securities) exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company. All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights and were issued in full compliance with applicable state and federal securities law and any rights of third parties. All of the issued and outstanding shares of capital stock of the Subsidiary have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights, were issued in full compliance with applicable state and federal securities law and any rights of third parties and are owned by the Company, beneficially and of record, subject to no lien, encumbrance or other adverse claim. No Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company. There are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company or any of its Subsidiary is or may be obligated to issue any equity securities of any kind.  Except as described on Schedule 4.3, and except for the Registration Rights Agreement, there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among the Company and any of the securityholders of the Company relating to the securities of the Company held by them. Except as described on Schedule 4.3 and except as provided in the Registration Rights Agreement, no Person has the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person.

 

(b)           Except as described on Schedule 4.3, the issuance and sale of the Securities hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than the Investors) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security.

 

(c)           The Company does not have outstanding stockholder purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events.

 

4.4           Valid Issuance.  Upon the due exercise of the Warrants, the Warrant Shares, will be validly issued, fully paid and non-assessable free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investors.  Assuming an Exercise Price of $1.00, the Company has reserved a sufficient number of shares of Common Stock for issuance upon the exercise of the Warrants, free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investors.

 

4.5           Consents.  Except as described in Schedule 4.5, the execution, delivery and performance by the Company of the Transaction Documents, and the offer, issuance and sale of the Securities, require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than (i) filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws or any other notices required thereby, all of which the Company undertakes to file within the applicable time periods, and (ii) those consents or filings which could not reasonably be expected to have a Material Adverse Effect.  Subject to the accuracy of the representations and warranties of each Investor set forth in Section 5 hereof, the Company has taken all action necessary to exempt (i) the issuance and sale of the Units, (ii) the issuance of the Shares, (iii) the issuance of the Warrant Shares upon due exercise of the Warrants, and (iv) the other transactions contemplated by the Transaction Documents from the provisions of any stockholder rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company’s Certificate of Incorporation or Bylaws that is or could reasonably be expected to become applicable to the Investors as a result of the transactions contemplated hereby, including without limitation, the issuance of the Securities and the ownership, disposition or voting of the Securities by the Investors or the exercise of any right granted to the Investors pursuant to this Agreement or the other Transaction Documents.

 

4.6           Delivery of SEC Filings; Business.  The Company has made available to the Investors through the EDGAR system, true and complete copies of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (the “10-K”), and all other reports filed by the Company, including without limitation the Current Report on Form 8-K filed on May 13, 2010, as amended on May 25, 2010, pursuant to the 1934 Act since the filing of the 10-K and prior to the date hereof (collectively, the “SEC Filings”). The SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such period. During such period, the Company and its Subsidiary engaged in all material respects only in the business described in the SEC Filings and the SEC Filings contained a complete and accurate description in all material respects of the business of the Company and its Subsidiary, taken as a whole, as of the date of each SEC Filing.

 

4.7           Use of Proceeds.  The net proceeds from this Offering (after payment of the expenses of this Offering and the other matters contemplated hereby) will be used primarily for the production of additional inventory in order to allow the Company to take on new chain customers.

 

4.8           SEC Filings.  At the time of filing thereof, the SEC Filings complied as to form in all material respects with the requirements of the 1934 Act and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

 

4.9           No Conflict, Breach, Violation or Default.  The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) the Company’s Certificate of Incorporation or the Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been made available to the Investors), or (ii)(a) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company, any Subsidiary or any of their respective assets or properties, or (b) any agreement or instrument to which the Company or its Subsidiary is a party or by which the Company or its Subsidiary is bound or to which any of their respective assets or properties is subject, except in the case of clause (ii) for such breaches, violations or defaults which could not reasonably be expected to have a Material Adverse Effect.

