Document:

ex4-11.htm

Exhibit 4.11

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

NATIONAL HOLDINGS CORPORATION

WARRANT TO PURCHASE COMMON STOCK

 

	Warrant No. Series C-2010-__	Dated: October 5, 2010

 

NATIONAL HOLDINGS CORPORATION, a Delaware corporation (the “Company”), hereby certifies that, for value received, ____________________ or his Permitted Transferees (as hereinafter defined) (the “Holder”), is entitled to purchase from the Company up to a total of _____________________________________ (______) shares of common stock, par value $0.02 per share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares issuable under the warrants, the “Warrant Shares”) at an exercise price of $0.50 (as adjusted from time to time as provided in Section 9, the “Exercise Price”), subject to the terms and conditions contained herein.

 

In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in that certain Securities Purchase Agreement, dated July 12, 2010 (the “Purchase Agreement”), pursuant to which the Company offered units (the “Units”) consisting of shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”) and warrants exercisable for shares of Common Stock of the Company.

 

1.      Vesting.

 

(a)           Vesting; Exercise Period.  Subject to the terms and conditions of this Warrant Certificate, the Warrants shall vest upon the date first written above(“Issuance Date”) and the first and second anniversary date (each an “Anniversary”) of the Issuance Date (each a "Vesting Date") and shall be exercisable for a period of five years following such vesting (“Exercise Period”), in each case in accordance with the following schedule:

 

	
Vesting Date

	
Incremental Vesting

	
Total Vested

	
Exercise Period

	
October 5, 2010

	
33 1/3%

	
33 1/3%

	
10.5.10-10.5.15

	
October 5, 2011

	
33 1/3%

	
66 2/3%

	
10.5.11 -10.5.16

	
October 5, 2012

	
33 1/3%

	
100%

	
10.5.12 -10.5.17

  

  

  

 

provided, however that effective five (5) business days immediately prior to the record date of a Business Combination (as defined herein) all unvested amounts of the Warrants shall immediately vest and constitute vested Warrants and the Holder accordingly shall have the right to exercise all or any portion of the entire Warrant immediately on or after such date and prior to or after the closing of the Business Combination and the Exercise Period for such Warrants shall end the earlier of (i) the latest date shown under “Exercise Period” in the above table or (ii) five (5) years from the closing of the Business Combination.  A “Business Combination” means any merger, consolidation or combination of the Corporation with or into any other corporation or entity, or any acquisition by the Corporation of all or substantially all the assets or securities of, or majority voting or economic interest in, any other corporation or other entity, or whether by merger, tender offer, asset purchase, stock purchase, or like combination or consolidation.

2.           Registration of Warrant.  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

3.           Registration of Transfers.  To the extent that the Company approves a transfer of this Warrant, the Company shall register the transfer and/or assignment of any portion of this Warrant (a “Permitted Transferee”) in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company’s transfer agent or to the Company at its address specified herein.  Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the Permitted Transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder.  The acceptance of the New Warrant by the Permitted Transferee thereof shall be deemed the acceptance by such Permitted Transferee of all of the rights and obligations of a holder of a Warrant.  The following persons or entities shall be deemed Permitted Transferees without the requirement of any prior or other approval of the Company: (a) in the case of a Holder that is an individual (i) a transferee receiving this Warrant by inter vivos gift or transfer or estate or tax planning purposes, or death by will or intestacy, in either case, to the Holder’s immediate family or to a trust, the beneficiaries of which are exclusively the Holder and a member or members of the Holder’s immediate family or (ii) a transferee which is any entity controlled by the Holder or (b) in the case of a Holder that is an entity, a transferee that is a successor via any transaction to all or substantial all of such Holder’s assets.

 

4.           Exercise and Duration of Warrants.

 

(a)           This Warrant shall be exercisable by the registered Holder at any time and from time to time during the applicable Exercise Period set forth in Section 1(a) of this Warrant (the final date of the applicable Exercise Period, the “Expiration Date”).  At 5:00 p.m., (New York City time) on the Expiration Date, the applicable portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and no longer be outstanding.

 

(b)           The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the “Exercise Notice”), appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “Cashless Exercise” if so indicated in the Exercise Notice pursuant to Section 10 below), and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.”

 

  

2

  

 

(c)           Exercise Disputes.  In the case of any dispute with respect to the number of shares to be issued upon exercise of this Warrant, the Company shall promptly issue such number of shares of Common Stock that is not disputed and shall submit the disputed determinations or arithmetic calculations to the Holder via fax (or, it the Holder has not provided the Company with a fax number, by overnight courier) within three (3) Business Days of receipt of the Holder’s election to purchase Warrant Shares.  If the Holder and the Company are unable to agree as to the determination of the Exercise Price within three (3)Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall in accordance with this Section, submit via facsimile the disputed determination to an independent, reputable outside accountant jointly determined by the Company and the Holder.  The Company shall cause such accountant to perform the determinations or calculations and notify the Company and the Holder of the results promptly, in writing and in sufficient detail to give the Holder and the Company a clear understanding of the issue.  The determination by such accountant shall be binding upon all parties absent manifest error.  The Company shall then on the next Business Day instruct its transfer agent to issue certificate(s) (or issue by electronic means through Depository Trust Corporation (“DTC”) or another established clearing corporation performing similar functions, if available) representing the appropriate number of Warrant Shares of Common Stock in accordance with such accountant’s determination and this Section.  The prevailing party shall be entitled to reimbursement of all fees and expenses of such determination and calculation.

 

5.           Delivery of Warrant Shares.

 

(a)           Upon exercise of this Warrant, the Company shall promptly (but in no event later than three (3) Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares to which the Holder is entitled upon such exercise, free of restrictive legends unless a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely transferable pursuant to Rule 144 under the Securities Act.  To the extent the Warrant Shares may be issued free of restrictive legends as set forth above, upon request of the Holder, the Company shall use its best efforts to deliver Warrant Shares hereunder electronically through DTC or another established clearing corporation performing similar functions.  For the purposes hereof, the term “Trading Day” means (a) any day on which the Common Stock is listed or quoted and traded on its primary trading market and/or quotation system, as the case may be, (b) if the Common Stock is not then listed or quoted and traded on any trading market, then a day on which trading occurs on the Nasdaq Capital Market (or any successor thereto), or (c) if trading ceases to occur on the Nasdaq Capital Market (or any successor thereto), any Business Day.

 

(b)           This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares.  Upon surrender of this Warrant following one or more partial exercises, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.

 

(c)           The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant  as required pursuant to the terms hereof.

 

  

3

  

 

(d)           Company’s Failure to Timely Deliver Securities.  If, and only if, in the event that the Warrant Shares are registered under the Securities Act of 1933, as amended, the Company shall fail, for any reason or for no reason, to issue to the Holder within the later of three (3) Trading Days after receipt of the applicable Exercise Notice (the “Share Delivery Deadline”), a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be), and if on or after such Share Delivery Deadline the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock times (B) the closing sale price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice.

 

6.           Charges, Taxes and Expenses.  Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

7.           Replacement of Warrant.  If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable bond or indemnity, if requested.  Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe.

 

8.           Reservation of Warrant Shares.  The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (after giving effect to the adjustments and restrictions of Section 9, if any). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.  The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed.

 

  

4

  

 

9.           Certain Adjustments.  The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.

 

(a)           Stock Dividends and Splits.  If the Company, at any time while this Warrant is outstanding, subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) the shares of Common Stock acquirable hereunder into a greater number of shares, then, after the date of record for effecting such subdivision, the Warrant Shares issuable upon exercise of this Warrant will be proportionately increased and the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced.  If the Company at any time combines (by any reverse stock split, recapitalization, reorganization, reclassification or otherwise) the shares of Common Stock acquirable hereunder into a smaller number of shares, then, after the date of record for effecting such combination, the Warrant Shares issuable upon exercise of this Warrant will be proportionately reduced and the Exercise Price in effect immediately prior to such combination will be proportionately increased.

 

(b)           Adjustments for Other Distributions.  In the event the Company at any time or from time to time makes, or files a record date for the determination of holders of Common Stock entitled to receive any distribution payable in securities or assets of the Company other than shares of Common Stock, then and in each such event, provision shall be made so that the holder of this Warrant shall receive upon exercise thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of securities or assets of the Company which they would have received had their Warrant been exercised into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the date of conversion, retained such securities or assets receivable by them as aforesaid during such period, subject to all other adjustment called for during such period under this Section 9(b) with respect to the rights of the holders of the Warrants.

 

(c)           Adjustments for Reclassification, Exchange and Substitution.  If the Common Stock issuable upon exercise of this Warrant shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), then and in each such event the holder of this Warrant shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization or reclassification or other change by holders of the number of shares of Common Stock that would have been subject to receipt by the holder upon exercise of this Warrant immediately before that change, all subject to further adjustment as provided herein.

 

(d)           Consolidation, Merger or Sale.  In case of any consolidation of the Company with, or merger of the Company with or into one or more other corporations or entities, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the Holder of this Warrant will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place.  In any such case, the Company will make appropriate provision to insure that the provisions of this Section 9(d) will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant.  The Company will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Company) assumes by written instrument the obligations under this Section 9(d) and the obligations to deliver to the Holder of this Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to acquire.

 

  

5

  

 

(e)           Distribution of Assets.  In case the Company shall declare or make any distribution of its assets (including cash) to holders of Common Stock as a partial liquidating dividend, by way of return of capital or otherwise, then, after the date of record for determining shareholders entitled to such distribution (on an “as converted” basis, as though all Warrants had been converted into Common Stock immediately prior to the dividend declaration date), the Holder of this Warrant shall be entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets which would have been payable to the Holder had the Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such distribution.

 

(f)           Additional Issuances of Equity Securities.  If the Company, at any time from the date of issuance of this Warrant through and including March 31, 2011, shall issue or sell any Equity Securities (as defined below) for no consideration or at an effective price per share less than the then effective Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of the Equity Securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the  then effective Exercise Price, such issuance shall be deemed to have occurred for less than the then effective Exercise Price on such date of the Dilutive Issuance), then, the Exercise Price shall be reduced and only reduced to equal the Base Share Price.  Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 9(b) in respect of Exempt Issuances (as defined below).  The Company shall notify the Holder in writing as promptly as reasonably possible following the issuance of any Equity Securities subject to this section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 9(b), upon the occurrence of any Dilutive Issuance while this Warrant is outstanding, after the date of such Dilutive Issuance the Holder is entitled to the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Exercise Notice.

 

For purposes of this Section 9(b), the following definitions shall apply:

 

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

 

“Equity Securities” means (i) Common Stock and (ii) Common Stock Equivalents.

 

  

6

  

“Exempt Issuance” means an issuance of Equity Securities in the manner contemplated by Section (H) of Article VIII of the Series C Certificate of Designation.

