Exhibit 10.1



Exhibit 10.1


PURCHASE AGREEMENT


THIS PURCHASE AGREEMENT ("Agreement") is made as of the ___ day of February, 2005 by and among C-Chip Technologies Corporation, a Nevada corporation (the "Company"), and the Investors set forth on the signature pages affixed hereto (each an "Investor" and collectively the "Investors").


Recitals


A.     The Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended; and


B.     The Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, upon the terms and conditions stated in this Agreement, Units consisting of (i) an aggregate of US$10,000,000 of the Company's 9.0% Senior Secured Convertible Notes, Series A in the form attached hereto as Exhibit A (the "Series A Notes or the "Notes"), which are convertible into shares of the Company's Common Stock, par value $0.00001 per share ("Common Stock"), (ii) Series E warrants to purchase an aggregate of 11,538,461 shares of Common Stock (subject to adjustment) for a period of five (5) years at an exercise price of $.75 per share (subject to adjustment) in the form attached hereto as Exhibit B-1 (the "Series E Warrants"); and (iii) Series F warrants to purchase an aggregate of 3,846,154 shares of Common Stock (subject to adjustment) for a period of one (1) year at an exercise price of $.70 per share (subject to adjustment) in the form attached hereto as Exhibit B-2 (the "Series F Warrants", and collectively with the Series E Warrant, the "Warrants").  Each Unit shall be for a minimum of US$200,000 (i.e. a $200,000 Note, a Series E Warrant for 230,769 shares and a Series F Warrant for 76,923 shares).  All references to "$" in this Agreement shall mean United States dollars.


C.     The obligations of the Company under the Transaction Documents will be guaranteed by all of the Subsidiaries of the Company pursuant to the terms of Guaranty Agreements in the forms attached hereto as Exhibit C-1 and C-2 (the "Guaranties"); and


D.     The Notes and the Guaranties will be secured by perfected first priority security interests in all the assets of the Company and each of its Subsidiaries, including, without limitation, accounts receivable, intellectual property rights and inventory pursuant to the terms of, inter alia, Pledge and Security Agreements in the form attached hereto as Exhibit D (collectively, the "Security Agreement"); and


E.     Contemporaneous with the sale of the Notes and Warrants, the parties hereto will execute and deliver a Registration Rights Agreement, in the form attached hereto as Exhibit E (the "Registration Rights Agreement"), pursuant to which the Company will agree to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and applicable state securities laws.


 

 

 





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.  In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below:


"Administrative Agent" means the person appointed as Administrative Agent pursuant to Section 7.2 hereto as well as any successor Administrative Agent.


"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.


"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.


"Collateral Agency Agreement" means the agreement dated as of this date pursuant to which the Investors appoint the Collateral Agent.


"Collateral Agent" means the person appointed as Collateral Agent pursuant to the Collateral Agency Agreement  as well as any successor Collateral Agent.


"Company's Knowledge" 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).


"Confidentiality Agreement" means the agreement, dated January __, 2005, between the Company and Midtown Partners & Co., LLC.


"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.


"Conversion Shares" means the shares of Common Stock issuable upon the conversion of the Notes.



 

 

 

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"Effective Date" means the date on which the initial Registration Statement is declared effective by the SEC.


"Effectiveness Deadline" means the date on which the initial Registration Statement is required to be declared effective by the SEC under the terms of the Registration Rights Agreement.


"Exempt Issuance" means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise of or conversion of any securities issued hereunder, convertible securities, options or warrants issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise or conversion price of any such securities, (c) securities issued pursuant to acquisitions or strategic transactions, provided any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, and (d) securities issued in a public offering registered with the SEC.


"GAAP" has the meaning set forth in Section 4.18.


"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).


"Material Adverse Effect" means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), business, or prospects 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.


"Obligations" means all principal, interest (including interest accrued after the filing of a bankruptcy or similar petition whether or not a claim therefor is enforceable), fees, expenses, indemnities and other liabilities and obligations payable from time to time to the Investors under the Notes, the Guaranties, the Security Documents or any other Transaction Documents.  



 

 

 

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"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" means Ten Million Dollars ($10,000,000).


"Required Investors" means the Investors acquiring at least a majority of the aggregate amount of the Notes.


"Registration Statement" has the meaning set forth in the Registration Rights Agreement.


"SEC Filings" has the meaning set forth in Section 4.6.


"Securities" means the Notes, the Warrants, the Conversion Shares and the Warrant Shares.


"Security Documents" means collectively all instruments and documents contemplated by Section 7.1 hereof including but not limited to the Security Agreement.


"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.


"Transaction Documents" means this Agreement, the Notes, the Warrants, the Guaranties, the Security Documents, the Registration Rights Agreement, the Collateral Agency Agreement and all documents ancillary hereto.


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


"1933 Act" means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.


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



2.     Purchase and Sale of the Notes and Warrants.  Subject to the terms and conditions of this Agreement, on the Closing Date, each of the Investors shall severally, and not jointly, purchase, and the Company shall sell and issue to the Investors, the Notes and Warrants in the respective amounts set forth opposite the Investors' names on the signature pages attached hereto in exchange for the Purchase Price as specified in Section 3 below.


 

 

 

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3.     Closing.     (a)     Upon confirmation that the other conditions to closing specified herein have been satisfied or duly waived by the Investors, the Company shall deliver to Lowenstein Sandler PC ("Escrow Agent"), in trust, the Notes and the Warrants, registered in such name or names as the Investors may designate, with instructions that such securities are to be held for release to the Investors only upon payment in full of the Purchase Price to the Company by all the Investors.  


(b)(i)     Simultaneously with the execution and delivery of this Agreement by an Investor, such Investor shall: promptly cause a wire transfer of immediately available funds (U.S. dollars) in an amount representing the "Purchase Price", as set forth on such Investor's signature page, to be paid to an escrow account of Escrow Agent, set forth on Schedule I affixed hereto (the aggregate amounts being held in escrow are referred to herein as the "Escrow Amount").  Escrow Agent shall hold the Escrow Amount in escrow in accordance with this Section 3.  


