SECURITIES PURCHASE AGREEMENT
Exhibit 10.1
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of February 4, 2010, is by and
among Digital Angel Corporation, a Delaware corporation with offices located at 000 Xxxxxxxx
Xxxxxx, Xxxxx Xxxxx Xxxx, Xxxxxxxxx 00000 (the “Company”), and each of the investors listed on the
Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).
RECITALS
A. The Company and each Buyer desire to enter into this transaction to purchase the Common
Shares (as defined below) and the Warrants (as defined below) set forth herein pursuant to a
currently effective shelf registration statement on Form S-3, which has at least 4,739,000
unallocated shares of common stock, $0.01 par value per share, of the Company (the “Common Stock”)
registered thereunder (Registration Number 333-164053) (the “Registration Statement”), which
Registration Statement has been declared effective in accordance with the Securities Act of 1933,
as amended (the “1933 Act”), by the United States Securities and Exchange Commission (the “SEC”).
B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms stated in
this Agreement, (i) the aggregate number of shares of Common Stock set forth opposite such Buyer’s
name in column (3) on the Schedule of Buyers (which aggregate amount for all Buyers shall be
3,385,000 shares of Common Stock and shall collectively be referred to herein as the “Common
Shares”) and (ii) a warrant to initially acquire up to that number of shares of Common Stock set
forth opposite such Buyer’s name in column (4) on the Schedule of Buyers, in the form attached
hereto as Exhibit A (the “Warrants”) (which aggregate amount initially acquirable for all
Buyers shall be 1,354,000 shares of Common Stock and shall, as exercised, collectively be referred
to herein as the “Warrant Shares”).
C. The Common Shares, the Warrants and the Warrant Shares are collectively referred to herein
as the “Securities.”
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.
(a) Common Shares and Warrants. The Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly,
shall purchase from the Company on the Closing Date (as defined below), that number of Common
Shares, as is set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers, along
with a Warrant to initially acquire up to that number of Warrant Shares as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers.
(b) Closing. The closing (the “Closing”) of the purchase of the Common Shares and the Warrants by the
Buyers shall occur at the offices of Xxxxxxxxx Xxxxxxx, LLP, 00 X. Xxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000. The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m.,
New York time, on the third (3rd) Trading Day (as defined in the Warrants) after the
date hereof (or such earlier date as is mutually agreed to by the Company and each Buyer). As used
herein “Business Day” means any day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are authorized or required by law to remain closed.
(c) Purchase Price. The aggregate purchase price for the Common Shares and the Warrants to be purchased by each
Buyer (the “Purchase Price”) shall be the amount set forth opposite such Buyer’s name in column (5)
on the Schedule of Buyers.
(d) Form of Payment; Deliveries. On the Closing Date, (i) each Buyer shall pay its respective Purchase Price to the Company
for the Common Shares and the Warrants to be issued and sold to such Buyer at the Closing, by wire
transfer of immediately available funds in accordance with the Company’s written wire instructions,
(less, in the case of Iroquois (as defined below), the amounts withheld pursuant to Section 4(g))
and (ii) the Company shall (A) cause Registrar and Transfer Company (together with any subsequent
transfer agent, the “Transfer Agent”) through the Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, to credit such aggregate number of Common Shares that such Buyer is
purchasing as is set forth opposite such Buyer’s name in column (3) of the Schedule of Buyers to
such Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian
system, (B) deliver to each Buyer a Warrant pursuant to which such Buyer shall have the right to
initially acquire up to that number of Warrant Shares as is set forth opposite such Buyer’s name in
column (4) of the Schedule of Buyers and (C) deliver to such Buyer the other documents, instruments
and certificates set forth in Section 6.
2. BUYER’S REPRESENTATIONS AND WARRANTIES.
Each Buyer, severally and not jointly, represents and warrants to the Company with respect to
only itself that:
(a) Organization; Authority. Such Buyer is an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization set forth across from its name on the Schedule of Buyers
attached hereto with the requisite power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents (as defined below) to which it is a party
and otherwise to carry out its obligations hereunder and thereunder.
(b) Validity; Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of such Buyer and constitutes the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with its terms, except as
such enforceability may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and remedies.
(c) No Conflicts. The execution, delivery and performance by such Buyer of this Agreement and the
consummation by such Buyer of the transactions contemplated hereby will
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not (i) result in a violation of the organizational documents of such Buyer or (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 such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree (including federal
and state securities laws) applicable to such Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the ability of such Buyer to
perform its obligations hereunder.
(d) Certain Trading Activities. Such Buyer has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Buyer, engaged in any
transactions in the securities of the Company (including, without limitation, any Short Sales (as
defined below) involving the Company’s securities) during the period commencing as of the time that
such Buyer was first contacted by the Placement Agent (as defined below) regarding the specific
investment in the Company contemplated by this Agreement and ending immediately prior to the
execution of this Agreement by such Buyer. “Short Sales” means all “short sales” as defined in Rule
200 promulgated under Regulation SHO under the 1934 Act (as defined below) (but shall not be deemed
to include the location and/or reservation of borrowable shares of Common Stock).
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
(a) Organization and Qualification. Each of the Company and each of its Subsidiaries are entities duly organized and validly
existing and in good standing (to the extent such concept exists in such jurisdiction) under the
laws of the jurisdiction in which they are formed, and have the requisite power and authorization
to own their properties and to carry on their business as now being conducted and as presently
proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified as a
foreign entity to do business and is in good standing (to the extent such concept exists in such
jurisdiction) 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 of the Company and its Subsidiaries, taken as a whole, (ii) the
transactions contemplated hereby or in any of the other Transaction Documents or (iii) the
authority or ability of the Company to perform any of its obligations under any of the Transaction
Documents. Other than the Persons (as defined below) set forth on Schedule 3(a), the Company has no
Subsidiaries. “Subsidiaries” means any Person in which the Company, directly or indirectly, (I)
owns any of the outstanding capital stock or holds any equity or similar interest of such Person or
(II) controls or operates all or any part of the business, operations or administration of such
Person, and each of the foregoing, is individually referred to herein as a “Subsidiary.”
(b) Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations
under this Agreement and the other
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Transaction Documents and to issue the Securities in accordance with the terms hereof and
thereof. The execution and delivery of this Agreement and the other Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Common Shares, the issuance of the Warrants and
the reservation for issuance and issuance of the Warrant Shares issuable upon exercise of the
Warrants) have been duly authorized by the Company’s board of directors and (other than the filing
with the SEC of the prospectus supplement required by the Registration Statement pursuant to Rule
424(b) under the 1933 Act (the “Prospectus Supplement”) supplementing the base prospectus forming
part of the Registration Statement (the “Prospectus”) and any other filings as may be required by
any state securities agencies) no further filing, consent or authorization is required by the
Company, its board of directors or its stockholders or other governing body. This Agreement has
been, and the other Transaction Documents will be prior to the Closing, duly executed and delivered
by the Company, and each constitutes the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with its respective terms, except as such
enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies and except as rights to indemnification
and to contribution may be limited by federal or state securities law. “Transaction Documents”
means, collectively, this Agreement, the Warrants, the Irrevocable Transfer Agent Instructions (as
defined below) and each of the other agreements and instruments entered into by the parties hereto
in connection with the transactions contemplated hereby and thereby, as may be amended from time to
time.
(c) Issuance of Securities; Registration Statement. The issuance of the Common Shares and the Warrants are duly authorized and, upon issuance in
accordance with the terms of the Transaction Documents, will be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof. As of the Closing, the Company shall have reserved
from its duly authorized capital stock the maximum number of shares of Common Stock issuable upon
exercise of the Warrants (without taking into account any limitations on the exercise of the
Warrants set forth therein). The issuance of the Warrant Shares is duly authorized, and upon
exercise in accordance with the Warrants, the Warrant Shares, when issued, will be validly issued,
fully paid and nonassessable and free from all preemptive or similar rights, taxes, liens, charges
and other encumbrances with respect to the issue thereof, with the holders being entitled to all
rights accorded to a holder of Common Stock. The issuance by the Company of the Securities has been
registered under the 1933 Act, the Securities are being issued pursuant to the Registration
Statement and all of the Securities are freely transferable and tradable by each of the Buyers
without restriction (other than any restriction imposed because of any act or omission by a Buyer).
