SECURITIES PURCHASE AGREEMENT
EXHIBIT
10.8
THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
August 31, 2007, by and between JMAR TECHNOLOGIES, a Delaware corporation (the
“Company”), and LAURUS MASTER FUND, LTD., a Cayman Islands company (the
“Purchaser”).
RECITALS
WHEREAS,
the Company has authorized the sale to the Purchaser of a Secured Term Note
in
the aggregate principal amount of Seven Million Five Hundred Thousand Dollars
($7,500,000) in the form of Exhibit A hereto (as amended, modified and/or
supplemented from time to time, the “Note”);
WHEREAS,
the Company wishes to issue to the Purchaser (i) a warrant in the form of
Exhibit B hereto (as amended, modified and/or supplemented from time to time,
the “Warrant A”) to purchase up to 80,000,000 shares of the Company’s Common
Stock (subject to adjustment as set forth therein) and (ii) a warrant
in the form of Exhibit B hereto (as amended, modified and/or supplemented from
time to time, the “Warrant B”) to purchase up to 39,000,000 shares of the
Company’s Common Stock (subject to adjustment as set forth therein) (Warrant A
and Warrant B are collectively referred to herein as the “Warrants”) in
connection with the Purchaser’s purchase of the Note;
WHEREAS,
the Purchaser desires to purchase the Note, and the Warrants on the terms and
conditions set forth herein; and
WHEREAS,
the Company desires to issue and sell the Note and Warrants to the Purchaser
on
the terms and conditions set forth herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Agreement
to Sell and Purchase. Pursuant to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company shall sell to the Purchaser, and the Purchaser shall purchase from
the
Company, the Note. The sale of the Note on the Closing Date shall be
known as the “Offering.” The Note will mature on the Maturity Date
(as defined in the Note). Collectively, the Note and Warrants and
Common Stock issuable upon exercise of the Warrants are referred to as the
“Securities.”
2. Fees
and Warrant. On the Closing Date:
(a) The
Company will issue and deliver to the Purchaser Warrant A and Warrant B in
connection with the Offering, pursuant to Section 1 hereof. All the
representations, covenants, warranties, undertakings, and indemnification,
and
other rights made or granted to or for the benefit of the Purchaser by the
Company are hereby also made and granted for the benefit of the holder of the
Warrants and shares of the Company’s Common Stock issuable upon exercise of the
Warrants (the “Warrant Shares”).
(b) The
Company shall pay to Laurus Capital Management, LLC, the investment manager
of
the Purchaser (“LCM”), a non-refundable payment in an amount equal to
$262,500. The foregoing payment is referred to herein as the “LCM
Payment.” Such payment shall be deemed fully earned on the Closing
Date and shall not be subject to rebate or proration for any
reason.
3. Closing,
Delivery and Payment.
3.1 Closing. Subject
to the terms and conditions herein, the closing of the transactions contemplated
hereby (the “Closing”), shall take place on the date hereof, at such time or
place as the Company and the Purchaser may mutually agree (such date is
hereinafter referred to as the “Closing Date”).
3.2 Delivery. Pursuant
to the Escrow Agreement, at the Closing on the Closing Date, the Company will
deliver to the Purchaser, among other things, the Note and the Warrants and
the
Purchaser will deliver to the Company, among other things, the amounts set
forth
in the Disbursement Letter by certified funds or wire transfer (it being
understood that $6,420,600.61 of the proceeds of the Note shall be placed in
the
Restricted Account (as defined in the Restricted Account Agreement referred
to
below)) and that $194,899.39 of the proceeds of the Note shall be paid to the
Purchaser from the Restricted Account at closing in respect of outstanding
Obligations (as defined in the Security Agreement referred to in the
Reaffirmation and Ratification Agreement of even date herewith). The Company
hereby acknowledges and agrees that Purchaser’s obligation to purchase the Note
from the Company on the Closing Date shall be contingent upon the satisfaction
(or waiver by the Purchaser in its sole discretion) of the
items and matters set forth in the closing checklist
provided by the Purchaser to the Company on or prior to the Closing
Date.
4. Representations
and Warranties of the Company. The Company hereby represents and
warrants to the Purchaser as follows
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4.1 Organization,
Good Standing and Qualification. Each of the Company and each of
its Subsidiaries is a corporation, partnership or limited liability company,
as
the case may be, duly organized, validly existing and in good standing under
the
laws of its jurisdiction of organization. Each of the Company and
each of its Subsidiaries has the corporate, limited liability company or
partnership, as the case may be, power and authority to own and operate its
properties and assets and, insofar as it is or shall be a party thereto, to
(1)
execute and deliver (i) this Agreement, (ii) the Note and the Warrants to
be issued in connection with this Agreement, (iii) the Reaffirmation and
Ratification Agreement dated as of the date hereof between the Company, certain
Subsidiaries of the Company and the Purchaser (as amended, modified and/or
supplemented from time to time, the “Reaffirmation Agreement”),
(iv) the Funds Escrow Agreement dated as of the date hereof among the
Company, the Purchaser and the escrow agent referred to therein, substantially
in the form of Exhibit C hereto (as amended, modified and/or supplemented from
time to time, the “Escrow Agreement”), (v) the Restricted Account Agreement
dated as of the date hereof among the Company, the Purchaser and North Fork
Bank
(as amended, modified or supplemented from time to time, the “Restricted Account
Agreement”), (vi) the Restricted Account Side Letter related to the Restricted
Account Agreement dated as of the date hereof between the Company and the
Purchaser (as amended, modified or supplemented from time to time, the
“Restricted Account Side Letter”) and (vii) all other documents, instruments and
agreements entered into in connection with the transactions contemplated hereby
and thereby (the preceding clauses (ii) through (vii), collectively, the
“Related Agreements”); (2) issue and sell the Note; (3) issue and sell the
Warrants and the Warrant Shares; and (4) carry out the provisions of this
Agreement and the Related Agreements and to carry on its business as presently
conducted. Each of the Company and each of its Subsidiaries is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation, partnership or limited liability company, as the case may be,
in
all jurisdictions in which the nature or location of its activities and of
its
properties (both owned and leased) makes such qualification necessary, except
for those jurisdictions in which failure to do so has not, or could not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of the Company and its
Subsidiaries, taken individually and as a whole (a “Material Adverse
Effect”).
4.2 Subsidiaries. Each
direct and indirect Subsidiary of the Company, the direct owner of such
Subsidiary and its percentage ownership thereof, is set forth on Schedule
4.2. For the purpose of this Agreement, a “Subsidiary” of any person
or entity means (i) a corporation or other entity whose shares of stock or
other
ownership interests having ordinary voting power (other than stock or other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the directors of such corporation, or other
persons or entities performing similar functions for such person or entity,
are
owned, directly or indirectly, by such person or entity or (ii) a corporation
or
other entity in which such person or entity owns, directly or indirectly, more
than 50% of the equity interests at such time. For purposes of this
Agreement and the Related Agreements, the term “Subsidiary” shall not include
JSI Microelectronics, Inc.
4.3 Capitalization;
Voting Rights.
(a)
The authorized capital stock of the Company, as of the date hereof consists
of
85,000,000 shares, of which 80,000,000 are shares of Common Stock, par value
$0.01 per share, 47,594,823 shares of which are issued and outstanding, and
5,000,000 are shares of preferred stock, par value $0.01 per share of
which 11,778 shares of Series G preferred stock ($10 stated value),
579,765 shares of Series I preferred stock ($10 stated value) and 708.8 shares
of Series J preferred stock ($1000 stated value) are issued and
outstanding. The authorized, issued and outstanding capital stock of
each Subsidiary of the Company is set forth on Schedule 4.3.
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(b) Except
as disclosed on Schedule 4.3, other than: (i) the shares reserved for
issuance under the Company’s stock option plans; and (ii) shares which may be
granted pursuant to this Agreement and the Related Agreements, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or stockholder agreements, or arrangements
or agreements of any kind for the purchase or acquisition from the Company
of
any of its securities. Except as disclosed on Schedule 4.3, neither
the offer, issuance or sale of any of the Note or the Warrants, or the issuance
of any of the Warrant Shares, nor the consummation of any transaction
contemplated hereby will result in a change in the price or number of any
securities of the Company outstanding, under anti-dilution or other similar
provisions contained in or affecting any such securities.
(c) All
issued and outstanding shares of the Company’s Common
Stock: (i) have been duly authorized and validly issued and are
fully paid and nonassessable; and (ii) were issued in compliance with all
applicable state and federal laws concerning the issuance of
securities.
