Exhibit 10.1
 
EXCHANGE AGREEMENT
 
THIS EXCHANGE AGREEMENT (the “Agreement”), dated as of February 7, 2011, is
entered into by and among ANTs software, inc., a Delaware corporation having an
address at 71 Stevenson Street, Suite 400, San Francisco, CA 94105 (the
“Company”), and Gemini Master Fund, Ltd., having an address at c/o Gemini
Strategies, LLC, 135 Liverpool Drive, Suite C, Cardiff, CA 92007 (“Gemini”), and
Manchester Securities Corp., having an address at 712 Fifth Avenue, New York, NY
10019 (“Manchester”, and collectively with Gemini, the “Holders”).
 
W I T N E S S E T H:
 
WHEREAS, the Company issued to William J. Healy, an individual (“WH”), that
certain 10% Convertible Promissory Note (“WH Note”) on or about May 30, 2008 in
the original principal amount of $1,000,000; and
 
WHEREAS, the Company issued to Robert T. Healey, an individual (“RH”, and
together with WH, the “Sellers” and each of the Sellers individually a
“Seller”), that certain 10% Convertible Promissory Note (“RH Note”, and together
with the WH Note, the “Notes”) on or about May 30, 2008 in the original
principal amount of $1,000,000; and
 
WHEREAS, contemporaneously herewith the Sellers and Holders are entering into
those certain Securities Purchase Agreements pursuant to which Gemini is
purchasing the WH Note and Manchester is purchasing the RH Note (“Securities
Purchase Agreements”); and
 
WHEREAS, contemporaneously with such purchase of the Notes by such Holders, and
as a condition to such purchase, the Company and the Holders desire to exchange
the Notes for securities consisting of (i) new convertible notes in the form of
Exhibit A attached hereto (“Exchange Notes”), and (ii) the Warrants, as herein
defined, all on the terms set forth below;
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
 

 
1.
Exchange of Notes.

 
a.      Issuance of Exchange Notes and Warrants.  Upon the following terms and
conditions, in exchange for the surrender and cancellation of the Notes, the
Company shall issue to each Holder, and each Holder shall acquire from the
Company (i) an Exchange Note dated and issued as of February 7, 2011 in the
aggregate original principal amount equal to 120% of the principal amount of the
Note surrendered by such Holder in exchange for the Exchange Note, and (ii) a
warrant to purchase such number of shares of Common Stock (as defined in the
Exchange Notes) of the Company as is equal to such principal amount of the Note
surrendered by such Holder divided by 0.30, in the form of Exhibit B attached
hereto (each a “Warrant” and collectively the “Warrants”).  The Exchange Notes
and Warrants are being issued in substitution for and not in satisfaction of the
Notes, provided, however, the Holders acknowledge and agree that upon the
issuance and acceptance of the original Exchange Notes and Warrants issued
pursuant to this Section, the original Notes will be deemed cancelled and will
be promptly surrendered to the Company.
 
 
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b.      Promptly following execution hereof or as soon thereafter as is
reasonably possible, the Company shall deliver the original Exchange Notes and
Warrants to Gemini’s counsel, and the Holders shall cause the original Notes (or
an affidavit of lost note in form and substance acceptable to the Company) to be
delivered to Gemini’s counsel.  The execution and consummation of the Securities
Purchase Agreements by the Holders and the Sellers shall be a condition
precedent to the consummation of the transactions contemplated hereby, provided
that the transactions contemplated hereunder and under the Securities Purchase
Agreements shall occur simultaneously, such that Gemini’s counsel shall
simultaneously release from escrow (1) the original Exchange Notes and Warrants
to the Holders, (2) the surrendered Notes to the Company, and (3) the purchase
price for the Notes to the Sellers.
 
c.      The date upon which the Exchange Notes and Warrants are released to the
Holders shall be the “Closing Date”.
 
d.      The Exchange Notes shall be guaranteed by Inventa Technologies, Inc., a
wholly-owned subsidiary of the Company.  The guaranty in the form of Exhibit C
attached hereto shall be executed by such guarantor and delivered at Closing
(“Guaranty”).

e.      Prior to the second Business Day following the Closing Date, the Company
shall pay to the Sellers any and all accrued but unpaid interest due under the
Notes through the Closing Date.