(g)           Effect on Exercise Price of Certain Events.  For purposes of determining the adjusted Exercise Price, the following will be applicable:

 

(i)           Issuance of Rights or Options.  If the Company in any manner issues or grants any warrants (other than the Warrants issued pursuant to the Purchase Agreement), rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or Convertible Securities (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter collectively referred to in this Section 9(g) as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Exercise Price on the date of issuance or grant of such Options, then the maximum total number of shares of Common Stock issuable upon the exercise of all such Options will, as of the date of the issuance or grant of such Options, be deemed to be outstanding and to have been issued and sold by the Company for such price per share.  For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount of cash, if any, received or receivable by the Company as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Options, plus, in the case of Convertible Securities (as hereinafter defined) issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion or exchange of Convertible Securities, if applicable).  No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

 

(ii)           Issuance of Convertible Securities.  If the Company in any manner issues or sells any other series or classes of Preferred Stock (other than the Series C Preferred Stock, but including, without limitation, shares of Series B Preferred Stock ) or other securities that are convertible into or exchangeable for Common Stock (“Convertible Securities”), whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Exercise Price on the date of issuance, then the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be deemed to be outstanding and to have been issued and sold by the Company for such price per share.  For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount of cash, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities.  No further adjustment to the Series C Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

(iii)           Change in Option Price or Conversion Rate.  If there is a change at any time in (i) the amount of additional consideration payable to the Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the conversion or exchange of any Convertible Securities; or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock (other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time of such change will be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold.

 

  

7

  

 

(iv)           Calculation of Consideration Received.  If any Common Stock, Options or Convertible Securities are issued, granted or sold for cash, the consideration received therefor for purposes hereof will be the amount received by the Company therefor, before deduction of reasonable commissions, underwriting discounts or allowances or other reasonable expenses paid or incurred by the Company in connection with such issuance, grant or sale.  In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Market Price (as defined in Article II of the Series C Certificate of Designation) thereof as of the date of receipt.  In case any Common Stock, Options or Convertible Securities are issued in connection with any acquisition, merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Options or Convertible Securities, as the case may be.  The fair value of any consideration other than cash or securities will be determined in good faith by the Board of Directors of the Company.

 

(h)           The Company will not by reorganization, transfer of assets, consolidation, merger, dissolution, or otherwise, avoid or seek to avoid observance or performance of any of the terms of this Section 9, but will at all times in good faith assist in the carrying out and performance of all provisions of this Section 9 in order to protect the rights of the Holder against impairment.

 

(i)           Number of Warrant Shares.  Simultaneously with any adjustment to the Exercise Price pursuant to this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, as applicable, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased, as applicable, number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

 

(j)           Calculations.  All calculations under this Section 9 shall be made to the nearest cent or the nearest share, as applicable.  The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

 

(k)           Notice of Adjustments.  Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based.  Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s Transfer Agent.

 

(l)           Minimum Adjustment of Exercise Price.  No adjustment of the Exercise Price shall be made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than 1% of such Exercise Price.

 

  

8

  

 

(m)           No Fractional Shares.  No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the average Market Price per share of the Common Stock for the five (5) Trading Days immediately prior to the date of such exercise.

 

(n)           Other Notices.  In case at any time:

 

(i)            the Company shall declare any dividend upon the Common Stock payable in shares of stock of any class or make any other distribution (including dividends or distributions payable in cash out of retained earnings) to the holders of the Common Stock;

 

(ii)            the Company shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights;

 

(iii)           there shall be any capital reorganization of the Company, or reclassification of the Common Stock, or consolidation or merger of the Company with or into, or sale of all or substantially all its assets to, or business combination with or into one or more other corporations or entities;

 

(iv)           there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

 

then, in each such case, the Company shall give to the Holder of this Warrant (a) written notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, business combination, liquidation or winding-up of the Company, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place.  Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, business combination liquidation, or winding-up, as the case may be.  Such notice shall be given at least thirty (30) days prior to the record date or the date on which the Company’s books are closed in respect thereto.  Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above.

 

10.           Payment of Exercise Price.  The Holder shall pay the Exercise Price in immediately available funds (a “Cash Exercise”); or the Holder may satisfy its obligation to pay the Exercise Price through a “Cashless Exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

 

	  	
X = Y [(A-B)/A]

	
where:

	  
	  	
X = the number of Warrant Shares to be issued to the Holder.

	  	  
	  	
Y = the number of Warrant Shares with respect to which this Warrant is being exercised (prior to cashless exercise).

	  	  
	  	
A = the average of the Closing Prices for the five (5) Trading Days immediately prior to (but not including) the Exercise Date.

	  	  
	  	
B = the Exercise Price.

 

  

9

  

 

For purposes of this Section 10, “Closing Prices” for any date, shall mean the closing price per share of the Common Stock for such date (or the nearest preceding date) on the primary trading market on which the Common Stock is then listed or quoted.

 

11.           Intentionally Deleted.

 

12.           Fractional Shares.  The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant.  In lieu of any fractional shares which would  otherwise be issuable, the Company shall pay the Holder entitled to such fractional Warrant Share a sum in cash equal to such fraction (calculated to the nearest 1/100th of a Warrant Share) multiplied by the then effective Exercise Price.

 

13.           Notices.  Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Subscription Agreement prior to 5:00 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Subscription Agreement on a day that is not a Trading Day or later than 5:00 p.m. (New York City time) on any Trading Day, (iii) the Trading Day following the date of mailing if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices or communications shall be as set forth in the Purchase Agreement.

 

14.           Warrant Agent.  The Company shall serve as warrant agent under this Warrant.  Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent.  Any corporation and/or other entity into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party shall be a successor warrant agent under this Warrant without any further act.  Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

 

15.           Miscellaneous.

 

(a)           Subject to the restrictions on transfer set forth on the first page hereof, this Warrant may be transferred or assigned by the Holder to a Permitted Transferee pursuant to Section 3, provided that, among other things, the Permitted Transferee covenants to be bound by the terms hereof.  This Warrant may not be assigned by the Company, except to a successor in the event of a Fundamental Transaction.  This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns.  Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.

 

  

10

  

 

(b)           The Company will not, by amendment of its governing documents or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, seek to call or redeem this Warrant or avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against dilution or other impairment.  Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, (ii) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares, free from all taxes, liens, security interests, encumbrances, preemptive or similar rights and charges of stockholders (other than those imposed by the Holders), on the exercise of the Warrant, and (iii) will not close its stockholder books or records in any manner which interferes with the timely exercise of this Warrant.

 

(c)           Remedies; Specific Performance.  The Company acknowledges and agrees that there would be no adequate remedy at law to the Holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant and accordingly, the Company agrees that, in addition to any other remedy to which the Holder may be entitled at law or in equity, the Holder shall be entitled to seek to compel specific performance of the obligations of the Company under this Warrant, without the posting of any bond, in accordance with the terms and conditions of this Warrant in any court of the United States or any State thereof having jurisdiction, and if any action should be brought in equity to enforce any of the provisions of this Warrant, the Company shall not raise the defense that there is an adequate remedy at law.  Except as otherwise provided by law, a delay or omission by the Holder hereof in exercising any right or remedy accruing upon any such breach shall not impair the right or remedy or constitute a waiver of or acquiescence in any such breach.  No remedy shall be exclusive of any other remedy.  All available remedies shall be cumulative.

 

(d)           Amendments and Waivers.  The Company may, without the consent of the Holders (but with written notice to the Holders), by supplemental agreement or otherwise, (i) make any changes or corrections in this Agreement that are required to cure any ambiguity or to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein or (ii) add to the covenants and agreements of the Company for the benefit of the Holders (including, without limitation, reduce the Exercise Price or extend the Expiration Date), or surrender any rights or power reserved to or conferred upon the Company in this Agreement; provided that, in the case of (i) or (ii), such changes or corrections shall not adversely affect the interests of Holders of then outstanding Warrants in any material respect.  This Warrant may also be amended or waived with the consent of the Company and the Holder.  Further, the Company may, with the consent, in writing or at a meeting, of the Holders of the then outstanding Warrants exercisable for at least fifty percent (50%) of the Common Stock issuable upon exercise of such Warrants (the “Required Holders”), amend in any way, by supplemental agreement or otherwise, this Warrant and/or all of the outstanding Warrants; provided, however, that (i) no such amendment by its express terms shall adversely affect any Holder differently than it affects all other Holders, unless such Holder consents thereto, and (ii) no such amendment concerning the number of Warrant Shares or Exercise Price shall be made unless any Holder who will be affected by such amendment consents thereto.  If a new warrant agent is appointed by the Company, it shall at the request of the Company, and without need of independent inquiry as to whether such supplemental agreement is permitted by the terms of this Section 16(d), join with the Company in the execution and delivery of any such supplemental agreements, but shall not be required to join in such execution and delivery for such supplemental agreement to become effective.

 

  

11

  

 

(e)           Governing Law; Venue; Waiver of Jury Trial. This Warrant shall be governed by and construed exclusively in accordance with the internal laws of the State of New York without regard to the conflicts of laws principles thereof. The parties hereto hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to, arising out of or under this Warrant, shall be brought solely and exclusively in a federal or state court located in the City, County and State of New York. By its execution hereof, the parties hereby expressly covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agree that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in New York City. The parties hereto expressly and irrevocably waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding (including, but not limited to, any motions made), the party prevailing therein shall be entitled to payment from the other party hereto of its reasonable counsel fees and disbursements. The Company and Holders hereby waive all rights to a trial by jury.

 

(f)           Headings.  The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

 

(g)          Partial Invalidity.  In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

 

	 	
NATIONAL HOLDINGS CORPORATION

	 
	 	 	 	 
	
 

	
By: 

	/S/ MARK GOLDWASSER	 
	 	 	
Name: Mark Goldwasser

	 
	 	 	
Title: Chief Executive Officer

	 
	 	 	 	 

 

  

12

  

 

FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

 

To:  NATIONAL HOLDINGS CORPORATION

 

The undersigned is the Holder of Warrant No. _______ (the “Warrant”) issued by National Holdings Corporation, a Delaware corporation (the “Company”).  Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.

 

	
  

	
(a)

	
The Warrant is currently exercisable to purchase a total of ______________ Warrant Shares.

 

	
  

	
(b)

	
The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares pursuant to the Warrant.

 

	
  

	
(c)

	
The holder shall make payment of the Exercise Price as follows (check one):

 

_______________ “Cash Exercise” under Section 10.

 

_______________ “Cashless Exercise” under Section 10.

 

	
  

	
(d)

	
If the holder is making a Cash Exercise, the holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant.

 

	
  

	
(e)

	
Pursuant to this exercise, the Company shall deliver to the holder ______________ Warrant Shares in accordance with the terms of the Warrant.

 

	
  

	
(f)

	
Following this exercise, the Warrant shall be exercisable to purchase a total of ______________ Warrant Shares.