(d) The
rights, preferences, privileges and restrictions of the shares of the Common
Stock are as stated in the Company’s Certificate of Incorporation (the
“Charter”). Except as to the portion of the Warrant Shares that are
in excess of the Company’s total authorized shares of Common Stock, the Warrant
Shares have been duly and validly reserved for issuance. When issued
in compliance with the provisions of this Agreement and the Company’s Charter,
the Securities will be validly issued, fully paid and nonassessable, and will
be
free of any liens or encumbrances; provided, however, that the Securities may
be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein or as otherwise required by such laws at the time a transfer
is proposed.
4.4 Authorization;
Binding Obligations. All corporate, partnership or limited
liability company, as the case may be, action on the part of the Company and
each of its Subsidiaries (including their respective officers and directors)
necessary for the authorization of this Agreement and the Related Agreements,
the performance of all obligations of the Company and its Subsidiaries hereunder
and under the other Related Agreements at the Closing and, the authorization,
sale, issuance and delivery of the Note and Warrant has been taken or will
be
taken prior to the Closing; subject, however, if required, to the requirement
to
obtain approval of the Company’s shareholder to an increase in the authorized
number of shares of Common Stock necessary for the full exercise of the
Warrants. This Agreement and the Related Agreements, when executed
and delivered and to the extent it is a party thereto, will be valid and binding
obligations of each of the Company and each of its Subsidiaries, enforceable
against each such person or entity in accordance with their terms,
except:
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(a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights;
and
(b) general
principles of equity that restrict the availability of equitable or legal
remedies.
The
sale
of the Note is not and will not be subject to any preemptive rights or rights
of
first refusal that have not been properly waived or complied
with. The issuance of the Warrants and the subsequent exercise of the
Warrants for Warrant Shares are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with.
4.5 Liabilities. Neither
the Company nor any of its Subsidiaries has any liabilities, except current
liabilities incurred in the ordinary course of business and liabilities
disclosed in any of the Company’s filings under the Securities Exchange Act of
1934 (“Exchange Act”) made prior to the date of this Agreement (collectively,
the “Exchange Act Filings”), copies of which have been provided to the
Purchaser.
4.6 Agreements;
Action. Except as set forth on Schedule 4.6 or as disclosed in
any Exchange Act Filings:
(a) there
are no agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Company or any
of
its Subsidiaries is a party or by which it is bound which may involve: (i)
obligations (contingent or otherwise) of, or payments to, the Company or any
of
its Subsidiaries in excess of $50,000 (other than obligations of, or payments
to, the Company or any of its Subsidiaries arising from purchase or sale
agreements entered into in the ordinary course of business); or (ii) the
transfer or license of any patent, copyright, trade secret or other proprietary
right to or from the Company or any of its Subsidiaries (other than licenses
arising from the purchase of “off the shelf” or other standard products); or
(iii) provisions restricting the development, manufacture or distribution of
the
Company’s or any of its Subsidiaries products or services; or (iv)
indemnification by the Company or any of its Subsidiaries with respect to
infringements of proprietary rights.
(b) Since June
30, 2007 (the “Balance Sheet Date”), neither the Company nor any of its
Subsidiaries has: (i) declared or paid any dividends, or authorized
or made any distribution upon or with respect to any class or series of its
capital stock; (ii) incurred any indebtedness for money borrowed or any other
liabilities (other than ordinary course obligations) individually in excess
of
$50,000 or, in the case of indebtedness and/or liabilities individually less
than $50,000, in excess of $100,000 in the aggregate; (iii) made any loans
or
advances to any person or entity not in excess, individually or in the
aggregate, of $100,000, other than ordinary course advances for travel expenses;
or (iv) sold, exchanged or otherwise disposed of any of its assets or rights,
other than the sale of its inventory in the ordinary course of
business.
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(c) For
the purposes of subsections (a) and (b) above, all indebtedness, liabilities,
agreements, understandings, instruments, contracts and proposed transactions
involving the same person or entity (including persons or entities the Company
or any Subsidiary of the Company has reason to believe are affiliated therewith)
shall be aggregated for the purpose of meeting the individual minimum dollar
amounts of such subsections.
(d) The
Company maintains disclosure controls and procedures (“Disclosure Controls”)
designed to ensure that information required to be disclosed by the Company
in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized, and reported, within the time periods specified in the
rules and forms of the Securities and Exchange Commission (“SEC”).
(e) The
Company makes and keep books, records, and accounts, that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the Company’s
assets. The Company maintains internal control over financial
reporting (“Financial Reporting Controls”) designed by, or under the supervision
of, the Company’s principal executive and principal financial officers, and
effected by the Company’s board of directors, management, and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles (“GAAP”), including
that:
(i) transactions
are executed in accordance with management’s general or specific
authorization;
(ii) unauthorized
acquisition, use, or disposition of the Company’s assets that could have a
material effect on the financial statements are prevented or timely
detected;
(iii) transactions
are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that the Company’s receipts and expenditures are being
made only in accordance with authorizations of the Company’s management and
board of directors;
(iv) transactions
are recorded as necessary to maintain accountability for assets;
and
(v) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals, and appropriate action is taken with respect to any
differences.
(f) In
its From 10_Q for the quarter ended June 30, 2007 and in its Form 10-K for
the
year ended December 31, 2006, the Company has disclosed that its Disclosure
Controls and Financing Reporting Controls are not effective and that it has
one
or more material weaknesses in its financial reporting.
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4.7 Obligations
to Related Parties. Except as set forth on Schedule 4.7, there
are no obligations of the Company or any of its Subsidiaries to officers,
directors, stockholders or employees of the Company or any of its Subsidiaries
other than:
(a) for
payment of salary for services rendered and for bonus payments;
(b) reimbursement
for reasonable expenses incurred on behalf of the Company and its
Subsidiaries;
(c) for
other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company and each Subsidiary of the
Company, as applicable); and
(d) obligations
listed in the Company’s and each of its Subsidiary’s financial statements or
disclosed in any of the Company’s Exchange Act Filings.
Except
as
described above or set forth on Schedule 4.7, none of the officers, directors
or, to the best of the Company’s knowledge, key employees or stockholders of the
Company or any of its Subsidiaries or any members of their immediate families,
are indebted to the Company or any of its Subsidiaries, individually or in
the
aggregate, in excess of $50,000 or have any direct or indirect ownership
interest in any firm or corporation with which the Company or any of its
Subsidiaries is affiliated or with which the Company or any of its Subsidiaries
has a business relationship, or any firm or corporation which competes with
the
Company or any of its Subsidiaries, other than passive investments in publicly
traded companies (representing less than one percent (1%) of such company)
which
may compete with the Company or any of its Subsidiaries. Except as
described above, no officer, director or stockholder of the Company or any
of
its Subsidiaries, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company or any of
its
Subsidiaries and no agreements, understandings or proposed transactions are
contemplated between the Company or any of its Subsidiaries and any such
person. Except as set forth on Schedule 4.7, neither the Company nor
any of its Subsidiaries is a guarantor or indemnitor of any indebtedness of
any
other person or entity.
4.8 Changes. Since
the Balance Sheet Date, except as disclosed in any Exchange Act Filing or in
any
Schedule to this Agreement or to any of the Related Agreements, there has not
been:
(a) any
change in the business, assets, liabilities, condition (financial or otherwise),
properties, operations or prospects of the Company or any of its Subsidiaries,
which individually or in the aggregate has had, or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect;
(b) any
resignation or termination of any officer, key employee or group of employees
of
the Company or any of its Subsidiaries;
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(c) any
material change, except in the ordinary course of business, in the contingent
obligations of the Company or any of its Subsidiaries by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) any
damage, destruction or loss, whether or not covered by insurance, which has
had,
or could reasonably be expected to have, individually or in the aggregate,
a
Material Adverse Effect;
(e) any
waiver by the Company or any of its Subsidiaries of a valuable right or of
a
material debt owed to it;
(f) any
direct or indirect loans made by the Company or any of its Subsidiaries to
any
stockholder, employee, officer or director of the Company or any of its
Subsidiaries, other than advances made in the ordinary course of
business;
(g) any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder of the Company or any of its
Subsidiaries;
(h) any
declaration or payment of any dividend or other distribution of the assets
of
the Company or any of its Subsidiaries;
(i) any
labor organization activity related to the Company or any of its
Subsidiaries;
(j) any
debt, obligation or liability incurred, assumed or guaranteed by the Company
or
any of its Subsidiaries, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) any
sale, assignment or transfer of any patents, trademarks, copyrights, trade
secrets or other intangible assets owned by the Company or any of its
Subsidiaries;
(l) any
change in any material agreement to which the Company or any of its Subsidiaries
is a party or by which either the Company or any of its Subsidiaries is bound
which either individually or in the aggregate has had, or could reasonably
be
expected to have, individually or in the aggregate, a Material Adverse
Effect;
(m) any
other event or condition of any character that, either individually or in the
aggregate, has had, or could reasonably be expected to have, individually or
in
the aggregate, a Material Adverse Effect; or
(n) any
arrangement or commitment by the Company or any of its Subsidiaries to do any
of
the acts described in subsection (a) through (m) above.