(ii)     Escrow Agent shall continue to hold the Escrow Amount in escrow  in accordance with and subject to this Agreement, from the date of its receipt of the funds constituting the Escrow Amount until the sooner of: (x) the Closing Date, in which case, the Escrow Amount shall be distributed to the Company; or (y) the termination of this Agreement pursuant to Section 6.3, (after taking into account any extensions thereof), in which case the Escrow Amount shall be returned to the Investors in accordance with their written wire transfer instructions delivered to Escrow Agent.  In the case of the termination of this Agreement pursuant to Section 6.3, if Escrow Agent has not received written wire transfer instructions from any Investor before the 30th day after the termination of this Agreement pursuant to Section 6.3, then Escrow Agent may, in its sole and absolute discretion, either (x) deposit that portion of the Escrow Amount to be returned to such Investor in a court of competent jurisdiction on written notice to such Investor, and Escrow Agent shall thereafter have no further liability with respect to such deposited funds, or (y) continue to hold such portion of the Escrow Amount pending receipt of written wire transfer instructions from such Investor or an order from a court of competent jurisdiction, and in case of clauses (x) and (y), the reasonable fees and expenses of Escrow Agent may be deducted from such portion of the Escrow Amount.


(iii)     The Company and the Investors acknowledge and agree for the benefit of Escrow Agent (which shall be deemed to be a third party beneficiary of this Section 3 and of Section 9.5) as follows: 


(A)     Escrow Agent: (i) is not responsible for the performance by the Company or the Investors of this Agreement or any of the Transaction Documents or for determining or compelling compliance therewith; (ii) is only responsible for (a) holding the Escrow Amount in escrow pending receipt of written instructions from the Company and Midtown Partners & Co., LLC ("Midtown") directing the release of the Escrow Amount, and (B) disbursing the Escrow Amount in accordance with the written instructions from the Company and Midtown; each of the responsibilities of Escrow Agent in clause (A) and (B) is ministerial in nature, and no implied duties or obligations of any kind shall be read into this Agreement against or on the part of Escrow Agent (collectively, the "Escrow Agent Duties"); (iii) shall not be obligated to take any legal or other action hereunder which might in its judgment involve or cause it to incur any expense or liability unless it shall have been furnished with




 

 

 

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indemnification acceptable to it, in its sole discretion; (iv) may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction (including, without limitation, wire transfer instructions, whether incorporated herein or provided in a separate written instruction), instrument, statement, certificate, request or other document furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper Person, and shall have no responsibility for making inquiry as to, or for determining, the genuineness, accuracy or validity thereof, or of the authority of the Person signing or presenting the same; and (v) may consult counsel satisfactory to it, and the opinion or advice of such counsel in any instance shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or advice of such counsel.  Documents and written materials referred to in this Section 3 include, without limitation, e-mail and other electronic transmissions capable of being printed, whether or not they are in fact printed; and any such e-mail or other electronic transmission may be deemed and treated by Escrow Agent as having been signed or presented by a Person if it bears, as sender, the Person's e-mail address. 


(B)     Escrow Agent shall not be liable to anyone for any action taken or omitted to be taken by it hereunder, except in the case of Escrow Agent's gross negligence or willful misconduct in breach of Escrow Agent Duties.  IN NO EVENT SHALL ESCROW AGENT BE LIABLE FOR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGE OR LOSS (INCLUDING BUT NOT LIMITED TO LOST PROFITS) WHATSOEVER, EVEN IF LEAD INVESTOR COUNSEL HAS BEEN INFORMED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION. 


(C)     The Company and the Investors, jointly and severally, hereby indemnify and hold harmless Escrow Agent from and against any and all loss, liability, cost, damage and expense, including, without limitation, reasonable counsel fees and expenses, which Escrow Agent may suffer or incur by reason of any action, claim or proceeding brought against Escrow Agent arising out of or relating to the performance of Escrow Agent Duties, unless such action, claim or proceeding is exclusively the result of the willful misconduct or gross negligence of Escrow Agent.   


(D)     Escrow Agent has acted as legal counsel to Midtown in connection with this Agreement and the other Transaction Documents, is merely acting as a stakeholder under this Agreement and is, therefore, hereby authorized to continue acting as legal counsel to Midtown including, without limitation, with regard to any dispute arising out of this Agreement, the other Transaction Documents, the Escrow Amount or any other matter.  Each of the Company and the Investors hereby expressly consents to permit Escrow Agent to represent Midtown in connection with all matters relating to this Agreement, including, without limitation, with regard to any dispute arising out of this Agreement, the other Transaction Documents, the Escrow Amount or any other matter, and hereby waives any conflict of interest or appearance of conflict or impropriety with respect to such representation.  Each of the Company and the Investors has consulted with its own counsel specifically about this Section (D) to the extent they deemed necessary, and has entered into this Agreement after being satisfied with such advice.




 

 

 

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(E)     Escrow Agent shall have the right at any time to resign for any reason and be discharged of its duties as escrow agent hereunder by giving written notice of its resignation to the Company and Midtown at least ten (10) calendar days prior to the specified effective date of such resignation.  All obligations of Escrow Agent hereunder shall cease and terminate on the effective date of its resignation and its sole responsibility thereafter shall be to hold the Escrow Amount, for a period of ten (10) calendar days following the effective date of resignation, at which time:


(i)     Escrow Agent shall be entitled to receive from the Escrow Amount its legal fees and expenses for acting as Escrow Agent through and including the effective date of resignation and the legal fees and expenses referred to in Section 9.5; and


(ii)     if a successor escrow agent shall have been appointed and have accepted such appointment in a writing to both the Company and Midtown, then upon written notice thereof given to each of the Investors, Escrow Agent shall deliver the Escrow Amount to the successor escrow agent, and upon such delivery, Escrow Agent shall have no further liability or obligation; or


(iii)     if a successor escrow agent shall not have been appointed, for any reason whatsoever, Escrow Agent shall at its option in its sole discretion, either (A) deliver the Escrow Amount to a court of competent jurisdiction selected by Escrow Agent and give written notice thereof to the Company and the Investors, or (B) continue to hold Escrow Amount in escrow pending written direction from the Company and Midtown in form and formality satisfactory to Escrow Agent.