 

4.10           Tax Matters.  The Company and its Subsidiary has timely prepared and filed all tax returns required to have been filed by the Company or such Subsidiary with all appropriate governmental agencies and timely paid all taxes shown thereon or otherwise owed by it, other than those returns and taxes for which an extension has been timely filed.  The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except for any assessment which is not material to the Company and its Subsidiary, taken as a whole. All taxes and other assessments and levies that the Company or any Subsidiary is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due. There are no tax liens or claims pending or, to the Company’s Knowledge, threatened against the Company or its Subsidiary or any of their respective assets or property. Except as described on Schedule 4.10, there are no outstanding tax sharing agreements or other such arrangements between the Company and any Subsidiary or other corporation or entity.

 

4.11           Title to Properties.  Except as disclosed in Schedule 4.11, each of the Company and its Subsidiary has good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof by them; and except as disclosed in Schedule 4.11, the Company and its Subsidiary holds any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently planned to be made thereof by them.

 

4.12           Certificates, Authorities and Permits.  The Company and its Subsidiary possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or such Subsidiary, could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate.

 

4.13           Labor Matters.

 

(a)           The Company is not a party to or bound by any collective bargaining agreements or other agreements with labor organizations. The Company has not violated in any material respect any laws, regulations, orders or contract terms, affecting the collective bargaining rights of employees, labor organizations or any laws, regulations or orders affecting employment discrimination, equal opportunity employment, or employees’ health, safety, welfare, wages and hours.

 

(b)           (i) There are no labor disputes existing, or to the Company’s Knowledge, threatened, involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts or any other disruptions of or by the Company’s employees, (ii) there are no unfair labor practices or petitions for election pending or, to the Company’s Knowledge, threatened before any governmental agency or labor commission relating to the Company’s employees, (iii) no demand for recognition or certification heretofore made by any labor organization or group of employees is pending with respect to the Company, and (iv) to the Company’s Knowledge, the Company enjoys good labor and employee relations with its employees and labor organizations.

 

(c)           The Company is, and at all times has been, in compliance in all material respects with all applicable laws respecting employment (including laws relating to classification of employees and independent contractors) and employment practices, terms and conditions of employment, wages and hours, and immigration and naturalization.

 

(d)           Except as disclosed in the SEC Filings or as described on Schedule 4.13, the Company is not a party to, or bound by, any employment or other contract or agreement that contains any severance, termination pay or change of control liability or obligation, including, without limitation, any “excess parachute payment,” as defined in Section 2806(b) of the Internal Revenue Code.

 

4.14           Contracts.

 

(a)           Except as set forth in the SEC Filings or as described on Schedule 4.14, neither the Company nor any of its Subsidiaries is party or subject to, or bound by:

 

(i)           any agreements, contracts or commitments that call for prospective fixed and/or contingent payments or expenditures by or to the Company or its Subsidiary of more than $500,000, or which is otherwise material and not entered into in the ordinary course of business;

 

(ii)           any contract, lease or agreement involving payments in excess of $500,000, which is not cancelable by the Company or its Subsidiary, as applicable, without penalty on not less than 60 days notice;

 

(iii)           any indenture, mortgage, promissory note, loan agreement, guaranty or other agreement or commitment for the borrowing of money or pledging or granting a security interest in any assets with a value in excess of $500,000;

 

(iv)           any employment contracts, non-competition agreements, invention assignments, severance or other agreements with officers, directors, 5% or greater stockholders, consultants (which, in the case of any consultant, involves payments in excess of $120,000) of the Company or its Subsidiary or Persons related to or affiliated with such Persons;

 

(v)           any stock redemption or purchase agreements or other agreements affecting or relating to the capital stock of the Company or its Subsidiary, including, without limitation, any agreement with any stockholder of the Company or its Subsidiary which includes, without limitation, antidilution rights, voting arrangements or operating covenants;

 

(vi)           any pension, profit sharing, retirement, stock option or stock ownership plans;

 

(vii)           any royalty, dividend or similar arrangement based on the revenues or profits of the Company or of its Subsidiary or based on the revenues or profits derived from any material contract;

 

(viii)          any acquisition, merger, asset purchase or other similar agreement entered into in the past five years; or

 

(ix)           any agreement under which the Company or its Subsidiary has granted any Person registration rights for its securities (all such agreements, contracts or instruments, collectively, the “Material Contracts”).