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4.9 Title
to Properties and Assets; Liens, Etc. Except as set forth on
Schedule 4.9, each of the Company and each of its Subsidiaries has good and
marketable title to its properties and assets, and good title to its leasehold
interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than:
(a) those
resulting from taxes which have not yet become delinquent;
(b) minor
liens and encumbrances which do not materially detract from the value of the
property subject thereto or materially impair the operations of the Company
or
any of its Subsidiaries, so long as in each such case, such liens and
encumbrances have no effect on the lien priority of the Purchaser in such
property; and
(c) those
that have otherwise arisen in the ordinary course of business, so long as they
have no effect on the lien priority of the Purchaser therein.
All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Schedule 4.9, the
Company and its Subsidiaries are in compliance with all material terms of each
lease to which it is a party or is otherwise bound.
4.10 Intellectual
Property.
(a) Each
of the Company and each of its Subsidiaries owns or possesses sufficient legal
rights to all patents, trademarks, service marks, trade names, copyrights,
trade
secrets, licenses, information and other proprietary rights and processes
necessary for its business as now conducted and, to the Company’s knowledge, as
presently proposed to be conducted (the “Intellectual Property”), without any
known infringement of the rights of others. There are no outstanding
options, licenses or agreements of any kind relating to the foregoing
proprietary rights, nor is the Company or any of its Subsidiaries bound by
or a
party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising from the
purchase of “off the shelf” or standard products.
(b) Neither
the Company nor any of its Subsidiaries has received any communications alleging
that the Company or any of its Subsidiaries has violated any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity, nor is the Company or any
of
its Subsidiaries aware of any basis therefore.
(c) The
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior
to
their employment by the Company or any of its Subsidiaries, except for
inventions, trade secrets or proprietary information that have been rightfully
assigned to the Company or any of its Subsidiaries.
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4.11 Compliance
with Other Instruments. Neither the Company nor any of its
Subsidiaries is in violation or default of (x) any term of its Charter or
Bylaws, or (y) except as set forth on Schedule 4.11, any provision of any
indebtedness, mortgage, indenture, contract, agreement or instrument to which
it
is party or by which it is bound or of any judgment, decree, order or writ,
which violation or default, in the case of this clause (y), has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. The execution, delivery and performance of
and compliance with this Agreement and the Related Agreements to which it is
a
party, and the issuance and sale of the Note by the Company and the other
Securities by the Company each pursuant hereto and thereto, will not, with
or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term
or
provision, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company or any of its
Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal
of any permit, license, authorization or approval applicable to the Company,
its
business or operations or any of its assets or properties.
4.12 Litigation. Except
as set forth on Schedule 4.12 hereto, there is no action, suit, proceeding
or
investigation pending or, to the Company’s knowledge, currently threatened
against the Company or any of its Subsidiaries that prevents the Company or
any
of its Subsidiaries from entering into this Agreement or the other Related
Agreements, or from consummating the transactions contemplated hereby or
thereby, or which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect or any change in
the
current equity ownership of the Company or any of its Subsidiaries, nor is
the
Company aware that there is any basis to assert any of the
foregoing. Neither the Company nor any of its Subsidiaries is a party
to or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is
no action, suit, proceeding or investigation by the Company or any of its
Subsidiaries currently pending or which the Company or any of its Subsidiaries
intends to initiate.
4.13 Tax
Returns and Payments. Each of the Company and each of its
Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it. All taxes shown to be due and payable on
such returns, any assessments imposed, and all other taxes due and payable
by
the Company or any of its Subsidiaries on or before the Closing, have been
paid
or will be paid prior to the time they become delinquent. Except as
set forth on Schedule 4.13, neither the Company nor any of its Subsidiaries
has been advised:
(a) that
any of its returns, federal, state or other, have been or are being audited
as
of the date hereof; or
(b) of
any adjustment, deficiency, assessment or court decision in respect of its
federal, state or other taxes.
The
Company has no knowledge of any liability for any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
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4.14 Employees. Except
as set forth on Schedule 4.14, neither the Company nor any of its Subsidiaries
has any collective bargaining agreements with any of its
employees. There is no labor union organizing activity pending or, to
the Company’s knowledge, threatened with respect to the Company or any of its
Subsidiaries. Except as disclosed in the Exchange Act Filings or on
Schedule 4.14, neither the Company nor any of its Subsidiaries is a party to
or
bound by any currently effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing plan, retirement
agreement or other employee compensation plan or agreement. To the
Company’s knowledge, no employee of the Company or any of its Subsidiaries, nor
any consultant with whom the Company or any of its Subsidiaries has contracted,
is in violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual
to
be employed by, or to contract with, the Company or any of its Subsidiaries
because of the nature of the business to be conducted by the Company or any
of
its Subsidiaries; and to the Company’s knowledge the continued employment by the
Company and its Subsidiaries of their present employees, and the performance
of
the Company’s and its Subsidiaries’ contracts with its independent contractors,
will not result in any such violation. Neither the Company nor any of
its Subsidiaries is aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency that would interfere with their duties to the Company
or
any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has received any notice alleging that any such violation has
occurred. Except for employees who have a current effective
employment agreement with the Company or any of its Subsidiaries, no employee
of
the Company or any of its Subsidiaries has been granted the right to continued
employment by the Company or any of its Subsidiaries or to any material
compensation following termination of employment with the Company or any of
its
Subsidiaries. Except as set forth on Schedule 4.14, the Company is
not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries have a present
intention to terminate the employment of any officer, key employee or group
of
employees.
4.15 Registration
Rights and Voting Rights. Except as set forth on
Schedule 4.15 and except as disclosed in Exchange Act Filings, neither the
Company nor any of its Subsidiaries is presently under any obligation, and
neither the Company nor any of its Subsidiaries has granted any rights, to
register any of the Company’s or its Subsidiaries’ presently outstanding
securities or any of its securities that may hereafter be
issued. Except as set forth on Schedule 4.15 and except as disclosed
in Exchange Act Filings, to the Company’s knowledge, no stockholder of the
Company or any of its Subsidiaries has entered into any agreement with respect
to the voting of equity securities of the Company or any of its
Subsidiaries.
4.16 Compliance
with Laws; Permits. Neither the Company nor any of its
Subsidiaries is in violation of any provision of the Xxxxxxxx-Xxxxx Act of
2002
or any SEC related regulation or rule or any rule of the Principal Market (as
hereafter defined) promulgated thereunder or any other applicable statute,
rule,
regulation, order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business
or
the ownership of its properties which has had, or could reasonably be expected
to have, either individually or in the aggregate, a Material Adverse
Effect. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or declarations
are required to be filed in connection with the execution and delivery of this
Agreement or any other Related Agreement and the issuance of any of the
Securities, except such as have been duly and validly obtained or filed, or
with
respect to any filings that must be made after the Closing, as will be filed
in
a timely manner. Each of the Company and its Subsidiaries has all
material franchises, permits, licenses and any similar authority necessary
for
the conduct of its business as now being conducted by it, the lack of which
could, either individually or in the aggregate, reasonably be expected to have
a
Material Adverse Effect.
11
4.17 Environmental
and Safety Laws. Neither the Company nor any of its Subsidiaries
is in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation. Except as set forth on Schedule 4.17, no
Hazardous Materials (as defined below) are used or have been used, stored,
or
disposed of by the Company or any of its Subsidiaries or, to the Company’s
knowledge, by any other person or entity on any property owned, leased or used
by the Company or any of its Subsidiaries. For the purposes of the
preceding sentence, “Hazardous Materials” shall mean:
(a) materials
which are listed or otherwise defined as “hazardous” or “toxic” under any
applicable local, state, federal and/or foreign laws and regulations that govern
the existence and/or remedy of contamination on property, the protection of
the
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials;
or
(b) any
petroleum products or nuclear materials.