(F)     In the event that Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions with respect to the Escrow Amount or any portion thereunder which, in its sole discretion, are in conflict either with other instructions received by it or with any provision of this Agreement, Escrow Agent shall have the absolute right to suspend all further performance under this Agreement (except for the safekeeping of such Escrow Amount) until such uncertainty or conflicting instructions have been resolved to Escrow Agent's sole satisfaction by final judgment of a court of competent jurisdiction, joint written instructions from the Company and all of the Investors, or otherwise.  In the event that any controversy arises between the Company and one or more of the Investors or any other party with respect to this Agreement or the Escrow Amount, Escrow Agent shall not be required to determine the proper resolution of such controversy or the proper disposition of the Escrow Amount, and shall have the absolute right, in its sole discretion, to deposit the Escrow Amount with the clerk of a court selected by Escrow Agent and file a suit in interpleader in that court and obtain an order from that court requiring all parties involved to litigate in that court their respective claims arising out of or in connection with the Escrow Amount.  Upon the deposit by Escrow Agent of the Escrow Amount with the clerk of such court in accordance with this provision, Escrow Agent shall thereupon be relieved of all further obligations and released from all liability hereunder.


(G)     The provisions of this Section 3 shall survive any termination of this Agreement.




 

 

 

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(c)     On the date (the "Closing Date") the Company receives the Purchase Price, the Notes and the Warrants shall be released to the Investors (the "Closing").  The Closing of the purchase and sale of the Notes and Warrants shall take place at the offices of Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th Floor, New York, New York 10020, or at such other location and on such other date as the Company and the Investors shall mutually agree.



4.     Representations and Warranties of the Company.  The Company hereby represents and warrants to the Investors that, except as set forth in the disclosure letter delivered herewith to the Investors (the "Disclosure Letter"):


4.1     Organization, Good Standing and Qualification.  Each of the Company and its Subsidiaries 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 Subsidiaries 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 and could not reasonably be expected to have a Material Adverse Effect.  The Company's Subsidiaries are listed on the Disclosure Letter.


4.2     Authorization.  Each of the Company and each Subsidiary has full power and authority and has taken all requisite action on the part of the Company and each Subsidiary, its respective officers, directors and stockholders necessary for (i) the authorization, execution and delivery of the Transaction Documents to which it is a party, (ii) the authorization of the performance of all obligations of the Company and each Subsidiary 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 and its Subsidiaries (to the extent a party thereto), enforceable against the Company and its Subsidiaries 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.  The Disclosure Letter sets forth as of [January 15, 2005] (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 stock award and/or option plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Notes and the Warrants) exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company.  There have been no changes in the Company's capitalization since that date.  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 compliance with applicable state and federal securities law and any rights of third parties.  Except as described in the Disclosure Letter, all of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights, were issued in compliance with applicable state and federal securities law and any rights of third parties and are



 

 

 

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owned by the Company, beneficially and of record, subject to no lien, encumbrance or other adverse claim except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws.  Except as described in the Disclosure Letter, no Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company.  Except as described in the Disclosure Letter, 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 Subsidiaries is or may be obligated to issue any equity securities of any kind and except as contemplated by this Agreement, neither the Company nor any of its Subsidiaries is currently in negotiations for the issuance of any equity securities of any kind.  Except as described in the Disclosure Letter 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 in the Disclosure Letter 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.


Except as described in the Disclosure Letter, the issuance and sale of the Securities hereunder and the consummation of the transactions contemplated by the Transaction Documents will not obligate the Company or any Subsidiary to issue shares of Common Stock or other debt or equity 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.


Except as described in the Disclosure Letter, 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.  The Conversion Shares have been duly and validly authorized.  Upon the due conversion of the Notes, the Conversion Shares will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Investors), except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws.  The Warrants have been duly and validly authorized.  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.  The Company has reserved a sufficient number of shares of Common Stock for the issuance of the Conversion Shares and the Warrant Shares, 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.  The execution, delivery and performance by the Company and each Subsidiary of the Transaction Documents to which it is a party and the offer, issuance and sale of the Securities requrie no consent of, action by or in



 

 

 

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respect of, or filing with, any Person, governmental body, agency, or official other than filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods.  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 Securities, (ii) the issuance of the Conversion Shares upon due conversion of the Notes, (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 is currently subject and any provision of the Company's Certificate of Incorporation or By-laws 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 most recent Annual Report on Form 10-KSB for the fiscal year ended June 30, 2004 (the "10-KSB"), Quarterly Report on Form 10-QSB for the fiscal quarter ended September 30, 2004 and all other reports filed by the Company pursuant to the 1934 Act since the filing of the 10-KSB 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.  The Company and its Subsidiaries are engaged in all material respects only in the business described in the SEC Filings and the SEC Filings contain a complete and accurate description in all material respects of the business of the Company and its Subsidiaries, taken as a whole.


4.7     Use of Proceeds.  The net proceeds of the sale of the Notes and the Warrants hereunder shall be used by the Company for working capital, growth and capital initiatives, repayment of secured debt and general corporate purposes.  The Company represents that its outstanding secured debt does not exceed $400,000 on a consolidated basis.