 

Each of the Material Contracts is valid and in full force and effect, is enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or similar laws affecting creditors’ rights generally and general principles of equity, and will continue to be so immediately following the Closing Date.

 

4.15           Intellectual Property.  Except as specified in Schedule 4.15:

 

(a)           All Intellectual Property of the Company and its Subsidiary is currently in compliance with all legal requirements (including timely filings, proofs and payments of fees) and is valid and enforceable.

 

(b)           The Company and its Subsidiary own or have the valid right to use all of the Intellectual Property that is necessary for the conduct of the Company’s and its Subsidiary’s respective businesses as currently conducted and for the ownership, maintenance and operation of the Company’s and its Subsidiary’s properties and assets, free and clear of all liens, encumbrances, adverse claims or obligations to license all such owned Intellectual Property and Confidential Information, other than licenses entered into in the ordinary course of the Company’s and its Subsidiary’s businesses.  To the Company’s Knowledge, the Company and its Subsidiary have a valid and enforceable right to use all third party Intellectual Property and Confidential Information used or held for use in the respective businesses of the Company and its Subsidiaries.

 

(c)           The consummation of the transactions contemplated hereby and by the other Transaction Documents will not result in the alteration, loss, impairment of or restriction on the Company’s or its Subsidiary’s ownership or right to use any of the Intellectual Property or Confidential Information which is necessary for the conduct of Company’s and its Subsidiary’s respective businesses as currently conducted.

 

4.16           Environmental Matters.  Except as specified in Schedule 4.16, to the Company’s Knowledge, neither the Company nor its Subsidiary (i) is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), (ii) owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, (iii) is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or (iv) is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim has had or could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the Company’s Knowledge, threatened investigation that might lead to such a claim.

 

4.17           Litigation.  Except as described on Schedule 4.17, there are no pending actions, suits or proceedings against or affecting the Company, its Subsidiaries or any of its or their properties; and to the Company’s Knowledge, no such actions, suits or proceedings are threatened or contemplated.

 

4.18           Financial Statements.  The financial statements included in each SEC Filing made after January 1, 2010, present fairly, in all material respects, the consolidated financial position of the Company as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and, in the case of quarterly financial statements, as permitted by Form 10-Q under the 1934 Act). Except as set forth in the financial statements of the Company included in the SEC Filings filed prior to the date hereof or as described on Schedule 4.18, neither the Company nor its Subsidiary has incurred any liabilities, contingent or otherwise, except those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.

 

4.19           Insurance Coverage.  Except as set forth on Schedule 4.19, the Company and its Subsidiary maintains in full force and effect insurance coverage that is customary for comparably situated companies for the business being conducted and properties owned or leased by the Company and each Subsidiary, and the Company reasonably believes such insurance coverage to be adequate against all liabilities, claims and risks against which it is customary for comparably situated companies to insure.

 

4.20           Brokers and Finders.  No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, its Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company, other than as described in Schedule 4.20.

 

4.21           No Directed Selling Efforts or General Solicitation.  Neither the Company nor any Person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Securities.

 

4.22           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 Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(2) for the exemption from registration for the transactions contemplated hereby or would require registration of the Securities under the 1933 Act.

 

4.23           Private Placement.  Assuming the truth and accuracy of the representation and warranties set forth in Sections 5.1 through 5.13, the offer and sale of the Securities to the Investors as contemplated hereby is exempt from the registration requirements of the 1933 Act.