The Registration Statement is effective and available for the issuance of the Securities thereunder
and the Company has not received any notice that the SEC has issued or intends to issue a
stop-order with respect to the Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or
intends or has threatened in writing to do so. The “Plan of Distribution” section under the
Registration Statement permits the issuance and sale of the Securities hereunder. Upon receipt of
the Securities, each of the Buyers will have good and marketable title to the Securities. The
Registration Statement and any prospectus included therein, including the Prospectus and the
Prospectus Supplement, complied in all material respects with the requirements of the 1933 Act and
the 1934 Act and the rules and regulations of the SEC promulgated thereunder and all
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other applicable laws and regulations. At the time the Registration Statement and any
amendments thereto became effective, at the date of this Agreement and at each deemed effective
date thereof pursuant to Rule 430B(f)(2) of the 1933 Act, the Registration Statement and any
amendments thereto complied and will comply in all material respects with the requirements of the
1933 Act and did not and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the statements therein not
misleading; and the Prospectus and any amendments or supplements thereto (including, without
limitation the Prospectus Supplement), at the time the Prospectus or any amendment or supplement
thereto was issued and at the Closing Date, complied and will comply in all material respects with
the requirements of the 1933 Act and did not and will not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The Company meets all of the
requirements for the use of Form S-3 under the 1933 Act for the offering and sale of the Securities
contemplated by this Agreement and the other Transaction Documents, and the SEC has not notified
the Company of any objection to the use of the form of the Registration Statement pursuant to Rule
401(g)(1) under the 1933 Act. The Registration Statement meets the requirements set forth in Rule
415(a)(1)(x) under the 1933 Act. At the earliest time after the filing of the Registration
Statement that the Company or another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) under the 0000 Xxx) relating to any of the Securities, the Company was
not and is not an “Ineligible Issuer” (as defined in Rule 405 under the 1933 Act). The Company (i)
has not distributed any offering material in connection with the offering and sale of any of the
Securities and (ii) until no Buyer holds any of the Securities, shall not distribute any offering
material in connection with the offering and sale of any of the Securities to, or by, any of the
Buyers, in each case, other than the Registration Statement, the Prospectus or the Prospectus
Supplement.
(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 hereby and thereby (including, without
limitation, the issuance of the Common Shares, the Warrants and Warrant Shares and the reservation
for issuance of the Warrant Shares) will not (i) result in a violation of the Articles of
Incorporation (as defined below) (including, without limitation, any certificates of designation
contained therein) or other organizational documents of the Company or any of its Subsidiaries, any
capital stock of the Company, or Bylaws (as defined below), (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 Nasdaq Capital Market (the “Principal Market”)) 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 that
could not reasonably be expected to have a Material Adverse Effect.
(e) Consents. The Company is not required to obtain any consent from, authorization or order of, or make
any filing or registration with (other than the filing with the SEC of the Prospectus Supplement
and any other filings as may be required by any state securities agencies), any court, governmental
agency or any regulatory or self-regulatory agency or any
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other Person in order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case, in accordance with the terms hereof or
thereof. 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 by the Transaction Documents. Except as disclosed in the SEC
Documents, the Company is not in violation of the requirements of the Principal Market and has no
knowledge of any facts or circumstances which could reasonably lead to delisting or suspension of
the Common Stock in the foreseeable future.
(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that each Buyer is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
hereby and thereby and that no Buyer is (i) an officer or director of the Company or any of its
Subsidiaries, (ii) an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a
successor rule thereto) (collectively, “Rule 144”)) of the Company or any of its Subsidiaries or
(iii) to its knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock (as
defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “1934
Act”)). The Company further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer’s
purchase of the Securities. The Company further represents to each Buyer that the Company’s
decision to enter into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
(g) Placement Agent’s Fees. The Company shall be responsible for the payment of any placement agent’s fees, financial
advisory fees, or brokers’ commissions (other than for Persons engaged by any Buyer or its
investment advisor) relating to or arising out of the transactions contemplated hereby. Other than
Chardan Capital Markets, LLC (the “Placement Agent”), neither the Company nor any of its
Subsidiaries has engaged any placement agent or other agent in connection with the sale of the
Securities.
(h) No Integrated Offering. None of the Company, its Subsidiaries or any of their affiliates, nor any Person 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 this offering of the Securities to
require approval of stockholders of the Company under any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of any exchange or
automated quotation system on which any of the securities of the Company are listed or designated.
None of the Company, its Subsidiaries, their affiliates nor any Person acting on their behalf will
take any action or steps that would cause the offering of any of the Securities to be integrated
with other offerings.
(i) Dilutive Effect. The Company understands and acknowledges that the number of Warrant Shares will increase in
certain circumstances. The Company further acknowledges that it has the obligation to issue the
Warrant Shares upon exercise of the Warrants in accordance
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with this Agreement and the Warrants, regardless of the dilutive effect that such issuance may
have on the ownership interests of other stockholders of the Company.
(j) Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, interested stockholder, business combination,
poison pill (including any distribution under a rights agreement) or other similar anti-takeover
provision under the Articles 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
Buyer as a result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and any Buyer’s ownership of the Securities.
The Company and its board of directors have taken all necessary action, if any, in order to render
inapplicable any stockholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of shares of Common Stock or a change in control of the Company or any of its
Subsidiaries.
(k) 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 1934 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 1934 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 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). No other information provided by or on behalf of the Company to the Buyers which
is not included in the SEC Documents contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein not misleading, in the
light of the circumstance under which they are or were made.
(l) Absence of Certain Changes. Since the date of the Company’s most recent audited financial statements contained in a Form
10-K, except as disclosed in the SEC Documents filed subsequent thereto and except as disclosed on
Schedule 3(l), 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
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of the Company or any of its Subsidiaries, taken as a whole. 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 material assets, in the
aggregate, outside of the ordinary course of business or (iii) made any material capital
expenditures, in the aggregate, that have not been disclosed in the SEC Documents. 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 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, 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). Each of the Company’s “significant subsidiaries” (as that term is defined in Regulation S-X
promulgated by the SEC), individually, is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing will not be, Insolvent. For purposes of
this Section 3(l), “Insolvent” means, (I) with respect to the Company and its Subsidiaries, on a
consolidated basis, (i) the present fair saleable value of their assets is less than the amount
required to pay their total Indebtedness (as defined below), (ii) are unable to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute
and matured or (iii) intend to incur or believe that they will incur debts that would be beyond
their ability to pay as such debts mature; and (II) with respect to the each “significant
subsidiary” (as that term is defined in Regulation S-X promulgated by the SEC) of the Company,
individually, (i) the present fair saleable value of such subsidiary’s (as the case may be) assets
is less than the amount required to pay its respective total Indebtedness, (ii) 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 (iii) 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.
(m) 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 their respective
business, properties, liabilities, prospects, 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 Common Stock and which has not been publicly announced
or (ii) could have a material adverse effect on any Buyer’s investment hereunder or could have a
Material Adverse Effect.
(n) 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 Articles 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 or
their organizational charter, certificate of formation or certificate of incorporation 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
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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. Without limiting the generality of the foregoing, except as disclosed in
the SEC Documents, the Company is not in violation of any of the rules, regulations or requirements
of the Principal Market and has no knowledge of any facts or circumstances that could reasonably
lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable
future. Since January 1, 2007, (i) the Common Stock has been listed or designated for quotation on
the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the
Principal Market and (iii) except as disclosed in the SEC Documents, the Company has received no
communication, written or oral, from the SEC or the Principal Market regarding the suspension or
delisting of the Common Stock from the Principal Market. The Company and each of its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate regulatory
authorities 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.
(o) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries nor any director, officer, agent, employee
or other Person 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.
(p) Xxxxxxxx-Xxxxx Act. The Company is in compliance with all applicable requirements of the Xxxxxxxx-Xxxxx 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.
(q) Transactions With Affiliates. Other than (i) the grant of the stock options, restricted stock and other securities set
forth on Schedule 3(q)(i) and (ii) as disclosed on Schedule 3(q)(ii) and in the SEC Documents, no
officer, director or employee of the Company or any Subsidiary is presently a party to any
transaction with the Company or any Subsidiary (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 in which any such officer, director, or employee has a substantial interest or is an
employee, officer, director, trustee or partner.
