NOTE AND WARRANT PURCHASE AGREEMENT
EXHIBIT
10.2
This
Note
and Warrant Purchase Agreement, dated as of June 1, 2008, (this “Agreement”)
is
entered into by and among Organic To Go Food Corporation, a Delaware corporation
(the “Company”),
and
X.Xxxxxx L.P., a limited partnership organized under the laws of the Bahamas
(the “Investor”).
RECITALS
On
the
terms and subject to the conditions set forth herein, the Investor is willing
to
purchase from the Company, and the Company is willing to sell to the Investor,
one or more convertible promissory notes in the aggregate principal amount
of up
to $10,000,000, together with one or more related warrants to acquire shares
of
the Company’s common stock, par value $0.001 per share (the “Common
Stock”).
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
Notes and Warrants.
(a) Issuance
of Notes.
At the
Closings (as defined below), the Company agrees to issue and sell to the
Investor, and, subject to all of the terms and conditions hereof, the Investor
agrees to purchase one or more convertible promissory notes in the form of
Exhibit A
hereto
(each, a “Note”
and,
collectively, the “Notes”)
in the
aggregate principal amount of up to $10,000,000.
2. Procedure.
The
initial Closing (the “Initial
Closing”)
shall
occur within seven (7) Business Days (as defined below) following the date
of
this Agreement (the “Initial
Closing Date”),
upon
which date the Company shall deliver to the Investor a Note in a principal
amount of $5,000,000 and a Warrant (as defined below) to purchase 625,000 shares
of Common Stock, and the Investor shall deliver to the Company the Purchase
Price (as defined below) of $5,000,000. At any time during the nine months
following the Initial Closing Date and so long as no Event of Default (as
defined below) shall have occurred and be continuing and there
has
been no event, occurrence or development that has had or that could reasonably
be expected to result in a Material Adverse Effect (as defined
below),
the
Company shall have the right and option, in its sole discretion, to issue and
sell a Note to the Investor and, subject to all of the terms and conditions
hereof, obligate the Investor to purchase such Note, by delivering a written
notice (the “Notice”)
to the
Investor which specifies: (i) a Closing Date (as defined below) within ten
(10)
Business Days following the date the Investor
receives
the Notice and (ii) the principal amount of such Note, which shall be at least
$1,000,000 and shall not, when aggregated with the principal amounts of all
of
the Notes previously issued under this Agreement, exceed $10,000,000.
“Business
Day”
means
any day except Saturday, Sunday and any day which is a federal legal holiday
in
the United States or in Switzerland, or a day on which banking institutions
in
the State of New York are authorized or required by law or other governmental
action to close. “Event
of Default”
shall
mean the occurrence of any of the following: (a) Voluntary
Bankruptcy or Insolvency Proceedings. The
Company shall (i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian of itself or of all or a substantial part
of
its property, (ii) be unable, or admit in writing its inability, to pay its
debts generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated,
(v) become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself
or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or other
proceeding commenced against it, or (vii) take any action for the purpose
of effecting any of the foregoing; or (b) Involuntary
Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall
be
commenced and an order for relief entered or such proceeding shall not be
dismissed or discharged within 60 days of commencement; or (c) Material
Breach.
The
Company shall breach any term of this Agreement, any of the Transaction
Documents or any other agreement or instrument executed in connection therewith,
which, individually or in the aggregate, materially and adversely affects any
of
the Investor’s rights under this Agreement or any of the Transaction Documents,
and
as
to any
breach that is capable of cure, the Company fails to cure such breach within
fifteen (15) days after the Investor provides written notice to the Company
of
such breach.
(a) Issuance
of Warrants. In
consideration for the purchase by the Investor of each Note, the Company will
issue to the Investor one five (5) year warrant in the form attached hereto
as
Exhibit B
(each, a
“Warrant”
and,
collectively, the “Warrants”)
to
purchase, at an exercise price of $3.00 per share, such number of shares of
Common Stock as determined by dividing the principal amount of such Note by
$10,000,000 and multiplying such amount by 1,250,000 shares of Common Stock;
provided that the number of shares of Common Stock subject to each Warrant
and
the exercise price of each Warrant shall be subject to adjustment in accordance
with Section 9 of the form of Warrant attached hereto as Exhibit
B. For
example, for a Note with a principal amount of $5,000,000, the Company shall
issue to the Investor a Warrant to purchase 625,000 shares of Common Stock
calculated as follows:
|
Investment
amount
|
$
|
5,000,000
|
||
|
Divided
by $10MM
|
$
|
10,000,000
|
||
|
Percent
of total maximum investment
|
50
|
%
|
||
|
Multiplied
by total warrants for $10MM
|
1,250,000
|
|||
|
Warrants
issued for $5MM investment
|
625,000
|
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(b)
Delivery.
The
sale and purchase of each Note and Warrant shall take place at a closing (the
“Closing”).
Each
Closing, other than the Initial Closing, shall be held on the date specified
in
the Notice, which shall be a Business Day (the “Closing
Date”).
At
each Closing, the Company will deliver to the Investor the Note and Warrant
to
be purchased by the Investor, against receipt by the Company of the
corresponding purchase price which shall be equal to the principal amount of
such Note (the “Purchase
Price”),
in
United States dollars and in immediately available funds, by wire transfer
to an
account designated in writing by the Company. Each Note and Warrant will be
registered in the Investor’s name in the Company’s records.
(c) Use
of Proceeds.
The
proceeds of the sale and issuance of the Notes shall be used solely to fund
acquisitions by the Company and for general working capital approved by the
Company’s Board of Directors.
3. Representations
and Warranties of the Company.
The
Company hereby makes the following representations and warranties to the
Investor:
(a) Subsidiaries.
The
Company has no direct or indirect Subsidiaries (as defined below) other than
as
specified in all reports required to be filed by it under the Securities Act
of
1933, as amended (the “Securities
Act”),
and
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required
by
law to file such reports) (the foregoing materials being collectively referred
to herein as the “SEC
Reports”).
Except
as disclosed in Schedule
2(a),
the
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all Liens (as defined below), and all
the
issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights. “Lien”
means
any lien, charge, encumbrance, security interest, right of first refusal or
other restrictions of any kind. “Subsidiary”
means
any “significant subsidiary” as defined in Rule 1-02(w) of the Regulation S-X
promulgated by the Commission under the Exchange Act.
(b) Organization
and Qualification.
The
Company and each Subsidiary are duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of
its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. The Company
and each Subsidiary are duly qualified to conduct its respective businesses
and
are in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned
by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not, individually
or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect. “Material
Adverse Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the
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Subsidiaries,
taken as a whole, or (iii) an adverse impairment to the Company’s ability to
perform on a timely basis its obligations under any Transaction Document (as
defined below).