 

4.24           Internal Controls.  The Company is in material compliance with the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the Company. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  The Company has established disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including the Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed periodic report under the 1934 Act, as the case may be, is being prepared. The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of the end of the period covered by the most recently filed periodic report under the 1934 Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the 1934 Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Except as set forth on Schedule 4.24, since the Evaluation Date, there have been no significant changes in the Company’s internal control over financial reporting (as such term is defined in the 1934 Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

4.25           Solvency.  The Company has not (a) made a general assignment for the benefit of creditors; (b) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by its creditors; (c) suffered the appointment of a receiver to take possession of all, or substantially all, of its assets; (d) suffered the attachment or other judicial seizure of all, or substantially all, of its assets; or (e) made an offer of settlement, extension or composition to its creditors generally.

 

4.26            Related Party Transactions.  Except as set forth in the SEC Reports or Schedule 4.26: (a) none of the Company or any of its Affiliates, officers, directors, holders of 5% or more of the outstanding common stock of the Company or employees, or any Affiliate of any of such Person, has any material interest in any property, real or personal, tangible or intangible, including the Company’s Intellectual Property, used in or pertaining to the business of the Company, except for the normal rights of a stockholder, or, to the Knowledge of the Company, any supplier, distributor or customer of the Company; (b) there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, employees, Affiliates, or, to the Company's Knowledge, any Affiliate thereof; (c) to the Company’s knowledge, no employee, officer or director of the Company or any of its Subsidiaries has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company; (d) to the Company’s Knowledge, no member of the immediate family of any officer or director of the Company is directly or indirectly interested in any Material Contract; or (e) there are no amounts owed (cash and stock) to officers, directors and consultants (salary, bonuses or other forms of compensation in excess of $250,000 in the aggregate).

 

5.           Representations and Warranties of the Investors.  Each Investor hereby severally, and not jointly, represents and warrants to the Company that:

 

5.1           Organization and Existence.  Such Investor is an individual or a validly existing corporation, limited partnership, limited liability company or other entity identified in the Subscription Documents and has all requisite individual, corporate, partnership or limited liability company power or other entity and authority, as applicable, to invest in the Securities pursuant to this Agreement.

 

5.2           Authorization.  The execution, delivery and performance by such Investor of the Transaction Documents to which such Investor is a party have been duly authorized and will each constitute the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

 

5.3           Purchase Entirely for Own Account.  The Securities to be received by such Investor hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws.  Nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a business that would require it to be so registered.

 

5.4           Investment Experience.  Such Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby.

 

5.5           Disclosure of Information.  Such Investor has had an opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the Offering. Such Investor acknowledges receipt of and/or access to copies of the SEC Filings. Neither such inquiries nor any other due diligence investigation conducted by such Investor shall modify, amend or affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement.

 

5.6           Restricted Securities.  Such Investor understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.  Such Investor also acknowledges that the Company was a shell company under the federal securities laws and as such, the ability of the Investor to transfer any of the Securities may be subject to more limitation than securities of a company that was never a shell company.

 

5.7           Legends.  It is understood that, except as provided below, any certificates evidencing the Securities may bear the following or any similar legend:

 

(a)           THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

(b)           If required by the authorities of any state in connection with the issuance or sale of the Securities, the legend required by such state authority.

 

5.8           Accredited Investor.  Such Investor is an “accredited investor” within the meaning of Rule 501(a) of Regulation D for the reasons checked in the Subscription Documents.

 

5.9           No General Solicitation.  Such Investor did not learn of the investment in the Securities as a result of any public advertising or general solicitation.

 

5.10           Brokers and Finders.  No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, its Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor.

 

5.11           Certain Trading Activities.  Such Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Investor, engaged in any transactions in the securities of the Company (including, without limitations, any Short Sales involving the Company’s securities) since the time that such Investor was first contacted by the Company regarding an investment in the Company.  Such Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with it will engage in any transactions in the securities of the Company (including Short Sales) prior to the time that the transactions contemplated by this Agreement are publicly disclosed.