4.8     No Material Adverse Change.  Since June 30, 2004, except as identified and described in the SEC Filings or as described in the Disclosure Letter, there has not been:


(i)     any change in the consolidated assets, liabilities, financial condition or operating results of the Company from that reflected in the financial statements included in the Company's Quarterly Report on Form 10-QSB for the quarter ended September 30, 2004, except for changes in the ordinary course of business which have not had and could not reasonably be expected to have a Material Adverse Effect, individually or in the aggregate;


(ii)     any declaration or payment of any dividend, or any authorization or payment of any distribution, on any of the capital stock of the Company, or any redemption or repurchase of any securities of the Company;




 

 

 

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(iii)     any material damage, destruction or loss, whether or not covered by insurance to any assets or properties of the Company or its Subsidiaries;


(iv)     any waiver, not in the ordinary course of business, by the Company or any Subsidiary of a material right or of a material debt owed to it;


(v)     any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company or a Subsidiary, except in the ordinary course of business and which is not material to the assets, properties, financial condition, operating results or business of the Company and its Subsidiaries taken as a whole (as such business is presently conducted and as it is proposed to be conducted);


(vi)     any change or amendment to the Company's Certificate of Incorporation or by-laws, or material change to any material contract or arrangement by which the Company or any Subsidiary is bound or to which any of their respective assets or properties is subject;


(vii)     any material labor difficulties or labor union organizing activities with respect to employees of the Company or any Subsidiary;


(viii)     any material transaction entered into by the Company or a Subsidiary other than in the ordinary course of business; 


(ix)     the loss of the services of any key employee, or material change in the composition or duties of the senior management of the Company or any Subsidiary;


(x)     the loss or threatened loss of any customer which has had or could reasonably be expected to have a Material Adverse Effect; or


(xi)     any other event or condition of any character that has had or could reasonably be expected to have a Material Adverse Effect.



4.9     SEC Filings.


(a)     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.


(b)     Each registration statement and any amendment thereto filed by the Company since January 1, 2001 pursuant to the 1933 Act, as of the date such statement or amendment became effective, complied as to form in all material respects with the 1933 Act and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein not misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue date and 




 

 

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as of the closing of any sale of securities pursuant thereto did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.



4.10     No Conflict, Breach, Violation or Default.  The execution, delivery and performance of the Transaction Documents by the Company and its Subsidiaries 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 through the EDGAR system), (ii) the Certificate of Incorporation or Bylaws of any Subsidiary or (iii)(a) any statute, rule, regulation, order or judgment 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 any Subsidiary is a party or by which the Company or a Subsidiary is bound or to which any of their respective assets or properties is subject.


4.11     Tax Matters.  The Company and each 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.  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 Subsidiaries, 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 any Subsidiary or any of their respective assets or property.  Except as described in the Disclosure Letter, there are no outstanding tax sharing agreements or other such arrangements between the Company and any Subsidiary or other corporation or entity.


4.12     Title to Properties.  Except as disclosed in the SEC Filings, the Company and each 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 the SEC Filings, the Company and each 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.


4.13     Certificates, Authorities and Permits.  The business of the Company and its Subsidiaries has been operated in compliance with all applicable laws, rules, regulations, codes, and ordinances of all governmental and regulatory authorities.  The Company and each Subsidiary possess adequate certificates, authorities or permits issued by 



 

 

 

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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.



4.14     Labor Matters.


(a)     Except as set forth in the Disclosure Letter, neither the Company nor its Subsidiaries is a party to or bound by any collective bargaining agreements or other agreements with labor organizations.  The Company and its Subsidiaries have 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 or the Subsidiaries' employees, (ii) there are no unfair labor practices or petitions for election pending or, to the Company's Knowledge, threatened before the National Labor Relations Board or any other federal, state, provincial or local labor commission relating to the Company's or the Subsidiaries' 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 or its Subsidiaries and (iv) to the Company's Knowledge, the Company and each of its Subsidiaries enjoys good labor and employee relations with its employees and labor organizations.


(c)     The Company and each of its Subsidiaries is, and at all times has been, in full 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.  No claims are pending against the Company or any of its Subsidiaries before the Equal Employment Opportunity Commission or any other administrative body or in any court asserting any violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination Act of 1967, 42 U.S.C. SS 1981 or 1983 or any other Canadian, federal, state, provincial or local law, statute or ordinance barring discrimination in employment.


(d)     Except as set forth in the Disclosure Letter and any SEC filings, neither the Company nor any of its Subsidiaries is 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.


(e)     Except as specified in the Disclosure Letter, each of the Company's employees is a Person who is either a United States or Canadian citizen or a permanent resident entitled to work in the United States or Canada, as




 

 

 

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the case may be.  To the Company's Knowledge, the Company and its Subsidiaries have no liability for the improper classification by the Company of such employees as independent contractors or leased employees prior to the Closing.



4.15     Intellectual Property.


(a)     All Intellectual Property of the Company and its Subsidiaries is currently in material compliance with all legal requirements (including timely filings, proofs and payments of fees) and to the Company's Knowledge is valid and enforceable.  Except as disclosed in the Disclosure Letter, no Intellectual Property of the Company or its Subsidiaries which is necessary for the conduct of Company's and each of its Subsidiaries' respective businesses as currently conducted or as currently proposed to be conducted has been or is now involved in any cancellation, dispute or litigation, and, to the Company's Knowledge, no such action is threatened.  No patent of the Company or its Subsidiaries has been or is now involved in any interference, reissue, re-examination or opposition proceeding.


(b)     All of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property which are necessary for the conduct of the Company's and each of its Subsidiaries' respective businesses as currently conducted or as currently proposed to be conducted to which the Company or any Subsidiary is a party or by which any of their assets are bound (other than generally commercially available, non-custom, off-the-shelf software application programs having a retail acquisition price of less than $10,000 per license) (collectively, "License Agreements") are valid and binding obligations of the Company or its Subsidiaries that are parties thereto and, to the Company's Knowledge, the other parties thereto, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors' rights generally, and to the Company's Knowledge there exists no event or condition which will result in a material violation or breach of or constitute (with or without due notice or lapse of time or both) a default by the Company or any of its Subsidiaries under any such License Agreement.