 

	
  

	
(g)

	
Notwithstanding anything to the contrary contained herein, this Exercise Notice shall constitute a representation by the Holder that, after giving effect to the exercise provided for in this Exercise Notice, the Holder (together with its affiliates) will not have beneficial ownership (together with the beneficial ownership of such Person’s affiliates) of a number of shares of Common Stock which exceeds the Maximum Percentage of the total outstanding shares of Common Stock as determined pursuant to the provisions of Section 11 of the Warrant.

 

	
  

	
(h)

	
The Holder represents that, as of the date of exercise:

 

	
  

	
i.

	
the Warrant Shares being purchased pursuant to this Exercise Notice are being acquired solely for the Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale; and

 

	
  

	
ii.

	
the Holder is an “accredited investor” as such term is defined in Rule 501(a)(1) of Regulation D promulgated by the U.S. Securities and Exchange Commission under the Securities Act.

 

  

13

  

 

	
  

	
(i)

	
If the Holder cannot make the representations required in Section (h)(ii) above because it is factually incorrect, it shall be a condition to the exercise of the Warrant that the Company receive such other representations as the Company considers necessary, acting reasonably, to assure the Company that the issuance of securities upon exercise of this Warrant shall not violate any United States or other applicable securities laws.

 

	
Dated: ____________________ , ________

	
Name of Holder:

	 	 
	  	  	 	
(Print)

	 
	  	  	 	  	 
	  	
By:

	 	 	 
	  	
Name:

	 	 	 
	  	
Title:

	 	 	 
	  	(Signature must conform in all respects to name of holder as specified on the face of the Warrant)

 

  

14

  

 

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase  ____________ shares of Common Stock of National Holdings Corporation to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of National Holdings Corporation with full power of substitution in the premises.

 

The undersigned transferee agrees to be bound by the covenants of the Warrant Holder during the term of the Warrant.

 

The undersigned transferee agrees represents and warrants that:

 

	
  

	
i.

	
the Warrant Shares being purchased pursuant to this Assignment are being acquired solely for the transferee’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale; and

	
  

	
ii.

	
the undersigned transferee is an “accredited investor” as such term is defined in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act.

 

If the undersigned transferee cannot make the representations required in clause (ii) above because it is factually incorrect, it shall be a condition to the transfer of the Warrant that the Company receive such other representations as the Company considers necessary, acting reasonably, to assure the Company that the transfer this Warrant shall not violate any United States or other applicable securities laws.

 

	
Dated: ____________________ , ________

	 	 	 	 
	  	 	
(Signature must conform in all respects to name of holder as specified on the face of the Warrant)

	  	 	  	 	  	 
	  	 	
 

	 
	 	 	
Address of Transferee

	 
	  	 	 	 
	  	 	 	 
	 	 	 	 
	
In the presence of:

	 	 	 
	 	 	
Signature of Transferee

	 	 	 
	 	 	 

 

15ex10-37.htm

Exhibit 10.37

 

 

NATIONAL HOLDINGS CORPORTATION

 

SECURITIES PURCHASE AGREEMENT

 

DATED AS OF

 

September 29, 2010

 

with respect to

 

SALE OF

 

SERIES D PREFERRED STOCK AND COMMON STOCK PURCHASE WARRANTS

 

 

  

  

  

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of September 29, 2010, is entered into by and among National Holdings Corporation, a Delaware corporation (the “Company”), and the individuals and entities listed on Exhibit A hereto under the heading “Purchasers” (the “Purchasers”) who become parties to this Agreement by executing and delivering a financing signature page in the form attached hereto as Exhibit B (the “Financing Signature Page”). A certain Initial Purchaser (designated on Exhibit A hereto) will be afforded the additional rights set forth herein and is referred to here as the “Lead Investor.”

 

WHEREAS, the Purchasers wish to purchase from the Company, and the Company wishes to sell and issue to the Purchasers, upon the terms and conditions stated in this Agreement, (i) an aggregate of up to 100,000 shares (the “Shares”) of a newly created class of Series D Preferred Stock (the “Series D Preferred Stock”) convertible into shares of the Company’s common stock, $0.02 par value per share (the “Common Stock”), at purchase price of $50.00 per Share and (ii) warrants (the “Warrants”) to purchase an aggregate of up to 10,000,000 shares of Common Stock (subject to adjustment) (“Warrant Shares”), at an exercise price of $0.50 per share (subject to adjustment), upon the terms and conditions set forth in this Agreement;  and

WHEREAS, the Shares, the Warrants and the Warrant Shares issued pursuant to this Agreement are collectively referred to herein as the “Units.”

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

 

1.           Authorization; Sale of Units.

 

1.1           Authorization.  The Company has, or before the Closing (as defined in Section 2.2) will have, duly authorized the sale and issuance, pursuant to the terms of this Agreement, of the Units.

 

1.2           Sale of Units.  Subject to the terms and conditions of this Agreement, at the Closing, the Company will sell and each of the Purchasers will purchase, severally and not jointly, the Units in the denominations set forth on Exhibit A attached hereto.  The rights, designations and privileges of the Series D Preferred Stock are set forth in the certificate of designations (“Series D Certificate of Designations”), a true and correct copy of which is attached hereto as Exhibit C.  The form of the Warrant is attached hereto as Exhibit D.

 

2.           Purchase Price; Closing.

 

2.1           Payment of the Purchase Price.  The aggregate purchase price (the “Purchase Price”) to be paid by the Purchasers to the Company to acquire the Units will be up to $5,000,000.

 

  

  

  

2.2           The Initial Closing.  Subject to the terms and conditions of this Agreement, the initial closing (the “Initial Closing”) of the sale and purchase of Units under this Agreement will take place at the offices of Littman Krooks LLP, 655 Third Avenue, New York, New York 10017 (or remotely via the exchange of documents and signatures) on the date of this Agreement (the “Initial Closing Date”).  At the Initial Closing:

 

(a)           the Company will deliver to each of the Initial Purchasers, such number of Shares and Warrants set forth on the signature pages attached hereto, which will be reflected opposite such Investor’s name on Exhibit A attached hereto; and

 

(b)           each Initial Purchaser will pay directly to the Company, by wire transfer of immediately available funds, the Purchase Price for the Units being purchased by such Initial Purchaser.

 

2.3           Additional Closings.  Additional sales of Units not sold at the Initial Closing may be made by the Company to the Additional Purchasers at one or more closings (each, an “Additional Closing”), up to and including October 31, 2010.  Each Additional Closing and the Initial Closing are collectively referred to as the “Closings” and the date of each Additional Closing and the Initial Closing are collectively referred to as the “Closing Dates.”  Each Additional Closing will take place at the offices of Littman Krooks LLP, 655 Third Avenue, New York, NY 10017 (or remotely via the exchange of documents and signatures).  At each Additional Closing, (i) each Additional Purchaser purchasing Units at such Additional Closing will execute and deliver a Financing Signature Page, and upon acceptance by the Company of such Financing Signature Page, such Additional Purchaser will become a “Purchaser” hereunder, (ii) the Company will issue and deliver to each Additional Purchaser who purchases Units at such Additional Closing such number of Shares and Warrants being purchased at such Additional Closing by such Additional Purchaser against payment to the Company of the Purchase Price for the Units being purchased by such Additional Purchaser and (iii) the Company will cause Exhibit A hereto to be amended to include each Additional Purchaser and all corresponding information specified in each such Exhibit (the “Revised Exhibit”).  The Purchase Price will be paid directly to the Company, by wire transfer of immediately available funds.

 

3.           Representations of the Company. To induce the Purchasers to enter into this Agreement and to purchase the Units, the Company hereby warrants, represents and covenants to the Purchasers as set forth below in this Section 3.  Except as set forth in the SEC Documents (as defined below) filed by the Company with the Securities and Exchange Commission (the “SEC”), the Company represents and warrants to the Purchasers that as of the Closing Date:

 

3.1           Due Organization and Qualification.  Each of the Company and its Subsidiaries (which for purposes of this Agreement is defined as the subsidiaries of the Company listed on Exhibit 21 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2009) is an entity duly organized and validly existing and in good standing under the laws of the jurisdiction in which it is formed, and has the requisite power and authorization to own its properties and to carry on its business as now being conducted and as presently proposed to be conducted.  Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.  As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects (to the extent disclosed in the SEC Documents) of the Company or any Subsidiary, either individually or taken as a whole, (ii) the transactions contemplated hereby or (iii) the authority or ability of the Company to perform any of its obligations hereunder.  Other than the Subsidiaries, the Company owns no interest, directly or indirectly, in any corporation, partnership, joint venture, limited liability company or other entity.

 

  

-2-

  

 

3.2           Power and Authority.  The Company has the requisite corporate power and authority to execute and deliver this Agreement and the Units and to perform its obligations hereunder and thereunder.  The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Company.  This Agreement has been duly executed and delivered by the Company and is the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, moratorium, insolvency, reorganization or other similar laws now or hereafter in effect generally affecting the enforcement of creditors’ rights, specific performance, injunctive or other equitable remedies.

 

3.3           Valid Issuance.  The Series D Preferred Stock, the Warrants, the shares of Common Stock issuable upon conversion of the Series D Preferred Stock (“Conversion Shares”) and the shares of Common Stock issuable upon exercise of the Warrants (“Warrant Shares”) have been duly and validly authorized.  When issued, the Series D Preferred Stock will be validly issued, fully paid and non-assessable, and will be free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth herein or imposed by applicable securities laws and except for those created by the Purchaser.  Upon due conversion of the Series D Preferred Stock, the Conversion Shares will be validly issued, fully paid and non-assessable, and will be free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth herein or imposed by applicable securities laws and except for permitted encumbrances that may be created by the Purchaser.  Upon the due exercise of the Warrants, the Warrant Shares will be validly issued, fully paid and non-assessable, and will be free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth herein or imposed by applicable securities laws and except for permitted encumbrances that may be created by the Purchaser.

 

3.4           Brokers. Neither the Company nor any of Company’s officers, directors, employees or stockholders has employed any broker or finder in connection with the transactions contemplated by this Agreement and no fee is or will be due and owing to any broker or finder in connection with the transactions contemplated by this Agreement.

 

3.5           Private Placement. Assuming the accuracy of the Purchaser representations and warranties set forth in Section 4 hereof, no registration under the Securities Act of 1933, as amended (“Securities Act”) is required for the offer and sale of the Units by the Company.

 

  

-3-

  

 

3.6           Intentionally Deleted.

 

3.7           No Conflict.  The execution, delivery and performance of this Agreement and the Units by the Company and the consummation by the Company of the transactions contemplated hereby and thereby does not and will not (i) result in a violation of the Company’s certificate of incorporation (including, without limitation, any certificates of designations contained therein) or other organizational documents of the Company or any of its Subsidiaries, any capital stock of the Company, or the Company’s or any Subsidiaries Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, federal and state securities laws and regulations and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”), and including all applicable federal laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations do not or could not reasonably be expected to have a Material Adverse Effect.