 

5.12           Reliance on Exemptions.  Such Investor understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and such Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Investor set forth herein in order to determine the availability of such exemptions and the eligibility of such Investor to acquire the Securities.

 

5.13           Address.  Investor’s address set forth on Investor’s counterpart signature page is the address of Investor’s principal place of business.

 

6.           Conditions to Closing.

 

6.1           Conditions to the Investors’ Obligations.  The obligation of an Investor to purchase the Units at a Closing is subject to the fulfillment to such Investor’s satisfaction, on or prior to the applicable Closing Date, of the following conditions, any of which may be waived by an Investor:

 

(a)           The representations and warranties made by the Company in Section 4 hereof qualified as to materiality shall be true and correct at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of a specific date, in which case such representation or warranty shall be true and correct as of such date, and, the representations and warranties made by the Company in Section 4 hereof not qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of a specific date, in which case such representation or warranty shall be true and correct in all material respects as of such specific date.

 

(b)           The Company shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Closing Date.

 

(c)           The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary or appropriate for consummation of the purchase and sale of the Shares and Warrants and the consummation of the other transactions contemplated by the Transaction Documents to be consummated on or prior to the Closing Date, all of which shall be in full force and effect.

 

(d)           The Company shall have executed and delivered the Shares, Warrants and the Registration Rights Agreement.

 

(e)           No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents.

 

(f)           The Company shall have delivered a Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in subsections (a), (b) and (c) of this Section 6.1.

 

(g)           The Company shall have delivered a Certificate, executed on behalf of the Company by its Secretary or Assistant Secretary, dated as of the Closing Date, certifying the resolutions adopted by the Board of Directors of the Company approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Securities, certifying the current versions of the Certificate of Incorporation and Bylaws of the Company and certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company.

 

(h)           The Investors shall have received an opinion of Blank Rome LLP, in form and substance reasonably acceptable to the Investors as to the corporate organization and good standing of the Company, due authorization of the transactions contemplated hereby and the enforceability of this Agreement.

 

(i)           No stop order or suspension of trading shall have been imposed by the SEC or any other governmental or regulatory body with respect to public trading in the Common Stock.

 

(j)           Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably could have or result in a Material Adverse Effect.

 

6.2           Conditions to Obligations of the Company.  The Company’s obligation to sell and issue the Units at a Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the applicable Closing Date of the following conditions, any of which may be waived by the Company:

 

(a)           The representations and warranties made by the Investors in Section 5 hereof and in the Subscription Documents shall be true and correct in all material respects when made and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date.  The Investors shall have performed in all material respects all obligations and covenants herein required to be performed by them on or prior to the Closing Date.

 

(b)           The Investors shall have executed and delivered the Registration Rights Agreement.

 

(c)           No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents

 

(d)           The Company shall have received the Purchase Price for the Units to be sold at the Closing.

 

6.3           Termination of Obligations to Effect Closing; Effects.

 

(a)           The outstanding obligations of the Company, on the one hand, and each Investor, on the other hand, to effect a Closing shall terminate as follows:

 

(i)           By the Company if any of the conditions set forth in Section 6.2 shall have become incapable of fulfillment, and shall not have been waived by the Company;

 

(ii)           By an Investor if any of the conditions set forth in Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by such Investor; and

 

(iii)           By the Company, if the Closing has not occurred on or prior to June 15, 2010;

 

provided, however, that, except in the case of clause (i) above, the party seeking to terminate its obligation to effect the Closing shall not then be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate its obligation to effect the Closing.

 

7.           Covenants and Agreements of the Company.

 

7.1           Reservation of Common Stock.  The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of providing for the exercise of the Warrants, such number of shares of Common Stock as shall from time to time equal a good faith estimate of the Warrant Shares issuable from time to time.