4.18 Valid
Offering. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements
of
the Securities Act of 1933, as amended (the “Securities Act”), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.19 Full
Disclosure. Each of the Company and each of its Subsidiaries has
provided the Purchaser with all information requested by the Purchaser in
connection with its decision to purchase the Note and Warrant, including all
information the Company and its Subsidiaries believe is reasonably necessary
to
make such investment decision. Neither this Agreement, the Related
Agreements, the exhibits and schedules hereto and thereto nor any other document
delivered by the Company or any of its Subsidiaries to Purchaser or its
attorneys or agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby, contain any untrue statement of a material
fact
nor omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading. Any financial projections and other estimates
provided to the Purchaser by the Company or any of its Subsidiaries were based
on the Company’s and its Subsidiaries’ experience in the industry and on
assumptions of fact and opinion as to future events which the Company or any
of
its Subsidiaries, at the date of the issuance of such projections or estimates,
believed to be reasonable.
12
4.20 Insurance. Each
of the Company and each of its Subsidiaries has general commercial, product
liability, fire and casualty insurance policies with coverages which the Company
believes are customary for companies similarly situated to the Company and
its
Subsidiaries in the same or similar business.
4.21 SEC
Reports. Except as set forth on Schedule 4.21, the Company has
filed all proxy statements, reports and other documents required to be filed
by
it under the Securities Xxxxxxxx Xxx 0000, as amended (the “Exchange
Act”). The Company has furnished the Purchaser copies
of: (i) its Annual Reports on Form 10-K for its fiscal years ended
December 31, 2006; and (ii) the Form 8-K filings which it has made during the
fiscal year 2007 to date (collectively, the “SEC Reports”). Except as
set forth on Schedule 4.21, each SEC Report was, at the time of its filing,
in
substantial compliance with the requirements of its respective form and none
of
the SEC Reports, nor the financial statements (and the notes thereto) included
in the SEC Reports, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.22 Listing. The
Company’s Common Stock is listed or quoted, as applicable, on a Principal Market
(as hereafter defined) and satisfies and at all times hereafter will satisfy,
all requirements for the continuation of such listing or quotation, as
applicable. The Company has not received any notice that its Common
Stock will be delisted from, or no longer quoted on, as applicable, the
Principal Market or that its Common Stock does not meet all requirements for
such listing or quotation, as applicable. For purposes hereof, the
term “Principal Market” means the NASD Over The Counter Bulletin Board, NASDAQ
Capital Market, NASDAQ National Markets System, American Stock Exchange or
New
York Stock Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock).
4.23 No
Integrated Offering. Neither the Company, nor any of its
Subsidiaries or affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited
any
offers to buy any security under circumstances that would cause the offering
of
the Securities pursuant to this Agreement or any of the Related Agreements
to be
integrated with prior offerings by the Company for purposes of the Securities
Act which would prevent the Company from selling the Securities pursuant to
Rule
506 under the Securities Act, or any applicable exchange-related stockholder
approval provisions, nor will the Company or any of its affiliates or
Subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.
4.24 Stop
Transfer. The Securities are restricted securities as of the date
of this Agreement. Neither the Company nor any of its Subsidiaries
will issue any stop transfer order or other order impeding the sale and delivery
of any of the Securities at such time as the Securities are registered for
public sale or an exemption from registration is available, except as required
by state and federal securities laws.
4.25 Dilution. The
Company specifically acknowledges that its obligation to issue the shares of
Common Stock upon exercise of the Warrants are binding upon the
Company and enforceable regardless of the dilution such issuance may have on
the
ownership interests of other shareholders of the Company.
13
4.26 Patriot
Act. The Company certifies that, to the best of Company’s
knowledge, neither the Company nor any of its Subsidiaries has been designated,
nor is or shall be owned or controlled, by a “suspected terrorist” as defined in
Executive Order 13224. The Company hereby acknowledges that the
Purchaser seeks to comply with all applicable laws concerning money laundering
and related activities. In furtherance of those efforts, the Company
hereby represents, warrants and covenants that: (i) none of the cash
or property that the Company or any of its Subsidiaries will pay or will
contribute to the Purchaser has been or shall be derived from, or related to,
any activity that is deemed criminal under United States law; and (ii) no
contribution or payment by the Company or any of its Subsidiaries to the
Purchaser, to the extent that they are within the Company’s and/or its
Subsidiaries’ control shall cause the Purchaser to be in violation of the United
States Bank Secrecy Act, the United States International Money Laundering
Control Act of 1986 or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001. The Company shall
promptly notify the Purchaser if any of these representations, warranties or
covenants ceases to be true and accurate regarding the Company or any of its
Subsidiaries. The Company shall provide the Purchaser all additional
information regarding the Company or any of its Subsidiaries that the Purchaser
deems necessary or convenient to ensure compliance with all applicable laws
concerning money laundering and similar activities. The Company
understands and agrees that if at any time it is discovered that any of the
foregoing representations, warranties or covenants are incorrect, or if
otherwise required by applicable law or regulation related to money laundering
or similar activities, the Purchaser may undertake appropriate actions to ensure
compliance with applicable law or regulation, including but not limited to
segregation and/or redemption of the Purchaser’s investment in the
Company. The Company further understands that the Purchaser may
release confidential information about the Company and its Subsidiaries and,
if
applicable, any underlying beneficial owners, to proper authorities if the
Purchaser, in its sole discretion, determines that it is in the best interests
of the Purchaser in light of relevant rules and regulations under the laws
set
forth in subsection (ii) above.
4.27 ERISA. Based
upon the Employee Retirement Income Security Act of 1974 (“ERISA”), and
the regulations and published interpretations thereunder: (i) neither
the Company nor any of its Subsidiaries has engaged in any Prohibited
Transactions (as defined in Section 406 of ERISA and Section 4975 of theInternal
Revenue Code of 1986, as amended (the “Code”)); (ii) each of the Company
and each of its Subsidiaries has met all applicable minimum funding requirements
under Section 302 of ERISA in respect of its plans; (iii) neither the Company
nor any of its Subsidiaries has any knowledge of any event or occurrence which
would cause the Pension Benefit Guaranty Corporation to institute proceedings
under Title IV of ERISA to terminate any employee benefit plan(s); (iv) neither
the Company nor any of its Subsidiaries has any fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons other
than the Company’s or such Subsidiary’s employees; and (v) neither the Company
nor any of its Subsidiaries has withdrawn, completely or partially, from any
multi-employer pension plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980.
14
5. Representations
and Warranties of the Purchaser. The Purchaser hereby represents
and warrants to the Company as follows (such representations and warranties
do
not lessen or obviate the representations and warranties of the Company set
forth in this Agreement):
5.1 No
Shorting. The Purchaser or any of its affiliates and investment
partners has not, will not and will not cause any person or entity, to directly
engage in “short sales” of the Company’s Common Stock as long as the Note shall
be outstanding.
5.2 Requisite
Power and Authority. The Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their
provisions. All corporate action on the Purchaser’s part required for
the lawful execution and delivery of this Agreement and the Related Agreements
have been or will be effectively taken prior to the Closing. Upon
their execution and delivery, this Agreement and the Related Agreements will
be
valid and binding obligations of the Purchaser, enforceable in accordance with
their terms, except:
(a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights;
and
(b) as
limited by general principles of equity that restrict the availability of
equitable and legal remedies.
5.3 Investment
Representations. The Purchaser understands that the Securities
are being offered and sold pursuant to an exemption from registration contained
in the Securities Act based in part upon the Purchaser’s representations
contained in this Agreement, including, without limitation, that the Purchaser
is an “accredited investor” within the meaning of Regulation D under the
Securities Act of 1933, as amended (the “Securities Act”). The
Purchaser confirms that it has received or has had full access to all the
information it considers necessary or appropriate to make an informed investment
decision with respect to the Note and the Warrants to be purchased by it under
this Agreement and the Warrant Shares acquired by it upon the exercise of the
Warrants, respectively. The Purchaser further confirms that it has
had an opportunity to ask questions and receive answers from the Company
regarding the Company’s and its Subsidiaries’ business, management and financial
affairs and the terms and conditions of the Offering, the Note, the Warrants
and
the Securities and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort
or
expense) necessary to verify any information furnished to the Purchaser or
to
which the Purchaser had access.
5.4 The
Purchaser Bears Economic Risk. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser must bear the
economic risk of this investment until the Securities are sold pursuant to:
(i)
an effective registration statement under the Securities Act; or (ii) an
exemption from registration is available with respect to such sale.
15
5.5 Acquisition
for Own Account. The Purchaser is acquiring the Note and Warrants
and the Warrant Shares for the Purchaser’s own account for investment only, and
not as a nominee or agent and not with a view towards or for resale in
connection with their distribution.
