SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
December [ ], 2003, among International DisplayWorks, Inc., a Delaware
corporation (the "Company"), and the investors identified on the signature pages
hereto (each, an "Investor" and collectively, the "Investors").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below) and Rule
506 promulgated thereunder, the Company desires to issue and sell to each
Investor, and each Investor, severally and not jointly, desires to purchase from
the Company certain securities of the Company, as more fully described in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"Action" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"Closing" means the closing of the purchase and sale of the Securities
pursuant to Article II.
"Closing Date" means the date of the Closing.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, no par value per
share, and any securities into which such common stock may hereafter be
reclassified.
"Common Stock Equivalents" means any securities of the Company or any
Subsidiary which entitle the holder thereof to acquire Common Stock at any time,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"Company Counsel" means Xxxxxx Eng & Xxxxxxxx, Sacramento, CA.
"Effective Date" means the date that the Registration Statement
required by Section 2(a) of the Registration Rights Agreement is first declared
effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Investment Amount" means, with respect to each Investor, the
investment amount indicated below such Investor's name on the signature page of
this Agreement.
"Lien" means any lien, charge, encumbrance, security interest, right
of first refusal or other restrictions of any kind.
"Per Share Purchase Price" equals $[TBD ].
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Investors of the Shares.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Investors, in the form of Exhibit A hereto.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities" means the Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued or issuable to the
Investors pursuant to this Agreement.
"Subsidiary" means any "significant subsidiary" as defined in Rule
1-02(w) of Regulation S-X promulgated by the Commission under the Exchange Act.
"Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a
day on which the Common Stock is traded in the over-the-counter market is quoted
in the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i) or (ii) hereof, then Trading Day shall mean
a Business Day.
"Trading Market" means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.
"Transaction Documents" means this Agreement, the Registration Rights
Agreement, and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Investor, and
each Investor shall, severally and not jointly, purchase from the Company, the
Shares representing such Investor's Investment Amount. The Closing shall take
place at the offices of Xxxxx Xxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx,
XX 00000 on the date this Agreement is executed and delivered by the parties or
at such other location or time as the parties may agree.
2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver
or cause to be delivered to each Investor the following:
(i) a certificate evidencing a number of Shares equal to such
Investor's Investment Amount divided by the Per Share Purchase Price, registered
in the name of such Investor;
(ii) the legal opinion of Company Counsel, in agreed form
attached as Exhibit B, addressed to the Investors; and
(iii) the Registration Rights Agreement, duly executed by the
Company.
(b) At the Closing, each Investor shall deliver or cause to be
delivered to the Company the following:
(i) its Investment Amount, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose; and
(ii) the Registration Rights Agreement, duly executed by such
Investor.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to each Investor:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than those listed in Schedule 3.1(a). Except as disclosed in Schedule
3.1(a), the Company owns, directly or indirectly, all of the capital stock of
each Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and each
Subsidiary is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and each Subsidiary is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, have
or reasonably be expected to result in (i) an adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material and
adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (iii) an adverse impairment to the Company's ability to perform on a
timely basis its obligations under any Transaction Document (any of (i), (ii) or
(iii), a "Material Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing with the Commission of one or more Registration
Statements in accordance with the requirements Registration Rights Agreement,
(ii) filings required by state securities laws, which the Company will promptly,
and in any event prior to the Effectiveness Date under the Registration
Statement, make (at the sole expense of the Company) in order to permit the
holders of the Securities to resell Securities to Persons in each State in the
U.S.A., (iii) the filings required in accordance with Section 4.5, and (iv)
those that have been made or obtained prior to the date of this Agreement.
(f) Issuance of the Securities. The Securities have been duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock all of the Shares issuable pursuant to this Agreement.
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company, and all shares of Common
Stock reserved for issuance under the Company's various option and incentive
plans, is set forth in Schedule 3.1(g). Except as set forth in Schedule 3.1(g),
no securities of the Company are entitled to preemptive or similar rights, and
no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and except as disclosed in Schedule 3.1(g), there are
no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Except as set forth in Schedule 3.1(g), the issue and sale of the Securities
will not, immediately or with the passage of time, obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Investors) and will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC Reports" and, together with the Schedules to this
Agreement (if any), the "Disclosure Materials") on a timely basis or has timely
filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. The Company has delivered
to the Investors a copy of all SEC Reports filed within the 10 days preceding
the date hereof. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, 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 light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, or in the case of unaudited interim financial 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 consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.
(i) Press Releases. The press releases disseminated by the Company
during the two (2) years preceding the date of this Agreement taken as a whole
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(j) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans. The Company
does not have pending before the Commission any request for confidential
treatment of information.
(k) Litigation. There is no Action which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as set forth in the SEC Reports,
could, if there were an unfavorable decision, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. Except as
set forth in the SEC Reports or in Schedule 3.1(k), neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and
to the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.