 

7.2           Compliance with Laws.  The Company will comply in all material respects with all applicable laws, rules, regulations, orders and decrees of all governmental authorities.

 

7.3           Listing of Underlying Shares and Related Matters.  If the Company applies to have its Common Stock or other securities traded on any stock exchange or market, it shall include in such application the Shares and the Warrant Shares and will take such other action as is necessary to cause such Common Stock to be so listed. Thereafter, the Company will use commercially reasonable efforts to continue the listing and trading of its Common Stock on such exchange or market and, in accordance, therewith, will use commercially reasonable efforts to comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of such exchange or market, as applicable.

 

7.4           Removal of Legends.  Certificates evidencing Securities shall not be required to contain any legend (including the legend set forth in Section 5.7): (i) following a sale or transfer of such Securities pursuant to an effective registration statement under the 1933 Act, or (ii) following a sale or transfer of such Securities pursuant to Rule 144 (assuming the transferee is not an Affiliate of the Company).

 

7.5           Furnishing of Information.  As long as any Investor owns the Securities, the Company covenants to use commercially reasonable efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the 1934 Act.  As long as any Investor owns Securities, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Investors and make publicly available in accordance with Rule 144 such information as is required to satisfy the “public information” requirements of Rule 144.

 

7.6           Integration.  The Company shall not, and shall use its best efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the 1933 Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the 1933 Act of the sale of the Securities to the Investors, or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market in a manner that would require stockholder approval of the sale of the Securities to the Investors.

 

8.           Survival and Indemnification.

 

8.1           Survival.  The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing of the transactions contemplated by this Agreement.

 

8.2           Indemnification.  The Company agrees to indemnify and hold harmless each Investor and its Affiliates and their respective directors, officers, employees and agents from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) to which such Person may become subject as a result of any material breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Transaction Documents, and will reimburse any such Person for all such amounts as they are incurred by such Person; provided that any reimbursement under this Article 8 to an Investor, its affiliates, directors, officers, employees and agents shall be limited to the total purchase price paid by the Investor for the Units purchased by such Investor hereunder.

 

8.3           Conduct of Indemnification Proceedings.  Promptly after receipt by any Person (the “Indemnified Person”) of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and expenses; provided, however,  that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of counsel to the Company representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Company shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding.

 

9.           Dispute Resolution.

 

9.1           Any controversy or claim that arises out of or relating to any Transaction Document, or the breach thereof, shall be finally settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on any award rendered by the arbitrator may be entered by any court having jurisdiction thereof.

 

9.2           Any arbitration conducted pursuant to this Section 9 shall be conducted before a single neutral arbitrator who shall be a member of the Bar of the State of Delaware actively engaged in the practice of law for at least ten years and experienced in the area of corporate law.

 

9.3           The place of arbitration shall be Wilmington, Delaware.

 

9.4           Any arbitration conducted pursuant to this Section 9 shall be conducted under the laws of the State of Delaware.  The parties acknowledge that the Transaction Documents evidence a transaction involving interstate commerce.  The Federal Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association shall govern the interpretation, enforcement, and proceedings pursuant to the arbitration clause in this Section 9.

 

9.5           If more than one arbitration is at any time pending under this Section 9 and any party contends that two or more arbitrations are substantially related and that the issue should be heard in one proceeding, the arbitrator selected in the first-filed of such proceedings shall determine whether, in the interests of justice and efficiency, the proceedings should be consolidated before that arbitrator.

 

9.6           Consistent with the expedited nature of arbitration, each party will, upon the written request of any other party, promptly provide such other party with copies of documents relevant to the issues raised by any claim or counterclaim.  Any dispute regarding discovery, or the relevance or scope thereof, shall be determined by the arbitrator in such arbitration, which determination shall be conclusive.  All discovery shall be completed within forty-five days following the appointment of the arbitrator.