(c)     The Company and its Subsidiaries own or to the Company's Knowledge have the valid right to use all of the Intellectual Property that is necessary for the conduct of the Company's and each of its Subsidiaries' respective businesses as currently conducted or as currently proposed to be conducted and for the ownership, maintenance and operation of the Company's and its Subsidiaries' 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 Subsidiaries' businesses.  To the Company's Knowledge, the Company and its Subsidiaries 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.


(d)     To the Company's Knowledge, the conduct of the Company's and its Subsidiaries' businesses as currently conducted does not infringe or otherwise impair or conflict with (colletively, "Infringe") any Intellectual Property




 

 

 

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rights of any third party or any confidentiality obligation owed to a third party, and, except as disclosed in the Disclosure Letter, to the Company's Knowledge, the Intellectual Property and Confidential Information of the Company and its Subsidiaries which are necessary for the conduct of Company's and each of its Subsidiaries' respective businesses as currently conducted or as currently proposed to be conducted are not being Infringed by any third party.  Except as disclosed in the Disclosure Letter, there is no litigation or order pending or outstanding or, to the Company's Knowledge, threatened or imminent, that seeks to limit or challenge or that concerns the ownership, use, validity or enforceability of any Intellectual Property or Confidential Information of the Company and its Subsidiaries and the Company's and its Subsidiaries' use of any Intellectual Property or Confidential Information owned by a third party, and, to the Company's Knowledge, there is no valid basis for the same.


(e)     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 any of its Subsidiaries' ownership or right to use any of the Intellectual Property or Confidential Information which is necessary for the conduct of Company's and each of its Subsidiaries' respective businesses as currently conducted or as currently proposed to be conducted.


(f)     The Company and its Subsidiaries have taken all commercially reasonable steps to protect the Company's and its Subsidiaries' rights in their Intellectual Property and Confidential Information.  Each employee, consultant and contractor who has had access to Confidential Information which is necessary for the conduct of Company's and each of its Subsidiaries' respective businesses as currently conducted or as currently proposed to be conducted has executed an agreement to maintain the confidentiality of such Confidential Information and has executed appropriate agreements that are substantially consistent with the Company's standard forms thereof.  Except under confidentiality obligations, there has been no material disclosure of any of the Company's or its Subsidiaries' Confidential Information to any third party.



4.16     Environmental Matters.  Neither the Company nor any Subsidiary 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"), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, and 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 in the Disclosure Letter, 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,



 

 

 

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no such actions, suits or proceedings are threatened or contemplated.


4.18     Financial Statements.  The financial statements included in each SEC Filing 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 (i) from the books and records of the Company and its Subsidiaries maintained in the ordinary course of their respective businesses and (ii) 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-QSB 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 in the Disclosure Letter, neither the Company nor any of its Subsidiaries 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.  The Company and each Subsidiary maintains in full force and effect insurance coverage that is, to the Company's Knowledge, 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, any 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 the Disclosure Letter.


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 accuracy of the Investors' representations and warranties in Section 5, the offer and sale of the Securities to the Investors as contemplated hereby is exempt from the registration and/or



 

 

 

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prospectus requirements, as the case may be, of the 1933 Act and of the securities laws and regulations in all applicable jurisdictions, including but not limited to the province of Quebec.


4.24     Questionable Payments.  Neither the Company nor any of its Subsidiaries nor, to the Company's Knowledge, any of their respective current or former stockholders, directors, officers, employees, agents or other Persons acting on behalf of the Company or any Subsidiary, has on behalf of the Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature.


4.25     Transactions with Affiliates.  Except as disclosed in the SEC Filings or as disclosed in the Disclosure Letter, none of the officers or directors of the Company and, to the Company's Knowledge, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than as holders of stock options and/or warrants, and for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the Company's Knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.


4.26     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-14 and 15d-14) 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 period 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.  Since the Evaluation Date, there have been no



 

 

 

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significant changes in the Company's internal controls (as such term is defined in Item 307(b) of Regulation S-K) or, to the Company's Knowledge, in other factors that could significantly affect the Company's internal controls.  The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with GAAP and the applicable requirements of the 1934 Act.


4.27     Disclosures.  Neither the Company nor any Person acting on its behalf has provided the Investors or their agents or counsel with any information that constitutes or might constitute material, non-public information except in accordance with the terms of the Confidentiality Agreement.  The written materials delivered to the Investors in connection with the transactions contemplated by the Transaction Documents do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.



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


5.1     Organization and Existence.  Such Investor if an entity is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement.  Each of the Investors that is an entity is organized under the laws of the jurisdiction indicated on the signature page and has its principal place of business in the jurisdiction indicated on the signature page.


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 and in compliance with the Transaction Documents.  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



 

 

 

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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 of the Securities.  Such Investor acknowledges receipt of 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.


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


(a)     "The securities represented hereby may not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state or provincial or securities laws."


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



5.8     Accredited Investor.  Such Investor is an "accredited investor" as defined in Rule 501 of Regulation D, as amended, under the 1933 Act.  The definition of "accredited investor" is annexed hereto.