2.        Representations and Warranties. The Company hereby makes to the
Holders the following representations and warranties:
 
a.       Authorization; Enforcement.  The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of this Agreement and the
Exchange Notes and Warrants by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, its board of directors or its stockholders in connection
therewith.  This Agreement and the Exchange Notes and Warrants have been duly
executed by the Company and, when delivered in accordance with the terms hereof
will constitute the valid and binding obligations of the Company enforceable
against the Company in accordance with their terms except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
 
 
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b.       No Conflicts.  The execution, delivery and performance of this
Agreement and the Exchange Notes and Warrants by the Company and the
consummation by the Company of the transactions contemplated hereby do not and
will not: (i) conflict with or violate any provision of the Company’s or any of
its subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any lien or encumbrance upon any of
the properties or assets of the Company or any subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any material agreement, credit facility, debt
or other material instrument (evidencing a Company or subsidiary debt or
otherwise) or other material understanding to which the Company or any
subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a material adverse
effect.
 
c.      Filings, Consents and Approvals.  Other than applicable anti-dilution
notices to be delivered to existing investors in the Company on or prior to the
due date therefor, the Company is not required to obtain any approval, consent,
waiver, authorization or order of, give any notice to, or make any filing,
qualification or registration with, any court or other federal, state, local,
foreign or other governmental authority or other person or entity in connection
with the execution, delivery and performance by the Company of this Agreement or
the Exchange Notes or Warrants.  No further approval or authorization of any
stockholder, the Board of Directors or others is required for the exchange for
and the issuance of the Exchange Notes and Warrants or any shares of Common
Stock issuable upon the conversion, exercise or exchange of, in payment of
interest on, or otherwise pursuant to the Exchange Notes or Warrants
(collectively, “Underlying Shares”).

d.      Issuance and Reservation of Securities.  The Exchange Notes, Warrants
and Underlying Shares are duly authorized.  Any Underlying Shares, when issued
in accordance with the terms of Exchange Notes and Warrants, will be duly and
validly issued, fully paid and nonassessable, free and clear of all liens,
freely tradable and without any legends thereon (except that Underlying Shares
issued pursuant to a cash exercise of the Warrants shall not be freely tradable
upon issuance and shall be subject to restrictive legends thereon).  The Company
has reserved, and shall at all times hereafter reserve, from its duly authorized
capital stock for issuance upon conversion and exercise pursuant to the Exchange
Notes and Warrants, at least such amount of shares of Common Stock as is equal
to the amount of Underlying Shares into which the Exchange Notes and Warrants
are fully convertible and exercisable, respectively (without regard to any
limitations on ownership or conversion or exercise set forth therein).

e.      Private Placement.  No registration under the Securities Act is required
for the issuance of the Exchange Notes, Warrants or any Underlying Shares in
accordance with the terms hereof and thereof.

f.      No Inside Information.  Neither the Company nor any Person acting on its
behalf has provided any Holder or its counsel with any information that
constitutes or might constitute material, non-public information concerning the
Company.

g.       Equal Consideration. Except as otherwise set forth herein, no
consideration has been offered or paid to any person to amend or consent to a
waiver, modification, forbearance, exchange or otherwise of any provision of the
Notes.
 
 
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h.       Survival. All of the Company’s warranties and representations contained
in this Agreement shall survive the execution, delivery and acceptance of this
Agreement by the parties hereto.
 