 

9.7           The award in any arbitration commenced under this Section 9 shall be made within nine (9) months of the filing of the related demand for arbitration, and the arbitrator in such arbitration shall agree to comply with such schedule before accepting appointment, provided that such time limit may be extended by agreement of the parties or by the arbitrator if the arbitrator determines that the same is necessary.

 

9.8           No arbitrator appointed pursuant to this Section 9 shall have any authority to award punitive or other damages not measured by the prevailing party’s actual damages, except as may be required by statute.

 

9.9           The arbitrator in any arbitration pursuant to this Section 9 shall award to the prevailing party, if any as determined by the arbitrator, all of its costs and fees.  For such purposes, “costs and fees” shall mean all reasonable pre-award expenses of the arbitration and the mediation, if any, including the arbitrator’s fees, the mediator’s fees, administrative fees, travel expenses, out-of-pocket expenses such as copying and telephone, court costs, witness fees, reasonable attorney’s fees and all other costs reasonably incurred by the prevailing party in enforcing its rights under any Transaction Document.

 

9.10           The finding of the arbitrator in any arbitration under this Section 9 will be final and binding. Judgment on any award rendered by the arbitrator may be entered in any court having jurisdiction thereover; provided, that any award of specific performance shall (a) be documented in a detailed written opinion containing findings of fact and law, and (b) be subject to review by any court to which such award is submitted for entry to the same extent that a similar award by the Delaware Court of Chancery would be subject to review by the Delaware Supreme Court.

 

10.           Miscellaneous.

 

10.1           Confidentiality.

 

(a)           All information furnished by the Company or its Representatives (as defined below), whether furnished before or after the date hereof, and regardless of the manner in which it is furnished, is referred to in this Agreement as “Proprietary Information”.  Proprietary Information does not include, however, information which (a) is or becomes generally available to the public other than as a result of a disclosure by an Investor or its Representatives, (b) was available to an Investor on a nonconfidential basis prior to its disclosure to an Investor by the Company or its Representatives, or (c) becomes available to an Investor on a nonconfidential basis from a person, other than the Company or any of its Representatives, who is not bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation to the Company.  As used in this Agreement, the term “Representative” means, as to any person, such person's affiliates and its and their directors, officers, employees, agents, advisors (including, without limitation, financial advisors, counsel and accountants) and controlling persons.  As used in this letter agreement, the term "person" shall be broadly interpreted to include, without limitation, any corporation, company, partnership, other entity or individual.

 

(b)           Each Investor shall keep strictly confidential all Proprietary Information and will not, without express written authorization signed by an authorized officer of the Company, use, sell, market or disclose any Confidential Information to any person for any purpose.  Each Investor shall be responsible for any breach of this Agreement by any of its Representatives and shall, at its sole expense, take all reasonable measures (including but not limited to court proceedings) to restrain its Representatives from prohibited or unauthorized disclosure of use of the Proprietary Information. Each Investor shall immediately notify the Company of any unauthorized disclosure and, without affecting the Company’s rights as a result thereof, take all steps necessary to prevent further disclosure.

 

(c)           In the event that an Investor is required by, law, regulation, legal process or regulatory authority to disclose any Proprietary Information or any other information concerning the Company, such Investor shall provide the Company with prompt written notice of such request or requirement (to the extent not prohibited by law or legal process) in order to enable the Company to seek an appropriate protective order or other remedy, to not object to the Company's taking steps (at its sole expense) to resist or narrow the scope of such request or legal process, or to waive compliance, in whole or in part, with the terms of this Agreement.  If, in the absence of a protective order or other remedy or waiver of the terms of this letter agreement, an Investor determines upon the opinion of its legal counsel that such Investor or any Representative is required by, law, regulation, legal process or regulatory authority to disclose any Proprietary Information or other information concerning the Company, such Investor or such Representative may disclose only such Proprietary Information or other information as must be disclosed by law, regulation, legal process or regulatory authority and shall exercise reasonable efforts to obtain assurances that such Proprietary Information or other information will be accorded confidential treatment.