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company
in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby
do
not and will not (i) conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company
or
any Subsidiary is a party or by which any property or asset of the Company
or
any Subsidiary is bound or affected, or (iii) result in a violation of any
law,
rule, regulation, order, judgment, injunction, decree or other restriction
of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect.
(e) Filings,
Consents and Approvals.
Neither
the Company nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than
(i) the filing with the Securities and Exchange Commission (the “SEC”)
of one
or more registration statements in accordance with the requirements of the
Note
Registration Rights Agreement (as defined below) and the Warrant Registration
Rights Agreement (as defined below), (ii) filings required by state securities
laws, (iii) filings required in accordance with Section 5(f) and (iv) those
that
have been made or obtained prior to the date of this Agreement.
(f) Issuance
of the Securities.
The
Securities (as defined below) have been duly authorized and, when issued and
paid for in accordance with the Transaction Documents, will be
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duly
and
validly issued, fully paid and nonassessable, free and clear of all Liens.
The
Company has reserved from its duly authorized capital stock the shares of Common
Stock issuable upon conversion of the Notes or the exercise of the Warrants.
“Securities”
means
the
Notes, the Warrants, the shares of Common Stock issuable upon conversion of
the
Notes and the shares of Common Stock issuable upon exercise of the
Warrants.
(g) Capitalization.
The
number of shares and type of all authorized, issued and outstanding capital
stock of the Company, and all shares of Common Stock reserved for issuance
under
the Company’s various option and incentive plans, is specified in the SEC
Reports. Except as specified in the SEC Reports and as disclosed in Schedule
2(g),
no
securities of the Company are entitled to preemptive or similar rights, and
no
Person (as defined below) has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as specified in the SEC
Reports
and
except as set forth on Schedule
2(g),
there
are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights
or
obligations convertible into or exchangeable for, or giving any Person any
right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or
securities or rights convertible or exchangeable into shares of Common Stock.
Except
with respect to 2,229,430 warrants to purchase Common Stock, the
issue
and sale of the Securities will not, immediately or with the passage of time,
obligate the Company or any Subsidiary to issue shares of Common Stock or other
securities to any Person (other than the Investor) and will not result in a
right of any holder of Company or Subsidiary securities to adjust the exercise,
conversion, exchange or reset price under such securities. “Person”
means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
(h) SEC
Reports; Financial Statements.
Except
as
set forth on Schedule
2(h),
the
Company
has filed all SEC Reports required to be filed by it on a timely basis or has
timely filed a valid extension of such time of filing and has filed any such
SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of
the
SEC promulgated thereunder, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Since February 13, 2007, the Company has not received any material
correspondence from the SEC or any Trading Market (as defined below) concerning
the SEC Reports. The financial statements of the Company and any Subsidiary
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”)
applied
on a consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case
of
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unaudited
statements, to normal, immaterial, year-end audit adjustments. “Trading
Market”
means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.
(i) Press
Releases.
The
press releases
disseminated by the Company since February
13, 2007
taken as
a whole do not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make
the
statements therein, in light of the circumstances under which they were made
and
when made, not misleading.
(j) Material
Changes.
Since
the
date of the latest audited financial statements included within the SEC Reports,
except as specifically
disclosed in the SEC Reports and
except as disclosed on Schedule
2(j),
(i)
there has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) neither
the
Company nor any Subsidiary has entered into any material contract, agreement
or
other transaction that is not in the ordinary course of business, (iii) neither
the Company nor any Subsidiary has incurred any liabilities or obligations
(contingent or otherwise) other than (A) trade payables, accrued expenses and
other liabilities incurred in the ordinary course of business consistent with
past practice, (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the SEC, and (C) liabilities not exceeding in the aggregate $200,000;
(iv) neither the Company nor any Subsidiary has altered its method of accounting
or the identity of its auditors, (v) neither the Company nor any Subsidiary
has
declared or made any dividend or distribution of cash or other property to
its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock, and (vi) neither the Company nor any Subsidiary
has issued any equity securities to any officer, director or Affiliate (as
defined below), except pursuant to existing stock option plans. The Company
does
not have pending before the Commission any request for confidential treatment
of
information. “Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144.
(k) Litigation.
Except
as set forth on Schedule
2(k),
there
is no Action (as defined below) which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or
the
Securities or (ii) except as specifically disclosed in the SEC Reports, could,
if there were an unfavorable decision, individually or in the aggregate, have
or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director or officer thereof (in his or
her
capacity as such), is or has been the subject of any Action involving a claim
of
violation of or liability under federal or state securities laws or a claim
of
breach of fiduciary duty, except as specifically disclosed in the SEC Reports.
There has not been, and to the knowledge of the Company, there is not pending
any investigation by the SEC involving the Company, any Subsidiary or any
current or former director or officer of the Company (in his or her capacity
as
such). The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act. “Action”
means
any action, suit, inquiry, notice of violation, proceeding
(including
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any
partial proceeding such as a deposition) or investigation pending or threatened
in writing against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local
or
foreign), stock market, stock exchange or trading facility.
(l) Labor
Relations.
Except
as set forth on Schedule
2(l),
no
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company or any
Subsidiary.
(m) Compliance.
Except
as set forth on Schedule
2(m),
neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is
in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect. The Company is in compliance with all effective
requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and
regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Material
Adverse Effect.
(n) Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in
the
SEC Reports, except where the failure to possess such permits could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect, and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
such
permits.
(o) Title
to Assets.
Except
as set forth on Schedule
2(o),
the
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them that is material to their respective businesses
and
good and marketable title in all personal property owned by them that is
material to their respective businesses, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by
them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
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(p) Patents
and Trademarks.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material
for
use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect
(collectively, the “Intellectual
Property Rights”).
Except
as set forth on Schedule
2(p),
neither
the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates
or
infringes upon the rights of any Person. Except as set forth in the SEC Reports,
to the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any
of
the Intellectual Property Rights.
(q) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged. The Company is the named beneficiary of a key-man life insurance policy
with respect to its Chief Executive Officer for a coverage amount of no less
than $1,000,000. The Company has a directors and officers liability insurance
policy with respect to the Company’s Board of Directors for a coverage amount of
no less than $5,000,000. The Company has no reason to believe that it will
not
be able to renew its and the Subsidiaries’ 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 on terms consistent with market
for
the Company’s and such Subsidiaries’ respective lines of business.
(r) Transactions
With Affiliates and Employees.
Except
as set forth in or otherwise not required to be disclosed in the SEC Reports,
none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company or any Subsidiary is presently
a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the
knowledge of the Company, any entity in which any officer, director, or any
such
employee has a substantial interest or is an officer, director, trustee or
partner.
(s) Internal
Accounting Controls.