 

3.8           Consents.  Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with any court, arbitrational tribunal, administrative agency or commission or other governmental or self regulatory authority or agency (including, without limitation, FINRA and the SEC) (each of the foregoing is hereafter referred to as a “Governmental Entity”) or any other person or entity in order for it to execute, deliver or perform any of its obligations under, or contemplated by, this Agreement, in each case, in accordance with the terms hereof or thereof, except (i) a Rule 5122 Filing with FINRA, (ii) a Form D with the SEC and (iii) blue sky filings in various states.  All consents, authorizations, orders, filings and registrations which the Company is required to obtain at or prior to the Closing have been obtained or effected on or prior to the Closing Date, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company from obtaining or effecting any of the registration, application or filings contemplated hereby, except to the extent failure to obtain such consents do not or could not reasonably be expected to have a Material Adverse Effect.

 

3.9           No Integrated Offering.  None of the Company, its Subsidiaries or any of their affiliates, nor any person or entity acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offer and sale of the Units to require approval of stockholders of the Company under any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of FINRA.  None of the Company, its Subsidiaries, their affiliates nor any person or entity acting on their behalf has taken nor will they take any action or steps that would cause the offer and sale of any of the Units to be integrated with other offerings of securities of the Company by the Company or any other person or entity.  The offer and sale of the Units is not and will not be integrated with other offerings of securities of the Company by the Company or any other person or entity.

 

  

-4-

  

 

3.10           Application of Takeover Protections. Other than the staggered board provisions contained in the Company’s By-Laws and power and authority to issue ‘blank check’ preferred stock, the Company and its board of directors (the “Board”) have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Certificate of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to any Purchaser as a result of the transactions contemplated by this Agreement.

 

3.11           SEC Documents; Financial Statements. During the two (2) years prior to the date hereof, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”).  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing.  Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company and its Subsidiaries as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate).

 

3.12           Absence of Certain Changes.  Since the date of the Company’s most recent audited financial statements contained in a Form 10-K, there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), condition (financial or otherwise) or prospects (to the extent disclosed in the SEC Documents) of the Company or any of its Subsidiaries.  Except as set forth in the SEC Documents, since the date of the Company’s most recent audited financial statements contained in a Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, outside of the ordinary course of business or (iii) made any material capital expenditures, individually or in the aggregate.  Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company or any Subsidiary have any actual knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.  The Company and its Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing will not be, Insolvent (as defined below).  For purposes of this Section 3.12, “Insolvent” means, (a) with respect to the Company and its Subsidiaries, on a consolidated basis, (i) the Company and its Subsidiaries are unable to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (ii) the Company and its Subsidiaries intend to incur or believe that they will incur debts that would be beyond their ability to pay as such debts mature; and (b) with respect to the Company and each Subsidiary, individually, (i) the Company or such Subsidiary (as the case may be) is unable to pay its respective debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (ii) the Company or such Subsidiary (as the case may be) intends to incur or believes that it will incur debts that would be beyond its respective ability to pay as such debts mature.  Neither the Company nor any of its Subsidiaries has engaged in any business or in any transaction, and is not about to engage in any business or in any transaction, for which the Company’s or such Subsidiary’s remaining assets constitute unreasonably small capital.

 

  

-5-

  

 

3.13           No Undisclosed Events, Liabilities, Developments or Circumstances.  No event, liability, development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to the Company, any of its Subsidiaries or any of their respective businesses, properties, liabilities, prospects (to the extent disclosed in the SEC Documents), operations (including results thereof) or condition (financial or otherwise) that (i) would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its securities and which has not been publicly announced, (ii) could have a material adverse effect on any Purchaser’s investment hereunder or (iii) could have a Material Adverse Effect.

 

3.14           Conduct of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, any certificate of designation, preferences or rights of any other outstanding series of preferred stock of the Company or any of its Subsidiaries or Bylaws, respectively.  Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect.  The Company and each of its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities (including, without limitation, FINRA) necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit, which if so initiated and adjudicated against the Company would be reasonably expected to have a Material Adverse Effect.  None of the Subsidiaries has received any notice of termination from one of their respective clearing brokers regarding such Subsidiaries’ relationship with such clearing broker.

 

  

-6-

  

 

3.15           Foreign Corrupt Practices.  Neither the Company nor any of its Subsidiaries nor any director, officer, agent, employee or other person or entity acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

3.16           Sarbanes-Oxley Act. The Company and each Subsidiary is in compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

 

3.17           Transactions With Affiliates.  Except with respect to Purchasers hereunder that are principal shareholders, officers, directors or employees of the Company, none of the officers, directors or employees of the Company or any of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries (other than for ordinary course services as employees, officers or 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 such officer, director or employee or, to the knowledge of the Company or any of its Subsidiaries, any corporation, partnership, trust or other person or entity in which any such officer, director or employee has a substantial interest or is an employee, officer, director, trustee or partner.

 

3.18           Capitalization.  The authorized and outstanding equity capitalization of the Company (including all options, warrants and other convertible or other securities of the Company or any Subsidiary) are as disclosed in the SEC Documents.

 

3.19           Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation by any person or entity or before any Governmental Entity pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or their respective officers or directors which individually or in the aggregate has or would reasonable be expected to have a Material Adverse Effect.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC or FINRA involving the Company, any of its Subsidiaries or any current or former director or officer of the Company or any of its Subsidiaries.

 

3.20           Insurance.  The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged.  Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for, and neither the Company nor any such Subsidiary has any reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

 

  

-7-

  

 

3.21           Subsidiary Rights.  The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the Company or such Subsidiary.

 

3.22           Tax Status.  Each of the Company and its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and its Subsidiaries know of no basis for any such claim.

 

3.23           Internal Accounting and Disclosure Controls.  Each of the Company and its Subsidiaries maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure.  Neither the Company nor any of its Subsidiaries has received any notice or correspondence from any accountant or other person or entity relating to any potential material weakness or significant deficiency in any part of the internal controls over financial reporting of the Company or any of its Subsidiaries.

 

3.24           Off Balance Sheet Arrangements.  There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.

 

  

-8-

  

 

3.25           Investment Company Status.  The Company is not, and upon consummation of the sale of the Units will not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

 

3.26           Money Laundering.  The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

 

3.27           Management. During the past five year period, no current director or executive officer of the Company or any of its Subsidiaries has been the subject of:

 

(a)           a petition under bankruptcy laws or any other insolvency or moratorium law or the appointment by a court of a receiver, fiscal agent or similar officer for such person or entity, or any partnership in which such person was a general partner at or within two years before the filing of such petition or such appointment, or any corporation or business association of which such person was an executive officer at or within two years before the time of the filing of such petition or such appointment;

 

(b)           a conviction in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations that do not relate to driving while intoxicated or driving under the influence);

 

(c)           any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining any such person from, or otherwise limiting, the following activities:

 

(i)           Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the United States Commodity Futures Trading Commission or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

 

(ii)           Engaging in any type of business practice; or

 

  

-9-

  

 

(iii)           Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of securities laws or commodities laws;

 

(d)           any order, judgment or decree, not subsequently reversed, suspended or vacated, of any authority barring, suspending or otherwise limiting for more than 60 days the right of any such person to engage in any activity described in the preceding sub paragraph, or to be associated with persons engaged in any such activity;

 

(e)           a finding by a court of competent jurisdiction in a civil action or by the SEC or other authority to have violated any securities law, regulation or decree and the judgment in such civil action or finding by the SEC or any other authority has not been subsequently reversed, suspended or vacated; or

 

(f)           a finding by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended or vacated.

 

4.           Representations of the Purchasers.  Each of the Purchasers severally represents and warrants to the Company as follows:

4.1           Existence and Power.  In the event the Purchaser is an entity, such Purchaser (a) is duly organized and validly existing and (b) has the requisite power and authority to execute, deliver and perform its obligations under this Agreement.  In the event the Purchaser is an individual, such Purchaser has the legal capacity to execute, deliver and perform the obligations under this Agreement.

 

4.2           Authorization; No Contravention.  The execution delivery and performance by each Purchaser of this Agreement and the transactions contemplated hereby, (a) have been duly authorized by all necessary action, (b) do not contravene the terms of such Purchaser’s organizational documents, or any amendment thereof, and (c) do not violate, conflict with or result in any breach or contravention of, or the creation of any lien under, any material contractual obligation of such Purchaser or any requirement of law applicable to such Purchaser, and (d) do not violate any orders of any Governmental Entity against, or binding upon, such Purchaser.

 

4.3           Disclosure of Information.  The Purchaser acknowledges that it has received all the information that it has requested relating to the Company and the purchase of the Units.  The Purchaser further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Units.

 

4.4           Binding Effect.  This Agreement has been duly executed and delivered by each Purchaser and constitute the legal, valid and binding obligations of such Purchaser, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting generally the enforcement of creditors’ rights and subject to a court’s discretionary authority with respect to granting a decree ordering specific performance or other equitable remedies.

 

  

-10-

  

 

4.5           Purchase for Own Account.  The Units hereby acquired by each Purchaser pursuant to this Agreement are being acquired for such Purchaser’s own account and with no intention of distributing or reselling such securities in any transaction that would be in violation of the securities laws of the United States of America or any state, without prejudice.  If such Purchaser should in the future decide to dispose of any of such Units, such Purchaser understands and agrees that it may do so only in compliance with the Securities Act and applicable state securities laws, as then in effect.  Each Purchaser agrees to the imprinting, so long as required by law, of legends on certificates representing the Series D Preferred Stock and Units Warrants, and, upon conversion, on the Conversion Shares and Warrant Shares, as follows:

 

	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE.  THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

 

4.6           Restricted Securities.  Each Purchaser understands the Units, the Series D Preferred Stocks, Warrants and the shares of Common Stock underlying the Series D Preferred Stock and Warrants will not be registered at the time of their issuance under the Securities Act since they are being acquired from the Company in a transaction exempt from the registration requirements of the Securities Act and that the reliance of the Company on such exemption is predicated in part on the Purchaser’s representations set forth herein.

 

4.7           Investment Representations.  Each Purchaser (i) has such knowledge and experience in financial and business affairs that it is capable of evaluating the merits and risks involved in purchasing the Units, (ii) is able to bear the economic risks involving in purchasing the Units, (iii) is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act and (iv) has had the opportunity to ask questions of, and receive answers from, Company and persons acting on Company’s behalf concerning Company’s business, management, and financial affairs and the terms and conditions of the Units.

 

4.8           Brokers.  There is no broker, investment banker, financial advisor, finder or other person who has been retained by or is authorized to act on behalf of the Purchaser who might be entitled to any fee or commission for which the Company will be liable in connection with the execution of this Agreement and the consummation of the transactions contemplated hereby, except as set forth in Section 7.4 (c).

 

4.9           Short Sales and Confidentiality Prior to the Date hereof.  Other than the transaction contemplated hereunder, the Purchaser has not directly or indirectly, nor has any person acting on behalf of or pursuant to any understanding with the Purchaser, executed any disposition, including short sales, in the securities of the Company during the period commencing from the time that the Purchaser first received an indication of interest (written or oral) from the Company or any other person setting forth the material terms of the transactions contemplated hereunder until the date hereof.  Other than to other persons party to this Agreement, the Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

 

  

-11-

  

 

5.           Conditions of Closing of the Purchasers.  The obligations of the Purchasers to purchase their respective Units being purchased at the Closing are subject to the fulfillment at or before the Closing of the following conditions precedent, any one or more of which may be waived in whole or in part by the Purchasers, which waiver will be at the sole discretion of such Purchasers:

5.1           Representations and Warranties.  The representations and warranties made by the Company in this Agreement will have been true and correct in all respects as of the date when made and as of each Closing Date, except for the representations and warranties that are expressly made as of a particular date (which will remain true and correct as of such date).

 

5.2           Agreements.  All agreements, and conditions contained in this Agreement to be performed or complied with by the Company prior to the Closing will have been performed or complied with by the Company prior to or at the Closing.

 

5.3           Consents, Etc.  The Company will have secured and delivered to the Purchasers all consents and authorizations that will be necessary or required lawfully to consummate this Agreement and to issue the Units to be purchased by each Purchaser at the Closing.

 

5.4           Delivery of Documents.  All of the documents to be delivered by the Company pursuant to Section 2.2 will be in a form and substance reasonably satisfactory to the Purchasers and their counsel, and will have been executed and delivered to the Purchasers by each of the other parties thereto.

 

5.5           Proceedings and Documents.  All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions will be in a form and substance reasonably satisfactory to the Purchasers and their counsel, and the Purchasers and their counsel will have received all such counterpart originals or certified or other copies of such documents as the Purchasers or their counsel may reasonably request.

 

5.6           Board Appointments.  The Board will have taken all corporate actions necessary to appoint (i) Michael Weiss, the initial designee of the Lead Investor, as Chairman of the Board of Directors effective upon his written consent which consent may be delivered subsequent to the Initial Closing Date and (ii) Paul Coviello as a director of the Board of Directors, effective as of the Initial Closing Date.  Additionally, so long as the Series D Preferred Stock is outstanding or the Lead Investor and/or any of its Affiliates, in the aggregate, (i) are the beneficial owners (as defined under Rule 13d-3 promulgated under the 1934 Act) of at least 5% of the Common Stock (as determined pursuant to such Rule 13d-3) outstanding or (ii) hold an amount of capital stock of the Company equal to at least 20% of the original number of Conversion Shares purchased pursuant to this Agreement, subject to applicable law and the Board’s fiduciary duty to its shareholders, the Board shall take such corporate actions as necessary to nominate Michael Weiss as director and Chairman and Paul Coviello as director at the annual meeting of stockholders of the Company for which the class of directors for which such individuals serve is due to be elected, including, without limitation, at every adjournments or postponements thereof.

 

5.7           Board Observer Rights.  So long as the Series D Preferred Stock is outstanding or the Lead Investor and/or any of its Affiliates, in the aggregate, (i) are the beneficial owners (as defined under Rule 13d-3 promulgated under the 1934 Act) of at least 5% of the Common Stock (as determined pursuant to such Rule 13d-3) outstanding or (ii) hold an amount of capital stock of the Company equal to at least 20% of the original number of Conversion Shares purchased pursuant to this Agreement, the Company will give Lead Investor written notice of each meeting of the Company’s Board of Directors and each committee thereof at least at the same time and in the same manner as notice is given to the directors, and the Company will permit a representative of Lead Investor to attend as an observer all meetings of the Company’s Board of Directors and all committees thereof; provided that in the case of telephonic meetings conducted in accordance with the Company’s Bylaws and applicable law, the Lead Investor representative will be given the opportunity to listen to such telephonic meetings; and provided, further, that the Company will have the right to exclude the Lead Investor representative from any portion of a meeting if, in the good faith judgment of the Company’s counsel, the inclusion of the Lead Investor representative therein would result in the waiver of any applicable privilege.  The Lead Investor representative will be entitled to receive all written materials and other information (including without limitation copies of meeting minutes) given to directors in connection with such meetings at the same time such materials and information are given to the directors; provided, however, that the Company will have the right to provide information to the Lead Investor representative if, in the good faith judgment of the Company’s counsel, the provision of such information to the Lead Investor representative would result in the waiver of any applicable privilege.  If the Company proposes to take any action by written consent in lieu of a meeting of its Board of Directors or of any committee thereof, the Company will give written notice thereof to the Lead Investor representative and each of the Company’s directors prior to the effective date of such consent describing in reasonable detail the nature and substance of such action.  The Company will pay the reasonable out-of-pocket expenses of the Lead Investor representative incurred in connection with attending such board and committee meetings.

5.8           Broker-Dealer Matters.  Neither the Company nor any of its Affiliates or Subsidiaries has received any oral or written notice from the SEC, FINRA or any state securities regulatory authority of any pending or threatened action or proceeding relating to the revocation or modification of any registration or qualification of the Company’s broker-dealer Subsidiaries as broker-dealers.  Neither the Company nor any of its Affiliates or Subsidiaries has received any oral or written notice from any of their clearing brokers of any pending or threatened revocation, modification or cancellation of their clearing relationship with the Company’s broker-dealer Subsidiaries.

 

  

-12-

  

 

5.8           Certificate of Designation.  The Certificate of Designation will have been filed with and received by the Secretary of State of the State of Delaware.

 

6.           Conditions of Closing of the Company.  The Company’s obligations to sell and issue the Units at the Closing are subject to the fulfillment at or before the Closing of the following conditions, which conditions may be waived in whole or in part by the Company, and which waiver will be at the sole discretion of the Company:

6.1           Representations and Warranties.  The representations and warranties made by the Purchasers in this Agreement will have been true and correct in all respects as of the date when made and as of each Closing Date, except for the representations and warranties that are expressly made as of a particular date (which will remain true and correct as of such date).

 

6.2           Agreements.  All agreements, and conditions contained in this Agreement to be performed or complied with by the Purchasers prior to the Closing will have been performed or complied with by the Company prior to or at the Closing.

 

6.3           Payment of Purchase Price.  The Purchasers will have tendered (either directly or through a designated escrow agent) the aggregate Purchase Price in exchange for the Units being issued hereunder in accordance with Section 2.2 or 2.3, as applicable.

 

7.           Covenants and Agreements of the Parties.

7.1           Reservation of Common Stock.

(a)           Subject to the next succeeding sentence, the Company will 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 conversion of the Shares and the exercise of the Warrants, such number of shares of Common Stock as will from time to time equal the number of shares sufficient to permit the issuance of the shares of Common Stock underlying the Shares and the Warrants pursuant to the terms thereof. Notwithstanding the foregoing, the Company does not currently have sufficient authorized Common Stock to issue Common Stock to the Purchasers, upon conversion of the Shares and exercise of the Warrants (once fully vested), the full amount of Conversion Shares and Warrant Shares.  In connection with its annual meeting of stockholders, contemplated to be held in March 2011, the Company will include in its Form 14A Proxy Statement a request for a stockholder vote and approval at the Company stockholders’ meeting called for pursuant to the Proxy Statement to authorize for issuance of up to 150,000,000 shares of Company Common Stock, and up to 10,000,000 shares of Company preferred stock containing such rights, preferences and designations as the board of directors of the Company may, from time to time designate (including the Series A Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock).

(b)           Each of the Purchasers do hereby covenant and agree to vote or execute written consents with respect to all of their shares of Common Stock and shares of Series D Preferred Stock in favor of the charter amendment described in Section 7.1(a). Except as otherwise provided herein, the covenants and agreements of the Purchasers set forth in this Section 7.1 are hereby deemed to be irrevocable and coupled with an interest, to the extent provided in Section 212 of the Delaware General Corporation Law.  In such connection, the Purchasers each hereby appoint Mark Goldwasser and Leonard Sokolow, and each of them, as the Purchaser’s proxy and attorney in fact to vote all of the shares of Common Stock and Series D Preferred Stock owned of record by such Purchaser and exercise all of the voting rights then enjoyed by the Purchaser to implement the provisions of this Section 7.1.

 

  

-13-

  

 

(c)           Payment upon Non-Conversion of the Shares.  If (i) the Company has not met its covenant to increase the number of its authorized Common Stock as set forth in Section 7.1(a) above and (ii) after the date of the annual meeting of stockholders referenced in Section 7.1(a), Purchaser is unable to either convert their shares of Series D Preferred Stock or exercise their Warrants  solely due to the Company having insufficient authorized but unissued shares of Common Stock available for such conversion or exercise, the Company shall, at the Purchaser’s option exercisable at any time concurrently with, or within five (5) days after delivery by Purchaser to the Company of the Notice of Conversion (as defined in the Series D Certificate of Designations) or Notice of Exercise of the Warrants, purchase the Shares from the Purchaser by paying to the Purchaser an amount of cash equal to:

In the case of the Series D Preferred, the product of (i) number of shares of Common Stock into which the Series D Preferred is convertible and (ii) the twenty (20) day trailing average closing price of the Shares; and

 

(i)           In the case of the Warrants, the amount as set forth in the Warrants.

 

7.2           Co-Sale Rights.

 

(a)           Certain Definitions:

“Counter Party” will mean a bona fide third party engaging in a Triggering Transaction with the Company during the Participation Period.

 

“Conversion Shares” will mean such number of shares of Common Stock as will be determined by dividing the stated value per share of Series D Preferred Stock by the conversion price of Series D Preferred Stock per share, then in effect.

 

“Makewhole Consideration” will mean the product of (i) the Makewhole Price and (ii) the Conversion Shares.

 

“Makewhole Price” will mean (i) during the ninety day period following the date of this Agreement (the “First Period”) $0.75 per Conversion Share; (ii) during the ninety day period following the First Period (the “Second Period”) $1.00 per Conversion Share; (iii) during the ninety day period following the Second Period (the “Third Period”) $1.25 per Conversion Share; and (iv) during the period following the Third Period until the expiration of the Participation Period (the “Final Period”) $1.50 per Conversion Share.

 

  

-14-

  

 

“Participation Period” will mean the period commencing from the date of this Agreement and expiring on March 31, 2011.

 

“Triggering Transaction” will mean a bona fide equity or equity linked capital raising transaction by the Company with a Counter Party in which $3 million or more is invested into the Company, either in one or a series of related transactions.

 

(b)           If at any time during the Participation Period the Company seeks to effectuate a Triggering Transaction, then no less than twenty (20) days prior to the anticipated date of the closing of the Triggering Transaction (the “Closing Date”), the Company will provide written notice to the Purchasers (a “Makewhole Notice”).  Pursuant to the Makewhole Notice, each Purchaser will have the right (but not the obligation) to require the Counter Party to purchase, for cash, all, but not less than all, of the shares of Series D Preferred Stock (or to the extent previously converted, the Conversion Shares) then owned by the Purchaser (the “Participation Securities”). Upon the proper delivery of the Co-Sale Notice in accordance with subsection (c) below, all electing Purchasers will be obligated to sell to the Counter Party, and the Counter Party will be obligated to purchase from such holders, all of the Participation Securities held by such holders in accordance with the provisions set forth in this Section 7.2 (the “Co-Sale Right”).  The Company covenants and agrees that as a condition to the consummation of the Triggering Transaction, the Company will require the Counter Party to abide by the provisions of this Section 7.2.

 

(c)           In order to exercise the Co-Sale Right, a participating Purchaser will deliver a written notice indicating such Purchaser’s election to sell the Participation Securities (“Co-Sale Notice”) to the Company, which will be delivered to the Company at least five (5) days prior to the Closing Date.  Upon receipt of such Co-Sale Notice, the Company will promptly, but in any event within two (2) days thereafter, delivers to the Counter Party written notice (the “Counter Party Notice”) indicating that the Co-Sale Right has been exercised and setting forth the Makewhole Consideration applicable to each participating Purchaser.

 

(d)           The purchase of the Participation Securities will take place at a single closing at the offices of the Company on the Closing Date; provided, however, that in the event that a participating Purchaser will be an Affiliate of the Company, such closing will take place on the later of (i) the Closing  Date or (ii) 6 months and 5 days from the date of this Agreement.  At the closing, each holder of Participation Securities being purchased will deliver to the Counter Party the certificate(s) evidencing the Participation Securities, a duly executed stock power, medallion guaranteed (if required) and an applicable instrument acknowledging the purchase of such Participation Securities by the Counter Party, which will include a certification that such holder has good and marketable title to such Participation Securities, free and clear of all liens, claims and encumbrances and the Counter Party will pay to each such holder the Makewhole Consideration for such holder’s Participation Securities in cash.

 

(e)           If (A) a Purchaser declines the opportunity to exercise the Co-Sale Right or (B) a Purchaser fails to timely deliver a Co-Sale Notice to the Company, then the Co-Sale Right with respect to such Purchaser will irrevocably expire and be of no further force and effect, provided, however, that if the proposed Triggering Transaction is not consummated, then the Co-Sale Rights will once again be reinstated for all Purchasers during the Participation Period.

 

  

-15-

  

7.3       Creation of OPN.  As soon as reasonably practicable following the Initial Closing, but no later than October 31, 2010 (or such later date agreed to by the Lead Investor (the “OPN Closing Date”)), the Company and the Lead Investor will cooperate and use their respective commercially reasonably efforts to (i) create a 50:50 joint venture arrangement that will initially pool their respective global life science, biotechnology, biopharma, specialty pharma, pharma, med-tech, medical device and other healthcare related-sectors resources and capabilities (“Core Business”) in an investment banking vertical that includes corporate finance, advisory, capital markets, sales and trading and retail brokerage  businesses into a single business unit under the brand name “OPN Capital Markets” (“OPN”) or such other name chosen by the Lead Investor and (ii) explore other disciplines outside of the Core Business which may be included within OPN.  OPN shall have exclusive rights to conduct the Core Businesses and the Company’s broker-dealers subsidiaries shall not compete within the Core Businesses and shall refer any business to OPN related to the Core Business so long as OPN exists, except with respect to syndicate product not originated or underwritten by the Company’s broker-dealer subsidiaries or as otherwise consented to by OPN. It is anticipated that the initial structure of OPN may be a combination of: (i) the formation of a new Office of Supervisory Jurisdiction (“OSJ”) under the Company’s broker-dealer subsidiary National Securities Corporation (“NSC”) and/or (ii) a revenue sharing arrangement between NSC and the Lead Investor’s affiliated broker-dealer, Opus Point & Co.,  LLC (“OPP”); in the case of a revenue sharing arrangement, NSC shall utilize its internal legal, compliance, supervision, accounting and other resources to assist OPP to obtain necessary regulatory approval to  act as a counterparty to a revenue sharing arrangement with the Company (collectively the “Initial Structure”).  Notwithstanding the creation of the Initial Structure, upon the determination of the Lead Investor, and subject to applicable regulatory approvals, Lead Investor may determine to transform OPN into a separate legal entity owned equally by the Company and the Lead Investor (the “OPN Entity”) by either (i) converting OPP into the OPN Entity or (ii) if the Lead Investor chooses to keep OPP independent, by causing the OPN Entity to become a registered broker dealer.  In any event, the external costs and expenses of changing the membership agreement of OPP, creating the OPN Entity or purchase an unaffiliated broker dealer or other transaction to transform OPN into a separate legal entity shall be deemed an expense of OPN. An oversight and quality control committee composed of two designees of the Lead Investor and two designees of the Company shall provide oversight for OPN (“Oversight Committee”).  The Lead Investor and the Company agree that the Oversight Committee will be for input, information and advisory purposes only and not for approval. The Oversight Committee shall overview the following activities:

(a) The expansion of the Core Business of OPN or the expansion of additional capital markets/investment banking verticals, retail or other business areas of OPN or the Company’s broker-dealer subsidiaries;

(b) Material transactions of OPN or the Company’s broker-dealer subsidiaries.

(c) Investment Banking or other investment products offered and sold through the retail channels of either OPN or the Company’s broker-dealer subsidiaries.

 

Notwithstanding the foregoing, the Lead Investor shall have the authority with respect to the day to day business activities of OPN including, without limitation, the expansion of additional capital market verticals, the addition of retail and entering into material obligations of OPN, subject however to applicable written supervisory procedures, independent contractor agreements and compliance and supervisory oversight; provided, further, however,  obligations or commitments related to compensation or payments to the principals or affiliates of the Lead Investor registered with the OPN or the offer and sale of debt or equity securities of  OPN shall require the approval of the Company and/or NSC as the case may be.  The Lead Investor shall have a right to designate a person who is registered with NSC to serve on NSC’s commitment committee which addresses investment banking transactions offered by the retail channel.  NSC shall have the right to designate a person who is registered with OPN if OPN is a separate broker-dealer to serve on OPN’s commitment committee.  In the event OPN is a separate legal entity, the Lead Investor shall be able to appoint board membership for OPN so that the Lead Investor would have representation on such board equal to 50% +1 board member and the Company shall be able to designate the balance of the board members.

 

  

-16-

  

It is expected that OPN will hire a general manager who will run day to day operations of OPN.  The general manager under the guidance of the Lead Investor and in consultation with the Oversight Committee will be responsible for building the OPN team.  Additional terms and conditions of OPN are contained on Exhibit E (which are hereby specifically incorporated by reference).

7.4       Use of Proceeds; Brokerage Fee. The Company will use the net proceeds from the sale of the Units as follows:

(a)           $500,000, plus 25% of the net proceeds of Units sold to investors other than the Lead Investor, shall be invested in OPN or if OPN is not yet operational or OPN is operational but is not constituted as the OPN Entity, than such amounts shall be held at the Company in a separate account and subsequently contributed exclusively to OPN when operational (details of such account as described in Exhibit E); and

(b)           The balance for general corporate and working capital purposes, including, but not limited to, maintaining the net capital requirements of the Company’s broker-dealer subsidiaries.  Any individual expense in excess of $75,000 will require Board of Directors approval until the Subsequent Financing (as hereinafter defined) is completed.

(c)           The Purchasers acknowledge and agree that a 6% commission of the purchase price will be paid to NSC.

7.5       Subsequent Financing.  The Company will utilize OPN for any subsequent financing of the Company during the twelve month period following the Closing Date (which amount will be dependent on valuation and general market conditions) (the “Subsequent Financing(s)”).  An aggregate of 25% of the net proceeds of any Subsequent Financing(s) shall be utilized as follows: (i) to the extent that OPN remains an OSJ of National Securities, then such funds shall be contributed to NSC and reserved in a separate account exclusively for the use of OPN (details of such account as described in Exhibit E) and (ii) if OPN is converted into the OPN Entity which becomes a registered broker dealer, such sums shall be contributed as a capital contribution into the OPN Entity.  During the 12 month period following the Initial Closing, any financing arrangement of the Company shall require the approval of the Lead Investor, not to be unreasonably withheld or delayed in the event there is a material change in circumstances that necessitates financing.

 

  

-17-

  

7.6       Creation of an Executive Management Committee; Goals and Objectives. (a) As promptly as reasonably practicable following the Initial Closing, the Company shall establish an Executive Management Committee, whose members will include Michael Mullen.

(b)  The Company has provided certain goal and objectives to the the Lead Investor. The Company seeks to achieve such goals and objectives.  So long as the Lead Investor continues to own its Requisite Percentage, on an annual basis, the management team of the Company will submit a set of goals and objectives to the Lead Investor, subject to review by the Board of Directors, which will guide the business for the subsequent year.  The Company shall provide the Lead Investor with a monthly update of the progress toward the achievement of the goals and objectives.  The Lead Investor acknowledges and agrees that such goals and objectives are not, and are not intended to be, projections with respect to the future operations of the Company.

7.7       Waiver of Certain Severance Payments.  Following the Initial Closing, to the extent the Board of Directors deems it necessary or appropriate to hire a new chief executive officer of the Company, each of Mark Goldwasser and Leonard Sokolow hereby agree to  report to such new chief executive officer of the Company.  Messrs Goldwasser and Sokolow further agree that such event or the election of Mike Weiss as Chairman shall not be deemed “Good Reason” for purposes of Section 1(q) of their respective Employment Agreements dated July 1, 2008, as amended (the “Employment Agreements”); and, as a result, such event would not be grounds for their “Termination for Good Cause” pursuant to Section 6(f) or 6(i) of their respective Employment Agreements.

8.           Miscellaneous.

8.1           Indemnification.

 

(a)           Subject to the provisions of Section 8.6 below, in consideration of each Purchaser’s execution and delivery of this Agreement and acquiring the Units and in addition to all of the Company’s other obligations hereunder and under the Units, the Company will defend, protect, indemnify and hold harmless each Purchaser and all of their respective stockholders, partners, members, officers, directors, employees, direct or indirect Purchasers, heirs, successors and assigns, and any agents or other representatives of any of the foregoing (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of this Agreement or the Units or (ii) the status of such Purchaser as an Purchaser in the Company pursuant to the transactions contemplated by this Agreement and the Units, except to the extent that the Purchaser breached any of its representations and warranties contained in Section 4 hereof.  To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company will make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

 

  

-18-

  

 

(b)           Promptly after receipt by an Indemnitee under this Section 8.1 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee will, if a claim in respect thereof is to be made against the Company under this Section 8.1, deliver to the Company a written notice of the commencement thereof, and the Company will have the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof with counsel mutually satisfactory to the Company and the Indemnitee; provided, however, that an Indemnitee will have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the Company if: (i) the Company has agreed in writing to pay such fees and expenses; (ii) the Company will have failed promptly to assume the defense of such Indemnified Liability and to employ counsel reasonably satisfactory to such Indemnitee in any such Indemnified Liability; or (iii) the named parties to any such Indemnified Liability (including any impleaded parties) include both such Indemnitee and the Company, and such Indemnitee will have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnitee and the Company (in which case, if such Indemnitee notifies the Company in writing that it elects to employ separate counsel at the expense of the Company, then the Company will not have the right to assume the defense thereof and such counsel will be at the expense of the Company), provided further, that in the case of clause (iii) above the Company will not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnitee.  The Indemnitee will reasonably cooperate with the Company in connection with any negotiation or defense of any such action or Indemnified Liability by the Company and will furnish to the Company all information reasonably available to the Indemnitee which relates to such action or Indemnified Liability.  The Company will keep the Indemnitee reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  The Company will not be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the Company will not unreasonably withhold, delay or condition its consent.  The Company will not, without the prior written consent of the Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified Liability or litigation, and such settlement will not include any admission as to fault on the part of the Indemnitee.  Following indemnification as provided for hereunder, the Company will be subrogated to all rights of the Indemnitee with respect to all third parties, firms or entities relating to the matter for which indemnification has been made.  The failure to deliver written notice to the Company within a reasonable time of the commencement of any such action will not relieve the Company of any liability to the Indemnitee under this Section 8.1, except to the extent that the Company is materially and adversely prejudiced in its ability to defend such action.