i.       Holding Period for Exchange Notes and Warrants.  Pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (“Securities Act”), the
holding period of the Exchange Notes, Warrants and the Underlying Shares (except
Underlying Shares issued pursuant to a cash exercise of the Warrants) tack back
to May 30, 2008 (the original issue date of the Notes).  The Company agrees not
to take a position contrary to this paragraph.  The Company agrees to take all
actions, including, without limitation, the issuance by its legal counsel of any
necessary legal opinions, necessary to issue the Underlying Shares without
restriction and not containing any restrictive legend without the need for any
action by the Holder (except Underlying Shares issued pursuant to a cash
exercise of the Warrants).  The Company is not currently, and has never been, an
issuer of the type described in Rule 144(i).  The Exchange Notes and Warrants
are being issued in substitution and exchange for and not in satisfaction of the
Notes.  The Exchange Notes shall not constitute a novation or satisfaction and
accord of any of the Notes.  Without limiting any of the terms, conditions or
covenants contained in this Agreement or other documents, if at any time it is
determined that any Underlying Shares are not freely tradable without
restriction or limitation pursuant to Rule 144, then the Company shall promptly
register the resale of all Underlying Shares under the Securities Act by filing
a registration statement with the SEC as soon as practicable (but in no event
later than 30 days) and causing such registration statement to be declared
effective as soon as practicable (but in no event later than 90 days).
 
j.      Balances.  As of the date hereof, the balance outstanding under the
Notes, including principal and interest, are as follows, and no further amounts
are due under the Notes:
 
Note
Principal
Interest
Balance
           
WH Note
$1,000,000
$0
$1,000,000
 
RH Note
$1,000,000
$0
$1,000,000
           
Total
$2,000,000
$0
$2,000,000
 

3.      Employees and Affiliates.
 
a.      Each Holder, severally and not jointly (and each Holder makes this
representation as to itself only), represents and warrants that (i) such Holder
is not, as of the date of this representation, and has not been for the last one
hundred twenty (120) days, an employee, officer, director or direct or indirect
beneficial owner of more than ten percent (10%) of any class of equity security
of the Company, or of any entity, directly or indirectly, controlling,
controlled by or under common control with the Company, or otherwise been an
“affiliate” as that term is used in Rule 144 promulgated under the Securities
Act, (ii) no consideration has been offered or paid by such Holder to any person
to amend or consent to a waiver, modification, forbearance, exchange or
otherwise of any provision of the Notes (other than the purchase of the Notes
pursuant to the Securities Purchase Agreements), (iii) such Holder has not,
directly or indirectly, controlled, been controlled by or been under common
control with the Company, and (iv) such Holder has on or about the date hereof
acquired a portion of the Notes without any restriction or limitation whatsoever
and without any requirement to have such transaction registered under the
Securities Act based on the representations contained in the Securities Purchase
Agreements.  For purposes of this paragraph, “Holder” includes any person or
entity that would be included with the Holder for purposes of Rule 144(a)(2).
 
 
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b.      The Company represents and warrants to each Holder that (i) such Holder
is not, as of the date of this representation, and has not been for the last one
hundred twenty (120) days, an employee, officer, director or direct beneficial
owner of more than ten percent (10%) of any class of equity security of the
Company, or otherwise been an “affiliate” as that term is used in Rule 144
promulgated under the Securities Act, (ii) no consideration has been offered or
paid by such Holder to amend or consent to a waiver, modification, forbearance,
exchange or otherwise of any provision of the Notes, (iii) such Holder has not,
directly or indirectly, controlled, been controlled by or been under common
control with the Company, and (iv) the Notes have been outstanding for in excess
of one year and the Notes have not been amended since the issuance date thereof.
 
4.      Legal Opinion. The Company hereby agrees to cause its legal counsel to
issue a legal opinion to the Holders and the Company’s Transfer Agent regarding
this Agreement and the transactions contemplated hereby, in form and substance
reasonably acceptable to the Holders, including an opinion that all shares
issuable upon conversion of the Exchange Notes (or in payment of interest
thereunder) or upon a cashless exercise of the Warrants may be sold pursuant to
Rule 144 without volume restrictions or manner of sale limitations and that
certificates representing any such shares may be issued without a restrictive
legend as required pursuant to Agreement, the Exchange Notes and the Warrants,
as the case may be.  Delivery of such legal opinion shall be a condition to the
consummation of the transactions contemplated hereby.  The Company acknowledges
and agrees that, other than delivery of a conversion notice in the form set
forth as an exhibit to the Exchange Notes, nothing further is required for a
Holder to obtain freely tradable and unlegended shares issuable upon conversion
of the Exchange Notes (or in payment of interest thereunder) or upon a cashless
exercise of the Warrants.
 