(r) Equity Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i)
50,000,000 shares of Common Stock, of which, 24,024,994 are issued
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and outstanding and 9,607,421 shares are reserved for issuance pursuant to securities (other
than the Warrants) exercisable or exchangeable for, or convertible into, shares of Common Stock and
(ii) 5,000,000 shares of preferred stock, of which none are issued and outstanding. No shares of
Common Stock are held in treasury. All of such outstanding shares are duly authorized and have
been, or upon issuance will be, validly issued and are fully paid and nonassessable. 833,019 shares
of the Company’s issued and outstanding shares of Common Stock on the date hereof are owned by
Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and calculated based on the
assumption that only officers, directors and holders of at least 10% of the Company’s issued and
outstanding shares of Common Stock are “affiliates” without conceding that any such Persons are
“affiliates” for purposes of federal securities laws) of the Company or any of its Subsidiaries. To
the Company’s knowledge, no Person owns 10% or more of the Company’s issued and outstanding shares
of Common Stock (calculated based on the assumption that all Equivalents, whether or not presently
exercisable or convertible, have been fully exercised or converted (as the case may be) taking
account of any limitations on exercise or conversion (including “blockers”) contained therein
without conceding that such identified Person is a 10% stockholder for purposes of federal
securities laws). (i) None of the Company’s or any Subsidiary’s capital stock is subject to
preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by
the Company or any Subsidiary, other than liens on the capital stock of the Subsidiaries securing
Indebtedness (all of which liens are disclosed in the SEC Documents); (ii) except as disclosed on
Schedule 3(r), there are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any capital stock of the Company or any of its Subsidiaries; (iii) except as
disclosed on Schedule 3(s) or in the SEC Documents, there are no outstanding debt securities,
notes, credit agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of
its Subsidiaries is or may become bound; (iv) except as disclosed on Schedule 3(r) and in the SEC
Documents, there are no financing statements securing obligations in any amounts filed in
connection with the Company or any of its Subsidiaries; (v) except as disclosed on Schedule 3(r),
there are no agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act (except pursuant to
this Agreement); (vi) there are no outstanding securities or instruments of the Company or any of
its Subsidiaries which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or
may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) except as
disclosed on Schedule 3(r), there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Securities; (viii) except as
disclosed on Schedule 3(r), neither the Company nor any Subsidiary has any stock appreciation
rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) neither
the Company nor any of its Subsidiaries have any liabilities or obligations required to be
disclosed in the SEC Documents which are not so disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and
which, individually or in the aggregate, do not or could not have a Material Adverse Effect. The
SEC
10
Documents contain true, correct and complete copies of the Company’s Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation”),
and the Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the
terms of all securities convertible into, or exercisable or exchangeable for, shares of Common
Stock and the material rights of the holders thereof in respect thereto.
(s) Indebtedness and Other Contracts. Neither the Company nor any of its Subsidiaries (i) except as disclosed on Schedule 3(s) or
in the SEC Documents, has any outstanding Indebtedness (as defined below), (ii) except as disclosed
on Schedule 3(s), is a party to any contract, agreement or instrument, the violation of which, or
default under which, by the other party(ies) to such contract, agreement or instrument could
reasonably be expected to result in a Material Adverse Effect, (iii) is in violation of any term
of, or in default under, any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the aggregate, in a
Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating to
any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x) “Indebtedness” of
any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations
issued, undertaken or assumed as the deferred purchase price of property or services (including,
without limitation, “capital leases” in accordance with generally accepted accounting principles)
(other than trade payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition of property, assets
or businesses, (E) all indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to any property or
assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied for the periods
covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or
other encumbrance upon or in any property or assets (including accounts and contract rights) owned
by any Person, even though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above;
(y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent
or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation
of another Person if the primary purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.
(t) Absence of Litigation. Except as set forth on Schedule 3(t), there is no action,
11
suit, proceeding, inquiry or investigation before or by the Principal Market, any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge
of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common
Stock or any of the Company’s or its Subsidiaries’ officers or directors which is outside of the
ordinary course of business or individually or in the aggregate material to the Company or any of
its Subsidiaries. There has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the SEC involving the Company, any of its Subsidiaries or any
current of former director or officer of the Company or any of its Subsidiaries. The SEC has not
issued any stop order or other order suspending the effectiveness of any registration statement
filed by the Company under the 1933 Act or the 1934 Act, including, without limitation, the
Registration Statement.
(u) 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.
(v) Employee Relations. Except as set forth on Schedule 3(v), neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union. The Company believes
that its and its Subsidiaries’ relations with their respective employees are good. No executive
officer (as defined in Rule 501(f) promulgated under the 0000 Xxx) or other key employee of the
Company or any of its Subsidiaries has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s
employment with the Company or any such Subsidiary. To the Company’s knowledge, no executive
officer or other key employee of the Company or any of its Subsidiaries is, or is now expected to
be, in violation of any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other contract or agreement or
any restrictive covenant, and to the Company’s knowledge, the continued employment of each such
executive officer or other key employee (as the case may be) does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and
its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(w) Title. The Company and its Subsidiaries have good and marketable title in fee simple to all real
property, and have good and marketable title to all personal property, owned by them which is
material to the business of the Company and its Subsidiaries, in each case, free and clear of all
liens, encumbrances and defects except (i) such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries and (ii) as disclosed in the SEC Documents. Any real property
and facilities held under lease by the Company or any of its Subsidiaries are
12
held by them under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such property and
buildings by the Company or any of its Subsidiaries.
(x) Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all
material trademarks, trade names, service marks, service xxxx registrations, service names,
patents, patent rights, copyrights, original works, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights and all applications and
registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective
businesses as now conducted and as presently proposed to be conducted. None of the Company’s or
its Subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned or are
expected to expire, terminate or be abandoned within three years from the date of this Agreement.
The Company has no knowledge of any infringement by the Company or any of its Subsidiaries of
Intellectual Property Rights of others. There is no claim, action or proceeding being made or
brought, or to the knowledge of the Company or any of its Subsidiaries, being threatened, against
the Company or any of its Subsidiaries regarding their Intellectual Property Rights. The Company is
not aware of any facts or circumstances which might give rise to any of the foregoing infringements
or claims, actions or proceedings. The Company and each of its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of their Intellectual
Property Rights.
(y) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with all applicable Environmental
Laws (as defined below), (ii) have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval where, in each of
the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved thereunder.
(z) 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.
(aa) Tax Status. Except as set forth on Schedule 3(aa), the Company and each of its Subsidiaries (i) has
timely made or filed all material foreign, federal and state income and all other material 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
13
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. The Company is not operated in such a manner
as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S.
Internal Revenue Code of 1986, as amended.
(bb) Internal Accounting and Disclosure Controls. The Company and each of its Subsidiaries maintains internal control over financial reporting
(as such term is defined in Rule 13a-15(f) under the 0000 Xxx) 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 0000 Xxx) that are effective in ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 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 1934 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 relating to any potential
material weakness in any part of the internal controls over financial reporting of the Company or
any of its Subsidiaries.
(cc) 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 1934 Act filings and is not so disclosed or that otherwise could be
reasonably likely to have a Material Adverse Effect.
(dd) Investment Company Status. The Company is not, and upon consummation of the sale of the Securities 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.
(ee) Acknowledgement Regarding Buyers’ Trading Activity. It is understood and acknowledged by the Company that (i) following the public disclosure of
the transactions contemplated by the Transaction Documents, in accordance with the terms thereof,
none of the Buyers have been asked by the Company or any of its Subsidiaries to agree, nor has any
Buyer
14
agreed with the Company or any of its Subsidiaries, to desist from effecting any transactions
in or with respect to (including, without limitation, purchasing or selling, long and/or short)
securities of the Company, or “derivative” securities based on securities issued by the Company or
to hold the Securities for any specified term; (ii) any Buyer, and counterparties in “derivative”
transactions to which any such Buyer is a party, directly or indirectly, presently may have a
“short” position in the Common Stock which were established prior to such Buyer’s knowledge of the
transactions contemplated by the Transaction Documents, and (iii) each Buyer shall not be deemed to
have any affiliation with or control over any arm’s length counterparty in any “derivative”
transaction. The Company further understands and acknowledges that following the public disclosure
of the transactions contemplated by the Transaction Documents pursuant to the Press Release (as
defined below) one or more Buyers may engage in hedging and/or trading activities at various times
during the period that the Securities are outstanding, including, without limitation, during the
periods that the value and/or number of the Warrant Shares deliverable with respect to the
Securities are being determined and (b) such hedging and/or trading activities, if any, can reduce
the value of the existing stockholders’ equity interest in the Company both at and after the time
the hedging and/or trading activities are being conducted. The Company acknowledges that such
aforementioned hedging and/or trading activities do not constitute a breach of this Agreement or
any other Transaction Document or any of the documents executed in connection herewith or
therewith.
(ff) Manipulation of Price. Neither the Company nor any of its Subsidiaries has, and, to the knowledge of the Company,
no Person acting on their behalf has, directly or indirectly, (i) taken any action designed to
cause or to result in the stabilization or manipulation of the price of any security of the Company
or any of its Subsidiaries to facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities
(other than the Placement Agent), or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company or any of its Subsidiaries.
(gg) U.S. Real Property Holding Corporation. Neither the Company nor any of its Subsidiaries is, or has ever been, and so long as any of
the Securities are held by any of the Buyers, shall become, a U.S. real property holding
corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and
the Company and each Subsidiary shall so certify upon any Buyer’s request.
(hh) Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other
than income or similar taxes) which are required to be paid in connection with the issuance and
sale of the Securities to be sold to each Buyer hereunder will be, or will have been, fully paid or
provided for by the Company, and all laws imposing such taxes will be or will have been complied
with.
(ii) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries is
subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the
Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor
any of its Subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%)
or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or
more of the total equity of a bank or any equity that is subject to the BHCA and to regulation by
the Federal Reserve. Neither the Company nor any of its Subsidiaries or
15
affiliates exercises a controlling influence over the management or policies of a bank or any
entity that is subject to the BHCA and to regulation by the Federal Reserve.
(jj) Shell Company Status. The Company is not, and has never been, an issuer
identified in, or subject to, Rule 144(i).
(kk) Disclosure. The Company confirms that neither it nor any other Person acting on
its behalf has provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, non-public information
concerning the Company or any of its Subsidiaries, other than the existence of the transactions
contemplated by this Agreement and the other Transaction Documents. The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the Buyers regarding the
Company and its Subsidiaries, their businesses and the transactions contemplated hereby, including
the schedules to this Agreement, furnished by or on behalf of the Company or any of its
Subsidiaries is true and correct and does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each press release issued by
the Company or any of its Subsidiaries during the twelve (12) months preceding the date of this
Agreement did not at the time of release 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 the light of the circumstances under which they are made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, liabilities, prospects, operations (including
results thereof) or conditions (financial or otherwise), which, under applicable law, rule or
regulation, requires public disclosure at or before the date hereof or announcement by the Company
but which has not been so publicly announced or disclosed. The Company acknowledges and agrees that
no Buyer makes or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2.
(ll) Registration Rights. No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the Registration Statement
or the issuance of the Securities hereunder that could expose the Company to material liability or
any Buyer to any liability or that could impair the Company’s ability to consummate the issuance
and sale of the Securities in the manner, and at the times, contemplated hereby, which rights have
not been waived by the holder thereof as of the date hereof.
(mm) SEDA. The Company has the unilateral right to terminate the SEDA (as defined below) for
no consideration or other remuneration upon fifteen (15) Trading Days’ prior written notice to YA
Global (as defined below). The Company will immediately following the execution of this Agreement
deliver to YA Global an irrevocable notice irrevocably terminating the SEDA on the fifteenth
(15th) Trading Day following the date hereof. The Company has not, and will not,
directly or indirectly, offer or pay to YA Global or any of its affiliated or related Persons any
consideration or other remuneration in connection with the termination of the SEDA. The Company
will not deliver an Advance Notice (as defined in the SEDA) or otherwise issue, or require YA
Global to purchase, any shares of Common Stock under the SEDA between the date hereof and the
termination of the SEDA.
16
4. COVENANTS.
(a) Maintenance of Registration Statement
For so long as any of the Warrants remain outstanding, the Company shall use its best efforts
to maintain the effectiveness of the Registration Statement for the issuance thereunder of the
Warrant Shares, provided that, if at any time while the Warrants are outstanding the Company shall
be ineligible to utilize Form S-3 (or any successor form) for the purpose of issuance of the
Warrant Shares, the Company shall promptly amend the Registration Statement on such other form as
may be necessary to maintain the effectiveness of the Registration Statement for this purpose. If
at any time following the date hereof the Registration Statement is not effective or is not
otherwise available for the issuance of the Securities, the Company shall immediately notify the
holders of the Securities in writing that the Registration Statement is not then effective and
thereafter shall promptly notify such holders when the Registration Statement is effective again
and available for the issuance of the Securities.
(b) Prospectus Supplement and Blue Sky. Immediately prior to execution of this
Agreement, the Company shall have delivered, and as soon as practicable after execution of this
Agreement the Company shall file, the Prospectus Supplement with respect to the Securities as
required under, and in conformity with, the 1933 Act, including Rule 424(b) thereunder. If
required, the Company, on or before the Closing Date, shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to, qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to the Buyers on or
prior to the Closing Date. Without limiting any other obligation of the Company under this
Agreement, the Company shall timely make all filings and reports relating to the offer and sale of
the Securities required under all applicable securities laws (including, without limitation, all
applicable federal securities laws and all applicable “Blue Sky” laws), and the Company shall
comply with all applicable federal, state and local laws, statutes, rules, regulations and the like
relating to the offering and sale of the Securities to the Buyers.
(c) Reporting Status. Until the date on which no Warrants are outstanding (the “Reporting Period”), the Company
shall use reasonable best efforts to timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would
no longer require or otherwise permit such termination.
(d) Use of Proceeds. The Company shall use the proceeds from the sale of the Securities principally for the
repayment of Indebtedness and other debt.
(e) Financial Information. The Company agrees to send the following to each Buyer during the Reporting Period (i)
unless the following are filed with the SEC through XXXXX and are available to the public through
the XXXXX system, within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim reports or any
consolidated balance sheets, income statements, stockholders’ equity statements and/or cash flow
statements for any period other than annual, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act and (ii) copies of
any notices and other information
17
made available or given to the stockholders of the Company generally, contemporaneously with
the making available or giving thereof to the stockholders.
(f) Listing. The Company shall promptly secure the listing or designation for quotation (as the case may
be) of all of the Common Shares and Warrant Shares upon each national securities exchange and
automated quotation system, if any, upon which the Common Stock is then listed or designated for
quotation (as the case may be) (subject to official notice of issuance) (but in no event later than
the Closing Date) and shall maintain such listing or designation for quotation (as the case may be)
of all the shares of Common Stock from time to time issuable under the terms of the Transaction
Documents on such national securities exchange or automated quotation system. The Company shall
maintain the Common Stock’s listing or designation for quotation (as the case may be) on the
Principal Market, The New York Stock Exchange, the NYSE Amex, the Nasdaq Global Market, the Nasdaq
Global Select Market or the OTC Bulletin Board (each, an “Eligible Market”). Neither the Company
nor any of its Subsidiaries shall take any action which could be reasonably expected to result in
the delisting or suspension of the Common Stock on an Eligible Market. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this Section 4(f).
(g) Fees. The Company shall reimburse Iroquois Master Fund Ltd. (“Iroquois”) or its designee(s) for
all costs and expenses incurred by it or its affiliates in connection with the transactions
contemplated by the Transaction Documents (including, without limitation, all legal fees and
disbursements in connection therewith, documentation and implementation of the transactions
contemplated by the Transaction Documents and due diligence and regulatory filings in connection
therewith) in a non-accountable amount equal to $63,000, which amount shall be withheld by Iroquois
from its Purchase Price at the Closing or paid by the Company upon termination of this Agreement on
demand by Iroquois so long as such termination did not occur as a result of a material breach by
Iroquois of any of its obligations hereunder (as the case may be), less $20,000 which was
previously advanced to Iroquois by the Company. The Company shall be responsible for the payment of
any placement agent’s fees, financial advisory fees, or broker’s commissions (other than for
Persons engaged by any Buyer) relating to or arising out of the transactions contemplated hereby
(including, without limitation, any fees payable to the Placement Agent, who is the Company’s sole
placement agent in connection with the transactions contemplated by this Agreement). The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any
claim relating to any such payment. Except as otherwise set forth in the Transaction Documents,
each party to this Agreement shall bear its own expenses in connection with the sale of the
Securities to the Buyers.
(h) Pledge of Securities. Notwithstanding anything to the contrary contained in this Agreement, the Company
acknowledges and agrees that the Securities may be pledged by a Buyer in connection with a bona
fide margin agreement or other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities
hereunder, and no Buyer effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or
any other Transaction Document. The Company hereby agrees to execute and deliver such documentation
as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by a Buyer.
18
(i) Disclosure of Transactions and Other Material Information. The Company shall, on or before 9:30 a.m., New York time (but in no event prior to 9:15
a.m., New York time), on the date of this Agreement, issue a press release (the “Press Release”)
reasonably acceptable to the Buyers disclosing all the material terms of the transactions
contemplated by the Transaction Documents. On or before 9:30 a.m., New York time (but in no event
prior to 9:15 a.m., New York time), on the date of this Agreement, the Company shall file a Current
Report on Form 8-K describing all the material terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and attaching all the material
Transaction Documents (including, without limitation, this Agreement (and shall make available upon
request all schedules to this Agreement) and the form of Warrants) (including all attachments, the
“8-K Filing”). From and after the issuance of the Press Release, the Company shall have disclosed
all material, non-public information (if any) delivered to any of the Buyers by the Company or any
of its Subsidiaries, or any of their respective officers, directors, employees or agents in
connection with the transactions contemplated by the Transaction Documents. The Company shall not,
and the Company shall cause each of its Subsidiaries and each of its and their respective officers,
directors, employees and agents, not to, provide any Buyer with any material, non-public
information regarding the Company or any of its Subsidiaries from and after the issuance of the
Press Release without the express prior written consent of such Buyer. In the event of a breach of
any of the foregoing covenants or any of the covenants contained in Section 4(n) by the Company,
any of its Subsidiaries, or any of its or their respective officers, directors, employees and
agents (as determined in the reasonable good faith judgment of such Buyer), in addition to any
other remedy provided herein or in the Transaction Documents, such Buyer shall have the right to
make a public disclosure, in the form of a press release, public advertisement or otherwise, of
such material, non-public information without the prior approval by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees or agents. No Buyer
shall have any liability to the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees, stockholders or agents, for any such disclosure. Subject to the
foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue any press releases or
any other public statements with respect to the transactions contemplated hereby; provided,
however, the Company shall be entitled, without the prior approval of any Buyer, to make any press
release or other public disclosure with respect to such transactions (i) in substantial conformity
with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be consulted by the Company
in connection with any such press release or other public disclosure prior to its release). Without
the prior written consent of the applicable Buyer or except as required by law or by any regulatory
authority, the Company shall not (and shall cause each of its Subsidiaries and affiliates to not)
disclose the name of such Buyer in any filing, announcement, release or otherwise.
(j) Additional Issuance of Securities. The Company agrees that for the period commencing on the date hereof and ending on the date
immediately following the one hundred eighty (180) day anniversary of the Closing Date (provided
that such period shall be extended by the number of days during such period and any extension
thereof contemplated by this proviso on which the Registration Statement is not effective or any
prospectus contained therein is not available for use) (the “Restricted Period”), neither the
Company nor any of its Subsidiaries shall directly or indirectly issue, offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any
option to purchase or other disposition of) any of their respective equity or equity equivalent
securities, including, without limitation, any
19
debt, preferred stock, rights, options, warrants or other instrument that is at any time and
under any circumstances convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, capital stock and other securities of the Company (including, without
limitation, 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) (collectively with such capital stock or
other securities of the Company, “Equivalents”) (any such issuance, offer, sale, grant, disposition
or announcement (whether occurring during the Restricted Period or at any time thereafter) is
referred to as a “Subsequent Placement”). Notwithstanding the foregoing, this Section 4(j) shall
not apply in respect of the issuance of (i) (A) shares of Common Stock or standard options to
purchase Common Stock to directors, officers or employees of the Company in their capacity as such
pursuant to an Approved Share Plan (as defined below), provided that (1) all such issuances (taking
into account the shares of Common Stock issuable upon exercise of such options) after the date
hereof pursuant to this clause (A) do not, in the aggregate, exceed more than 1,199,771 shares of
Common Stock and (2) such options issued after the date hereof are not amended to increase the
number of shares issuable thereunder or to lower the exercise price thereof or to otherwise
materially change the terms or conditions thereof in any manner that adversely affects any of the
Buyers; (B) shares of Common Stock issued upon the conversion or exercise of Equivalents issued
prior to the date hereof, provided that such Equivalents have not been amended since the date of
this Agreement to increase the number of shares issuable thereunder or to lower the exercise or
conversion price thereof or otherwise materially change the terms or conditions thereof in any
manner that adversely affects any of the Buyers; and (C) the Warrant Shares (each of the foregoing
in clauses (A) through (C), collectively the “Excluded Securities”), (ii) up to 1,247,364 shares of
unregistered Common Stock in the aggregate pursuant to, and in accordance with, the agreements and
obligations set forth on Schedule 4(j)(i), provided that 412,444 of such 1,247,364 shares are
registered shares that may be issued as expressly permitted by Schedule 4(j)(i), provided further
that none of such 412,444 registered shares shall be issued prior to May 15, 2010 and (iii) up to
452,636 shares of Common Stock in the aggregate to the consultants of the Company set forth on
Schedule 4(j)(ii), provided that no shares of Common Stock contemplated by this clause (iii) shall
be issued prior to April 1, 2010 (other than up to 44,000 shares of Common Stock permitted to be
issued on or after March 1, 2010 as expressly set forth on Schedule 4(j)(ii)) (each of the
foregoing in clauses (ii) and (iii), collectively referred to as “Additional Securities”).
“Approved Share Plan” means any employee benefit plan which has been approved by the board of
directors of the Company prior to or subsequent to the date hereof pursuant to which shares of
Common Stock and standard options to purchase Common Stock may be issued to any employee, officer
or director for services provided to the Company in their capacity as such.
(k) Reservation of Shares. So long as any of the Warrants remain outstanding, the Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of issuance, the maximum
number of shares of Common Stock issuable upon exercise of all the Warrants (without regard to any
limitations on the exercise of the Warrants set forth therein).
(l) Conduct of Business. The business of the Company and its Subsidiaries shall not be conducted in violation of any
law, ordinance or regulation of any governmental entity, except
20
where such violations would not result, either individually or in the aggregate, in a Material
Adverse Effect.
(m) Variable Rate Transaction. Until the five (5) year anniversary of the Closing
Date, the Company and each Subsidiary shall be prohibited from effecting or entering into an
agreement to effect any Subsequent Placement involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company or any Subsidiary (i) issues or sells any
Equivalents either (A) at a conversion, exercise or exchange rate or other price that is based upon
and/or varies with the trading prices of or quotations for the shares of Common Stock at any time
after the initial issuance of such Equivalents, or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the initial issuance of such
Equivalents or upon the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock, other than pursuant to a
customary “full-ratchet” or “weighted average” anti-dilution provision or (ii) enters into any
agreement (including, without limitation, an equity line of credit) whereby the Company or any
Subsidiary may sell securities at a future determined price (other than standard and customary
“preemptive” or “participation” rights). Each Buyer shall be entitled to obtain injunctive relief
against the Company and its Subsidiaries to preclude any such issuance, which remedy shall be in
addition to any right to collect damages.
(n) Participation Right. From the date hereof through the twelve (12) month
anniversary of the Closing Date, neither the Company nor any of its Subsidiaries shall, directly or
indirectly, effect any Subsequent Placement unless the Company shall have first complied with this
Section 4(n). The Company acknowledges and agrees that the right set forth in this Section 4(n) is
a right granted by the Company, separately, to each Buyer.
(i) At least five (5) Trading Days prior to any proposed or intended Subsequent
Placement, the Company shall deliver to each Buyer a written notice of its proposal or
intention to effect a Subsequent Placement (each such notice, a “Pre-Notice”), which
Pre-Notice shall not contain any information (including, without limitation, material,
non-public information) other than: (i) a statement that the Company proposes or intends to
effect a Subsequent Placement, (ii) a statement that the statement in clause (i) above does
not constitute material, non-public information and (iii) a statement informing such Buyer
that it is entitled to receive an Offer Notice (as defined below) with respect to such
Subsequent Placement upon its written request. Upon the written request of a Buyer within
three (3) Trading Days after the Company’s delivery to such Buyer of such Pre-Notice, and
only upon a written request by such Buyer, the Company shall promptly, but no later than one
(1) Trading Day after such request, deliver to such Buyer an irrevocable written notice (the
“Offer Notice”) of any proposed or intended issuance or sale or exchange (the “Offer”) of
the securities being offered (the “Offered Securities”) in a Subsequent Placement, which
Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price
and other terms upon which they are to be issued, sold or exchanged, and the number or
amount of the Offered Securities to be issued, sold or exchanged, (y) identify the Persons
(if known) to which or with which the Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with such Buyer in accordance with
the terms of the Offer 100% of the Offered Securities, provided that the number of Offered
Securities which such Buyer shall have the right to subscribe for under this Section 4(n)
shall be (a)
21
based on such Buyer’s pro rata portion of the aggregate number of Common Shares
purchased hereunder by all Buyers (the “Basic Amount”), and (b) with respect to each Buyer
that elects to purchase its Basic Amount, any additional portion of the Offered Securities
attributable to the Basic Amounts of other Buyers as such Buyer shall indicate it will
purchase or acquire should the other Buyers subscribe for less than their Basic Amounts (the
“Undersubscription Amount”).
(ii) To accept an Offer, in whole or in part, such Buyer must deliver a written notice
to the Company prior to the end of the fifth (5th) Business Day after such
Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the portion of such
Buyer’s Basic Amount that such Buyer elects to purchase and, if such Buyer shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Buyer
elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts
subscribed for by all Buyers are less than the total of all of the Basic Amounts, then such
Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided, however, if the Undersubscription Amounts subscribed
for exceed the difference between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the “Available Undersubscription Amount”), such Buyer who has subscribed for
any Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to the total
Basic Amounts of all Buyers that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent it deems reasonably necessary. Notwithstanding the
foregoing, if the Company desires to modify or amend the terms and conditions of the Offer
prior to the expiration of the Offer Period, the Company may deliver to each Buyer a new
Offer Notice and the Offer Period shall expire on the fifth (5th) Business Day
after such Buyer’s receipt of such new Offer Notice.
(iii) The Company shall have five (5) days from the expiration of the Offer Period
above (i) to offer, issue, sell or exchange all or any part of such Offered Securities as to
which a Notice of Acceptance has not been given by a Buyer (the “Refused Securities”)
pursuant to a definitive agreement(s) (the “Subsequent Placement Agreement”), but only to
the offerees described in the Offer Notice (if so described therein) and only upon terms and
conditions (including, without limitation, unit prices and interest rates) that are not more
favorable to the acquiring Person or Persons or less favorable to the Company than those set
forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent
Placement Agreement, and (b) either (x) the consummation of the transactions contemplated by
such Subsequent Placement Agreement or (y) the termination of such Subsequent Placement
Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such
Subsequent Placement Agreement and any documents contemplated therein filed as exhibits
thereto.
(iv) In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in Section
4(n)(iii) above), then such Buyer may, at its sole option and in its sole discretion, reduce
the number or amount of the Offered Securities specified in its Notice of Acceptance to an
amount that shall be not less than the number or amount of the Offered Securities that
22
such Buyer elected to purchase pursuant to Section 4(n)(ii) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered Securities to be
issued or sold to Buyers pursuant to this Section 4(n) prior to such reduction) and (ii) the
denominator of which shall be the original amount of the Offered Securities. In the event
that any Buyer so elects to reduce the number or amount of Offered Securities specified in
its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(n)(i) above.
(v) Upon the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities, such Buyer shall acquire from the Company, and the Company shall issue
to such Buyer, the number or amount of Offered Securities specified in its Notice of
Acceptance. The purchase by such Buyer of any Offered Securities is subject in all cases to
the preparation, execution and delivery by the Company and such Buyer of a separate purchase
agreement relating to such Offered Securities reasonably satisfactory in form and substance
to such Buyer and its counsel.
(vi) Any Offered Securities not acquired by a Buyer or other Persons in accordance with
this Section 4(n) may not be issued, sold or exchanged until they are again offered to such
Buyer under the procedures specified in this Agreement.
(vii) The Company and each Buyer agree that if any Buyer elects to participate in the
Offer, neither the Subsequent Placement Agreement with respect to such Offer nor any other
transaction documents related thereto (collectively, the “Subsequent Placement Documents”)
shall include any term or provision whereby such Buyer shall be required to agree to any
restrictions on trading as to any securities of the Company (other than restrictions
required by applicable securities laws on the resale of “restricted securities” (as that
term is defined under Rule 144) being issued in the Subsequent Placement) or be required to
consent to any amendment to or termination of, or grant any waiver, release or the like
under or in connection with, any agreement previously entered into with the Company or any
instrument received from the Company.
(viii) Notwithstanding anything to the contrary in this Section 4(n) and unless
otherwise agreed to by such Buyer, the Company shall either confirm in writing to such Buyer
that the transaction with respect to the Subsequent Placement has been abandoned or shall
publicly disclose its intention to issue the Offered Securities, in either case in such a
manner such that such Buyer will not be in possession of any material, non-public
information, by the fifth (5th) Business Day following delivery of the Offer
Notice. If by such fifth (5th) Business Day, no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice regarding
the abandonment of such transaction has been received by such Buyer, such transaction shall
be deemed to have been abandoned and such Buyer shall not be deemed to be in possession of
any material, non-public information with respect to the Company or any of its Subsidiaries.
Should the Company decide to pursue such transaction with respect to the Offered Securities,
the Company shall provide such Buyer with another Offer Notice in accordance with the terms
of this Section 4(n) and such Buyer will again have the right of participation set
23
forth in this Section 4(n). The Company shall not be permitted to deliver more than one
Offer Notice to such Buyer in any sixty (60) day period, except as expressly contemplated by
the last sentence of Section 4(n)(ii).
(ix) The restrictions contained in this Section 4(n) shall not apply in connection with
the issuance of any (i) Excluded Securities, (ii) Additional Securities, (iii) shares of
Common Stock issued pursuant to a bona fide firm commitment underwritten public offering
with a nationally recognized underwriter that generates gross proceeds to the Company in
excess of $20,000,000 (but expressly excluding “at-the-market offerings” (as defined in Rule
415(a)(4) under the 0000 Xxx) and “equity lines of credit”) or (iv) unregistered shares of
Common Stock to a Person who enters into a bona fide strategic alliance with the Company but
only if such Person (1) is, itself or through its subsidiaries, an operating company (which,
for clarification purposes, does not include a Person in the business of making investments
in, or providing capital to, other Persons) in a business synergistic with the business of
the Company and its Subsidiaries and (2) actually provides strategic operational benefits to
the Company and its Subsidiaries. The Company shall not circumvent the provisions of this
Section 4(n) by providing terms or conditions to one Buyer that are not provided to all.
(o) Passive Foreign Investment Company. The Company shall conduct its business in
such a manner as will ensure that the Company will not be deemed to constitute a passive foreign
investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as
amended.
(p) Stockholder Approval. The Company shall provide each stockholder entitled to vote
at a special or annual meeting of stockholders of the Company (the “Shareholder Meeting”), which
meeting shall be held no later than one hundred fifty (150) days after the Closing Date (the
“Shareholder Meeting Deadline”), a proxy statement, substantially in a form which has been
previously reviewed by each of the Buyers and each of their counsel at the expense of the Company,
soliciting each such stockholder’s affirmative vote at the Shareholder Meeting for approval of
resolutions (the “Resolutions”) permitting adjustments to the Exercise Price (as defined in the
Warrants) below the Floor Price (as defined in the Warrants) and the issuance of any resulting
additional shares of Common Stock issuable thereunder in accordance with applicable law and the
rules and regulations of Principal Market (such affirmative approval being referred to herein as
the “Shareholder Approval”), and the Company shall use its reasonable best efforts to solicit its
stockholders’ approval of the Resolutions (which efforts shall include, without limitation, the
requirement to hire a proxy solicitor) and to cause the board of directors of the Company to
recommend to the stockholders that they approve the Resolutions. The Company shall be obligated to
seek to obtain the Shareholder Approval by the Shareholder Meeting Deadline. If, despite the
Company’s reasonable best efforts the Shareholder Approval is not obtained on or prior to the
Shareholder Meeting Deadline, the Company shall cause an additional Shareholder Meeting to be held
each semi-annual period thereafter until such Shareholder Approval is obtained or until such
Shareholder Approval is no longer required under the rules and regulations of the Principal Market
or is no longer required to eliminate restrictions on adjustments to the Exercise Price below the
Floor Price and the issuance of all resulting additional shares of Common Stock issuable
thereunder. Until Shareholder Approval is obtained, (i) the Company shall not, directly or
indirectly, issue or sell, or, in accordance with Section 2 of the Warrants, be deemed to have
issued or sold, any shares of Common Stock (other than
24
Excluded Securities) for consideration per share (determined in accordance with Section 2 of
the Warrants) less than the Floor Price at any time while any of the Warrants are outstanding
without the prior written consent of each Buyer, which consent may be granted or withheld in each
Buyer’s sole discretion and (ii) in no event shall any Excluded Securities be issued, or be deemed
to be issued as contemplated hereby, for less than the fair market value of the Common Stock at the
time such Excluded Securities are so issued or are so deemed to be issued.
| 5. | REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND. |
(a) Register. The Company shall maintain at its principal executive offices (or such other office or
agency of the Company as it may designate by notice to each holder of Securities), a register for
the Common Shares and the Warrants in which the Company shall record the name and address of the
Person in whose name the Common Shares and the Warrants have been issued (including the name and
address of each transferee), the number of Common Shares held by such Person and the number of
Warrant Shares issuable upon exercise of the Warrants held by such Person. The Company shall keep
the register open and available at all times during business hours for inspection of any Buyer or
its legal representatives.
(b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to the Transfer Agent in the form
previously provided to the Company (the “Irrevocable Transfer Agent Instructions”) to issue
certificates or credit shares to the applicable balance accounts at DTC, registered in the name of
each Buyer or its respective nominee(s), for the Common Shares and the Warrant Shares in such
amounts as specified from time to time by each Buyer to the Company upon delivery of the Common
Shares or the exercise of the Warrants (as the case may be). The Company represents and warrants
that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5(b) will be given by the Company to the Transfer Agent with respect to the Securities, and
that the Securities shall otherwise be freely transferable on the books and records of the Company.
If a Buyer effects a sale, assignment or transfer of the Securities, the Company shall permit the
transfer and shall promptly instruct the Transfer Agent to issue one or more certificates or credit
shares to the applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to each Buyer. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations under this Section
5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of
the provisions of this Section 5(b), that each Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and without any bond or other
security being required. The Company shall cause its counsel to issue the legal opinion referred to
in the Irrevocable Transfer Agent Instructions to the Transfer Agent. Any fees (with respect to the
Transfer Agent, counsel to the Company or otherwise) associated with the issuance of such opinion
shall be borne by the Company.
(c) Legends. Certificates and any other instruments evidencing the Securities shall not bear any
restrictive or other legend.
| 6. | ADDITIONAL CLOSING DELIVERIES OF THE COMPANY. |
(a) Deliveries. The Company shall deliver to each Buyer on the Closing Date each of
25
the following:
(i) The opinion of Winthrop & Weinstine, P.A., the Company’s counsel, dated as of the
Closing Date, in the form previously provided to the Company.
(ii) A copy of the Irrevocable Transfer Agent Instructions, in the form previously
provided to the Company, that have been delivered to and acknowledged in writing by the
Transfer Agent.
(iii) A certificate evidencing the formation and good standing of the Company and each
of its domestic “significant subsidiaries” (as that term is defined in Regulation S-X
promulgated by the SEC) in each such entity’s jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction of formation as of a date
within ten (10) days of the Closing Date.
(iv) A certificate evidencing the Company’s qualification as a foreign corporation and
good standing issued by the Secretary of State (or comparable office) of each jurisdiction
in which the Company conducts business and is required to so qualify, as of a date within
ten (10) days of the Closing Date.
(v) A certified copy of the Articles of Incorporation within ten (10) days of the
Closing Date.
(vi) A certificate, in the form previously provided to the Company, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions
consistent with Section 3(b) as adopted by the Company’s board of directors in a form
reasonably acceptable to such Buyer, (ii) the Articles of Incorporation and (iii) the
Bylaws, each as in effect at the Closing.
(vii) A letter from the Transfer Agent certifying the number of shares of Common Stock
outstanding on the Closing Date immediately prior to the Closing.
(viii) Evidence of the irrevocable termination for no consideration or other
remuneration of that certain Standby Equity Distribution Agreement, dated July 10, 2009,
between YA Global Master SPV LTD. (“YA Global”) and the Company, as amended (the “SEDA”).
(ix) Such other documents, instruments or certificates relating to the transactions
contemplated by this Agreement as such Buyer or its counsel may reasonably request.
| 7. | TERMINATION. |
In the event that the Closing shall not have occurred with respect to a Buyer within ten (10)
days of the date hereof, then such Buyer shall have the right to terminate its obligations under
this Agreement with respect to itself at any time on or after the close of business on such date
without liability of such Buyer to any other party; provided, however, (i) the right to terminate
this Agreement under this Section 7 shall not be available to such Buyer if the failure of the
transactions contemplated by this Agreement to have been consummated by such date is
26
the result of such Buyer’s breach of this Agreement and (ii) the abandonment of the sale and
purchase of the Common Shares and the Warrants shall be applicable only to such Buyer providing
such written notice, provided further that no such termination shall affect any obligation of the
Company under this Agreement to reimburse such Buyer for the expenses described in Section 4(g)
above. Nothing contained in this Section 7 shall be deemed to release any party from any liability
for any breach by such party of the terms and provisions of this Agreement or the other Transaction
Documents or to impair the right of any party to compel specific performance by any other party of
its obligations under this Agreement or the other Transaction Documents.
8. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws of any jurisdictions other than
the State of New York. 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 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 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 OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which 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. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an
executed signature page, such signature page 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 signature page were an original thereof.
(c) Headings; Gender. The headings of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. Unless the context clearly indicates otherwise,
each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural
forms thereof. The terms “including,” “includes,” “include” and words of
like import shall be construed broadly as if followed by the words “without limitation.” The terms
“herein,” “hereunder,” “hereof” and words of like import refer to this
entire Agreement instead of just the provision in which they are found.
27
(d) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability of the remainder of
this Agreement in that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement, the other Transaction Documents and the schedules and exhibits attached
hereto and thereto and the instruments referenced herein and therein supersede all other prior oral
or written agreements between the Buyers, the Company, their affiliates and Persons acting on their
behalf solely with respect to the matters contained herein and therein, and this Agreement, the
other Transaction Documents, the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein contain the entire understanding of the parties solely
with respect to the matters covered herein and therein; provided, however, nothing contained in
this Agreement or any other Transaction Document shall (or shall be deemed to) (i) have any effect
on any agreements any Buyer has entered into with the Company or any of its Subsidiaries prior to
the date hereof with respect to any prior investment made by such Buyer in the Company or (ii)
waive, alter, modify or amend in any respect any obligations of the Company or any of its
Subsidiaries, or any rights of or benefits to any Buyer or any other Person, in any agreement
entered into prior to the date hereof between or among the Company and/or any of its Subsidiaries
and any Buyer and all such agreements shall continue in full force and effect. Except as
specifically set forth herein or therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to such matters. For clarification
purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended
other than by an instrument in writing signed by the Company and each of the Buyers. No waiver
shall be effective unless it is in writing and signed by an authorized representative of the
waiving party. No consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents unless the same
consideration also is offered to all of the parties to the Transaction Documents, all holders of
Common Shares or all holders of the Warrants (as the case may be). The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in the Transaction
Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any
financing to the Company, any Subsidiary or otherwise.
(f) Notices. Any notices, consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) Business Day after deposit with an overnight courier service with
next day delivery specified, in each case, properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
Digital Angel Corporation
000 Xxxxxxxx Xxxxxx
000 Xxxxxxxx Xxxxxx
00
Xxxxx Xxxxx Xxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx, CFO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx, CFO
With a copy (for informational purposes only) to:
Winthrop & Weinstine, P.A.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
If to the Transfer Agent:
Registrar and Transfer Company
00 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000, ext. 2514
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000, ext. 2514
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxx
If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies
to such Buyer’s representatives as set forth on the Schedule of Buyers,
with a copy (for informational purposes only) to:
Xxxxxxxxx Traurig, LLP
00 X. Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Xxxx X. Xxxxx, Esq.
00 X. Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Xxxx X. Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change, provided that Xxxxxxxxx Traurig, LLP shall only be provided
copies of notices sent to Iroquois. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns, including, as contemplated below, any assignee of any of the
Securities. The Company shall not assign this Agreement or
29
any rights or obligations hereunder without the prior written consent of each of the Buyers, including, without
limitation, by way of a Fundamental Transaction (as defined in the Warrants) (unless the Company is
in compliance with the applicable provisions governing Fundamental Transactions set forth in the
Warrants). A Buyer may assign some or all of its rights hereunder in connection with any transfer
of any of its Securities without the consent of the Company, in which event such assignee shall be
deemed to be a Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person, other than the Indemnitees referred to in Section 8(k).
(i) Survival. The representations, warranties, agreements and covenants shall survive the Closing. Each
Buyer shall be responsible only for its own representations, warranties, agreements and covenants
hereunder.
(j) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(k) Indemnification.
(i) In consideration of each Buyer’s execution and delivery of the Transaction Documents
and acquiring the Securities thereunder and in addition to all of the Company’s other obligations
under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless
each Buyer and each holder of any Securities and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the foregoing Persons’
agents or other representatives (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 any of the Transaction Documents, (b) any breach
of any covenant, agreement or obligation of the Company contained in any of the Transaction
Documents 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 any of
the Transaction Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, (iii) any disclosure
properly made by such Buyer pursuant to Section 4(i), or (iv) the status of such Buyer or holder of
the Securities as an investor in the Company pursuant to
30
the transactions contemplated by the Transaction Documents. Notwithstanding the foregoing,
the Company will not be liable in any such case to the extent that any Indemnified
Liabilities arose primarily or solely as a result of the gross negligence or willful
misconduct of the Indemnitee seeking indemnification. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law.
(ii) Promptly after receipt by an Indemnitee under this Section 8(k) of notice of the
commencement of any action or proceeding (including any governmental action or proceeding)
involving an Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is
to be made against the Company under this Section 8(k), deliver to the Company a written
notice of the commencement thereof, and the Company shall 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 shall 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 shall 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 shall 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 shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Company), provided further, that in
the case of clause (iii) above the Company shall not be responsible for the reasonable fees
and expenses of more than one (1) separate legal counsel for such Indemnitee. The Indemnitee
shall reasonably cooperate with the Company in connection with any negotiation or defense of
any such action or Indemnified Liability by the Company and shall furnish to the Company all
information reasonably available to the Indemnitee which relates to such action or
Indemnified Liability. The Company shall keep the Indemnitee reasonably apprised at all
times as to the status of the defense or any settlement negotiations with respect thereto.
The Company shall not be liable for any settlement of any action, claim or proceeding
effected without its prior written consent, provided, however, that the Company shall not
unreasonably withhold, delay or condition its consent. The Company shall 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 shall not include
any admission as to fault on the part of the Indemnitee. Following indemnification as
provided for hereunder, the Company shall be subrogated to all rights of the Indemnitee with
respect to all third parties, firms or corporations 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 shall not relieve the Company of any
liability to the Indemnitee under this Section 8(k), except to the extent that the Company
is materially and adversely
31
prejudiced in its ability to defend such action.
(iii) The indemnification required by this Section 8(k) shall 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.
(iv) The indemnity agreement contained herein shall be in addition to (A) any cause of
action or similar right of the Indemnitee against the Company or others, and (B) any
liabilities the Company may be subject to pursuant to the law.
(l) 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.
(m) Remedies. Each Buyer and each holder of any Securities shall have all rights and remedies set forth
in the Transaction Documents and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all other rights granted by
law. Furthermore, the Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any remedy at law may
prove to be inadequate relief to the Buyers. The Company therefore agrees that the Buyers shall 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.
(n) Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Buyer 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 Buyer 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.
(o) Payment Set Aside; Currency. To the extent that the Company makes a payment or payments to any Buyer hereunder or
pursuant to any of the other Transaction Documents or any of the Buyers enforce or exercise their
rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, foreign, 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. Unless
otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other
Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts owing under
this Agreement and all other Transaction Documents
32
shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be
converted in the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of
calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S.
Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street
Journal on the relevant date of calculation.
(p) Independent Nature of Buyers’ Obligations and Rights. The obligations of each Buyer under the Transaction Documents are several and not joint
with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by any Buyer pursuant
hereto or thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges that
the Buyers 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 Buyers are in any way acting in concert or as
a group or entity with respect to such obligations or the transactions contemplated by the
Transaction Documents or any matters, and the Company acknowledges that the Buyers are not acting
in concert or as a group, and the Company shall not assert any such claim, with respect to such
obligations or the transactions contemplated by the Transaction Documents. The decision of each
Buyer to purchase Securities pursuant to the Transaction Documents has been made by such Buyer
independently of any other Buyer. Each Buyer acknowledges that no other Buyer has acted as agent
for such Buyer in connection with such Buyer making its investment hereunder and that no other
Buyer will be acting as agent of such Buyer in connection with monitoring such Buyer’s investment
in the Securities or enforcing its rights under the Transaction Documents. The Company and each
Buyer confirms that each Buyer has independently participated with the Company in the negotiation
of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including, without limitation,
the rights arising out of this Agreement or out of any other Transaction Documents, and it shall
not be necessary for any other Buyer 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 Securities
contemplated hereby was solely in the control of the Company, not the action or decision of any
Buyer, and was done solely for the convenience of the Company and not because it was required or
requested to do so by any Buyer. It is expressly understood and agreed that each provision
contained in this Agreement and in each other Transaction Document is between the Company and a
Buyer, solely, and not between the Company and the Buyers collectively and not between and among
the Buyers.
[signature pages follow]
33
IN WITNESS WHEREOF, Buyer and the Company have caused their respective signature page to this
Agreement to be duly executed as of the date first written above.
| COMPANY: DIGITAL ANGEL CORPORATION |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
IN WITNESS WHEREOF, Buyer and the Company have caused their respective signature page to this
Agreement to be duly executed as of the date first written above.
BUYER:
IROQUOIS MASTER FUND LTD.
By: Xxxxxx Xxxxxxxxx, Authorized Signatory
IN WITNESS WHEREOF, Buyer and the Company have caused their respective signature page to this
Agreement to be duly executed as of the date first written above.
BUYER:
[OTHER BUYERS]
SCHEDULE OF BUYERS
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | ||||||||||||
| Number of | Number of | |||||||||||||||||
| Address and Facsimile | Common | Warrant | Purchase | Legal Representative’s | State or Country of | |||||||||||||
| Buyer | Number | Shares | Shares | Price | Address and Facsimile Number | Organization | ||||||||||||
Iroquois Master Fund Ltd. |
Iroquois Master Fund Ltd. 000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx Xxx Xxxx, Xxx Xxxx 00000 Facsimile: (000) 000-0000 |
1,692,500 | 677,000 | $ | 846,250 | Xxxxxxxxx Traurig, LLP 00 X. Xxxxxx Xxxxx, Xxxxx 0000 Xxxxxxx, Xxxxxxxx 00000 Attention: Xxxxx X. Xxxxxxxxx Xxxx X. Xxxxx Facsimile: (000) 000-0000 |
Cayman Islands | |||||||||||
Alpha Capital Anstalt |
c/o LH Financial Services Corp 000 Xxxxxxx Xxxx Xxxxx, 0xx Xx. XX, XX 00000 Attn: Xxx Xxxxxx Facsimile: (000) 000-0000 |
1,692,500 | 677,000 | $ | 846,250 | Elected Not To Provide | ||||||||||||