5.6 The
Purchaser Can Protect Its Interest. The Purchaser represents that
by reason of its, or of its management’s, business and financial experience, the
Purchaser has the capacity to evaluate the merits and risks of its investment
in
the Note, the Warrants and the Securities and to protect its own interests
in
connection with the transactions contemplated in this Agreement and the Related
Agreements. Further, the Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement
or the Related Agreements.
5.7 Accredited
Investor. The Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities
Act.
5.8 Legends.
(a) The
Warrant Shares, if not issued by DWAC system (as hereinafter defined), shall
bear a legend which shall be in substantially the following form until such
shares are covered by an effective registration statement filed with the
SEC:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO JMAR TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”
(b) The
Warrants shall bear substantially the following legend:
“THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO JMAR
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”
16
6. Covenants
of the Company. The Company covenants and agrees with the
Purchaser as follows:
6.1 Stop-Orders. The
Company will advise the Purchaser, promptly after it receives notice of issuance
by the SEC, any state securities commission or any other regulatory authority
of
any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
6.2 Listing. The
Company shall promptly secure the listing or quotation, as applicable, of the
shares of Common Stock issuable upon the exercise of the Warrants on the
Principal Market upon which shares of Common Stock are listed or quoted for
trading, as applicable (subject to official notice of issuance) and shall
maintain such listing or quotation, as applicable, so long as any other shares
of Common Stock shall be so listed or quoted, as applicable. The
Company will maintain the listing or quotation, as applicable, of its Common
Stock on the Principal Market, and will comply in all material respects with
the
Company’s reporting, filing and other obligations under the bylaws or rules of
the National Association of Securities Dealers (“NASD”) and such exchanges, as
applicable.
6.3 Market
Regulations. The Company shall notify the SEC, NASD and
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law,
rule
and regulation, for the legal and valid issuance of the Securities to the
Purchaser and promptly provide copies thereof to the Purchaser.
6.4 Reporting
Requirements. The
Company will deliver, or cause to be delivered, to the Purchaser each
of
the following, which shall be in form and detail acceptable to the
Purchaser:
(a) As
soon as available, and in any event within ninety (90) days after the end of
each fiscal year of the Company, each of the Company’s and each of its
Subsidiaries’ audited financial statements with a report of independent
certified public accountants of recognized standing selected by the Company
and
acceptable to the Purchaser (the “Accountants”), which annual financial
statements shall be without qualification (except for a going concern
qualification) and shall include each of the Company’s and each of its
Subsidiaries’ balance sheet as at the end of such fiscal year and the related
statements of each of the Company’s and each of its Subsidiaries’ income,
retained earnings and cash flows for the fiscal year then ended, prepared on
a
consolidated basis to include the Company, each Subsidiary of the Company and
each of their respective affiliates, all in reasonable detail and prepared
in
accordance with GAAP, together with (i) if and when available, copies of any
management letters prepared by the Accountants; and (ii) a certificate of the
Company’s President, Chief Executive Officer or Chief Financial Officer stating
that such financial statements have been prepared in accordance with GAAP and
whether or not such officer has knowledge of the occurrence of any Event of
Default (as defined in the Note) and, if so, stating in reasonable
detail the facts with respect thereto;
17
(b) As
soon as available and in any event within forty five (45) days after the end
of
each fiscal quarter of the Company, an unaudited/internal balance sheet and
statements of income, retained earnings and cash flows of the Company and each
of its Subsidiaries as at the end of and for such quarter and for the year
to
date period then ended, prepared on a consolidated basis to include all the
Company, each Subsidiary of the Company and each of their respective affiliates,
in reasonable detail and stating in comparative form the figures for the
corresponding date and periods in the previous year, all prepared in accordance
with GAAP, subject to year-end adjustments and accompanied by a certificate
of
the Company’s President, Chief Executive Officer or Chief Financial Officer,
stating (i) that such financial statements have been prepared in accordance
with
GAAP, subject to year-end audit adjustments, and (ii) whether or not such
officer has knowledge of the occurrence of any Event of Default (as defined
in
the Note) not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto;
(c) As
soon as available and in any event within fifteen (15) days after the end of
each calendar month, an unaudited/internal balance sheet and statements of
income, retained earnings and cash flows of each of the Company and its
Subsidiaries as at the end of and for such month and for the year to date period
then ended, prepared on a consolidated basis to include the Company, each
Subsidiary of the Company and each of their respective affiliates, in reasonable
detail and stating in comparative form the figures for the corresponding date
and periods in the previous year, all prepared in accordance with GAAP, subject
to year-end adjustments and accompanied by a certificate of the Company’s
President, Chief Executive Officer or Chief Financial Officer, stating (i)
that
such financial statements have been prepared in accordance with GAAP, subject
to
year-end audit adjustments, and (ii) whether or not such officer has knowledge
of the occurrence of any Event of Default (as defined in the Note) not
theretofore reported and remedied and, if so, stating in reasonable detail
the
facts with respect thereto;
(d) The
Company shall timely file with the SEC all reports required to be filed pursuant
to the Exchange Act and refrain from terminating its status as an issuer
required by the Exchange Act to file reports thereunder even if the Exchange
Act
or the rules or regulations thereunder would permit such
termination. Promptly after (i) the filing thereof, copies of the
Company’s most recent registration statements and annual, quarterly, monthly or
other regular reports which the Company files with the Securities and Exchange
Commission (the “SEC”), and (ii) the issuance thereof, copies of such
financial statements, reports and proxy statements as the Company shall send
to
its stockholders; and
(e) The
Company shall deliver, or cause the applicable Subsidiary of the Company to
deliver, such other information as the Purchaser shall reasonably
request.
6.5 Use
of Funds. The Company shall use the proceeds of the sale of the
Note and the Warrants for general working capital purposes only (it being
understood that $6,420,600.61 of the proceeds of the Note will be deposited
in
the Restricted Account on the Closing Date and shall be subject to the terms
and
conditions of the Restricted Account Agreement and the Restricted Account Side
Letter).
18
6.6 Access
to Facilities. Each of the Company and each of its Subsidiaries
will permit any representatives designated by the Purchaser (or any successor
of
the Purchaser), upon reasonable notice and during normal business hours, at
such
person’s expense and accompanied by a representative of the Company or any
Subsidiary (provided that no such prior notice shall be required to be given
and
no such representative of the Company or any Subsidiary shall be required to
accompany the Purchaser in the event the Purchaser believes such access is
necessary to preserve or protect the Collateral (as defined in the Pledge and
Security Agreement and the Security Agreement, as such terms are defined in
the
Reaffirmation Agreement or following the occurrence and during the continuance
of an Event of Default (as defined in the Note)), to:
(a) visit
and inspect any of the properties of the Company or any of its
Subsidiaries;
(b) examine
the corporate and financial records of the Company or any of its Subsidiaries
(unless such examination is not permitted by federal, state or local law or
by
contract) and make copies thereof or extracts therefrom; and
(c) discuss
the affairs, finances and accounts of the Company or any of its Subsidiaries
with the directors, officers and independent accountants of the Company or
any
of its Subsidiaries.
Notwithstanding
the foregoing, neither the Company nor any of its Subsidiaries will provide
any
material, non-public information to the Purchaser unless the Purchaser signs
a
confidentiality agreement and otherwise complies with Regulation FD, under
the
federal securities laws.
6.7 Taxes. Each
of the Company and each of its Subsidiaries will promptly pay and discharge,
or
cause to be paid and discharged, when due and payable, all taxes, assessments
and governmental charges or levies imposed upon the income, profits, property
or
business of the Company and its Subsidiaries; provided, however, that any such
tax, assessment, charge or levy need not be paid currently if (i) the validity
thereof shall currently and diligently be contested in good faith by appropriate
proceedings, (ii) such tax, assessment, charge or levy shall have no effect
on
the lien priority of the Purchaser in any property of the Company or any of
its
Subsidiaries and (iii) if the Company and/or such Subsidiary shall have set
aside on its books adequate reserves with respect thereto in accordance with
GAAP; and provided, further, that the Company and its Subsidiaries will pay
all
such taxes, assessments, charges or levies forthwith upon the commencement
of
proceedings to foreclose any lien which may have attached as security
therefor.