The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly
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during
the period in which the Company’s Form 10-K or 10-Q, as the case may be, is
being prepared. The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures in accordance with Item
307 of Regulation S-K under the Exchange Act for the Company’s most recently
ended fiscal quarter or fiscal year-end (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed Form 10-K or Form 10-Q the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 308T of Regulation
S-K under the Exchange Act) or, to the Company’s knowledge, in other factors
that could significantly affect the Company’s internal controls.
(t) Solvency.
Based
on the financial condition of the Company and each Subsidiary as of the Closing
Date (and assuming that the Closing shall have occurred), (i) the Company’s and
each Subsidiary’s fair saleable value of its assets exceeds the amount that will
be required to be paid on or in respect of the Company’s and each Subsidiary’s
existing debts and other liabilities (including known contingent liabilities)
as
they mature, (ii) the Company’s and each Subsidiary’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal
year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company and each Subsidiary, and projected capital requirements
and capital availability thereof, and (iii) the current cash flow of the Company
and each Subsidiary, together with the proceeds the Company and each Subsidiary
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on
or
in respect of its debt when such amounts are required to be paid. The Company
and each Subsidiary does not intend to incur debts beyond its ability to pay
such debts as they mature (taking into account the timing and amounts of cash
to
be payable on or in respect of its debt).
(u) Certain
Fees.
Except
as described in Schedule
2(u),
no
brokerage or finder’s fees or commissions are or will be payable by the Company
or any Subsidiary to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Investor shall have no
obligation with respect to any fees or with respect to any claims (other than
such fees or commissions owed by the Investor pursuant to written agreements
executed by the Investor which fees or commissions shall be the sole
responsibility of the Investor) made by or on behalf of other Person for fees
of
a type contemplated in this Section 3(u) that may be due in connection with
the
transactions contemplated by this Agreement.
(v) Certain
Registration Matters.
Assuming the accuracy of the Investor’s representations and warranties set forth
in Section 4, no registration under the Securities Act is required for the
offer
and sale of the Securities by the Company to the Investor under the Transaction
Documents. The Company is eligible to register its Common Stock for resale
by
the Investor under Form S-1 promulgated under the Securities Act. Except as
specified in the SEC Reports and except as set forth on Schedule
2(v),
neither
the Company nor any Subsidiary has granted or agreed to grant to any Person
any
rights (including “piggy-back” registration rights) to
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9 -
have
any
securities of the Company registered with the SEC or any other governmental
authority that have not been satisfied.
(w) Listing
and Maintenance Requirements.
Except
as specified in the SEC Reports, the Company has not, since February 13, 2007,
received notice from any Trading Market to the effect that the Company is not
in
compliance with the listing, quoting or maintenance requirements thereof. The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with the listing, quoting or maintenance
requirements for continued listing or quoting of the Common Stock on the Trading
Market on which the Common Stock is currently listed or quoted. The issuance
and
sale of the Securities under the Transaction Documents does not contravene
the
rules and regulations of the Trading Market on which the Common Stock is
currently listed or quoted, and no approval of the stockholders of the Company
thereunder is required for the Company to issue and deliver to the Investor
the
Securities contemplated by Transaction Documents.
(x) Investment
Company.
The
Company and each Subsidiary is not, and is not an Affiliate of, and immediately
following the Closing will not have become, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
(y) Application
of Takeover Protections.
The
Company has taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill (including
any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable
to
the Investor as a result of the Investor and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company’s issuance of the Securities and the
Investor’s ownership of the Securities.
(z) No
Additional Agreements.
The
Company does not have any agreement or understanding with the Investor with
respect to the transactions contemplated by the Transaction Documents other
than
as specified in the Transaction Documents.
(aa) Consultation
with Auditors.
The
Company and each Subsidiary has consulted its independent auditors concerning
the accounting treatment of the transactions contemplated by the Transaction
Documents, and in connection therewith has furnished such auditors complete
copies of the Transaction Documents.
(bb) Foreign
Corrupt Practices Act.
Neither
the Company nor any Subsidiary, nor to the knowledge of the Company, any agent
or other person acting on behalf of any of the Company or any Subsidiary, has,
directly or indirectly, (i) used any funds, or will use any proceeds from the
sale of the Securities, for unlawful contributions, gifts, entertainment or
other unlawful expenses related to foreign or domestic political activity,
(ii)
made any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or campaigns from
corporate funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any Person acting on their behalf of
which
the Company is aware)
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10 -
which
is
in violation of law, or (iv) has violated in any material respect any provision
of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and
regulations thereunder.
(cc) PFIC.
Neither
the Company nor any Subsidiary is or intends to become a “passive foreign
investment company” within the meaning of Section 1297 of the U.S. Internal
Revenue Code of 1986, as amended.
(dd) OFAC.
Neither
the Company nor any Subsidiary nor, to the knowledge of the Company, any
director, officer, agent, employee, Affiliate or Person acting on behalf of
the
Company or any Subsidiary is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”);
and
the Company will not directly or indirectly use the proceeds of the sale of
the
Securities, or lend, contribute or otherwise make available such proceeds to
any
Subsidiary, joint venture partner or other Person or entity, towards any sales
or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country
sanctioned by OFAC or for the purpose of financing the activities of any Person
currently subject to any U.S. sanctions administered by OFAC.
(ee) Money
Laundering Laws.
The
operations of each of the Company and any Subsidiary are and have been conducted
at all times in compliance with the money laundering statutes of applicable
jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any
applicable governmental agency (collectively, the “Money
Laundering Laws”)
and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company and/or any Subsidiary
with respect to the Money Laundering Laws is pending or, to the best knowledge
of the Company, threatened.
(ff) Dependence
on Major Customers.
No
single customer of the Company or any of its Subsidiaries accounted for more
than 10% of the Company’s or any of its Subsidiaries’ total sales during the
calendar year of 2007.
(gg) Disclosure.
All
disclosure provided to the Investor regarding the Company (including each
Subsidiary), its and any Subsidiary’s business and the transactions contemplated
hereby, furnished by or on behalf of the Company (including the Company’s
representations and warranties set forth in this Agreement) are true and correct
and do not contain any untrue statement of a material fact or omit to state
any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
4. Representations
and Warranties of the Investor.
The
Investor hereby represents and warrants to the Company as follows:
(a) This
Agreement is made by the Company with the Investor who is a Non-U.S. Person
in
reliance upon such Non-U.S. Person’s representations, warranties and covenants
made in this Section 4.