 

  

-19-

  

 

(c)           The indemnification required by this Section 8.1 will be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred.

 

(d)           The indemnity agreement contained herein will be in addition to (i) any cause of action or similar right of the Indemnitee against the Company or others, and (ii) any liabilities the Company may be subject to pursuant to the law.

 

8.2           Intentionally Omitted.

 

8.3           No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

8.4           Remedies.  Each Purchaser will have all rights and remedies applicable to it which are set forth in this Agreement and in the Units and all rights and remedies which such parties have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law.  The Company acknowledges and agrees that in the event that it fails to perform, observe, or discharge any or all of its obligations under this Agreement or the Units, any remedy at law may prove to be inadequate relief to the Purchasers. The Company therefore agrees that the Purchasers will be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.

 

8.5           Successors and Assigns.  This Agreement, and the rights and obligations of each Purchaser hereunder, may be assigned by such Purchaser to (a) any person or entity to which the Units are transferred by such Purchaser, or (b) to any Affiliated Party (as hereinafter defined), and, in each case, such transferee will be deemed a “Purchaser” for purposes of this Agreement; provided that such assignment of rights will be contingent upon the transferee providing a written instrument to the Company notifying the Company of such transfer and assignment and agreeing in writing to be bound by the terms of this Agreement.  The Company may not assign its rights under this Agreement.  For purposes of this Agreement, “Affiliated Party” will mean, with respect to any Purchaser, any person or entity which, directly or indirectly, controls, is controlled by or is under common control with such Purchaser, including, without limitation, any general partner, manager, officer or director of such Purchaser and any venture capital fund now or hereafter existing which is controlled by one or more general partners of, or shares the same management company as, such Purchaser.

 

8.6           Survival of Representations and Warranties; Survival.  All of the representations, warranties, covenants and agreements made herein will survive the execution and delivery of this Agreement for one (1) year from the Closing Date.  The Purchasers are entitled to rely, and the parties hereby acknowledge that the Purchasers have so relied, upon the truth, accuracy and completeness of each of the representations and warranties of the Company contained herein, irrespective of any independent investigation made by Purchasers.  The Company is entitled to rely, and the parties hereby acknowledge that the Company has so relied, upon the truth, accuracy and completeness of each of the representations and warranties of the Purchasers contained herein, irrespective of any independent investigation made by the Company.  Notwithstanding the first sentence of this Section 8.6, the provisions of Sections 5.6, 5.7, 7.1, 7.3, 7.4, 7.5, 7.6 and 7.7 of this Agreement shall continue in full force and effect so long as the Series D Preferred Stock is outstanding or the Lead Investor and/or any of its Affiliates, in the aggregate, (i) are the beneficial owners (as defined under Rule 13d-3 promulgated under the 1934 Act) of at least 5% of the Common Stock (as determined pursuant to such Rule 13d-3) outstanding or (ii) hold an amount of capital stock of the Company equal to at least 20% of the original number of Conversion Shares and Warrant Shares purchased pursuant to this Agreement.

 

  

-20-

  

 

8.7           Expenses.  Each party hereto will pay its own expenses relating to the transactions contemplated by this Agreement except that the Company will pay the reasonable fees and expenses of Investor not to exceed $50,000. Such expenses will be paid not later than the Closing.

 

8.8           Severability.  The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement.

 

8.9           Governing Law; Venue.  This Agreement will be governed by and construed in accordance with the internal laws of the State of New York (without reference to the conflicts of law provisions thereof).  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service will constitute good and sufficient service of process and notice thereof. Nothing contained herein will be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

8.10           Notices.  All notices, requests, consents, and other communications under this Agreement will be in writing and will be deemed delivered (i) three business days after being sent by registered or certified mail, return receipt requested, postage prepaid or (ii) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery or (iii) by facsimile transmission (with printed confirmation of receipt), in each case to the intended recipient as set forth below:

 

(a)           If to the Company, at 120 Broadway, 27th Floor, New York, NY  10271, Attention: Mark Goldwasser, CEO, Fax Number: (212) 417-8159, or at such other address as may have been furnished in writing by the Company to the other parties hereto, with a copy (which will not constitute notice) to Littman Krooks LLP, 655 Third Avenue, New York, New York 10017, Attention: Mitchell C. Littman, Esq., Fax Number: (212) 490-2990.

 

  

-21-

  

 

(b)           If to a Purchaser, at its address set forth on Exhibit A, or at such other address as may have been furnished in writing by such Purchaser to the other parties hereto, with a copy (which will not constitute notice) to Alston & Bird, LLP, 90 Park Avenue, New York, NY 10016, Attention: Matthew W. Mamak, Esq. Fax Number: (212) 210-9444.

 

(c)           Any party may give any notice, request, consent or other communication under this Agreement using commercially reasonable means (including, without limitation, personal delivery, messenger service, telecopy, first class mail or electronic mail), but no such notice, request, consent or other communication will be deemed to have been duly given unless and until it is actually received by the party for whom it is intended.  Any party may change the address to which notices, requests, consents or other communications hereunder are to be delivered by giving the other parties notice in the manner set forth in this Section.

 

8.11           Complete Agreement.  This Agreement (including its exhibits and schedules and any other agreement or instrument contemplated hereby) constitutes the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter.  It is agreed that the Lead Investor will have the right and power to enforce the Surviving Provisions on behalf of all of the Purchasers.

 

8.12           Amendments and Waivers.  This Agreement may be amended or terminated and the observance of any term of this Agreement may be waived with respect to all parties to this Agreement (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the holders of at least 50% of the aggregate amount of Units then held by all Purchasers (the “Requisite Holders”).  Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereunder may not be waived with respect to any Purchaser without the written consent of such Purchaser unless such amendment, termination or waiver applies to all Purchasers in the same fashion.  The Company will give prompt written notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination or waiver.  Any amendment, termination or waiver effected in accordance with this Section 8.12 will be binding on all parties hereto, even if they do not execute such consent.  No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, will be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

 

8.13           Pronouns.  Whenever the context may require, any pronouns used in this Agreement will include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns will include the plural, and vice versa.

 

8.14           Counterparts.  This Agreement may be executed in any number of counterparts (including, in the case of the Purchasers, Financing Signature Pages), each of which will be deemed to be an original, and all of which will constitute one and the same document.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature will create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

  

-22-

  

 

8.15           Section Headings and References.  The section headings are for the convenience of the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties.  Any reference in this agreement to a particular section or subsection will refer to a section or subsection of this Agreement, unless specified otherwise.

 

8.16           Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser are several and not joint with the obligations of any other Purchaser, and no Purchaser will be responsible in any way for the performance of the obligations of any other Purchaser.  Nothing contained herein or in any other agreement or instrument contemplated hereby, and no action taken by any Purchaser pursuant hereto or thereto, will be deemed to constitute the Purchasers as, and the Company acknowledges that the Purchasers do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Purchasers are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated hereby or thereby or any matters, and the Company acknowledges that the Purchasers are not acting in concert or as a group, and the Company will not assert any such claim, with respect to such obligations or the transactions contemplated hereby or thereby.  The decision of each Purchaser to purchase Units has been made by such Purchaser independently of any other Purchaser.  Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with such Purchaser making its investment hereunder and that no other Purchaser will be acting as agent of such Purchaser in connection with monitoring such Purchaser’s investment in the Units or enforcing its rights hereunder.  The Company and each Purchaser confirms that each Purchaser has independently participated with the Company in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors.  Each Purchaser will be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or the Units, and it will not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  The use of a single agreement to effectuate the purchase and sale of the Units contemplated hereby was solely in the control of the Company, not the action or decision of any Purchaser, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Purchaser.  It is expressly understood and agreed that each provision contained in this Agreement and in the Units is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

 

[Signature Page Follows]

 

  

-23-

  

IN WITNESS WHEREOF, each Purchaser and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.

 

	 	COMPANY:	 
	 	 	 
	 	NATIONAL HOLDINGS CORPORATION	 
	 	 	 	 
	 	 	 	 
	 	
By: 

	/S/ LEONARD J. SOKOLOW	 
	 	 	Name: Leonard J. Sokolow	 
	 	 	Title: President	 
	 	 	 	 
	 	ACCEPTED WITH RESPECT TO SECTION 7.7:	 
	 	 	 	 
	 	/S/ MARK GOLDWASSER	 
	 	Mark Goldwasser	 
	 	 	 	 
	 	/S/ LEONARD J. SOKOLOW	 
	 	Leonard J. Sokolow 	 

 

  

  

  

 

EXHIBIT B

 

FINANCING SIGNATURE PAGE

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a Purchaser, as defined in that certain Securities Purchase Agreement (the “Purchase Agreement”) by and among National Holdings Corporation, a Delaware corporation (the “Company”), and the Purchasers (as defined in the Purchase Agreement), dated as of the Closing Date (as defined in the Purchase Agreement), acknowledges having read the representations in the Purchase Agreement section entitled “Representations of the Purchasers,” and hereby represents that the statements contained therein are complete and accurate with respect to the undersigned as a Purchaser.  The undersigned further hereby agrees to be bound by the terms and conditions of the Purchase Agreement as a “Purchaser” thereunder and authorizes this signature page to be attached to the Purchase Agreement.

 

Executed, in counterpart, as of the date set forth below.