(l) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(m) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect. The Company is in compliance
with the applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended,
and the rules and regulations thereunder, except where such noncompliance could
not have or reasonably be expected to result in a Material Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
(o) Title to Assets. The Company and the Subsidiaries have good and
marketable title to all real property owned by them that is material to their
respective businesses and good and marketable title in all personal property
owned by them that is material to their respective businesses, in each case free
and clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and proposed
to be made of such property by the Company and the Subsidiaries. Any real
property and facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases of which the Company
and the Subsidiaries are in compliance, except as could not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(p) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect (collectively, the "Intellectual Property
Rights"). Neither the Company nor any Subsidiary has received a written notice
that the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. Except as set forth in the
SEC Reports, to the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.
(q) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. The Company has no reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant increase in cost.
(r) Transactions With Affiliates and Employees. Except as set forth in
the SEC Reports, none of the officers or directors of the Company and, to the
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knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(s) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for
the Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its Subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company's Form 10-K or 10-Q, as the
case may be, is being prepared. The Company's certifying officers have evaluated
the effectiveness of the Company's controls and procedures as of the end of the
Company's most recently ended fiscal quarter (such date, the "Evaluation Date").
The Company presented in its most recently filed Form 10-K or Form 10-Q the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company's internal controls (as such term is defined in Item 307(b) of
Regulation S-K under the Exchange Act) or, to the Company's knowledge, in other
factors that could significantly affect the Company's internal controls.
(t) Solvency. Based on the financial condition of the Company as of
the Closing Date (and assuming that the Closing shall have occurred), (i) the
Company's fair saleable value of its assets in an orderly liquidation exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).
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(u) Certain Fees. Except as described in Schedule 3.1(u), no brokerage
or finder's fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Investors shall have no obligation with respect to any fees
or with respect to any claims (other than such fees or commissions owed by an
Investor pursuant to written agreements executed by such Investor which fees or
commissions shall be the sole responsibility of such Investor) made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.
(v) Certain Registration Matters. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Investors under the Transaction Documents.
Except as described in Schedule 3.1(v), the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
(w) Listing and Maintenance Requirements. Except as specified in the
SEC Reports, the Company has not, in the two years preceding the date hereof,
received notice from any Trading Market to the effect that the Company is not in
compliance with the listing or maintenance requirements thereof. The Company is,
and has no reason to believe that it will not in the foreseeable future continue
to be, in compliance with the listing and maintenance requirements for continued
listing of the Common Stock on the Trading Market, including the Eligibility
Rules thereunder. The issuance and sale of the Securities under the Transaction
Documents does not contravene the rules and regulations of the Trading Market on
which the Common Stock is currently listed or quoted, and no approval of the
shareholders of the Company thereunder is required for the Company to issue and
deliver to the Investors the Securities contemplated by Transaction Documents.
(x) Investment Company. The Company is not, and is not an Affiliate
of, an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(y) Application of Takeover Protections. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the Investors' ownership
of the Securities.
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(z) No Additional Agreements. The Company does not have any agreement
or understanding with any Investor with respect to the transactions contemplated
by the Transaction Documents other than as specified in this Agreement.
(aa) Disclosure. The Company confirms that neither it nor any Person
acting on its behalf has provided any of the Investors or their agents or
counsel with any information that the Company believes constitutes material,
non-public information. The Company understands and confirms that the Investors
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the
Investors regarding the Company, its business and the transactions contemplated
hereby, furnished by or on behalf of the Company (including the Company's
representations and warranties set forth in this Agreement) are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
3.2 Representations and Warranties of the Investors. Each Investor hereby,
for itself and for no other Investor, represents and warrants to the Company as
follows:
(a) Organization; Authority. Such Investor is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such
Investor of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or, if such Investor is not a corporation,
such partnership, limited liability company or other applicable like action, on
the part of such Investor. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Investor, and when delivered by such
Investor in accordance with terms hereof, will constitute the valid and legally
binding obligation of such Investor, enforceable against it in accordance with
its terms.
(b) Investment Intent. Such Investor is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor's right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Subject to the immediately preceding
sentence, nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Securities for any period of time. Such Investor is
acquiring the Securities hereunder in the ordinary course of its business. Such
Investor does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.
(c) Investor Status/Residence. At the time such Investor was offered
the Securities, it was, and at the date hereof it is, an "accredited investor"
as defined in Rule 501(a) under the Securities Act. Such Investor is not a
registered broker-dealer under Section 15 of the Exchange Act. Each Investor
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represents that, to the extent that he or she is an individual, that he or she
is a resident of the state set forth opposite his or her name on signature page,
and, to the extent that it is an organizational entity, they it has been
organized under the laws of the state or country set forth opposite its name on
signature page.
(d) General Solicitation. Such Investor is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(e) Access to Information. Such Investor acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Securities;
(ii) access to information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(f) Independent Investment Decision. Such Investor has independently
evaluated the merits of its decision to purchase Securities pursuant to this
Agreement, such decision has been independently made by such Investor and such
Investor confirms that it has only relied on the advice of its own business
and/or legal counsel and not on the advice of any other Investor's business
and/or legal counsel in making such decision.
The Company acknowledges and agrees that each Investor does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of an Investor or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act.