(b) Such
Non-U.S. Person has been advised and acknowledges that (i) the Securities have
not been, and when issued, will not be registered under the Securities Act,
the
securities laws of
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11 -
any
state
of the United States or the securities laws of any other country; (ii) in
issuing and selling the Securities to such Non-U.S. Person pursuant hereto,
the
Company is relying upon the “safe harbor” provided by Regulation S and/or on
Section 4(2) under the Securities Act; (iii) it is a condition to the
availability of the Regulation S “safe harbor” that the Securities not be
offered or sold in the United States or to a U.S. Person until the expiration
of
a period of six (6) months following the Closing Date; (iv) notwithstanding
the
foregoing, prior to the expiration of six (6) months after the Closing (the
“Restricted
Period”),
the
Securities may be offered and sold by the holder thereof only if such offer
and
sale is made in compliance with the terms of this Agreement and either: (A)
if
the offer or sale is within the United States or to or for the account of a
U.S.
Person, the Securities are offered and sold pursuant to an effective
registration statement or pursuant to Rule 144 under the Securities Act or
pursuant to an exemption from the registration requirements of the Securities
Act; or (B) the offer and sale is outside the United States and to other than
a
U.S. Person.
(c) As
used
in this Agreement, the term “United
States”
means
and includes the United States of America, its territories and possessions,
any
State of the United States, and the District of Columbia, the term “U.S.
Person”
means:
(i) a natural person resident in the United States; (ii) any partnership or
corporation organized or incorporated under the laws of the United States;
(iii)
any estate of which any executor or administrator is a U.S. person; (iv) any
trust of which any trustee is a U.S. person; (v) any agency or branch of a
foreign entity located in the United States; (vi) any nondiscretionary account
or similar account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. person; (vii) any discretionary
account or similar account (other than an estate or trust) held by a dealer
or
other fiduciary organized, incorporated and (if an individual) resident in
the
United States; or (viii) a corporation or partnership organized under the laws
of any foreign jurisdiction and formed by a U.S. person principally for the
purpose of investing in securities not registered under the Securities Act,
unless it is organized or incorporated, and owned, by accredited investors
(as
defined in Rule 501(a) under the Securities Act) who are not natural persons,
estates or trusts, and the term “Non-U.S.
Person”
means
any person who is not a U.S. Person or is deemed not to be a U.S. Person under
Rule 902(k)(2) of the Securities Act.
(d) Such
Non-U.S. Person agrees that with respect to the Securities until the expiration
of the Restricted Period: (i) such Non-U.S. Person, its agents or its
representatives have not and will not solicit offers to buy, offer for sale
or
sell any of the Securities, or any beneficial interest therein in the United
States or to or for the account of a U.S. Person during the Restricted Period;
(ii) notwithstanding the foregoing, prior to the expiration of the Restricted
Period, the Securities may be offered and sold by the holder thereof only if
such offer and sale is made in compliance with the terms of this Agreement
and
either: (A) if the offer or sale is within the United States or to or for the
account of a U.S. Person, the Securities are offered and sold pursuant to an
effective registration statement or pursuant to Rule 144 under the Securities
Act or pursuant to an exemption from the registration requirements of the
Securities Act; or (B) the offer and sale is outside the United States and
to
other than a U.S. Person; and (iii) such Non-U.S. Person shall not engage in
hedging transactions with regard to the Securities unless in compliance with
the
Securities Act. The foregoing restrictions are binding upon subsequent
transferees of the Securities, except for transferees pursuant to an effective
registration statement. Such Non-U.S. Person agrees that after
-
12 -
the
Restricted Period, the Securities may be offered or sold within the United
States or to or for the account of a U.S. Person only pursuant to applicable
securities laws.
(e) Such
Non-U.S. Person has not engaged, nor is it aware that any party has engaged,
and
such Non-U.S. Person will not engage or cause any third party to engage, in
any
directed selling efforts (as such term is defined in Regulation S) in the United
States with respect to the Securities.
(f) Such
Non-U.S. Person: (i) is domiciled and has its principal place of business
outside the United States; (ii) certifies it is not a U.S. Person and is not
acquiring the Securities for the account or benefit of any U.S. Person; and
(iii) at the time of the Closing Date, the Non-U.S. Person or persons acting
on
Non-U.S. Person’s behalf in connection therewith will be located outside the
United States.
(g) At
the
time of offering to such Non-U.S. Person and communication of such Non-U.S.
Person’s order to purchase the Securities and at the time of such Non-U.S.
Person’s execution of this Agreement, the Non-U.S. Person or persons acting on
Non-U.S. Person’s behalf in connection therewith were located outside the United
States.
(h) Such
Non-U.S. Person is not a “distributor” (as defined in Regulation S) or a
“dealer” (as defined in the Securities Act).
(i) Such
Non-U.S. Person acknowledges that the Company shall make a notation in its
stock
books regarding the restrictions on transfer set forth in this Section 4
and shall transfer such Securities on the books of the Company only to the
extent consistent therewith. In particular, such Non-U.S. Person acknowledges
that the Company shall refuse to register any transfer of the Securities not
made in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act or pursuant to an available exemption from
registration.
(j) The
Investor understands and agrees that the Notes being issued hereunder shall
bear
the legend set forth on the form attached hereto as Exhibit
A,
until
(i) the shares of Common Stock underlying the Notes shall have been registered
under the Securities Act pursuant to a registration statement that has been
declared effective or (ii) in the opinion of counsel reasonably acceptable
to
the Company, such Securities may be sold without registration under the
Securities Act as well as any applicable “Blue Sky” or state securities
laws.
(k) The
Investor understands and agrees that the Warrants being issued hereunder shall
bear the legend set forth on the form attached hereto as Exhibit
B,
until
(i) the shares of Common Stock underlying the Warrants shall have been
registered under the Securities Act pursuant to a registration statement that
has been declared effective or (ii) in the opinion of counsel reasonably
acceptable to the Company, such Securities may be sold without registration
under the Securities Act as well as any applicable “Blue Sky” or state
securities laws.
(l) The
Investor understands and agrees that the certificates for the Common Stock
that
are issuable upon conversion of the Notes or exercise of the Warrants shall
bear
substantially the following legend until (i) such Securities shall have been
registered under the Securities Act
-
13 -
pursuant
to a registration statement that has been declared effective or (ii) in the
opinion of counsel reasonably acceptable to the Company, such Securities may
be
sold without registration under the Securities Act as well as any applicable
“Blue Sky” or state securities laws:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE PROVISIONS
OF
REGULATION S PROMULGATED UNDER THE SECURITIES ACT, PURSUANT TO REGISTRATION
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION. HEDGING TRANSACTIONS INVOLVING THE SHARES REPRESENTED HEREBY
MAY
NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. THIS
CERTIFICATE MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A
CONDITION PRECEDENT TO THE SALE, PLEDGE, HYPOTHECATION OR ANY OTHER TRANSFER
OF
ANY INTEREST IN ANY OF THE SHARES REPRESENTED BY THIS CERTIFICATE.
(m) The
Investor hereby represents that the Investor is satisfied as to the full
observance of the laws of such Investor’s jurisdiction in connection with any
invitation to subscribe for the Securities, including (i) the legal requirements
within such Investor’s jurisdiction for the purchase of the Securities, (ii) any
foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of such Securities. Such Investor’s
subscription and payment for, and such Investor’s continued beneficial ownership
of, the Securities, will not violate any applicable securities or other laws
of
such Investor’s jurisdiction.
(n) The
Investor has full power and authority to enter into this Agreement, the
execution and delivery of which has been duly authorized, if applicable, and
this Agreement constitutes a valid and legally binding obligation of the
Investor enforceable against the Investor 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.
(o) The
information in the “Investor Questionnaire,” attached hereto as Exhibit
C,
completed and executed by the Investor (the “Investor
Questionnaire”)
is
accurate and true in all material respects.
(p) The
Investor is not relying on the Company or its Affiliates with respect to
economic considerations involved in this investment.
(q) The
Investor understands and agrees that the Investor must bear the economic risk
of
the Investor’s purchase because, among other reasons, the Securities have not
been registered under the Securities Act or under the securities laws of any
state and, therefore, cannot be resold,
-
14 -
assigned
or otherwise disposed of unless they are subsequently registered under the
Securities Act and under the applicable securities laws of such states, or
an
exemption from such registration is available.
(r) No
representations or warranties have been made to the Investor by the Company
or
any of its officers, employees, agents, Affiliates or subsidiaries, other than
any representations of the Company contained herein, and in subscribing for
the
Securities the Investor is not relying upon any representations other than
any
contained herein; provided that nothing contained herein shall modify, amend
or
affect the Investor’s right to rely on the Company’s representations and
warranties contained herein.
(s) The
Investor understands and acknowledges that the Investor’s purchase of the
Securities is a speculative investment that involves a high degree of risk
and
the potential loss of the Investor’s entire investment.
(t) Neither
the SEC nor any state securities commission has approved the Securities, or
passed upon or endorsed the merits of this offering or confirmed the accuracy
or
determined the adequacy of any information provided to the Investor by the
Company.
(u) The
Investor and the Investor’s advisors, if any, have had a reasonable opportunity
to ask questions of and receive answers from a person or persons acting on
behalf of the Company concerning the offering and the business, financial
condition, results of operations and prospects of the Company, and all such
questions have been answered to the reasonable satisfaction of the Investor
and
the Investor’s advisors, if any.
(v) The
Investor is unaware of, is in no way relying on, and did not become aware of
the
offering through or as a result of, any article, notice, advertisement or other
communication published in any newspaper, magazine or similar media or broadcast
over television, radio or over the Internet, in connection with the offering
and
sale of the Securities and is not subscribing for the Securities and did not
become aware of the offering of the Securities through or as a result of any
seminar or meeting to which the Investor was invited by, or any solicitation
of
a subscription by, a person not previously known to the Investor in connection
with investments in securities generally.
(w) The
Investor has not engaged any placement agent, financial advisor or broker,
which
would give rise to any claim by any person for brokerage commissions, finders’
fees or the like relating to this Agreement or the transactions contemplated
hereby and, in turn, to be paid to other selected dealers.
(x) The
foregoing representations, warranties and agreements shall survive the
Closing.
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15 -
5. Other
Agreements of the Parties.
(a) Securities
may only be disposed of in compliance with state and federal securities laws.
In
connection with any transfer of the Securities other than pursuant to an
effective registration statement, to the Company, to an Affiliate of the
Investor or in connection with a pledge as contemplated in Section 5(b), the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under
the
Securities Act.
(b) The
Company acknowledges and agrees that the Investor may from time to time pledge,
and/or grant a security interest in some or all of the Securities pursuant
to a
bona fide margin agreement in connection with a bona fide margin account and,
if
required under the terms of such agreement or account, such Investor may
transfer pledged or secured Securities to the pledgees or secured parties.
Such
a pledge or transfer would not be subject to approval or consent of the Company
and no legal opinion of legal counsel to the pledgee, secured party or pledgor
shall be required in connection with the pledge, but such legal opinion may
be
required in connection with a subsequent transfer following default by the
Investor transferee of the pledge. No notice shall be required of such pledge.
At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities
including the preparation and filing of any required prospectus supplement
under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling stockholders
thereunder. Except as otherwise provided in Section 5(c), any shares subject
to
a pledge or security interest as contemplated by this Section 5(b) shall
continue to bear the legend set forth in this Agreement and be subject to the
restrictions on transfer set forth in Section 5(a).
(c) Certificates
evidencing shares of Common Stock issuable upon conversion of the Notes or
exercise of the Warrants shall not contain any legend, including the legend
set
forth in Section 4(l): (i) following a sale or transfer of such shares pursuant
to an effective registration statement (including a Note Registration Statement
and a Warrant Registration Statement, both as defined below), or (ii) following
a sale or transfer of such shares pursuant to Rule 144 (assuming the transferee
is not an Affiliate of the Company). If
the
Investor shall make a sale or transfer of shares either (x) pursuant to Rule
144
or (y) pursuant to a registration statement and in each case shall have
delivered to the Company or the Company’s
transfer
agent the certificate representing shares containing a restrictive legend which
are the subject of such sale or transfer
and a representation letter in customary form (the
date of
such sale or transfer and share delivery being the “Share
Delivery Date”)
and (1)
the Company shall fail to deliver or cause to be delivered to the Investor
a
certificate representing such shares that is free from all restrictive or other
legends by the third Trading Day (as defined in the Note) following the Share
Delivery Date and (2) following such third Trading Day after the Share Delivery
Date and prior to the time such shares are received free from restrictive
legends, the Investor, or any third party on behalf of such Investor, purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Investor of such shares (a "Buy-In"),
then
the Company shall pay in cash to the Investor (for costs incurred either
directly by such Investor or on behalf of a third party) the amount by which
the
total
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16 -
purchase
price paid for Common Stock as a result of the Buy-In (including brokerage
commissions, if any) exceed the proceeds received by such Investor as a result
of the sale to which such Buy-In relates. The Investor shall provide the Company
written notice indicating the amounts payable to the Investor in respect of
the
Buy-In. “Note
Registration Statement”
means
a
registration statement meeting the requirements set forth in the Note
Registration Rights Agreement and covering the resale by the Investor of the
shares of Common Stock underling the Note. “Warrant
Registration Statement”
means
a
registration statement meeting the requirements set forth in the Warrant
Registration Rights Agreement and covering the resale by the Investor of the
shares of Common Stock underling the Warrant.
(d) As
long
as the Investor owns the Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as the Investor owns Securities, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Investor and make publicly available in accordance with
Rule
144 such information as is required for the Investor to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell the Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
(e) The
Company shall not, and shall use its best efforts to ensure that no Affiliate
of
the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale
of the Securities to the Investor, or that would be integrated with the offer
or
sale of the Securities for purposes of the rules and regulations of any Trading
Market in a manner that would require stockholder approval of the sale of the
Securities to the Investor.
(f) By
9:00
a.m. (New York time) four (4) Trading Days following the execution of this
Agreement, and by 9:00 a.m. (New York time) four (4) Trading Days following
the
Initial Closing Date, the Company shall issue press releases disclosing the
transactions contemplated hereby and the Initial Closing. Within four (4)
Trading Days following the execution of this Agreement, the Company will file
a
current report on Form 8-K disclosing the material terms of the Transaction
Documents (and attach as exhibits thereto the Transaction Documents), and within
four (4) Trading Days following the Initial Closing Date the Company will file
an additional current report on Form 8-K to disclose the Initial Closing. In
addition, the Company will make such other filings and notices in the manner
and
time required by the SEC and the Trading Market on which the Common Stock is
quoted or listed in connection with the Transaction Documents.
(g) In
addition to the indemnity provided in any other Transaction Document, the
Company will indemnify and hold the Investor and its directors, officers,
shareholders, partners, employees and agents (each, an “Investor
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any
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17 -
such
Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred. Except as otherwise
set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 5(g) shall be the same as those set forth in
Section 5 of the Warrant Registration Rights Agreement and Section 5 of the
Note
Registration Rights Agreement.
(h)
The
Company covenants and agrees that neither it nor any other Person acting on
its
behalf will provide the Investor or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Investor shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that the Investor shall be relying on the foregoing representations
in
effecting transactions in securities of the Company.
(i) The
Company agrees, (i) if the Company applies to have the Common Stock listed
or
quoted on any Trading Market, other than the Trading Market on which the Common
Stock is currently listed or quoted, it will include in such application the
shares of Common Stock issuable upon conversion of the Notes and exercise of
the
Warrants, and will take such other action as is necessary or desirable to cause
such shares to be listed or quoted on such other Trading Market as promptly
as
possible, and (ii) it will take all action reasonably necessary to continue
the
listing or quoting of its Common Stock on a Trading Market and will comply
in
all material respects with the Company’s reporting, filing and other obligations
under the bylaws or rules of the Trading Market.
(j) Prior
to
the Initial Closing, Company will not, without the Investor's prior written
consent: (i) change the nature of its business; (ii) issue any equity, equity
securities (other than stock options issued pursuant to Company’s stock option
plan in the ordinary course of business) or debt in any form; (iii) divest,
acquire, change the structure of its assets or otherwise decrease the value
of
its assets; or (iv) enter into any collaboration, partnership, distribution
or
other agreement binding Company to any future payments, services or other
contractual obligations exceeding in value $250,000 (other than certain
acquisitions contemplated by Company which have been previously disclosed to
the
Investor).
(k) The
Company will keep the existence and
content of its negotiations with the Investor, including the terms of the
Transaction Documents, confidential and will not disclose to any third party
any
information relating to the transactions hereunder, except to its employees,
shareholders, Affiliates, counsel or consultants, who will each be bound by
confidentiality agreements and who will have a ‘need to know’, and except as
required by law. Except as required by applicable law, the Company will make
no
public statement, press release, or other announcement with respect to the
transactions hereunder, without the Investor’s prior written approval. The
Investor will maintain all confidential information it obtains from the Company
in accordance with the provisions of that certain Confidentiality Agreement,
dated as of December 26, 2007, by and among the Investor and the Company.
Notwithstanding the foregoing, any activities
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18 -
undertaken
by the Investor on behalf of the Company, such as discussions with potential
investors or strategic partners, will not be deemed to be a breach of the
Investor’s confidentiality obligations.
(l) The
Investor and the Company agree not to engage in any activities designed to
manipulate the trading price of the Common Stock.
6. Conditions
to Closing of the Investor.
The
Investor’s obligations at each Closing are subject to the fulfillment, on or
prior to each Closing Date, of all of the following conditions, any of which
may
be waived in whole or in part by the Investor:
(a) Representations
and Warranties.
The
representations and warranties made by the Company in Section 3 shall have
been true and correct when made, and shall be true and correct on such Closing
Date.
(b) Performance.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to
such
Closing Date;
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents;
(d) Transaction
Documents.
The
Company shall have duly executed and delivered to the Investor the following
documents (collectively, the “Transaction
Documents”):
(i) this
Agreement;
(ii) a
Note
issued in accordance with Section 2;
(iii) a
Warrant
issued in accordance with Section 2;
(iv) the
Registration Rights Agreement, dated as of the date of this Agreement, between
the Company and the Investor, substantially in the form attached hereto as
Exhibit
D, pursuant
to which the Company shall be obligated file a Registration Statement on Form
S-1, covering the shares of Common Stock underlying the Notes no later than
ninety (90) days following the conversion of the Notes (the “Note
Registration Rights Agreement”);
and
(v) the
Registration Rights Agreement, dated as of the date of this Agreement, between
the Company and the Investor, substantially in the form attached hereto as
Exhibit
E, pursuant
to which the Company shall be obligated to file a Registration Statement on
Form
S-1, covering the shares of Common Stock underlying the Warrants no later than
ninety (90) days following the exercise of the Warrants (the “Warrant
Registration Rights Agreement”);
provided, however, that this Agreement, the Note Registration Rights Agreement
and the Warrant
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19 -
Registration
Rights Agreement shall only be required to be executed and delivered at the
Initial Closing;
(e) Officer’s
Certificate.
The
Company shall have delivered to the Investor a certificate of the Company,
dated
as of the Closing Date, signed by the Chief Executive Officer of the Company,
confirming that since the date of execution of this Agreement, no event or
series of events have occurred that reasonably could have or result in a
Material Adverse Effect;
(f) Legal
Opinion.
At the
Initial Closing and each closing which occurs after October 31, 2008, the
Company shall have delivered to the Investor a legal opinion of Loeb & Loeb
LLP, in agreed form, addressed to the Investor and a legal opinion of
Xxxx
XxXxxxxxx Xxxxxxxxx Xxxxxxxx & Xxxx Professional Law Corporation,
in
agreed form, addressed to the Investor;
(g) Good
Standing Certificate.
The
Company shall have delivered to the Investor good standing certificates from
(a)
the State of Delaware and (b) the State of Washington, dated as of no more
than
three days prior to the Closing Date, certifying that the Company is in good
standing and qualified to do business in these jurisdictions;
(h) Secretary’s
Certificate.
At the
Initial Closing, the Company shall have delivered to the Investor a certificate
duly executed by the Secretary of the Company, having attached thereto and
certified resolutions approved by the Board of Directors of the Company
authorizing the transactions contemplated hereunder;
(i) Waivers.
The
Company shall have delivered to the Investor validly executed waivers of
preemptive rights or any other rights that the stockholders of the Company
may
have in connection with this Agreement and the transaction contemplated
hereunder, in a form reasonably suitable to the Investor; and
(j) No
Suspensions of Trading in Common Stock; Listing.
Trading
in the Common Stock shall not have been suspended by the SEC or any Trading
Market (except for any suspensions of trading of not more than one Trading
Day
solely to permit dissemination of material information regarding the Company)
at
any time since the date of execution of this Agreement, and the Common Stock
shall have been at all times since such date listed or quoted for trading on
a
Trading Market.
7. Conditions
to Obligations of the Company.
The
Company’s obligation to issue and sell the Notes at each Closing is subject to
the fulfillment, on or prior to each Closing Date, of the following conditions,
any of which may be waived in whole or in part by the Company:
(a) Representations
and Warranties.
The
representations and warranties made by the Investor in Section 4 shall be
true and correct when made, and shall be true and correct on such Closing
Date;
(b) Performance.
The
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to such Closing Date;
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20 -
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents;
(d) Transaction
Documents.
At the
Initial Closing, the Investor shall have duly executed and delivered to the
Investor the following documents:
(i) this
Agreement;
(ii) the
Note
Registration Rights Agreement; and
(iii) the
Warrant Registration Rights Agreement; and
(e) Purchase
Price.
The
Investor shall have delivered to the Company the Purchase Price in respect
of
the Note and Warrant being purchased by the Investor referenced in
Section 2.
8. Miscellaneous.
(a) Waivers
and Amendments.
Any
provision of this Agreement may be amended, waived or modified only upon the
written consent of the Company and the Investor.
(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
New York, without regard to the conflicts of law provisions of the State of
New
York or of any other state.
(c) Survival.
The
representations, warranties, covenants and agreements made herein shall survive
the execution and delivery of this Agreement.
(d) Successors
and Assigns.
Subject
to the restrictions on transfer described in Sections 8(e)
and 8(f) below, the rights and obligations of the Company and the
Investor shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
(e) Registration,
Transfer and Replacement of the Notes.
The
Notes issuable under this Agreement shall be registered notes. The Company
will
keep, at its principal executive office, books for the registration and
registration of transfer of the Notes. Prior to presentation of any Note for
registration of transfer, the Company shall treat the Person in whose name
such
Note is registered as the owner and holder of such Note for all purposes
whatsoever, whether or not such Note shall be overdue, and the Company shall
not
be affected by notice to the contrary. Subject to the restrictions on or
conditions to transfer set forth in this Agreement or in any Note, the holder
of
any Note, at its option, may in person or by duly authorized attorney surrender
the same for exchange at the Company’s principal executive office, and promptly
thereafter and at the Company’s expense, except as provided below, receive in
exchange therefor one or more new Note(s), each in the principal requested
by
such holder, dated the date of the Note so surrendered and registered in the
name of such Person or Persons as shall have been designated in writing by
such
holder or its
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21 -
attorney
for the same principal amount as the principal amount of the Note so
surrendered. Upon receipt by the Company of evidence reasonably satisfactory
to
it of the ownership of and the loss, theft, destruction or mutilation of any
Note and (a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it; or (b) in the case of mutilation, upon
surrender thereof, the Company, at its expense, will execute and deliver in
lieu
thereof a new Note executed in the same manner as the Note being replaced,
in
the same principal amount as the principal amount of such Note and dated the
date of such Note.
(f) Assignment
by the Company.
The
rights, interests or obligations hereunder may not be assigned, by operation
of
law or otherwise, in whole or in part, by the Company.
(g) Entire
Agreement.
This
Agreement together with the other Transaction Documents constitute and contain
the entire agreement among the Company and the Investor and supersede any and
all prior agreements, negotiations, correspondence, understandings and
communications among the parties, whether written or oral, respecting the
subject matter hereof.
(h) Notices.
All
notices and other communications made pursuant to this Agreement shall be in
writing and shall be conclusively deemed to have been duly given:
(i) in
the
case of hand delivery to the address set forth below, on the next Business
Day
after delivery;
(ii) in
the
case of delivery by an internationally recognized overnight courier to the
address set forth below, freight prepaid, on the next Business Day after
delivery and signed receipt by the recipient; and
(iii) in
the
case of a notice sent by facsimile transmission to the number and addressed
as
set forth below, on the next Business Day after delivery, if receipt of such
facsimile transmission is confirmed.
For
all
notices given pursuant to one of the methods listed above, a copy of the notice
should also be sent by email to the email address set forth below.
Contact
details:
If
to
Investor:
Address
for notices being delivered by hand/courier:
c/o
Inventages Whealth Management Inc.
Winterbotham
Place, Marlborough & Queen Streets
P.
O. Box
N-3026
Nassau,
The Bahamas, Attn: Xx. Xxxxxx Xxxxxxx
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22 -
Always
with a copy to: IVC SA, Xxxxx xx Xxxxxx 00X, 0000 - Xxxxxxxx, Xxxxxxxxxxx,
Attn: Xx. Xxxxxx xxx Xxxxxxxxx
Always
with a copy to: xxxxxxx@xxxxxxxxxx.xxx
and
xxxxxxxxx@xxxxxxxxxx.xxx
Number
for notices being delivered by facsimile transmission:
To:
IVC
SA, Attn: Xx. Xxxxxx xxx Xxxxxxxxx, at: x00 00 000 0000
Always
with a copy to: xxxxxxx@xxxxxxxxxx.xxx
and
xxxxxxxxx@xxxxxxxxxx.xxx
If
to the
Company:
Address
for notices being delivered by hand/courier:
Organic
To Go Food Corporation
0000
Xxxxx Xxxxxx Xxxxx
Xxxxxxx,
Xxxxxxxxxx 00000
Attn:
Chief Financial Officer
Always
with a copy to:
Loeb
& Loeb LLP
00000
Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx
0000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention:
Xxxxxxxx Xxxxxx, Esq.
Number
for notices being delivered by facsimile transmission:
To:
Organic To Go Food Corporation, Attn: Chief Financial Officer, at: x0
000
000
0000
Always
with a copy to: Loeb & Loeb LLP, Attn: Xxxxxxxx Xxxxxx, Esq, at:
x0
000
000 0000
A
party
may change or supplement the contact details for service of any notice pursuant
to this Agreement, or designate additional addresses, facsimile numbers and
email addresses for the purposes of this Section 8(h) by giving the other
parties written notice of the new contact details in the manner set forth
above.
(i) Arbitration.