 

	 	PURCHASER:	 
	 	 	 	 
	 	Opus Point Partners, LLC
	 	Name of Purchaser
	 	 	 	 
	 	By: 	/S/ MICHAEL WEISS 
	 	 	 	 
	 	Title:	Manager
	 	 	 	 
	 	Date:	September 29, 2010
	 	 	 	 
	 	Contact Person:	Michael Weiss 
	 	 	 	 
	 	Telephone No.:	 
	 	 	 	 
	 	Fax No.:	 
	 	 	 	 
	 	E-mail Address:	 
	 	 	 	 

 

  

  

  

 

EXHIBIT B

 

FINANCING SIGNATURE PAGE

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a Purchaser, as defined in that certain Securities Purchase Agreement (the “Purchase Agreement”) by and among National Holdings Corporation, a Delaware corporation (the “Company”), and the Purchasers (as defined in the Purchase Agreement), dated as of the Closing Date (as defined in the Purchase Agreement), acknowledges having read the representations in the Purchase Agreement section entitled “Representations of the Purchasers,” and hereby represents that the statements contained therein are complete and accurate with respect to the undersigned as a Purchaser.  The undersigned further hereby agrees to be bound by the terms and conditions of the Purchase Agreement as a “Purchaser” thereunder and authorizes this signature page to be attached to the Purchase Agreement.

 

Executed, in counterpart, as of the date set forth below.

 

	 	PURCHASER:	 
	 	 	 	 
	 	Opus Point Healthcare Innovations Fund, L.P.
	 	Name of Purchaser
	 	 	 	 
	 	By: 	/S/ MICHAEL WEISS 
	 	 	 	 
	 	Title:	Manager
	 	 	 	 
	 	Date:	September 29, 2010
	 	 	 	 
	 	Contact Person:	Michael Weiss 
	 	 	 	 
	 	Telephone No.:	 
	 	 	 	 
	 	Fax No.:	 
	 	 	 	 
	 	E-mail Address:	 
	 	 	 	 

 

  

  

  

EXHIBIT B

 

FINANCING SIGNATURE PAGE

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a Purchaser, as defined in that certain Securities Purchase Agreement (the “Purchase Agreement”) by and among National Holdings Corporation, a Delaware corporation (the “Company”), and the Purchasers (as defined in the Purchase Agreement), dated as of the Closing Date (as defined in the Purchase Agreement), acknowledges having read the representations in the Purchase Agreement section entitled “Representations of the Purchasers,” and hereby represents that the statements contained therein are complete and accurate with respect to the undersigned as a Purchaser.  The undersigned further hereby agrees to be bound by the terms and conditions of the Purchase Agreement as a “Purchaser” thereunder and authorizes this signature page to be attached to the Purchase Agreement.

 

Executed, in counterpart, as of the date set forth below.

 

 

	 	PURCHASER:	 
	 	 	 	 
	 	Opus Point Healthcare Value Fund, L.P. 
	 	Name of Purchaser
	 	 	 	 
	 	By: 	/S/ MICHAEL WEISS 
	 	 	 	 
	 	Title:	Manager
	 	 	 	 
	 	Date:	September 29, 2010
	 	 	 	 
	 	Contact Person:	Michael Weiss 
	 	 	 	 
	 	Telephone No.:	 
	 	 	 	 
	 	Fax No.:	 
	 	 	 	 
	 	E-mail Address:	 
	 	 	 	 

 

  

  

  

 

EXHIBIT B

 

FINANCING SIGNATURE PAGE

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a Purchaser, as defined in that certain Securities Purchase Agreement (the “Purchase Agreement”) by and among National Holdings Corporation, a Delaware corporation (the “Company”), and the Purchasers (as defined in the Purchase Agreement), dated as of the Closing Date (as defined in the Purchase Agreement), acknowledges having read the representations in the Purchase Agreement section entitled “Representations of the Purchasers,” and hereby represents that the statements contained therein are complete and accurate with respect to the undersigned as a Purchaser.  The undersigned further hereby agrees to be bound by the terms and conditions of the Purchase Agreement as a “Purchaser” thereunder and authorizes this signature page to be attached to the Purchase Agreement.

 

Executed, in counterpart, as of the date set forth below.

 

	 	PURCHASER:	 
	 	 	 	 
	 	Opus Point Healthcare (Low Net) Fund, L.P.
	 	Name of Purchaser
	 	 	 	 
	 	By: 	/S/ MICHAEL WEISS 
	 	 	 	 
	 	Title:	Manager
	 	 	 	 
	 	Date:	September 29, 2010
	 	 	 	 
	 	Contact Person:	Michael Weiss 
	 	 	 	 
	 	Telephone No.:	 
	 	 	 	 
	 	Fax No.:	 
	 	 	 	 
	 	E-mail Address:	 
	 	 	 	 

 

  

  

  

 

EXHIBIT B

 

FINANCING SIGNATURE PAGE

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a Purchaser, as defined in that certain Securities Purchase Agreement (the “Purchase Agreement”) by and among National Holdings Corporation, a Delaware corporation (the “Company”), and the Purchasers (as defined in the Purchase Agreement), dated as of the Closing Date (as defined in the Purchase Agreement), acknowledges having read the representations in the Purchase Agreement section entitled “Representations of the Purchasers,” and hereby represents that the statements contained therein are complete and accurate with respect to the undersigned as a Purchaser.  The undersigned further hereby agrees to be bound by the terms and conditions of the Purchase Agreement as a “Purchaser” thereunder and authorizes this signature page to be attached to the Purchase Agreement.

 

Executed, in counterpart, as of the date set forth below.

 

	 	PURCHASER:	 
	 	 	 	 
	 	Opus Point Capital Preservation Fund, L.P. 
	 	Name of Purchaser
	 	 	 	 
	 	By: 	/S/ MICHAEL WEISS 
	 	 	 	 
	 	Title:	Manager
	 	 	 	 
	 	Date:	September 29, 2010
	 	 	 	 
	 	Contact Person:	Michael Weiss 
	 	 	 	 
	 	Telephone No.:	 
	 	 	 	 
	 	Fax No.:	 
	 	 	 	 
	 	E-mail Address:	 
	 	 	 	 

 

  

  

  

 

EXHIBIT B

 

FINANCING SIGNATURE PAGE

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a Purchaser, as defined in that certain Securities Purchase Agreement (the “Purchase Agreement”) by and among National Holdings Corporation, a Delaware corporation (the “Company”), and the Purchasers (as defined in the Purchase Agreement), dated as of the Closing Date (as defined in the Purchase Agreement), acknowledges having read the representations in the Purchase Agreement section entitled “Representations of the Purchasers,” and hereby represents that the statements contained therein are complete and accurate with respect to the undersigned as a Purchaser.  The undersigned further hereby agrees to be bound by the terms and conditions of the Purchase Agreement as a “Purchaser” thereunder and authorizes this signature page to be attached to the Purchase Agreement.

 

Executed, in counterpart, as of the date set forth below.

 

	 	PURCHASER:	 
	 	 	 	 
	 	Linden Growth Partners Master Fund, L.P. 
	 	Name of Purchaser
	 	 	 	 
	 	By: 	/S/ PAUL J. COVIELLO
	 	 	 	 
	 	Title:	Manager
	 	 	 	 
	 	Date:	September 29, 2010
	 	 	 	 
	 	Contact Person:	Paul Coviello
	 	 	 	 
	 	Telephone No.:	 
	 	 	 	 
	 	Fax No.:	 
	 	 	 	 
	 	E-mail Address:	 
	 	 	 	 

 

  

  

  

 

EXHIBIT C

 

FORM OF CERTIFICATE OF DESIGNATIONS

 

  

  

  

 

EXHIBIT D

 

FORM OF WARRANT

 

  

  

  

 

EXHIBIT E

 

Other terms and conditions; Determination of Net Cash Flow of OPN

 

  The following sets for the terms and conditions pursuant to which contributions in, and payments from the operations of, OPN will be made.

 

	
  

	
·

	
The Company shall provide the financing as set forth in 7.4 and 7.5 (the “National Investment”).

	
  

	
·

	
Immediately following each Closing, the Company shall place the National Investment in a separate bank account at the Company granting exclusive signing authority to Michael Weiss if he is Chairman, or a designee of the Lead Investor; provided such designee is deemed an officer, employee or director of the Company or otherwise having a title or role commensurate with such authority in order to properly administer the Company’s internal control procedures.  To the extent possible, in the event OPN will be an OSJ of NSC, the National Investment shall be contributed to NSC to be held in a separate account granting exclusive signing authority to Michael Weiss, or a designee of the Lead Investor; provided Michael Weiss or such designee is a registered representative with NSC with the goal of allowing such National Investment to be treated as ‘good capital’ for net capital purposes, subject to applicable regulatory requirements and NSC supervisory procedures.  Any additional required National Investment over the 12 month period succeeding the Initial Closing date will also be deposited in the account.  If OPN is converted into the OPN Entity, then any amounts of the National Investment remaining in the account (or remaining to be paid pursuant to 7.4 and 7.5) will be transferred to an account owned exclusively by OPN Entity as part of the Company’s capital contribution for its 50% ownership stake in the OPN Entity.

	
  

	
·

	
The Company, through NSC, shall provide financial, compliance, supervisory and regulatory infrastructure required to run the OPN business until it is established as a separate broker-dealer and if established as the OPN Entity at the Lead Investor’s option, NSC will continue to provide such infrastructure.

	
  

	
·

	
Company will maintain a separate profit and loss and financial statements for the operations of OPN in accordance with GAAP.

	
  

	
·

	
“Net Cash Flow” of OPN shall mean for any period, the positive difference, if any, between: (a) all revenues generated by OPN during such period, and (b) any cash expenditures made or to be made in connection with the operation of the business of OPN during such period, which for these purposes include:

	
  

	
1.

	
Direct expenses

	
  

	
2.

	
Indirect expenses reasonably allocated by National to OPN using a consistent methodology employed by National for its operating divisions/business units.  Such allocation shall first commence after the one year period from the date of the Agreement and shall include applicable costs associated with:

	
  

	
a.

	
Compliance

	
  

	
b.

	
Supervision

	
  

	
c.

	
Operations

	
  

	
d.

	
Accounting

	
  

	
e.

	
Insurance

	
  

	
f.

	
IT

	
  

	
3.

	
Reasonable reserves for contingencies

 

  

  

  

 

	
  

	
·

	
Net Cash Flow of OPN will distributed as follows: 50% will be retained by NSC and 50% will be paid out to either (x) affiliates of the Lead Investor who become duly registered with NSC and/or (y) a broker-dealer affiliated with the Lead Investor.

	
  

	
·

	
Beginning on the date of this Agreement, the Lead Investor (or such other registered persons within OPN as the Lead Investor designates) shall receive a quarterly bonus equal to fifty (50%) percent of Net Cash Flow generated by OPN during such calendar quarter.

	
  

	
·

	
Net Cash Flow shall be calculated on a quarterly basis and the bonus shall be paid within 45 days of the end of each calendar quarter.  Net Cash Flow shall be calculated in accordance with GAAP.

	
  

	
·

	
At the request of the Lead Investor, the Company agrees to make available space for OPN team members at its midtown and downtown, NYC locations.

	
  

	
·

	
NSC will invite a number of its brokers, including Michael Mullen to join OPN (however, all commissions related to retail trading not associated with OPN specific business shall remain the commissions of NSC, unless otherwise determined by NSC and OPN)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00179-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00179-of-00352.parquet"}]]