6.8 Insurance. (i)
The Company shall bear the full risk of loss from any loss of any nature
whatsoever with respect to the Collateral (as defined in each of the Pledge
and
Security Agreement and the Security Agreement, (as defined in the Reaffirmation
Agreement) and each other security agreement entered into by the Company and/or
any of its Subsidiaries for the benefit of the Purchaser) and the Company and
each of its Subsidiaries will, jointly and severally, bear the full risk of
loss
from any loss of any nature whatsoever with respect to the assets pledged to
the
Purchaser as security for the Obligations (as defined in the Pledge and Security
Agreement and the Security Agreement). Furthermore, the Company
will insure or cause the Collateral to be insured in the Purchaser’s name as an
additional insured and lender loss payee, with an appropriate loss payable
endorsement in form and substance satisfactory to the Purchaser, against loss
or
damage by fire, flood, sprinkler leakage, theft, burglary, pilferage, loss
in
transit and other risks customarily insured against by companies in similar
business similarly situated as the Company and its Subsidiaries including but
not limited to workers compensation, public and product liability and business
interruption, and such other hazards as the Purchaser shall specify in amounts
and under insurance policies and bonds by insurers acceptable to the Purchaser
and all premiums thereon shall be paid by the Company and the policies delivered
to the Purchaser. If the Company or any of its Subsidiaries fails to
obtain the insurance and in such amounts of coverage as otherwise required
pursuant to this Section 6.8, the Purchaser may procure such insurance and
the
cost thereof shall be promptly reimbursed by the Company and shall constitute
Obligations.
19
(ii) The
Company’s insurance coverage shall not be impaired or invalidated by any act or
neglect of the Company or any of its Subsidiaries and the insurer will provide
the Purchaser with no less than thirty (30) days notice prior of
cancellation;
(iii) The
Purchaser, in connection with its status as a lender loss payee, will be
assigned at all times to a first lien position until such time as all the
Purchaser’s Obligations have been indefeasibly satisfied in full.
6.9 Intellectual
Property. Each of the Company and each of its Subsidiaries shall
maintain in full force and effect its existence, rights and franchises and
all
licenses and other rights to use Intellectual Property owned or possessed by
it
and reasonably deemed to be necessary to the conduct of its
business.
6.10 Properties. Each
of the Company and each of its Subsidiaries will keep its properties in good
repair, working order and condition, reasonable wear and tear excepted, and
from
time to time make all needful and proper repairs, renewals, replacements,
additions and improvements thereto; and, except as set forth on Schedule 6.10
hereto, each of the Company and each of its Subsidiaries will at all times
comply with each provision of all leases to which it is a party or under which
it occupies property if the breach of such provision could, either individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
6.11 Confidentiality. The
Company will not, and will not permit any of its Subsidiaries to, disclose,
and
will not include in any public announcement, the name of the Purchaser, unless
expressly agreed to by the Purchaser or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement. Notwithstanding the foregoing, the Company may disclose
the Purchaser’s identity and the terms of this Agreement to its current and
prospective debt and equity financing sources.
6.12 Required
Approvals. (I) For so long as twenty-five percent (25%) of the
principal amount of the Note is outstanding, the Company, without the prior
written consent of the Purchaser, shall not, and shall not permit any of its
Subsidiaries to:
20
(a) (i)
directly or indirectly declare or pay any dividends, other than dividends paid
to the Company or any of its wholly-owned Subsidiaries, (ii) issue any
preferred stock that is mandatorily redeemable prior to the one year anniversary
of the Maturity Date (as defined in the Note) or (iii) redeem any of its
preferred stock or other equity interests;
(b)
liquidate, dissolve or effect a material reorganization (it being understood
that in no event shall the Company or any of its Subsidiaries dissolve,
liquidate or merge with any other person or entity (unless, in the case of
such
a merger, the Company or, in the case of merger not involving the Company,
such
Subsidiary, as applicable, is the surviving entity);
(c) become
subject to (including, without limitation, by way of amendment to or
modification of) any agreement or instrument which by its terms would (under
any
circumstances) restrict the Company’s or any of its Subsidiaries, right to
perform the provisions of this Agreement, any Related Agreement or any of the
agreements contemplated hereby or thereby;
(d) materially
alter or change the scope of the business of the Company and its Subsidiaries
taken as a whole;
(e) (i)
create, incur, assume or suffer to exist any indebtedness (exclusive of trade
debt and debt incurred to finance the purchase of equipment (not in excess
of
five percent (5%) of the fair market value of the Company’s and its
Subsidiaries’ assets)) whether secured or unsecured other than (x) the Company’s
obligations owed to the Purchaser, (y) indebtedness set forth on Schedule
6.12(e) attached hereto and made a part hereof and any refinancings or
replacements thereof on terms no less favorable to the Purchaser than the
indebtedness being refinanced or replaced, and (z) any indebtedness incurred
in
connection with the purchase of assets (other than equipment) in the ordinary
course of business, or any refinancings or replacements thereof on terms no
less
favorable to the Purchaser than the indebtedness being refinanced or replaced,
so long as any lien relating thereto shall only encumber the fixed assets so
purchased and no other assets of the Company or any of its Subsidiaries; (ii)
cancel any indebtedness owing to it in excess of $50,000 in the aggregate during
any 12 month period; (iii) assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligations of any other
person or entity, except the endorsement of negotiable instruments by the
Company or any Subsidiary thereof for deposit or collection or similar
transactions in the ordinary course of business or guarantees of indebtedness
otherwise permitted to be outstanding pursuant to this clause (e);
or
create
or
acquire any Subsidiary after the date hereof unless (i) such Subsidiary is
a
wholly-owned Subsidiary of the Company and (ii) such Subsidiary becomes a party
to the Pledge and Security Agreement, the Security Agreement, and the Subsidiary
Guaranty (either by executing a counterpart thereof or an assumption or joinder
agreement in respect thereof) and, to the extent required by the Purchaser,
satisfies each condition of this Agreement and the Related Agreements as if
such
Subsidiary were a Subsidiary on the Closing Date.
21
6.13 Reissuance
of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Section 5.8 above
at such time as:
(a) the
holder thereof is permitted to dispose of such Securities pursuant to Rule
144(k) under the Securities Act; or
(b) upon
resale subject to an effective registration statement after such Securities
are
registered under the Securities Act.
The
Company agrees to cooperate with the Purchaser in connection with all resales
pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary
to
allow such resales provided the Company and its counsel receive reasonably
requested representations from the Purchaser and broker, if any.
6.14 Opinion. On
the Closing Date, the Company will deliver to the Purchaser an opinion
acceptable to the Purchaser from the Company’s external legal
counsel. The Company will provide, at the Company’s expense, such
other legal opinions in the future as are deemed reasonably necessary by the
Purchaser (and acceptable to the Purchaser) in connection with the exercise
of
the Warrants.
6.15 Margin
Stock. The Company will not permit any of the proceeds of the
Note or the Warrants to be used directly or indirectly to “purchase” or “carry”
“margin stock” or to repay indebtedness incurred to “purchase” or “carry”
“margin stock” within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now
and
from time to time hereafter in effect.
6.16 FIRPTA. Neither
the Company, nor any of its Subsidiaries, is a “United States real property
holding corporation” as such term is defined in Section 897(c)(2) of the Code
and Treasury Regulation Section 1.897-2 promulgated thereunder and neither
the
Company nor any of its Subsidiaries shall at any time take any action or
otherwise acquire any interest in any asset or property to the extent the effect
of which shall cause the Company and/or such Subsidiary, as the case may be,
to
be a “United States real property holding corporation” as such term is defined
in Section 897(c)(2) of the Code and Treasury Regulation Section 1.897-2
promulgated thereunder.
6.17 Restricted
Cash Disclosure. The Company agrees that, in connection with its
filing of its 8-K Report with the SEC concerning the transactions contemplated
by this Agreement and the Related Agreements (such report, the “Laurus
Transaction 8-K”) in a timely manner after the date hereof, it will disclose in
such Laurus Transaction 8-K the amount of the proceeds of the Note issued to
the
Purchaser that has been placed in a restricted cash account and is subject
to
the terms and conditions of this Agreement and the Related
Agreements. Furthermore, the Company agrees to disclose in all public
filings required by the Commission (where appropriate) following the filing
of
the Laurus Transaction 8-K, the existence of the restricted cash referred to
in
the immediately preceding sentence, together with the amount
thereof.
22
6.18 Authorization
and Reservation of Shares. Subject to the Company obtaining the
approval of its shareholders for an increase in authorized shares of common
stock in accordance with Section 6.22 below, the Company shall at all times
have
authorized and reserved a sufficient number of shares of Common Stock to provide
for the exercise of the Warrants.