Each
party agrees that any dispute, controversy, or claim arising in relation to
this
Agreement, including with regard to its validity, invalidity, breach,
enforcement or termination, shall be resolved by binding arbitration in London,
England, in accordance with the
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23 -
rules
of
arbitration which are in force in the United Kingdom on the date when the notice
of arbitration is submitted. The arbitrability of such dispute, claim or
controversy shall also be determined in such arbitration. Such arbitration
proceeding shall be conducted in the English language before one (1) arbitrator
agreed to by the parties. Both the foregoing agreement of the parties to
arbitrate any and all such disputes, claims and controversies, and the results,
determinations, findings, judgments and/or awards rendered through any such
arbitration shall be final and binding on the parties hereto and may be
specifically enforced by legal proceedings.
(j) Expenses.
Each
party shall pay the fees and expenses of its advisers, counsel, accountants
and
other experts, if any, and all other expenses incurred by such party incident
to
the negotiation, preparation, execution, delivery and performance of the
Transaction Documents; provided, however, that the Company shall pay up to
$25,000 in reasonable legal expenses incurred by the Investor.
(k) Severability.
(l) If
any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
(m) Limitation
of Liability. Notwithstanding
anything herein to the contrary, the Company acknowledges and agrees that no
trustee, officer, investment vehicle, investor, shareholder or holder of shares
of beneficial interest of the Investor shall be personally liable for any
liabilities of the Investor.
(n) Counterparts.
This
Agreement may be executed in one or more counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
agreement. Facsimile copies of signed signature pages will be deemed binding
originals.
[Signature
Page Follows]
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24 -
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.
COMPANY:
ORGANIC
TO GO FOOD CORPORATION
a
Delaware corporation
By:
/s/
Xxxxx Xxxxx
Name:
Xxxxx Xxxxx
Title:
Chief Executive Officer
INVESTOR:
X.XXXXXX
L.P.
By:
/s/
Xx. Xxxxxx Xxxxxxx
Xx.
Xxxxxx Xxxxxxx
Director,
Inventages Whealth Management, Inc., as General Partner of X.Xxxxxx
L.P.
By:
/s/
Xx. Xxxxxxxx Xxxxxxxxxxxxx
Xx.
Xxxxxxxx Xxxxxxxxxxxxx
Director,
Inventages Whealth Management, Inc., as General Partner of X.Xxxxxx
L.P.
DISCLOSURE
SCHEDULE
Exhibit
A
Form
of Note
Exhibit
B
Form
of Warrant
Exhibit
C
Investor
Questionnaire
Organic
To Go Food Corporation (the “Company”)
will
use the responses to this questionnaire to qualify prospective investors for
purposes of U.S. securities laws.
Your
answers will be kept confidential at all times. However, by signing this
questionnaire, you agree that the Company may present this questionnaire to
such
parties as it deems appropriate to establish the availability of exemptions
from
registration under U.S. securities laws.
|
Investor:
|
|
|
Exact
name as it should appear on the Securities. If the name is a “nominee
name,” please so state and in addition, provide the name of the legal
owner.
|
|
|
Address
|
|
|
Address
for securityholder records. All notices and mailings will be made
to this
address. Indicate, if appropriate, the person at that address to
whose
attention the mailing should be
directed.
|
1. Representations,
Warranties and Agreements.
In
order for the Company to offer the notes, shares of common stock and warrants
(the “Securities”)
in
conformance with Regulation S (“Regulation
S”)
promulgated under the Securities Act of 1933, as amended (the “Securities
Act”),
the
following information must be obtained. (For purposes of answering the following
questions, the term “United States” means the United States of America, its
territories and possessions, any State of the United States and the District
of
Columbia.)
(a) Please
initial the blank that correctly responds to the following statement: The
undersigned is not purchasing the Securities for the account or benefit of
any
person, entity, group or organization that resides in the United States or
has a
place of business in the United States.
____
True
____
False
(b) Please
initial the blank that correctly responds to the following statement: (i) the
undersigned did not receive an offer to subscribe for the Securities in the
United States (as defined above); and
(ii)
this Investor Suitability Questionnaire (“Questionnaire”)
is
being executed and entered into outside of the United States (as defined
above).
____
True
____
False
(c) The
undersigned agrees to transfer the Securities only in accordance with the
provisions of Regulation S, pursuant to registration under the Securities Act
or
pursuant to an available exemption from registration under the Securities Act.
Any transfer in violation of the preceding sentence will be null and void and
the Company will not recognize any such attempted transfer. The undersigned
acknowledges that the Securities are characterized as “restricted securities”
under U.S. federal securities laws and may be resold without registration under
the Securities Act only in certain limited circumstances. All certificates
representing shares of common stock will bear legends to this effect.
Additionally, all of the Securities will be subject to certain contractual
limitations on transferability.
____
True
____
False
Indicate
the form of entity of the undersigned:
|
Individual
|
||
|
Corporation
|
||
|
Limited
Partnership
|
||
|
General
Partnership
|
||
|
Limited
Liability Company
|
||
|
Trust
|
||
|
Other
form of organization (indicate form of organization):
|
||
The
foregoing representations and warranties are true and accurate as of the date
hereof and shall be true and accurate as of the date of the closing (the
“Closing”)
of any
sale of the Securities to the undersigned and shall survive such date.
If
in
any respect such representations and warranties shall not be true and accurate
prior to Closing, the undersigned shall give immediate notice of such fact
to
the Company, specifying which representations and warranties are not true and
accurate and the reasons therefor.
2. Indemnification.
The
undersigned understands the meaning and legal consequences of the
representations and warranties made by the undersigned herein, and that the
Company is relying on such representations and warranties in making its
determination to accept or reject the undersigned’s offer to purchase the
Securities in this offering. The undersigned hereby agrees to indemnify and
hold
harmless the Company and each director, officer, employee or agent thereof
from
and against any and all loss, damage or liability due to or arising out of
a
breach of any representation or warranty of the undersigned contained in this
Questionnaire.
3. Survival
of Representations, Warranties and Agreements.
All
representations, warranties and agreements contained herein or made in writing
by or on behalf of the undersigned in connection with the transactions
contemplated hereby shall survive the Closing of any sale of Securities by
the
Company to the undersigned.
4. Headings.
The
headings in this Questionnaire are for convenience of reference, and shall
not
by themselves determine the meaning of this Questionnaire or of any part
hereof.
CORPORATIONS,
PARTNERSHIPS, LLCs, TRUSTS AND OTHER ENTITIES
Date:
June 1, 2008
|
NAME
OF ENTITY
|
|
|
BY
(Signature)
|
|
|
PRINT
NAME
|
|
|
TITLE
|
|
|
PRINCIPAL
PLACE OF BUSINESS:
|
|
|
NUMBER
AND STREET
|
|
|
CITY/PROVINCE/COUNTRY/POSTAL
CODE
|
|
|
TELEPHONE
NUMBER
|
|
|
FAX
NUMBER
|
Exhibit
D
Note
Registration Rights Agreement
Exhibit
E
Warrant
Registration Rights Agreement