5.      Transfer Consent and Documentation.  The Company hereby consents to the
transfer of the Notes from the Sellers to the Holders as contemplated in the
Securities Purchase Agreements, an executed copy of which has been furnished to
the Company.  The Company hereby waives any requirement for any legal opinion in
connection with such transfer, and represents and warrants that no further
consent of or action by any other person or entity is required in connection
with such transfer.  The Company further represents, warrants and agrees that,
other than the aforementioned delivery of a PDF copy of the fully executed
Securities Purchase Agreements, no further documentation or action is necessary
or required in order for the Company to effectuate the transfer of the Notes on
its books and records and the issuance of the Exchange Notes and Warrants as
contemplated hereunder in exchange for such Notes.  The Company also represents,
warrants and agrees that no endorsement of any principal, interest or other
payments on any of the Notes is required in connection with the transfers
contemplated by the Securities Purchase Agreements.
 
 
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6.      Public Information.  So long as any Holder owns any Exchange Notes,
Warrants and/or Underlying Shares, the Company shall timely file (or timely
obtain extensions in respect thereof and file within the applicable grace
period) all reports and definitive proxy or information statements required to
be filed by the Company under the Securities Exchange Act of 1934, as amended
(“Exchange Act”), and 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 promulgated thereunder would otherwise permit such termination).

7.      Conversion/Exercise Procedures.  The form of Conversion Notice included
in the Exchange Notes sets forth the totality of the procedures required of a
Holder in order to convert any such Exchange Notes.  The form of Exercise Notice
included in the Warrants sets forth the totality of the procedures required of a
Holder in order to exercise any such Warrants.  No additional legal opinion or
other information or instructions shall be required of a Holder to convert such
Exchange Notes or exercise such Warrants.  The Company shall honor all
conversions of any Exchange Notes and exercises of any Warrants and shall
deliver Underlying Shares in accordance with the terms, conditions and time
periods set forth in the Exchange Notes and Warrants.

 
8.
Miscellaneous.

a.      If the transactions contemplated hereby are material to the Company or
otherwise constitute material non-public information concerning the Company,
then the Company shall, prior to 8:30AM on the trading day following the date
hereof, issue a Current Report on Form 8-K disclosing the material terms of the
transactions contemplated hereby and attaching this Agreement and all other
related agreements thereto, including without limitation the Exchange Notes and
Warrants. The Company shall not at any time furnish any material non-public
information to any Holder without such Holder’s prior written consent.

b.       This Agreement may be executed in two or more counterparts and by
facsimile signature, delivery of PDF images of executed signature pages by email
or otherwise, and each of such counterparts shall be deemed an original and all
of such counterparts together shall constitute one and the same agreement.

c.      Each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.  The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Exchange Notes and
Warrants.

d.       If any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent jurisdiction,
the provision that would otherwise be prohibited, invalid or unenforceable shall
be deemed amended to apply to the broadest extent that it would be valid and
enforceable, and the invalidity or unenforceability of such provision shall not
affect the validity of the remaining provisions of this Agreement so long as
this Agreement as so modified continues to express, without material change, the
original intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the provision(s) in
question does not substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the benefits that
would otherwise be conferred upon the parties.  The parties will endeavor in
good faith negotiations to replace the prohibited, invalid or unenforceable
provision(s) with a valid provision(s), the effect of which comes as close as
possible to that of the prohibited, invalid or unenforceable provision(s).
 
 
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e.       This Agreement shall be governed by and interpreted in accordance with
laws of the State of New York, excluding its choice of law rules. The parties
hereto hereby waive the right to a jury trial in any litigation resulting from
or related to this Agreement.  The parties hereto consent to exclusive
jurisdiction and venue in the federal courts sitting in the southern district of
New York, unless no federal subject matter jurisdiction exists, in which case
the parties hereto consent to exclusive jurisdiction and venue in the New York
state courts in the borough of Manhattan, New York.  Each party waives all
defenses of lack of personal jurisdiction and forum non conveniens. Process may
be served on any party hereto in the manner authorized by applicable law or
court rule.