(b) Certificates evidencing the Securities will contain the following
legend, until such time as they are not required under Section 4.1(c):
5
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH
SECURITIES.
The Company acknowledges and agrees that an Investor may from time to
time pledge, and/or grant a security interest in some or all of the Securities
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or account, such
Investor may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval or consent
of the Company and no legal opinion of legal counsel to the pledgee, secured
party or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Investor transferee of the pledge. No notice shall be required of
such pledge. At the appropriate Investor's expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
(c) Certificates evidencing the Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)): (i) following a sale of such
Securities pursuant to an effective registration statement (including the
Registration Statement) so long as the purchaser of the Securities is not an
Affiliate of the Company, or (ii) following a sale of such Securities pursuant
to Rule 144, or (iii) while such Securities are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements issued
by the Staff of the Commission) provided in the case of (iv), however, that the
beneficial owner of the Securities is not an Affiliate of the Company. Following
such time as restrictive legends are not required to be placed on certificates
representing Securities, the Company will, not later than five Trading Days
following the delivery by an Investor to the Company or the Company's transfer
agent of a certificate representing such Securities containing a restrictive
legend, deliver or cause to be delivered to such Investor a certificate
representing such Securities that is free from all restrictive and other
6
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
4.2 Furnishing of Information. As long as any Investor owns the
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Investor owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Investors and make publicly available in accordance with Rule 144(c) such
information as is required for the Investors to sell such Securities under Rule
144. The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell such Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Investors, or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.
4.4 Subsequent Registrations. Other than pursuant to the Registration
Statement, prior to the Effective Date, the Company may not file any
registration statement (other than on Form S-8) with the Commission with respect
to any securities of the Company.
4.5 Securities Laws Disclosure; Publicity. By 8:30 a.m. (New York
time) on the Closing Date, the Company shall issue a press release reasonably
acceptable to the Investors disclosing the transactions contemplated hereby and
file a Current Report on Form 8-K disclosing the material terms of the
transactions contemplated hereby. In addition, the Company will make such other
filings and notices in the manner and time required by the Commission and the
Trading Market on which the Common Stock is listed. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Investor, or
include the name of any Investor in any filing with the Commission (other than
the Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the Exchange
Act) or any regulatory agency or Trading Market, without the prior written
consent of such Investor, except to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company shall provide the
Investors with prior notice of such disclosure.
4.6 Limitation on Issuance of Future Priced Securities. During the six
months following the Closing Date, the Company shall not issue any security that
would be a "Future Priced Securities" as such term is described by NASD
IM-4350-1.
4.7 Lock-Up. The Company shall take such actions as is required to
ensure that none of its executive officers shall sell more than five percent
7
(5%) of the total number of shares of Common Stock that such executive officer
beneficially owns as of the Closing Date during the period commencing on the
Closing Date and ending on the date that is six months following the Effective
Date other than shares of such executive officer that have been scheduled in
Schedule 3.1(v) hereto. The foregoing limitation shall expire with respect to
any officer, upon his or her termination of employment with the Company.
4.8 Indemnification of Investors. In addition to the indemnity
provided in the Registration Rights Agreement, the Company will indemnify and
hold the Investors and their directors, officers, shareholders, partners,
employees and agents (each, an "Investor Party") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation (collectively, "Losses")
that any such Investor Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
4.9 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Investor
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Investor
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Investor shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.10 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes, including, but
not limited to, the acquisition of manufacturing rights of new technologies, and
not for the satisfaction of any portion of the Company's debt (other than
payment of trade payables and accrued expenses in the ordinary course of the
Company's business and prior practices), to redeem any Common Stock or Common
Stock Equivalents or to settle any outstanding Action.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. Each Investor and the Company shall pay the
fees and expenses of its own advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of the Transaction
Documents. The Company shall pay all stamp and other taxes and duties levied in
connection with the issuance of the Securities under this Agreement.
5.2 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
8
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as follows:
If to the Company: International DisplayWorks, Inc.
000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
With a copy to: Xxxxxx Eng & Xxxxxxxx
000 Xxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx and/or Xxxxx X. Xxxxx
If to an Investor: To the address set forth under such Investor's
name on the signature pages hereof;
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed by the Company and the Investor or
Investors holding no less than 66 ?% of the outstanding Shares. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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. This Agreement
9
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the "Investors."
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8 (as to each
Investor Party).
5.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) may be commenced non-exclusively in the state
and federal courts sitting in the City of New York, Borough of Manhattan (the
"New York Courts"). Each party hereto hereby irrevocably submits to the
non-exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of the any
of the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
5.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Securities.
10
5.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall 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 signature page
were an original thereof.
5.11 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not timely perform
its related obligations within the periods therein provided, then such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
5.13 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
11
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.16 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose.
5.17 Limitation of Liability. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
INTERNATIONAL DISPLAYWORKS, INC.
-----------------------------------------
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]
IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first written above.
[INVESTOR]
By:_____________________________________
Name:
Title:
Number of Shares: _________________
Investment Amount: $[__________]
Address for Notice:
