CONVERTIBLE NOTE PURCHASE AGREEMENT
Exhibit
10.27
This
Convertible Note Purchase Agreement, dated as of February 4, 2008 (this “Agreement”), is
entered into by and among PureDepth, Inc., a Delaware corporation, with its
headquarters located at 000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx Xxxx, XX, (the
“Company”) and K One W One Limited, (the “Purchaser”).
RECITALS
WHEREAS,
the Company needs financing in order to continue its operations, while it seeks
to obtain additional financing and/or explores strategic alternatives, for
working capital and general corporate purposes; and
WHEREAS,
the Company has requested that the Purchaser provide such financing and, the
Purchaser has agreed to provide such support through the making of a loan to the
Company, on the terms and subject to the conditions set forth herein, which loan
will be evidenced by one or more convertible promissory notes (individually, a
“Note,” and collectively, the “Notes”) issued by the Company to the
Purchaser.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing, and the representations,
warranties, and conditions set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. The
Note(s).
(a) Issuance of
Note(s). In reliance upon the representations, warranties and
covenants of the parties set forth herein, the Company agrees to issue, sell and
deliver to the Purchaser, and the Purchaser agrees to purchase from the Company,
one or more Notes in an aggregate principal amount of up to
US$3,000,000. The purchase price for the Note(s) shall be payable in
immediately available funds.
(b) Terms of the
Note(s). The terms and conditions of the Note(s) are set forth
in the form of Note attached as Exhibit B
hereto. Capitalized terms not otherwise defined herein shall have the
meaning set forth in Exhibit B
attached hereto.
2. Warrant.
(a) Issuance of
Warrant. Company agrees to issue to Purchaser, a Warrant to
purchase that number of investment instruments of the Company issued in a
Qualified Financing, (as defined in the form of Note attached hereto as Exhibit B), in an
amount equal to (i) the aggregate principal amount of the Note(s) multiplied by
the Warrant Coverage (as defined in the Warrant attached hereto as Exhibit C), divided
by (ii) the Instrument Price (as defined in the Warrant attached hereto as Exhibit
C.
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(b) Terms of
Warrant. The terms and conditions of the Warrant are set forth
in the form of Warrant attached hereto as Exhibit C.
3. Closing; Deliverables;
Additional Funding.
(a) Closing. The
closing of the purchase and sale hereunder of an initial Note in an aggregate
original principal amount of $1,000,000 (the “Initial Note”) and the Warrant
(the “Initial Closing”) shall take place at the offices of DLA Piper US LLP,
counsel to the Company (“DLA”), 0000 Xxxxxxxxxx Xxxxxx, Xxxx Xxxx Xxxx, XX
00000-0000 at 1:00 p.m. on February 4, 2008, or at such time and place as
the Company and the Purchaser may agree (the “Initial Closing
Date”).
(b) Initial Closing
Deliverables. Subject to the terms of this Agreement, at the
Initial Closing, the Company will deliver to the Purchaser the Initial Note and
the Warrant in Purchaser’s name representing the Initial Note and the Warrant
purchased by the Purchaser, and Purchaser will deliver to the Company by check
or wire transfer payment for the Initial Note and the Warrant in an amount of
US$1,000,000 (less any amounts funded to the Company by Purchaser within the 30
days immediately preceding the Initial Closing, including, without limitation,
the funding of $100,000 wired to the Company on January 31, 2008).
(c) Additional
Funding.
(i) Closing of Qualified
Financing. In the event that the Company receives
proceeds from a Qualified Financing (as defined below) on or before the date
that is 45 days after the Initial Closing (the “Additional Funding Date”), on
the Additional Funding Date the Purchaser agrees to invest in such Qualified
Financing an amount of $2,000,000 on the earlier of the last date for closings
under such Qualified Financing or the Additional Funding Date and on the same
terms as the other investors in such Qualified Financing.
(ii) No Closing of Qualified
Financing. In the event that the Company has not received
proceeds from a Qualified Financing on or before the Additional Funding Date, on
or after the Additional Funding Date the Purchaser, at its sole discretion,
may:
(A) Purchase an
additional Note in an aggregate original principal amount of $2,000,000, in
which case the Company will deliver to the Purchaser such additional Note
representing the $2,000,000 in Purchaser’s name, and Purchaser will deliver to
the Company by check or wire transfer payment for such in an amount of
$2,000,000;
(B) Purchase an
additional Note in an aggregate original principal amount less than $2,000,000
(but no less than $500,000), in which case the Company will deliver to the
Purchaser such additional Note representing the amount purchased by Purchaser,
in Purchaser’s name, and Purchaser will deliver to the Company by check or wire
transfer payment for such amount;
(C) Purchase no
further Notes, in which case the Purchaser shall, after receipt from the Company
of three (3) days prior written notice confirming that no such additional
funding is to be provided by the Purchaser to the Company, release all security
evidenced by the NZ Security Documents and the Security Agreement (as each such
capitalized term is defined in the form of Note attached hereto as Exhibit B), without
prejudice to Section 5 of the Security Agreement;
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(d) For purposes
hereof and in the Note(s), “Qualified Financing” shall mean the Company’s first
financing transaction after the Initial Closing in which the Company issues
investment instruments of the Company and receives gross proceeds of at least
$3,000,000 for application to several corporate purposes from an investor or
investors (not including proceeds from the conversion of the Note(s)); and
provided that if the proposed investment instruments offered in such financing
transaction are other than capital stock or other equity instruments (such as
convertible debentures or other debt instruments), the financing transaction
shall require the written consent of Purchaser to be considered a Qualified
Financing for purposes of this Agreement. For the avoidance of doubt,
an investment instrument will not be deemed to be an equity instrument for the
purposes of the preceding sentence if such investment instrument is, by its
terms, convertible into or exchangeable for any type of debt instrument, whether
at the option of the Company or the holder thereof.
4. Representations and
Warranties of the Company. The Company hereby represents and warrants to
Purchaser that the statements contained in the following paragraphs of this
Section 4 are all true and correct as of the Initial Closing Date and as of
each date (each, a "Subsequent Closing Date") on which any Note other than the
Initial Note (each, a "Subsequent Note") is issued to the Purchaser hereunder
(provided that the statements contained in the following paragraphs of this
Section 4 shall, in respect of any Subsequent Closing Date, be read with such
contextual modifications as are necessary to reflect that this Agreement is
executed, and the Warrant is issued, only on the Initial Closing Date and that
the "Note" shall mean the Initial Note and any relevant "Subsequent
Note"):
(a) Organization and Standing:
Certificate and Bylaws. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as
presently conducted.
(b) Corporate
Power. The Company has all requisite legal and corporate power
to enter into, execute and deliver this Agreement, the Note and the
Warrant. This Agreement, and upon this issuance, the Note and
Warrant, will be, valid and binding obligations of the Company, enforceable in
accordance with their terms, except as the same may be limited by bankruptcy,
insolvency, moratorium, and other laws of general application affecting the
enforcement of creditors’ rights, and as limited by general principles of equity
that restrict the availability of equitable remedies.
(c) Authorization. All
corporate and legal action on the part of the Company, its officers, directors
and shareholders necessary for the execution and delivery of this Agreement, the
Note and the Warrant, the sale and issuance of the Note and the Warrant and the
performance of the Company’s obligations hereunder, under the Note and under the
Warrant, have been taken.
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(d) Government Consent,
Etc. No consent, approval, order or authorization of, or
designation, registration, declaration or filing with, any federal, state, local
or provincial or other governmental authority on the part of the Company is
required in connection with the valid execution and delivery of this Agreement,
the Note, the Warrant, other than, if required, filings or qualifications under
the California Corporate Securities Law of 1968, as amended (the “California
Law”), or other applicable blue sky laws, which filings or qualifications, if
required, will be timely filed or obtained by the Company.
(e) Litigation. Except
as set forth on Exhibit A, there is
no action, suit, proceeding or arbitration (“Action”) pending, and there is no
Action, claim or investigation currently threatened, against the Company, its
activities, properties or assets, or against any officer, director or employee
of the Company in connection with such officer’s, director’s or employee’s
relationship with or actions taken on behalf of the Company. The
Company is not a party to or subject to the provisions of any material order,
writ, injunction, judgment or decree of any court or governmental agency or
instrumentality and there is no Action or claim by the Company currently pending
or which the Company intends to initiate.
(f) Disclosure. The
Company has fully provided the Purchaser with all information which the
Purchaser has requested for deciding whether to purchase the Note and all
information which the Company believes is reasonably necessary to enable the
Purchaser to make such a decision. Neither this Agreement nor any
other statement or certificate made or delivered in connection with the
Agreement and the transactions contemplated hereby contains any untrue statement
of a material fact or omits to state a material fact necessary not to make the
statements herein untrue or misleading.
5. Representations and
Warranties by the Purchaser. The Purchaser represents and
warrants to the Company as follows as of the Closing Date and as of each
Subsequent Closing Date (provided that the statements contained in the following
paragraphs of this Section 5 shall be read with such contextual modifications as
are necessary to reflect that this Agreement is executed, and the Warrant is
issued, only on the Initial Closing Date and the "Note" shall mean the Initial
Note and any relevant "Subsequent Note"):
(a) During the
negotiation of the transactions contemplated herein, the Purchaser and its
representatives have been afforded full and free access to corporate books,
financial statements, records, contracts, documents, and other information
concerning the Company, and to its offices and facilities, have been afforded an
opportunity to ask such questions of the Company’s officers, employees, agents,
accountants and representatives concerning the Company’s business, operations,
financial condition, assets, liabilities and other relevant matters as they have
deemed necessary or desirable, and have been given all such information as has
been requested, in order to evaluate the merits and risks of the prospective
investment contemplated herein. Notwithstanding the foregoing, such
due diligence investigation shall not limit the representations and warranties
made by the Company in Section 5 hereof.
(b) The Purchaser
and its representatives have been solely responsible for the Purchaser’s own
“due diligence” investigation of the Company and its management and business,
for its own analysis of the merits and risks of this investment, and for its own
analysis of the fairness and desirability of the terms of the investment; in
taking any action or performing any role relative to the arranging of the
proposed investment, the Purchaser has acted solely in its own interest, and
neither the Purchaser nor any of its representatives has acted as an agent of
the Company.
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(c) The Purchaser
has the full right, power and authority to enter into and perform the
Purchaser’s obligations under this Agreement, and this Agreement constitutes a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms except as limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium, usury or other laws of general application
relating to or affecting enforcement of creditors rights and rules or laws
concerning equitable remedies.
(d) Investment
Representations. Purchaser (i) is an “Accredited
Investor” as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act or has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of such Purchaser’s prospective investment in the Securities;
(ii) has the ability to bear the economic risks of such Purchaser’s
prospective investment, including a complete loss of Purchaser’s investment in
the Securities; and (iii) has not been offered the Securities by any form
of advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any such
media.
(e) The Note(s)
and Warrant (collectively the “Securities”) will be acquired for the Purchaser’s
own account, for investment and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
California Law.
(f) The Purchaser
understands that the Securities have not been registered under the Securities
Act of 1933, as amended (the “Securities Act”) by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act pursuant to Section 4(2) thereof, that the Company has
no present intention of registering the Securities, that the Securities must be
held by the Purchaser indefinitely, and that the Purchaser must therefore bear
the economic risk of such investment indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
registration. The Purchaser further understands that the Securities
have not been qualified under the California Law by reason of their issuance in
a transaction exempt from the qualification requirements of the California Law
pursuant to Section 25102(f) thereof, which exemption depends upon, among other
things, the bona fide nature of the Purchaser’s investment intent expressed
above.
(g) Purchaser
understands that the Company does not have a registration statement covering the
Securities (or a filing pursuant to the exemption from registration under
Regulation A of the Securities Act covering the Securities) under the Securities
Act and therefore the Purchaser may be required to hold the Securities for an
indeterminate period. Purchaser also understands that any sale of the
Securities that might be made by such Purchaser in reliance upon Rule 144
under the Securities Act may be made only in limited amounts in accordance with
the terms and conditions of that rule.
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6. Miscellaneous.
(a) Waivers and
Amendments. Any provision of this Agreement may be amended,
waived or modified upon the written consent of the Company and
Purchaser.
(b) Governing
Law. This Agreement and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of law
provisions of the State of California or of any other state.
(c) Entire
Agreement. This Agreement together with the exhibits attached
hereto constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
(d) Notices,
etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent via facsimile,
overnight courier service or mailed by certified or registered mail, postage
prepaid, return receipt requested, addressed or sent (a) if to the Purchaser, at
the address or facsimile number of the Purchaser set forth below such party’s
signature below, or at such other address or number as the Purchaser shall have
furnished to the Company in writing, or (b) if to the Company, at the address
written above, or at such other address or number as the Company shall have
furnished to the Purchaser in writing.
(e) Validity. If
any provision of this Agreement, the Note(s) or the Warrant shall be judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(f) Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall be deemed to constitute one
instrument.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and
delivered by their proper and duly authorized officers as of the date and year
first written above.
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PURCHASER:
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COMPANY:
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K
One W One Limited
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By: _______________________________________
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By:___________________________________
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Name:_____________________________________
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Name:_________________________________
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Title:______________________________________
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Title:__________________________________
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Address:___________________________________
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SIGNATURE
PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT
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EXHIBIT
A
SCHEDULE OF
EXCEPTIONS
This
Schedule of Exceptions and the information and disclosures contained herein are
intended only to qualify and limit the representations, warranties and covenants
of the Company contained in the Agreement, and shall not be deemed to expand in
any way the scope or effect of any of such representations, warranties or
covenants. The section numbers in this Schedule correspond to the
section numbers in the Agreement. Disclosure of any information or
document herein is not a statement or admission that it is material or required
to be disclosed herein. Capitalized terms used but not defined herein
shall have the same meanings given them in the Agreement.
Section 4 (e).A
former employee of the Company, filed an action with the California Labor
Commission, claiming penalties pursuant to Labor Code Section 203 for one (1)
work day at the rate of $458.31 per day, claiming that Plaintiff was discharged
on July 16, 2007, pursuant to Labor Code Section 201, but the payment for the 1
day was not received until November 6, 2007. Total claimed to be
determined. A hearing is scheduled for March 2008.
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EXHIBIT
B
THIS NOTE
AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
CONVERTIBLE PROMISSORY
NOTE
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US$[____].00
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___________,
0000
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Xxxxxxx
Xxxx, Xxxxxxxxxx
FOR VALUE
RECEIVED, PureDepth, Inc., a Delaware corporation, (the “Company”), promises to
pay to K One W One Limited (the “Holder”), or its registered assigns, the
principal sum of US$____________, or such lesser amount as shall then equal the
outstanding principal amount hereof, together with interest on the unpaid
principal balance at a rate equal to eight percent (8%) per
annum. Interest shall begin to accrue on October 4,
2008. The interest rate shall be computed on the basis of the actual
number of days elapsed and a year of 365 days. All unpaid principal,
together with the balance of unpaid and accrued interest and other amounts
payable hereunder, if not converted pursuant to Section 4(a) below, or converted
into Common Stock of the Company pursuant to Section 4(c) below prior to or on
February 4, 2009 (the “Maturity Date”), shall be payable in cash on the
Maturity Date. This Note is issued pursuant to that Convertible Note
Purchase Agreement dated February 4, 2008 (the
“Agreement”). Capitalized terms not otherwise defined herein shall
have the meanings given to them in the Agreement.
The
following is a statement of the rights of the Holder and the conditions to which
this Note is subject, and to which the Holder hereof, by the acceptance of this
Note, agrees:
1. Definitions. As
used in this Note, the following capitalized terms have the following
meanings:
(a) “Instruments” means
the class or series of investment instruments of the Company sold in the
Qualified Financing (as defined below).
(b) “Qualified Financing”
shall have the definition set forth in the Agreement.
2. Prepayment. This
Note may be prepaid in cash, in whole or in part, at any time by the Company
with the prior written consent of Holder. Any such prepayment will be
applied first to the payment of expenses due under this Note, second to interest
accrued on this Note and third, if the amount of prepayment exceeds the amount
of all such expenses and accrued interest, to the payment of principal of this
Note.
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3. Security. The
Obligations due under the Note are secured by (a) a security agreement dated as
of the date of the Agreement, and executed by Company (the “Security
Agreement”), (b) a general security agreement dated as of the date of
the Agreement, executed by PureDepth Limited ("PDL"), the Company's directly
wholly-owned subsidiary (the “PDL General Security Agreement”), (c) a general
security agreement dated as of the date of the Agreement, executed by PureDepth
Incorporated Limited ("PDIL"), the Company's indirectly wholly-owned subsidiary
(the "PDIL General Security Agreement"), and (d) a deed of guarantee and
indemnity dated as of the date of the Agreement, executed by PDL and PDIL (the
“Deed of Guarantee" and, together with the PDL General Security Agreement and
the PDIL General Security Agreement, the "NZ Security Documents”), each in
favor, and for the benefit, of the Holder of this Note. Additional
rights of the Holder are set forth in the Security Agreement and the NZ Security
Documents.
4. Conversion.
(a) Conversion upon Qualified
Financing. Upon a closing (the “Closing”) of a Qualified
Financing, all of the principal and accrued interest then outstanding on the
Note automatically shall be converted into Instruments at the Closing of the
Qualified Financing. The price per investment instrument for the conversion
shall be an amount equal to ninety-five percent (95%) of the price per share of
the Instruments sold in the Qualified Financing (the “Conversion Price upon
Qualified Financing”).
(b) Notice Regarding Qualified
Financing; Definitive Agreements. Written notice shall be
delivered to the Holder of this Note notifying the Holder of the terms and
conditions of the Qualified Financing, the Conversion Price upon Qualified
Financing, the principal and accrued interest then outstanding on the Note, the
date on which any such conversion will occur and calling upon such Holder, to
surrender to the Company, in the manner and at the place designated, the Note.
Notwithstanding the foregoing, upon the Closing of the Qualified Financing,
the principal and
accrued interest then outstanding under the Note shall be automatically
converted into Instruments issued pursuant to the Qualified Financing
without any action
by the Holder. Notwithstanding the foregoing, the Company shall have
no obligation to issue the Instruments to be issued upon such
automatic conversion until and unless the Holder has executed and delivered to
the Company the agreements prepared in connection with the Qualified
Financing, which
such
condition may be waived by the Company in its sole
discretion.
(c) Conversion on Maturity
Date. On the Maturity Date, all of the principal and accrued
interest then outstanding on the Note automatically shall be immediately due and
payable in cash, provided that, at Holder’s sole option, all of the principal
and accrued interest then outstanding on the Note may be converted into Common
Stock of the Company. The price per share of Common Stock for any
such conversion shall be equal to an amount equal to ninety-five
percent (95%) of the lower of (i) the average of the daily VWAP (the
volume-weighted average price) of
the Company’s Common Stock over a period of ten (10) trading days
prior to the signing of the Agreement, as quoted on the OTCBB, or (ii) the
average of the daily VWAP (the volume-weighted average price) of
the Company’s Common Stock over a period of ten (10) trading days prior to the
Maturity Date, as quoted on the OTCBB (the “Conversion Price upon Maturity
Date”).
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(d) Notice Regarding Maturity
Date; Definitive Agreements. In the event that Holder elects
to convert the principal and accrued interest then outstanding under the Note
pursuant to Section 4(c) above, written notice shall be delivered to the Company
prior to the Maturity Date notifying the Company of such election, and the
Company shall provide Holder a written notice on the Maturity Date providing the
terms of conversion of the Note, including without limitation the Conversion
Price upon Maturity Date, the principal and accrued interest then outstanding on
the Note, and notice to surrender to the Company, in the manner and at the place
designated, the Note. Notwithstanding the
foregoing, the Company shall have no obligation to issue the Common Stock
to be issued upon
such conversion until and unless the Holder has executed and delivered to the
Company the agreements prepared in connection with the conversion,
including delivery of the Note (all of which agreements shall be reasonably
acceptable in form and substance to Holder), which such condition may be
waived by the Company in its sole discretion.
(e) Mechanics and Effect of
Conversion. Upon the conversion of all of the principal and
accrued interest outstanding under this Note pursuant to Section 4(a) or 4(c)
above, in lieu of the Company issuing any fractional Instruments or fractional
shares of Common Stock to the Holder, the Company shall pay to the Holder the
amount of outstanding principal that is not so converted. Upon full
conversion of this Note, the Company shall be forever released from all its
obligations and liabilities under this Note.
5. Successors and
Assigns. Subject to the restrictions on transfer described in
Section 7 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
6. Waiver and
Amendment. Any provision of this Note may be amended, waived
or modified upon the written consent of the Company and the
Holder. Any amendment or waiver effected in accordance with this
Section 6 shall be binding upon the Company, the Holder and each transferee of a
Note.
7. Transfer of this
Note. This Note may not be transferred in violation of any
restrictive legend set forth hereon. Each new Note issued upon
transfer of this Note shall bear such a restrictive legend as to the applicable
restrictions on transferability in order to ensure compliance with the
Securities Act of 1933, as amended (the “Act”), unless in the opinion of counsel
for the Company such legend is not required in order to ensure compliance with
the Act. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions. Prior to
presentation of this Note for registration of transfer, the Company shall treat
the registered holder hereof as the owner and holder of this Note for the
purpose of receiving all payments of principal and interest hereon and for all
other purposes whatsoever, whether or not this Note shall be overdue and the
Company shall not be affected by notice to the contrary.
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8. Assignment by
Company. Neither this Note nor any of the rights, interests or
obligations hereunder may be assigned, by operation of law or otherwise, in
whole or in part, by the Company, without the prior written consent of the
Holder.
9. Treatment of
Note. To the extent permitted by generally accepted accounting
principles, the Company will treat, account and report the Note as debt and not
equity for accounting purposes and with respect to any returns filed with
federal, state or local tax authorities.
10. Notices. Any
notice, request or other communication required or permitted hereunder shall be
in writing and shall be deemed to have been duly given if personally delivered
or mailed by registered or certified mail, postage prepaid, or by recognized
overnight courier or personal delivery at the respective addresses of the
parties as set forth in the records maintained by the
Company. Any party hereto may by notice so given change its address
for future notice hereunder. Notice shall conclusively be deemed to
have been given when received.
11. Payment. Payment
shall be made in lawful tender of the United States.
12. Expenses;
Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys’ fees and costs, incurred in connection with such
action. The Company hereby waives notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor and all other
notices or demands relative to this instrument.
13. Governing
Law. This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflicts of law provisions of
the State of California or of any other state.
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[REMAINDER
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[SIGNATURE
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IN
WITNESS WHEREOF, the Company has caused this Note to be issued as of the date
first written above.
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By:_______________________________
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Name:_____________________________
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Its:_______________________________
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AGREED
AND ACKNOWLEDGED:
“HOLDER”
K One W
One Limited
_________________________________
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By:______________________________
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Name:____________________________
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Its:______________________________
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SIGNATURE PAGE TO
CONVERTIBLE PROMISSORY NOTE
13
EXHIBIT
C
THE
SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
WARRANT
TO PURCHASE INVESTMENT INSTRUMENTS
of
(void
after February 4, 2011)
1. Number of Instruments
Subject to Warrant. FOR VALUE RECEIVED, on and after the
Commencement Date (as defined below), and subject to the terms and conditions
herein set forth, Holder (as defined below) is entitled to purchase from
PureDepth, Inc., a Delaware corporation (the “Company”), at any time before
termination of this Warrant pursuant to Section 7 below, at a price per share
equal to the Instrument Price (as defined below), the Instruments (as defined
below and subject to adjustments as described below) upon exercise or conversion
of this Warrant pursuant to Section 5 hereof.
2. Definitions. As
used in this Warrant, the following terms shall have the definitions ascribed to
them below:
(a) “Commencement Date”
shall mean the first closing of the Qualified Financing (as defined in the
Note).
(b) “Holder” shall mean K
One W One Limited or its assigns.
(c) “Note(s)” shall mean
the Convertible Promissory Note or Notes issued by the Company to Holder
pursuant to the Note Purchase Agreement. .
(d) “Note Purchase
Agreement” shall mean the Convertible Note Purchase Agreement entered into
between Holder and the Company on February 4, 2008.
(e) “Securities” shall
mean the series of investment instruments of the Company sold in the Qualified
Financing (as defined in the Note Purchase Agreement).
(f) “Warrant Coverage”
shall mean ten percent (10%).
1
(g) “Instrument Price”
shall be equal to the Conversion Price upon a Qualified Financing (as defined in
the Note Purchase Agreement), of each Instrument (as defined below) issued in
the Qualified Financing (as defined in the Note Purchase Agreement), subject to
adjustment as described in Section 3 below. The Instrument
Price is determined
solely for purposes of this Warrant and shall not be deemed to be the fair
market value of the Instruments.
(h) “Instruments” shall
mean the Securities purchasable upon exercise of this Warrant or issuable upon
conversion of this Warrant. The total number of instruments to be
issued upon exercise of the Warrant, subject to adjustment as described in
Section 3 below, shall be an amount equal to (i) the aggregate principal amount
of the Note(s) multiplied by the Warrant Coverage, divided by (ii) the
Instrument Price.
3. Adjustments and
Notices. The Instrument Price shall be subject to adjustment
from time to time in accordance with the following provisions:
(a) Subdivision, Stock Dividends
or Combinations. In case the Company shall at any time
subdivide the outstanding Securities or shall issue a stock dividend with
respect to the Securities, the Instrument Price in effect immediately prior to
such subdivision or the issuance of such dividend shall be proportionately
decreased, and in case the Company shall at any time combine the outstanding
Securities, the Instrument Price in effect immediately prior to such combination
shall be proportionately increased, effective at the close of business on the
date of such subdivision, dividend or combination, as the case may
be.
(b) Reclassification, Exchange,
Substitution, In-Kind Distribution. Upon any
reclassifications, exchange, substitution, or other event that results in a
change of the number and/or class of the Securities issuable upon exercise or
conversion of this Warrant or upon the payment of a dividend in securities or
property other than Securities, the Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Securities if this Warrant had
been exercised immediately before the record date for such reclassification,
exchange, substitution, or other event or immediately prior to the record date
for such dividend. The Company or its successor shall promptly issue
to Holder a new Warrant for such new securities or other
property. The new Warrant shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for in
this Section 3 including, without limitation, adjustments to the Instrument
Price and to the number of securities or property issuable upon exercise of the
new Warrant. The provisions of this Section 3(b) shall similarly
apply to successive reclassifications, exchanges, substitutions, or other events
and successive dividends.
(c) No
Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out the provisions of this
Section 3 and in taking all such action as may be necessary or appropriate to
protect the Holder’s rights under this Section 3 against
impairment. If the Company takes any action affecting the Securities
other than as described above that adversely affects Holder’s rights under this
Warrant, the Instrument Price shall be adjusted downward.
2
(d) Notice. Upon
any adjustment of the Instrument Price and any increase or decrease in the
number of the Instruments purchasable upon the exercise or conversion of this
Warrant, then, and in each such case, the Company, as promptly as practicable
thereafter, shall give written notice thereof to the Holder of this Warrant at
the address of such Holder as shown on the books of the Company which notice
shall state the Instrument Price as adjusted and the increased or decreased
number of Instruments purchasable upon the exercise or conversion of this
Warrant, setting forth in reasonable detail the method of calculation of
each.
(e) Fractional
Interests. No fractional Instruments shall be issuable upon
exercise or conversion of the Warrant and the number of Instruments to be issued
shall be rounded down to the nearest whole instrument. If a
fractional Securities interest arises upon any exercise or conversion of the
Warrant, the Company shall eliminate such fractional interest by paying the
Holder an amount computed by multiplying the fractional interest by the fair
market value of a full Instrument.
4. No Shareholder
Rights. This Warrant, by itself, as distinguished from any
Instruments purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
5. Exercise of
Warrant.
(a) Exercise of Warrant for
Instruments in the Qualified Financing. This Warrant may be
exercised in whole or part by the Holder, at any time after the Commencement
Date and prior to the termination of this Warrant, for Instruments sold in the
Qualified Financing, by the surrender of this Warrant, together with the Notice
of Exercise and Investment Representation Statement in the forms attached hereto
as Attachments 1 and
2, respectively, duly completed and executed at the principal office of
the Company, specifying the portion of the Warrant to be exercised and
accompanied by payment in full of the aggregate Instrument Price in cash or by
check with respect to the Instruments being purchased. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Instruments issuable upon such exercise shall be
treated for all purposes as Holder of such Instruments as of the close of
business on such date. As promptly as practicable after such date,
the Company shall issue and deliver to the person or persons entitled to receive
the same a certificate or certificates or other instruments for the number of
full Instruments issuable upon such exercise. If the Warrant shall be
exercised for less than the total full number of Instruments then issuable upon
exercise, promptly after surrender of the Warrant upon such exercise, the
Company will execute and deliver a new Warrant, dated the date hereof,
evidencing the right of the Holder to the balance of the Instruments purchasable
hereunder upon the same terms and conditions set forth herein.
(b) Conversion. In
lieu of exercising this Warrant or any portion hereof, the Holder hereof shall
have the right to convert this Warrant or any portion hereof into Instruments by
executing and delivering to the Company at its principal office the written
Notice of Conversion and Investment Representation Statement in the forms
attached hereto as Attachments 2 and 3,
specifying the portion of the Warrant to be converted, and accompanied by this
Warrant. The number of Instruments to be issued to Holder upon such
conversion shall be computed using the following formula:
3
X =
(P)(Y)(A-B)/A
|
whereX
=
|
the
number of Instruments to be issued to the Holder for the portion of the
Warrant being converted.
|
|
|
P =
the portion of the Warrant being converted expressed as a decimal
fraction.
|
|
|
Y =
the total number of Instruments issuable upon exercise of the Warrant in
full.
|
|
|
A =
the fair market value of an Instrument, determined as provided
below.
|
|
|
B =
the Instrument Price on the date of
conversion.
|
Any
portion of this Warrant that is converted shall be immediately
canceled. This Warrant or any portion hereof which the Holder elects
to convert pursuant to this subsection shall be deemed to have been converted
immediately prior to the close of business on the date of the Company’s receipt
of the Notice of Conversion, or such later date as is specified therein, and the
person entitled to receive the Instruments issuable upon such conversion shall
be treated for all purposes as holder of such Instruments of record as of the
close of business on such date. As promptly as practicable after such
date, the Company shall issue and deliver to the person or persons entitled to
receive the same a certificate or certificates for the number of full
Instruments issuable upon such conversion. If the Warrant shall be
converted for less than the total number of Instruments then issuable upon
conversion, promptly after surrender of the Warrant upon such conversion, the Company
will execute and deliver a new Warrant, dated the date hereof, evidencing the
right of the Holder to the balance of the Instruments purchasable hereunder
upon the same terms and conditions set forth herein.
For
purposes of the foregoing, (a) if the Company’s common stock is traded in a
public market (including The OTC Bulletin Board), the fair market value of Instruments, that
are represented by Common Stock of the Company, if any, shall be the closing
price per share for the Company’s common stock reported for the trading day
immediately before the date on which the Company receives the Notice of
Conversion, and (b) if the Company’s common stock is not traded in a public
market, the Board of Directors of the Company shall determine, in its reasonable
good faith judgment, the fair market value of the Instruments, that
are represented by Common Stock of the Company, if any, on the date of the
Company’s receipt of a written request by Holder and shall deliver such
determination to Holder within five (5) business days of such
request.
6. Transfer of
Warrant. This Warrant may be transferred or assigned by the
Holder hereof in whole or in part, provided that (i) the transferor provides, at
the Company’s request, an opinion of counsel satisfactory to the Company that
such transfer does not require registration under the Securities Act of 1933, as
amended and the securities law applicable with respect to any other applicable
jurisdiction, and (ii) the Company, in its sole discretion, consents to such
assignment or transfer. Notwithstanding the foregoing, this Warrant
may be transferred by Purchaser if it is a partnership to a limited or general
partner of such partnership if (i) the transferee agrees in writing to be
subject to the terms of this Warrant; and (ii) the Purchaser delivers written
notice of such transfer to the Company.
4
7. Termination. This Warrant
shall terminate on the first to occur of (i) 5:00 p.m. California time on
February 4, 2011, or (ii) immediately prior to the closing of the
acquisition of the Company by another entity by means of any transaction or
series of related transactions (including, without limitation, any
reorganization, merger or consolidation) that results in (x) the transfer of
fifty percent (50%) or more of the outstanding voting power of the Company or
(y) the holders of a majority of the Company’s outstanding voting stock holding
less than a majority of the voting stock of the surviving
corporation.
8. Miscellaneous. This
Warrant shall be governed by the laws of the State of California, as such laws
are applied to contracts to be entered into and performed entirely in
California. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed or
waived orally, but only by an instrument in writing signed by the Company and
the Holder of this Warrant. All notices and other communications from
the Company to the Holder of this Warrant shall be delivered personally or
mailed by first class mail, postage prepaid, to the address furnished to the
Company in writing by the last Holder of this Warrant who shall have furnished
an address to the Company in writing, and if mailed shall be deemed given three
days after deposit in the United States mail.
ISSUED: February 4,
2008
By:______________________________
Name:____________________________
Title:_____________________________
AGREED
AND ACKNOWLEDGED:
K One W
One Limited
By:________________________________
Name:______________________________
Title:_______________________________
5
Attachment
1
NOTICE OF
EXERCISE
TO: PUREDEPTH,
INC.
1. The
undersigned hereby elects to purchase ________ Instruments of PureDepth, Inc.
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price in full, together with all applicable transfer taxes, if
any.
2. Please issue
a certificate or certificates representing said Instruments in the name of the
undersigned or in such other name as is specified below:
________________________________________
(Name)
________________________________________
(Address)
| _________________________________ | _____________________________________ |
|
(Date)
|
(Name
of Warrant Holder)
|
|
By:__________________________________
|
|
|
Title:_________________________________
|
Attachment
2
INVESTMENT
REPRESENTATION STATEMENT
Securities
(as
defined below) of
In
connection with the purchase of the above-listed securities, the undersigned
hereby represents to PureDepth, Inc. (the “Company”) as
follows:
(a) The
securities to be received upon the exercise of the Warrant (the “Securities”) will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and the undersigned
has no present intention of selling, granting participation in or otherwise
distributing the same, but subject, nevertheless, to any requirement of law that
the disposition of its property shall at all times be within its
control. By executing this Statement, the undersigned further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The
undersigned understands that the Securities issuable upon exercise of the
Warrant at the time of issuance may not be registered under the Securities Act
of 1933, as amended (the “Act”), and applicable state securities laws, on the
ground that the issuance of such securities is exempt pursuant to Section 4(2)
of the Act and state law exemptions relating to offers and sales not by means of
a public offering, and that the Company’s reliance on such exemptions is
predicated on the undersigned’s representations set forth herein.
(c) Except for a
transfer by the undersigned, in the event the undersigned is a partnership, to a
limited or general partner of such partnership, the undersigned agrees that in
no event will it make a disposition of any Securities acquired upon the exercise
of the Warrant unless and until (i) it shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (ii) it shall have
furnished the Company with an opinion of counsel satisfactory to the Company and
Company’s counsel to the effect that (A) appropriate action necessary for
compliance with the Act and any applicable state securities laws has been taken
or an exemption from the registration requirements of the Act and such laws is
available, and (B) the proposed transfer will not violate any of said
laws.
(d) The
undersigned acknowledges that an investment in the Company is highly speculative
and represents that it is able to fend for itself in the transactions
contemplated by this Statement, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investments, and has the ability to bear the economic risks (including the risk
of a total loss) of its investment. The undersigned represents that
it has had the opportunity to ask questions of the Company concerning the
Company’s business and assets and to obtain any additional information which it
considered necessary to verify the accuracy of or to amplify the Company’s
disclosures, and has had all questions which have been asked by it
satisfactorily answered by the Company.
(e) The
undersigned acknowledges that the Securities issuable upon exercise of the
Warrant must be held indefinitely unless subsequently registered under the Act
or an exemption from such registration is available. The undersigned
is aware of the provisions of Rule 144 promulgated under the Act which permit
limited resale of securities purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the securities, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through a “broker’s transaction” or in transactions directly with a
“market makers” (as provided by Rule 144(f)) and the number of securities being
sold during any three-month period not exceeding specified
limitations.
Dated:_____________________
________________________________________
(Typed or
Printed Name)
By:______________________________________
(Signature)
________________________________________
(Title)
Attachment
3
NOTICE OF
CONVERSION
TO: PUREDEPTH,
INC.
1. The
undersigned hereby elects to acquire _______ Instruments of PureDepth, Inc.
pursuant to the terms of the attached Warrant, by conversion of _____ percent
(%) of the Warrant.
2. Please issue
a certificate or certificates representing said Instruments in the name of the
undersigned or in such other name as is specified below:
____________________________________
(Name)
____________________________________
(Address)
Dated:______________________________________
________________________________________
(Typed or
Printed Name)
By:______________________________________
(Signature)
________________________________________
(Title)