 

10.2           Successors and Assigns.  This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Investors, as applicable, provided, however, that an Investor may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate or to a third party acquiring some or all of its Securities in a private transaction without the prior written consent of the Company or the other Investors, after notice duly given by such Investor to the Company provided, that no such assignment or obligation shall affect the obligations of such Investor hereunder. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

10.3           Counterparts; Faxes.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original.

 

10.4           Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

10.5           Notices.  Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or telecopier, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier, and (v) if given by electronic mail, then such notice shall be deemed given upon transmission thereof. All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party:

 

If to the Company:

 

AFH Holding II, Inc./First Blush Brands, Inc.

9595 Wilshire Blvd., Suite #900

Beverly Hills, CA 90212

Attn:  Barrett A. Carrere

Fax:

E-mail: ***@***

 

With a copy to:

 

Blank Rome LLP

The Chrysler Building

405 Lexington Avenue

New York, NY 10174

Attn: Pamela E. Flaherty, Esq.

Fax:   ###-###-####

E-mail: ***@***

 

If to the Investors:

 

to the addresses set forth on the signature pages hereto.

 

10.6           Expenses.  Except as set forth under Section 8 hereof, each party shall pay, or make provision for the payment of, their own fees and expenses in connection with this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby.

 

10.7           Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement 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 holding a majority of the Shares outstanding.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding, each future holder of all such Securities, and the Company.  Notwithstanding the foregoing, no consideration shall be offered or paid by the Company to any Investor 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 holders of the Shares and/or Warrants.

 

10.8           Publicity.  No public release or announcement concerning the transactions contemplated hereby shall be issued by the Company or the Investors without the prior consent of the Company (in the case of a release or announcement by the Investors) or the Investor Agent (in the case of a release or announcement by the Company) (which consents shall not be unreasonably withheld), except as such release or announcement may be required by law or the applicable rules or regulations of any securities exchange or securities market, in which case the Company or the Investors, as the case may be, shall allow the Investors or the Company, as applicable, to the extent reasonably practicable in the circumstances, reasonable time to comment on such release or announcement in advance of such issuance.

 

10.9           Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

 

10.10           Entire Agreement.  This Agreement, including the Exhibits and the Disclosure Schedules, and the other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

 

10.11           Further Assurances.  The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

 

10.12           Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Delaware without regard to the choice of law principles thereof.

 

10.13           Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. The decision of each Investor to purchase Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that each of the Investors has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.

 

10.14           No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

10.15           Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Investor exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then, prior to such time as the Company timely performs such related obligation, such Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

 

10.16           Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested.  The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.  If a replacement certificate or instrument evidencing any Securities is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

 

10.17           Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

10.18           Payment Set Aside.  To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

10.19           Limitation of Liability.  Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that the liability of an Investor arising directly or indirectly, under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of the assets of such Investor, and that no trustee, officer, other investment vehicle or any other Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest of such an Investor shall be personally liable for any liabilities of such Investor.

 

[signature page follows]

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

 

 

 

 

 

By signing below, the undersigned agrees to the terms of the Securities Purchase Agreement and to purchase the number of Units set forth below.

 

Number of Units: ______________________   Aggregate Purchase Price: _______________

INVESTOR: _______________________________     By:_________________________________ Name: Title:   Address:____________________________               ____________________________     Facsimile:____________________________ E-mail: ______________________________   With a copy to:

Please complete the following:
1.	The exact name that your Shares and Warrants are to be registered in (this is the name that will appear on any Share and Warrant certificates). You may use a nominee name if appropriate:
2.	The relationship between the Investors of the Shares and Warrants and the Registered Holder listed in response to item 1 above:
3.	The mailing address and facsimile number of the Registered Holder listed in response to item 1 above (if different from above):	_______________________________ _______________________________ Facsimile:  ___________________________ E-mail: ______________________________