6.19 Vermont
Operations. The Company shall (i) discontinue all business
operations at its Burlington Vermont location (“Burlington”) within forty five
(45) days from and after the date hereof; and (ii) liquidate and/or transfer
all
Collateral (as defined in the Security Agreement referred to in the
Reaffirmation Agreement among the Purchaser, the Company and certain of its
Subsidiaries of even date herewith) located at Burlington to the Company’s San
Diego location located at 00000 Xxxxxxxxxx Xxxxx, Xxx Xxxxx,
Xxxxxxxxxx.
6.20 Chief
Financial Officer. Within thirty (30) days from and after the
date hereof, the Company shall identify and hire a Chief Financial Officer
and
assemble a management team with in-depth commercialization experience including
marketing and sales capabilities for reliable market analysis and assessments,
plus requisite product engineering, integration and testing skills responsive
to
market needs.
6.21 Royalty
Payments. On or before the first day of each calendar month
hereafter the Company shall pay to Laurus (x) two percent (2.0%) of
all gross receipts of the Company or any of its Subsidiaries arising from sales,
licenses or royalty payments of any kind from any municipal, city, state or
federal entity (each, a “Governmental Body”) actually received by the Company or
any of its Subsidiaries within the previous calendar month; and (y) twelve
percent (12.0%) of all gross receipts of the Company or any of its Subsidiaries
arising from sales, licenses or royalty payments of any kind (the “12% Royalty”)
from any entity that is not a Governmental Body actually received by
the Company or any of its Subsidiaries within the previous calendar month
provided, however that solely with respect to gross receipts arising from sales
of the Company’s BioSentry product to any entity that is not a Governmental
Body, the 12.0% Royalty shall be reduced to 7%. Failure to make each of the
payments required by Section 6.12(i)(x) and 6.12(i)(y) shall
constitute and Event of Default under the Note.
6.22 Approval
of Increase in Authorized Shares. On or before March 5,
2008, the Company shall have increased its authorized Common Stock to no less
than 300,000,000 shares. Failure to increase its authorized shares to at least
300,000,000 shares on or before such date shall constitute an Event of Default
under the Note.
23
7. Covenants
of the Purchaser. The Purchaser covenants and agrees with the
Company as follows:
7.1 Confidentiality. The
Purchaser will not disclose, and will not include in any public announcement,
the name of the Company, unless expressly agreed to by the Company or unless
and
until such disclosure is required by law or applicable regulation, and then
only
to the extent of such requirement.
7.2 Non-Public
Information. The Purchaser will not effect any sales in the
shares of the Company’s Common Stock while in possession of material, non-public
information regarding the Company if such sales would violate applicable
securities law.
7.3 Limitation
on Acquisition of Common Stock of the Company. Notwithstanding
anything to the contrary contained in this Agreement, any Related Agreement
or
any document, instrument or agreement entered into in connection with any other
transactions between the Purchaser and the Company, the Purchaser may not
acquire stock in the Company (including, without limitation, pursuant to a
contract to purchase, by exercising an option or warrant, by converting any
other security or instrument, by acquiring or exercising any other right to
acquire, shares of stock or other security convertible into shares of stock
in
the Company, or otherwise, and such contracts, options, warrants, conversion
or
other rights shall not be enforceable or exercisable) to the extent such stock
acquisition would cause any interest (including any original issue discount)
payable by the Company to the Purchaser not to qualify as “portfolio interest”
within the meaning of Section 881(c)(2) of the Code, by reason of
Section 881(c)(3) of the Code, taking into account the constructive
ownership rules under Section 871(h)(3)(C) of the Code (the “Stock Acquisition
Limitation”). The Stock Acquisition Limitation shall automatically
become null and void without any notice to the Company upon the earlier to
occur
of either (a) the Company’s delivery to the Purchaser of a Notice of Redemption
(as defined in the Note) or (b) the existence of an Event of Default (as defined
in the Note) at a time when the average closing price of the Company’s common
stock as reported by Bloomberg, L.P. on the Principal Market for the immediately
preceding five trading days is greater than or equal to 150% of the Exercise
Price (as defined in the Warrants).
8. Covenants
of the Company and the Purchaser Regarding Indemnification.
8.1 Company
Indemnification. The Company agrees to indemnify, hold harmless,
reimburse and defend the Purchaser, each of the Purchaser’s officers, directors,
agents, affiliates, control persons, and principal shareholders, against all
claims, costs, expenses, liabilities, obligations, losses or damages (including
reasonable legal fees) of any nature, incurred by or imposed upon the Purchaser
which result, arise out of or are based upon: (i) any misrepresentation by
the
Company or any of its Subsidiaries or breach of any warranty by the Company
or
any of its Subsidiaries in this Agreement, any other Related Agreement or in
any
exhibits or schedules attached hereto or thereto; or (ii) any breach or default
in performance by Company or any of its Subsidiaries of any covenant or
undertaking to be performed by Company or any of its Subsidiaries hereunder,
under any other Related Agreement or any other agreement entered into by the
Company and/or any of its Subsidiaries and the Purchaser relating hereto or
thereto.
24
8.2 Purchaser’s
Indemnification. The Purchaser agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company’s officers,
directors, agents, affiliates, control persons and principal shareholders,
at
all times against any claims, costs, expenses, liabilities, obligations, losses
or damages (including reasonable legal fees) of any nature, incurred by or
imposed upon the Company which result, arise out of or are based
upon: (i) any misrepresentation by the Purchaser or breach of any
warranty by the Purchaser in this Agreement or in any exhibits or schedules
attached hereto or any Related Agreement; or (ii) any breach or default in
performance by the Purchaser of any covenant or undertaking to be performed
by
the Purchaser hereunder, or any other agreement entered into by the Company
and
the Purchaser relating hereto.
9. Exercise
of the Warrants.
9.1 Mechanics
of Exercise.
(a) Provided
the Purchaser has notified the Company of the Purchaser’s intention to sell the
Warrant Shares and the Warrant Shares are included in an effective registration
statement or are otherwise exempt from registration when sold: (i)
upon the exercise of the Warrants or part thereof, the Company shall, at its
own
cost and expense, take all necessary action (including the issuance of an
opinion of counsel reasonably acceptable to the Purchaser following a request
by
the Purchaser) to assure that the Company’s transfer agent shall issue shares of
the Company’s Common Stock in the name of the Purchaser (or its nominee) or such
other persons as designated by the Purchaser in accordance with Section 9.1(b)
hereof and in such denominations to be specified representing the number of
Warrant Shares issuable upon such exercise; and (ii) the Company warrants
that no instructions other than these instructions have been or will be given
to
the transfer agent of the Company’s Common Stock and that after the
effectiveness date of a registration statement filed pursuant to the Securities
Act the Warrant Shares issued will be freely transferable subject to the
prospectus delivery requirements of the Securities Act and the provisions of
this Agreement, and will not contain a legend restricting the resale or
transferability of the Warrant Shares.
(b) The
Purchaser will give notice of its decision to exercise its right to exercise
the
Warrants or part thereof by faxing or otherwise delivering an executed and
completed notice of the number of shares to be subscribed to the Company (the
“Form of Subscription”). The Purchaser will not be required to
surrender the Warrants until the Purchaser receives a credit to the account
of
the Purchaser’s prime broker through the DWAC system (as defined below),
representing the Warrant Shares or until the Warrants have been fully
exercised. Each date on which a Form of Subscription is faxed or
delivered to the Company in accordance with the provisions hereof shall be
deemed a “Exercise Date.” Pursuant to the terms of the Form of
Subscription, the Company will issue instructions to the transfer agent
accompanied by an opinion of counsel within one (1) business day of the date
of
the delivery to the Company of the Form of Subscription and shall
cause the transfer agent to transmit the certificates representing the Warrant
Shares set forth in the applicable Form of Subscription to the Holder by
crediting the account of the Purchaser’s prime broker with the Depository Trust
Company (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system
within three (3) business days after receipt by the Company of the Form of
Subscription (the “Delivery Date”).
25
(c) The
Company understands that a delay in the delivery of the Warrant Shares in the
form required pursuant to Section 9 hereof beyond the Delivery Date could result
in economic loss to the Purchaser. In the event that the Company
fails to direct its transfer agent to deliver the Warrant Shares to the
Purchaser via the DWAC system within the time frame set forth in Section 9.1(b)
above and the Warrant Shares are not delivered to the Purchaser by the Delivery
Date, as compensation to the Purchaser for such loss, the Company agrees to
pay
late payments to the Purchaser for late issuance of the Warrant Shares in the
form required pursuant to Section 9 hereof upon exercise of the Warrant in
the
amount equal to the greater of: (i) $500 per business day after the
Delivery Date; or (ii) the Purchaser’s actual damages from such delayed
delivery. The Company shall pay any payments incurred under this
Section in immediately available funds upon demand and, in the case of actual
damages, accompanied by reasonable documentation of the amount of such
damages. Such documentation shall show the number of shares of Common
Stock the Purchaser is forced to purchase (in an open market transaction) which
the Purchaser anticipated receiving upon such exercise, and shall be calculated
as the amount by which (A) the Purchaser’s total purchase price (including
customary brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate amount of the Exercise Price for the
Warrants, for which such Form of Subscription was not timely
honored.