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, any 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     Prohibited Transactions.  During the last thirty (30) days prior to the date hereof, neither such Investor nor any Affiliate of such Investor which (x) had knowledge of the transactions contemplated hereby, (y) has or shares



 

 

 

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discretion relating to such Investor's investments or trading or information concerning such Investor's investments, including in respect of the Securities, or (z) is subject to such Investor's review or input concerning such Affiliate's investments or trading (collectively, "Trading Affiliates") has, directly or indirectly, effected or agreed to effect any short sale, whether or not against the box, established any "put equivalent position" (as defined in Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted any other right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, relates to or derived any significant part of its value from the Common Stock or otherwise sought to hedge its position in the Securities (each, a "Prohibited Transaction").  Prior to the earliest to occur of (i) the termination of this Agreement or (ii) the Announcement Date, such Investor shall not, and shall cause its Trading Affiliates not to, engage, directly or indirectly, in a Prohibited Transaction.  In addition, until the date that this transaction is announced by the Company by filing a Form 8-K with the SEC (the "Announcement Date"), neither the Investor nor any Affiliate shall buy or sell any Common Stock or enter into any Prohibited Transaction.  Such Investor acknowledges that the representations, warranties and covenants contained in this Section 5.11 are being made for the benefit of the Investors as well as the Company and that each of the other Investors shall have an independent right to assert any claims against such Investor arising out of any breach or violation of the provisions of this Section 5.11.


Notwithstanding the foregoing, (i) in the case of an Investor that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Investor's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Investor's assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement and (ii) the term Trading Affiliate, for purposes of this Section 5.11, shall not include an investment vehicle that may otherwise be deemed to be an Trading Affiliate of the Investor for which separate portfolio managers manage such investment vehicle's assets, make investment decisions on behalf of such investment vehicle and do not have direct knowledge of the investment decisions made on behalf of the Investor.


The Company understands and acknowledges that (a) one or more Investors may engage in hedging activities at various times during the period that the Notes are outstanding, including without limitation, during the periods that the value of the Conversion Shares or Warrant Shares is being determined and (b) such hedging activities (if any) could reduce the value of the existing stockholders' equity interests in the Company at and after the time that the hedging activities are being conducted.



6.     Conditions to Closing.


6.1     Conditions to the Investors' Obligations.  The obligation of each Investor to purchase the Notes and the Warrants at the Closing is subject to the fulfillment to such Investor's satisfaction, on or prior to the Closing Date, of the following conditions, any of which may be waived by such Investor (as to itself only):



 

 

 

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(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 an earlier date, in which case such representation or warranty shall be true and correct as of such earlier 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 an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date.  The Company shall have performed in all material respects all obligations and conditions herein required to be performed or observed by it on or prior to the Closing Date.


(b)     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 Securities and the consummation of the other transactions contemplated by the Transaction Documents, all of which shall be in full force and effect.


(c)     The Company shall have executed and delivered the Transaction Documents.


(d)     The Subsidiaries shall have executed and delivered the Guaranties and the Security Documents as provided in Section 7.1 hereof (except as otherwise permitted therein).  


(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, domestic or foreign, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, domestic or foreign, 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), (g) and (k) of this Section 6.1.


(g)     The Company shall have delivered a Certificate, executed on behalf of the Company by its 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 opinions from Conrad Lysiak, Esq. and Claude Pellerin, Esq., the Company's counsel, dated as of the Closing Date, in form and substance reasonably acceptable to the Investors




 

 

 

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and addressing such legal matters as the Investors may reasonably request.


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



6.2     Conditions to Obligations of the Company.  The Company's obligation to sell and issue the Notes and the Warrants at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the 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, other than the representations and warranties contained in Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment Representations"), 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 Investment Representations shall be true and correct in all respects when made, and shall be true and correct in all 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 conditions herein required to be performed or observed by them on or prior to the Closing Date.


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


(c)     The Investors shall have delivered the Purchase Price to the Company.



6.3     Termination of Obligations to Effect Closing; Effects.


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


(i)     Upon the mutual written consent of the Company and the Investors;


(ii)     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;


(iii)     By an Investor (with respect to itself only) if any of the conditions set forth in Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the Investor; or





 

 

 

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(iv)     By either the Company or any Investor (with respect to itself only) if the Closing has not occurred on or prior to March 1, 2005;





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.


(b)     In the event of termination by the Company or any Investor of its obligations to effect the Closing pursuant to this Section 6.3, written notice thereof shall forthwith be given to the other Investors and the other Investors shall have the right to terminate their obligations to effect the Closing upon written notice to the Company and the other Investors.  Nothing in this Section 6.3 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.




7.     Covenants and Agreements of the Company.


7.1     Grant of Security Interest.  As soon as possible, and in any event within ten (10) days of the Closing Date, the Company and each of its Subsidiaries shall have (a) executed and delivered all Security Agreements, mortgages, hypothecs, pledges, financing statements and similar documents requested by the Investors so as to grant the Investors a duly perfected first priority lien and security interest in all of the assets of the Company and its Subsidiaries, including a first priority pledge of all of the capital stock of the Subsidiaries, the whole in order to secure the Obligations and (b) delivered to the Investors an opinion of counsel to the Company, in form and substance acceptable to the Investors, addressing the due grant and perfection of all such security interests and the enforceability of all Security Documents.  The Company shall not create any new subsidiaries unless it first (c) pledges the capital stock of the subsidiary to the Investors and (d) causes such new Subsidiary to become an Additional Guarantor under the Guaranties and shall execute and deliver all Security Documents that may be reasonably requested by the Investors.


7.2     Appointment of Fonde de Pouvoir.  Without limiting the powers of the Administrative Agent and the Collateral Agent hereunder and under the Transaction Documents, each Investor (for its benefit and the benefit of its affiliates), the Administrative Agent, the Collateral Agent (all such Investors (for their benefit and the benefit of their respective affiliates), Administrative Agent and Collateral Agent, are collectively called, for purposes of this Section 7.2, the "Quebec Secured Parties") and the Company hereby acknowledges and agrees that the Collateral Agent shall, for the purposes of holding any security granted by the Company and any of its Subsidiaries under the Security Documents pursuant to the laws of the Province of Quebec to secure payment of any of the Obligations, be the holder of an irrevocable power of attorney ("fonde de pouvoir") (within the meaning of Article 2692 of the Civil Code of Quebec) for all present and future Quebec Secured Parties and holders of the Notes.  Each assignee Quebec Secured Party and each assignee holder of Notes shall be deemed to have confirmed 