f.      Each Holder and the Company hereby agrees and provides further
assurances that it will, in the future, execute and deliver any and all further
agreements, certificates, instruments and documents and do and perform or cause
to be done and performed, all acts and things as may be necessary or appropriate
to carry out the intent and accomplish the purposes of this Agreement.

g.      The parties acknowledge and agree that the actions and obligations of
each Holder hereunder are several and not joint with the actions and obligations
of any other Holder and that no Holder shall be responsible in any way for the
representations, warranties, agreements, acts or omissions, or the performance
or non-performance of the obligations, of any other Holder hereunder.  Any and
all rights granted to the Holders hereunder, at law or in equity shall be
enforceable by each such Holder independently, and it shall not be necessary
(but may be permissible) for any other Holder to be joined as an additional
party in any action for such purpose.

h.      The parties acknowledge and agree that (i) the Holders are not are
agents, affiliates or partners of each other, (ii) the Holders are not, under
any circumstances, agreeing to act jointly, in concert or as a group with
respect to the Notes, Exchange Notes, Warrants or any Underlying Shares, (iii)
nothing contained in any document, and no action taken by any Holder pursuant
thereto, constitutes or shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holders are in any way acting or agreeing to act
jointly, in concert or as a group with respect to the Notes, Exchange Notes,
Warrants or any Underlying Shares, any transactions, or any of their actions or
obligations under any documents (including without limitation the decision to
acquire, dispose of or vote any securities), and (iv) the Company shall not
assert any claim inconsistent with the foregoing.

i.      The Company acknowledges and agrees, and each Holder represents and
agrees, that (i) such Holder has independently participated in the negotiation
hereof with the advice of its own counsel and advisors, (ii) no other Holder has
acted or will be acting as such Holder’s agent in connection with its
acquisition, disposition or voting of any securities or monitoring its
investment therein, (iii) such Holder’s decision to purchase and exchange the
Notes has been made by such Holder independently of any other Holder and
independently of any information, materials, statements or opinions regarding
the Company which may have been made or given by any other Holder, and (iv) no
Holder shall have any liability to any other Holder relating to or arising from
any such information, materials, statements or opinions.  The Company represents
and acknowledges that (A) for reasons of convenience of the Company only and not
because it was required or requested to do so by any Holder, (1) each Holder and
its counsel may have communicated and may continue to communicate with the
Company through a lead counsel who represents one or more of the Holders
independently, and (2) the Company has elected to provide all Holders with the
same terms hereunder, and (B) such procedures with respect to this Agreement
shall in no way create a presumption that the Holders are in any way acting
jointly, in concert or as a group with respect to this Agreement or the Exchange
Notes or Warrants or the transactions contemplated hereby.
 
 
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j.      Each Holder agrees that so long as such Holder holds any Exchange Notes,
such Holder shall not engage in any Short Sale transaction which would cause
such Holder to have a Net Short Position, where (1) “Short Sale” shall have the
meaning set forth in Rule 200 of Regulation SHO promulgated under the Securities
Act, and (2) “Net Short Position” shall mean having a contractual obligation to
deliver a greater number of shares of Common Stock than such Purchaser
beneficially owns long, which includes without limitation shares of Common Stock
held long and shares of Common Stock issuable upon exercise, conversion or
exchange of Company securities held by such Purchaser (whether or not then
convertible, exercisable or exchangeable, and including Exchange Notes and
Warrants).

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IN WITNESS WHEREOF, this Agreement is executed as of the date first set forth
above.
 
COMPANY:
   
ANTS SOFTWARE, INC.
       
By:
/s/ David A. Buckel                   
Name:
David A. Buckel
Title:
CFO / Corporate Secretary
       
HOLDERS:
   
GEMINI MASTER FUND, LTD.
By: GEMINI STRATEGIES, LLC, as investment manager
   
By:
/s/ Steven Winters                    
Name:
Steven Winters
Title:
Managing Member
   
MANCHESTER SECURITIES CORP.
       
By:
/s/ Elliot Greenberg                   
Name:
Elliot Greenberg
Title:
Vice President

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