10. Offering
Restrictions. Except as previously disclosed in the SEC Reports
or in the Exchange Act Filings, or stock or stock options granted to employees
or directors of the Company (these exceptions hereinafter referred to as the
“Excepted Issuances”), neither the Company nor any of its Subsidiaries will,
prior to the full repayment of the Note (together with all accrued and unpaid
interest and fees related thereto), (x) enter into any equity line of credit
agreement or similar agreement or (y) issue, or enter into any agreement to
issue, any securities with a variable/floating conversion and/or pricing feature
which are or could be (by conversion or registration) free-trading securities
(i.e. common stock subject to a registration statement).
11. Miscellaneous.
11.1 Governing
Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS
AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
26
(b) THE
COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
AND THE PURCHASER, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF
THE
RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT THE PURCHASER AND
THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD
BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND
FURTHERPROVIDED, THAT, NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE
ON
THE COLLATERAL (AS DEFINED IN THE PLEDGE AND SECURITY AGREEMENT AND THE SECURITY
AGREEMENT) OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS DEFINED IN THE PLEDGE
AND SECURITY AGREEMENT AND THE SECURITY AGREEMENT), OR TO ENFORCE A JUDGMENT
OR
OTHER COURT ORDER IN FAVOR OF THE PURCHASER. THE COMPANY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION THAT
IT
MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE
BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH
IN SECTION 11.9 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(c) THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE
ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE
PURCHASER AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
THIS
AGREEMENT, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
THERETO.
11.2 Severability. Wherever
possible each provision of this Agreement and the Related Agreements shall
be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement or any Related Agreement shall be
prohibited by or invalid or illegal under applicable law such provision shall
be
ineffective to the extent of such prohibition or invalidity or illegality,
without invalidating the remainder of such provision or the remaining provisions
thereof which shall not in any way be affected or impaired thereby.
27
11.3 Survival. The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by the Purchaser and the closing of the transactions
contemplated hereby to the extent provided therein. All statements as
to factual matters contained in any certificate or other instrument delivered
by
or on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by
the
Company hereunder solely as of the date of such certificate or
instrument. All indemnities set forth herein shall survive the
execution, delivery and termination of this Agreement and the Note and the
making and repayment of the obligations arising hereunder, under the Note and
under the other Related Agreements.
11.4 Successors. Except
as otherwise expressly provided herein, the provisions hereof shall inure to
the
benefit of, and be binding upon, the successors, heirs, executors and
administrators of the parties hereto and shall inure to the benefit of and
be
enforceable by each person or entity which shall be a holder of the Securities
from time to time, other than the holders of Common Stock which has been sold
by
the Purchaser pursuant to Rule 144 or an effective registration
statement. The Purchaser may assign any or all of its rights
hereunder or under any Related Agreement to any person and any such assignee
shall succeed to the Purchaser’s rights with respect thereto; provided that the
Purchaser shall not be permitted to effect any such assignment to a competitor
of any Company unless an Event of Default (as defined in the Note) has occurred
and is continuing. Upon such assignment, the Purchaser shall be
released from all responsibility for the Collateral (as defined in the Master
Security Agreement, the Stock Pledge Agreement and each other security
agreement, mortgage, cash collateral deposit letter, pledge and other agreements
which are executed by the Company or any of its Subsidiaries in favor of the
Purchaser) to the extent same is assigned to any transferee. The
Purchaser may from time to time sell or otherwise grant participations in any
of
the Obligations (as defined in the Master Security Agreement) and the holder
of
any such participation shall, subject to the terms of any agreement between
the
Purchaser and such holder, be entitled to the same benefits as the Purchaser
with respect to any security for the Obligations (as defined in the Master
Security Agreement) in which such holder is a participant. The
Company agrees that each such holder may exercise any and all rights of banker's
lien, set-off and counterclaim with respect to its participation in the
Obligations (as defined in the Master Security Agreement) as fully as though
the
Company were directly indebted to such holder in the amount of such
participation. The Company may not assign any of its rights or
obligations hereunder without the prior written consent of the
Purchaser. All of the terms, conditions, promises, covenants,
provisions and warranties of this Agreement shall inure to the benefit of each
of the undersigned, and shall bind the representatives, successors and permitted
assigns of the Company.
11.5 Entire
Agreement; Maximum Interest. This Agreement, the Related
Agreements, the exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically
set
forth herein and therein. Nothing contained in this Agreement, any
Related Agreement or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of
a
rate of interest or other charges in excess of the maximum rate permitted by
applicable law. In the event that the rate of interest or dividends
required to be paid or other charges hereunder exceed the maximum rate permitted
by such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Purchaser and thus refunded to the
Company.
28
11.6 Amendment
and Waiver.
(a) This
Agreement may be amended or modified only upon the written consent of the
Company and the Purchaser.
(b) The
obligations of the Company and the rights of the Purchaser under this Agreement
may be waived only with the written consent of the Purchaser.
(c) The
obligations of the Purchaser and the rights of the Company under this Agreement
may be waived only with the written consent of the Company.
11.7 Delays
or Omissions. It is agreed that no delay or omission to exercise
any right, power or remedy accruing to any party, upon any breach, default
or
noncompliance by another party under this Agreement or the Related Agreements,
shall impair any such right, power or remedy, nor shall it be construed to
be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance thereafter
occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative
and
not alternative.
11.8 Notices. All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given:
(a) upon
personal delivery to the party to be notified;
(b) when
sent by confirmed facsimile if sent during normal business hours of the
recipient, if not, then on the next business day;
(c) three
(3) business days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or
(d) one
(1) day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt.
All
communications shall be sent as follows:
If
to the Company, to:
|
JMAR
Technologies, Inc.
00000
Xxxxxxxxxx Xxxxx
Xxx
Xxxxx, XX 00000
Attention: Chief
Financial Officer
Facsimile: 000-000-0000
|
29
If
to the Purchaser, to:
|
Laurus
Master Fund, Ltd.
c/o
M&C Corporate Services Limited
X.X. Xxx
000 XX
Xxxxxx
Xxxxx
Xxxxxx
Xxxx
South
Church Street
Grand
Cayman, Cayman Islands
Facsimile: 000-000-0000
|
|
with
a copy to:
|
||
Portfolio
Services
Laurus
Capital Management, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, XX 00000
Facsimile: 000-000-0000
|
or
at
such other address as the Company or the Purchaser may designate by written
notice to the other parties hereto given in accordance herewith.
11.9 Attorneys’
Fees. In the event that any suit or action is instituted to
enforce any provision in this Agreement or any Related Agreement, the prevailing
party in such dispute shall be entitled to recover from the losing party all
fees, costs and expenses of enforcing any right of such prevailing party under
or with respect to this Agreement and/or such Related Agreement, including,
without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
11.10 Titles
and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered
in
construing this Agreement.
11.11 Facsimile
Signatures; Counterparts. This Agreement may be executed by
facsimile signatures and in any number of counterparts, each of which shall
be
an original, but all of which together shall constitute one
agreement.
11.12 Broker’s
Fees. Except as set forth on Schedule 11.12 hereof, each party
hereto represents and warrants that no agent, broker, investment banker, person
or firm acting on behalf of or under the authority of such party hereto is
or
will be entitled to any broker’s or finder’s fee or any other commission
directly or indirectly in connection with the transactions contemplated
herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 11.12 being untrue.
30
11.13 Construction. Each
party acknowledges that its legal counsel participated in the preparation of
this Agreement and the Related Agreements and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Agreement or any
Related Agreement to favor any party against the other.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
31
IN
WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY:
|
PURCHASER:
|
JMAR
TECHNOLOGIES, INC.
|
LAURUS
MASTER FUND, LTD.
|
By: /s/
C. NEIL BEER
|
By: /s/
XXXXXX GRIN
|
Name: C.
Neil Beer
|
Name: Xxxxxx
Grin
|
Title: Chief
Executive Officer
|
Title: Director
|
32
EXHIBIT
A
FORM
OF SECURED TERM NOTE
A-1
EXHIBIT
B
FORM
OF WARRANT
B-1
EXHIBIT
C
FUNDS
ESCROW AGREEMENT
C-1