 

 

 

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and ratified the constitution of the Collateral Agent as the holder of such irrevocable power of attorney ("fonde de pouvoir") by execution of the relevant agreements relating to such assignment.  The Collateral Agent agrees to act in such capacity.  The parties hereto expressly waive the provisions and protection of Section 32 of An Act Respecting Special Powers of Legal Persons ("Quebec").  The Collateral Agent may acquire and be the holder of the Notes or other titles of indebtedness.  Each of the parties hereto acknowledges and agrees that the Notes constitute a title of indebtedness as such term is used in Article 2692 of the Civil Code of Quebec.  Notwithstanding Section 9.11 hereof, the provisions of this Section 7.2 shall be governed by the laws of the Province of Quebec and the federal laws of Canada applicable therein.  The Notes shall rank equally and be equally and ratably secured notwithstanding the date of their issuance by the Company or release by the Escrow Agent.  The Administrative Agent shall be Midtown Partners & Co., LLC.


7.3     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 the number of shares sufficient to permit the exercise of the Warrants issued pursuant to this Agreement in accordance with their respective terms.


7.4     Reports.  The Company will furnish to the Investors and/or their assignees such information relating to the Company and its Subsidiaries as from time to time may reasonably be requested by the Investors and/or their assignees; provided, however, that the Company shall not disclose material nonpublic information to the Investors, or to advisors to or representatives of the Investors, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Investors, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and any Investor wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto.


7.5     No Conflicting Agreements.  The Company and its Subsidiaries will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the Company's obligations to the Investors under the Transaction Documents.


7.6     Insurance.  The Company shall maintain insurance coverages in accordance with Section 4.19.


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


7.8     Listing of Underlying Shares and Related Matters.  If the Company applies to have its Common Stock or other securities traded on any other principal stock exchange or market, it shall include in such application the Conversion Shares and the Warrant Shares and will take such other action as is necessary to cause such Common Stock to be so listed.



 

 

 

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7.9     Termination of Covenants.  The provisions of Sections 7.3 through 7.6 shall terminate and be of no further force and effect upon the earlier of (i) the mutual consent of the Company and the Investors and (ii) the date on which the Company's obligations under the Registration Rights Agreement to register or maintain the effectiveness of any registration covering the Registrable Securities (as such term is defined in the Registration Rights Agreement) shall terminate.


7.10     Removal of Legends.  Upon the earlier of (i) registration for resale pursuant to the Registration Rights Agreement and receipt by the Company of the Investor's written confirmation that such Securities will not be disposed of except in compliance with the prospectus delivery requirements of the 1933 Act or (ii) Rule 144(k) becoming available the Company shall, upon an Investor's written request, promptly cause certificates evidencing the Investor's Securities to be replaced with certificates which do not bear such restrictive legends, and Conversion Shares subsequently issued upon due conversion of the Notes and Warrant Shares subsequently issued upon due exercise of the Warrants shall not bear such restrictive legends provided the provisions of either clause (i) or clause (ii) above, as applicable, are satisfied with respect to such Conversion Shares or Warrant Shares, as applicable.  When the Company is required to cause unlegended certificates to replace previously issued legended certificates, if unlegended certificates are not delivered to an Investor within five (5) Business Days of submission by that Investor of legended certificate(s) to the Company's transfer agent together with a representation letter in customary form, the Company shall be liable to the Investor for liquidated damages in an amount equal to 1.5% of the aggregate purchase price of the Securities evidenced by such certificate(s) for each thirty (30) day period (or portion thereof) beyond such five (5) Business Days that the unlegended certificates have not been so delivered.


7.11     Participation in Future Financing.  From the date hereof until twelve (12) months after the Closing Date, upon any equity financing by the Company, including an equity-linked financing such as, but not limited to, a convertible notes financing or a unit financing of notes plus warrants (a "Subsequent Financing"), the Purchasers shall have the right to participate in such Subsequent Financing.  At least ten (10) Business Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Investor a written notice of its intention to effect a Subsequent Financing ("Pre-Notice"), which Pre-Notice shall ask such Investor if it wants to review the details of such financing (such additional notice, a "Subsequent Financing Notice").  Upon the request of an Investor, and only upon a request by such Investor, for a Subsequent Financing Notice, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Investor.  The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder, the Person with whom such Subsequent Financing is proposed to be effected, and attached to which shall be a term sheet or similar document relating thereto.  If by 6:30 p.m. (New York City time) on the tenth day after all of the Investors have received the Pre-Notice, notifications by the Investors of their willingness to participate in the Subsequent Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may effect the remaining portion of such Subsequent Financing on the terms and to the Persons set forth in the Subsequent Financing Notice.  If the Company receives no notice from a Investor as



 

 

 

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of such tenth day, such Investor shall be deemed to have notified the Company that it does not elect to participate.  The Company must provide the Investors with a second Subsequent Financing Notice, and the Investors will again have the right of participation set forth above in this Section 7.10, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within sixty (60) Business Days after the date of the initial Subsequent Financing Notice. In the event the Company receives responses to Subsequent Financing Notices from Investors seeking to purchase more than the aggregate amount of the Subsequent Financing, each such Investor shall have the right to purchase their Pro Rata Portion (as defined below) of the amount of the Subsequent Financing.  "Pro Rata Portion" is the ratio of (x) the Subscription Amount of Securities purchased by a participating Investor and (y) the sum of the aggregate Subscription Amount of all participating Investors.  Notwithstanding the foregoing, this Section 7.10 shall not apply in respect of an Exempt Issuance.


7.12     Most Favored Nation Exchange.  From the date hereof until the date twenty four (24) months after the Closing Date, if the Company consummates a Subsequent Financing, the Investors shall have the right to exchange the principal amount of any Notes held by them at their face value, for any of the securities issued in the Subsequent Financing at the Subsequent Financing price.  Interest accrued to the date of such exchange shall be paid by the Company to the Investors within three (3) Business Days of the date of the exchange.



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 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.


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



 

 

 

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 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 such Indemnified Person 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.     Miscellaneous.


9.1     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 consent of the Company or the other Investors, after written 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.


9.2     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.


9.3     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.


9.4     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



 

 

 

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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, and (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.  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:


C-Chip Technologies Corporation

4710 St. Ambroise

Suite 227

Montreal, Quebec

Canada H4C 2C7


Attention:     

Fax:     



With a copy to:


 

 

Attention:  

Fax:  



If to the Investors:




to the addresses set forth on the signature pages hereto.


9.5     Expenses.  The parties hereto shall pay their own costs and expenses in connection herewith, except that the Company shall pay the reasonable fees and expenses of Lowenstein Sandler PC, not to exceed $40,000, and Stikeman Elliott LLP, special Canadian counsel, and shall reimburse the Investors for all other reasonable out-of-pocket expenses incurred by the Investors in connection with the transactions contemplated hereby.  Such expenses shall be paid not later than the Closing.  The Company shall reimburse the Investors upon demand for all reasonable out-of-pocket expenses incurred by the Investors, including without limitation reimbursement of fees and disbursements of one counsel for the Investors, in connection with any amendment, modification or waiver of this Agreement or the other Transaction Documents as may be requested by the Company.  In the event that legal proceedings are commenced by any party to this Agreement against another party to this Agreement in connection with this Agreement or the other Transaction Documents, the party or parties which do not prevail in such proceedings shall severally, but not jointly, pay their pro rata share of the reasonable attorneys' fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.



 

 

 

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9.6     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 the Required Investors.  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.


9.7     Publicity.  Except as set forth below, 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 Investors (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.  By 8:30 a.m. (New York City time) on the trading day immediately following the Closing Date, the Company shall issue a press release disclosing the consummation of the transactions contemplated by this Agreement.  No later than the third trading day following the Closing Date, the Company will file a Current Report on Form 8-K attaching the press release described in the foregoing sentence as well as copies of the Transaction Documents.  In addition, the Company will make such other filings and notices in the manner and time required by the SEC or Nasdaq.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or include the name of any Investor in any filing with the SEC (other than the Registration Statement and any exhibits to filings made in respect of this transaction in accordance with periodic filing requirements under the 1934 Act) or any regulatory agency or Nasdaq, without the prior written consent of such Investor, except to the extent such disclosure is required by law or trading market regulations, in which case the Company shall provide the Investors with prior notice of such disclosure.


9.8     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.


9.9     Entire Agreement.  This Agreement, including the Exhibits and the Disclosure Letter, 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, except for the Confidentiality Agreement which shall remain in full force and



 

 

 

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effect to the extent that any provisions of the Confidentiality Agreement do not conflict with any disclosure requirements of the Company pursuant to any state or federal securities laws.


9.10     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.


9.11     U.S. Dollars; Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  All currency and dollars amounts referred to in this Agreement shall be United States dollars.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.  Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.


9.12     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 



 

 

 

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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.



[signature page follows]


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


	
The Company:
	
C-CHIP TECHNOLOGIES CORPORATION

	 
	 
	 
	 	
By:
	
____________________________________

	 	 	
Name:  

	 	 	
Title:  





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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The Investors:

	 
	 
	 
	 	
By:
	
_________________________

	 	 	
Name:

	 	 	
Title:

	 
	
Aggregate Purchase Price:  $

	
Principal Amount of Notes:  $

	
Number of Warrants:  

	 
	
Principal Place of Business:

	 
	
Jurisdiction of Incorporation

	
or Organization:

	 
	 
	
Address for Notice:

	 
	 
	 
	 
	 	
Attention:  

	 
	 	
with a copy to:

	 
	 	 
	 
	 
	 	
Attn:  

	 	
Telephone:
	 
	 	
Facsimile:
	 
	
Account information for payments:

	
Bank:





 

 

[other investors]


 

 

 

 

 

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Definition of "Accredited Investor"


	
Category A 
	
___
	
The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000.

	 	 
	
Category B
	
___
	
The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year.

	 	 
	
Category C 
	
___
	
The undersigned is a director or executive officer of the Company which is issuing and selling the securities.

	 	 
	
Category D 
	
___
	
The undersigned is a bank; a savings and loan association; insurance company; registered investment company; registered business development company; licensed small business investment company ("SBIC"); or employee benefit plan within the meaning of Title 1 of ERISA and (a) the investment decision is made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment advisor, or (b) the plan has total assets in excess of $5,000,000 or (c) is a self directed plan with investment decisions made solely by persons that are accredited investors. 

	 	 	 
	
Category E
	
___
	
The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advisors Act of 1940. ( 

	 	 
	
Category F 
	
___
	
The undersigned is either a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Securities and with total assets in excess of $5,000,000.

	 	 
	
Category G 
	
___
	
The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, where the purchase is directed by a "sophisticated investor" as defined in Regulation 506(b)(2)(ii) under the Act.

	 	 
	
Category H 
	
___
	
The undersigned is an entity (other than a trust) in which all of the equity owners are "accredited investors" within one or more of the above categories.  If relying upon this Category alone, each equity owner must complete a separate copy of this Agreement.





 

 

 

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SCHEDULE I


	
Wire Instructions:

	 
	 
	
LOWENSTEIN SANDLER PC

	
Attorney Trust Account

	 
	
Wire Room of:
	
Bank of America

	 	
Morristown, NJ

	 
	 	
ABA # 021300019

	 
	
For credit to:
	
Lowenstein Sandler PC

	 	
Attorney Trust Account

	 	
IOLTA

	 
	 	
Account # 999-021-443

	 	
sub account # 8 0475 _

	 
	
For International wires please use:
	
SWIFT Code: FNBBUS33





 

 

 

 

 

 

 

 

 

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